What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-06 · 143 added, 144 removed, 331 unchanged (46% of the section changed)

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In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including the impact of the continuing coronavirus (COVID-19) pandemic on our business, results of operations and financial condition and our response to it, and those identified below, under “Part II, Item 1A.

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including the impact of the continuing coronavirus (COVID-19) pandemic on our business, results of operations and financial condition and our and the government's response to it, and those identified below, under “Part II, Item 1A.

Risk Factors,” and elsewhere herein.

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In this Quarterly Report, unless otherwise specified or the context otherwise requires, “Green Dot,” “we,” “us,” and “our” refer to Green Dot Corporation and its consolidated subsidiaries.

Green Dot Corporation is a financial technology and registered bank holding company focused on making modern banking and money movement accessible for all.

Our goal is to deliver trusted, best-in-class money management and payment solutions to our customers and partners, seamlessly connecting people to their money.

Our proprietary technology enables faster, more efficient electronic payments and money management, powering intuitive and seamless ways for people to spend, send, control and save their money.

Through our bank, we offer a suite of financial products to consumers and businesses including debit, prepaid, checking, credit and payroll cards, as well as robust money processing services, such as cash deposits and disbursements, and tax refund processing.

Green Dot Corporation is a financial technology and registered bank holding company committed to delivering trusted, best-in-class money management and payment solutions to customers and partners, seamlessly connecting people to their money.

Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all.

We offer a broad set of financial services to consumers and businesses including debit, checking, credit, prepaid, and payroll cards, as well as robust money processing services, such as tax refunds, cash deposits and disbursements.

Our operations are aggregated amongst three reportable segments:

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Consolidated Financial Results and Trends

Our consolidated results of operations for the three and six months ended June 30, 2021 and 2020 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Total operating expenses 330,669 293,720 36,949 12.6 % 1,027,740 907,890 119,850 13.2 %

Net income 24,933 3,294 21,639 656.9 % 50,668 50,139 529 1.1 %

Net income (loss) 7,335 (2,992) 10,327 * 58,003 47,147 10,856 23.0 %

• (*) % change not meaningful

Refer to "Segment Results" for a summary of financial results of each of our reportable segments.

Total operating revenues

Our total operating revenues for the three and six months ended June 30, 2021 increased $53.1 million, or 17%, and $84.5 million, or 12%, respectively, over the prior year comparable periods, generating revenue growth across our Consumer Services and B2B Services segments, partially offset by lower revenues earned from our Money Movement Services through the first half of the year.

Our total operating revenues for the three and nine months ended September 30, 2021 increased $48.4 million, or 17%, and $132.9 million, or 14%, respectively, over the prior year comparable periods, generating revenue growth across our Consumer Services and B2B Services segments, partially offset by lower revenues earned from our Money Movement Services.

Our deposit account programs within our Consumer Services and B2B Services segments continue to benefit from organic growth as the demand for digital payments continues.

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In December 2020, an additional $900 billion economic stimulus package was signed into law, providing for additional direct payments and enhanced unemployment benefits.

In March 2021, another $1.9 trillion economic package was authorized under the American Rescue Plan Act of 2021, which provides for additional direct payments and enhanced unemployment benefits through September 2021.

As a result of organic growth and the benefit of U.S.

government actions, our total gross dollar volume and purchase volume grew by 15% and 5%, respectively, for the three months ended June 30, 2021, and 29% and 15%, respectively, for the six months ended June 30, 2021 over the prior year comparable periods.

The growth in these key metrics resulted in year-over-year increases in BaaS program management service fee revenues earned from platform partners, monthly maintenance fees, and interchange revenues across our deposit account programs.

Our Consumer Services segment has also benefited from fees associated with the introduction of our optional overdraft protection program services made available to cardholders across our portfolios, including our Go2bank product launched earlier this year, and favorable decreases in the amount of cash back rewards on our legacy card programs due to changes in consumer behavioral trends and the estimated redemption amounts.

Total Money Movement Services revenues for the three months ended June 30, 2021 remained consistent with the prior year comparable period.

Within our Money Movement Services, our tax processing revenues have increased on a year-over-year basis for the three months ended June 30, 2021 primarily due to timing shifts in the number of tax refunds processed for the comparable periods.

