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GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
60
Note 2—Summary of Significant Accounting Policies (continued)
Since PCI loans are recorded at fair value at the acquisition date, we do not classify these loans as nonperforming
as the loans were written down to fair value at the acquisition date and the accretable yield is recognized in interest
income over the remaining life of the loan.
Nonperforming Loans
Nonperforming loans generally include loans, other than PCI loans, that have been placed on nonaccrual status.
We generally place loans on nonaccrual status when they are past due 90 days or more. We reverse the related
accrued interest receivable and apply interest collections on nonaccruing loans as principal reductions; otherwise, we
credit such collections to interest income when received. These loans may be restored to accrual status when all
principal and interest is current and full repayment of the remaining contractual principal and interest is expected.
We consider a loan to be impaired when it is probable that we will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Once we determine a loan to be impaired, we measure the impairment
based on the present value of the expected future cash flows discounted at the loan's effective interest rate. We may
also measure impairment based on observable market prices, or for loans that are solely dependent on the collateral
for repayment, the estimated fair value of the collateral less estimated costs to sell. If the recorded investment in
impaired loans exceeds this amount, we establish a specific allowance as a component of the allowance for loan
losses or by adjusting an existing valuation allowance for the impaired loan.
Allowance for Loan Losses
We establish an allowance for loan losses to account for estimated credit losses inherent in our loan portfolio. For
the portfolio of loans excluding impaired and PCI loans, our estimate of inherent losses is separately calculated on an
aggregate basis for groups of loans that are considered to have similar credit characteristics and risk of loss. We
analyze historical loss rates for these groups and then adjust the rates for qualitative factors which in our judgment
affect the expected inherent losses. Qualitative considerations include, but are not limited to, prevailing economic or
market conditions, changes in the loan grading and underwriting process, changes in the estimated value of the
underlying collateral for collateral dependent loans, delinquency and nonaccrual status, problem loan trends, and
geographic concentrations. We separately establish specific allowances for impaired and PCI loans based on the
present value of changes in cash flows expected to be collected, or for impaired loans that are considered collateral
dependent, the estimated fair value of the collateral.
Property and Equipment
We carry our property and equipment at cost less accumulated depreciation and amortization. We generally
compute depreciation on property and equipment using the straight-line method over the estimated useful lives of the
assets, except for internal-use software in development and land, which are not depreciated. We generally compute
amortization on tenant improvements using the straight-line method over the shorter of the related lease term or
estimated useful lives of the improvements. We expense expenditures for maintenance and repairs as incurred.
The estimated useful lives of the respective classes of assets are as follows:
Land N/A
Building 30 years
Computer equipment, furniture and office equipment 3-4 years
Computer software purchased 3 years
Capitalized internal-use software 2 years
Tenant improvements Shorter of the useful life or the lease term
We capitalize certain internal and external costs incurred to develop internal-use software during the application
development stage. We also capitalize the cost of specified upgrades and enhancements to internal-use software that
result in additional functionality. Once a development project is substantially complete and the software is ready for
its intended use, we begin depreciating these costs on a straight-line basis over the internal-use software’s estimated
useful life.