GREEN DOT CORP 10-Q

ITEM 1. Financial Statements GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS June 30, 2022 December 31, 2021 (unaudited) Assets (In thousands, except par value) Current assets: Unrestricted cash and cash equivalents $ 776,305 $ 1,322,319 Restricted cash 6,173 3,321 Settlement assets 498,061 320,377 Accounts receivable, net 67,380 80,401 Prepaid expenses and other assets 62,893 81,380 Income tax receivable 644 1,354 Total current assets 1,411,456 1,809,152 Investment securities available-for-sale, at fair value 2,391,350 2,115,501 Loans to bank customers, net of allowance for loan losses of $ 10,204 and $ 5,555 as of June 30, 2022 and December 31, 2021, respectively 21,097 19,270 Prepaid expenses and other assets 199,792 136,400 Property, equipment, and internal-use software, net 138,645 135,341 Operating lease right-of-use assets 9,158 10,967 Deferred expenses 7,293 16,855 Net deferred tax assets 73,362 15,048 Goodwill and intangible assets 455,719 466,943 Total assets $ 4,707,872 $ 4,725,477 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 87,140 $ 51,353 Deposits 3,376,004 3,286,889 Obligations to customers 182,507 124,221 Settlement obligations 15,017 15,682 Amounts due to card issuing banks for overdrawn accounts 396 513 Other accrued liabilities 97,800 128,294 Operating lease liabilities 4,540 6,918 Deferred revenue 15,096 28,903 Income tax payable 12,106 291 Total current liabilities 3,790,606 3,643,064 Other accrued liabilities 3,507 3,531 Operating lease liabilities 6,187 8,209 Total liabilities 3,800,300 3,654,804 Commitments and contingencies (Note 17) Stockholders’ equity: Class A common stock, $ 0.001 par value; 100,000 shares authorized as of June 30, 2022 and December 31, 2021; 53,740 and 54,868 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 54 55 Additional paid-in capital 376,902 401,055 Retained earnings 753,002 699,370 Accumulated other comprehensive loss ( 222,386 ) ( 29,807 ) Total stockholders’ equity 907,572 1,070,673 Total liabilities and stockholders’ equity $ 4,707,872 $ 4,725,477 See notes to unaudited consolidated financial statements 1 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands, except per share data) Operating revenues: Card revenues and other fees $ 218,574 $ 197,937 $ 431,402 $ 383,949 Cash processing revenues 57,467 66,825 157,495 157,740 Interchange revenues 76,038 101,115 154,894 212,341 Interest income, net 10,690 3,496 19,595 8,829 Total operating revenues 362,769 369,373 763,386 762,859 Operating expenses: Sales and marketing expenses 77,376 96,507 160,902 215,410 Compensation and benefits expenses 57,611 59,984 123,875 134,951 Processing expenses 112,388 94,316 224,480 191,985 Other general and administrative expenses 91,455 86,763 178,598 154,725 Total operating expenses 338,830 337,570 687,855 697,071 Operating income 23,939 31,803 75,531 65,788 Interest expense, net 29 38 116 75 Other (expense) income, net ( 4,038 ) 1,633 ( 4,808 ) 547 Income before income taxes 19,872 33,398 70,607 66,260 Income tax expense 4,864 8,465 16,975 15,592 Net income $ 15,008 $ 24,933 $ 53,632 $ 50,668 Basic earnings per common share: $ 0.28 $ 0.46 $ 0.98 $ 0.93 Diluted earnings per common share: $ 0.27 $ 0.45 $ 0.97 $ 0.91 Basic weighted-average common shares issued and outstanding: 53,928 54,005 54,240 53,829 Diluted weighted-average common shares issued and outstanding: 54,389 55,061 54,855 55,059 See notes to unaudited consolidated financial statements 2 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands) Net income $ 15,008 $ 24,933 $ 53,632 $ 50,668 Other comprehensive (loss) income Unrealized holding (loss) gains, net of tax ( 79,983 ) 8,652 ( 192,579 ) ( 13,892 ) Comprehensive (loss) income $ ( 64,975 ) $ 33,585 $ ( 138,947 ) $ 36,776 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 June 30, 2022 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at March 31, 2022 54,293 $ 54 $ 388,299 $ 737,994 $ ( 142,403 ) $ 983,944 Common stock issued under stock plans, net of withholdings and related tax effects 292 1 2,013 — — 2,014 Stock-based compensation — — 5,635 — — 5,635 Repurchases of Class A Common Stock ( 845 ) ( 1 ) ( 19,045 ) — — ( 19,046 ) Net income — — — 15,008 — 15,008 Other comprehensive loss — — — — ( 79,983 ) ( 79,983 ) Balance at June 30, 2022 53,740 $ 54 $ 376,902 $ 753,002 $ ( 222,386 ) $ 907,572 Three Months Ended June 30, 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 March 31, 2021 54,389 $ 54 $ 364,926 $ 677,625 $ ( 19,116 ) $ 1,023,489 Common stock issued under stock plans, net of withholdings and related tax effects 251 1 2,259 — — 2,260 Stock-based compensation — — 8,366 — — 8,366 Net income — — — 24,933 — 24,933 Other comprehensive income — — — — 8,652 8,652 Balance at June 30, 2021 54,640 $ 55 $ 375,551 $ 702,558 $ ( 10,464 ) $ 1,067,700 See notes to unaudited consolidated financial statements 4 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (UNAUDITED) Six Months Ended June 30, 2022 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2021 54,868 $ 55 $ 401,055 $ 699,370 $ ( 29,807 ) $ 1,070,673 Common stock issued under stock plans, net of withholdings and related tax effects 498 1 ( 602 ) — — ( 601 ) Stock-based compensation — — 20,493 — — 20,493 Repurchases of Class A Common Stock ( 1,626 ) ( 2 ) ( 44,044 ) — — ( 44,046 ) Net income — — — 53,632 — 53,632 Other comprehensive