What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-03-02 · 223 added, 195 removed, 331 unchanged (56% of the section changed)

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In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under “Part I, Item 1A.

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including the impact of the coronavirus (COVID-19) pandemic on our business, results of operations and financial condition and our and the U.S.

government’s response to it, and the impact of the coronavirus (COVID-19) pandemic on our business, results of operations and financial condition and our and the U.S.

government’s response to it, and those identified below, under “Part I, Item 1A.

Risk Factors,” and elsewhere herein.

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In this Annual Report, unless otherwise specified or the context otherwise requires, “Green Dot,” “we,” “us,” and “our” refer to Green Dot Corporation and its consolidated subsidiaries.

Green Dot Corporation is a financial technology leader and bank holding company with a mission to reinvent banking for the masses.

Our company’s long-term strategy is to create a unique, sustainable and highly valuable fintech ecosystem, in part through the continued evolution of Green Dot’s innovative Banking as a Service (“BaaS”) platform, that’s intended to fuel the engine of innovation and growth for Green Dot and its business partners.

Enabled by proprietary technology, our commercial bank charter and our high-scale program management operating capability, our vertically integrated technology and banking platform is used by a growing list of America’s most prominent consumer and technology companies to design and deploy their own bespoke financial services solutions to their customers and partners, while we use that same integrated platform for our own leading collection of banking and financial services products marketed directly to consumers through what we believe to be the most broadly distributed, omni-channel branchless banking platforms in the United States.

Green Dot Corporation is a financial technology and registered bank holding company focused on making modern banking and money movement accessible for all.

Our goal is to deliver trusted, best-in-class money management and payment solutions to our customers and partners, seamlessly connecting people to their money.

Our proprietary technology enables faster, more efficient electronic payments and money management, powering intuitive and seamless ways for people to spend, send, control and save their money.

Through our bank, we offer a suite of financial products to consumers and businesses including debit, prepaid, checking, credit and payroll cards, as well as robust money processing services, such as tax refund processing, cash deposits and disbursements.

Our products and services are divided among our two reportable segments:

1) Account Services and 2) Processing and Settlement Services.

We also consider our product and service offerings based on our market distribution strategies, which we refer to as our Consumer Business and Platform Services Business.

Refer to " Part 1, Item 1.

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Year Ended December 31,

2020 2019 Change %

(In thousands, except percentages)

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Total operating expenses 1,223,687 985,677 238,010 24.1 %

Net income 23,131 99,897 (76,766) (76.8) %

Impact of COVID-19

The unprecedented and rapid spread of the COVID-19 pandemic and the measures implemented to contain it have created a significant amount of economic volatility in our markets.

We have taken steps to ensure the health and safety of our employees and continued service to our customers and partners, while at the same time seeking to mitigate the impact of the pandemic on our financial condition and results of operations.

Our employees and business continuity

In response to the pandemic, we enacted business continuity plans in Shanghai, China and across the U.S., mandated that our employees work from home, required contractors to work remotely and implemented strict travel

restrictions.

To date, our U.S.

employees have been successful in maintaining our operations in a remote work environment and our offices in China have since reopened consistent with local guidelines.

Most of our U.S.

personnel will continue to operate remotely for the foreseeable future.

While we experienced disruption in staffing levels at our third-party call centers across the globe in the first half of 2020, staffing levels have been restored to appropriate levels and we continue to monitor the situation, as we evaluate future operating plans.

In response to our remote employee workforce strategy in the U.S., we have commenced closure of most our leased office locations beginning in 2021.

However, we will be required to continue making our contractual payments until our operating leases are formally terminated or expire.

Demand for our products and services

Beginning in March 2020, the business and operations of our retail distributors, employers offering our PayCard programs and certain of our BaaS partners have been disrupted, with many experiencing reduced foot traffic or usage of their products and services.

The conditions caused by the COVID-19 pandemic adversely affected our customers’ spending levels and the ability or willingness to purchase our products and services through our retail distributors, lowered the volume of transactions through our BaaS and PayCard programs and delayed the launching of new products and services.

Subsequently, governmental actions in the second quarter of 2020, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) helped mitigate the effects of COVID-19 on our business.

In particular, stimulus funds and incremental unemployment benefits provided under the CARES Act and a fundamental shift in consumer behavior towards electronic payments have created a higher demand and usage of our products and services.

On a year-over-year basis, our gross dollar volume, purchase volume and the number of active accounts grew year-over-year by 34%, 16% and 8%, respectively, compared to December 31, 2019.

In December 2020, an additional $900 billion economic stimulus package was signed into law, providing for additional direct payments and enhanced unemployment benefits through March 2021.

There has also been significant discussion among lawmakers regarding another economic relief package, which may provide for further direct payments and extend unemployment benefits.

While we believe our cardholder programs will continue to benefit from current and potentially further governmental economic relief packages, as well as the accelerated adoption of digital payments during the pandemic, we expect our key performance indicators will normalize as the effect of governmental actions lessen.

Impact on interest income, cost structure and liquidity

Interest Income

The Federal Reserve announced reductions in short-term interest rates in March 2020 that have lowered the yields on our cash and investment balances and therefore, we have experienced a reduction in the amount of interest income we earn.

An extended duration of near zero short-term interest rates will continue to impact the amount of net interest income we earn in the future.

Cost Structure

We have experienced increased costs, including higher disputed transaction losses, which were exacerbated by the disruption in staffing levels at our third-party call centers in the first half of 2020.

We have implemented cost-saving measures to offset increased costs and are otherwise working to continue mitigating the conditions driving our higher costs.

We have taken steps to strengthen our liquidity position and ensure we have ample flexibility to pursue strategic priorities, including utilizing our revolving credit facility, strictly managing our enterprise-wide employee headcount and delaying or reducing non-critical projects.

We currently have the full $100 million available to us under our revolving credit facility should we need it to invest in strategic initiatives.

Additionally, the CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

As of December 31, 2020, we have deferred payment of approximately $3.9 million.

However, if another economic relief package is signed into law that provides for substantial additional direct payments and unemployment benefits, we may need to increase the size of our cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments.

The duration and magnitude of the effects of COVID-19 remain uncertain and dependent on various factors, including the continued severity and transmission rate of the virus and new variants of the virus, the nature of and duration for which the preventative measures remain in place, the extent and effectiveness of containment and

mitigation efforts, including vaccination programs, the type of stimulus measures and other policy responses that the U.S.

government may further adopt, and the impact of these and other factors on our employees, customers, retail distributors, partners and vendors.

See Part II, Item 1A, Risk Factors , for an additional discussion of risk related to the COVID-19 pandemic.

Total operating revenues

Our total operating revenues for the year ended December 31, 2019 increased $43.0 million , or 4.0% over the prior year comparable period.

