What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-06 compared with 2020-08-06 · 140 added, 134 removed, 714 unchanged (28% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Assets (In thousands, except par value)

9 unchanged sentences

Investment securities available-for-sale, at fair value 309,374 267,419

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

Loans to bank customers, net of allowance for loan losses of $ 642 and $ 1,166 as of September 30, 2020 and December 31, 2019, respectively

20,423 21,417

26 unchanged sentences

Class A common stock, $ 0.001 par value;

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

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

53,459 and 51,807 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 329,967 296,224

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

12 unchanged sentences

Total operating expenses 293,720 242,635 907,890 736,127

Operating income 5,390 43,963 64,239 125,348

Operating (loss) income ( 2,650 ) ( 2,187 ) 61,589 123,161

Interest expense, net 39 120 723 1,790

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

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

Income tax expense 3,807 9,106 15,762 24,977

Net income $ 3,294 $ 34,692 $ 50,139 $ 98,735

Basic earnings per common share:

Other (expense) income, net ( 1,650 ) 8 696 42

(Loss) income before income taxes ( 4,339 ) ( 2,299 ) 61,562 121,413

Income tax (benefit) expense ( 1,347 ) ( 1,768 ) 14,415 23,209

Net (loss) income $ ( 2,992 ) $ ( 531 ) $ 47,147 $ 98,204

Basic (loss) earnings per common share:

$ ( 0.06 ) $ ( 0.01 ) $ 0.89 $ 1.87

Diluted earnings per common share:

Diluted (loss) earnings per common share:

$ ( 0.06 ) $ ( 0.01 ) $ 0.87 $ 1.84

5 unchanged sentences

GREEN DOT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

(In thousands)

Net income $ 3,294 $ 34,692 $ 50,139 $ 98,735

Net (loss) income $ ( 2,992 ) $ ( 531 ) $ 47,147 $ 98,204

Other comprehensive income

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

Unrealized holding gain, net of tax 756 167 907 2,329

Comprehensive (loss) income $ ( 2,236 ) $ ( 364 ) $ 48,054 $ 100,533

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Three Months Ended June 30, 2020

Three Months Ended September 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

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

Common stock issued under stock plans, net of withholdings and related tax effects 162 — ( 4,922 ) — — ( 4,922 )

Stock-based compensation — — 11,806 — — 11,806

Net income — — — 3,294 — 3,294

Net loss — — — ( 2,992 ) — ( 2,992 )

Other comprehensive income — — — — 756 756

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

Three Months Ended June 30, 2019

Balance at September 30, 2020 53,459 $ 53 $ 329,967 $ 675,906 $ 2,947 $ 1,008,873

Three Months Ended September 30, 2019

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, 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

Common stock issued under stock plans, net of withholdings and related tax effects 76 — ( 1,259 ) — — ( 1,259 )

1 unchanged sentence

Repurchases of Class A common stock ( 406 ) — — — — —

Net income — — — 34,692 — 34,692

Net loss — — — ( 531 ) — ( 531 )

Other comprehensive income — — — — 167 167

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

Balance at September 30, 2019 51,479 $ 52 $ 297,593 $ 627,347 $ 2,192 $ 927,184

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

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

9 unchanged sentences

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

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

Six Months Ended June 30, 2019

Balance at September 30, 2020 53,459 $ 53 $ 329,967 $ 675,906 $ 2,947 $ 1,008,873

Nine Months Ended September 30, 2019

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

7 unchanged sentences

Other comprehensive income — — — — 2,329 2,329

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

Balance at September 30, 2019 51,479 $ 52 $ 297,593 $ 627,347 $ 2,192 $ 927,184

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

6 unchanged sentences

Stock-based compensation 36,793 30,136

Losses in equity method investment 2,716 —

Losses in equity method investments 4,313 —

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

Amortization of premium (discount) on available-for-sale investment securities 618 ( 209 )

Change in fair value of contingent consideration — ( 1,866 )