loss — — — — ( 192,579 ) ( 192,579 ) Balance at June 30, 2022 53,740 $ 54 $ 376,902 $ 753,002 $ ( 222,386 ) $ 907,572 Six Months Ended June 30, 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 606 1 ( 4,512 ) — — ( 4,511 ) Stock-based compensation — — 25,603 — — 25,603 Net income — — — 50,668 — 50,668 Other comprehensive loss — — — — ( 13,892 ) ( 13,892 ) Balance at June 30, 2021 54,640 $ 55 $ 375,551 $ 702,558 $ ( 10,464 ) $ 1,067,700 See notes to unaudited consolidated financial statements 5 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2022 2021 (In thousands) Operating activities Net income $ 53,632 $ 50,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and internal-use software 28,399 27,181 Amortization of intangible assets 12,181 13,887 Provision for uncollectible overdrawn accounts from purchase transactions 7,407 10,213 Provision for loan losses 18,452 10,143 Stock-based compensation 20,493 25,603 Losses (earnings) in equity method investments 6,647 ( 578 ) Amortization of (discount) premium on available-for-sale investment securities ( 544 ) 1,588 Impairment of long-lived assets 4,134 — Other ( 1,445 ) 84 Changes in operating assets and liabilities: Accounts receivable, net 5,614 ( 757 ) Prepaid expenses and other assets 15,809 6,330 Deferred expenses 9,562 9,644 Accounts payable and other accrued liabilities 12,046 ( 15,505 ) Deferred revenue ( 14,192 ) ( 12,542 ) Income tax receivable/payable 11,968 ( 1,958 ) Other, net ( 2,709 ) ( 4,545 ) Net cash provided by operating activities 187,454 119,456 Investing activities Purchases of available-for-sale investment securities ( 694,358 ) ( 217,652 ) Proceeds from maturities of available-for-sale securities 165,635 72,666 Proceeds from sales and calls of available-for-sale securities 2,875 5,198 Payments for acquisition of property and equipment ( 36,537 ) ( 23,826 ) Net changes in loans ( 18,732 ) ( 16,487 ) Investment in TailFin Labs, LLC ( 35,000 ) ( 35,000 ) Purchases of other investments ( 31,934 ) ( 50,000 ) Other investing activities ( 1,448 ) ( 599 ) Net cash used in investing activities ( 649,499 ) ( 265,700 ) Financing activities Borrowings on revolving line of credit 50,000 — Repayments on revolving line of credit ( 50,000 ) — Proceeds from exercise of options and ESPP purchases 3,415 5,230 Taxes paid related to net share settlement of equity awards ( 4,016 ) ( 9,741 ) Net changes in deposits 85,240 125,539 Net changes in settlement assets and obligations to customers ( 120,063 ) 425,821 Contingent consideration payments ( 1,647 ) ( 2,000 ) Repurchase of Class A common stock ( 44,046 ) — Net cash (used in) provided by financing activities ( 81,117 ) 544,849 Net (decrease) increase in unrestricted cash, cash equivalents and restricted cash ( 543,162 ) 398,605 Unrestricted cash, cash equivalents and restricted cash, beginning of period 1,325,640 1,496,701 Unrestricted cash, cash equivalents and restricted cash, end of period $ 782,478 $ 1,895,306 Cash paid for interest $ 326 $ 274 Cash paid for income taxes $ 4,086 $ 17,289 Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period: Unrestricted cash and cash equivalents $ 776,305 $ 1,891,100 Restricted cash 6,173 4,206 Total unrestricted cash, cash equivalents and restricted cash, end of period $ 782,478 $ 1,895,306 See notes to unaudited consolidated financial statements 6 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 committed to giving all people the power to bank seamlessly, affordably, and with confidence. Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all. We offer a broad set of financial services to consumers and businesses including debit, checking, credit, prepaid, and payroll cards, as well as robust money processing services, such as tax refunds, cash deposits and disbursements. 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, 2021 for additional disclosures, including a summary of our significant accounting policies. There have been no material changes to our significant accounting policies during the six months ended June 30, 2022, 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 June 30, 2022 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 a variety of factors, including those identified under Part II, Item 1A. "Risk Factors" in this report. Recent Accounting Pronouncements Recently adopted accounting pronouncements 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 adopted the provisions of ASU 2020-06 on January 1, 2022, the results of which did not have a material impact on our consolidated financial statements. Note 3— 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. 7 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 3—Revenues (continued) The following table disaggregates our revenues earned from external customers by each of our reportable segments: Three Months Ended June 30, 2022 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 92,430 $ 42,467 $ 53,337 $ 188,234 Transferred over time 53,971 109,068 806 163,845 Operating revenues (1) $ 146,401 $ 151,535 $ 54,143 $ 352,079 Three Months Ended June 30, 2021 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 113,924 $ 43,016 $ 64,715 $ 221,655 Transferred over time 62,506 80,412 1,304 144,222 Operating revenues (1) $ 176,430 $ 123,428 $ 66,019 $ 365,877 Six Months Ended June 30, 2022 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 187,320 $ 83,690 $ 149,741 $ 420,751 Transferred over time 113,500 207,822 1,718 323,040 Operating revenues (1) $ 300,820 $ 291,512 $ 151,459 $ 743,791 Six Months Ended June 30, 2021 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 226,576 $ 91,875 $ 153,835 $ 472,286 Transferred over time 128,532 150,661 2,551 281,744 Operating revenues (1) $ 355,108 $ 242,536 $ 156,386 $ 754,030 (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 interchange fees, ATM fees, overdraft protection fees, other similar cardholder transaction-based fees, and substantially all of our cash processing revenues. 