What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-11 · 242 added, 171 removed, 606 unchanged (41% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Assets (In thousands, except par value)

9 unchanged sentences

Investment securities available-for-sale, at fair value 241,534 267,419

Loans to bank customers, net of allowance for loan losses of $ 1,057 and $ 1,166 as of March 31, 2020 and December 31, 2019, respectively

Loans to bank customers, net of allowance for loan losses of $ 570 and $ 1,166 as of June 30, 2020 and December 31, 2019, respectively

19,551 21,417

Prepaid expenses and other assets 42,346 10,991

Property and equipment, net 147,530 145,476

Property, equipment, and internal-use software, net 148,258 145,476

Operating lease right-of-use assets 23,476 26,373

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Class A common stock, $ 0.001 par value;

100,000 shares authorized as of March 31, 2020 and December 31, 2019;

52,854 and 51,807 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

100,000 shares authorized as of June 30, 2020 and December 31, 2019;

53,297 and 51,807 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 323,083 296,224

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands, except per share data)

13 unchanged sentences

Interest expense, net 443 66 684 1,670

Other income (expense), net 2,154 ( 99 ) 2,346 34

Income before income taxes 7,101 43,798 65,901 123,712

12 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

1 unchanged sentence

Other comprehensive income

Unrealized holding gain, net of tax 4,157 1,166

Comprehensive income $ 51,002 $ 65,209

Unrealized holding (loss) gain, net of tax ( 4,006 ) 996 151 2,162

Comprehensive (loss) income $ ( 712 ) $ 35,688 $ 50,290 $ 100,897

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity

1 unchanged sentence

(In thousands)

Balance at March 31, 2020 52,854 $ 53 $ 306,151 $ 675,604 $ 6,197 $ 988,005

Common stock issued under stock plans, net of withholdings and related tax effects 443 — 3,330 — — 3,330

Stock-based compensation — — 13,602 — — 13,602

Net income — — — 3,294 — 3,294

Other comprehensive income — — — — ( 4,006 ) ( 4,006 )

Balance at June 30, 2020 53,297 $ 53 $ 323,083 $ 678,898 $ 2,191 $ 1,004,225

Three Months Ended June 30, 2019

Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity

Shares Amount

(In thousands)

Balance at March 31, 2019 53,148 $ 53 $ 384,447 $ 593,186 $ 1,029 $ 978,715

Common stock issued under stock plans, net of withholdings and related tax effects 327 1 ( 918 ) — — ( 917 )

Stock-based compensation — — 8,427 — — 8,427

Repurchases of Class A common stock ( 1,666 ) ( 2 ) ( 99,998 ) — — ( 100,000 )

Net income — — — 34,692 — 34,692

Other comprehensive income — — — — 996 996

Balance at June 30, 2019 51,809 $ 52 $ 291,958 $ 627,878 $ 2,025 $ 921,913

See notes to unaudited consolidated financial statements

GREEN DOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

Six Months Ended June 30, 2020

Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity

Shares Amount

(In thousands)

Balance at December 31, 2019 51,807 $ 52 $ 296,224 $ 629,040 $ 2,040 $ 927,356

6 unchanged sentences

2016-13 (CECL) — — — ( 281 ) — ( 281 )

Balance at March 31, 2020 52,854 $ 53 $ 306,151 $ 675,604 $ 6,197 $ 988,005

Three Months Ended March 31, 2019

Balance at June 30, 2020 53,297 $ 53 $ 323,083 $ 678,898 $ 2,191 $ 1,004,225

Six Months Ended June 30, 2019

Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

4 unchanged sentences

Stock-based compensation — — 23,242 — — 23,242

Repurchases of Class A common stock ( 1,666 ) ( 2 ) ( 99,998 ) — — ( 100,000 )

Net income — — — 98,735 — 98,735

Other comprehensive income — — — — 2,162 2,162

Balance at March 31, 2019 53,148 $ 53 $ 384,447 $ 593,186 $ 1,029 $ 978,715

Balance at June 30, 2019 51,809 $ 52 $ 291,958 $ 627,878 $ 2,025 $ 921,913

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

Provision for uncollectible overdrawn accounts from purchase transactions 4,398 4,047

Employee stock-based compensation 11,385 14,815

Stock-based compensation 24,987 23,242

Losses in equity method investment 2,716 —

Realized gain on sale of available-for-sale investment securities ( 5,062 ) —

Amortization of premium (discount) on available-for-sale investment securities 432 ( 224 )

Amortization of deferred financing costs 84 1,124

Impairment of capitalized software — 100

Impairment of internal-use software 1,068 104

Changes in operating assets and liabilities:

12 unchanged sentences

Payments for acquisition of property and equipment ( 31,395 ) ( 37,746 )

