10-Q 1 form10-qxgdot06302018.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________________
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission file number 001-34819

a2018greendotlogonotagv1a02.jpg
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
 
95-4766827
(IRS Employer Identification No.)
3465 E. Foothill Blvd.
Pasadena, California 91107
(Address of principal executive offices, including zip code)
 
(626) 765-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
There were 52,566,602 shares of Class A common stock outstanding, par value $.001 per share as of July 31, 2018.
 



GREEN DOT CORPORATION
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II – OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
 



PART I
ITEM 1. Financial Statements
GREEN DOT CORPORATION
CONSOLIDATED BALANCE SHEETS
 
June 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Assets
(In thousands, except par value)
Current assets:
 
 
 
Unrestricted cash and cash equivalents
$
1,117,937

 
$
919,243

Restricted cash
757

 
90,852

Investment securities available-for-sale, at fair value
15,000

 
11,889

Settlement assets
208,151

 
209,399

Accounts receivable, net
24,840

 
35,277

Prepaid expenses and other assets
42,057

 
47,086

Income tax receivable

 
7,459

Total current assets
1,408,742

 
1,321,205

Investment securities available-for-sale, at fair value
176,030

 
141,620

Loans to bank customers, net of allowance for loan losses of $1,173 and $291 as of June 30, 2018 and December 31, 2017, respectively
21,628

 
18,570

Prepaid expenses and other assets
7,930

 
8,179

Property and equipment, net
104,716

 
97,282

Deferred expenses
9,348

 
21,791

Net deferred tax assets
6,620

 
6,507

Goodwill and intangible assets
565,965

 
582,377

Total assets
$
2,300,979

 
$
2,197,531

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
39,693

 
$
34,863

Deposits
1,068,067

 
1,022,180

Obligations to customers
75,269

 
95,354

Settlement obligations
13,078

 
6,956

Amounts due to card issuing banks for overdrawn accounts
1,819

 
1,371

Other accrued liabilities
108,600

 
123,397

Deferred revenue
19,642

 
30,875

Note payable
20,906

 
20,906

Income tax payable
49

 
74

Total current liabilities
1,347,123

 
1,335,976

Other accrued liabilities
21,100

 
30,520

Note payable
48,252

 
58,705

Net deferred tax liabilities
7,791

 
7,780

Total liabilities
1,424,266

 
1,432,981

Commitments and contingencies (Note 16)

 

Stockholders’ equity:
 
 
 
Class A common stock, $0.001 par value; 100,000 shares authorized as of June 30, 2018 and December 31, 2017; 52,390 and 51,136 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
52

 
51

Additional paid-in capital
367,454

 
354,789

Retained earnings
510,298

 
410,440

Accumulated other comprehensive loss
(1,091
)
 
(730
)
Total stockholders’ equity
876,713

 
764,550

Total liabilities and stockholders’ equity
$
2,300,979

 
$
2,197,531

See notes to unaudited consolidated financial statements

1


GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share data)
Operating revenues:
 
 
 
 
 
 
 
Card revenues and other fees
$
120,783

 
$
107,340

 
$
250,843

 
$
208,309

Processing and settlement service revenues
60,618

 
51,675

 
160,858

 
142,350

Interchange revenues
76,948

 
63,533

 
161,646

 
124,890

Total operating revenues
258,349

 
222,548

 
573,347

 
475,549

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing expenses
82,478

 
70,144

 
174,446

 
141,829

Compensation and benefits expenses
54,478

 
50,866

 
108,985

 
92,084

Processing expenses
46,363

 
44,754

 
94,788

 
85,696

Other general and administrative expenses
47,849

 
36,593

 
91,567

 
74,373

Total operating expenses
231,168

 
202,357

 
469,786

 
393,982

Operating income
27,181

 
20,191

 
103,561

 
81,567

Interest income
5,789

 
2,323

 
11,389

 
5,177

Interest expense
(1,626
)
 
(1,533
)
 
(3,142
)
 
(3,198
)
Income before income taxes
31,344

 
20,981

 
111,808

 
83,546

Income tax expense
1,517

 
1,715

 
11,950

 
23,526

Net income
$
29,827

 
$
19,266

 
$
99,858

 
$
60,020

 
 
 
 
 
 
 
 
Basic earnings per common share:
$
0.57

 
$
0.39

 
$
1.93

 
$
1.19

Diluted earnings per common share:
$
0.55

 
$
0.37

 
$
1.84

 
$
1.14

Basic weighted-average common shares issued and outstanding:
52,105

 
50,013

 
51,774

 
50,234

Diluted weighted-average common shares issued and outstanding:
54,390

 
52,452

 
54,301

 
52,577

See notes to unaudited consolidated financial statements

2


GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Net income
$
29,827

 
$
19,266

 
$
99,858

 
$
60,020

Other comprehensive income (loss)
 
 
 
 
 
 
 
Unrealized holding gains (losses), net of tax
193

 
(20
)
 
(361
)
 
(7
)
Comprehensive income
$
30,020

 
$
19,246

 
$
99,497

 
$
60,013

See notes to unaudited consolidated financial statements

3


GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Operating activities
 
 
 
Net income
$
99,858

 
$
60,020

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
18,216

 
17,142

Amortization of intangible assets
16,411

 
14,742

Provision for uncollectible overdrawn accounts
41,817

 
37,438

Employee stock-based compensation
20,602

 
16,392

Amortization of premium on available-for-sale investment securities
704

 
692

Change in fair value of contingent consideration

 
(7,500
)
Amortization of deferred financing costs
797

 
792

Impairment of capitalized software
175

 
1,014

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(31,380
)
 
(7,954
)
Prepaid expenses and other assets
5,278

 
(893
)
Deferred expenses
12,443

 
9,249

Accounts payable and other accrued liabilities
(16,383
)
 
(9,286
)
Deferred revenue
(9,992
)
 
(13,267
)
Income tax receivable/payable
7,460

 
24,548

Other, net
1,684

 
576

Net cash provided by operating activities
167,690

 
143,705

 
 
 
 
Investing activities
 
 
 
Purchases of available-for-sale investment securities
(79,026
)
 
(57,818
)
Proceeds from maturities of available-for-sale securities
29,283

 
43,232

Proceeds from sales of available-for-sale securities
11,028

 
18,666

Payments for acquisition of property and equipment
(27,376
)
 
(20,924
)
Net increase in loans
(4,292
)
 
(2,763
)
Acquisition, net of cash acquired

 
(141,493
)
Net cash used in investing activities
(70,383
)
 
(161,100
)
 
 
 
 
Financing activities
 
 
 
Borrowings from notes payable

 
20,000

Repayments of borrowings from notes payable
(11,250
)
 
(31,250
)
Borrowings on revolving line of credit

 
335,000

Repayments on revolving line of credit

 
(335,000
)
Proceeds from exercise of options
16,440

 
15,994

Taxes paid related to net share settlement of equity awards
(24,376
)
 
(7,893
)
Net increase (decrease) in deposits
45,887

 
(33,090
)
Net (decrease) increase in obligations to customers
(12,715
)
 
3,658

Contingent consideration payments
(2,694
)
 
(723
)
Repurchase of Class A common stock

 
(50,000
)
Deferred financing costs

 
(164
)
Net cash provided by (used in) financing activities
11,292

 
(83,468
)
 
