NEW YORK -

Along with acknowledging a document request from the Securities and Exchange Commission, Ally Financial reported a new record for used-vehicle originations as the company generated $3.2 billion in used paper during the third quarter.

The performance marked two quarters in a row where Ally set a new record for used-vehicle originations. The company’s year-over-year increase for the third quarter came in at $600 million.

All told, Ally’s automotive finance division boasted an originations total of $11.8 billion for the quarter, up 23 percent year-over-year.

Along with that used-vehicle origination figure, that Q3 total included $5.6 billion of new-vehicle installment contracts and $3.0 billion of new-model leases.

The company indicated net financing revenue improved 6 percent versus the prior-year period while automotive earning assets increased 7 percent year-over-year.

The company’s auto finance segment reported pre-tax income of $415 million for the third quarter, compared to $339 million in the corresponding prior-year period.

“Results for the quarter were primarily driven by solid net financing revenue, due to strong earning asset growth across all products, despite continued intense competition and ongoing normalization of used-vehicle prices resulting in lower lease gains during the quarter,” Ally said.

“Additionally, provision expense declined year-over-year due to lower expected credit losses. Non-interest expense was up modestly due to investments in the auto finance platform to service the company's larger portfolio,” officials continued.

The performance of Ally’s auto portfolio reflected seasonal trends as 30-day delinquencies moved up to 2.28 percent in Q3, up from 2.10 percent a year earlier and 2.02 percent in the previous quarter. The net charge-off rate also moved higher in the third quarter, edging up to 0.93 percent. In Q3 of last year, the rate stood at 0.82 percent

Meanwhile, Ally’s insurance businesses, which focuses on dealer-centric products such as extended vehicle service contracts (VSCs) and dealer inventory insurance, reported pre-tax income from continuing operations of $60 million in the third quarter of 2014, compared to pre-tax income of $83 million in the corresponding prior year period.

The company explained the drop was driven by a $21 million decrease in underwriting income as the result of wholesale floorplan weather-related losses, compared to the prior year period. Partially offsetting the decline was a $15 million improvement to non-weather related losses resulting from lower vehicle service contract claims.

Top-Line Performance

The results from Ally’s auto businesses helped the company generate a net income level of $423 million, or $0.74 per diluted common share, for the third quarter of 2014, compared to net income of $323 million, or $0.54 per diluted common share, in the prior quarter, and net income of $91 million, or a loss of $0.27 per diluted common share, for the third quarter of 2013.

The company reported core pre-tax income of $467 million in the third quarter of 2014, compared to core pre-tax income of $400 million in the prior quarter and $269 million in the comparable prior year period. Adjusted earnings per diluted common share for the quarter were $0.53, compared to $0.42 for the previous quarter and $0.05 for the comparable prior year period.

"In the third quarter, Ally's results demonstrated continued strength and marketplace leadership by its dealer financial services operation, as well as steady and efficient deposit growth at Ally Bank,” Ally chief executive officer Michael Carpenter.

“We continued to make significant progress on our three-point plan to improve the core return on tangible common equity and in the third quarter achieved additional decreases in our cost of funds and increases in both net interest margin and net financing revenue,” Carpenter continued.

“Operationally, Ally's businesses have performed well in the respective sectors. The auto finance business continued to broaden its dealer network and new and used originations from growth channel dealers increased 54 percent year-over-year,” he went on to say. “In addition, Ally Bank’s customer-centric philosophy continues to win considerable accolades, supporting the steady expansion of its customer base of purposeful savers and increasing retail deposits, up 12 percent in the past year to $46.7 billion.”

SEC Demand

After reporting its results and conducting its conference call with investment analysts, Ally revealed in its quarterly filing with the SEC that the company officials “recently received a document request from the SEC in connection with its investigation related to subprime automotive finance and related securitization activities.”

The latest development comes after federal officials made multiple requests of General Motors Financial for documents related to subprime activities.

When reached by SubPrime Auto Finance News on Monday, Ally spokesperson Gina Proia said, “Ally has been asked to provide data and records relating to our auto finance activities and will respond accordingly to the SEC.”