The year-over-year increase was driven by revenue growth in certain Platform Services within our Processing and Settlement Services segment, principally from growth in the total number of cash transfers, disbursements through our Simply Paid platform and tax refunds processed.

This increase was partially offset by a slight decrease in revenues from our Account Services segment, primarily attributable to an overall decline of 5.6% in our number of total active accounts.

Within Account Services, our Consumer business experienced a year-over-year decline in active accounts, partially offset by growth in the number of active accounts from our BaaS and PayCard programs under our Platform Services category.

This growth of active accounts from our Platform Services powered year-over-year growth of 4.9% in the number of direct deposit active accounts, which contributed to year-over-year growth of 8.6% in gross dollar volume and 3.9% in purchase volume, and corresponding growth in interchange revenue of 6.2% during the year ended December 31, 2019 .

Accounts enrolled in direct deposit tend to generate higher levels of gross dollar volume and purchase volume than other active accounts, and consequently have a greater impact on the amount of interchange revenue we earn.

Our Account Services revenue during the year ended December 31, 2019 also benefited from a strong year-over-year increase in net interest income due to higher yields on our cash and investment balances as a result of the full year impact in 2019 of the rate increases by the Federal Reserve over the course of 2018 and higher average balances thereof.

In future periods we may experience declines in our net interest income due to an evolving interest rate environment.

As a result of uncertainties around global economic growth and trade, the Federal Reserve recently announced a reduction in short-term interest rates, with additional reductions possible in the future.

Further reductions in short-term interest rates could result in a decrease in the amount of net interest income we earn for the remainder of the year and in the near term.

The decline in our active accounts in recent periods is in part attributable to changes in our competitive environment within our Consumer business, particularly as new entrants market largely free bank account offerings.

While we expect these trends to continue to negatively impact our number of active accounts in the short term, we believe the early adoption rates for our new products, our innovative product roadmap and our strong infrastructural competitive advantages make us well positioned to address these competitive pressures.

Our total operating revenues for the year ended December 31, 2020 increased $145.2 million , or 13.1% over the prior year comparable period, generating revenue growth principally from our Account Services segment and to a lesser extent, our Processing and Settlement Services segment.

Account Services

Within our Account Services segment, total operating revenues increased year-over-year by 16% for the year ended December 31, 2020, primarily attributable to growth in our key metrics, such as gross dollar volume and purchase volume.

The growth in our key metrics resulted in year-over-year increases in BaaS program management service fee revenues earned from platform partners, monthly maintenance fee assessments and interchange revenues, partially offset by an increase in estimated cash back rewards that we record as a reduction to card revenues and other fees.

We also experienced a year-over-year decline in net interest income during the year ended December 31, 2020 due to lower yields on our cash and investment balances as a result of rate decreases by the Federal Reserve.

The growth in gross dollar volume was driven principally from the growth in the number of direct deposit active accounts, as new and existing customers utilized our platform to receive stimulus funds and unemployment benefits under the CARES Act and the additional stimulus package that was passed by the federal government in December 2020.

While we believe gross dollar volume is a strong indicator of our revenue for all our account programs and believe our long term strategy and unique collection of assets and product offerings provide an advantage to address the competitive pressures we face from new entrants, such as "challenger" banks, current economic conditions caused by the COVID-19 pandemic have created mixed trends in our business that make it difficult to forecast future results.

We saw an increased proportion of ACH deposits coming from government benefits when account holders filed for unemployment benefits during the year.

The December stimulus package reinstituted supplemental federal unemployment benefits at $300 per week through March 2021.

While such state and federal unemployment benefits helped to offset the economic impact of the pandemic, it remains unclear whether such benefits will be maintained, significantly reduced or replaced after March 2021, which may impact our future results.

In January 2021, we announced the launch of GO2bank, a new mobile bank designed to help the majority of Americans living paycheck to paycheck build a stronger financial foundation.

GO2bank is designed to help our customers lower the cost of accessing and managing their money and offers features such as overdraft protection, high-value rewards, high-interest savings, and opportunities to establish, build, and track credit, regardless of credit history.

While still in its early stages, we remain encouraged by the growth opportunity GO2bank provides to our financial results in 2021 and beyond.

Processing and Settlement Services

Within our Processing and Settlement Services segment, total operating revenues increased slightly year-over-year by 1%.

Our processing and settlement services revenues increased due to a higher number of tax refund payments processed and the introduction of new tax processing services, as well as growth in the number of cash transfers, partially offset by a year-over-year decline in Simply Paid disbursement transactions due to the continued effects of the COVID-19 pandemic on the rideshare industry.

During the fourth quarter of 2020, we experienced a modest decline in the number of cash transfers and the related revenue, as compared to the same period in 2019, as a result of the non-renewal of a reload partner arrangement.

The impact to net income was limited due to the lower profitability of this arrangement.

The non-renewal of this agreement will impact the number of cash transfers in 2021.

However, any year-over-year growth or decline in cash transfers in 2021 will be dependent on multiple factors, including the level of growth in our Account Services programs.

In addition, we anticipate revenues from our tax processing services to decline year-over-year in 2021 as result of securing a multi-year agreement with one of our largest customers in exchange for lower economics on tax refund transfers.

Total operating expenses

Our total operating expenses for the year ended December 31, 2020 increased $238.0 million, or 24.1% over the prior year comparable period.

This increase was primarily the result of several factors, including higher sales and marketing expenses attributable to the year-over-year increases in operating revenues generated from products that are subject to revenue-sharing arrangements with our distributors and partners, our marketing investment in the recent launch of our Green Dot Unlimited Cash Back Bank Account ("Green Dot Unlimited"), and higher processing expenses as a result of increased transactional usage.

These increases were offset by a decrease in compensation and benefits expenses primarily due to lower employee stock-based compensation expense as a result of the modification of certain performance-based equity awards and adjustments for the estimated payouts thereof.

We also experienced an overall decrease in other general and administrative expenses principally related to a prior year expense associated with the resolution of an earn-out for our tax refund processing business, which did not recur in the current year.

As previously announced we renewed our Walmart MoneyCard agreement in October 2019.

The term of the agreement began on January 1, 2020 and expires on January 31, 2027, with an automatic renewal clause for an additional period of one year, subject to certain terms as discussed in the agreement.

Revenues generated under the MoneyCard program have represented a substantial, but declining portion of our total operating revenues.

Under this new agreement, the sales commission rate we pay to Walmart for the MoneyCard program increased from the prior agreement.

Consequently, we expect our sales and marketing expenses in 2020 to be negatively impacted by the increased commission rate.

Income tax expense for the year ended December 31, 2019 increased $16.1 million from the prior year comparable period.

The increase was principally due to a $18.5 million decline in benefit from the recognition of excess tax benefits of stock-based compensation and additional expenses related to state taxes, net of federal benefits.

