GREEN DOT CORP 10-Q

ITEM 1. Financial Statements GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS March 31, 2021 December 31, 2020 (unaudited) Assets (In thousands, except par value) Current assets: Unrestricted cash and cash equivalents $ 2,711,791 $ 1,491,842 Restricted cash 4,900 4,859 Settlement assets 416,753 782,262 Accounts receivable, net 76,276 67,755 Prepaid expenses and other assets 69,436 66,705 Total current assets 3,279,156 2,413,423 Investment securities available-for-sale, at fair value 996,215 970,969 Loans to bank customers, net of allowance for loan losses of $ 1,531 and $ 757 as of March 31, 2021 and December 31, 2020, respectively 26,089 21,011 Prepaid expenses and other assets 73,619 40,481 Property, equipment, and internal-use software, net 130,713 133,400 Operating lease right-of-use assets 13,051 13,134 Deferred expenses 12,241 18,332 Net deferred tax assets 19,992 12,739 Goodwill and intangible assets 484,322 491,778 Total assets $ 5,035,398 $ 4,115,267 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 56,180 $ 34,823 Deposits 3,594,984 2,735,116 Obligations to customers 129,385 95,375 Settlement obligations 13,722 17,759 Amounts due to card issuing banks for overdrawn accounts 277 235 Other accrued liabilities 143,168 145,359 Operating lease liabilities 8,421 8,175 Deferred revenue 21,531 28,584 Income tax payable 19,246 12,146 Total current liabilities 3,986,914 3,077,572 Other accrued liabilities 3,203 4,275 Operating lease liabilities 14,600 16,396 Net deferred tax liabilities 7,192 7,192 Total liabilities 4,011,909 3,105,435 Commitments and contingencies (Note 17) Stockholders’ equity: Class A common stock, $ 0.001 par value; 100,000 shares authorized as of March 31, 2021 and December 31, 2020; 54,389 and 54,034 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively 54 54 Additional paid-in capital 364,926 354,460 Retained earnings 677,625 651,890 Accumulated other comprehensive (loss) income ( 19,116 ) 3,428 Total stockholders’ equity 1,023,489 1,009,832 Total liabilities and stockholders’ equity $ 5,035,398 $ 4,115,267 See notes to unaudited consolidated financial statements 1 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, 2021 2020 (In thousands, except per share data) Operating revenues: Card revenues and other fees $ 186,012 $ 141,394 Cash processing revenues 90,915 123,066 Interchange revenues 111,226 90,866 Interest income, net 5,333 6,843 Total operating revenues 393,486 362,169 Operating expenses: Sales and marketing expenses 118,903 116,738 Compensation and benefits expenses 74,967 53,065 Processing expenses 97,669 71,095 Other general and administrative expenses 67,962 62,422 Total operating expenses 359,501 303,320 Operating income 33,985 58,849 Interest expense, net 37 241 Other (expense) income, net ( 1,086 ) 192 Income before income taxes 32,862 58,800 Income tax expense 7,127 11,955 Net income $ 25,735 $ 46,845 Basic earnings per common share: $ 0.47 $ 0.89 Diluted earnings per common share: $ 0.46 $ 0.87 Basic weighted-average common shares issued and outstanding: 53,651 51,894 Diluted weighted-average common shares issued and outstanding: 55,068 52,673 See notes to unaudited consolidated financial statements 2 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended March 31, 2021 2020 (In thousands) Net income $ 25,735 $ 46,845 Other comprehensive (loss) income Unrealized holding (loss) gain, net of tax ( 22,544 ) 4,157 Comprehensive income $ 3,191 $ 51,002 See notes to unaudited consolidated financial statements 3 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Three Months Ended March 31, 2021 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2020 54,034 $ 54 $ 354,460 $ 651,890 $ 3,428 $ 1,009,832 Common stock issued under stock plans, net of withholdings and related tax effects 355 — ( 6,771 ) — — ( 6,771 ) Stock-based compensation — — 17,237 — — 17,237 Net income — — — 25,735 — 25,735 Other comprehensive loss — — — — ( 22,544 ) ( 22,544 ) Balance at March 31, 2021 54,389 $ 54 $ 364,926 $ 677,625 $ ( 19,116 ) $ 1,023,489 Three Months Ended March 31, 2020 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2019 51,807 $ 52 $ 296,224 $ 629,040 $ 2,040 $ 927,356 Common stock issued under stock plans, net of withholdings and related tax effects 72 — ( 1,457 ) — — ( 1,457 ) Stock-based compensation — — 11,385 — — 11,385 Walmart restricted shares 975 1 ( 1 ) — — — Net income — — — 46,845 — 46,845 Other comprehensive income — — — — 4,157 4,157 Cumulative effect adjustment for adoption of ASU No. 2016-13 (CECL) — — — ( 281 ) — ( 281 ) Balance at March 31, 2020 52,854 $ 53 $ 306,151 $ 675,604 $ 6,197 $ 988,005 See notes to unaudited consolidated financial statements 4 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, 2021 2020 (In thousands) Operating activities Net income $ 25,735 $ 46,845 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and internal-use software 13,200 13,697 Amortization of intangible assets 6,944 7,279 Provision for uncollectible overdrawn accounts from purchase transactions 2,994 1,316 Stock-based compensation 17,237 11,385 Losses (earnings) in equity method investments 875 ( 223 ) Amortization of premium on available-for-sale investment securities 659 138 Amortization of deferred financing costs 42 42 Changes in operating assets and liabilities: Accounts receivable, net ( 11,515 ) ( 3,363 ) Prepaid expenses and other assets ( 1,786 ) 9,246 Deferred expenses 6,091 6,389 Accounts payable and other accrued liabilities 20,201 9,859 Deferred revenue ( 7,159 ) ( 9,355 ) Income tax receivable/payable 7,169 11,805 Other, net ( 15 ) ( 930 ) Net cash provided by operating activities 80,672 104,130 Investing activities Purchases of available-for-sale investment securities ( 95,332 ) ( 60,267 ) Proceeds from maturities of available-for-sale securities 34,364 25,509 Proceeds from sales of available-for-sale securities 5,198 10,047 Payments for acquisition of property and equipment ( 10,474 ) ( 15,743 ) Net changes in loans ( 6,488 ) 1,584 Investment in TailFin Labs, LLC ( 35,000 ) ( 35,000 ) Other ( 529 ) — Net cash used in investing activities ( 108,261 ) ( 73,870 ) Financing activities Borrowings on revolving line of credit — 100,000 Repayments on revolving line of credit — ( 35,000 ) Proceeds from exercise of options and ESPP purchases 1,780 23 Taxes paid related to net share settlement of equity awards ( 8,551 ) ( 1,480 ) Net changes in deposits 859,868 442,017 Net changes in settlement assets and obligations to customers 395,482 ( 34,667 ) Contingent consideration payments ( 1,000 ) ( 1,000 ) Net cash provided by financing activities 1,247,579 469,893 Net increase in unrestricted cash, cash equivalents and restricted cash 1,219,990 500,153 Unrestricted cash, cash equivalents and restricted cash, beginning of period 1,496,701 1,066,154 Unrestricted cash, cash equivalents and restricted cash, end of period $ 2,716,691 $ 1,566,307 Cash paid for interest $ 84 $ 283 Cash refund from income taxes $ ( 20 ) $ ( 95 ) Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period: Unrestricted cash and cash equivalents $ 2,711,791 $ 1,563,740 Restricted cash 4,900 2,567 Total unrestricted cash, cash equivalents and restricted cash, end of period $ 2,716,691 $ 1,566,307 See notes to unaudited consolidated financial statements 5 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1— Organization Green Dot Corporation (“we,” “our,” or “us” refer to Green Dot Corporation and its consolidated subsidiaries) 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 cash deposits and disbursements, and tax refund processing. We were incorporated in Delaware in 1999 and became a bank holding company under the Bank Holding Company Act and a member bank of the Federal Reserve System in December 2011. Note 2— Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. We consolidated our wholly-owned subsidiaries and eliminated all significant intercompany balances and transactions. We have also prepared the accompanying unaudited consolidated financial statements in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X and, consequently, they do not include all of the annual disclosures required by GAAP. Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures, including a summary of our significant accounting policies. There have been no material changes to our significant accounting policies during the three months ended March 31, 2021, other than the adoption of the accounting pronouncements discussed herein. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available as of March 31, 2021 and through the date of this report. The accounting estimates used in the preparation of our consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. Actual results may differ from these estimates due to the uncertainty around the magnitude, duration and effects of the COVID-19 pandemic, as well as other factors. Recent Accounting Pronouncements Recently adopted accounting pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies various aspects related to the accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and modifies existing guidance to improve consistent application of Topic 740. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We adopted the provisions of ASU 2019-12 on January 1, 2021, the results of which did not have a material impact on our consolidated financial statements. Recently issued accounting pronouncements not yet adopted 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. 6 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 2—Summary of Significant Accounting Policies (continued) In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04"), which provides optional expedients and exceptions to GAAP requirements for modifications of debt instruments, leases, derivatives and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The guidance permits entities to treat such modifications as the continuation of the original contract, without any required accounting reassessments or remeasurements. The amendments in ASU 2020-04 were effective upon issuance and may be elected over time through December 31, 2022, as reference rate reform activities occur. Upon adoption, the guidance must be applied prospectively for all eligible contract modifications. We continue to monitor the impact of ASU 2020-04 as reference rate reform continues to develop, however, do not expect any material impact on our consolidated financial statements as our revolving line of credit is based on variable rates available that we elect at the time of borrowing. See Note 9 — Debt, to these consolidated financial statements for additional information. Note 3— Revenues Disaggregation of Revenues As discussed in Note 19 — Segment Informatio n, we determine our operating segments based on how our chief operating decision maker manages our operations, makes operating decisions and evaluates operating performance. Within our segments, we believe that the nature, amount, timing and uncertainty of our revenue and cash flows and how they are affected by economic factors can be further illustrated based on the timing in which revenue for each of our products and services is recognized. Our products and services are offered only to customers within the United States. The following table disaggregates our revenues earned from external customers by each of our reportable segments: Three Months Ended March 31, 2021 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 112,652 $ 48,859 $ 89,120 $ 250,631 Transferred over time 66,026 70,249 1,247 137,522 Operating revenues (1) $ 178,678 $ 119,108 $ 90,367 $ 388,153 Three Months Ended March 31, 2020 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 89,301 $ 47,057 $ 119,100 $ 255,458 Transferred over time 56,944 41,972 952 99,868 Operating revenues (1) $ 146,245 $ 89,029 $ 120,052 $ 355,326 (1) Excludes net interest income, a component of total operating revenues, as it is outside the scope of ASC 606, Revenues. Also excludes the effects of intersegment revenues. Revenues recognized at a point in time are comprised of ATM fees, interchange, and other similar transaction-based fees. Revenues recognized over time consists of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS partner program management fees. Substantially all of our money movement services are recognized at a point in time. Contract Balances As disclosed on our Consolidated Balance Sheets, we record deferred revenue for any upfront payments received in advance of our performance obligations being satisfied. These contract liabilities consist principally of unearned new card fees and monthly maintenance fees. We recognized approximately $ 17.6 million and $ 17.0 million in revenue for the three months ended March 31, 2021 and 2020, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance 7 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 3—Revenues (continued) 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. Note 4— Investment Securities Our available-for-sale investment securities were as follows: Amortized cost Gross unrealized gains Gross unrealized losses Fair value (In thousands) March 31, 2021 Corporate bonds $ 10,000 $ 17 $ — $ 10,017 Agency bond securities 230,839 — ( 11,803 ) 219,036 Agency mortgage-backed securities 746,416 1,442 ( 15,086 ) 732,772 Municipal bonds 29,774 67 ( 593 ) 29,248 Asset-backed securities 4,924 218 — 5,142 Total investment securities $ 1,021,953 $ 1,744 $ ( 27,482 ) $ 996,215 December 31, 2020 Corporate bonds $ 10,000 $ 110 $ — $ 10,110 Agency bond securities 235,839 31 ( 1,713 ) 234,157 Agency mortgage-backed securities 686,108 5,258 ( 337 ) 691,029 Municipal bonds 29,977 524 — 30,501 Asset-backed securities 4,917 255 — 5,172 Total investment securities $ 966,841 $ 6,178 $ ( 2,050 ) $ 970,969 As of March 31, 2021 and December 31, 2020, 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 Fair value Unrealized loss Fair value Unrealized loss (In thousands) March 31, 2021 Agency bond securities $ 219,036 $ ( 11,803 ) $ — $ — $ 219,036 $ ( 11,803 ) Agency mortgage-backed securities 673,673 ( 15,086 ) — — 673,673 ( 15,086 ) Municipal bonds 24,181 ( 593 ) — — 24,181 ( 593 ) Total investment securities $ 916,890 $ ( 27,482 ) $ — $ — $ 916,890 $ ( 27,482 ) December 31, 2020 Agency bond securities $ 189,127 $ ( 1,713 ) $ — $ — $ 189,127 $ ( 1,713 ) Agency mortgage-backed securities 162,579 ( 337 ) — — 162,579 ( 337 ) Total investment securities $ 351,706 $ ( 2,050 ) $ — $ — $ 351,706 $ ( 2,050 ) Our investments generally consist of highly rated securities, substantially all of which are directly or indirectly backed by the U.S. federal government. Our investment policy restricts our investments to highly liquid, low credit risk assets. As such, we have no t recorded any significant credit-related impairment losses during the three months ended March 31, 2021 or 2020 on our available-for-sale investment securities. Unrealized losses as of March 31, 2021 are the result of recent fluctuations in interest rates as our investment portfolio is comprised predominantly of fixed rate securities. 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. 8 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4—Investment Securities (continued) As of March 31, 2021, the contractual maturities of our available-for-sale investment securities were as follows: Amortized cost Fair value (In thousands) Due after one year through five years $ 10,000 $ 10,017 Due after five years through ten years 190,839 181,521 Due after ten years 69,774 66,763 Mortgage and asset-backed securities 751,340 737,914 Total investment securities $ 1,021,953 $ 996,215 The expected payments on mortgage-backed and asset-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations. Note 5— Accounts Receivable Accounts receivable, net consisted of the following: March 31, 2021 December 31, 2020 (In thousands) Trade receivables $ 34,670 $ 25,279 Reserve for uncollectible trade receivables ( 355 ) ( 315 ) Net trade receivables 34,315 24,964 Overdrawn cardholder balances from purchase transactions 4,099 3,229 Reserve for uncollectible overdrawn accounts from purchase transactions ( 2,280 ) ( 1,653 ) Net overdrawn cardholder balances from purchase transactions 1,819 1,576 Overdrawn cardholder balances from maintenance fees 2,686 3,165 Total net overdrawn account balances due from cardholders 4,505 4,741 Receivables due from card issuing banks 5,508 4,377 Fee advances, net 5,515 21,424 Other receivables 26,433 12,249 Accounts receivable, net $ 76,276 $ 67,755 Our net overdrawn account balances due from cardholders are a result of purchase transactions that we honor or maintenance fee assessments, in each case, in excess of the funds in the cardholder’s account. Overdrawn cardholder balances from maintenance fee assessments are presented net of the consideration we expect to receive and are recorded as contra-revenue within card revenues and other fees. Activity in the reserve for uncollectible overdrawn accounts from purchase transactions consisted of the following: Three Months Ended March 31, 2021 2020 (In thousands) Balance, beginning of period $ 1,653 $ 3,398 Provision for uncollectible overdrawn accounts from purchase transactions 2,994 1,316 Charge-offs ( 2,367 ) ( 1,034 ) Balance, end of period $ 2,280 $ 3,680 9 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6— Loans to Bank Customers The following table presents total outstanding loans, gross of the related allowance for credit losses, and a summary of the related payment status: 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Total Current or Less Than 30 Days Past Due Total Outstanding (In thousands) March 31, 2021 Residential $ — $ — $ — $ — $ 3,067 $ 3,067 Commercial — — — — 10,044 10,044 Installment — — — — 423 423 Consumer 591 4 — 595 1,648 2,243 Secured credit card 366 322 835 1,523 10,320 11,843 Total loans $ 957 $ 326 $ 835 $ 2,118 $ 25,502 $ 27,620 Percentage of outstanding 3.5 % 1.2 % 3.0 % 7.7 % 92.3 % 100.0 % December 31, 2020 Residential $ — $ — $ — $ — $ 3,008 $ 3,008 Commercial — — — — 3,435 3,435 Installment — — — — 497 497 Secured credit card 864 699 1,363 2,926 11,902 14,828 Total loans $ 864 $ 699 $ 1,363 $ 2,926 $ 18,842 $ 21,768 Percentage of outstanding 4.0 % 3.2 % 6.3 % 13.4 % 86.6 % 100.0 % Nonperforming Loans The following table presents the carrying value, gross of the related allowance for credit losses, of our nonperforming loans. 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, 2020 for further information on the criteria for classification as nonperforming. March 31, 2021 December 31, 2020 (In thousands) Residential $ 227 $ 240 Installment 133 137 Secured credit card 835 1,363 Total loans $ 1,195 $ 1,740 Credit Quality Indicators We closely monitor and assess the credit quality and credit risk of our loan portfolio on an ongoing basis. We continuously review and update loan risk classifications. We evaluate our loans using non-classified or classified as the primary credit quality indicator. Classified loans are those loans that have demonstrated credit weakness where we believe there is a heightened risk of principal loss, including all impaired loans. Classified loans are generally internally categorized as substandard, doubtful or loss, consistent with regulatory guidelines. Our secured credit card portfolio is collateralized by cash deposits made by each cardholder in an amount equal to the user's available credit limit, which mitigates the risk of any significant credit losses we expect to incur. The table below presents the carrying value, gross of the related allowance for credit losses, of our loans within the primary credit quality indicators related to our loan portfolio: 10 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6—Loans