Net decrease in loans 1,584 1,754

Net changes in loans 1,612 ( 1,296 )

Investment in TailFin Labs, LLC ( 35,000 ) —

Other ( 832 ) —

Net cash used in investing activities ( 24,732 ) ( 78,803 )

3 unchanged sentences

Repayments on revolving line of credit ( 135,000 ) —

Proceeds from exercise of options 23 705

Proceeds from exercise of options and ESPP purchases 4,858 4,836

Taxes paid related to net share settlement of equity awards ( 2,985 ) ( 16,874 )

2 unchanged sentences

Contingent consideration payments ( 2,000 ) ( 2,634 )

Net cash provided by financing activities 469,893 510,513

Repurchase of Class A common stock — ( 100,000 )

Net cash provided by (used in) financing activities 734,473 ( 82,868 )

Net increase in unrestricted cash, cash equivalents and restricted cash 871,257 5,397

2 unchanged sentences

Cash paid for interest $ 759 $ 1,604

Cash (refund from)/paid for income taxes $ ( 95 ) $ 38

Cash paid for income taxes $ 34 $ 3,702

Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period:

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Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2019 for additional disclosures, including a summary of our significant accounting policies.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2020, other than the adoption of the accounting pronouncements discussed herein.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

There have been no material changes to our significant accounting policies during the six months ended June 30, 2020, other than the adoption of the accounting pronouncements discussed herein.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

1 unchanged sentence

accordingly, accounting estimates require the exercise of judgment.

These financial statements were prepared using information reasonably available as of March 31, 2020 and through the date of this Report.

These financial statements were prepared using information reasonably available as of June 30, 2020 and through the date of this Report.

The accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.

6 unchanged sentences

Credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited by the amount that the fair value is less than amortized cost.

The amendments of ASU 2016-13 eliminate the probable incurred loss recognition model under current GAAP and introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments.

The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information, and reasonable and supportable forecasts.

The new ASU also expands the disclosure requirements to enable users of financial statements to understand the

The amendments under ASU 2016-13 eliminate the probable incurred loss recognition model under GAAP and introduce a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments.

The estimate of expected credit losses requires entities to incorporate considerations of historical information, current information, and reasonable and supportable forecasts.

The new ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s

GREEN DOT CORPORATION

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Note 2—Summary of Significant Accounting Policies (continued)

entity’s assumptions, models, and methods for estimating expected credit losses.

assumptions, models, and methods for estimating expected credit losses.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

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The following table disaggregates our revenues by the timing in which the revenue is recognized:

Three Months Ended March 31, 2020 Three Months Ended March 31, 2019

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

Account Services Processing and Settlement Services Account Services Processing and Settlement Services

4 unchanged sentences

$ 247,349 $ 66,752 $ 200,716 $ 69,304

(1) Excludes net interest income, a component of total operating revenues, as it is outside the scope of ASC 606, Revenues

Within our Account Services segment, revenues recognized at a point in time are comprised principally of ATM fees, interchange, and other similar transaction-based fees.

Revenues recognized over time consists of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS partner program management fees.

Substantially all of our processing and settlement services are recognized at a point in time.

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

Account Services Processing and Settlement Services Account Services Processing and Settlement Services

Timing of revenue recognition (In thousands)

Transferred at a point in time $ 256,179 $ 188,516 $ 264,074 $ 174,647

Transferred over time 222,479 2,253 157,331 3,665

Operating revenues (1)

$ 478,658 $ 190,769 $ 421,405 $ 178,312

GREEN DOT CORPORATION

1 unchanged sentence

Note 3—Revenues (continued)

(1) Excludes net interest income, a component of total operating revenues, as it is outside the scope of ASC 606, Revenues

Within our Account Services segment, revenues recognized at a point in time are comprised principally of ATM fees, interchange, and other similar transaction-based fees.

Revenues recognized over time consist of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS partner program management fees.

Substantially all of our processing and settlement services are recognized at a point in time.

Refer to Note 19 — Segment Informatio n for our revenues disaggregated by our products and services and the components to our total operating revenues on our Consolidated Statements of Operations for additional information.

2 unchanged sentences

These contract liabilities consist principally of unearned new card fees and monthly maintenance fees.

We recognized approximately $ 17.0 million and $ 21.2 million in revenue for the three months ended March 31, 2020 and 2019, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance obligations satisfied in previous periods.

We recognized approximately $ 8.9 million and $ 10.2 million in revenue for the three months ended June 30, 2020 and 2019, respectively, and $ 25.9 million and $ 31.4 million for the six months ended June 30, 2020 and 2019, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance obligations satisfied in previous periods.