This increase was primarily the result of several factors, including higher processing expenses associated with the growth of certain BaaS account programs and an increase in other general and administrative expenses, primarily due to a year-over-year increase in dispute transaction losses and impairment charges to long-lived assets we no longer intend to utilize.

We also experienced higher compensation and benefits expenses, principally due to higher stock-based compensation expenses, which was driven by higher achievement of performance-based equity awards relative to the prior year period and in part by inducement awards issued in connection with several key executive hires during the period.

Compensation and benefits also increased due to higher accrued bonus compensation for non-executive employees and increased severance costs associated with the reorganization of our leadership team.

For the year ended December 31, 2020, we also experienced higher sales and marketing expenses attributable to the year-over-year increases in operating revenues generated from products and services that are subject to revenue-sharing arrangements with our distributors and partners.

In addition, under our current Walmart MoneyCard agreement, effective January 1, 2020, the sales commission rate we pay to Walmart for the MoneyCard program increased from the prior agreement.

While we continue to build operational efficiencies within our customer service operations, in the short-term, we have incurred significantly higher dispute transaction losses year-over-year, primarily due to higher volumes of incoming customer disputes and operational disruptions caused by the COVID-19 pandemic.

While we do not anticipate these conditions to persist over the long-term, dispute transaction losses have negatively impacted other general and administrative expenses for the year ended December 31, 2020, which we expect will normalize in 2021 as our improvement measures begin to take effect.

In response to the COVID-19 pandemic, our U.S.

employees have shifted to a fully remote workforce strategy and we expect to continue operating in a remote environment for the foreseeable future.

As a result, we have commenced closure of most our leased office locations in the U.S.

beginning in 2021.

While we will be required to continue making our contractual payments until our operating leases are formally terminated or expire, we recorded impairment charges to our operating lease right-of-use assets and related property and equipment located at our office facilities during the period.

We also recorded impairment charges of internal-use software related to legacy platforms that have been replaced by new technology platforms expected to better scale with our operations.

Total impairment charges to long-lived assets amounted to approximately $21.7 million for the year ended December 31, 2020.

Income tax expense for the year ended December 31, 2020 decreased $16.2 million from the prior year comparable period.

The decrease in income tax expense was primarily driven by the decline in our operating income, as our effective tax rate of 17.7% for the year ended December 31, 2020 remained consistent with the prior year comparable period.

Our effective tax rate for the year ended December 31, 2020 and 2019 is lower than our statutory federal income tax rate primarily due to tax benefits from general business credits and stock-based compensation, offset by higher taxes from non-deductible executive compensation.

We review a number of metrics to help us monitor the performance of, and identify trends affecting, our business.

We believe the following measures are the primary indicators of our revenues:

Year Ended December 31,

Year Ended December 31, Year Ended December 31,

2020 2019 Change % 2019 2018 Change %

(In millions, except percentages)

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These metrics also serve as leading indicators of revenue generated through our Account Services segment products, inclusive of interest income generated on deposits held at Green Dot Bank, fees charged to account holders and interchange revenues generated through the spending of account balances.

The increases in gross dollar volume in the aggregate and from direct deposit sources during the year ended December 31, 2019 from the comparable prior year period were principally driven by the increase in the number of direct deposit active accounts over the same period.

The increases in gross dollar volume in the aggregate and from direct deposit sources during the year ended December 31, 2020 from the comparable prior year period were principally driven by the increase in the number of direct deposit active accounts and stimulus funds and unemployment benefits received under the CARES Act and additional Economic Impact Payments received at the end of December 2020.

Number of Active Accounts — represents accounts in our portfolio that had a purchase, deposit or ATM withdrawal transaction during the applicable quarter.

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Our direct deposit active accounts, on average, have the longest tenure and generate the majority of our gross dollar volume in any period and thus, generate more revenue over their lifetime than other active accounts.

Despite our year-over-year decrease in the number of active accounts, resulting principally from lower unit sales of prepaid accounts within our retail and digital Consumer business, we had an increase in direct deposit active accounts of 4.9% as of December 31, 2019 on a year-over-year basis, primarily driven by growth in the number of active accounts from our BaaS and PayCard programs within our Platform Services category, which tend to enroll in direct deposit at a higher rate as compared to accounts generated under other programs.

As of December 31, 2020, we experienced an increase on a year-over-year basis in the number of active accounts and direct deposit active accounts of 8% and 15%, respectively, primarily driven by new and existing customers utilizing our platform to receive stimulus funds and unemployment benefits provided for under the CARES Act and the accelerated adoption of digital payments during the pandemic.

Purchase Volume — represents the total dollar volume of purchase transactions made by our account holders.

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We review this metric as a measure of the size and scale of our retail cash processing network, as an indicator of customer engagement and usage of our products and services, and to analyze cash transfer revenue, which is a key component of our financial performance.

Our cash transfers increase d 9.0% during the year ended December 31, 2019 over the comparable prior year period primarily due to the number of third-party account programs that utilize the Green Dot Network to accept funds through our cash processing network.

Our cash transfers increased 5.8% during the year ended December 31, 2020 over the comparable prior year period primarily due to an increase in the number of third-party account programs that utilize the Green Dot Network to accept cash reloads.

As discussed above, during the fourth quarter of 2020, we experienced a modest decline in the number of cash transfers and the related revenue, as compared to the same period in 2019, as a result of the non-renewal of a reload partner arrangement.

Number of Tax Refunds Processed — represents the total number of tax refunds processed in a specified period.

We review this metric as a measure of the size and scale of our tax refund processing platform and as an indicator of consumer engagement and usage of its products and services.

The increase in the number of tax refunds processed of 3.2% for the year ended December 31, 2019 from the comparable prior year period was primarily driven by increased volumes from certain online consumer tax filing software platforms.

The increase in the number of tax refunds processed of 3.1% for the year ended December 31, 2020 from the comparable prior year period was primarily due to an increase in refunds processed through online consumer tax filing software platforms, compared to the prior year period.

Key components of our results of operations

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We charge ATM fees to cardholders when they withdraw money at certain ATMs in accordance with the terms and conditions in our cardholder agreements.

We charge new card fees, if applicable, when a consumer purchases a GPR card, gift card, or a checking account product.

We charge new card fees, if applicable, when a consumer purchases a GPR card, gift card,

or a checking account product.

Other revenues consist primarily of revenue associated with our gift card program, annual fees associated with our secured credit card portfolio, transaction-based fees, fees associated with optional products or services, and cash-back rewards we offer to cardholders.

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Our aggregate other fees vary primarily based upon account sales of all types, gift card sales, purchase transactions and the number of active accounts in our portfolio.

Processing and Settlement Service Revenues — Processing and settlement service revenues consist of cash transfer revenues, tax refund processing service revenues and Simply Paid disbursement revenues.