to Bank Customers (continued) March 31, 2021 December 31, 2020 Non-Classified Classified Non-Classified Classified (In thousands) Residential $ 2,840 $ 227 $ 2,768 $ 240 Commercial 10,044 — 3,435 — Installment 290 133 360 137 Consumer 2,243 — — — Secured credit card 11,008 835 13,465 1,363 Total loans $ 26,425 $ 1,195 $ 20,028 $ 1,740 Impaired Loans and Troubled Debt Restructurings When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a Troubled Debt Restructuring, or TDR. Our TDR modifications involve an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk. As of March 31, 2021, none of our TDR modifications have been made in response to the COVID-19 pandemic. The following table presents our impaired loans and loans that we modified as TDRs as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 Unpaid Principal Balance Carrying Value Unpaid Principal Balance Carrying Value (In thousands) Residential $ 227 $ 170 $ 240 $ 180 Installment 133 100 137 103 Allowance for Credit Losses Activity in the allowance for credit losses in our loan portfolio consisted of the following: Three Months Ended March 31, 2021 2020 (In thousands) Balance, beginning of period $ 757 $ 1,166 Provision for loans 1,410 192 Loans charged off ( 707 ) ( 487 ) Recoveries of loans previously charged off 71 186 Balance, end of period $ 1,531 $ 1,057 Note 7— Equity Method Investment On January 2, 2020, we effectuated our agreement with Walmart to jointly establish a new fintech accelerator under the name TailFin Labs, LLC (“TailFin Labs”), with a mission to develop innovative products, services and technologies that sit at the intersection of retail shopping and consumer financial services. The entity is majority-owned by Walmart and 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 . Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for, among other things, its proportionate share of earnings or losses. However, given the capital structure of the TailFin Labs arrangement, we apply the Hypothetical Liquidation Book Value ("HLBV") method to determine the allocation of profits and losses since our liquidation rights and priorities, as defined by the agreement, differ from our underlying ownership interest. The HLBV method calculates the proceeds that would be attributable to each partner in an investment based on the liquidation 11 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 7—Equity Method Investment (continued) provisions of the agreement if the partnership was to be liquidated at book value as of the balance sheet date. Each partner’s allocation of income or loss in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions. Any future economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties. As of March 31, 2021, our net investment in TailFin Labs amounted to approximately $ 62.2 million and is included in the long term portion of prepaid expenses and other assets on our consolidated balance sheet. We recorded equity in losses from TailFin Labs of approximately $ 1.6 million for the three months ended March 31, 2021, which is recorded as a component of other income and expense on our consolidated statement of operations. Total equity in losses also includes income and losses from other investments that are not material to these consolidated financial statements. Note 8— Deposits Deposits are categorized as non-interest or interest-bearing deposits as follows: March 31, 2021 December 31, 2020 (In thousands) Non-interest bearing deposit accounts $ 3,565,939 $ 2,704,050 Interest-bearing deposit accounts Checking accounts 5,106 5,060 Savings 7,221 8,505 GPR deposits 12,001 12,955 Time deposits, denominations greater than or equal to $100 3,946 3,767 Time deposits, denominations less than $100 771 779 Total interest-bearing deposit accounts 29,045 31,066 Total deposits $ 3,594,984 $ 2,735,116 Total deposit balances have increased substantially as compared to December 31, 2020, principally due to funds received by our cardholders from federal relief programs signed into law at the end of December 2020 and March 2021. The scheduled contractual maturities for total time deposits are presented in the table below: March 31, 2021 (In thousands) Due in 2021 $ 1,265 Due in 2022 1,457 Due in 2023 918 Due in 2024 560 Due in 2025 500 Thereafter 17 Total time deposits $ 4,717 Note 9— Debt 2019 Revolving Facility In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. The credit facility provides for a $ 100.0 million five-year revolving line of credit (the "2019 Revolving Facility"), maturing in October 2024. We use the proceeds of any borrowings under the 2019 Revolving Facility for working capital and other general corporate purposes, subject to the terms and conditions set forth in the credit agreement. We classify amounts outstanding as long-term on our consolidated balance sheets; however, we may make voluntary repayments at any time prior to maturity. As of March 31, 2021, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use. 12 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 9—Debt (continued) 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 %, (b) the Wells Fargo prime rate and (c) a daily rate equal to one-month LIBOR rate plus 1.0 % (the “Base Rate"), plus in either case an applicable margin. The margin is dependent upon on our total leverage ratio and varies from 1.25 % to 2.00 % for LIBOR Rate loans and .25 % to 1.00 % for Base Rate loans. We also pay a commitment fee, which varies from .20 % to .35 % per annum on the actual daily unused portions of the 2019 Revolving Facility. Letter of credit fees are payable in respect of outstanding letters of credit at a rate per annum equal to the applicable margin for LIBOR Rate loans. The 2019 Revolving Facility contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements. We must also maintain a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as set forth in the credit agreement. At March 31, 2021, 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. We did no t incur any cash interest expense related to our debt during the three months ended March 31, 2021. Cash interest expense was $ 0.2 million for the three months ended March 31, 2020 . Note 10— Income Taxes Income tax expense for the three months ended March 31, 2021 and 2020 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows: Three Months Ended March 31, 2021 2020 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 0.7 ( 1.1 ) General business credits ( 2.2 ) ( 6.6 ) Employee stock-based compensation ( 6.1 ) 2.1 Nondeductible executive compensation 8.4 