What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-01 · 125 added, 103 removed, 1246 unchanged (15% of the section changed)

59 unchanged sentences

Description of the Matter As shown in the consolidated statement of operations and discussed in Note 2 and Note 3 of the consolidated financial statements, the Company recorded card revenues and other fees of $1,007.6 million, interchange revenues of $231.0 million, and cash processing revenues of $225.4 million in operating revenues for the year ended December 31, 2023.

Card revenues and other fees consist of monthly maintenance fees, new card fees, ATM fees, and other card revenues, which include revenue associated with the Company’s gift card program.

Card revenues and other fees consist of monthly maintenance fees, new card fees, ATM fees, transaction-based fees and other card revenues, which include revenue associated with the Company’s overdraft protection fees, gift card program revenues and BaaS partner program management service fees.

The Company records estimated cash back rewards as a reduction to card revenues and other fees.

Cash processing include cash transfer revenues, Simply Paid disbursement revenues, and tax refund processing service revenues.

Cash processing revenues include cash transfer revenues, tax refund processing service revenues, Simply Paid disbursement revenues, and other tax processing service revenues.

The Company’s revenue recognition differs between each of these discrete revenue streams.

The Company recognizes revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.

Auditing card revenues and other fees, interchange revenues, and cash transfer revenues was complex due to the high aggregate dollar value and large volume of revenue-generating transactions, the number of contracts involved with each revenue stream, the number of systems and processes involved in the processing of such transactions, including third-party service organizations, and the judgment required by management in estimating the average card lifetime used to recognize new card fees and estimating the cash back rewards included in card revenues and other fees.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s processes, systems and controls related to the recognition of card revenues and other fees, interchange revenues, and cash transfer revenues, including, among others, controls related to management’s assessment of when control of goods and services is transferred to customers, the Company’s use of relevant third-party service organizations, and management’s review of significant assumptions and underlying data used to estimate the average card lifetime and the cash back rewards.

Except for gift card program revenues and BaaS partner program management service fees, auditing card revenues and other fees (monthly maintenance fees, new card fees, ATM fees, transaction-based fees and overdraft protection fees), interchange revenues, and cash transfer revenues (collectively, “Revenue”) was complex due to the high aggregate dollar value and large volume of revenue-generating transactions, the number of contracts involved with each revenue stream, the number of systems and processes involved in the processing of such transactions, including third-party service organizations.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s processes, systems and controls related to the recognition of Revenue, including, among others, controls related to management’s assessment of when control of goods and services is transferred to customers, the Company’s use of relevant third-party service organizations.

Our audit procedures included, among others, assessing a sample of contracts to determine whether terms that may impact revenue recognition were identified and properly considered in the Company’s evaluation of the accounting for the contracts, calculating revenue per transaction based upon the card revenues and other fees, interchange revenues, and cash transfer revenues recognized and relevant non-financial metrics for each revenue stream (e.g., purchase volumes and number of card activations) and comparing the revenue per transaction for each revenue stream to historical trends and expectations based on contractual rates and historical data.

We tested revenue transaction details on a sample basis for certain card revenues and other fees by agreeing such revenues and fees to third party supporting documentation.

In addition, we tested the methodology and significant assumptions and underlying data used in management’s estimate of the average card lifetime by comparing the assumptions and data to the Company’s historical data involving the period from activation of the card through the date of last positive balance.

We tested the methodology and significant assumptions and underlying data used in management’s estimate of the cash back rewards by comparing the customer activity and customer redemption rates to comparable peer trends and the Company’s historical reward data.

We tested revenue transaction details on a sample basis for certain card revenues and other fees revenue by agreeing such revenues and fees to third party supporting documentation.

/s/ Ernst & Young LLP

8 unchanged sentences

Restricted cash 4,239 5,900

Investment securities available-for-sale, at fair value 33,859 —

Settlement assets 737,989 493,395

1 unchanged sentence

Prepaid expenses and other assets 69,419 78,155

Income tax receivable — 1,354

Total current assets 1,637,910 1,465,832

19 unchanged sentences

Deferred revenue 6,343 25,029

Line of credit 61,000 —

Income tax payable 6,262 11,641

53 unchanged sentences

Net income $ 6,722 $ 64,212 $ 47,480

Other comprehensive (loss) income

Unrealized holding (loss) gain, net of tax ( 292,921 ) ( 33,235 ) 1,388

Comprehensive (loss) income $ ( 228,709 ) $ 14,245 $ 24,519

Other comprehensive income and loss

Unrealized holding income (loss), net of tax 35,741 ( 292,921 ) ( 33,235 )

Comprehensive income (loss) $ 42,463 $ ( 228,709 ) $ 14,245

See notes to consolidated financial statements

7 unchanged sentences

Stock-based compensation — — 51,419 — — 51,419

Walmart restricted shares 975 1 ( 1 ) — — —

Net income — — — 47,480 — 47,480

Other comprehensive income — — — — 1,388 1,388

Cumulative effect adjustment for adoption of ASU No.