Amortization of deferred financing costs 127 1,253

24 unchanged sentences

Taxes paid related to net share settlement of equity awards ( 8,153 ) ( 18,159 )

Net increase in deposits 826,203 140,110

Net changes in deposits 1,108,354 ( 133,132 )

Net decrease in obligations to customers ( 84,304 ) ( 25,311 )

2 unchanged sentences

Net cash provided by (used in) financing activities 983,001 ( 335,374 )

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

Net increase (decrease) in unrestricted cash, cash equivalents and restricted cash 1,075,914 ( 230,840 )

Unrestricted cash, cash equivalents and restricted cash, beginning of period 1,066,154 1,095,218

1 unchanged sentence

Cash paid for interest $ 839 $ 2,049

Cash paid for income taxes $ 34 $ 3,702

Cash paid for/(refund from) income taxes $ 5,497 $ ( 3,612 )

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

17 unchanged sentences

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 six months ended June 30, 2020, other than the adoption of the accounting pronouncements discussed herein.

There have been no material changes to our significant accounting policies during the nine months ended September 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.

2 unchanged sentences

accordingly, accounting estimates require the exercise of judgment.

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

These financial statements were prepared using information reasonably available as of September 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.

30 unchanged sentences

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the impact of ASU 2019-12 on our consolidated financial statements.

We do not anticipate any immediate impact on our consolidated financial statements upon adoption.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

We are currently evaluating the provisions of ASU 2020-06, but do not expect any material impact on our consolidated financial statements.

Note 3— Revenues

4 unchanged sentences

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

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

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

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

4 unchanged sentences

$ 230,356 $ 58,694 $ 178,298 $ 55,633

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

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 3—Revenues (continued)

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

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

4 unchanged sentences

$ 709,014 $ 249,463 $ 599,703 $ 233,945

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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

6 unchanged sentences

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

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.

We recognized approximately $ 0.1 million and $ 0.2 million in revenue for the three months ended September 30, 2020 and 2019, respectively, and $ 25.9 million and $ 31.6 million for the nine months ended September 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)

June 30, 2020

September 30, 2020

Corporate bonds $ 10,000 $ 92 $ — $ 10,092

14 unchanged sentences

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:

As of September 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)

June 30, 2020

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

September 30, 2020

Agency bond securities $ 29,886 $ ( 114 ) $ — $ — $ 29,886 $ ( 114 )

Municipal bonds 4,618 ( 241 ) — — 4,618 ( 241 )

Total investment securities $ 34,504 $ ( 355 ) $ — $ — $ 34,504 $ ( 355 )

December 31, 2019

3 unchanged sentences

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

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.

We did no t record any significant credit-related impairment losses during the three and nine months ended September 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.

2 unchanged sentences

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.

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.

During the nine months ended September 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:

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

Amortized cost Fair value

10 unchanged sentences

Accounts receivable, net consisted of the following:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In thousands)

14 unchanged sentences

Overdrawn cardholder balances from maintenance fee assessments are presented net of the consideration we expect to receive under ASC 606 and are recorded as contra-revenue within card revenues and other fees.

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.

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 given their short-term nature.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

10 unchanged sentences

(In thousands)

June 30, 2020

September 30, 2020

Residential $ — $ — $ — $ — $ 3,821 $ 3,821

14 unchanged sentences

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.

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In thousands)

14 unchanged sentences

Note 6—Loans to Bank Customers (continued)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Non-Classified Classified Non-Classified Classified

8 unchanged sentences

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 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

As of September 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 September 30, 2020 and December 31, 2019:

September 30, 2020 December 31, 2019

Unpaid Principal Balance Carrying Value Unpaid Principal Balance Carrying Value

4 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

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.

The entity is majority-owned by Walmart and focuses 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 from January 2020 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 .

3 unchanged sentences

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

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 7—Equity Method Investment (continued)

1 unchanged sentence

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.

As of September 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.

We recorded total equity in losses of approximately $ 1.6 million and $ 4.3 million for the three and nine months ended September 30, 2020, which are recorded as a component of other income and expense on our consolidated statements of operations.