Changes in the deferred revenue balance are driven primarily by the amount of new card fees recognized during the period, and the degree to which these reductions to the deferred revenue balance are offset by the deferral of new card fees associated with cards sold during the period.

3 unchanged sentences

(In thousands)

March 31, 2020

June 30, 2020

Corporate bonds $ 10,000 $ 58 $ — $ 10,058

11 unchanged sentences

Total investment securities $ 274,957 $ 2,725 $ ( 243 ) $ 277,439

As of March 31, 2020 and December 31, 2019, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows:

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 4—Investment Securities (continued)

As of June 30, 2020 and December 31, 2019, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows:

Less than 12 months 12 months or more Total fair value Total unrealized loss

1 unchanged sentence

(In thousands)

March 31, 2020

June 30, 2020

Agency mortgage-backed securities $ 6,768 $ ( 45 ) $ 1,371 $ ( 4 ) $ 8,139 $ ( 49 )

Municipal bonds 4,109 ( 75 ) 89 ( 1 ) 4,198 ( 76 )

Asset-backed securities 9,739 ( 255 ) — — 9,739 ( 255 )

Total investment securities $ 17,660 $ ( 416 ) $ 6,010 $ ( 68 ) $ 23,670 $ ( 484 )

December 31, 2019

2 unchanged sentences

Total investment securities $ 43,337 $ ( 153 ) $ 8,848 $ ( 90 ) $ 52,185 $ ( 243 )

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 4—Investment Securities (continued)

Our investments generally consist of highly rated securities, as our investment policy restricts our investments to highly liquid, low credit risk assets.

For the three months ended March 31, 2020, we recorded a de minimis credit-related impairment loss on an individual security within our available-for-sale investment portfolio.

We did no t record any significant credit-related impairment losses during the three and six months ended June 30, 2020 or 2019 on our available-for-sale investment securities.

Upon adoption of ASU 2016-13, we establish an allowance for credit losses limited by the amount that the fair value of the investment is less than its amortized cost, rather than a direct write down under previous GAAP.

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We do not intend to sell our investments and we have determined that it is more likely than not that we will not be required to sell our investments before recovery of their amortized cost bases, which may be at maturity.

We did no t record any credit-related impairment losses during the three months ended March 31, 2019 on our available-for-sale investment securities.

As of March 31, 2020, the contractual maturities of our available-for-sale investment securities were as follows:

For the three months ended June 30, 2020, we recorded a realized gain of approximately $ 5.1 million as a result of the sale of certain investment securities.

The gain recognized upon sale of the investments was reclassified from accumulated other comprehensive income and is recorded as a component of other income and expenses on our consolidated statements of operations.

As of June 30, 2020, the contractual maturities of our available-for-sale investment securities were as follows:

Amortized cost Fair value

(In thousands)

Due in one year or less $ 10,000 $ 10,003

Due after one year through five years 10,000 10,058

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The expected payments on mortgage-backed and asset-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 5— Accounts Receivable

Accounts receivable, net consisted of the following:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands)

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The adoption of ASU 2016-13 did not result in any material changes to our methods for developing allowances for any component within our accounts receivable.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 5—Accounts Receivable (continued)

Activity in the reserve for uncollectible overdrawn accounts from purchase transactions consisted of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

3 unchanged sentences

Balance, end of period $ 5,070 $ 2,368 $ 5,070 $ 2,368

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 6— Loans to Bank Customers

2 unchanged sentences

(In thousands)

March 31, 2020

June 30, 2020

Residential $ 125 $ — $ — $ 125 $ 3,645 $ 3,770

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See Note 2 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information on the criteria for classification as nonperforming.

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands)

9 unchanged sentences

Classified loans are generally internally categorized as substandard, doubtful or loss, consistent with regulatory guidelines.

Our secured credit card portfolio is collateralized by cash deposits made by each cardholder in an amount equal to the user's available credit limit, which mitigates the risk of any significant credit losses we expect to incur.

The table below presents the carrying value, gross of the related allowance for loan losses, of our loans within the primary credit quality indicators related to our loan portfolio:

GREEN DOT CORPORATION

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Note 6—Loans to Bank Customers (continued)

Our secured credit card portfolio is collateralized by cash deposits made by each cardholder in an amount equal to the user's available credit limit, which mitigates risk of any significant credit losses we expect to incur.

The table below presents the carrying value, gross of the related allowance for loan losses, of our loans within the primary credit quality indicators related to our loan portfolio:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Non-Classified Classified Non-Classified Classified

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Our TDR modifications involve an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk.

As of March 31, 2020, none of our TDR modifications have been made in response to the COVID-19 pandemic.

The following table presents our impaired loans and loans that we modified as TDRs as of March 31, 2020 and December 31, 2019:

March 31, 2020 December 31, 2019

As of June 30, 2020, none of our TDR modifications have been made in response to the COVID-19 pandemic.