4.2 Nondeductible expenses 0.3 0.6 Other ( 0.4 ) 0.1 Effective tax rate 21.7 % 20.3 % The effective tax rate for the three months ended March 31, 2021 and 2020 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 executive compensation. The increase in the effective tax rate for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 is primarily due to an increase in our expected pre-tax income and the corresponding rate impact on items such as general business credits and the IRC 162(m) limitation on the deductibility of executive compensation. The overall increase in the effective tax rate for three months ended March 31, 2021 was partially offset by an increase of $ 3.3 million in excess tax benefits from stock-based compensation. We recognized an excess tax benefit on stock-based compensation of $ 2.0 million for the three months ended March 31, 2021, compared to a $ 1.2 million discrete tax expense on shortfalls from stock based compensation for the prior year comparable period. We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the three months ended March 31, 2021, the provision for GILTI tax expense was not material to our financial statements. 13 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2021, we did no t have a valuation allowance on any of our deferred tax assets as we believe it is more-likely-than-not that we would realize the benefits of our deferred tax assets. As of March 31, 2020, we maintained a valuation allowance against our capital loss carryforwards as we believed it was more-likely-than-not that the tax benefits related to the capital loss carryforwards would not be realized. We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax return for the years ended December 31, 2017 through 2020. 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 that the returns were filed. 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 as of March 31, 2021. We do not expect the outcome of this examination will have any material impact on our consolidated financial statements. As of March 31, 2021, we have federal net operating loss carryforwards of approximately $ 19.2 million and state net operating loss carryforwards of approximately $ 68.8 million, which will be available to offset future income. If not used, the federal net operating losses will expire between 2026 and 2034. Of our total state net operating loss carryforwards, approximately $ 46.6 million will expire between the fourth quarter of 2021 and 2040, while the remaining balance of approximately $ 22.2 million does not expire and carries forward indefinitely. The net operating losses are subject to an annual IRC Section 382 limitation, which restricts their utilization against taxable income in future periods. In addition, we have state business tax credits of approximately $ 19.4 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 March 31, 2021 and December 31, 2020, we had a liability of $ 11.0 million and $ 9.5 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows: Three Months Ended March 31, 2021 2020 (In thousands) Beginning balance $ 9,518 $ 8,398 Increases related to positions taken during prior years — 235 Increases related to positions taken during the current year 1,470 1,200 Ending balance $ 10,988 $ 9,833 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 10,805 $ 9,662 As of March 31, 2021 and 2020, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 0.5 million and $ 0.6 million, respectively. Note 11— Stockholders' Equity 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. As of March 31, 2021, we have an authorized $ 50 million remaining under our current stock repurchase program for any additional repurchases. Walmart Restricted Shares On January 2, 2020, we issued Walmart, in a private placement, 975,000 restricted shares of our Class A Common Stock. The shares vest in equal monthly increments through December 1, 2022. Walmart is entitled to voting rights and participate in any dividends paid from the issuance date on the unvested balance, and therefore, the total amount of restricted shares issued are included in our total Class A shares outstanding. As of March 31, 2021, there were 568,751 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 the term of our relationship with Walmart. 14 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 12— Stock-Based Compensation We currently grant restricted stock unit awards to employees, directors and non-employee consultants under our 2010 Equity Incentive Plan and from time to time may also grant stock option awards. Through our 2010 Employee Stock Purchase Plan, employees are also able to purchase shares of our Class A common stock at a discount through payroll deductions. We have reserved shares of our Class A common stock for issuance under these plans. The total stock-based compensation expense recognized was $ 17.2 million and $ 11.4 million for the three months ended March 31, 2021 and 2020, respectively. Restricted Stock Units Restricted stock units with only service conditions for the three months ended March 31, 2021 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2020 1,222 $ 36.24 Restricted stock units granted 342 50.87 Restricted stock units vested ( 235 ) 30.11 Restricted stock units canceled ( 41 ) 37.15 Outstanding at March 31, 2021 1,288 $ 41.21 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity for the three months ended March 31, 2021 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2020 946 $ 35.62 Performance restricted stock units granted (at target) 398 46.93 Performance restricted stock units vested ( 215 ) 35.20 Performance restricted stock units canceled ( 4 ) 65.46 Adjustment for completed performance periods 111 33.34 Outstanding at March 31, 2021 1,236 $ 39.50 We grant performance-based restricted stock units to certain employees that are subject to the attainment of pre-established internal performance conditions, market conditions, or a combination thereof (collectively referred to herein as performance-based restricted stock units). The actual number of shares subject to the award is determined at the end of the performance period and may range from 0 % to 200 % of the target shares granted depending upon the terms of the award. These awards generally contain an additional service component after each performance period is concluded and the unvested balance of the shares after the performance metrics are achieved will vest over the remaining requisite service period. Compensation expense related to these awards is recognized using the accelerated attribution method over the vesting