 
 
 
Net increase (decrease) in unrestricted cash, cash equivalents and restricted cash
108,599

 
(100,863
)
Unrestricted cash, cash equivalents and restricted cash, beginning of period
1,010,095

 
744,761

Unrestricted cash, cash equivalents and restricted cash, end of period
$
1,118,694

 
$
643,898

 
 
 
 
Cash paid for interest
$
2,345

 
$
2,406

Cash paid for/(refund from) income taxes
$
4,285

 
$
(1,057
)
 
 
 
 
Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period:
 
 
 
Unrestricted cash and cash equivalents
$
1,117,937

 
$
594,538

Restricted cash
757

 
49,360

Total unrestricted cash, cash equivalents and restricted cash, end of period
$
1,118,694

 
$
643,898

See notes to unaudited consolidated financial statements

4

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Organization
Green Dot Corporation (“we,” “our,” or “us” refer to Green Dot Corporation and its consolidated subsidiaries) is a pro-consumer bank holding company and financial technology innovator with a mission to reinvent personal banking for the masses. We employ a unique “products and platform” operating model whereby we use our banking and technology assets to design, build and distribute our branded financial services products directly to consumers through a large-scale omni-channel national distribution platform, while also allowing qualified third party partners to access those same banking and technology assets to design, build and distribute their own bespoke financial services which we provide directly to consumers through their own distribution platforms. Through our six revenue divisions and our subsidiary bank, Green Dot Bank, we are a leading provider of prepaid cards, debit cards, checking accounts, secured credit cards, payroll debit cards, consumer cash processing services, wage disbursements and tax refund processing services. With approximately 100,000 mostly major name U.S. retail stores selling our products, several leading direct-to-consumer websites, thousands of tax preparation offices, several apps available in the two leading app stores and distribution through several enterprise-scale “Banking as a Service,” or "BaaS," partnerships, we are one of the most broadly distributed banking franchises in the United States. We are headquartered in Pasadena, California, with additional facilities throughout the United States and in Shanghai, China.
As the regulated entity and issuing bank for substantially all products and services we provide, whether our own or on behalf of a BaaS platform partner, we are directly accountable for all aspects of each program’s integrity, inclusive of ensuring the program’s compliance with all applicable banking regulations, applicable state and federal law and our various internal governance policies and procedures related to all areas of risk and compliance, in addition to deploying enterprise-class risk management practices and procedures to ensure each program’s initial and ongoing safety and soundness.
Our products and services:
We offer consumers a broad collection of financial products and services managed through several diverse business lines which are then made available to consumers through a widely-available “branchless" distribution network in the United States. Many of the products and services we internally create and distribute are marketed under the Green Dot brand name, which we believe is both a well-known and highly trusted brand name for millions of consumers. Our branchless network consists of:
distribution arrangements with approximately 100,000 mostly major chain retail locations, which we refer to as “retail distributors” and thousands of neighborhood Financial Service Center locations;
several differently branded, Green Dot-owned and operated direct-to-consumer online and direct mail customer acquisition platforms;
corporate distribution partnerships with businesses that provide payroll cards to their employees to receive wage disbursements;
more than 25,000 small and large tax preparation companies and individual tax preparers, which are sometimes referred to as electronic return originators, or “EROs”, who are able to offer our products and services to their customers through the use of various tax preparation industry software packages with which our products are integrated;
apps compatible with the iOS and Android operating systems downloaded through the corresponding app store; and
platform partners’ distribution channels that those partners use to acquire customers for their bespoke products and services that are powered by our BaaS Platform.
Our products and services include several deposit account programs, such as network-branded reloadable prepaid debit cards marketed under several leading consumer brand names, which we collectively refer to as "GPR cards," consumer checking accounts, small business checking accounts, network-branded gift cards (known as open-loop), secured credit cards and other financial services.
We also offer several products and services that specialize in facilitating the movement cash on behalf of consumers and businesses. These products and services include: our proprietary swipe reload system for crediting cash onto an enabled payment card by swiping the payment card at the point of sale at any Green Dot Network participating retailer; MoneyPak, a product that allows a consumer to add funds to accounts we issue or accounts issued by other United States chartered and regulated third party banks; and e-cash remittance services, a service that allows a consumer

5

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Organization (continued)
to transfer money to a smartphone for fulfillment at a Green Dot participating retailer. We refer to these services collectively as our cash transfer products. We also provide disbursement services through our Simply Paid platform that enables a payment solution for companies to pay their workforce and customers in the time and manner they desire and provide tax refund transfers that provide the processing technology to facilitate receipt of a taxpayers' refund proceeds.
Our BaaS Platform:
Through our BaaS Platform, we currently offer the following types of products and services in partnership with several of America’s largest retail, consumer, technology and financial services companies:
Mobile banking;
Loan disbursement accounts;
Spend-based Mobile P2P services, such as Apple Pay Cash;
Money transfer services;
GPR cards;
Network branded "open loop" gift cards;
Instant payment and wage disbursements;
Small business checking accounts and debit cards; and
Consumer checking accounts.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. We consolidated our wholly-owned subsidiaries and eliminated all significant intercompany balances and transactions.
We have also prepared the accompanying unaudited consolidated financial statements in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X and, consequently, they do not include all of the annual disclosures required by GAAP. Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2017 for additional disclosures, including a summary of our significant accounting policies. There have been no material changes to our significant accounting policies during the six months ended June 30, 2018, other than the adoption of the accounting pronouncements discussed below. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented.
Recent Accounting Pronouncements    
Recently issued accounting pronouncements not yet adopted
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other ("ASU 2017-04"): Simplifying the Test for Goodwill Impairment, which simplifies the existing two-step guidance for goodwill impairment testing by eliminating the second step resulting in a write-down to goodwill equal to the initial amount of impairment determined in step one. The ASU is to be applied prospectively for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We are currently evaluating the impact of the provisions of ASU 2017-04 on our consolidated financial statements, however, we do not anticipate it will have a material impact upon adoption.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") that requires financial assets measured at amortized cost be presented at the net amount expected to be collected. Credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited by the amount that the fair value is less than amortized cost. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements.

6

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 2—Summary of Significant Accounting Policies (continued)
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02") in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for leases with a term greater than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods, using a modified retrospective approach and early adoption is permitted. We are currently assessing the impact of the adoption of this principle on our consolidated financial statements. We have reviewed the requirements under the new standard, but have not yet quantified its effect on our consolidated financial statements upon adoption, or assessed its impact on our related disclosures or our internal controls over financial reporting. We anticipate adopting this ASU on January 1, 2019.
Recently adopted accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), and has been modified through additional technical corrections since its original issuance (collectively ASC 606). ASU 2014-09 supersedes nearly all existing revenue recognition guidance under current GAAP. The core principle of ASU 2014-09, is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under previous GAAP. The standard allows companies to apply either a full retrospective approach, which requires applying the standard to each prior year reporting period presented, or a modified retrospective approach with a cumulative effect adjustment recognized upon adoption. We adopted the provisions of the standard on January 1, 2018 using the modified retrospective approach, which did not result in any cumulative adjustment to opening retained earnings nor did it have a material impact on our consolidated financial statements. The adoption of ASU 2014-09, however, requires expanded disclosures under the new guidance. See Note 3 - Revenues for further information and additional discussion around changes identified to our policies under the new accounting pronouncement.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. We adopted the provisions of ASU 2016-01 on January 1, 2018, the result of which did not have any impact upon our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash ("ASU 2016-18"), to require that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statement of cash flows. Consequently, transfers between cash and restricted cash will not be presented as a separate line item in the operating, investing or financing sections of the cash flow statement. The amendments should be applied retrospectively to each period presented. We adopted the provisions of ASU 2016-18 on January 1, 2018, the effect of which resulted in an immaterial reclassification in presentation on our statement of cash flows, but had no effect on our consolidated financial results.
In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. The amendments in this ASU also require certain disclosures about stranded tax effects. We adopted the provisions of ASU 2018-02 as of December 31, 2017, the result of which did not have a material impact upon our consolidated financial statements.