Processing and Settlement Service Revenues — Processing and settlement service revenues consist of cash transfer revenues, tax refund processing service revenues, Simply Paid disbursement revenues and other tax processing service revenues.

We earn cash transfer revenues when consumers fund their cards through a reload transaction at a Green Dot Network retail location.

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Interest Income, net — Net interest income represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities held at Green Dot Bank.

Interest-earning assets include customer deposits, loans, and investment securities.

Interest-earning assets include cash from customer deposits, loans, and investment securities.

Our interest-bearing liabilities held at Green Dot Bank include interest-bearing deposits.

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We generally establish commission percentages in long-term distribution agreements with our retail distributors and platform partners.

Aggregate commissions with our retail distributors are determined by the number of prepaid cards, checking account products and cash transfers sold at their respective retail stores.

Aggregate commissions with our retail distributors are determined by the number of account products and cash transfers sold at their respective retail stores.

Commissions with our platform partners and, in certain cases, our retail distributors are determined by the revenue generated from the ongoing use of the associated card programs.

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Our income tax expense consists of the federal and state corporate income taxes accrued on income resulting from the sale of our products and services.

Critical Accounting Policies and Estimates

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.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP.

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Revenue Recognition

As prescribed under our recent adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers, we recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, as determined under a five-step process.

As prescribed under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, we recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, as determined under a five-step process.

Our new card fee provides our cardholders a material right and accordingly we defer and recognize new card fee revenues on a straight-line basis over the period commensurate with our performance obligation to our customers.

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For GPR cards, average card lifetime is determined based on recent historical data using the period from sale (or activation) of the card through the date of last positive balance.

We reassess average card lifetime quarterly.

Average card lifetimes may vary in the future as cardholder behavior changes relative to historical experience because customers are influenced by changes in the pricing of our services, the availability of substitute products, and other factors.

We reassess average card lifetime quarterly for GPR cards and annually for gift cards.

lifetimes may vary in the future as cardholder behavior changes relative to historical experience because customers are influenced by changes in the pricing of our services, the availability of substitute products, and other factors.

We also defer commissions paid to retail distributors related to new card sales as costs to obtain contracts and expense ratably over the average card lifetime commensurate with our GPR and gift cards.

Transaction prices related to our account services are based on stand-alone fees stated within the terms and conditions and may also include certain elements of variable consideration depending upon the product’s features, such as cardholder incentives, cash-back rewards, monthly fee concessions and reserves on accounts that may become overdrawn.

Transaction prices related to our account services are based on stand-alone fees stated within the terms and conditions and may also include certain elements of variable consideration depending upon the product’s features, such as cash-back rewards and reserves on accounts that may become overdrawn.

We estimate such amounts using historical data and customer behavior patterns to determine these estimates which are recorded as a reduction to the corresponding fee revenue.

Additionally, while the number of transactions that a cardholder may perform is unknown, any uncertainty is resolved at the end of each daily service contract.

We report our different types of revenues on a gross or net basis based on our assessment of whether we act as a principal or an agent in the transaction.

To the extent we act as a principal in the transaction, we report revenues on a gross basis.

In concluding whether or not we act as a principal or an agent, we evaluate whether we obtain control of the good or service prior to the good or service being transferred to the customer.

For all our significant revenue-generating arrangements, we record revenues on a gross basis except for our tax refund processing service revenues which are recorded on a net basis.

Stock-Based Compensation

We record employee stock-based compensation expense based on the grant-date fair value.

For stock options and stock purchases under our employee stock purchase plan, we base compensation expense on fair values estimated at the grant date using the Black-Scholes option-pricing model.

For stock awards, including restricted stock units, we base compensation expense on the fair value of our Class A common stock at the grant date.

We recognize compensation expense for awards with only service conditions that have graded vesting schedules on a straight-line basis over the vesting period of the award.

Vesting is based upon continued service to our company.

For performance based awards, we recognize compensation cost for the restricted stock units if and when we conclude it is probable that the performance will be satisfied, over the requisite service period based on the grant-date fair value of the stock.

We reassess the probability of vesting at each reporting period and adjust compensation expense based on the probability assessment.

For market based restricted stock units, we base compensation expense on the fair value estimated at the date of grant using a Monte Carlo simulation or similar lattice model.

We recognize compensation expense over the requisite service period regardless of the market condition being satisfied, provided that the requisite service has been provided, since the estimated grant date fair value already incorporates the probability of outcomes that the market condition will be achieved.

Based on our recent adoption of Accounting Standards Update No.

2018-07, Compensation – Stock Compensation (Topic 718):

Improvements to Non-employee Share-Based Payment Accounting, we measure the fair value of equity instruments issued to non-employees based on the grant-date fair value, and recognize the related expense in the same periods that the goods or services are received.

The amount of cash-back rewards on our programs varies based on multiple factors, including the terms and conditions for cardholder eligibility, the redemption amount based on cardholder activity, and the cardholder redemption rates.

We accrue our estimated cash-back rewards as a component of other accrued liabilities on our consolidated balance sheets and as a reduction to card revenues and other fees on our consolidated statements of operations.

Cash rewards have increased by approximately 123% for the year ended December 31, 2020 compared to the prior year period, as our cash-back programs have grown, principally from our Green Dot Unlimited product launched in the second half of 2019.

Increases or decreases in our estimate of cash-back rewards is dependent upon cardholder behavioral changes and we periodically evaluate our estimation process and assumptions based on developments in redemption patterns, dollars redeemed and other cardholder behavioral trends.

A relatively small change in any of our assumptions could result in a sizable increase or decrease in the amount of cash-back rewards we accrue.

For example, on our Green Dot Unlimited product, a combination of a 1% increase in cardholder eligibility and a $1 increase in the average redemption amount would translate to additional cash rewards of approximately $0.6 million.

Differences between actual results and our estimates are adjusted in the period that each cardholder's annual rewards cycle is completed.

Reserve for Uncollectible Overdrawn Accounts

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While we decline authorization attempts for amounts that exceed the available balance in a cardholder’s account, the application of card association rules, the timing of the settlement of transactions and the assessment of the card’s monthly maintenance fee, among other things, can result in overdrawn accounts.

Overdrawn account balances are deemed to be our

receivables due from cardholders, and we include them as a component of accounts receivable, net, on our consolidated balance sheets.

Overdrawn account balances are deemed to be our receivables due from cardholders, and we include them as a component of accounts receivable, net, on our consolidated balance sheets.

We generally recover overdrawn account balances from those cardholders that perform a reload transaction.

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We classify overdrawn accounts into age groups based on the number of days since the account last had repayment activity.

We then calculate a reserve factor for each age group based on the average recovery rate for the most recent six months.