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. As presented 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 $ 9.0 million and $ 9.1 million in revenue for the three months ended June 30, 2022 and 2021, respectively, and $ 25.5 million and $ 26.6 million for the six months ended June 30, 2022 and 2021, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance obligations satisfied in previous periods. Substantially all of the deferred revenue balances at the beginning of the periods are recognized in the first half of each year. 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. 8 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) 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) June 30, 2022 Corporate bonds $ 10,000 $ — $ ( 726 ) $ 9,274 Agency bond securities 240,185 — ( 35,777 ) 204,408 Agency mortgage-backed securities 2,396,285 149 ( 249,534 ) 2,146,900 Municipal bonds 30,251 — ( 5,258 ) 24,993 Asset-backed securities 5,766 11 ( 2 ) 5,775 Total investment securities $ 2,682,487 $ 160 $ ( 291,297 ) $ 2,391,350 December 31, 2021 Corporate bonds $ 10,000 $ — $ ( 27 ) $ 9,973 Agency bond securities 230,841 — ( 9,245 ) 221,596 Agency mortgage-backed securities 1,879,793 806 ( 32,268 ) 1,848,331 Municipal bonds 28,135 288 ( 243 ) 28,180 Asset-backed securities 7,326 99 ( 4 ) 7,421 Total investment securities $ 2,156,095 $ 1,193 $ ( 41,787 ) $ 2,115,501 As of June 30, 2022 and December 31, 2021, 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) June 30, 2022 Corporate bonds $ 9,274 $ ( 726 ) $ — $ — $ 9,274 $ ( 726 ) Agency bond securities 9,221 ( 123 ) 195,188 ( 35,654 ) 204,409 ( 35,777 ) Agency mortgage-backed securities 1,688,226 ( 181,315 ) 440,726 ( 68,219 ) 2,128,952 ( 249,534 ) Municipal bonds 24,993 ( 5,258 ) — — 24,993 ( 5,258 ) Asset-backed securities — — 774 ( 2 ) 774 ( 2 ) Total investment securities $ 1,731,714 $ ( 187,422 ) $ 636,688 $ ( 103,875 ) $ 2,368,402 $ ( 291,297 ) December 31, 2021 Corporate bonds $ 9,973 $ ( 27 ) $ — $ — $ 9,973 $ ( 27 ) Agency bond securities $ 52,865 $ ( 2,128 ) $ 168,730 $ ( 7,117 ) $ 221,595 $ ( 9,245 ) Agency mortgage-backed securities 1,661,091 ( 27,899 ) 106,510 ( 4,369 ) 1,767,601 ( 32,268 ) Municipal bonds 9,678 ( 243 ) — — 9,678 ( 243 ) Asset-backed securities 2,358 ( 4 ) — — 2,358 ( 4 ) Total investment securities $ 1,735,965 $ ( 30,301 ) $ 275,240 $ ( 11,486 ) $ 2,011,205 $ ( 41,787 ) Our investments generally consist of highly rated securities, substantially all of which are directly or indirectly backed by the U.S. federal government, as our investment policy restricts our investments to highly liquid, low credit risk assets. As such, we have not recorded any significant credit-related impairment losses during the three and six months ended June 30, 2022 or 2021 on our available-for-sale investment securities. Unrealized losses as of June 30, 2022 and December 31, 2021 are the result of recent fluctuations in interest rates as our investment portfolio is comprised predominantly of fixed rate securities. Substantially all of the underlying securities within our investment portfolio were in an unrealized loss position as of June 30, 2022 and December 31, 2021 due to the timing of our investment purchases, as a significant portion of our investments were purchased prior to recent increases in interest rates by the Federal Reserve. 9 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4—Investment Securities (continued) 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. As of June 30, 2022, 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 $ 19,344 $ 18,494 Due after five years through ten years 190,841 163,523 Due after ten years 70,251 56,658 Mortgage and asset-backed securities 2,402,051 2,152,675 Total investment securities $ 2,682,487 $ 2,391,350 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: June 30, 2022 December 31, 2021 (In thousands) Trade receivables $ 27,029 $ 33,921 Reserve for uncollectible trade receivables ( 106 ) ( 82 ) Net trade receivables 26,923 33,839 Overdrawn cardholder balances from purchase transactions 4,787 5,395 Reserve for uncollectible overdrawn accounts from purchase transactions ( 2,033 ) ( 3,394 ) Net overdrawn cardholder balances from purchase transactions 2,754 2,001 Cardholder fees 4,609 4,054 Receivables due from card issuing banks 4,201 4,645 Fee advances, net 1,983 20,643 Other receivables 26,910 15,219 Accounts receivable, net $ 67,380 $ 80,401 Activity in the reserve for uncollectible overdrawn accounts from purchase transactions consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands) Balance, beginning of period $ 4,348 $ 2,280 $ 3,394 $ 1,653 Provision for uncollectible overdrawn accounts from purchase transactions 2,707 7,219 7,407 10,213 Charge-offs ( 5,022 ) ( 3,987 ) ( 8,768 ) ( 6,354 ) Balance, end of period $ 2,033 $ 5,512 $ 2,033 $ 5,512 10 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) June 30, 2022 Residential $ — $ — $ — $ — $ 4,482 $ 4,482 Commercial — — — — 2,539 2,539 Installment — — — — 1,320 1,320 Consumer 2,887 — — 2,887 13,490 16,377 Secured credit card 635 531 1,606 2,772 3,811 6,583 Total loans $ 3,522 $ 531 $ 1,606 $ 5,659 $ 25,642 $ 31,301 Percentage of outstanding 11.3 % 1.7 % 5.1 % 18.1 % 81.9 % 100.0 % December 31, 2021 Residential $ — $ — $ — $ — $ 3,722 $ 3,722 Commercial — — — — 3,392 3,392 Installment — — 3 3 1,340 1,343 Consumer 2,244 — — 2,244 7,788 10,032 Secured credit card 43 98 853 994 5,342 6,336 Total loans $ 2,287 $ 98 $ 856 $ 3,241 $ 21,584 $ 24,825 Percentage of outstanding 9.2 % 0.4 % 3.5 % 13.1 % 86.9 % 100.0 % We offer an optional overdraft protection program service on certain demand deposit account programs that allows cardholders who opt-in to spend up to a pre-authorized amount in excess of their available card balance. When overdrawn, the purchase related balances due on these deposit accounts are reclassified as consumer loans. Fees due from our cardholders for our overdraft service are included as a component of accounts receivable. Overdrawn balances are unsecured and considered immediately due from the cardholder. In December 2021, we made the determination to sell a portion of our secured credit card portfolio and reclassified these assets as loans held for sale. These loans are included in the long-term portion of prepaid and other assets on our consolidated balance sheets. Upon re-classification, we reversed any previous allowance for credit loss on these portfolios and recorded an estimated valuation allowance to reflect the portfolio at its estimated fair value. Changes in valuation allowances are recorded as a component of other income and expenses on our consolidated statement of operations. As of June 30, 2022 and December 31, 2021, the fair value of the loans held for sale amounted to approximately $ 4.3 million and $ 5.1 million, respectively. 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, 2021 for further information on the criteria for classification as nonperforming. June 30, 2022 December 31, 2021 (In thousands) Residential $ 172 $ 195 Installment 105 115 Secured credit card 1,606 853 Total loans $ 1,883 $ 1,163 11 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6—Loans to Bank Customers (continued) 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 include those designated as substandard, doubtful, or loss, consistent with regulatory guidelines. Secured credit card loans are considered classified if they are greater than 90 days past due. However, 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: June 30, 2022 December 31, 2021 Non-Classified Classified Non-Classified Classified (In thousands) Residential $ 4,241 $ 241 $ 3,481 $ 241 Commercial 2,539 — 3,392 — Installment 1,205 115 1,228 115 Consumer 16,377 — 10,032 — Secured credit card 4,977 1,606 5,483 853 Total loans $ 29,339 $ 1,962 $ 23,616 $ 1,209 Allowance for Credit Losses Activity in the allowance for credit losses on our loan portfolio consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands) Balance, beginning of period $ 9,058 $ 1,531 $ 5,555 $ 757 Provision for loans 7,953 8,733 18,452 10,143 Loans charged off ( 6,807 ) ( 3,645 ) ( 13,803 ) ( 4,352 ) Recoveries of loans previously charged off — 74 — 145 Balance, end of period $ 10,204 $ 6,693 $ 10,204 $ 6,693 Activity within our allowance for credit losses increased during the comparable periods principally due to the introduction of our optional overdraft protection program services on certain demand deposit accounts and other consumer advances related to our tax processing services. Note 7— Equity Method Investments 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 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 12 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 7—Equity Method Investments (continued) able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions. Any future economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties. As of June 30, 2022 and December 31, 2021, our net investment in TailFin Labs amounted to approximately $ 89.4 million and $ 61.5 million, respectively, and is included in the long-term portion of prepaid expenses and other assets on our consolidated balance sheets. We recorded equity in losses from TailFin Labs of approximately $ 5.0 million and $ 0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 7.1 million and $ 2.3 million for the six months ended June 30, 2022 and 2021, respectively, which are recorded as a component of other income and expense on our consolidated statements of operations. Our equity method investments also include an investment held by our bank, which amounted to $ 6.8 million and $ 6.4 million at June 30, 2022 and December 31, 2021, respectively. Equity in earnings from this investment were de minimis for the three months ended June 30, 2022 and approximately $ 2.1 million for the three months ended June 30, 2021. We recorded equity in earnings of approximately $ 0.4 million and $ 2.9 million for the six months ended June 30, 2022 and 2021, respectively. Note 8— Deposits Deposits are categorized as non-interest or interest-bearing deposits as follows: June 30, 2022 December 31, 2021 (In thousands) Non-interest