7

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 3—Revenues
Adoption of ASC 606
On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to contracts which were not completed upon adoption, the impact of which did not result in any cumulative adjustment to our retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting policies.
The impact of our adoption of ASC 606 was limited to a change in presentation of certain incentive agreements. Prior to the adoption of ASC 606, incentive payments with our retail distributors and other partners had generally been recorded as a reduction to revenues over the related period of benefit the incentive payment related. Upon the adoption of ASC 606, such payments are classified as sales and marketing expenses since these contractual arrangements have been determined to be outside the scope of contracts with our customers under the new accounting standard. The total amount of incentive payments recognized was $1.8 million and $1.2 million for the three months ended June 30, 2018 and 2017, respectively, and $3.5 million and $2.3 million for the six months ended June 30, 2018 and 2017, respectively.
Accounting Policy Update
Our operating revenues consist of card revenues and other fees, processing and settlement service revenues and interchange revenues. The core principle of the new revenue standard is that these revenues will be recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, as determined under a five-step process.
A description of our principal revenue generating activities is as follows:
Card Revenues and Other Fees
Card revenues and other fees consist of monthly maintenance fees, new card fees, ATM fees, and other card revenues. We earn these fees based upon the underlying terms and conditions with each of our cardholders that obligate us to stand ready to provide account services to each of our cardholders over the contract term. Agreements with our cardholders are considered daily service contracts as they are not fixed in duration.
We charge maintenance fees on a monthly basis pursuant to the terms and conditions in the applicable cardholder agreements. We recognize monthly maintenance fees ratably over each day in the monthly bill cycle in which the fee is assessed, which represents the period our cardholders receive the benefits of our services and our performance obligation is satisfied.
We charge new card fees when a consumer purchases a new card in a retail store. The new card fee provides our cardholders a material right and accordingly, we defer and recognize new card fee revenues on a straight-line basis over our average card lifetime, which is currently five months for our GPR cards and six months for our gift cards. We determine the average card lifetime based on our recent historical data for comparable products. We measure card lifetime for our GPR cards as the time, inclusive of reload activity, between sale (or activation) of the card and the date of the last positive balance. We measure the card lifetime for our gift cards as the redemption period during which cardholders initiate the substantial majority of their transactions. We reassess average card lifetime quarterly. We report the unearned portion of new card fees as a component of deferred revenue in our consolidated balance sheets. See Contract Balances below for further information.
We charge ATM fees to cardholders when they withdraw money at certain ATMs in accordance with the terms and conditions in our cardholder agreements. We recognize ATM fees when the withdrawal is made by the cardholder, which is the point in time our performance obligation is satisfied and service is performed. Since our cardholder agreements are considered daily service contracts, our performance obligations for these types of transactional based fees are satisfied on a daily basis, or as each transaction occurs.
Other revenues consist primarily of revenue associated with our gift card program, transaction-based fees and fees associated with optional products or services, which we offer our cardholders at their election. Since our performance obligations are settled daily, we recognize most of these fees at the point in time the transactions occur which is when the underlying performance obligation is satisfied. In the case of our gift card program, we record the related revenues using the redemption method.

8

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 3—Revenues (continued)
Substantially all our fees are collected from our cardholders at the time the fees are assessed and debited from their account balance.
Processing and Settlement Service Revenues
Our processing and settlement services consist of cash transfer revenues, Simply Paid disbursement revenues, and tax refund processing service revenues.
We generate cash transfer revenues when consumers purchase our cash transfer products (reload services) in a retail store. Our reload services are subject to the same terms and conditions in each of the applicable cardholder agreements as discussed above. We recognize these revenues at the point in time the reload services are completed. Similarly, we earn Simply Paid disbursement fees from our business partners as payment disbursements are made.
We earn tax refund processing service revenues when a customer of a third-party tax preparation company chooses to pay their tax preparation fee through the use of our tax refund processing services. Revenues we earn from these services are generated from our contractual relationships with the tax software transmitters. These contracts may be multi-year agreements and vary in length, however, our underlying promise obligates us to process each refund transfer on a transaction by transaction basis as elected by the taxpayer. Accordingly, we recognize tax refund processing service revenues at the point in time we satisfy our performance obligation by remitting each taxpayer’s proceeds from his or her tax return.
Interchange
We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates established by the payment networks, such as Visa and MasterCard, when account holders make purchase transactions using our card products and services. We recognize interchange revenues at the point in time the transactions occur, as our performance obligation is satisfied.
Principal vs Agent
For all our significant revenue-generating arrangements, we record revenues on a gross basis except for our tax refund processing service revenues which are recorded on a net basis.
Disaggregation of Revenues
Our products and services are offered only to customers within the United States. We determine our operating segments based on how our chief operating decision maker manages our operations, makes operating decisions and evaluates operating performance. Within our segments, we believe that the nature, amount, timing and uncertainty of our revenue and cash flows and how they are affected by economic factors can be further illustrated based on the timing in which revenue for each of our products and services is recognized.
The following table disaggregates our revenues by the timing in which the revenue is recognized:
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
Account Services
 
Processing and Settlement Services
 
Account Services
 
Processing and Settlement Services
Timing of revenue recognition
(In thousands)
Transferred at a point in time
$
124,785

 
$
60,613

 
$
261,311

 
$
160,848

Transferred over time
72,070

 
881

 
149,416

 
1,772

Operating revenues
$
196,855

 
$
61,494

 
$
410,727

 
$
162,620

Within our Account Services segment, revenues recognized at a point in time are comprised of ATM fees, interchange, and other similar transaction-based fees. Revenues recognized over time consists of new card fees, monthly maintenance fees and revenue earned from gift cards. Substantially all of our processing and settlement services are recognized at a point in time.
Refer to Note 18- Segment Information for our revenues disaggregated by our products and services and the components to our total operating revenues on our Consolidated Statements of Operations for additional information.