Total equity in losses also includes income and losses from an investment held by our bank under the Community Reinvestment Act, which is inconsequential to these consolidated financial statements.

Note 8— Deposits

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In thousands)

10 unchanged sentences

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

June 30, 2020

September 30, 2020

(In thousands)

11 unchanged sentences

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 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

As of December 31, 2019, the outstanding balance 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 September 30, 2020.

GREEN DOT CORPORATION

1 unchanged sentence

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.

4 unchanged sentences

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

At September 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.

4 unchanged sentences

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 .

We did no t incur any cash interest expense related to our debt during the three months ended September 30, 2020 and 2019 .

Cash interest expense was $ 0.6 million for each of the nine months ended September 30, 2020 and 2019.

Note 10— 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.

Income tax expense for the nine months ended September 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:

Six Months Ended June 30,

Nine Months Ended September 30,

federal statutory tax rate 21.0 % 21.0 %

6 unchanged sentences

Effective tax rate 23.4 % 19.1 %

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)

The effective tax rate for the nine months ended September 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

GREEN DOT CORPORATION

1 unchanged sentence

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.

certain executive compensation.

The increase in the effective tax rate for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 is primarily due to an increase of $ 0.5 million in taxable income resulting from the IRC 162(m) limitation on the deductibility of certain executive compensation and a $ 3.9 million decline in excess tax benefits from stock-based compensation.

We recognized an excess tax benefit on stock compensation of $ 0.5 million for the nine months ended September 30, 2020, compared to a $ 4.4 million excess tax benefit for the prior year comparable period.

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

2 unchanged sentences

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

For the nine months ended September 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 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.

During the second quarter 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 that period sufficient to offset our capital loss carryforward amount.

As of September 30, 2020 and December 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.

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

1 unchanged sentence

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.

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

federal tax return.

The IRS initiated an examination of our 2017 U.S.

federal tax return during the second quarter June 30, 2020 and the examination remains ongoing.

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.

As of September 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.

2 unchanged sentences

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.

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.

As of September 30, 2020 and December 31, 2019, we had a liability of $ 9.8 million and $ 8.4 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:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

2 unchanged sentences

Increases related to positions taken during the current year 1,200 1,569

Decreases as a result of a lapse of applicable statute of limitations — ( 456 )

Ending balance $ 9,833 $ 8,078

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 9,657 $ 8,023

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.

As of September 30, 2020 and 2019, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 0.8 million and $ 0.4 million, respectively.

GREEN DOT CORPORATION

5 unchanged sentences

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

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

Walmart Restricted Shares

2 unchanged sentences

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

As of September 30, 2020, there were 731,253 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.

5 unchanged sentences

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,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 12—Stock-Based Compensation (continued)

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,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

Performance-based restricted stock units granted (1)

128 627 572 883

Weighted-average grant-date fair value $ 51.25 $ — $ 34.82 $ 50.15

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 12—Stock-Based Compensation (continued)

(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.

5 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands, except per share data)

3 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Risk-free interest rate 0.63 %

2 unchanged sentences

Expected volatility 53.8 %

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.

The total stock-based compensation expense recognized was $ 11.8 million and $ 6.9 million for the three months ended September 30, 2020 and 2019, respectively, and $ 36.8 million and $ 30.1 million for the nine months ended September 30, 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.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13— Earnings per Common Share

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

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

Note 13— Earnings (Loss) per Common Share

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

(In thousands, except per share data)

Basic earnings per Class A common share

Net income $ 3,294 $ 34,692 $ 50,139 $ 98,735

Income attributable to unvested Walmart restricted shares ( 52 ) — ( 828 ) —

Net income allocated to Class A common stockholders $ 3,242 $ 34,692 $ 49,311 $ 98,735

Basic earnings (loss) per Class A common share

Net (loss) income $ ( 2,992 ) $ ( 531 ) $ 47,147 $ 98,204

Amount attributable to unvested Walmart restricted shares 43 — ( 742 ) —

Net (loss) income allocated to Class A common stockholders $ ( 2,949 ) $ ( 531 ) $ 46,405 $ 98,204