period (generally, a period of at least four years ) based on the grant date fair value of the award. Stock Options Total stock option activity for the three months ended March 31, 2021 was as follows: Options Weighted-Average Exercise Price (In thousands, except per share data) Outstanding at December 31, 2020 1,634 $ 32.04 Options granted — — Options exercised ( 63 ) 28.18 Options canceled ( 1 ) 31.61 Outstanding at March 31, 2021 1,570 $ 32.19 Exercisable at March 31, 2021 404 $ 22.85 15 Table of Contents GREEN DOT CORPORATION 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 March 31, 2021 2020 (In thousands, except per share data) Basic earnings per Class A common share Numerator: Net income $ 25,735 $ 46,845 Amount attributable to unvested Walmart restricted shares ( 283 ) ( 808 ) Net income allocated to Class A common stockholders $ 25,452 $ 46,037 Denominator: Weighted-average Class A shares issued and outstanding 53,651 51,894 Basic earnings per Class A common share $ 0.47 $ 0.89 Diluted earnings per Class A common share Numerator: Net income allocated to Class A common stockholders $ 25,452 $ 46,037 Re-allocated earnings 7 12 Diluted net income allocated to Class A common stockholders $ 25,459 $ 46,049 Denominator: Weighted-average Class A shares issued and outstanding 53,651 51,894 Dilutive potential common shares: Stock options 514 57 Service-based restricted stock units 523 338 Performance-based restricted stock units 361 351 Employee stock purchase plan 19 33 Diluted weighted-average Class A shares issued and outstanding 55,068 52,673 Diluted earnings per Class A common share $ 0.46 $ 0.87 The restricted shares issued to Walmart contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing EPS pursuant to the two-class method. The computation above excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator. For the periods presented, we excluded certain restricted stock units and stock options outstanding (as applicable), which could potentially dilute basic EPS in the future, from the computation of diluted EPS as their effect was anti-dilutive. Additionally, we have excluded any performance-based restricted stock units where the performance contingency has not been met as of the end of the period. The following table shows the weighted-average number of shares excluded from the diluted EPS calculation as their effects were anti-dilutive: Three Months Ended March 31, 2021 2020 (In thousands) Class A common stock Options to purchase Class A common stock 500 98 Service-based restricted stock units 107 491 Performance-based restricted stock units 657 174 Unvested Walmart restricted shares 596 910 Total 1,860 1,673 16 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 14— Fair Value Measurements Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value. 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, 2020. As of March 31, 2021 and December 31, 2020, our assets and liabilities carried at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Fair Value March 31, 2021 (In thousands) Assets Corporate bonds $ — $ 10,017 $ — $ 10,017 Agency bond securities — 219,036 — 219,036 Agency mortgage-backed securities — 732,772 — 732,772 Municipal bonds — 29,248 — 29,248 Asset-backed securities — 5,142 — 5,142 Total assets $ — $ 996,215 $ — $ 996,215 Liabilities Contingent consideration $ — $ — $ 4,300 $ 4,300 December 31, 2020 Assets Corporate bonds $ — $ 10,110 $ — $ 10,110 Agency bond securities — 234,157 — 234,157 Agency mortgage-backed securities — 691,029 — 691,029 Municipal bonds — 30,501 — 30,501 Asset-backed securities — 5,172 — 5,172 Total assets $ — $ 970,969 $ — $ 970,969 Liabilities Contingent consideration $ — $ — $ 5,300 $ 5,300 We based the fair value of our fixed income securities held as of March 31, 2021 and December 31, 2020 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three months ended March 31, 2021 or 2020. The following table presents changes in our contingent consideration payable for the three months ended March 31, 2021 and 2020, which is categorized in Level 3 of the fair value hierarchy: Three Months Ended March 31, 2021 2020 (In thousands) Balance, beginning of period $ 5,300 $ 9,300 Payments of contingent consideration ( 1,000 ) ( 1,000 ) Balance, end of period $ 4,300 $ 8,300 17 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 15— Fair Value of Financial Instruments The following describes the valuation technique for determining the fair value of financial instruments, whether or not such instruments are carried at fair value on our consolidated balance sheets. Short-term Financial Instruments Our short-term financial instruments consist principally of unrestricted and restricted cash and cash equivalents, settlement assets and obligations, and obligations to customers . These financial instruments are short-term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. Under the fair value hierarchy, these instruments are classified as Level 1. Investment Securities The fair values of investment securities have been derived using methodologies referenced in 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, 2020 . Under the fair value hierarchy, our investment securities are classified as Level 2. Loans We determined the fair values of loans by discounting both principal and interest cash flows expected to be collected using a discount rate commensurate with the risk that we believe a market participant would consider in determining fair value. Under the fair value hierarchy, our loans are classified as Level 3. Deposits The fair value of demand and interest checking deposits and savings deposits is the amount payable on demand at the reporting date. We determined the fair value of time deposits by discounting expected future cash flows using market-derived rates based on our market yields on certificates of deposit, by maturity, at the measurement date. Under the fair value hierarchy, our deposits are classified as Level 2. Contingent Consideration The fair value of contingent consideration obligations, such as the earn-out associated with our acquisition of UniRush LLC ("UniRush") in 2017, is estimated through valuation models designed to estimate the probability of such contingent payments based on various assumptions. Estimated payments are discounted using present value techniques to arrive at an estimated fair value. Our contingent consideration payable is classified as Level 3 because we use unobservable inputs to estimate fair value, including the probability of achieving certain earnings thresholds and appropriate discount rates. Changes in fair value of contingent consideration are recorded through operating expenses. Debt The fair value of our revolving line of credit is based on borrowing rates currently available to a market participant for loans with similar terms or maturity. The carrying amount of our outstanding revolving line of credit approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the revolving line of credit is classified as a Level 2 liability in the fair value hierarchy. Fair Value of Financial Instruments The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value , at March 31, 2021 and December 31, 2020 are presented in the table below. 