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

Other comprehensive loss — — — — ( 33,235 ) ( 33,235 )

Balance at December 31, 2021 54,868 $ 55 $ 401,055 $ 699,370 $ ( 29,807 ) $ 1,070,673

1 unchanged sentence

Stock-based compensation — — 34,812 — — 34,812

Repurchases of Class A Common Stock ( 4,064 ) ( 4 ) ( 95,521 ) — — ( 95,525 )

Net income — — — 64,212 — 64,212

3 unchanged sentences

Stock-based compensation — — 33,744 — — 33,744

Repurchases of Class A Common Stock ( 4,064 ) ( 4 ) ( 95,521 ) — — ( 95,525 )

Net income — — — 6,722 — 6,722

Other comprehensive loss — — — — ( 292,921 ) ( 292,921 )

Other comprehensive income — — — — 35,741 35,741

Balance at December 31, 2023 52,816 $ 53 $ 375,980 $ 770,304 $ ( 286,987 ) $ 859,350

14 unchanged sentences

Losses (earnings) in equity method investments 9,310 15,648 ( 1,579 )

Realized gain on sale of available-for-sale investment securities — — ( 5,073 )

Amortization of (discount) premium on available-for-sale investment securities ( 2,276 ) ( 1,434 ) 2,563

15 unchanged sentences

Proceeds from sales and calls of available-for-sale securities 186 3,488 6,823

Payments for acquisition of property and equipment ( 84,326 ) ( 57,432 ) ( 59,035 )

Payments for property, equipment and internal-use software ( 75,942 ) ( 84,326 ) ( 57,432 )

Net changes in loans ( 28,970 ) ( 32,057 ) ( 28,385 )

2 unchanged sentences

Other investing activities ( 3,782 ) ( 2,558 ) ( 852 )

Net cash used in investing activities ( 820,188 ) ( 1,368,487 ) ( 785,832 )

Net cash provided by (used in) investing activities 33,157 ( 820,188 ) ( 1,368,487 )

Financing activities

8 unchanged sentences

Other financing activities — ( 4,500 ) ( 4,500 )

Net cash provided by financing activities 36,707 1,030,393 1,007,201

Net (decrease) increase in unrestricted cash, cash equivalents and restricted cash ( 505,795 ) ( 171,061 ) 430,547

Net cash (used in) provided by financing activities ( 264,019 ) 36,707 1,030,393

Net decrease in unrestricted cash, cash equivalents and restricted cash ( 133,343 ) ( 505,795 ) ( 171,061 )

Unrestricted cash, cash equivalents and restricted cash, beginning of period 819,845 1,325,640 1,496,701

49 unchanged sentences

Remittance of these funds with our retail distributors, third-party payment processors and other partners takes an average of two business days.

Obligations to customers represent customer funds collected from (or to be remitted by) our retail distributors and partners for which the underlying products have not been activated.

Once the underlying products have been activated, the customer funds are reclassified as deposits in a bank account established for the benefit of the customer.

Included in this balance are also disbursements of customer funds that have been initiated but not yet settled.

Settlement obligations represent the customer funds received by our subsidiary bank that are due to third-party card issuing banks upon activation.

Obligations to customers generally represent customer funds related to our products and services for transactions that have not yet settled.

Settlement obligations represent the customer funds received by our subsidiary bank that are due to third-party card issuing banks.

Accounts Receivable, net

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We measure the loss as the amount by which the carrying amount exceeds its fair value calculated using the present value of estimated net future cash flows.

We recorded total impairment charges of $ 4.3 million, $ 0 , and $ 21.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Impairment charges for the year ended December 31, 2022 related to internal-use software that we determined would no longer be utilized.