We then calculate a reserve factor for each age group based on the average recovery rate for the most recent six months discussed above.

These factors are applied to these age groups to estimate our overall reserve.

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Our actual recovery rates and related estimates thereof may change in the future in response to factors such as customer behavior, product pricing and features that impact the frequency and velocity of reloads and other deposits to such accounts.

We include our provision for uncollectible overdrawn accounts related to maintenance fees and purchase transactions as an offset to card revenues and other fees and in other general and administrative expenses, respectively, in our consolidated statements of operations.

We include our provision for uncollectible overdrawn accounts related to purchase transactions in other general and administrative expenses in our consolidated statements of operations.

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

Goodwill and Intangible Assets

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Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill may not be recoverable include a decline in our stock price and market capitalization, declines in the market conditions of our products, reductions in our future cash flow estimates, and significant adverse industry or economic market trends.

We test for impairment of goodwill by assessing various qualitative factors with respect to developments in our business and the overall economy and calculating the fair value of a reporting unit using the discounted cash flow method, as necessary.

In the event that the carrying value of assets is determined to be unrecoverable, we would estimate the fair value of the reporting unit and record an impairment charge for the excess of the carrying value over the fair value.

We test for impairment of goodwill by first assessing various qualitative factors with respect to developments in our business and the overall economy to determine if it is more likely than not our goodwill is impaired.

In the event it is more likely than not the carrying value of our reporting units is greater than its fair value, we calculate the estimated fair value of the reporting unit and record an impairment charge for the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.

The estimate of fair value requires management to make a number of assumptions and projections, which could include, but would not be limited to, future revenues, earnings and the probability of certain outcomes.

We completed our annual goodwill impairment test as of September 30, 2019 .

Based on the results of step one of the annual goodwill impairment test, we determined that step two was not required for each of our reporting units as their fair values exceeded their carrying values indicating there was no impairment.

Intangible and other long lived-assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

We completed our annual goodwill impairment test as of September 30, 2020 and concluded there was no impairment in any of our reporting units.

Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Certain factors which may occur and indicate that an impairment exists include, but are not limited to, the following:

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Year Ended December 31,

Operating Revenues

Amount % of Total

Operating Revenues Amount % of Total

Operating Revenues

6 unchanged sentences

Total operating revenues $ 1,253,760 100.0 % $ 1,108,595 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $459.4 million for the year ended December 31, 2019 , a decrease of $23.5 million , or 5% , from the comparable prior year period.

Our card revenues and other fees decreased primarily as a result of a decline in monthly maintenance fees and an increase in estimated cash back rewards that we record as a reduction to card revenues and other fees.

The decline in monthly maintenance fees is associated with the decline in the number of active accounts in our Consumer business.

Our estimate of cash rewards varies based on multiple factors including the terms and conditions of the cash back program, customer activity and customer redemption rates.

Cash rewards have increased steadily year-over-year as our cash-back programs have grown, principally from those launched in 2016 and to a lesser extent, new cash-back programs launched in 2019.

These decreases were partially offset by program management fees earned from our BaaS partners.

Card Revenues and Other Fees — Card revenues and other fees totaled $593.9 million for the year ended December 31, 2020, an increase of $134.5 million, or 29%, from the comparable prior year period.

Our card revenues and other fees increased principally as a result of BaaS program management service fee revenues earned from platform partners and to a lesser extent, an increase in monthly maintenance fee assessments as a result of higher account balances that benefited from government stimulus.

These increases were offset partially by an increase in estimated cash back rewards that we record as a reduction to card revenues and other fees.

Our estimate of cash rewards varies based on multiple factors including the terms and conditions of the cash back

program, customer activity and customer redemption rates.

Cash rewards have increased steadily year-over-year as our cash-back programs have grown, principally from those programs launched in the second half of 2019.

Processing and Settlement Service Revenues — Processing and settlement service revenues totaled $293.2 million for the year ended December 31, 2020, an increase of $6.1 million, or 2%, from the comparable prior year period.

The increase was driven primarily by year-over-year growth in transaction volume associated with cash transfers and disbursement services through our Simply Paid disbursement service.

This increase was driven primarily by year-over-year growth in transaction volume associated with cash transfers, expanded adoption of our taxpayer advance programs and the introduction of new tax processing services for the year ended December 31, 2020 compared to the prior year period, partially offset by lower Simply Paid disbursement transactions due to the effects of the COVID-19 pandemic on the rideshare industry.

Interchange Revenues — Interchange revenues totaled $351.8 million for the year ended December 31, 2020, an increase of $21.6 million, or 7%, from the comparable prior year period.

The increase was primarily due to an increase in purchase volume during the year ended December 31, 2019 .

Interest Income, net — Net interest income totaled $31.9 million for the year ended December 31, 2019 , an increase of $8.1 million , or 34% , from the comparable prior year period.

The increase was principally the result of higher interest rates earned compared to the prior year period, and to a lesser extent, higher average balances in our investment securities portfolio and customer funds on deposit.

The increase was primarily due to an increase in purchase volume during the year ended December 31, 2020 compared to the prior year period, which we attribute primarily to stimulus funds and unemployment benefits made available under the CARES Act, partially offset by a decline in the interchange rate earned as a result of an increase in the average dollar amount purchased per transaction.

Interest Income, net — Net interest income totaled $14.8 million for the year ended December 31, 2020, a decrease of $17.1 million, or 54%, from the comparable prior year period.

The decrease was principally the result of lower yields on our investment securities portfolio and cash held from customer funds on deposit as a result of rate decreases by the Federal Reserve during the first quarter of 2020.

Operating Expenses

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Year Ended December 31,

Operating Revenues

Amount % of Total

Operating Revenues Amount % of Total

Operating Revenues

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Sales and Marketing Expenses — Sales and marketing expenses totaled $415.1 million for the year ended December 31, 2020, an increase of $28.3 million, or 7% compared to the year ended December 31, 2019.

This increase was primarily driven by an increase in advertising expenses in support of our recent Green Dot Unlimited product launch and in sales commissions associated with higher revenues generated from products that are subject to revenue-sharing agreements.

Under our new agreement with Walmart, the sales commission rate we pay for the MoneyCard program increased from the prior agreement.

We expect our sales and marketing expenses in 2020 to be negatively impacted by the increased commission rate.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $198.4 million for the year ended December 31, 2019 , a decrease of $23.2 million , or 10% , compared to the year ended December 31, 2018 .

The decrease was primarily the result of a $20.5 million decrease in employee stock-based compensation as a result of the modification of certain performance based equity awards and adjustments for the estimated payouts thereof as of December 31, 2019 , as well as lower salaries and wages of $7.7 million due to a decrease in accrued bonus compensation.

These decreases were partially offset by an increase of $3.2 million in third-party contractor expenses, primarily related to call center support.