9

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 3—Revenues (continued)
Significant Judgments and Estimates
Transaction prices related to our account services are based on stand-alone fees stated within the terms and conditions, however, may also include certain elements of variable consideration depending upon the product’s features, such as cardholder incentives, monthly fee concessions and reserves on accounts that may become overdrawn. We estimate such amounts using historical data and customer behavior patterns to determine these estimates which are recorded as a reduction to the corresponding fee revenue. Additionally, while the number of transactions that a cardholder may perform is unknown, any uncertainty is resolved at the end of each daily service contract.
Contract Balances
As disclosed on our Consolidated Balance Sheets, we record deferred revenue for any upfront payments received in advance of our performance obligations being satisfied. These contract liabilities consist principally of unearned new card fees and monthly maintenance fees. We recognized approximately $9.4 million and $28.3 million for the three and six months ended June 30, 2018, respectively, or substantially all of the amount of contract liabilities included in deferred revenue at the beginning of the period, and did not recognize any revenue during these periods from performance obligations satisfied in previous periods. Changes in the deferred revenue balance are driven primarily by the amount of new card fees recognized during the period, offset by the deferral of new card fees associated with cards sold during the period.
Costs to Obtain or Fulfill a Contract
Our incremental direct costs of obtaining a contract consist primarily of revenue share payments we make to our retail partners associated with new card sales. These commissions are generally capitalized upon payment and expensed over the period the corresponding revenue is recognized. These deferred commissions are not material and are included in deferred expenses on our Consolidated Balance Sheets.
Practical Expedients and Exemptions
Any unsatisfied performance obligations at the end of the period relate to contracts with customers that either have an original expected length of one year or less or are contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Therefore, no additional disclosure is provided for these performance obligations.
Note 4—Business Combination
On February 28, 2017, we completed our acquisition of all the membership interests of UniRush, LLC ("UniRush"), an online direct-to-consumer GPR card and corporate payroll card provider. The fair value of the total consideration in connection with the acquisition was approximately $163.7 million, which included cash and contingent consideration in the form of an earn-out. We financed the transaction with $142.2 million in cash, of which $95 million was raised from a combination of our Revolving Facility, as discussed in Note 10 — Note Payable, and subordinated notes payable of $20 million to the selling shareholders of UniRush. The subordinated notes were repaid during the three months ended March 31, 2017. The transaction terms include an earn-out equal to the greater of (i) a specified percentage of the revenue generated by the online direct-to-consumer GPR card portfolio for the five-year period following the closing or (ii) $20 million, payable quarterly over the five years.
The following table summarizes the fair value of consideration transferred:
 
Consideration
 
(In thousands)
Cash, including proceeds from notes payable
$
142,154

Fair value of contingent consideration
21,500

Total consideration
$
163,654


10

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 4—Business Combination (continued)
The allocation of the purchase price was as follows:
 
February 28, 2017
 
(In thousands)
Assets:
 
Cash and cash equivalents
$
656

Accounts receivable, net
5,745

Prepaid expenses and other assets
5,146

Property and equipment, net
4,233

Intangible assets
69,000

Goodwill
93,435

Total assets:
178,215

 
 
Liabilities:
 
Accounts payable
10,861

Other liabilities
3,700

Total liabilities:
14,561

 
 
Net assets acquired
$
163,654

Goodwill of approximately $93.4 million represents the excess of the purchase price over the estimated fair value of the underlying identifiable tangible and intangible assets acquired and liabilities assumed. The goodwill arises from the opportunity for synergies and economies of scale from the combined companies, and expanding our reach into the online direct-to-consumer and corporate payroll distribution channels. Although the goodwill will not be amortized for financial reporting purposes, it is anticipated that substantially all of the goodwill will be deductible for federal tax purposes over the statutory period of 15 years.
Intangible assets consist primarily of customer relationships and trade names of approximately $58.5 million and $5.5 million, respectively. The customer relationships will be amortized over its estimated useful life of 5-10 years and the trade names will be amortized over a period of 15 years.
Our acquisition of UniRush was accounted for under the acquisition method of accounting, with the operating results of UniRush included in our consolidated statements of operations beginning March 1, 2017. Transaction costs incurred in connection with the acquisition were not material.
Unaudited pro forma financial information
The following unaudited pro forma summary financial results for the six months ended June 30, 2017 present the consolidated results of operations as if the acquisition of UniRush had occurred as of January 1, 2016, after the effect of certain adjustments, including interest expense on the debt used to fund the purchase, amortization of certain identifiable intangible assets, income and expense items not attributable to ongoing operations and related tax effects. The unaudited pro forma condensed consolidated statements of operations does not include any adjustments for any restructuring activities, operating efficiencies or cost savings. The pro forma results for the six months ended June 30, 2017 have been presented for comparative purposes only and are not indicative of what would have occurred had the UniRush acquisition been made as of January 1, 2016, or of any potential results which may occur in the future.
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands, except per share data)
 
 
 
(Pro forma)
Net revenues
$
573,347

 
$
494,834

Net income attributable to common stock
$
99,858

 
$
52,737

Basic earnings per common share
$
1.93

 
$
1.05

Diluted earnings per common share
$
1.84

 
$
1.00

Basic weighted-average common shares issued and outstanding
51,774

 
50,234

Diluted weighted-average common shares issued and outstanding
54,301

 
52,577


11

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 5—Investment Securities
Our available-for-sale investment securities were as follows:
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
 
(In thousands)
June 30, 2018
 
Negotiable certificate of deposit
$
20,000

 
$

 
$

 
$
20,000

Agency bond securities
14,952

 

 
(48
)
 
14,904

Agency mortgage-backed securities
118,350

 
32

 
(1,514
)
 
116,868

Municipal bonds
604

 

 
(21
)
 
583

Asset-backed securities
38,756

 

 
(81
)
 
38,675

Total investment securities
$
192,662

 
$
32

 
$
(1,664
)
 
$
191,030

 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Corporate bonds
$
1,000

 
$

 
$

 
$
1,000

U.S. Treasury notes
10,921

 

 
(46
)
 
10,875

Agency mortgage-backed securities
121,037

 
52

 
(1,055
)
 
120,034

Municipal bonds
742

 
4

 
(7
)
 
739

Asset-backed securities
20,952

 

 
(91
)
 
20,861

Total investment securities
$
154,652

 
$
56

 
$
(1,199
)
 
$
153,509

As of June 30, 2018 and December 31, 2017, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows:
 
Less than 12 months
 
12 months or more
 
Total fair value
 
Total unrealized loss
 
Fair value
 
Unrealized loss
 
Fair value
 
Unrealized loss
 
 
 
(In thousands)
June 30, 2018
 
Agency bond securities
$
14,904

 
$
(48
)
 
$

 
$

 
$
14,904

 
$
(48
)
Agency mortgage-backed securities
52,114

 
(366
)
 
45,236

 
(1,148
)
 
97,350

 
(1,514
)
Municipal bonds
427

 
(12
)
 
156

 
(9
)
 
583

 
(21
)
Asset-backed securities
29,436

 
(13
)
 
9,238

 
(68
)
 
38,674

 
(81
)
Total investment securities
$
96,881

 
$
(439
)
 
$
54,630

 
$
(1,225
)
 
$
151,511

 
$
(1,664
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury notes
$
4,588

 
$
(21
)
 
$
6,288

 
$
(25
)
 
$
10,876

 
$
(46
)
Agency mortgage-backed securities
62,683

 
(453
)
 
44,159

 
(602
)
 
106,842

 
(1,055
)
Municipal bonds

 

 
193

 
(7
)
 
193

 
(7
)
Asset-backed securities
2,134

 
(2
)
 
18,727

 
(89
)
 
20,861

 
(91
)
Total investment securities
$
69,405

 
$
(476
)
 
$
69,367

 
$
(723
)
 
$
138,772

 
$
(1,199
)
We did not record any other-than-temporary impairment losses during the three and six months ended June 30, 2018 or 2017 on our available-for-sale investment securities. We do not intend to sell these investments and we have determined that it is more likely than not that we will not be required to sell these investments before recovery of their amortized cost bases, which may be at maturity.