bearing deposit accounts $ 3,350,756 $ 3,258,650 Interest-bearing deposit accounts Checking accounts 3,706 5,900 Savings 8,063 7,398 Secured card deposits 8,338 9,673 Time deposits, denominations greater than or equal to $250 2,258 2,497 Time deposits, denominations less than $250 2,883 2,771 Total interest-bearing deposit accounts 25,248 28,239 Total deposits $ 3,376,004 $ 3,286,889 The scheduled contractual maturities for total time deposits are presented in the table below: June 30, 2022 (In thousands) Due in 2022 $ 2,016 Due in 2023 1,189 Due in 2024 541 Due in 2025 483 Due in 2026 746 Thereafter 166 Total time deposits $ 5,141 13 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) 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 June 30, 2022, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use. 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) 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 0.25 % to 1.00 % for Base Rate loans. We also pay a commitment fee, which varies from 0.20 % to 0.35 % 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 terms of our existing agreement also provide for a method to determine an alternative benchmark interest rate, which will apply when the LIBOR rates cease to be available in June 2023. This alternative benchmark rate will be selected between the parties taking into consideration recommendations from regulatory bodies or based on prevailing market conventions at the time the alternative rate is established, and may include the Secured Overnight Financing Rate. 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 June 30, 2022, 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 meaningful cash interest expense related to our debt during the three and six months ended June 30, 2022 and 2021. Note 10— Income Taxes Income tax expense for the six months ended June 30, 2022 and 2021 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows: Six Months Ended June 30, 2022 2021 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 0.8 1.1 General business credits ( 1.7 ) ( 1.9 ) Employee stock-based compensation 1.7 ( 2.9 ) IRC 162(m) limitation 2.3 6.4 Nondeductible expenses 0.4 0.1 Other ( 0.5 ) ( 0.3 ) Effective tax rate 24.0 % 23.5 % 14 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) The effective tax rate for the six months ended June 30, 2022 and 2021 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 net increase in the effective tax rate for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is primarily due to a $ 3.1 million decline in excess tax benefits from stock-based compensation. We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.2 million for the six months ended June 30, 2022, compared to a $ 1.9 million excess tax benefit for the prior year comparable period. These increases were partially offset by the impact of general business credits and a decrease of $ 2.7 million subject to the IRC 162(m) limitation on the deductibility of executive compensation. We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the six months ended June 30, 2022 and 2021, the provision for GILTI tax expense was not material to our financial statements. We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2022 and 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 will realize the benefits of our deferred tax assets. We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax return for the years ended December 31, 2017 through 2021. 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 ended June 30, 2020, and the examination remains ongoing as of June 30, 2022. We do not expect the outcome of these examinations will have any material impact on our consolidated financial statements. As of June 30, 2022, we have federal net operating loss carryforwards of approximately $ 17.2 million and state net operating loss carryforwards of approximately $ 89.1 million, which will be available to offset future income. If not used, the federal net operating losses will expire between 2029 and 2034. Of our total state net operating loss carryforwards, approximately $ 57.3 million will expire between 2026 and 2041, while the remaining balance of approximately $ 31.8 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 $ 20.7 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will expire between 2023 and 2027. As of June 30, 2022 and December 31, 2021, we had a liability of $ 12.4 million and $ 11.0 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows: Six Months Ended June 30, 2022 2021 (In thousands) Beginning balance $ 10,972 $ 9,518 Increases related to positions taken during prior years — — Increases related to positions taken during the current year 1,410 1,470 Ending balance $ 12,382 $ 10,988 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 12,055 $ 10,801 As of June 30, 2022 and 2021, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.0 million and $ 0.6 million, respectively. 