The following table presents our impaired loans and loans that we modified as TDRs as of June 30, 2020 and December 31, 2019:

June 30, 2020 December 31, 2019

Unpaid Principal Balance Carrying Value Unpaid Principal Balance Carrying Value

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Activity in the allowance for loan losses consisted of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

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Balance, end of period $ 570 $ 970 $ 570 $ 970

Note 7— Employee Stock-Based Compensation

We currently grant restricted equity awards to employees and directors under our 2010 Equity Incentive Plan.

Additionally, through our 2010 Employee Stock Purchase Plan, employees are able to purchase shares of our Class A common stock at a discount through payroll deductions.

We have reserved shares of our Class A common stock for issuance under these plans.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 7—Employee Stock-Based Compensation (continued)

Restricted Stock Units

The following table summarizes restricted stock units subject to only service conditions granted under our 2010 Equity Incentive Plan:

Three Months Ended March 31,

(In thousands, except per share data)

Restricted stock units granted 1,234 35

Weighted-average grant-date fair value $ 26.50 $ 66.96

Performance-Based Restricted Stock Units

We grant performance-based restricted stock units to certain employees which are subject to the attainment of pre-established annual performance targets.

The actual number of shares subject to the award is determined at the end of the annual performance period and may range from 0 % to 200 % of the target shares granted.

These awards generally contain an additional service component after each annual performance period is concluded and the unvested balance of the shares determined at the end of the annual performance period will vest over the remaining requisite service period.

Compensation expense related to these awards is recognized using the accelerated attribution method over the vesting period (generally, a period of four years ) based on the fair value of the closing market price of our Class A common stock on the date of the grant and the estimated performance that is expected to be achieved.

The following table summarizes the performance-based restricted stock units granted under our 2010 Equity Incentive Plan:

Three Months Ended March 31,

(In thousands, except per share data)

Performance-based restricted stock units granted (1)

Weighted-average grant-date fair value $ 29.40 $ 57.51

(1) Performance awards granted also reflects, as applicable, the issuance of any shares awarded in excess of their original target amount based on the Compensation Committee's certification of completed performance years.

The grant date fair value for these awards are based on the grant price at the time of the original award.

Performance-Based Stock Options

In connection with the hiring of our new Chief Executive Officer, we granted performance-based stock options with a seven -year term that vest subject to continued service over three years , and upon our company achieving certain stock trading prices within a five -year period.

Compensation expense related to these awards is recognized over the greater of the explicit service period or a derived implicit period based on when the performance targets are expected to be achieved.

The grant date fair value is determined through the use of a Monte Carlo simulation and is not subsequently re-measured.

The following table summarizes the performance-based stock options granted:

Three Months Ended March 31,

(In thousands, except per share data)

Performance-based stock options granted 1,000

Exercise price $ 23.83

Estimated weighted-average grant-date fair value $ 11.17

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 7—Employee Stock-Based Compensation (continued)

For purposes of these consolidated financial statements, the estimated weighted-average grant-date fair value was based on a provisional estimate using the following assumptions:

Three Months Ended March 31,

Risk-free interest rate 0.77 %

Expected term (in years) (1)

Expected dividends —

Expected volatility 53 %

(1) Provisional estimate assumes no early exercise of options.

The total stock-based compensation expense recognized was $ 11.4 million and $ 14.8 million for the three months ended March 31, 2020 and 2019, respectively.

Total stock-based compensation expense includes amounts related to each of the awards discussed above and purchases made under our 2010 Employee Stock Purchase Plan, and reflects, as applicable, accelerated expense recognition associated with our retirement policy.

Under our retirement policy, following a qualified retirement, any service-based requirement for unvested stock awards held by the eligible employee is eliminated.

Accordingly, the related compensation expense is recognized immediately for qualifying awards granted to eligible employees, or in the case of ineligible employees who later become eligible under the retirement policy, over the period from the grant date to the date a qualifying retirement is achieved, if earlier than the standard vesting dates.

Performance-based restricted stock units issued to retirement eligible employees remain subject to the stock awards’ annual performance targets and the expense will be adjusted accordingly based expected achievement.

Note 7— Equity Method Investment

On January 2, 2020, we effectuated our agreement with Walmart to jointly establish a new fintech accelerator under the name TailFin Labs, LLC (“TailFin Labs”), with a mission to develop innovative products, services and technologies that sit at the intersection of retail shopping and consumer financial services.

The entity is majority-owned by Walmart and will focus on developing tech-enabled solutions to integrate omni-channel retail shopping and financial services.

We hold a 20 % ownership interest in the entity, in exchange for annual capital contributions of $ 35.0 million per year through January 2024.

