Green Dot 2010 Annual Report Download - page 31

Our proposed bank acquisition will, if completed, subject our business to significant new,
and potentially changing, regulatory requirements, which may adversely affect our busi-
ness, financial position and results of operations.
If we complete our proposed bank acquisition, we will become a “bank holding company” under the
BHC Act. As a bank holding company, we would be required to file periodic reports with, and would be
subject to comprehensive supervision and examination by, the Federal Reserve Board. Among other
things, we and our proposed subsidiary bank would be subject to risk-based and leverage capital
requirements, which could adversely affect our results of operations and restrict our ability to grow.
These capital requirements, as well as other federal laws applicable to banks and bank holding companies,
could also limit our ability to pay dividends. We also would likely incur additional costs associated with legal
and regulatory compliance as a bank holding company, which could adversely affect our results of
operations. In addition, as a bank holding company, we would generally be prohibited from engaging,
directly or indirectly, in any activities other than those permissible for bank holding companies. This
restriction might limit our ability to pursue future business opportunities we might otherwise consider but
which might fall outside the activities permissible for a bank holding company.
Moreover, substantial changes to banking laws and regulations are possible in the near future. The
Dodd-Frank Act made numerous changes to the regulatory framework governing banking organizations,
and many of the provisions must be implemented by regulation. These regulations could likewise
substantially affect our business and operations. There are proposals in the U.S. Congress that could
make additional changes to the regulatory framework affecting our operations. These changes, if they are
made, could have an adverse effect on our business, financial position and results of operations.
We rely on relationships with card issuing banks to conduct our business, and our results
of operations and financial position could be materially and adversely affected if we fail to
maintain these relationships or we maintain them under new terms that are less favorable
to us.
Substantially all of our cards are issued by GE Money Bank or Columbus Bank and Trust Company, a
division of Synovus Bank. Our relationships with these banks are currently, and will be for the foreseeable
future, a critical component of our ability to conduct our business and to maintain our revenue and expense
structure, because we are currently unable to issue our own cards, and, even if we consummate our
pending bank acquisition, will be unable to do so for the foreseeable future at the volume necessary to
conduct our business, if at all. If we lose or do not maintain existing banking relationships, we would incur
significant switching and other costs and expenses and we and users of our products and services could
be significantly affected, creating contingent liabilities for us. As a result, the failure to maintain adequate
banking relationships could have a material adverse effect on our business, results of operations and
financial condition. Our agreements with the banks that issue our cards provide for revenue-sharing
arrangements and cost and expense allocations between the parties. Changes in the revenue-sharing
arrangements or the costs and expenses that we have to bear under these relationships could have a
material impact on our operating expenses. In addition, we may be unable to maintain adequate banking
relationships or, following their expiration in 2015 and 2012, respectively, renew our agreements with the
banks that currently issue substantially all of our cards under terms at least as favorable to us as those
existing before renewal.
We receive important services from third-party vendors, including card processing from
Total System Services, Inc. Replacing them would be difficult and disruptive to our
business.
Some services relating to our business, including fraud management and other customer verification
services, transaction processing and settlement, card production and customer service, are outsourced to
third-party vendors, such as Total System Services, Inc. for card processing and Genpact International,
Inc. for call center services. It would be difficult to replace some of our third-party vendors, particularly Total
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