Green Dot 2015 Annual Report Download - page 68

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62
Note 2—Summary of Significant Accounting Policies (continued)
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.
Nonperforming Loans
Nonperforming loans generally include 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 nonaccrual 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, 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 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 land, which is 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.
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.
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 2-7 years
Tenant improvements Shorter of the useful life or the lease term