We account for our investment in TailFin Labs under the equity method of accounting in accordance with ASC 323 , Investments – Equity Method and Joint Ventures .

Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for, among other things, its proportionate share of earnings or losses.

However, given the capital structure of the TailFin Labs arrangement, we apply the Hypothetical Liquidation Book Value ("HLBV") method to determine the allocation of profits and losses since our liquidation rights and priorities, as defined by the agreement, differ from our underlying ownership interest.

The HLBV method calculates the proceeds that would be attributable to each partner in an investment based on the liquidation provisions of the agreement if the partnership was to be liquidated at book value as of the balance sheet date.

Each partner’s allocation of income or loss in the period is equal to the change in the amount of net equity they are legally

Note 7—Equity Method Investment (continued)

able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions.

Any future economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties.

We recorded total equity in losses of approximately $ 2.9 million and $ 2.7 million for the three and six months ended June 30, 2020, which is recorded as a component of other income and expense on our consolidated statements of operations.

As of June 30, 2020, our net investment balance is included in the long term portion of the caption entitled prepaid expenses and other assets on our consolidated balance sheet.

Total equity in losses also includes income and losses from an investment held by our bank under the Community Reinvestment Act, which is not material to these consolidated financial statements.

Note 8— Deposits

Deposits are categorized as non-interest or interest-bearing deposits as follows:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands)

8 unchanged sentences

Total deposits $ 2,000,570 $ 1,175,341

Total deposit balances have increased substantially as compared to December 31, 2019, principally as a result of stimulus funds and other government benefits received by our cardholders under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The scheduled contractual maturities for total time deposits are presented in the table below:

March 31, 2020

June 30, 2020

(In thousands)

6 unchanged sentences

Total time deposits $ 4,890

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2019 Revolving Facility

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We classify amounts outstanding as long-term on our consolidated balance sheets, however, we may make voluntary repayments at any time prior to maturity.

In March 2020, we drew down the full amount available to us under our 2019 Revolving Facility to strengthen our liquidity position as a precautionary measure due to the uncertainty associated with the COVID-19 pandemic and to provide flexibility to pursue strategic priorities.

As of March 31, 2020 and December 31, 2019, the outstanding balance on our revolving line of credit was $ 100.0 million and $ 35.0 million, respectively.

In March 2020, we drew down the full amount available under our 2019 Revolving Facility to strengthen our liquidity position as a precautionary measure due to the uncertainty associated with the COVID-19 pandemic and to provide flexibility to pursue strategic priorities, but have since repaid the entire balance drawn as of June 30, 2020.

As of December 31, 2019, the outstanding balance

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 9—Debt (continued)

on our revolving line of credit was $ 35.0 million.

The entire $ 100.0 million remains available for use under the credit facility as of June 30, 2020.

At our election, loans made under the credit agreement bear interest at 1) a LIBOR rate (the “LIBOR Rate") or 2) a base rate determined by reference to the highest of (a) the United States federal funds rate plus .50 %, (a) the Wells Fargo prime rate and (c) a daily rate equal to one-month LIBOR rate plus 1.0 % (the “Base Rate"), plus in either case an applicable margin.

The margin is dependent upon on our total leverage ratio and varies from 1.25 % to 2.00 % for LIBOR Rate loans and .25 % to 1.00 % for Base Rate loans.

The interest rate on our outstanding balance as of March 31, 2020 was 2.00 %.

We also pay a commitment fee, which varies from .20 % to .35 % per annum on the actual daily unused portions of the 2019 Revolving Facility.

Letter of credit fees are payable in respect of outstanding letters of credit at a rate per annum equal to the applicable margin for LIBOR Rate loans.

The 2019 Revolving Facility contains customary representations and warranties relating to us and our subsidiaries.

The facility also contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements.

The 2019 Revolving Facility contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements.

We must also maintain a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as set forth in the credit agreement.

At March 31, 2020, we were in compliance with all such covenants.

At June 30, 2020, we were in compliance with all such covenants.

If an event of default shall occur and be continuing under the facility, the commitments may be terminated and the principal amounts outstanding under the 2019 Revolving Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.

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In March 2019, we elected to make a voluntary prepayment of $ 60.0 million to retire the Term Facility without penalty or additional premium.

Cash interest expense related to our debt was $ 0.2 million and $ 0.6 million for the three months ended March 31, 2020 and 2019, respectively.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Revolving Facility remained available for use until the Senior Credit Facility matured in October 2019, at which point we entered into the 2019 Revolving Facility discussed above.

Cash interest expense related to our debt was $ 0.4 million for the three months ended June 30, 2020 and $ 0.6 million for each of the six months ended June 30, 2020 and 2019.