Impairment charges for the year ended December 31, 2020 were principally associated with capitalized internal-use software, and our operating lease right-of-use assets and other tenant improvements we determined to no longer be utilized as a result of our remote workforce strategy.

No impairment charges were recognized related to long-lived assets for the years ended December 31, 2023 or 2021.

We recorded total impairment charges of $ 4.3 million for the year ended December 31, 2022 related to internal-use software that we determined would no longer be utilized.

These impairment charges are included in other general and administrative expenses in our consolidated statements of operations.

67 unchanged sentences

Substantially all our fees are collected from our cardholders at the time the fees are assessed and debited from their account balance.

Program management fees from our BaaS partners are generally earned over time on a monthly basis, pursuant to the terms of each program management agreement.

Program management service fees from our BaaS partners are generally earned over time on a monthly basis, pursuant to the terms of each program management agreement.

Our agreements are generally multi-year arrangements of varying lengths.

58 unchanged sentences

Earnings Per Common Share

We apply the two-class method in calculating earnings per common share, or EPS, because we have certain unvested restricted shares outstanding that are entitled to participate with our common stockholders in the distributions of earnings based on their dividend rights.

We apply the two-class method in calculating earnings per common share, or EPS, because we have had certain unvested restricted shares outstanding that are entitled to participate with our common stockholders in the distributions of earnings based on their dividend rights.

The two-class method requires net income to be allocated between each class or series of common stock and other participating securities based on their respective rights to receive dividends, whether or not declared.

20 unchanged sentences

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 .

In November 2023, the Financial Standards Accounting Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

Note 3— Revenues

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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 (as defined herein) partner program management fees.

Revenues recognized over time consists of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS (as defined herein) partner program management service fees.

Significant Judgments and Estimates

31 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

15 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 )

8 unchanged sentences

Note 4—Investment Securities (continued)

During the year ended December 31, 2020, we recorded a realized gain of approximately $ 5.1 million as a result of the sale of certain investment securities.

The gain recognized upon sale of the investments was reclassified from accumulated other comprehensive income and was recorded as a component of other income and expenses on our consolidated statements of operations.

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

1 unchanged sentence

(In thousands)

Due in one year or less $ 34,102 $ 33,859

Due after one year through five years 81,224 73,085

114 unchanged sentences

Our equity method investments also include an investment held by our bank, which amounted to $ 3.5 million and $ 4.8 million at December 31, 2023 and 2022, respectively.

We recorded equity in losses from this investment of approximately $ 1.6 million for the year ended December 31, 2022, and equity in earnings of $ 3.9 million and $ 0.7 million for the years ended December 31, 2021 and 2020, respectively.

We recorded equity in losses from this investment of approximately $ 1.4 million and $ 1.6 million for the years ended December 31, 2023 and 2022, respectively, and equity in earnings of $ 3.9 million for the year ended December 31, 2021 .

Note 8— Property and Equipment

13 unchanged sentences

Included in those amounts are depreciation expense related to internal-use software of $ 51.8 million, $ 49.9 million and $ 47.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

We recorded an impairment charge to property and equipment of $ 4.3 million, $ 0 , and $ 21.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Impairment charges for the year ended December 31, 2022 related to internal-use software that we determined would no longer be utilized.

Impairment charges for the year ended December 31, 2020 were primarily associated with capitalized internal-use software, as well as tenant improvements and other computer equipment at our office locations that would no longer provide any future economic benefit as a result of our remote workforce strategy.

No impairment charges were recognized related to long-lived assets for the years ended December 31, 2023 or 2021.

We recorded an impairment charge to property and equipment of $ 4.3 million for the year ended December 31, 2022 related to internal-use software that we determined would no longer be utilized.

Note 9— Goodwill and Intangible Assets

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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.

We classify amounts outstanding on our consolidated balance sheets based on the remaining duration of the credit facility, however, we may make voluntary repayments at any time prior to maturity.

As of December 31, 2023, the outstanding balance on the 2019 Revolving Facility was $ 61 million.

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 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.

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.

The interest rate on our outstanding balance as of December 31, 2023 was 7.23 %.

1 unchanged sentence

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.

2 unchanged sentences

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 years ended December 31, 2022 and 2021.

Cash interest expense related to our debt was $ 0.6 million for the year ended December 31 , 2020.

We incurred interest expense during the year December 31, 2023 of approximately $ 2.9 million.

We did no t incur any meaningful interest expense related to our debt during the years ended December 31, 2022 and 2021.