The revenue impact from the shift in refund transfer volumes to the second quarter of 2021 was partially offset by lower unit economics earned from refund transfers with one of our largest customers, which was agreed upon in exchange for securing a multi-year arrangement.

The net increase in our tax processing revenues during the second quarter of 2021 was offset by a decline in the number of cash transfers processed, in part due to our decision not to renew a reload partner agreement in the fourth quarter of 2020.

The non-renewal of this agreement will continue to impact the number of cash transfers and, to a lesser extent, profitability within the segment for the remainder of the year, but any year-over-year growth or decline in cash transfers in 2021 will be dependent on multiple factors, including the level of growth of deposit account programs in our Consumer Services and B2B Services segments.

Money Movement Services revenues decreased year-over-year for the six months ended June 30, 2021 as a result of the lower unit economics earned from refund transfers with one of our largest customers and a decline in the number of cash transfers processed, as discussed above.

In March 2021, another $1.9 trillion economic package was authorized under the American Rescue Plan Act of 2021, which provided for additional direct payments, expanded child tax credits and enhanced unemployment benefits that extended through September 2021.

As a result of these consumer trends and economic factors, our consolidated gross dollar volume and purchase volume grew by 24% and 9%, respectively, for the nine months ended September 30, 2021.

During the three months ended September 30, 2021, our consolidated gross dollar volume grew by 13%.

This increase was driven by organic growth from new and existing partners in our B2B Services segment, resulting in an increase in BaaS program management service fee revenues earned from platform partners and interchange revenues.

In our Consumer Services segment, gross dollar volume, the number of active accounts and direct deposit accounts declined year-over-year for three months ended September 30, 2021 by 18%, 15%, and 9%, respectively, as a result of the timing of when prior year tax refund payments were received by cardholders in this segment due to the extended tax filing deadlines into July 2020, and a reduction in enhanced federal unemployment benefits, as the weekly benefit to cardholders was reduced by half in 2021 compared with the prior year period and discontinued in early September 2021.

To a lesser extent, these metrics were also impacted in the current quarter by enhanced fraud monitoring controls we have implemented to to protect our customers.

While we anticipate this trend to be temporary, further erosion in our active accounts may impact our financial results.

Despite these year-over-year declines in our Consumer Services segment, revenue growth in the segment benefited from customer adoption of new features, such as the introduction of our optional overdraft protection program services made available to cardholders across our portfolios, including our GO2bank product launched earlier this year, and favorable decreases in the amount of cash back rewards on our legacy card programs due to changes in consumer behavioral trends and the estimated redemption amounts.

While many of our cardholders have benefited from federal relief programs, much of the enhanced pandemic related unemployment benefits provided by the federal government ended in September 2021, and it remains unclear whether such benefits will be extended further into 2022.

The impact of further governmental actions and whether or not these benefits are reinstituted may also impact our future results.

We expect our key performance indicators will continue to normalize as the effect of governmental actions continues to lessen.

Total Money Movement Services segment revenues for the three and nine months ended September 30, 2021 decreased by 19% and 17%, respectively, with the prior year comparable periods.

The decrease in our Money Movement Services was primarily attributable to the number of cash transfers processed, which decreased by 22% and 18% for the three and nine months ended September 30, 2021, respectively, from the prior year comparable periods.

The decrease in volume of cash transfers is in part due to our decision not to renew a reload partner agreement in the fourth quarter of 2020.

The non-renewal of this agreement will continue to impact the number of cash transfers for the remainder of the year and, to a lesser extent, profitability within the segment, but any year-over-year growth or decline in cash transfers in 2021 will be dependent on multiple factors, including the level of growth of deposit account programs in our Consumer Services and B2B Services segments.

Our tax processing revenues have also decreased year-over-year for the nine months ended September 30, 2021 as a result of a decrease in the number of tax refunds processed of 3% for the comparable periods.

Tax processing revenues were also impacted by lower unit economics earned from refund transfers with one of our largest customers, which was agreed upon in exchange for securing a multi-year arrangement.