We did no t incur any cash interest expense during the three months ended June 30, 2019 .

Note 10— Income Taxes

Income tax expense for the three months ended March 31, 2020 and 2019 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes.

Income tax expense for the six months ended June 30, 2020 and 2019 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes.

The sources and tax effects of the differences are as follows:

Three Months Ended March 31,

Six Months Ended June 30,

federal statutory tax rate 21.0 % 21.0 %

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Effective tax rate 23.9 % 20.2 %

The effective tax rate for the three months ended March 31, 2020 and 2019 differs from the statutory federal income tax rate of 21 %, primarily due to state income taxes, net of federal tax benefits, general business credits, employee stock-based compensation, and the Internal Revenue Code (IRC) 162(m) limitation on the deductibility of certain executive compensation.

The increase in the effective tax rate for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 is primarily due to a $ 4.4 million decline in benefit on the recognition of excess tax benefits from stock-based compensation as we recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.2 million for the three months ended March 31, 2020, compared to a $ 3.1 million excess tax benefit for the prior year comparable period.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law.

The CARES Act, among other things, includes certain income tax provisions for individuals and corporations;

The effective tax rate for the six months ended June 30, 2020 and 2019 differs from the statutory federal income tax rate of 21 %, primarily due to state income taxes, net of federal tax benefits, general business credits, employee stock-based compensation, and the Internal Revenue Code (IRC) 162(m) limitation on the deductibility of certain executive compensation.

The increase in the effective tax rate for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 is primarily due to an increase of $ 2.4 million as a result of the IRC 162(m)

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 10—Income Taxes (continued)

limitation on the deductibility of certain executive compensation and a $ 5.8 million decline in excess tax benefits from stock-based compensation.

We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.2 million for the six months ended June 30, 2020, compared to a $ 4.6 million excess tax benefit for the prior year comparable period.

These increases were partially offset by the impact of general business credits.

On March 27, 2020, the CARES Act was signed into law, which, among other things, includes certain income tax provisions for individuals and corporations;

however, these benefits do not impact our current tax provision.

We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred.

For the three months ended March 31, 2020, the provision for GILTI tax expense was not material to our financial statements.

For the six months ended June 30, 2020, the provision for GILTI tax expense was not material to our financial statements.

We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

As of March 31, 2020, we maintained a valuation allowance against our capital loss carryforwards as we believe it is more-likely-than-not that the tax benefits related to the capital loss carryforwards will not be realized.

As of March 31, 2019, we did no t have a valuation allowance on any of our deferred tax assets as we believed it was more-likely-than-not that we would realize the benefits of our deferred tax assets.

As of June 30, 2020, we released our valuation allowance against our capital loss carryforwards, as we recognized capital gains on the sale of certain investment securities during the current period sufficient to offset our capital loss carryforward amount.

Accordingly, it is more-likely-than-not that the tax benefits related to the capital loss carryforwards will be realized before they expire.

As of June 30, 2019, we did no t have a valuation allowance on any of our deferred tax assets as we believed it was more-likely-than-not that we would realize the benefits of our deferred tax assets.

We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities.

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We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates the returns were filed.

As of March 31, 2020, we have federal net operating loss carryforwards of approximately $ 31.9 million, state net operating loss carryforwards of approximately $ 57.9 million, and capital loss carryforwards of approximately $ 1.5 million, which will be available to offset future income.

During the quarter ended June 30, 2020, the IRS initiated an examination of our 2017 U.S.

federal tax return.

We do not expect that this examination will have a material impact on our consolidated financial statements.

As of June 30, 2020, we have federal net operating loss carryforwards of approximately $ 31.9 million and state net operating loss carryforwards of approximately $ 57.9 million which will be available to offset future income.

If not used, the federal net operating losses will expire between 2021 and 2035.

Of our total state net operating loss carryforwards, approximately $ 31.7 million will expire between 2021 and 2039, while the remaining balance of approximately $ 26.2 million does not expire and carries forward indefinitely.

The capital loss carryforwards will expire between the fourth quarter of 2020 and 2023.

The net operating losses are subject to an annual IRC Section 382 limitation, which restricts their utilization against taxable income in future periods.

In addition, we have state business tax credits of approximately $ 16.3 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will expire between 2023 and 2027.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 10—Income Taxes (continued)

As of March 31, 2020 and December 31, 2019, we had a liability of $ 9.7 million and $ 8.3 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits.

As of June 30, 2020 and December 31, 2019, we had a liability of $ 9.7 million and $ 8.3 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits.

The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 9,660 $ 8,481

As of March 31, 2020 and 2019, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 0.6 million and $ 0.4 million, respectively.