GREEN DOT CORPORATION

11 unchanged sentences

Comprehensive Income

The tax impact on unrealized losses and gains on investment securities available-for-sale for the years ended December 31, 2022 , 2021 and 2020 was approximately $( 94.6 ) million, $( 11.5 ) million and $ 0.3 million, respectively.

The tax impact on unrealized gains and losses on investment securities available-for-sale for the years ended December 31, 2023 , 2022 and 2021 was approximately $ 12.2 million, $( 94.6 ) million and $( 11.5 ) million, respectively.

Stock Repurchase Program

6 unchanged sentences

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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 12—Stockholders’ Equity (continued)

Other Repurchases

2 unchanged sentences

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

As of December 31, 2022, we repurchased 3,150,181 shares at a volume-weighted average price of $ 22.39 under our 10b5-1 plan.

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

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 12—Stockholders’ Equity (continued)

Walmart Restricted Shares

2 unchanged sentences

As such, the total amount of restricted shares issued were included in our total Class A shares outstanding at the end of each period.

As of December 31, 2022, there were no unvested shares remaining.

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 our relationship with Walmart.

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The 2010 Employee Stock Purchase Plan enables eligible employees to purchase shares of our Class A common stock periodically at a discount.

Our 2010 Employee Stock Purchase Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code.

Our 2010 Employee Stock Purchase Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code ("IRC").

Approximately 4.0 million shares are available for grant under the 2010 Equity Incentive Plan as of December 31, 2023.

13 unchanged sentences

Weighted-average grant-date fair value $ 16.67 $ 27.77 $ 48.20

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13—Stock-Based Compensation (continued)

Restricted stock unit activity for the year ended December 31, 2023 was as follows:

9 unchanged sentences

The total fair value of restricted stock vested for the years ended December 31, 2023, 2022 and 2021 was $ 11.3 million, $ 15.8 million and $ 23.4 million, respectively, based on the price of our Class A common stock on the vesting date.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13—Stock-Based Compensation (continued)

Performance-Based Restricted Stock Units

1 unchanged sentence

The actual number of shares subject to the award is determined at the end of the performance period and may range from zero 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.

Some awards may 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.

9 unchanged sentences

Outstanding at December 31, 2022

1,377 $ 35.96

Performance restricted stock units granted (at target) 724 18.13

4 unchanged sentences

The total fair value of all performance-based restricted stock vested for the years ended December 31, 2023, 2022 and 2021 was $ 2.1 million, $ 4.2 million and $ 17.6 million, respectively, based on the price of our Class A common stock on the vesting date.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13—Stock-Based Compensation (continued)

Stock Options

12 unchanged sentences

We have not issued any stock option awards from our 2010 Equity Incentive Plan during the year ended December 31, 2023.

The total intrinsic value of options exercised was $ 0.1 million, $ 2.0 million and $ 10.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 13—Stock-Based Compensation (continued)

The total intrinsic value of options exercised was de minimis for the year ended December 31, 2023, and $ 0.1 million and $ 2.0 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2023, the aggregate intrinsic value of our option awards outstanding was zero, as the fair value per Class A common share exceeded each option's exercise price.

17 unchanged sentences

The sources and tax effects of the differences are as follows:

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 14—Income Taxes (continued)

Year Ended December 31,

2 unchanged sentences

State income taxes, net of federal tax benefit 2.0 2.2 1.2

Foreign tax rate differential ( 1.5 ) ( 0.3 ) ( 0.4 )

General business credits ( 25.0 ) ( 3.2 ) ( 2.2 )

1 unchanged sentence

IRC 162(m) limitation 0.4 0.8 8.0

Capital loss valuation allowance release — — ( 1.1 )

Bank owned life insurance ( 4.2 ) ( 0.7 ) ( 0.1 )

Nondeductible penalties 29.1 0.1 ( 0.2 )

Global intangible low-taxed income tax 2.0 0.3 0.5

Other 1.5 0.1 0.3

Effective tax rate 54.1 % 23.5 % 25.5 %

The effective tax rate for the year ended December 31, 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, stock-based compensation, and the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation.

The decrease in the effective tax rate for the year ended December 31, 2022 as compared to the prior year ended December 31, 2021 is primarily due to a decrease of the IRC 162(m) limitation on the deductibility of certain executive compensation and an increase of general business credits.