The decrease in number of tax refunds processed for the three months ended September 30, 2021 compared to the prior year period was the result of extended tax filing deadlines in 2020, which resulted in a portion of refund volumes shifting from the second quarter to the third quarter of 2020.

The 2021 tax season did not have a similar shift.

Total operating expenses

Our total operating expenses for the three and six months ended June 30, 2021 increased $26.7 million, or 9%, and $82.9 million, or 13%, respectively, over the prior year comparable periods.

This increase was the result of several factors, including higher processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs and an increase in sales and marketing expenses in our Consumer Services segment to promote our recently launched GO2bank product during tax season.

As such, we have incurred more marketing expenses in the first half of 2021 than we expect to incur in the second half.

Both of these segments experienced an increase in third-party call center support, a component of compensation and benefits expenses, to meet the increased demand in our customer service center as a result of the federal relief programs described above.

In addition, both of these segments experienced year-over-year growth in transaction losses, a component within other general and administrative expenses, in connection with the growth in purchase volume and the introduction of our overdraft protection services.

Compensation and benefits expenses within Corporate and Other expenses also increased principally due to the timing of bonus compensation.

During 2021, we intend to continue to make investments that we believe will help to accelerate revenue growth and allow margins to expand in 2022 and beyond, including reinvesting any incremental revenue benefit in 2021,

such as revenue associated with the March 2021 economic stimulus package, into marketing efforts for our newly launched GO2bank product.

In addition to marketing investments, our other growth oriented investments are focused on improving our customer's overall experience and building a modern and scalable core banking and card management platform that reduces our reliance on third-party processors and increases our ability to innovate and preserve margins.

Our total operating expenses for the three and nine months ended September 30, 2021 increased $36.9 million, or 13%, and $119.9 million, or 13%, respectively, over the prior year comparable periods.

This increase was the result of several factors, including higher processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs and an increase in third-party call center support (a component of compensation and benefits expenses) within Consumer Services and B2B Services, to meet the increased demand in our customer service center as a result of our efforts to improve our customers' overall experience.

In addition, both of these segments experienced year-over-year growth in transaction losses, a component within other general and administrative expenses, from increases in gross dollar volume and purchase volume in our B2B Services segment and the introduction of our overdraft protection services in our Consumer Services segment.

Total operating expenses for three and nine months ended September 30, 2021 were partially offset by a decrease in sales and marketing expenses due to a decrease in sales commissions from lower revenues generated from certain products subject to revenue-sharing agreements within our Money Movement Services segment.

For the remainder of 2021, we intend to continue to make growth-oriented investments that will benefit our financial results in 2022 and beyond.

Our growth-oriented investments are focused on marketing efforts for our GO2bank product, improving our customers' overall experience and building a modern and scalable core banking and card management platform that reduces our reliance on third-party processors and increases our ability to innovate and preserve margins.

In addition, we are making improvements in our compliance, customer service, change management structure, and our staffing and training models, among other areas of improvement, as part of an overall effort to enhance our consumer compliance controls.

As such, we expect to continue incurring higher costs year-over-year associated with third-party call centers, a component of compensation and benefits expenses, in our Consumer Services and B2B Services segments.

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Additionally, we expect our implementation to increase components of other general and administrative expenses, such as software license and hosting costs.

Our income tax expense for the six months ended June 30, 2021 decreased $0.2 million, or 1%, on a year-over-year basis.

Our effective tax rate for the six months ended June 30, 2021 was 23.5%, compared to 23.9% for the prior year period.

Our income tax expense for the nine months ended September 30, 2021 increased $3.5 million, or 24%, on a year-over-year basis.

Our effective tax rate for the nine months ended September 30, 2021 was 23.6%, compared to 23.4% for the prior year period.

The effective rates differ from our statutory rate due to the impact of items such as the IRC 162(m) limitation on the deductibility of executive compensation, state income taxes, general business credits, and the tax effects associated with stock-based compensation.

COVID-19 Update

Most of our U.S.

personnel continue to operate remotely and in response to our remote workforce strategy, we are in the process of closing most our U.S.

The health and safety of our employees remains a top priority for our business and most of our U.S.

personnel continue to operate remotely.