This increase was primarily driven by an increase in sales commissions associated with higher revenues generated from products that are subject to revenue-sharing agreements.

In addition, beginning on January 1, 2020, the sales commission rate we pay for the MoneyCard program increased from the prior agreement.

These increases were partially offset by lower advertising expenses as we focused our marketing spending on more efficient channels.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $233.2 million for the year ended December 31, 2020, an increase of $34.8 million, or 18%, compared to the year ended December 31, 2019.

The increase was primarily due to an increase in stock-based compensation expense of approximately $24.1 million, driven primarily by higher achievement of performance-based awards compared to the prior year period and inducement awards issued in connection with several key executive hires during the period.

Salaries and wages were also higher by $15.2 million, which was attributable to accrued bonus compensation and increased severance expenses associated with a reorganization of our leadership team.

These increases were partially offset by lower employee travel expenses due to COVID-19 related travel restrictions.

Processing Expenses — Processing expenses totaled $293.7 million for the year ended December 31, 2020, an increase of $93.0 million, or 46%, compared to the year ended December 31, 2019.

This increase was principally the result of higher volume of ATM and purchase transactions initiated by our account holders and higher merchant acquiring costs associated with peer-to-peer payment activity on our mobile-only accounts by our account holders within our Account Services segment.

The year-over-year increase was also attributable to the growth in disbursement transactions processed by our Simply Paid platform within our Processing and Settlement Services segment.

Other General and Administrative Expenses — Other general and administrative expenses totaled $199.8 million for the year ended December 31, 2019 , a decrease of $6.2 million , or 3% , from the comparable prior year period.

Other general and administrative expenses decreased principally due to the $13.5 million expense recorded during the prior year period for the resolution of the final earn-out calculation related to the acquisition of our tax refund processing business, which did not recur for the year ended December 31, 2019 .

Other general and administrative expenses were also impacted favorably by lower dispute and purchase transaction losses compared with the prior year period, offset by higher depreciation and amortization of property and equipment of $10.1 million, higher professional expenses of $4.1 million and higher other administrative expenses.

This increase was principally due to growth in BaaS account programs within our Account Services segment and overall volume of transactions processed through our platform.

Other General and Administrative Expenses — Other general and administrative expenses totaled $281.7 million for the year ended December 31, 2020, an increase of $81.9 million, or 41%, from the comparable prior year period.

This increase was primarily due to a year-over-year growth in dispute transaction losses and impairment

charges of long-lived assets, as discussed above in our management overview, and higher depreciation and amortization of property, plant and equipment as a result of growth in capital expenditures in recent years.

Income Tax Expense

5 unchanged sentences

Employee stock-based compensation (7.7) (2.2)

Tax Cuts and Jobs Act remeasurement

IRC 162(m) limitation

Non-deductible executive compensation 17.2 0.1

Non-deductible penalties 1.1 —

Capital loss valuation allowance release (1.1) —

Other 0.1 0.6

Effective tax rate 17.7 % 17.5 %

Our income tax expense amounted to $21.2 million for the year ended December 31, 2019 , an increase of $16.1 million from the prior year period due to an increase in our effective tax rate from 4.1% to 17.5% .

This increase is primarily due to the decrease in benefit on the recognition of excess tax benefits from stock-based compensation expense and additional expenses related to state taxes, net of federal benefits.

Our income tax expense totaled $5.0 million for the year ended December 31, 2020, representing a decrease of $16.2 million from the comparable prior year period.

The decrease in income tax expense was primarily driven by the decline in our operating income as our effective tax rate for the year ended December 31, 2020 remained consistent with the prior year comparable period.

The "Other" category in our effective tax rate consists of a variety of permanent differences, none of which were individually significant.

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The definitions associated with the amounts and ratios below are as follows:

Ratio Definition

Tier 1 leverage ratio

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Total capital divided by risk-weighted assets

Terms Definition

Tier 1 capital and

Common equity Tier 1 capital

Primarily includes common stock, retained earnings and accumulated OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles.

Common equity Tier 1 capital Primarily includes common stock, retained earnings and accumulated OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles.

Under the regulatory capital rules, certain deductions and adjustments to these capital figures are phased in through January 1, 2018.

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December 31, 2020

Regulatory Minimum

"Well-capitalized" Minimum

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

(In thousands, except ratios)

Green Dot Corporation:

Tier 1 leverage

Common equity Tier 1 capital

Tier 1 leverage $ 515,134 17.5 % 4.0 % n/a

Common equity Tier 1 capital $ 515,134 57.8 % 4.5 % n/a

Tier 1 capital $ 515,134 57.8 % 6.0 % 6.0 %

6 unchanged sentences

December 31, 2019

Regulatory Minimum

"Well-capitalized" Minimum

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

(In thousands, except ratios)

Green Dot Corporation:

Tier 1 leverage

Common equity Tier 1 capital

Tier 1 leverage $ 400,445 22.2 % 4.0 % n/a

Common equity Tier 1 capital $ 400,445 70.5 % 4.5 % n/a

Tier 1 capital $ 400,445 70.5 % 6.0 % 6.0 %

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Financing activities 1,007,201 (65,125)

(Decrease) increase in unrestricted cash, cash equivalents and restricted cash

During the year s ended December 31, 2019 and 2018 we financed our operations primarily through our cash flows provided by operating activities.

Increase (decrease) in unrestricted cash, cash equivalents and restricted cash $ 430,547 $ (29,064)

During the years ended December 31, 2020 and 2019 we financed our operations primarily through our cash flows provided by operating activities and customer funds held on deposit.

From time to time, we may also finance short term working capital activities through our borrowings under our credit facility.

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We use trend and variance analysis as well as our detailed budgets and forecasts to project future cash needs, making adjustments to the projections when needed.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditure, equity method investee capital commitment, and debt service requirements and any other capital needs for at least the next 12 months.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditures, equity method investee capital commitments, and any other capital needs for at least the next 12 months.

We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

However, if an additional economic relief package is signed into law that provides for substantial additional direct payments and unemployment benefits, we may need to increase the size of our cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments.

We continue to monitor the impact of COVID-19 on our business to ensure our liquidity and capital resources remain appropriate throughout this period of uncertainty.

Cash Flows from Operating Activities

Our $189.9 million of net cash provided by operating activities in the year ended December 31, 2019 principally resulted from $99.9 million of net income, adjusted for certain non-cash operating expenses of $118.5 million , and a decrease in working capital assets and liabilities of $28.5 million , driven principally by changes in accounts receivables and prepaid and other assets.

Our $251.1 million of net cash provided by operating activities in the year ended December 31, 2018 principally resulted from $118.7 million of net income, adjusted for certain non-cash operating expenses of $128.1 million , and an increase in net changes in working capital assets and liabilities of $4.3 million , driven principally by the timing of payments of our accounts payable and accrued liabilities and the settlement of outstanding accounts receivables.