Weighted-average Class A shares issued and outstanding 52,635 51,595 52,269 52,405

Basic earnings per Class A common share $ 0.06 $ 0.66 $ 0.95 $ 1.87

Diluted earnings per Class A common share

Net income allocated to Class A common stockholders $ 3,242 $ 34,692 $ 49,311 $ 98,735

Basic (loss) earnings per Class A common share $ ( 0.06 ) $ ( 0.01 ) $ 0.89 $ 1.87

Diluted earnings (loss) per Class A common share

Net (loss) income allocated to Class A common stockholders $ ( 2,949 ) $ ( 531 ) $ 46,405 $ 98,204

Re-allocated earnings ( 1 ) — 16 —

Diluted net income allocated to Class A common stockholders $ 3,243 $ 34,692 $ 49,324 $ 98,735

Diluted net (loss) income allocated to Class A common stockholders $ ( 2,950 ) $ ( 531 ) $ 46,421 $ 98,204

Weighted-average Class A shares issued and outstanding 52,635 51,595 52,269 52,405

5 unchanged sentences

Diluted weighted-average Class A shares issued and outstanding 54,082 52,295 53,455 53,474

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

Diluted (loss) earnings per Class A common share $ ( 0.06 ) $ ( 0.01 ) $ 0.87 $ 1.84

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.

3 unchanged sentences

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

13 unchanged sentences

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

As of September 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

June 30, 2020 (In thousands)

September 30, 2020 (In thousands)

Corporate bonds $ — $ 10,092 $ — $ 10,092

13 unchanged sentences

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

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,

We based the fair value of our fixed income securities held as of September 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 nine months ended September 30, 2020 or 2019.

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Payments of contingent consideration ( 1,000 ) ( 1,000 ) ( 3,000 ) ( 3,634 )

Change in fair value of contingent consideration — ( 1,866 ) — ( 1,866 )

Balance, end of period $ 6,300 $ 10,300 $ 6,300 $ 10,300

24 unchanged sentences

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 June 30, 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 September 30, 2020 and December 31, 2019 are presented in the table below.

GREEN DOT CORPORATION

1 unchanged sentence

Note 15—Fair Value of Financial Instruments (continued)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Carrying Value Fair Value Carrying Value Fair Value

22 unchanged sentences

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

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 total lease expense amounted to approximately $ 2.3 million and $ 3.5 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.9 million and $ 8.1 million for the nine months ended September 30, 2020 and 2019, respectively.

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

2 unchanged sentences

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

June 30, 2020

September 30, 2020

Cash paid for operating lease liabilities (in thousands) $ 7,455

4 unchanged sentences

Note 16—Leases (continued)

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

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

Operating Leases

43 unchanged sentences

Financial Commitments

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.

As discussed in Note 7 — Equity Method Investment , we are committed to make annual capital contributions in TailFin Labs, LLC of $ 35.0 million per year from January 2020 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.

5 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

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:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Walmart * 13 %

13 unchanged sentences

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Account Services Processing and Settlement Services Corporate and Other Total

2 unchanged sentences

Operating expenses 211,216 52,613 29,891 293,720

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

Three Months Ended June 30, 2019

Operating income (loss) $ 26,919 $ 6,769 $ ( 36,338 ) $ ( 2,650 )

Three Months Ended September 30, 2019

Account Services Processing and Settlement Services Corporate and Other Total

2 unchanged sentences

Operating expenses 173,014 49,151 20,470 242,635

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

Six Months Ended June 30, 2020

Operating income (loss) $ 18,259 $ 6,874 $ ( 27,320 ) $ ( 2,187 )

Nine Months Ended September 30, 2020

Account Services Processing and Settlement Services Corporate and Other Total

3 unchanged sentences

Operating income $ 87,769 $ 83,288 $ ( 109,468 ) $ 61,589

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Account Services Processing and Settlement Services Corporate and Other Total

4 unchanged sentences

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