12

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 5—Investment Securities (continued)
As of June 30, 2018, 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
$
15,000

 
$
15,000

Due after one year through five years
19,952

 
19,904

Due after five years through ten years

 

Due after ten years
604

 
583

Mortgage and asset-backed securities
157,106

 
155,543

Total investment securities
$
192,662

 
$
191,030

The expected payments on mortgage-backed and asset-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.
Note 6—Accounts Receivable
Accounts receivable, net consisted of the following:
 
June 30, 2018
 
December 31, 2017
 
(In thousands)
Overdrawn account balances due from cardholders
$
21,391

 
$
17,856

Reserve for uncollectible overdrawn accounts
(17,087
)
 
(14,471
)
Net overdrawn account balances due from cardholders
4,304

 
3,385

 
 
 
 
Trade receivables
3,878

 
4,231

Reserve for uncollectible trade receivables
(67
)
 
(3
)
Net trade receivables
3,811

 
4,228

 
 
 
 
Receivables due from card issuing banks
7,267

 
6,309

Fee advances
232

 
16,194

Other receivables
9,226

 
5,161

Accounts receivable, net
$
24,840

 
$
35,277

Activity in the reserve for uncollectible overdrawn accounts consisted of the following:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Balance, beginning of period
$
15,796

 
$
12,233

 
$
14,471

 
$
11,932

Provision for uncollectible overdrawn accounts:
 
 
 
 
 
 
 
Fees
20,353

 
17,310

 
36,132

 
34,269

Purchase transactions
3,079

 
1,882

 
5,685

 
3,169

Charge-offs
(22,141
)
 
(17,806
)
 
(39,201
)
 
(35,751
)
Balance, end of period
$
17,087

 
$
13,619

 
$
17,087

 
$
13,619


13

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 7—Loans to Bank Customers
The following table presents total outstanding loans, gross of the related allowance for loan losses, and a summary of the related payment status:
 
30-59 Days Past Due
 
60-89 Days Past Due
 
90 Days or More Past Due
 
Total Past Due
 
Total Current or Less Than 30 Days Past Due
 
Total Outstanding
 
(In thousands)
June 30, 2018
 
Residential
$

 
$
4

 
$
7

 
$
11

 
$
4,043

 
$
4,054

Commercial

 

 

 

 
323

 
323

Installment
1

 

 

 
1

 
1,056

 
1,057

Secured credit card
1,402

 
1,259

 
546

 
3,207

 
14,160

 
17,367

Total loans
$
1,403


$
1,263

 
$
553

 
$
3,219

 
$
19,582

 
$
22,801

 
 
 
 
 
 
 
 
 
 
 
 
Percentage of outstanding
6.2
%
 
5.5
%
 
2.4
%
 
14.1
%
 
85.9
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential
$

 
$

 
$

 
$

 
$
3,554

 
$
3,554

Commercial

 

 

 

 
315

 
315

Installment
1

 

 

 
1

 
1,378

 
1,379

Secured credit card
1,223

 
593

 
424

 
2,240

 
11,373

 
13,613

Total loans
$
1,224

 
$
593

 
$
424

 
$
2,241

 
$
16,620

 
$
18,861

 
 
 
 
 
 
 
 
 
 
 
 
Percentage of outstanding
6.5
%
 
3.1
%
 
2.3
%
 
11.9
%
 
88.1
%
 
100.0
%
Secured Credit Card Loans
On August 31, 2017, we completed an asset acquisition of a secured credit card portfolio for approximately $8.1 million. In exchange for the payment, we received approximately $8.2 million of secured credit card receivables. All of our credit card receivables are collateralized by the cardholders' security deposits, which also act as the cardholders' credit limit.
Nonperforming Loans
The following table presents the carrying value, gross of the related allowance for loan losses, of our nonperforming loans. See Note 2 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2017 for further information on the criteria for classification as nonperforming.
 
June 30, 2018
 
December 31, 2017
 
(In thousands)
Residential
$
649

 
$
502

Installment
214

 
191

Total loans
$
863

 
$
693

Credit Quality Indicators
We closely monitor and assess the credit quality and credit risk of our loan portfolio on an ongoing basis. We continuously review and update loan risk classifications. We evaluate our loans using non-classified or classified as the primary credit quality indicator. Classified loans are those loans that have demonstrated credit weakness where we believe there is a heightened risk of principal loss, including all impaired loans. Classified loans are generally internally categorized as substandard, doubtful or loss, consistent with regulatory guidelines.

14

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 7—Loans to Bank Customers (continued)
The table below presents the carrying value, gross of the related allowance for loan losses, of our loans within the primary credit quality indicators related to our loan portfolio:
 
June 30, 2018
 
December 31, 2017
 
Non-Classified
 
Classified
 
Non-Classified
 
Classified
 
(In thousands)
Residential
$
3,405

 
$
649

 
$
3,038

 
$
516

Commercial
323

 

 
315

 

Installment
695

 
362

 
1,059

 
320

Secured credit card
17,367

 

 
13,613

 

Total loans
$
21,790

 
$
1,011

 
$
18,025

 
$
836

Impaired Loans and Troubled Debt Restructurings
When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a Troubled Debt Restructuring, or TDR. Our TDR modifications involve an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk. The following table presents our impaired loans and loans that we modified as TDRs as of June 30, 2018 and December 31, 2017:
 
June 30, 2018
 
December 31, 2017
 
Unpaid Principal Balance
 
Carrying Value
 
Unpaid Principal Balance
 
Carrying Value
 
(In thousands)
Residential
$
649

 
$
529

 
$
516

 
$
452

Installment
214

 
63

 
262

 
120

Allowance for Loan Losses
Activity in the allowance for loan losses consisted of the following:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Balance, beginning of period
$
451

 
$
281

 
$
291

 
$
277

Provision for loans
966

 
63

 
1,234

 
63

Loans charged off
(328
)
 
(26
)
 
(634
)
 
(31
)
Recoveries of loans previously charged off
84

 
1

 
282

 
10

Balance, end of period
$
1,173

 
$
319

 
$
1,173

 
$
319

Note 8—Employee Stock-Based Compensation
We currently grant restricted equity awards to employees and directors under our 2010 Equity Incentive Plan. Additionally, through our 2010 Employee Stock Purchase Plan, employees are able to purchase shares of our Class A common stock at a discount through payroll deductions. We have reserved shares of our Class A common stock for issuance under these plans.
Restricted Stock Units
The following table summarizes restricted stock units with only service conditions granted under our 2010 Equity Incentive Plan:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share data)
Restricted stock units granted
120