Our $209.2 million of net cash provided by operating activities in the year ended December 31, 2020 principally resulted from $23.1 million of net income, adjusted for certain non-cash operating expenses of $156.6 million, and an increase in net working capital assets and liabilities of $29.5 million.

Our $189.9 million of net cash provided by operating activities in the year ended December 31, 2019 principally resulted from $99.9 million of net income, adjusted for certain non-cash operating expenses of $125.1 million, and a decrease in net working capital assets and liabilities of $35.1 million, driven principally by changes in accounts receivables and prepaid and other assets.

Cash Flows from Investing Activities

Our $153.9 million of net cash used in investing activities in the year ended December 31, 2019 primarily reflects payments for acquisition of property and equipment of $78.2 million and purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $73.2 million .

Our $115.0 million of net cash used in investing activities in the year ended December 31, 2018 primarily reflects payments for acquisition of property and equipment of $61.0 million and purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $48.1 million .

Our $785.8 million of net cash used in investing activities in the year ended December 31, 2020 primarily reflects purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $687.8 million, payments for the development and acquisition of property and equipment of $59.0 million and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million.

Capital commitment relief recently granted to us by the Federal Reserve on our GPR deposits has provided greater flexibility in how we can utilize our cash and cash equivalents, and as a result, we purchased additional available-for-sale investment securities compared to the prior year.

Our $153.9 million of net cash used in investing activities in the year ended December 31, 2019 primarily reflects payments for the development and acquisition of property and equipment of $78.2 million and purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $73.2 million.

Cash Flows from Financing Activities

Our $65.1 million of net cash used in financing activities for the year ended December 31, 2019 was principally the result of $100.0 million used for stock repurchases under our stock repurchase program, $60.0 million in repayments of our note payable, a net decrease in obligations to customers of $66.8 million and $21.3 million in taxes paid from net settled equity awards, offset by a net increase in customer deposits of $146.1 million and borrowings on our revolving credit facility of $35.0 million .

Our $51.0 million of net cash used in financing activities for the year ended December 31, 2018 was primarily the result of $46.0 million in taxes paid from net settled equity awards and $22.5 million in repayments of our note payable, offset by $21.9 million from stock option exercise and employee stock purchase plan proceeds.

We anticipate that we will continue to purchase property and equipment as necessary in the normal course of our business.

The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of employees, the rate of change of computer hardware and software used in our business and our business outlook.

We intend to continue to invest in new products and programs, new features for our existing products and IT infrastructure to scale and operate effectively to meet our

strategic objectives.

We expect these capital expenditures will be similar to the amount of our capital expenditures in 2019 as we reinvest a portion of the incremental cash flow generated from operations.

We have used cash to acquire businesses and technologies and we anticipate that we may continue to do so in the future.

The nature of these transactions makes it difficult to predict the amount and timing of such cash requirements.

We may also be required to raise additional financing to complete future acquisitions.

On February 28, 2017, we completed our acquisition of all the membership interests of UniRush LLC, which included a minimum $4 million annual earn-out payment for five years following the closing.

The earn-out payments will be made each year, with the minimum payment potentially becoming greater if certain revenue growth targets for the RushCard GPR card program are met in a given year, although any potential increase is not expected to be material to the overall purchase price.

Additionally, we may make periodic cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments at levels we have agreed to with our regulators.

Senior Credit Facility

In October 2014, we entered into a $225 million credit agreement with Bank of America, N.A., as administrative agent, Wells Fargo Bank, National Association, and other lenders party thereto.

The agreement provided for (i) a $75 million five-year revolving facility (the “Revolving Facility”) and (ii) a five-year $150 million term loan facility (the “Term Facility” and, together with the Revolving Facility, the “Senior Credit Facility”).

At our election, loans made under the credit agreement carried interest at (1) a LIBOR rate or (2) a base rate as defined in the agreement, plus an applicable margin.

Quarterly principal payments of $5.6 million were payable on the loans under the Term Facility.

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

The Revolving Facility remained available for use until October 2019, at which point we entered into a new revolving facility.

The Senior Credit Facility subjected us to certain financial covenants, which included maintaining a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as defined in the agreement, as amended.

We were in compliance with all such covenants for the duration of the agreement.

Our $1.0 billion of net cash provided by financing activities for the year ended December 31, 2020 was principally the result of a net increase in customer deposits of $1.6 billion, partially offset by a net decrease in obligations to customers of $512.5 million and repayments on our revolving credit facility of $35.0 million.

customer deposit balances have increased substantially as compared to December 31, 2019, driven primarily by stimulus funds and other government benefits received by our cardholders under the CARES Act and the additional economic stimulus package signed into law in December 2020.

Our $65.1 million of net cash used in financing activities for the year ended December 31, 2019 was primarily the result of $100.0 million used for stock repurchases under our stock repurchase program, $60.0 million in repayments of our note payable, a net decrease in obligations to customers of $66.8 million and $21.3 million in taxes paid from net settled equity awards, partially offset by a net increase in customer deposits of $146.1 million and borrowings on our revolving credit facility of $35.0 million.

Other Sources of Liquidity:

2019 Revolving Facility

In October 2019, we entered into a new revolving credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto.

The new credit agreement provides for a $100 million five-year revolving facility and matures in October 2024.

Borrowings available under the 2019 Revolving Facility as of December 31, 2019 amounted to $65.0 million .

In October 2019, we entered into a revolving credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto.

The credit agreement provides for a $100.0 million five-year revolving facility and matures in October 2024.

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 0.50%, (b) the Wells Fargo prime rate, and (c) one-month LIBOR rate plus 1.0% (the “Base Rate"), plus in either case an applicable margin.

The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25% to 2.00% for LIBOR Rate loans and 0.25% to 1.00% for Base Rate loans ( 3.05% as of December 31, 2019).

We remain subject to certain financial covenants, which include maintaining a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as defined in the agreement.

As of December 31, 2019 , we were in compliance with all such covenants.

Share Repurchase Program

In previous years, we have repurchased shares of our Class A Common Stock under an authorized stock repurchase program.

In May 2017, our Board of Directors authorized, subject to regulatory approval, expansion of our stock repurchase program by an additional $150 million.

We sought and received regulatory approval during the second quarter of 2019, at which point we made an up-front payment of $100 million to enter into an accelerated share repurchase agreement.

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.

We have an authorized $50 million remaining under our current stock repurchase program for any additional repurchases.

The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25% to 2.00% for LIBOR Rate loans and 0.25% to 1.00% for Base Rate loans.