In response to our remote workforce strategy, we have closed most of our U.S.

leased office locations.

However, we will be required to continue making our contractual payments until our operating leases are formally terminated or expire.

While we believe our cardholder programs will continue to benefit from the governmental economic relief packages signed into law, as well as the accelerated adoption of digital payments during the pandemic, we expect our key performance indicators will normalize as the effect of governmental actions lessen.

In response to the economic impact caused by COVID-19, the Federal Reserve announced reductions in short-term interest rates in March 2020 that have lowered the yields on our cash and investment balances and therefore, we continue to experience a reduction in the amount of interest income we earn.

An extended duration of near zero short-term interest rates will continue to impact the amount of net interest income we earn in the future.

The duration and magnitude of the continuing effects of COVID-19 remain uncertain and dependent on various factors, including the continued severity and transmission rate of the virus, new variants of the virus, the nature of and duration for which preventative measures remain in place, the extent and effectiveness of containment and mitigation efforts, including vaccination programs, and the type of stimulus measures and other policy responses that the U.S.

government may further adopt.

The duration and magnitude of the continuing effects of COVID-19 remain uncertain and dependent on various factors, including the continued severity and transmission rate of the virus, new variants of the virus, the nature of and duration for which preventative measures remain in place, the extent and effectiveness of containment and mitigation efforts, including vaccination programs and mandates, and the type of stimulus measures and other policy responses that the U.S.

government may further adopt, if any.

See Part II, Item 1A, Risk Factors , for an additional discussion of risk related to the COVID-19 pandemic.

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We believe the following measures are the primary indicators of our quarterly and annual revenues:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Tax Refunds Processed 0.43 0.75 (0.32) (42.7) % 12.02 12.35 (0.33) (2.7) %

* Represents the number of active accounts as of June 30, 2021 and 2020, respectively.

* Represents the number of active accounts as of September 30, 2021 and 2020, respectively.

See “Segment Results” for additional information and discussion regarding key metrics performance by segment.

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Reference is made to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Comparison of Three-Month Periods Ended June 30, 2021 and 2020

Comparison of Three-Month Periods Ended September 30, 2021 and 2020

Operating Revenues

The following table presents a breakdown of our operating revenues among card revenues and other fees, cash processing revenues, interchange revenues and net interest income:

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total

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Total operating revenues $ 339,499 100.0 % $ 291,070 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $197.9 million for the three months ended June 30, 2021, an increase of $45.2 million, or 29.6%, from the comparable prior year period.

Card Revenues and Other Fees — Card revenues and other fees totaled $202.5 million for the three months ended September 30, 2021, an increase of $55.9 million, or 38.1%, from the comparable prior year period.

Our card revenues and other fees increased in part as a result of an increase in total gross dollar volume of 13%.

The increase in total gross dollar volume resulted in an increase in BaaS program management service fee revenues earned from platform partners and to a lesser extent, an increase in monthly maintenance fee assessments.

Card revenues and other fees also increased as a result of new optional features recently launched on our card programs, such as our overdraft protection program, as well as a favorable decrease in the estimated accrual of cash back rewards, which we record as a reduction to revenue.

The increase in total gross dollar volume resulted in an increase in BaaS program management service fee revenues earned from platform partners.

Card revenues and other fees also increased as a result of optional features recently launched on our card programs, such as our overdraft protection program, as well as a favorable decrease in the estimated accrual of cash back rewards, which we record as a reduction to revenue.

Our estimate of cash rewards varies based on multiple factors including the terms and conditions of the cash back program currently in effect, customer activity and customer redemption rates.

Cash Processing Revenues — Cash processing revenues totaled $66.8 million for the three months ended June 30, 2021, an increase of $1.3 million, or 2%, from the comparable prior year period.

The increase is primarily due to timing shifts in the number of tax refunds processed for the comparable periods.

Tax refunds processed for the 2021 tax season shifted from the first quarter of 2021 to the second quarter of 2021 as a result of the extension of the tax filing deadlines to the latter half of the second quarter of the year, while a number of tax refunds processed during the prior year 2020 tax season shifted into the third quarter of 2020 also due to extended filing deadlines.The revenue impact from the shift in refund transfer volumes to the second quarter of 2021 was partially offset by lower unit economics earned on tax refund transfers from one of our largest customers as a result of our multi-year agreement.