15 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 11— Stockholders' Equity Stock Repurchase Program In May 2017, our Board of Directors authorized, subject to regulatory approval, $ 150 million for our stock repurchase program under which we repurchased $ 100 million of shares in 2019. In February 2022, our Board of Directors provided authorization to increase our remaining stock repurchase limit to $ 100 million for any future repurchases. Accelerated Share Repurchases In March 2022, we entered into an accelerated share repurchase arrangement ("ASR") with a financial institution. Pursuant to the terms of the ASR agreement and in exchange for an up-front payment of $ 25 million, we received an initial 781,555 shares of our Class A Common Stock. Final settlement of the ASR was completed in April 2022, at which point we received an additional 132,482 shares from the financial institution. The final number of shares received upon settlement for the ASR was determined based on the volume-weighted average price of our common stock over the term of the agreement less an agreed upon discount and subject to adjustments pursuant to the terms and conditions of the ASR. Total shares repurchased under the ASR amounted to 914,037 shares at an average price of $ 27.35 . The up-front payments were accounted for as a reduction to shareholders’ equity on our consolidated balance sheets in the period the payments were made. The ASR was accounted for in two separate transactions: 1) a treasury stock repurchase for the initial shares received and 2) a forward stock purchase contract indexed to our own stock for the unsettled portion of the ASR. The par value of the shares received were recorded as a reduction to common stock with the remainder recorded as a reduction to additional paid-in capital. The ASR met all of the applicable criteria for equity classification, and therefore was not accounted for as a derivative instrument. The initial repurchase of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The shares were retired upon repurchase, but remain authorized for registration and issuance in the future. Other Repurchases In March 2022, we also entered into a repurchase plan under Rule 10b5-1 of the Exchange Act for $ 75 million that went into effect at the conclusion of the ASR. The agreement allows for $ 10 million of monthly share repurchases through the remainder of 2022 until the contract amount is reached. The timing and amount of purchases depend on a variety of factors, including market conditions and the volume limit defined by Rule 10b-18. As of June 30, 2022, we have repurchased 712,057 shares at an average price of $ 26.75 under our 10b5-1 plan, with approximately $ 56 million available for additional purchases. 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; however, Walmart is entitled to voting rights and to participate in any dividends paid from the issuance date on the unvested balance. As such, the total amount of restricted shares issued are included in our total Class A shares outstanding. As of June 30, 2022, there were 162,502 unvested shares outstanding. The estimated grant-date fair value of the restricted shares is recorded as a component of stock-based compensation expense over the related period we expect to benefit under the term of our relationship with Walmart. 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 $ 5.6 million and $ 8.4 million for the three months ended June 30, 2022 and 2021, respectively, and $ 20.5 million and $ 25.6 million for the six months ended June 30, 2022 and 2021, respectively. 16 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 12—Stock-Based Compensation (continued) Restricted Stock Units Restricted stock unit activity for awards subject to only service conditions was as follows for the six months ended June 30, 2022: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2021 1,596 $ 42.71 Restricted stock units granted 725 29.88 Restricted stock units vested ( 430 ) 38.94 Restricted stock units canceled ( 122 ) 43.14 Outstanding at June 30, 2022 1,769 $ 38.34 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity for the six months ended June 30, 2022 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2021 1,377 $ 35.36 Performance restricted stock units granted 115 32.75 Performance restricted stock units vested ( 53 ) 49.78 Performance restricted stock units canceled ( 246 ) 34.15 Outstanding at June 30, 2022 1,193 $ 34.72 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 based on the grant date fair value of the award. Stock Options Total stock option activity for the six months ended June 30, 2022 was as follows: Options Weighted-Average Exercise Price (In thousands, except per share data) Outstanding at December 31, 2021 1,204 $ 26.62 Options exercised ( 4 ) 22.06 Outstanding at June 30, 2022 1,200 $ 26.63 Exercisable at June 30, 2022 951 $ 27.37 We have not issued any stock option awards from our 2010 Equity Incentive Plan for the periods presented in these consolidated financial statements. 