18 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 15—Fair Value of Financial Instruments (continued) March 31, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Financial Assets Loans to bank customers, net of allowance $ 26,089 $ 23,661 $ 21,011 $ 20,421 Financial Liabilities Deposits $ 3,594,984 $ 3,594,940 $ 2,735,116 $ 2,735,072 Note 16— Leases Our leases consist of operating lease agreements principally related to our corporate and subsidiary office locations. Currently, we do not enter into any financing lease agreements. Our leases have remaining lease terms of less than 1 year to approximately 5 years, many of which include renewal options of varying terms. As of December 31, 2020, we committed to a remote workforce strategy for most U.S. based employees and recorded a substantial impairment charge to our lease right-of-use assets as we no longer intend to utilize our leased office spaces in the U.S. for the duration of our remaining lease terms. Our lease agreements have or will be terminated in due course in accordance with our lease provisions; however, we may be contractually obligated to continue making lease payments where no termination option is available. Our total lease expense amounted to approximately $ 1.3 million and $ 2.3 million for the three months ended March 31, 2021 and 2020, respectively. Our lease expense is generally based on fixed payments stated within the agreements. Any variable payments for non-lease components and other short term lease expenses are not considered material. Supplemental Information Supplemental information related to our ROU assets and related lease liabilities is as follows: March 31, 2021 Cash paid for operating lease liabilities (in thousands) $ 2,423 Weighted average remaining lease term (years) 3.2 Weighted average discount rate 4.8 % Maturities of our operating lease liabilities as of March 31, 2021 is as follows: Operating Leases (In thousands) Remainder of 2021 $ 7,392 2022 8,981 2023 3,679 2024 3,596 2025 1,775 25,423 Less: imputed interest ( 2,402 ) Total lease liabilities $ 23,021 19 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17— Commitments and Contingencies Financial Commitments 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 through January 2024. 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. As of March 31, 2021, the estimated fair value of our remaining earn-out payments amounted to $ 4.3 million. Litigation and Claims In the ordinary course of business, we are a party to various legal proceedings, including, from time to time, actions which are asserted to be maintainable as class action suits. We review these actions on an ongoing basis to determine whether it is probable and estimable that a loss has occurred and use that information when making accrual and disclosure decisions. We have provided reserves where necessary for all claims and, based on current knowledge and in part upon the advice of legal counsel, all matters are believed to be adequately covered by insurance, or, if not covered, we do not expect the outcome in any legal proceedings, individually or collectively, to have a material adverse impact on our financial condition or results of operations. On December 18, 2019, an alleged class action entitled Koffsmon v. Green Dot Corp., et al., No. 19-cv-10701-DDP-E, was filed in the United States District Court for the Central District of California, against us and two of our former officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business strategy. Plaintiff alleges that defendants made statements that were misleading because they allegedly failed to disclose details regarding our customer acquisition strategy and its impact on our financial performance. The suit is purportedly brought on behalf of purchasers of our securities between May 9, 2018 and November 7, 2019, and seeks compensatory damages, fees and costs. On February 18, 2020, a shareholder derivative suit and securities class action entitled Hellman v. Streit, et al, No. 20-cv-01572-SVW-PVC was filed in United States District Court for the Central District of California, against us and certain of our officers and directors. The suit avers purported breach of fiduciary duty and unjust enrichment claims, as well as claims under Sections 10(b), 14(a) and 20(a) of the Exchange Act, on the basis of the same wrongdoing alleged in the first lawsuit described above. The suit does not define the purported class allegedly damaged. These cases have been related. We have not yet responded to the complaints in these matters. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows. Other Legal Matters We monitor the laws of all 50 states to identify state laws or regulations that apply (or may apply) to our products and services. We have obtained money transmitter licenses (or similar such licenses) where applicable, based on advice of counsel or when we have been requested to do so. If we were found to be in violation of any laws and regulations governing banking, money transmitters, electronic fund transfers, or money laundering in the United States or abroad, we could be subject to penalties or could be forced to change our business practices. From time to time we enter into contracts containing provisions that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to: (i) contracts with our card issuing banks, under which we are responsible to them for any unrecovered overdrafts on cardholders’ accounts; (ii) certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities, and other claims arising from our use of the premises; (iii) certain agreements with our officers, directors, and employees, under which we may be required to indemnify these persons for liabilities arising out of their relationship with us; and (iv) contracts under which we may be required to indemnify our retail distributors, suppliers, vendors and other parties with whom we have contracts against claims arising from certain of our actions, omissions, violations of law and/or infringement of patents, trademarks, copyrights and/or other intellectual property rights. 