As of June 30, 2020 and 2019, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 0.7 million and $ 0.5 million, respectively.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 11— Stockholders' Equity

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In August 2019, we completed final settlement of shares purchased under this agreement, receiving in total approximately 2.1 million shares at an average repurchase price of $ 48.26 .

As of March 31, 2020, we have an authorized $ 50 million remaining under our current stock repurchase program for any additional repurchases.

As of June 30, 2020, we have an authorized $ 50 million remaining under our current stock repurchase program for any additional repurchases.

Walmart Restricted Shares

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Walmart is entitled to voting rights and participate in any dividends paid from the issuance date on the unvested balance, and therefore, the total amount of restricted shares issued are included in our total Class A shares outstanding.

As of March 31, 2020, there were 893,751 unvested shares outstanding.

As of June 30, 2020, there were 812,502 unvested shares outstanding.

The estimated grant-date fair value of the restricted shares is recorded as a component of stock-based compensation expense over the related period we expect to benefit under our relationship with Walmart.

Note 12— Stock-Based Compensation

We currently grant restricted equity awards to employees, directors and non-employee consultants under our 2010 Equity Incentive Plan.

Additionally, through our 2010 Employee Stock Purchase Plan, employees are able to purchase shares of our Class A common stock at a discount through payroll deductions.

We have reserved shares of our Class A common stock for issuance under these plans.

Restricted Stock Units

The following table summarizes restricted stock units subject to only service conditions granted under our 2010 Equity Incentive Plan:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands, except per share data)

Restricted stock units granted 266 53 1,500 89

Weighted-average grant-date fair value $ 38.49 $ 48.63 $ 28.62 $ 55.92

Performance-Based Restricted Stock Units

We grant performance-based restricted stock units to certain employees which are subject to the attainment of pre-established annual performance targets.

The actual number of shares subject to the award is determined at the end of the annual performance period and may range from 0 % to 200 % of the target shares granted.

The following table summarizes the performance-based restricted stock units granted under our 2010 Equity Incentive Plan:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands, except per share data)

Performance-based restricted stock units granted (1)

128 627 572 883

Weighted-average grant-date fair value $ 41.84 $ 49.17 $ 32.18 $ 50.15

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 12—Stock-Based Compensation (continued)

The grant date fair value for these awards are based on the grant price at the time of the original award.

Performance-Based Stock Options

In connection with the recent hiring of certain executive officers, we granted performance-based stock options with a seven -year term that vest subject to continued service over three years , and upon our company achieving certain stock trading prices within a five -year period.

The grant date fair value is determined through the use of a Monte Carlo simulation and is not subsequently re-measured.

The following table summarizes the performance-based stock options granted to date:

Six Months Ended June 30,

(In thousands, except per share data)

Performance-based stock options granted 1,750

Weighted-average exercise price $ 25.70

Weighted-average grant-date fair value $ 11.48

The estimated grant-date fair value of each performance option grant was based on the following weighted-average assumptions:

Six Months Ended June 30,

Risk-free interest rate 0.68 %

Expected term (in years) 3.18

Expected dividends —

Expected volatility 53.4 %

The total stock-based compensation expense recognized was $ 13.6 million and $ 8.4 million for the three months ended June 30, 2020 and 2019, respectively, and $ 25.0 million and $ 23.2 million for the six months ended June 30, 2020 and 2019, respectively.

Under our retirement policy, following a qualified retirement, any service-based requirement for unvested stock awards held by the eligible employee is eliminated.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13— Earnings per Common Share

The calculation of basic and diluted EPS was as follows:

Three Months Ended March 31,

The calculation of basic and diluted earnings per share (EPS) was as follows:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands, except per share data)

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Diluted earnings per Class A common share $ 0.06 $ 0.64 $ 0.93 $ 1.82

The restricted shares issued to Walmart contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing earnings per share pursuant to the two-class method.

The restricted shares issued to Walmart contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing EPS pursuant to the two-class method.

The computation above excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator.

For the periods presented, we excluded certain restricted stock units and stock options outstanding (as applicable), which could potentially dilute basic EPS in the future, from the computation of diluted EPS as their effect was anti-dilutive.

Additionally, we have excluded any performance-based restricted stock units for which the performance contingency has not been met as of the end of the period.

Additionally, we have excluded any performance-based restricted stock units and performance-based stock options where the performance contingency has not been met as of the end of the period.

The following table shows the weighted-average number of shares excluded from the diluted EPS calculation as their effects were anti-dilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

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For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2019.