This decrease was partially offset by tax shortfalls from stock-based compensation and an expenses related to state taxes, net of federal benefits.

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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 14—Income Taxes (continued)

The effective tax rate for the year ended December 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, nondeductible penalties, and the IRC 162(m) limitation on the deductibility of executive compensation.

The increase in the effective tax rate for the year ended December 31, 2023 as compared to the prior year ended December 31, 2022 is primarily due to an increase in the expense related to tax shortfalls from stock-based compensation, an increase in the expense related to nondeductible penalties, and an increase to state tax expense, net of federal benefits.

These increases were partially offset by a decrease of the IRC 162(m) limitation on the deductibility of certain executive compensation, cash value growth in bank owned life insurance policies, and the impact of general business credits.

The increase in nondeductible penalties for the year ended December 31, 2023 is related to the tax effect associated with the estimated accrual for our proposed consent order received from the Federal Reserve Board discussed in Note 21—Commitments and Contingencies.

The Inflation Reduction Act of 2022 (the "IRA") levies a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases.

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

We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred.

20 unchanged sentences

Net deferred tax assets $ 117,139 $ 117,159

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 December 31, 2023 and 2022, we did not 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.

GREEN DOT CORPORATION

1 unchanged sentence

Note 14—Income Taxes (continued)

We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2022 and 2021, we did not 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.

18 unchanged sentences

1,431 1,260 1,470

Decreases related to positions settled with tax authorities

Decreases due to a lapse of applicable statute of limitations

3 unchanged sentences

We recognized accrued interest and penalties related to unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021, of approximately $ 1.2 million, $ 0.9 million and $ 0.8 million, respectively.

For tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize and amortize research and development costs pursuant to IRC Section 174.

Section 174 requires taxpayers to capitalize research and development costs and amortize them over 5 years for expenditures attributed to domestic research and 15 years for expenditures attributed to foreign research.

During the year ended December 31, 2023, our cash paid for taxes was adversely impacted by the requirement to capitalize and amortize research and development expenses under Section 174.

Although Congress is considering legislation that would reinstate and extend Section 174 expensing for certain research and experimental expenditures, the possibility that this will happen is uncertain.

GREEN DOT CORPORATION

60 unchanged sentences

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 December 31, 2023 and 2022 on either quoted prices in active markets for similar assets or identical securities in inactive markets.

8 unchanged sentences

Balance, end of period $ — $ — $ 1,347

We had no remaining balance outstanding on our contingent consideration payable as of December 31, 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.

16 unchanged sentences

Contingent Consideration

The fair value of contingent consideration obligations, such as the earn-out associated with our acquisition of UniRush LLC ("UniRush") in 2017, was estimated through valuation models designed to estimate the probability of such contingent payments based on various assumptions.

The fair value of contingent consideration obligations was estimated through valuation models designed to estimate the probability of such contingent payments based on various assumptions.

Estimated payments were discounted using present value techniques to arrive at an estimated fair value.

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Note 19— Defined Contribution Plan

On January 1, 2004, we established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code.

On January 1, 2004, we established a defined contribution savings plan under Section 401(k) of the IRC.

Employees who have attained at least 21 years of age are generally eligible to participate in the plan on the first day of the calendar month following the month in which they commence service with us.

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Note 21— 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.

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.

In the ordinary course of business, we are a party to various legal proceedings, including, from time to time, regulatory, supervisory, and governmental matters as well as actions which are asserted to be maintainable as class action suits, employment claims, and or enforcement actions.

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.

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, would not be likely to have a material adverse impact on our financial condition or results of operations.

Nonetheless, given the inherent unpredictability of these matters, an adverse outcome could, from time to time, have a material adverse impact on our financial condition or results of operations.

We and our subsidiary bank received a proposed consent order from the Federal Reserve Board relating principally to various aspects of compliance risk management, including consumer compliance and compliance with anti-money laundering regulations.

Included in the proposed consent order are proposals for civil money penalties related to these issues.

While we are still in discussions with the Federal Reserve Board regarding these proposals, we accrued an estimated liability of $ 20 million related to the proposed consent order during the three months ended December 31, 2023.

There may be an exposure to loss in excess of the amount accrued.

We believe the estimate of the aggregate range of reasonably possible losses (meaning the likelihood of losses is more than remote but less than likely), is up to $ 50 million as of December 31, 2023.