The net increase from our tax processing revenues was offset by a decrease in the number of cash transfers processed year-over-year, in part due to our decision not to renew a reload network agreement with a partner in the fourth quarter of 2020.

Interchange Revenues — Interchange revenues totaled $101.1 million for the three months ended June 30, 2021, an increase of $5.1 million, or 5%, from the comparable prior year period.

The increase was primarily due to an increase in the amount of purchase volume during the three months ended June 30, 2021 compared to the prior year period, which is primarily attributed to the economic stimulus funds and unemployment benefits provided by the federal government.

Interest Income, net — Net interest income totaled $3.5 million for the three months ended June 30, 2021, an increase of $1.4 million, or 67%, from the comparable prior year period.

The increase in net interest income earned was the result of an increase in the size of our investment securities portfolio and customer funds on deposit, which is also primarily attributed to the economic stimulus funds and unemployment benefits provided by the federal government.

Cash Processing Revenues — Cash processing revenues totaled $47.5 million for the three months ended September 30, 2021, a decrease of $10.0 million, or 17%, from the comparable prior year period.

Although we processed a lower number of tax refund transfers compared to the prior year period, our total tax processing revenues increased as a result of an increase in other ancillary tax processing services offered through our tax business.

Interchange Revenues — Interchange revenues totaled $85.9 million for the three months ended September 30, 2021, an increase of $1.0 million, or 1%, from the comparable prior year period.

Although the amount of purchase volume decreased during the three months ended September 30, 2021 compared to the prior year period, the interchange rate we earned increased as a result of a lower average dollar amount purchased per transaction.

As interchange fees have both fixed and variable components, the effective rate we earn varies based on the size of transactions, amongst other factors.

Interest Income, net — Net interest income totaled $3.6 million for the three months ended September 30, 2021, an increase of $1.6 million, or 80%, from the comparable prior year period.

The increase in net interest income earned was the result of an increase in the size of our investment securities portfolio and customer funds on deposit, which is primarily attributed to the economic stimulus funds and enhanced unemployment benefits provided by the federal government and organic growth in our deposit account programs.

Operating Expenses

The following table presents a breakdown of our operating expenses among sales and marketing, compensation and benefits, processing, and other general and administrative expenses:

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total

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Total operating expenses $ 330,669 97.4 % $ 293,720 100.9 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $96.5 million for the three months ended June 30, 2021, a decrease of $10.3 million, or 10% from the comparable prior year period.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues generated from certain products that are subject to revenue-sharing agreements, partially offset by higher marketing and supply chain expenses in connection with the launch of GO2bank in January 2021.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $60.0 million for the three months ended June 30, 2021, an increase of $1.1 million or 2% from the comparable prior year period.

The increase was primarily driven by higher third-party call center support costs to meet increased demand in our customer service center as a result of the federal relief programs described above, partially offset by a decrease in stock-based compensation expense of approximately $5.2 million driven primarily by the timing of forfeited awards during the period and lower salaries and wages, principally attributable to reduced employee headcount for the comparable periods.

Processing Expenses — Processing expenses totaled $94.3 million for the three months ended June 30, 2021, an increase of $22.9 million or 32% from the comparable prior year period.

Sales and Marketing Expenses — Sales and marketing expenses totaled $84.0 million for the three months ended September 30, 2021, a decrease of $12.2 million, or 13% from the comparable prior year period.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues generated from certain products that are subject to revenue-sharing agreements, partially offset by higher supply chain expenses in connection with the continued roll-out of GO2bank, which we launched in the first quarter of 2021.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $65.0 million for the three months ended September 30, 2021, an increase of $3.9 million or 6% from the comparable prior year period.

The increase was primarily driven by higher third-party call center support costs to meet increased demand in our customer service center as a result of our effort to improve our customers' overall experience, partially offset by a decrease in salaries and wages, principally attributable to the timing of accrued bonus compensation.

Processing Expenses — Processing expenses totaled $95.7 million for the three months ended September 30, 2021, an increase of $21.5 million or 29% from the comparable prior year period.