 
94

 
183

 
195

Weighted-average grant-date fair value
$
71.20

 
$
35.60

 
$
67.17

 
$
31.23



15

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 8—Employee Stock-Based Compensation (continued)
Performance Based Restricted Stock Units
We grant performance-based restricted stock units to certain employees which are subject to the attainment of minimum pre-established annual performance targets. The majority of these awards are tied to the achievement of an annual non-GAAP earnings per share target for the grant year. The actual number of shares subject to the award is determined at the end of the annual performance period and may range from zero to 150% percent of the target shares granted. These awards contain an additional service component after each annual performance period is concluded and the unvested balance of the shares determined at the end of the annual performance period will vest over the remaining requisite service period. Compensation expense related to these awards is recognized using the accelerated attribution method over the four-year vesting period based on the fair value of the closing market price of our Class A common stock on the date of the grant and the estimated performance that is expected to be achieved. In the case of our Chief Executive Officer, vesting of the award is based on the achievement of a total shareholder return ("TSR") relative to the S&P 600 index over the three-year performance period. Compensation expense related to these awards is recognized over the performance period based on the grant date fair value through the use of a Monte Carlo simulation and are not subsequently re-measured.
The following table summarizes the performance-based restricted stock units granted under our 2010 Equity Incentive Plan:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share data)
Performance based restricted stock units granted (1)
168

 
329

 
612

 
616

Weighted-average grant-date fair value
$
71.47

 
$
36.35

 
$
49.04

 
$
36.01

(1
)
Performance awards granted also reflects the impact of any incremental shares awarded during the periods ended for performance periods completed. The grant date fair value for these awards are based on the grant price at the time of the initial award.
The total stock-based compensation expense recognized was $11.2 million and $9.9 million for the three months ended June 30, 2018 and 2017, respectively, and $20.6 million and $16.4 million for the six months ended June 30, 2018 and 2017, respectively. Total stock-based compensation expense includes amounts related to awards of stock options, restricted stock units (including performance-based restricted stock units) and purchases under our 2010 Employee Stock Purchase Plan.
Note 9—Deposits
Deposits are categorized as non-interest or interest-bearing deposits as follows:
 
June 30, 2018
 
December 31, 2017

(In thousands)
Non-interest bearing deposit accounts
 
 
 
GPR deposits
$
834,693

 
$
803,549

Other demand deposits
92,475

 
61,264

Total non-interest bearing deposit accounts
927,168

 
864,813

Interest-bearing deposit accounts
 
 
 
Checking accounts
119,112

 
140,555

Savings
10,042

 
10,523

GPR deposits
6,195

 

Time deposits, denominations greater than or equal to $100
4,133

 
4,752

Time deposits, denominations less than $100
1,417

 
1,537

Total interest-bearing deposit accounts
140,899

 
157,367

Total deposits
$
1,068,067

 
$
1,022,180


16

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 9—Deposits (continued)
The scheduled contractual maturities for total time deposits are presented in the table below:
 
June 30, 2018
 
(In thousands)
Due in 2018
$
1,126

Due in 2019
1,272

Due in 2020
1,280

Due in 2021
822

Due in 2022
788

Thereafter
262

Total time deposits
$
5,550

Note 10—Note Payable
In October 2014, we entered into a $225.0 million secured credit agreement with Bank of America, N.A., as an administrative agent, Wells Fargo Bank, National Association, and the other lenders party thereto. The credit agreement provides for 1) a $75.0 million five year revolving facility (the "Revolving Facility") and 2) a five year $150.0 million term loan facility ("Term Facility" and, together with the Revolving Facility, the “Senior Credit Facility"). The credit agreement also includes an accordion feature that, subject to securing additional commitments from existing lenders or new lending institutions, will allow us to increase the aggregate amount of these facilities by up to an additional $50.0 million.
As of June 30, 2018 and December 31, 2017, our outstanding debt, net of deferred financing costs of $2.1 million and $2.9 million, respectively, consisted of the following:
 
June 30, 2018
 
December 31, 2017
 
(In thousands)
Term facility
$
69,158

 
$
79,611

Revolving facility

 

Total notes payable
$
69,158

 
$
79,611

Quarterly principal payments of $5.6 million are payable on the loans under the Term Facility. During each of the six months ended June 30, 2018 and 2017, we made scheduled quarterly principal payments totaling $11.3 million. The Senior Credit Facility matures on October 23, 2019 and any amounts then outstanding are due upon maturity.
Interest
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 Bank of America prime rate, (b) the United States federal funds rate plus 0.50% 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 applicable margin for borrowings depends on our total leverage ratio and varies from 2.50% to 3.00% for LIBOR Rate loans and 1.50% to 2.00% for Base Rate loans. The effective interest rate on borrowings outstanding as of June 30, 2018 was 4.59%. Interest expense, excluding the amortization of debt issuance costs, related to our Senior Credit Facility was $0.9 million and $1.1 million for the three months ended June 30, 2018 and 2017, respectively, and $1.7 million and $2.3 million for the six months ended June 30, 2018 and 2017, respectively.
Covenants and restrictions
The Senior Credit Facility contains customary representations and warranties relating to us and our subsidiaries. Obligations under the Senior Credit Facility are secured by first priority liens on, and security interests in, substantially all of our company assets and each Guarantor, as defined in the agreement. The Senior Credit Facility also 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 maintain a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as set forth in the credit agreement. At June 30, 2018, we were in compliance with all such covenants.

17

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 11—Income Taxes
Income tax expense for the six months ended June 30, 2018 and 2017 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:
 
Six Months Ended June 30,
 
2018
 
2017
U.S. federal statutory tax rate
21.0
 %
 
35.0
 %
State income taxes, net of federal tax benefit
0.6

 
(0.4
)
General business credits
(0.7
)
 
(2.1
)
Employee stock-based compensation
(12.2
)
 
(5.1
)
Other
1.9

 
0.8

Effective tax rate
10.6
 %
 
28.2
 %
On December 22, 2017, H.R. 1, known as the Tax Cuts and Jobs Act (the "Tax Act") was signed into law and makes significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduced the US federal corporate tax rate from 35% to 21%, created new taxes on certain foreign-sourced earnings and certain related-party payments, eliminated certain deductions and enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property.
Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017. We remeasured deferred tax assets and liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate from 35% to 21% and recorded a provisional tax benefit of $6.3 million. We also analyzed the transition tax on accumulated foreign subsidiary earnings and made a provisional determination that we have no additional tax obligation. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts including estimates for certain employment compensation. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The SEC has provided up to a one-year measurement period for companies to finalize the accounting for the impacts of this new legislation and we anticipate finalizing our accounting over the coming quarters.
The effective tax rate for the six months ended June 30, 2018 and 2017 differs from the statutory federal income tax rate of 21% and 35%, respectively, primarily due to state income taxes, net of federal tax benefits, general business credits and employee stock-based compensation. The decrease in the effective tax rate for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 is primarily due to the decrease in the statutory federal tax rate noted above and higher excess tax benefits related to stock compensation as a result of an increase in the value of our stock price at the time equity awards are vested or exercised.
We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2018 and 2017, we did not have a valuation allowance on any of our deferred tax assets as we believed it was more-likely-than-not that we would realize the benefits of our deferred tax assets.
We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax return for the years ended December 31, 2014 through 2016. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates the returns were filed.
As of June 30, 2018, we have net operating loss carryforwards of approximately $37.7 million and $33.7 million for federal and state tax purposes, respectively, which will be available to offset future income. If not used, these carryforwards will expire between 2020 and 2035. In addition, we have state business tax credits of approximately $9.8 million that can be carried forward indefinitely and other state business tax credits of approximately $1.2 million that will expire between 2023 and 2027.
As of June 30, 2018 and December 31, 2017, we had a liability of $6.7 million and $5.6 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:

18

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 11—Income Taxes (continued)
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Beginning balance
$
5,560

 
$
7,314

Increases related to positions taken during prior years

 
321

Increases related to positions taken during the current year
1,099

 
1,039

Decreases related to positions settled with tax authorities

 
(1,189
)
Decreases as a result of a lapse of applicable statute of limitations

 
(636
)
Ending balance
$
6,659

 
$
6,849

 
 
 
 
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate
$
6,659

 
$
6,849

As of June 30, 2018 and 2017, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $0.6 million and $0.5 million, respectively.
Note 12—Stockholders' Equity
Stock Repurchase Program
In June 2015, our Board of Directors authorized, subject to regulatory approval, a repurchase of shares of our Class A Common Stock in an amount up to $150 million under a stock repurchase program with no expiration date. As of November 2017, we have repurchased all $150 million of Class A common stock under the repurchase program.
Accelerated Share Repurchases
We have entered into accelerated share repurchase arrangements (“ASRs”) with a financial institution from time to time under our stock repurchase program. The following table summarizes our ASR activity for the prior year comparative period:
 
Purchase Period End Date
 
Number of Shares (In thousands)
 
Average Repurchase Price Per Share
 
ASR Amount (In thousands)
 
March 2017 ASR
November 2017
 
1,326

 
$
38.64

 
$
50,000

(1)
(1)
We elected to cash settle approximately $2.0 million worth of shares owed back to the counterparty under our March 2017 accelerated share repurchase agreement.
In exchange for an up-front payment in March 2017, the financial institution delivered 1.3 million shares of our Class A common stock.
The up-front payments are accounted for as a reduction to shareholders’ equity on our consolidated balance sheets in the periods the payments are made. The ASRs are 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 are recorded as a reduction to common stock with the remainder recorded as a reduction to additional paid-in capital and retained earnings.  The ASRs meet all of the applicable criteria for equity classification, and therefore are not accounted for as derivative instruments. The initial repurchase of shares result 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 final number of shares received upon settlement for the ASR is determined based on the volume-weighted average price of our common stock over the term of the agreement less an agreed upon discount and subject to adjustments pursuant to the terms and conditions of the ASR. The shares received are retired in the periods they are delivered, but remain authorized for registration and issuance in the future.

19

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 13—Earnings per Common Share
The calculation of basic and diluted EPS was as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share data)
Basic earnings per Class A common share
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income
$
29,827

 
$
19,266

 
$
99,858

 
$
60,020

Denominator:
 
 
 
 
 
 
 
Weighted-average Class A shares issued and outstanding
52,105

 
50,013

 
51,774

 
50,234

Basic earnings per Class A common share
$
0.57

 
$
0.39

 
$
1.93

 
$
1.19

 
 
 
 
 
 
 
 
Diluted earnings per Class A common share
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income
$
29,827

 
$
19,266

 
$
99,858

 
$
60,020

Denominator:
 
 
 
 
 
 
 
Weighted-average Class A shares issued and outstanding
52,105

 
50,013

 
51,774

 
50,234

Dilutive potential common shares:
 
 
 
 
 
 
 
Stock options
343

 
759

 
441

 
706

Restricted stock units
1,236

 
1,418

 
1,296

 
1,368

Performance based restricted stock units
705

 
259

 
789

 
268

Employee stock purchase plan
1

 
3

 
1

 
1

Diluted weighted-average Class A shares issued and outstanding
54,390

 
52,452

 
54,301

 
52,577

Diluted earnings per Class A common share
$
0.55

 
$
0.37

 
$
1.84

 
$
1.14

For the periods presented, we excluded certain restricted stock units and stock options outstanding (as applicable) which could potentially dilute basic EPS in the future, from the computation of diluted EPS as their effect was anti-dilutive. Additionally, we have excluded any performance based restricted stock units for which the performance contingency has not been met as of the end of the period. The following table shows the weighted-average number of shares excluded from the diluted EPS calculation:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Class A common stock
 
 
 
 
 
 
 
Options to purchase Class A common stock

 
56

 

 
73

Performance based restricted stock units
134

 
424

 
101

 
216

Total options and restricted stock units
134

 
480

 
101

 
289

Note 14—Fair Value Measurements
Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value.
For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2017.

20

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 14—Fair Value Measurements (continued)
As of June 30, 2018 and December 31, 2017, our assets and liabilities carried at fair value on a recurring basis were as follows:
 
Level 1
 
Level 2
 
Level 3
 
Total Fair Value
June 30, 2018
(In thousands)
Assets
 
 
 
 
 
 
 
Negotiable certificate of deposit
$

 
$
20,000

 
$

 
$
20,000

Agency bond securities

 
14,904

 

 
14,904

Agency mortgage-backed securities

 
116,868

 

 
116,868

Municipal bonds

 
583

 

 
583

Asset-backed securities

 
38,675

 

 
38,675

Total assets
$

 
$
191,030

 
$

 
$
191,030

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration
$

 
$

 
$
14,664

 
$
14,664

 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Corporate bonds
$

 
$
1,000

 
$

 
$
1,000

U.S. Treasury notes

 
10,875

 

 
10,875

Agency mortgage-backed securities

 
120,034

 

 
120,034

Municipal bonds

 
739

 

 
739

Asset-backed securities

 
20,861

 

 
20,861

Total assets
$

 
$
153,509

 
$

 
$
153,509

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration
$

 
$

 
$
17,358

 
$
17,358

We based the fair value of our fixed income securities held as of June 30, 2018 and December 31, 2017 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three and six months ended June 30, 2018 or 2017.
The following table presents changes in our contingent consideration payable for the three and six months ended June 30, 2018 and 2017, which is categorized in Level 3 of the fair value hierarchy:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Balance, beginning of period
$
17,156

 
$
26,442

 
$
17,358

 
$
8,634

Issuance

 

 

 
18,000

Payments of contingent consideration
(2,492
)
 
(531
)
 
(2,694
)
 
(723
)
Purchase accounting adjustment

 
3,500

 

 
3,500

Change in fair value of contingent consideration

 
(7,500
)
 

 
(7,500
)
Balance, end of period
$
14,664

 
$
21,911

 
$
14,664

 
$
21,911


21

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 15—Fair Value of Financial Instruments
The following describes the valuation technique for determining the fair value of financial instruments, whether or not such instruments are carried at fair value on our consolidated balance sheets.
Short-term Financial Instruments
Our short-term financial instruments consist principally of unrestricted and restricted cash and cash equivalents, settlement assets and obligations, and obligations to customers. These financial instruments are short-term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. Under the fair value hierarchy, these instruments are classified as Level 1.
Investment Securities
The fair values of investment securities have been derived using methodologies referenced in Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2017. Under the fair value hierarchy, our investment securities are classified as Level 2.
Loans
We determined the fair values of loans by discounting both principal and interest cash flows expected to be collected using a discount rate commensurate with the risk that we believe a market participant would consider in determining fair value. Under the fair value hierarchy, our loans are classified as Level 3.
Deposits
The fair value of demand and interest checking deposits and savings deposits is the amount payable on demand at the reporting date. We determined the fair value of time deposits by discounting expected future cash flows using market-derived rates based on our market yields on certificates of deposit, by maturity, at the measurement date. Under the fair value hierarchy, our deposits are classified as Level 2.
Contingent Consideration
The fair value of contingent consideration obligations, such as the earn-outs associated with our acquisitions of TPG and UniRush, are 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.
Note Payable
The fair value of our note payable is based on borrowing rates currently available to a market participant for loans with similar terms or maturity. The carrying amount of our note payable approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the note payable is classified as a Level 2 liability in the fair value hierarchy.
Fair Value of Financial Instruments
The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value, at June 30, 2018 and December 31, 2017 are presented in the table below.
 