17 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands, except per share data) Basic earnings per Class A common share Numerator: Net income $ 15,008 $ 24,933 $ 53,632 $ 50,668 Amount attributable to unvested Walmart restricted shares ( 53 ) ( 235 ) ( 226 ) ( 517 ) Net income allocated to Class A common stockholders $ 14,955 $ 24,698 $ 53,406 $ 50,151 Denominator: Weighted-average Class A shares issued and outstanding 53,928 54,005 54,240 53,829 Basic earnings per Class A common share $ 0.28 $ 0.46 $ 0.98 $ 0.93 Diluted earnings per Class A common share Numerator: Net income allocated to Class A common stockholders $ 14,955 $ 24,698 $ 53,406 $ 50,151 Re-allocated earnings 1 4 3 11 Diluted net income allocated to Class A common stockholders $ 14,956 $ 24,702 $ 53,409 $ 50,162 Denominator: Weighted-average Class A shares issued and outstanding 53,928 54,005 54,240 53,829 Dilutive potential common shares: Stock options 121 446 169 477 Service-based restricted stock units 182 362 191 453 Performance-based restricted stock units 148 242 243 293 Employee stock purchase plan 10 6 12 7 Diluted weighted-average Class A shares issued and outstanding 54,389 55,061 54,855 55,059 Diluted earnings per Class A common share $ 0.27 $ 0.45 $ 0.97 $ 0.91 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, 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, or whereby the result of including such awards was anti-dilutive. The following table shows the weighted-average number of anti-dilutive shares excluded from the diluted EPS calculation: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands) Class A common stock Options to purchase Class A common stock 139 139 139 139 Service-based restricted stock units 1,256 562 1,204 320 Performance-based restricted stock units 867 829 822 742 Unvested Walmart restricted shares 190 515 230 555 Total 2,452 2,045 2,395 1,756 18 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, 2021. As of June 30, 2022 and December 31, 2021, our assets and liabilities carried at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Fair Value June 30, 2022 (In thousands) Assets Investment securities: Corporate bonds $ — $ 9,274 $ — $ 9,274 Agency bond securities — 204,408 — 204,408 Agency mortgage-backed securities — 2,146,900 — 2,146,900 Municipal bonds — 24,993 — 24,993 Asset-backed securities — 5,775 — 5,775 Loans held for sale — — 4,313 4,313 Total assets $ — $ 2,391,350 $ 4,313 $ 2,395,663 December 31, 2021 Assets Investment securities: Corporate bonds $ — $ 9,973 $ — $ 9,973 Agency bond securities — 221,596 — 221,596 Agency mortgage-backed securities — 1,848,331 — 1,848,331 Municipal bonds — 28,180 — 28,180 Asset-backed securities — 7,421 — 7,421 Loans held for sale — — 5,148 5,148 Total assets $ — $ 2,115,501 $ 5,148 $ 2,120,649 Liabilities Contingent consideration $ — $ — $ 1,347 $ 1,347 We based the fair value of our fixed income securities held as of June 30, 2022 and December 31, 2021 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three and six months ended June 30, 2022 or 2021. A reconciliation of changes in fair value for Level 3 assets or liabilities are not considered material to these consolidated financial statements and therefore are not presented for any of the periods presented. 19 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, 2021 . 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 June 30, 2022 and December 31, 2021 are presented in the table below. June 30, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Financial Assets Loans to bank customers, net of allowance $ 21,097 $ 20,910 $ 19,270 $ 17,481 Financial Liabilities Deposits $ 3,376,004 $ 3,375,929 $ 3,286,889 $ 3,286,837 20 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) 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 generally include renewal options of varying terms. Our total lease expense amounted to approximately $ 1.2 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2.3 million and $ 1.8 million for the six months ended June 30, 2022 and 2021, 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. Additional Information Additional information related to our ROU assets and related lease liabilities is as follows: June 30, 2022 Cash paid for operating lease liabilities (in thousands) $ 4,275 Weighted average remaining lease term (years) 2.66 Weighted average discount rate 4.8 % Maturities of our operating lease liabilities as of June 30, 2022 is as follows: Operating Leases (In thousands) Remainder of 2022 $ 3,596 2023 3,786 2024 3,704 2025 1,051 2026 38 12,175 Less: imputed interest ( 1,448 ) Total lease liabilities $ 10,727 Note 17— Commitments and Contingencies Financial Commitments As discussed in Note 7 — Equity Method Investments , we are committed to making annual capital contributions in TailFin Labs, LLC of $ 35.0 million per year from January 2020 through January 2024. Our definitive agreement to acquire all of the equity interests of UniRush provided for a minimum $ 4.0 million annual earn-out payment for five years following the closing, and ended in February 2022. The final earn-out payment was made in April 2022. 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. 21 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) On October 6, 2021, the Court appointed the New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff, and on April 1, 2022, plaintiff filed its First Amended Complaint. Defendants filed a motion to dismiss the First Amended Complaint on May 31, 2022, and the motion is scheduled to be heard on November 7, 2022. 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 and, pursuant to a stipulated agreement between the parties, the Hellman suit is stayed pending resolution of any motions to dismiss in the Koffsman case reference above, after which time the parties will meet and confer on a case schedule, including the schedule for defendants to respond to the complaint. 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 these matters. Given the uncertainty of litigation and the preliminary stage of these claims, we are currently unable to estimate the probability of the outcome of these actions or the range of reasonably possible losses, if any, or the impact on our results of operations, financial condition or cash flows, except as disclosed. Settlement In May 2021, we announced that we entered into a definitive agreement to purchase the assets and operations of Tax Refund Solutions (“TRS”), a business segment of Republic Bank & Trust Company ("Republic Bank"), subject to customary closing conditions. Pursuant to the terms of the definitive agreement, we agreed to pay Republic Bank approximately $ 165.0 million in cash for the TRS assets. On October 4, 2021, we announced that we had been unable to obtain the Federal Reserve’s approval of or non-objection to the transaction, and therefore, the transaction would not be consummated. The agreement provided for a termination fee payable by us of $ 5.0 million, which we recorded in the fourth quarter of 2021 and paid in January 2022 (the "Termination Fee"). On October 5, 2021, Republic Bank filed a claim against us in the Court of Chancery of the State of Delaware. The lawsuit claimed that we had breached the contract in which we agreed, subject to certain conditions, to purchase the TRS business. On June 3, 2022, Republic Bank agreed to settle its claims in exchange for a $ 13.0 million payment (which amount was in addition to the Termination Fee) by us to Republic Bank, which we recorded during three months ended June 30, 2022 and is included as a component of other general and administrative expenses on our consolidated statements of operations. 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. 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. 22 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Walmart 21 % 23 % 21 % 24 % In addition, approximately 29 % and 20 % of our total operating revenues for the three months ended June 30, 2022 and 2021, respectively, and 26 % and 18 % for the six months ended June 30, 2022 and 2021, respectively, were generated from a single BaaS partner, without a corresponding concentration to gross profit for the periods. Note 19— Segment Information Our Chief Operating Decision Maker (our "CODM" who is our Chief Executive Officer) organizes and manages our businesses primarily on the basis of the channels in which our product and services are offered and uses net revenue 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. Our operations are 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 the United States' 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, such as cash deposit and disbursements, 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. Revenues within Corporate and Other are comprised of net interest income and certain other investment income earned by our bank and inter-segment eliminations. Unallocated corporate expenses include our fixed expenses such as salaries, wages and related benefits for our employees, professional service fees, software licenses, telephone and communication costs, rent and utilities, insurance and inter-segment eliminations. These costs are not considered when our CODM evaluates the performance of our three reportable segments since they are not directly attributable to any reporting segment. Non-cash expenses such as stock-based compensation, depreciation and amortization of long-lived assets, impairment charges, and other non-recurring expenses that are not considered by our CODM when evaluating our overall consolidated financial results are excluded from our unallocated corporate expenses above. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. 23 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) The following tables present financial information for each of our reportable segments for the periods then ended: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Segment Revenue (In thousands) Consumer Services $ 150,959 $ 182,093 $ 309,716 $ 366,434 B2B Services 143,514 112,589 277,414 218,564 Money Movement Services 54,143 66,019 151,459 156,386 Corporate and Other 6,485 ( 2,763 ) 11,190 ( 3,641 ) Total segment revenues 355,101 357,938 749,779 737,743 BaaS commissions and processing expenses 8,429 11,435 14,941 25,116 Other income ( 761 ) — ( 1,334 ) — Total operating revenues $ 362,769 $ 369,373 $ 763,386 $ 762,859 Segment 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, as well as certain other investment income earned by our bank, which is included in Corporate and Other. Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Segment Profit (In thousands) Consumer Services $ 60,376 $ 55,790 $ 114,664 $ 109,317 B2B Services 22,775 18,174 45,039 35,707 Money Movement Services 30,151 38,192 91,611 87,006 Corporate and Other ( 45,754 ) ( 49,232 ) ( 93,440 ) ( 95,746 ) Total segment profit 67,548 62,924 157,874 136,284 Reconciliation to income before income taxes Depreciation and amortization of property, equipment and internal-use software 14,595 13,981 28,399 27,181 Stock based compensation and related employer taxes 5,770 8,444 20,939 25,626 Amortization of acquired intangible assets 5,664 6,943 12,181 13,887 Impairment charges 1,871 — 4,134 — Legal settlement expenses 13,921 — 13,495 10 Other expense 1,788 1,753 3,195 3,792 Operating income 23,939 31,803 75,531 65,788 Interest expense, net 29 38 116 75 Other (expense) income, net ( 4,038 ) 1,633 ( 4,808 ) 547 Income before income taxes $ 19,872 $ 33,398 $ 70,607 $ 66,260 24 Table of Contents