Green Dot 2013 Annual Report Download - page 66

GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
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Note 2—Summary of Significant Accounting Policies (continued)
We regularly evaluate each fixed income security where the value has declined below amortized cost to assess
whether the decline in fair value is other-than-temporary. In determining whether an impairment is other-than-temporary,
we consider the severity and duration of the decline in fair value, the length of time expected for recovery, the financial
condition of the issuer, and other qualitative factors, as well as whether we either plan to sell the security or it is more-
likely-than-not that we will be required to sell the security before recovery of its amortized cost. If the impairment of
the investment security is credit-related, an other-than-temporary impairment is recorded in earnings. We recognize
non-credit-related impairment in accumulated other comprehensive income. If we intend to sell an investment security
or believe we will more-likely-than-not be required to sell a security, we record the full amount of the impairment as an
other-than-temporary impairment.
Interest on fixed income securities, including amortization of premiums and accretion of discounts, is included in
interest income.
Obligations to Customers and Settlement Assets and Obligations
Our retail distributors collect customer funds for purchases of new cards and reloads at the point of sale and then
remit these funds directly to bank accounts established for the benefit of these customers by the banks that issue our
cards. During the third quarter of 2012, our retail distributors began remitting these funds to our subsidiary bank as
we transitioned our card issuing program with Synovus Bank to our subsidiary bank. Our retail distributors’ remittance
of these funds takes an average of two business days.
Settlement assets represent the amounts due from our retail distributors for customer funds collected at the point
of sale that have not yet been received by our subsidiary bank. Obligations to customers represent customer funds
collected from or to be remitted by our retail distributors for which the underlying products have not been activated.
Settlement obligations represent the customer funds received by our subsidiary bank that are due to third-party card
issuing banks upon activation.
Accounts Receivable, Net
Accounts receivable is comprised principally of receivables due from card issuing banks, overdrawn account
balances due from cardholders, trade accounts receivable and other receivables. We record accounts receivable net
of reserves for estimated uncollectible accounts. Receivables due from card issuing banks primarily represent revenue-
related funds collected by the third-party card issuing banks from our retail distributors, merchant banks and cardholders
that have yet to be remitted to us. These receivables are generally collected within a short period of time based on
the remittance terms in our agreements with the third-party card issuing banks.
Overdrawn Account Balances Due from Cardholders and Reserve for Uncollectible Overdrawn Accounts
Cardholder account overdrafts may arise from maintenance fee assessments on our GPR cards or from purchase
transactions that we honor on GPR or gift cards, in each case in excess of the funds in a cardholder’s account. We
are exposed to losses from unrecovered cardholder account overdrafts. We establish a reserve for uncollectible
overdrawn accounts. We classify overdrawn accounts into age groups based on the number of days that have elapsed
since an account has had activity, such as a purchase, ATM transaction or maintenance fee assessment. We calculate
a reserve factor for each age group based on the average recovery rate for the most recent six months. These factors
are applied to these age groups to estimate our overall reserve. When more than 90 days have passed without activity
in an account, we consider recovery to be remote and write off the full amount of the overdrawn account balance. We
include our provision for uncollectible overdrawn accounts related to maintenance fees and purchase transactions as
an offset to card revenues and other fees and in other general and administrative expenses, respectively, in the
accompanying consolidated statements of operations.
Restricted Cash
We maintain restricted deposits in bank accounts to collateralize a standby letter of credit that guarantees our full
performance of our obligations under our ten-year office lease in Pasadena, California.
Loans to Bank Customers
We report loans measured at historical cost at their outstanding principal balances, net of any charge-offs, and
for purchased loans, net of any unaccreted discounts. We recognize interest income as it is earned.