20 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be reasonably estimated. With the exception of overdrafts on cardholders’ accounts, historically, we have not been required to make payments under these and similar contingent obligations, and no liabilities have been recorded for these obligations in our consolidated balance sheets. For additional information regarding overdrafts on cardholders’ accounts, refer to Note 5 — Accounts Receivable. Note 18— Significant Retailer and Partner Concentration A credit concentration may exist if customers are involved in similar industries, economic sectors, and geographic regions. Our retail distributors operate in similar economic sectors but diverse domestic geographic regions. The loss of a significant retail distributor could have a material adverse effect upon our card sales, profitability, and revenue growth. Revenues derived from our products sold at retail distributors constituting greater than 10% of our total operating revenues were as follows: Three Months Ended March 31, 2021 2020 Walmart 24 % 25 % In addition, approximately 16 % of our total operating revenues for the three months ended March 31, 2021 were generated from a single BaaS partner, without a corresponding concentration to our gross profit for the period. Note 19— Segment Information Effective beginning with the first quarter of 2021, we have realigned our segment financial reporting based on how our current Chief Operating Decision Maker (“CODM”) manages our businesses, including resource allocation and performance assessment. Our CODM organizes and manages the business primarily on the basis of the channels in which our product and services are offered and uses net revenues and segment profit to assess profitability. Segment profit reflects each segment's net revenue less direct costs, such as sales and marketing expenses, processing expenses, third-party call center support and transaction losses. As a result of this realignment, our operations are now aggregated amongst three reportable segments: 1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services. Our Consumer Services segment consists of revenues and expenses derived from deposit account programs, such as consumer checking accounts, prepaid cards, secured credit cards, and gift cards that we offer to consumers (i) through distribution arrangements with more than 90,000 retail locations and thousands of neighborhood Financial Service Center locations (the "Retail" channel), and (ii) directly through various marketing channels, such as online search engine optimization, online displays, direct mail campaigns, mobile advertising, and affiliate referral programs (the "Direct" channel). Our B2B Services segment consists of revenues and expenses derived from (i) our partnerships with some of America's most prominent consumer and technology companies that make our banking products and services available to their consumers, partners and workforce through integration with our banking platform (the "Banking-as-a-Service", or "BaaS" channel), and (ii) a comprehensive payroll platform that we offer to corporate enterprises (the "Employer" channel) to facilitate payments for today’s workforce. Our products and services in this segment include deposit account programs, such as consumer and small business checking accounts and prepaid cards, as well as our Simply Paid Disbursements services utilized by our partners. Our Money Movement Services segment consists of revenues and expenses generated on a per transaction basis from our services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as money processing services and tax refund processing services. Our money processing services are marketed to third-party banks, program managers, and other companies seeking cash deposit and disbursement capabilities for their customers. Those customers, including our own cardholders, can access our cash deposit and disbursement services at any of the locations within our network of retail distributors and neighborhood Financial Service Centers. We market our tax-related financial services through a network of tax preparation franchises, independent tax professionals and online tax preparation providers. 21 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) The Corporate and Other segment primarily consists of net interest income earned by our bank, eliminations of intersegment revenues and expenses, unallocated corporate expenses, and other fixed costs that are not considered when our CODM evaluates segment performance, such as salaries, wages and related benefits for our employees, professional service fees, software licenses, telephone and communication costs, rent and utilities, and insurance. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. We have restated segment information for the historical periods presented herein to conform to our current presentation. The change in segment presentation does not affect the financial results of our consolidated statements of operations, balance sheets or statements of cash flows as previously presented. The following tables present financial information for each of our reportable segments for the periods then ended: Three Months Ended March 31, 2021 2020 Segment Revenue (In thousands) Consumer Services $ 184,341 $ 152,922 B2B Services 105,975 73,840 Money Movement Services 90,367 120,052 Corporate and Other ( 878 ) ( 273 ) Total segment revenues 379,805 346,541 Net revenue adjustment 13,681 15,628 Total operating revenues $ 393,486 $ 362,169 Net revenue adjustments represent commissions and certain processing-related costs associated with our BaaS products and services, which are netted against our B2B Services revenues when evaluating segment performance. Three Months Ended March 31, 2021 2020 Segment Profit (In thousands) Consumer Services $ 53,527 $ 50,385 B2B Services 17,533 19,827 Money Movement Services 48,814 66,719 Corporate and Other ( 46,514 ) ( 44,813 ) Total segment profit 73,360 92,118 Reconciliation to income before income taxes Depreciation and amortization of property, equipment and internal-use software 13,200 13,697 Stock based compensation and related employer taxes 17,182 11,578 Amortization of acquired intangible assets 6,944 7,279 Other expense 2,049 715 Operating income 33,985 58,849 Interest expense, net 37 241 Other (expense) income, net ( 1,086 ) 192 Income before income taxes $ 32,862 $ 58,800 22 Table of Contents