This estimated range of reasonably possible losses is based on currently available information for those proceedings in which we are involved and considers our best estimate of such losses for those matters for which an estimate can be made.

However, there can be no assurance that our accrual is sufficient or that losses from the proposed consent order will not exceed the estimated range.

For further discussion, see the headings "As a bank holding company, we are subject to extensive and potentially changing regulation and are required to serve as a source of strength for Green Dot Bank" and “Litigation or investigations could result in significant settlements, sanctions, fines or penalties” included as part of our risk factor disclosures in "Part I, Item 1A, Risk Factors," of this Annual Report on Form 10-K.

Other Litigation and Claims

On October 20, 2023, an alleged class action captioned Lyons v.

, was filed in the U.S.

District Court for the Middle District of Alabama, alleging that Walmart, Green Dot Corporation, and Green Dot Bank breached implied warranties of merchantability and fitness for a particular purpose, and were otherwise negligent in the packaging of gift cards at Walmart stores, resulting in the unauthorized tampering with, and loss of stored values, on four gift cards sold in advance of the 2022 Christmas holiday season but that were later used at another location in January 2023.

The plaintiff sought to represent a nationwide class of persons who purchased a Visa Prepaid card issued by us and subjected to unauthorized use by a third party after purchase but prior to the first authorized use, at a Walmart retail store located in a state that has adopted Article 2 of the Uniform Commercial Code (thereby excluding Louisiana).

On October 24, 2023 the court on its own initiative ordered the plaintiff to re-plead the action based on insufficient jurisdictional allegations, and an amended complaint was filed October 30, 2023.

The court dismissed the action as to the plaintiff with prejudice on February 14, 2024.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 21—Commitments and Contingencies (continued)

On October 25, 2023, a putative class action, Brockington v.

Green Dot Corporation, was filed in the Circuit Court of the 7th Judicial District for Volusia County, Florida, alleging we violated Florida debt collection law by emailing, monthly, several email communications that her “Green Dot Account statement is ready” that were received between 5:58 a.m.

and 6:02 a.m., outside the permitted communication times of 8:01 a.m.

The plaintiff alleges that these communications are debt collection communications covered by the Florida Consumer Collection Practices Act, and seeks to represent a class of persons with Florida addresses who received communications between the hours of 9 p.m.

in connection with the collection of a consumer debt.

On November 17, 2023, the plaintiff voluntarily dismissed the suit, and the court approved the dismissal of this matter without further notice or proceedings.

On October 27, 2023, an alleged class action, Hester v.

Green Dot Corporation , was filed in District Court for Travis County, Texas, alleging he was unable to access funds in his account for an extended period, and that we have similarly blocked access for other customers.

The complaint purports to allege three causes of action for breach of contract, breach of fiduciary duty, and deceptive trade practices in violation of the Texas Deceptive Trade Practices Act.

The proposed class is all Texas residents and GO2bank customers or account holders who “had their accounts or funds blocked, closed, or otherwise restricted” for more than 72 hours at any time during the four years (or the length of the longest applicable statute of limitations for any asserted claim) immediately preceding the filing of this action continuing through the date of judgment.

On November 21, 2023, we filed a motion to compel arbitration and stay all proceedings, which are currently pending before the District Court.

On December 18, 2019, an alleged class action entitled Koffsmon v.

Green Dot Corp., et al.

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.

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

Streit, et al.

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.

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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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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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 21—Commitments and Contingencies (continued)

Other Legal Matters

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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.

GREEN DOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Note 21—Commitments and Contingencies (continued)

From time to time, we enter into contracts containing provisions that contingently require us to indemnify various parties against claims from third parties.

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For additional information regarding overdrafts on cardholders’ accounts, refer to Note 5—Accounts Receivable .

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 final payment under this commitment was made in January 2024.

Note 22— Significant Retailer and Partner Concentration

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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 B2B Services segment consists of revenues and expenses derived from (i) our partnerships with 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.

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Income before income taxes $ 14,633 $ 83,921 $ 63,700

Note 25— Subsequent Event

In February 2024, we initiated a reduction in workforce that impacted approximately 10 % of our global employees.

This strategic reduction in force is intended to improve our cost structure, streamline operations, and refocus resources on core strategic priorities.

As a result of these decisions, we recorded a severance accrual of approximately $ 4.2 million during the first quarter of 2024, under the guidance of ASC 712, Compensation - Nonretirement Postemployment Benefits.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data