June 30, 2018
 
December 31, 2017
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
(In thousands)
Financial Assets
 
 
 
 
 
 
 
Loans to bank customers, net of allowance
$
21,628

 
$
20,845

 
$
18,570

 
$
18,102

 
 
 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
Deposits
$
1,068,067

 
$
1,068,005

 
$
1,022,180

 
$
1,022,102

Note payable
$
69,158

 
$
69,158

 
$
79,611

 
$
79,611


22

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 16—Commitments and Contingencies
Litigation and Claims
In the ordinary course of business, we are a party to various legal proceedings, including, from time to time, actions which are asserted to be maintainable as class action suits. We review these actions on an ongoing basis to determine whether it is probable and estimable that a loss has occurred and use that information when making accrual and disclosure decisions. We have provided reserves where necessary for all claims and, based on current knowledge and in part upon the advice of legal counsel, all matters are believed to be adequately covered by insurance, or, if not covered, we do not expect the outcome in any legal proceedings, individually or collectively, to have a material adverse impact on our financial condition or results of operations.
The third and final performance period under an earn-out provision for the acquisition of our tax refund processing business ended on June 30, 2017. We believe that our tax refund processing business did not achieve its earn-out performance target for the fiscal year performance period based on the provisions of the contract and therefore, the total potential payout of $26 million has not been accrued on our balance sheet as of June 30, 2018. We are currently in the process of resolving the final earn-out calculation with the selling shareholders with the assistance of a neutral third party who will make a determination of the final outcome. To the extent there is an unfavorable resolution for the earn-out payment, we may be required to make payment of up to $26 million.
During the quarter ended June 30, 2016, we were in the process of our planned conversion of customer files from our legacy third-party card processor to our current third-party card processor. As part of the conversion process, a small percentage of our active account holders experienced limited disruptions in service. As a result of this limited disruption in service, two putative class action complaints were filed during the second quarter of 2016. We agreed with our third-party card processor that any payments to resolve the consolidated class actions would be borne equally between us and our third-party card processor. We previously recorded an accrual of approximately $2.3 million, which represented our portion of the estimated total settlement amount, all of which our insurance carrier agreed to reimburse us. During the three months ended June 30, 2018, we settled the class actions and began making payments to those members of the class. As of June 30, 2018, we have paid approximately $2.2 million of the accrued liability, the balance of which is expected to be paid to remaining class members shortly thereafter.
Other Matters
We monitor the laws of all 50 states to identify state laws or regulations that apply (or may apply) to our products and services. We have obtained money transmitter licenses (or similar such licenses) where applicable, based on advice of counsel or when we have been requested to do so. If we were found to be in violation of any laws and regulations governing banking, money transmitters, electronic fund transfers, or money laundering in the United States or abroad, we could be subject to penalties or could be forced to change our business practices.
From time to time we enter into contracts containing provisions that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to: (i) contracts with our card issuing banks, under which we are responsible to them for any unrecovered overdrafts on cardholders’ accounts; (ii) certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities, and other claims arising from our use of the premises; (iii) certain agreements with our officers, directors, and employees, under which we may be required to indemnify these persons for liabilities arising out of their relationship with us; and (iv) contracts under which we may be required to indemnify our retail distributors, suppliers, vendors and other parties with whom we have contracts against claims arising from certain of our actions, omissions, violations of law and/or infringement of patents, trademarks, copyrights and/or other intellectual property rights.
Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be reasonably estimated. With the exception of overdrafts on cardholders’ accounts, historically, we have not been required to make payments under these and similar contingent obligations, and no liabilities have been recorded for these obligations in our consolidated balance sheets.
For additional information regarding overdrafts on cardholders’ accounts, refer to Note 6 — Accounts Receivable.
As of June 30, 2018 and December 31, 2017, we had restricted cash balances of $0.8 million and $90.9 million, which consist principally of funds required to collateralize a prefunding obligation with a business partner.


23

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 17—Significant Retailer Concentration
A credit concentration may exist if customers are involved in similar industries, economic sectors, and geographic regions. Our retail distributors operate in similar economic sectors but diverse domestic geographic regions. The loss of a significant retail distributor could have a material adverse effect upon our card sales, profitability, and revenue growth.
Revenues derived from our products sold at retail distributors constituting greater than 10% of our total operating revenues were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Walmart
37%
 
40%
 
35%
 
38%
Settlement assets derived from our products sold at retail distributors constituting greater than 10% of the settlement assets outstanding on our consolidated balance sheets were as follows:
 
June 30, 2018
 
December 31, 2017
Walmart
29%
 
33%
Note 18—Segment Information
Our operations are comprised of two reportable segments: 1) Account Services and 2) Processing and Settlement Services. We identified our reportable segments based on factors such as how we manage our operations and how our chief operating decision maker views results. Our chief operating decision maker organizes and manages our business primarily on the basis of product and service offerings and uses operating income to assess profitability.
The Account Services segment consists of revenues and expenses derived from our deposit account programs, such as prepaid cards, debit cards, consumer and small business checking accounts, secured credit cards, payroll debit cards and gift cards. These deposit account programs are marketed under several of our leading consumer brand names and under the brand names of our Banking as a Service, or "BaaS," partners. The Processing and Settlement Services segment consists of revenues and expenses derived from our products and services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as consumer cash processing services, wage disbursements and tax refund processing services. The Corporate and Other segment primarily consists of eliminations of intersegment revenues and expenses, unallocated corporate expenses, depreciation and amortization, and other costs that are not considered when management evaluates segment performance. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented.
The following tables present certain financial information for each of our reportable segments for the periods then ended:
 
Three Months Ended June 30, 2018
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
204,265

 
$
61,906

 
$
(7,822
)
 
$
258,349

Operating expenses
165,748

 
42,849

 
22,571

 
231,168

Operating income
$
38,517

 
$
19,057

 
$
(30,393
)
 
$
27,181

 
Three Months Ended June 30, 2017
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
175,114

 
$
55,064

 
$
(7,630
)
 
$
222,548

Operating expenses
141,536

 
38,578

 
22,243

 
202,357

Operating income
$
33,578

 
$
16,486

 
$
(29,873
)
 
$
20,191




24

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)



Note 18—Segment Information (continued)
 
Six Months Ended June 30, 2018
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
426,699

 
$
163,764

 
$
(17,116
)
 
$
573,347

Operating expenses
335,236

 
93,522

 
41,028

 
469,786

Operating income
$
91,463

 
$
70,242

 
$
(58,144
)
 
$
103,561

 
Six Months Ended June 30, 2017
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
342,807

 
$
148,774

 
$
(16,032
)
 
$
475,549

Operating expenses
268,213

 
83,681

 
42,088