As of March 31, 2020 and December 31, 2019, our assets and liabilities carried at fair value on a recurring basis were as follows:

As of June 30, 2020 and December 31, 2019, our assets and liabilities carried at fair value on a recurring basis were as follows:

Level 1 Level 2 Level 3 Total Fair Value

March 31, 2020 (In thousands)

June 30, 2020 (In thousands)

Corporate bonds $ — $ 10,058 $ — $ 10,058

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Contingent consideration $ — $ — $ 9,300 $ 9,300

We based the fair value of our fixed income securities held as of March 31, 2020 and December 31, 2019 on quoted prices in active markets for similar assets.

We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three months ended March 31, 2020 or 2019.

The following table presents changes in our contingent consideration payable for the three months ended March 31, 2020 and 2019, which is categorized in Level 3 of the fair value hierarchy:

Three Months Ended March 31,

We based the fair value of our fixed income securities held as of June 30, 2020 and December 31, 2019 on quoted prices in active markets for similar assets.

We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three and six months ended June 30, 2020 or 2019.

The following table presents changes in our contingent consideration payable for the three and six months ended June 30, 2020 and 2019, which is categorized in Level 3 of the fair value hierarchy:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

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Fair Value of Financial Instruments

The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value , at March 31, 2020 and December 31, 2019 are presented in the table below.

The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value , at June 30, 2020 and December 31, 2019 are presented in the table below.

GREEN DOT CORPORATION

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Note 15—Fair Value of Financial Instruments (continued)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Carrying Value Fair Value Carrying Value Fair Value

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Under Topic 842, we determine if an arrangement is or contains a lease at inception.

ROU assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term.

Right-of-use (ROU) assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, we consider only fixed payments stated in the leases at the time of commencement.

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Lease expense is recognized on a straight-line basis over the lease term.

Our total lease expense amounted to approximately $ 2.3 million and $ 1.9 million for the three months ended March 31, 2020 and 2019, respectively.

Our total lease expense amounted to approximately $ 2.2 million and $ 2.7 million for the three months ended June 30, 2020 and 2019, respectively, and $ 4.6 million for each of the six months ended June 30, 2020 and 2019.

Our lease expense is generally based on fixed payments stated within the agreements.

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Supplemental information related to our ROU assets and related lease liabilities is as follows:

March 31, 2020

June 30, 2020

Cash paid for operating lease liabilities (in thousands) $ 4,993

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Note 16—Leases (continued)

Maturities of our operating lease liabilities as of March 31, 2020 is as follows:

Maturities of our operating lease liabilities as of June 30, 2020 is as follows:

Operating Leases

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Financial Commitments

The entity is majority-owned by Walmart and is expected to focus on developing tech-enabled solutions to integrate omni-channel retail shopping and financial services.

We own a 20 % equity interest in the newly formed entity, in exchange for capital contributions of $ 35.0 million per year over the next 5 years.

We account for our investment in TailFin Labs under the equity method of accounting.

Any economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties.

During the three months ended March 31, 2020, we made our first annual capital contribution to TailFin Labs of $ 35.0 million.

As of March 31, 2020, this amount has been classified as a component of our long-term prepaid expenses and other assets on our consolidated balance sheet.

As discussed in Note 7 — Equity Method Investments , we are committed to make annual capital contributions in TailFin Labs, LLC of $ 35.0 million per year through January 2024.

On February 28, 2017, we completed our acquisition of all the membership interests of UniRush, an online direct-to-consumer GPR card and corporate payroll card provider.

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Revenues derived from our products sold at retail distributors constituting greater than 10% of our total operating revenues were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Walmart 29 % 35 % 27 % 32 %

Settlement assets derived from our products sold at retail distributors constituting greater than 10% of the settlement assets outstanding on our consolidated balance sheets were as follows:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Walmart * 13 %

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The following tables present certain financial information for each of our reportable segments for the periods then ended:

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Account Services Processing and Settlement Services Corporate and Other Total

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Operating income $ 27,043 $ 18,208 $ ( 39,861 ) $ 5,390

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Account Services Processing and Settlement Services Corporate and Other Total

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Operating income $ 50,458 $ 24,173 $ ( 30,668 ) $ 43,963

Table of Co n tents

Six Months Ended June 30, 2020

Account Services Processing and Settlement Services Corporate and Other Total

(In thousands)

Operating revenues $ 501,116 $ 193,507 $ ( 16,214 ) $ 678,409

Operating expenses 440,266 116,988 56,916 614,170

Operating income $ 60,850 $ 76,519 $ ( 73,130 ) $ 64,239

Six Months Ended June 30, 2019

Account Services Processing and Settlement Services Corporate and Other Total

(In thousands)

Operating revenues $ 455,665 $ 180,689 $ ( 17,514 ) $ 618,840

Operating expenses 342,361 100,382 50,749 493,492

Operating income $ 113,304 $ 80,307 $ ( 68,263 ) $ 125,348

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements