What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-09 · 130 added, 204 removed, 626 unchanged (35% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Assets (In thousands, except par value)

2 unchanged sentences

Restricted cash 4,006 5,900

Investment securities available-for-sale, at fair value 15,660 —

Settlement assets 482,976 493,395

1 unchanged sentence

Prepaid expenses and other assets 63,878 78,155

Income tax receivable 721 1,354

Total current assets 1,345,757 1,465,832

Investment securities available-for-sale, at fair value 2,353,672 2,363,687

Loans to bank customers, net of allowance for loan losses of $ 9,413 and $ 5,555 as of September 30, 2022 and December 31, 2021, respectively

Loans to bank customers, net of allowance for loan losses of $ 13,254 and $ 9,078 as of March 31, 2023 and December 31, 2022, respectively

31,705 21,421

20 unchanged sentences

Operating lease liabilities 4,464 5,247

Line of credit — 35,000

Total liabilities 3,825,657 4,007,695

2 unchanged sentences

Class A common stock, $ 0.001 par value;

100,000 shares authorized as of September 30, 2022 and December 31, 2021;

52,502 and 54,868 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

100,000 shares authorized as of March 31, 2023 and December 31, 2022;

51,994 and 51,674 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 347,385 340,575

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands, except per share data)

13 unchanged sentences

Interest expense, net 1,644 87

Other (expense) income, net ( 4,249 ) 849 ( 9,057 ) 1,396

Other expense, net ( 3,024 ) ( 770 )

Income before income taxes 46,327 50,735

4 unchanged sentences

Diluted earnings per common share $ 0.69 $ 0.70

$ 0.09 $ 0.13 $ 1.07 $ 1.04

Basic weighted-average common shares issued and outstanding:

5 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands)

Net income $ 36,012 $ 38,624

Other comprehensive (loss) income

Unrealized holding loss, net of tax ( 112,269 ) ( 4,010 ) ( 304,848 ) ( 17,902 )

Comprehensive (loss) income $ ( 107,573 ) $ 3,325 $ ( 246,520 ) $ 40,101

Other comprehensive income (loss)

Unrealized holding gain (loss), net of tax 36,297 ( 112,596 )

Comprehensive income (loss) $ 72,309 $ ( 73,972 )

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Three Months Ended September 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 June 30, 2022 53,740 $ 54 $ 376,902 $ 753,002 $ ( 222,386 ) $ 907,572

Common stock issued under stock plans, net of withholdings and related tax effects 71 — ( 655 ) — — ( 655 )

Stock-based compensation — — 10,806 — — 10,806

Repurchases of Class A Common Stock ( 1,309 ) ( 1 ) ( 30,003 ) — — ( 30,004 )

Net income — — — 4,696 — 4,696

Other comprehensive loss — — — — ( 112,269 ) ( 112,269 )

Balance at September 30, 2022 52,502 $ 53 $ 357,050 $ 757,698 $ ( 334,655 ) $ 780,146

Three Months Ended September 30, 2021

Three Months Ended March 31, 2023

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

1 unchanged sentence

(In thousands)

Balance at June 30, 2021 54,640 $ 55 $ 375,551 $ 702,558 $ ( 10,464 ) $ 1,067,700

Balance at December 31, 2022 51,674 $ 52 $ 340,575 $ 763,582 $ ( 322,728 ) $ 781,481

Common stock issued under stock plans, net of withholdings and related tax effects 320 — ( 2,372 ) — — ( 2,372 )

1 unchanged sentence

Net income — — — 36,012 — 36,012

Other comprehensive loss — — — — ( 4,010 ) ( 4,010 )

Balance at September 30, 2021 54,671 $ 55 $ 386,465 $ 709,893 $ ( 14,474 ) $ 1,081,939

See notes to unaudited consolidated financial statements

GREEN DOT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

Nine Months Ended September 30, 2022

Other comprehensive income — — — — 36,297 36,297

Balance at March 31, 2023 51,994 $ 52 $ 347,385 $ 799,594 $ ( 286,431 ) $ 860,600

Three Months Ended March 31, 2022

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

7 unchanged sentences

Other comprehensive loss — — — — ( 112,596 ) ( 112,596 )

Balance at September 30, 2022 52,502 $ 53 $ 357,050 $ 757,698 $ ( 334,655 ) $ 780,146

Nine Months Ended September 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 637 1 ( 5,106 ) — — ( 5,105 )

Stock-based compensation — — 37,111 — — 37,111

Net income — — — 58,003 — 58,003

Other comprehensive loss — — — — ( 17,902 ) ( 17,902 )

Balance at September 30, 2021 54,671 $ 55 $ 386,465 $ 709,893 $ ( 14,474 ) $ 1,081,939

Balance at March 31, 2022 54,293 $ 54 $ 388,299 $ 737,994 $ ( 142,403 ) $ 983,944

See notes to unaudited consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

7 unchanged sentences

Stock-based compensation 9,182 14,858

Losses (earnings) in equity method investments 11,878 ( 1,314 )

Amortization of (discount) premium on available-for-sale investment securities ( 892 ) 2,330

Losses in equity method investments 4,068 1,708

Amortization of discount on available-for-sale investment securities ( 556 ) ( 290 )

Impairment of long-lived assets — 2,263

26 unchanged sentences

Net changes in settlement assets and obligations to customers ( 19,864 ) ( 104,691 )

Contingent consideration payments ( 1,647 ) ( 3,000 )

Repurchase of Class A common stock — ( 25,000 )

Net cash provided by financing activities 69,459 564,696

Net cash (used in) provided by financing activities ( 161,648 ) 185,974

Net (decrease) increase in unrestricted cash, cash equivalents and restricted cash ( 93,836 ) 1,002

2 unchanged sentences

Cash paid for interest $ 2,016 $ 180

Cash paid for income taxes $ 9,760 $ 19,394

Cash paid (refund) for income taxes $ 509 $ ( 11 )

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

16 unchanged sentences

Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2022 for additional disclosures, including a summary of our significant accounting policies.

There have been no material changes to our significant accounting policies during the nine months ended September 30, 2022, other than the adoption of the accounting pronouncements discussed herein.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2023.

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

2 unchanged sentences

accordingly, accounting estimates require the exercise of judgment.

These financial statements were prepared using information reasonably available as of September 30, 2022 and through the date of this report.

These financial statements were prepared using information reasonably available as of March 31, 2023 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.

1 unchanged sentence

"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

2 unchanged sentences

Our products and services are offered only to customers within the United States.

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 September 30, 2022

Consumer Services B2B Services Money Movement Services Total

Timing of recognition (In thousands)

Transferred point in time $ 86,888 $ 42,179 $ 36,890 $ 165,957

Transferred over time 45,154 120,410 781 166,345

Operating revenues (1)

$ 132,042 $ 162,589 $ 37,671 $ 332,302

Three Months Ended September 30, 2021

Consumer Services B2B Services Money Movement Services Total

Timing of recognition (In thousands)

Transferred point in time $ 102,089 $ 42,118 $ 44,636 $ 188,843

Transferred over time 60,040 86,043 960 147,043

Operating revenues (1)

$ 162,129 $ 128,161 $ 45,596 $ 335,886

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Consumer Services B2B Services Money Movement Services Total

4 unchanged sentences

$ 136,627 $ 170,836 $ 98,241 $ 405,704

Nine Months Ended September 30, 2021

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 3—Revenues (continued)

Three Months Ended March 31, 2022

Consumer Services B2B Services Money Movement Services Total

5 unchanged sentences

(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.

Also excludes the effects of inter-segment 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.

2 unchanged sentences

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

We recognized approximately $ 25.8 million and $ 26.6 million for the nine months ended September 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.

We recognized approximately $ 14.4 million and $ 16.5 million for the three months ended March 31, 2023 and 2022, 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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 4— Investment Securities

2 unchanged sentences

(In thousands)

September 30, 2022

March 31, 2023

Corporate bonds $ 10,000 $ — $ ( 657 ) $ 9,343

2 unchanged sentences

Municipal bonds 29,552 — ( 5,691 ) 23,861

Asset-backed securities 161 — — 161

Total investment securities $ 2,755,273 $ 6 $ ( 385,947 ) $ 2,369,332

4 unchanged sentences

Municipal bonds 29,613 — ( 6,640 ) 22,973

Asset-backed securities 7,326 99 ( 4 ) 7,421

Total investment securities $ 2,791,843 $ 8 $ ( 428,164 ) $ 2,363,687

As of September 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:

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 4—Investment Securities (continued)

As of March 31, 2023 and December 31, 2022, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows:

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

1 unchanged sentence

(In thousands)

September 30, 2022

March 31, 2023

Corporate bonds $ — $ — $ 9,343 $ ( 657 ) $ 9,343 $ ( 657 )

2 unchanged sentences

Municipal bonds 4,747 ( 288 ) 19,114 ( 5,403 ) 23,861 ( 5,691 )

Asset-backed securities — — 160 — 160 —

Total investment securities $ 613,181 $ ( 26,246 ) $ 1,753,581 $ ( 359,701 ) $ 2,366,762 $ ( 385,947 )

4 unchanged sentences

Municipal bonds 16,333 ( 3,370 ) 6,641 ( 3,270 ) 22,974 ( 6,640 )

Asset-backed securities 2,358 ( 4 ) — — 2,358 ( 4 )

Total investment securities $ 917,373 $ ( 71,396 ) $ 1,443,708 $ ( 356,768 ) $ 2,361,081 $ ( 428,164 )

1 unchanged sentence

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 nine months ended September 30, 2022 or 2021 on our available-for-sale investment securities.

Unrealized losses as of September 30, 2022 and December 31, 2021 are the result of continued increases 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 September 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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 4—Investment Securities (continued)

As such, we have not recorded any significant credit-related impairment losses during the three months ended March 31, 2023 or 2022 on our available-for-sale investment securities.

Unrealized losses as of March 31, 2023 and December 31, 2022 are the result of increases 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 March 31, 2023 and December 31, 2022 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, and general volatility in market conditions.

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 September 30, 2022, the contractual maturities of our available-for-sale investment securities were as follows:

As of March 31, 2023, the contractual maturities of our available-for-sale investment securities were as follows:

Amortized cost Fair value

(In thousands)

Due in one year or less $ 15,837 $ 15,660

Due after one year through five years 51,093 46,045

4 unchanged sentences

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

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 5— Accounts Receivable

Accounts receivable, net consisted of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

11 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands)

9 unchanged sentences

(In thousands)

September 30, 2022

March 31, 2023

Residential $ — $ — $ — $ — $ 4,604 $ 4,604

17 unchanged sentences

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.

A portion of our secured credit card portfolio is classified 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 September 30, 2022 and December 31, 2021, the fair value of the loans held for sale amounted to approximately $ 4.1 million and $ 5.1 million, respectively.

As of March 31, 2023 and December 31, 2022, the fair value of the loans held for sale amounted to approximately $ 4.6 million and $ 5.3 million, respectively.

Nonperforming Loans

1 unchanged sentence

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, 2022 for further information on the criteria for classification as nonperforming.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

14 unchanged sentences

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:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Non-Classified Classified Non-Classified Classified

8 unchanged sentences

Activity in the allowance for credit losses on our loan portfolio consisted of the following:

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands)

17 unchanged sentences

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 September 30, 2022 and December 31, 2021, our net investment in TailFin Labs amounted to approximately $ 86.2 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 $ 3.2 million for the three months ended September 30, 2022 and minimal equity in losses for the three months ended September 30, 2021, and $ 10.3 million and $ 2.3 million for the nine months ended September 30, 2022 and 2021, respectively.

As of March 31, 2023 and December 31, 2022, our net investment in TailFin Labs amounted to approximately $ 113.4 million and $ 82.4 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 $ 4.1 million and $ 2.1 million for the three months ended March 31, 2023 and 2022, respectively.

These amounts 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 $ 4.8 million and $ 6.4 million at September 30, 2022 and December 31, 2021, respectively.

We recorded equity in losses from this investment of $ 2.0 million and $ 1.6 million for the three and nine months ended September 30, 2022, respectively, and equity in earnings of $ 0.7 million and $ 3.6 million for the three and nine months ended September 30, 2021, respectively.

Our equity method investments also include an investment held by our bank, which amounted to $ 4.8 million at March 31, 2023 and December 31, 2022.

Equity in earnings from this investment for the three months ended March 31, 2023 a nd 2022 were de minimis.

Note 8— Deposits

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

9 unchanged sentences

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

September 30, 2022

March 31, 2023

(In thousands)

4 unchanged sentences

Due in 2027 1,153

Thereafter 573

Total time deposits $ 4,748

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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.

The credit agreement 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.

1 unchanged sentence

however, we may make voluntary repayments at any time prior to maturity.

As of September 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.

As of March 31, 2023, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use.

In March 2023, we amended the terms of our agreement to replace LIBOR with the Secured Overnight Financing Rate ("SOFR").

At our election, loans made under the credit agreement bear interest at 1) an adjusted SOFR rate (the “SOFR 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) an adjusted SOFR rate plus 1.0 % (the “Base Rate"), plus in either case, an applicable margin.

The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25 % to 2.00 % for SOFR 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.

Letter of credit fees are payable in respect of outstanding letters of credit at a rate per annum equal to the applicable margin for SOFR 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 September 30, 2022, we were in compliance with all such covenants.

At March 31, 2023, 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 nine months ended September 30, 2022 and 2021.

We incurred total cash interest expense during the three months ended March 31, 2023 of approximately $ 1.6 million.

We did not incur any interest expense during the three months ended March 31, 2022.

Note 10— Income Taxes

Income tax expense for the nine months ended September 30, 2022 and 2021 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes.

Income tax expense for the three months ended March 31, 2023 and 2022 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:

Nine Months Ended September 30,

Three Months Ended March 31,

federal statutory tax rate 21.0 % 21.0 %

1 unchanged sentence

General business credits ( 3.4 ) ( 1.6 )

Employee stock-based compensation 2.4 ( 2.5 )

Stock-based compensation 3.7 1.2

IRC 162(m) limitation 1.6 2.5

Bank owned life insurance ( 1.6 ) ( 0.7 )

Nondeductible expenses 0.6 0.3

1 unchanged sentence

Effective tax rate 22.3 % 23.9 %

The effective tax rate for the nine months ended September 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 (the "IRC") 162(m) limitation on the

GREEN DOT CORPORATION

1 unchanged sentence

Note 10—Income Taxes (continued)

deductibility of executive compensation.

The net increase in the effective tax rate for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 is primarily due to a $ 3.8 million decline in excess tax benefits from stock-based compensation and an increase of $ 0.4 million in state income taxes, net of federal benefits.

We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.9 million for the nine months ended September 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 $ 3.4 million subject to the IRC 162(m) limitation on the deductibility of executive compensation.

The effective tax rate for the three months ended March 31, 2023 and 2022 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, stock-based compensation, cash value growth in bank owned life insurance policies, and the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation.

The net decrease in the effective tax rate for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 is primarily due to the impact of an increase of $ 0.8 million in general business credits, an increase of $ 0.4 million in tax benefits from bank owned life insurance policies, a decrease of $ 0.5 million subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, and a decrease of $ 0.4 million in state income taxes, net of federal benefits.

These decreases were partially offset by the impact of a $ 1.1 million increase in tax expense associated with shortfalls from stock-based compensation.

We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.7 million for the three months ended March 31, 2023, compared to a $ 0.6 million discrete tax expense for the prior year comparable period.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law.

The IRA contains a number of revisions to the IRC, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022.

These tax law revisions have no immediate effect and we do not expect that they will have a material impact on our results of operations in the future.

To date, these tax law revisions have had no immediate effect and we do not expect that they will have a material impact on our results of operations in the future.

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 nine months ended September 30, 2022 and 2021, the provision for GILTI tax expense was not material to our financial statements.

For the three months ended March 31, 2023 and 2022, 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 September 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.

As of March 31, 2023 and 2022, 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.

2 unchanged sentences

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 September 30, 2022.

federal tax return during the second quarter ended June 30, 2020, and the examination remains ongoing as of March 31, 2023.

We do not expect the outcome of these examinations will have any material impact on our consolidated financial statements.

As of September 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.

As of March 31, 2023, we have federal net operating loss carryforwards of approximately $ 15.2 million and state net operating loss carryforwards of approximately $ 102.3 million, which will be available to offset future income.

If not used, the federal net operating losses will expire between 2029 and 2034.

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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 September 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.

In addition, we have state business tax credits of approximately $ 20.9 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will start to expire on December 31, 2023 and continue to expire through December 31, 2027.

As of March 31, 2023 and December 31, 2022, we had a liability of $ 12.3 million and $ 11.2 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:

Nine Months Ended September 30,

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 10—Income Taxes (continued)

Three Months Ended March 31,

(In thousands)

Beginning balance $ 11,178 $ 10,972

Increases related to positions taken during prior years — —

Increases related to positions taken during the current year 1,260 1,410

Decreases related to positions settled with tax authorities ( 90 ) —

Ending balance $ 12,348 $ 12,382

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 11,917 $ 12,060

As of September 30, 2022 and 2021, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.1 million and $ 0.7 million, respectively.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As of March 31, 2023 and 2022, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.0 million and $ 0.9 million, respectively.

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.

In February 2022, our Board of Directors authorized a $ 100 million increase to our stock repurchase program.

As of March 31, 2023, we have an authorized $ 4.5 million remaining under our stock repurchase program for additional repurchases.

Accelerated Share Repurchases

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Total shares repurchased under the ASR amounted to 914,037 shares at a volume-weighted average price of $ 27.35 .

The up-front payment was 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 September 30, 2022, we have repurchased 2,020,952 shares at a volume-weighted average price of $ 24.27 under our 10b5-1 plan, with approximately $ 26 million available for additional purchases.

The agreement allowed for $ 10 million of monthly share repurchases through December 31, 2022 until the contract amount was reached, unless otherwise terminated.

In December 2022, we early terminated the agreement just prior to completing the entire $ 75 million of repurchases.

We repurchased 3,150,181 shares at a volume-weighted average price of $ 22.39 under the 10b5-1 plan.

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 September 30, 2022, there were 81,253 unvested shares outstanding.

The shares vested in equal monthly increments through December 1, 2022;

however, Walmart was 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 were included in our total Class A shares outstanding.

All shares issued to Walmart were fully vested as of December 31, 2022.

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.

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

The total stock-based compensation expense recognized was $ 10.8 million and $ 11.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 31.3 million and $ 37.1 million for the nine months ended September 30, 2022 and 2021, respectively.

The total stock-based compensation expense recognized was $ 9.2 million and $ 14.9 million for the three months ended March 31, 2023 and 2022, respectively.

GREEN DOT CORPORATION

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Restricted Stock Units

Restricted stock unit activity for awards subject to only service conditions was as follows for the nine months ended September 30, 2022:

Restricted stock unit activity for awards subject to only service conditions was as follows for the three months ended March 31, 2023:

Shares Weighted-Average Grant-Date Fair Value

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Restricted stock units canceled ( 58 ) 37.16

Outstanding at September 30, 2022

Outstanding at March 31, 2023

2,184 $ 26.77

Performance-Based Restricted Stock Units

Performance-based restricted stock unit activity for the nine months ended September 30, 2022 was as follows:

Performance-based restricted stock unit activity for the three months ended March 31, 2023 was as follows:

Shares Weighted-Average Grant-Date Fair Value

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Outstanding at December 31, 2022

1,377 $ 35.36

Performance restricted stock units granted 724 18.13

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Performance restricted stock units canceled ( 28 ) 27.74

Outstanding at September 30, 2022

Adjustment for completed performance periods 15 46.82

Outstanding at March 31, 2023

1,263 $ 24.31

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 nine months ended September 30, 2022 was as follows:

Total stock option activity for the three months ended March 31, 2023 was as follows:

Options Weighted-Average Exercise Price

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Options exercised ( 8 ) 16.34

Outstanding at September 30, 2022

Outstanding at March 31, 2023

1,163 $ 27.04

Exercisable at September 30, 2022

Exercisable at March 31, 2023

1,163 $ 27.04

We have not issued any stock option awards from our 2010 Equity Incentive Plan for the periods presented in these consolidated financial statements.

We did not issue any stock option awards from our 2010 Equity Incentive Plan for the periods presented in these consolidated financial statements.

GREEN DOT CORPORATION

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands, except per share data)

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Diluted earnings per Class A common share $ 0.69 $ 0.70

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 restricted shares issued to Walmart contained non-forfeitable rights to dividends and were 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.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands)

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For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022.

As of September 30, 2022 and December 31, 2021, our assets and liabilities carried at fair value on a recurring basis were as follows:

As of March 31, 2023 and December 31, 2022, our assets carried at fair value on a recurring basis were as follows:

Level 1 Level 2 Level 3 Total Fair Value

September 30, 2022 (In thousands)

March 31, 2023 (In thousands)

Investment securities:

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Municipal bonds — 23,861 — 23,861

Asset-backed securities — 161 — 161

Loans held for sale — — 4,597 4,597

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Municipal bonds — 22,973 — 22,973

Asset-backed securities — 7,421 — 7,421

Loans held for sale — — 5,324 5,324

Total assets $ — $ 2,363,687 $ 5,324 $ 2,369,011

Contingent consideration $ — $ — $ 1,347 $ 1,347

We based the fair value of our fixed income securities held as of September 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 nine months ended September 30, 2022 or 2021.

We based the fair value of our fixed income securities held as of March 31, 2023 and December 31, 2022 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, 2023 or 2022.

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.

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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.

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.

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Fair Value of Financial Instruments

The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value, at September 30, 2022 and December 31, 2021 are presented in the table below.

September 30, 2022 December 31, 2021

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, 2023 and December 31, 2022 are presented in the table below.

March 31, 2023 December 31, 2022

Carrying Value Fair Value Carrying Value Fair Value

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Our leases have remaining lease terms of less than 1 year to approximately 10 years, most of which generally include renewal options of varying terms.

Our total lease expense amounted to approximately $ 1.0 million for the three months ended September 30, 2022 and 2021, and $ 3.3 million and $ 2.8 million for the nine months ended September 30, 2022 and 2021, respectively.

Our total lease expense amounted to approximately $ 1.0 million and $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively.

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

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Additional information related to our right of use assets and related lease liabilities is as follows:

September 30, 2022

March 31, 2023

Cash paid for operating lease liabilities (in thousands) $ 983

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Weighted average discount rate 5.0 %

Maturities of our operating lease liabilities as of September 30, 2022 is as follows:

Maturities of our operating lease liabilities as of March 31, 2023 is as follows:

Operating Leases

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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.

As discussed in Note 7 — Equity Method Investments , we are committed to making annual capital contributions in TailFin Labs of $ 35.0 million per year from January 2020 through January 2024.

Litigation and Claims

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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 December 12, 2022.

Defendants filed a motion to dismiss the First Amended Complaint on May 31, 2022, and the motion was heard on December 12, 2022.

On February 18, 2020, a shareholder derivative suit and securities class action entitled Hellman v.

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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.

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 Koffsmon 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.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Walmart 17 % 20 %

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Note 18—Significant Retailer and Partner Concentration (continued)

In addition, approximately 35 % and 23 % of our total operating revenues for the three months ended September 30, 2022 and 2021, respectively, and 29 % and 19 % for the nine months ended September 30, 2022 and 2021, respectively, were generated from a single BaaS partner, but without a corresponding concentration to gross profit for the periods.

In addition, approximately 32 % and 23 % of our total operating revenues for the three months ended March 31, 2023 and 2022, respectively, were generated from a single BaaS partner, but without a corresponding concentration to gross profit for the periods.

Note 19— Segment Information

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We market our tax-related financial services through a network of tax preparation franchises, independent tax professionals and online tax preparation providers.

Our Corporate and Other segment primarily consists of net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue), eliminations of intersegment revenues and expenses, and unallocated corporate expenses, which include our fixed expenses such as salaries, wages and related benefits for our employees, professional service fees, software licenses, telephone and communication costs, rent, utilities, and insurance.

Our Corporate and Other segment primarily consists of net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue), eliminations of inter-segment revenues and expenses, and unallocated corporate expenses, which include our fixed expenses such as salaries, wages and related benefits for our employees, professional services fees, software licenses, telephone and communication costs, rent, utilities, and insurance.

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.

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Segment Revenue (In thousands)

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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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Segment Profit (In thousands)

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Interest expense, net 1,644 87

Other (expense) income, net ( 4,249 ) 849 ( 9,057 ) 1,396

Other expense, net ( 3,024 ) ( 770 )

Income before income taxes $ 46,327 $ 50,735

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

What changed 10-Q

Item 1. Financial Statements