During the first quarter of 2020, we drew the maximum amount available of $100.0 million as a precautionary measure due to the uncertainty associated with the COVID-19 pandemic, but have since repaid the entire balance resulting in there being no borrowings outstanding as of December 31, 2020.

We are also subject to certain financial covenants, which include maintaining a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as defined in the agreement.

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

Material Cash Requirements

While the effect of COVID-19 has created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and purchase property and equipment as necessary in the normal course of our business.

The amount and timing of these payments and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of new employees, the rate of change of computer hardware and software used in our business and our business outlook as a result of the COVID-19 pandemic.

We intend to continue to invest in new products and programs we believe are critical, including GO2bank, new features for our existing products and IT infrastructure to scale and operate effectively to meet our strategic objectives.

However, we do not expect these capital expenditures will exceed the amount of our capital expenditures in 2020.

We expect to fund these capital expenditures primarily through our cash flows provided by operating activities.

We have used cash to acquire businesses and technologies and we anticipate that we may continue to do so in the future.

The nature of these transactions, however, makes it difficult to predict the amount and timing of such cash requirements.

As we noted above, if another economic relief package is signed into law that provides for substantial additional direct payments and unemployment benefits, we may need to increase the size of our cash contributions to our subsidiary bank to maintain its capital, leverage and other financial commitments.

We also have certain contractual payment obligations, in each case, as described in more detail below.

Contractual Obligations

Our contractual commitments will have an impact on our future liquidity.

The following table summarizes our contractual obligations, including both on and off-balance sheet transactions that represent material expected or contractually committed future obligations, at December 31, 2019 .

We believe that we will be able to fund these obligations through cash generated from operations and from our existing cash balances.

Payments Due by Period

Less than 1 Year

More than 5 Years

(In thousands)

Debt obligations

Operating lease obligations

Purchase obligations(1)

Primarily future minimum payments under agreements with vendors and our retail distributors.

See Note 20 — Commitments and Contingencies of the Notes to our Consolidated Financial Statements.

In addition to the above contractual obligations, our definitive agreement to acquire all of the equity interests of UniRush provides for a minimum $4 million annual earn-out payment for five years following the closing, ending in February 2022.

Off-Balance Sheet Arrangements

During the year s ended December 31, 2019 and 2018 we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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

See Note 25- Subsequent Events of the Notes to our Consolidated Financial Statements for additional information.

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.

See Note 7 - Equity Method Investment of the Notes to our Consolidated Financial Statements for additional information.

In response to our remote employee workforce strategy in the U.S., we have commenced closure of most our leased office locations beginning in 2021.

However, we will be required to continue making our contractual payments until our operating leases are formally terminated or expire.

Our leases have remaining lease terms of less than 1 year to approximately 5 years, many of which generally include renewal options of varying terms, and as

of December 31, 2020, we have a total lease liability of $24.6 million.

See Note 20 - Leases of the Notes to our Consolidated Financial Statements for additional information regarding our lease liabilities as of December 31, 2020.

Our definitive agreement to acquire all of the equity interests of UniRush provides for a minimum $4 million annual earn-out payment for five years following the closing, ending in February 2022.

In the normal course of business, we enter into various agreements with our vendors and retail distributors that may subject us to minimum annual requirements.

While our contractual commitments will have an impact on our future liquidity, we believe that we will be able to adequately fulfill these obligations through cash generated from operations and from our existing cash balances.

Statistical Disclosure by Bank Holding Companies

As discussed in Part I, Item 1.

Business, we became a bank holding company in December 2011.

This section presents information required by the SEC’s Industry Guide 3, “ Statistical Disclosure by Bank Holding Companies .” The tables in this section include Green Dot Bank information only.

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The following table presents average balance data and interest income and expense data for our banking operations, as well as the related interest yields and rates for the years ended December 31, 2020 and 2019 and average balance data for the period ended December 31, 2018:

Year ended December 31,

Period ended December 31,

Interest income/

interest expense

Interest income/

interest expense

Year ended December 31, Period ended December 31,

2020 2019 2018

balance Interest income/

interest expense Yield/

balance Interest income/

interest expense Yield/

(In thousands, except percentages)

Interest-bearing assets

Loans (1) $ 22,533 $ 2,454 10.9 % $ 23,656 $ 2,050 8.7 % $ 21,742

Taxable investment securities 506,152 7,031 1.4 229,575 6,722 2.9 208,359

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Federal reserve stock 5,473 272 5.0 5,377 273 5.1 3,722

Fee advances 7,775 1,455 18.7 6,301 1,296 20.6 7,641

Cash 1,769,837 5,709 0.3 1,124,979 24,616 2.2 992,138

Total interest-bearing assets 2,323,251 17,199 0.7 % 1,390,287 34,967 2.5 % 1,234,025

Non-interest bearing assets 131,612 255,997 236,254

Total assets $ 2,454,863 $ 1,646,284 $ 1,470,279

Interest-bearing liabilities

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December 31, 2020

Total Change in Interest Income/ Expense

Change Due to Rate (1)

Change Due to Volume (1)

Total Change in Interest Income/ Expense Change Due to Rate (1) Change Due to Volume (1)

(In thousands)

Loans $ 404 $ 526 $ (122)

Taxable investment securities 309 (3,533) 3,842

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Federal reserve stock (1) (6) 5

Fee advances 159 (116) 275

Cash (18,907) (20,987) 2,080

$ (17,768) $ (24,117) $ 6,349

Checking accounts $ (1,696) $ (1,205) $ (491)

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Time deposits, denominations less than $100 (8) (6) (2)

$ (1,653) $ (1,145) $ (508)

(1) The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns.

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The following table presents the amortized cost and fair value of Green Dot Bank’s investment portfolio at December 31, 2020, 2019 and 2018:

December 31, 2019

December 31, 2018

December 31, 2017

Amortized Cost

December 31, 2020 December 31, 2019 December 31, 2018

Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value

(In thousands)

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The following table shows the scheduled maturities, by amortized cost, and average yields for Green Dot Bank’s investment portfolio at December 31, 2020:

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total

(In thousands, except percentages)

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The following table shows Green Dot Bank’s average deposits and the annualized average rate paid on those deposits for the years ended December 31, 2020, 2019, and 2018:

December 31, 2019

December 31, 2018

December 31, 2017

Average Balance

Weighted-Average Rate

Average Balance

Weighted-Average Rate

Average Balance

Weighted-Average Rate

December 31, 2020 December 31, 2019 December 31, 2018

Average Balance Weighted-Average Rate Average Balance Weighted-Average Rate Average Balance Weighted-Average Rate

(In thousands, except percentages)

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The following table shows certain of Green Dot Bank’s key financial ratios for the years ended December 31, 2020, 2019, and 2018:

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Net return on assets 2.0 % 3.4 % 2.3 %

2 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-K

Item 7. Management’s Discussion and Analysis