This increase was principally due to growth in BaaS account programs within our B2B Services segment and overall volume of transactions processed through our consolidated platform.

Other General and Administrative Expenses — Other general and administrative expenses totaled $86.8 million for the three months ended June 30, 2021, an increase of $13.0 million or 18%, from the comparable prior year period.

This increase was primarily due to a year-over-year growth in transaction losses as a result of the increase in purchase volume and the introduction of our overdraft protection services, as well as higher software license expenses for the reasons discussed above, partially offset by lower professional fees and rent expenses as a result of our office closures in the U.S.

Other General and Administrative Expenses — Other general and administrative expenses totaled $85.9 million for the three months ended September 30, 2021, an increase of $23.6 million or 38%, from the comparable prior year period.

This increase was primarily due to a year-over-year growth in transaction losses as a result of increases in gross dollar volume and purchase volume in our B2B Services segment and the introduction of our overdraft protection services in our Consumer Services segment, as well as higher professional fees and software license expenses for the reasons discussed above, partially offset by lower rent expenses as a result of our office closures in the U.S.

The following table presents a breakdown of our effective tax rate among federal, state, and other:

Three Months Ended June 30,

Three Months Ended September 30,

federal statutory tax rate 21.0 % 21.0 %

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Nondeductible expenses 0.1 5.7

Capital loss valuation allowance release — (4.4)

Other (0.2) 0.7

Effective tax rate 23.9 % 31.1 %

Our income tax expense totaled $8.5 million, an increase of $4.6 million or 122% from the prior year comparable period, primarily due to an increase in operating income.

The decrease in the effective tax rate for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 is primarily due to an

increase in our pre-tax income and the corresponding rate impact on items such as state income taxes, general business credits, employee stock-based compensation, and the IRC 162(m) limitation on the deductibility of executive compensation.

Our income tax expense totaled $2.3 million for the three months ended September 30, 2021, an increase of $3.6 million or 269% from the prior year comparable period, primarily due to an increase in operating income.

The decrease in the effective tax rate for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 is primarily due to an increase in our pre-tax income and the corresponding rate impact

on items such as state income taxes, general business credits, employee stock-based compensation, and the IRC 162(m) limitation on the deductibility of executive compensation.

The "Other" category in our effective tax rate consists of a variety of permanent differences, none of which were individually significant.

Comparison of Six-Month Periods Ended June 30, 2021 and 2020

Comparison of Nine-Month Periods Ended September 30, 2021 and 2020

Operating Revenues

The following table presents a breakdown of our operating revenues among card revenues and other fees, cash processing revenues, interchange revenues and net interest income:

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total

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Total operating revenues $ 1,102,358 100.0 % $ 969,479 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $383.9 million for the six months ended June 30, 2021, an increase of $89.8 million, or 31%, from the comparable prior year period.

This increase was driven by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2021 and 2020—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $157.7 million for the six months ended June 30, 2021, a decrease of $30.8 million, or 16%, from the comparable prior year period.

This decrease was driven by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2021 and 2020—Operating Revenues—Cash Processing Revenues," as well as a decline in the number of Simply Paid disbursement transactions due to the effects of the COVID-19 pandemic on the rideshare industry.

Interchange Revenues — Interchange revenues totaled $212.3 million for the six months ended June 30, 2021, an increase of $25.5 million, or 14%, from the comparable prior year period.

The increase was primarily due to an increase in the amount of purchase volume during the six months ended June 30, 2021 compared to the prior year period, which is primarily attributed to the economic stimulus funds and unemployment benefits provided by the federal government, partially offset by a decline in the interchange rate earned as a result of an increase in the average dollar amount purchased per transaction.

Interest Income, net — Net interest income totaled $8.8 million for the six months ended June 30, 2021, a decrease of $0.2 million, or 2%, from the comparable prior year period.

The decrease was principally the result of lower yields on our investment securities portfolio and customer funds on deposit as a result of rate decreases by the Federal Reserve in March 2020, partially offset by an increase in the size of our investment securities portfolio and customer funds on deposit.

Card Revenues and Other Fees — Card revenues and other fees totaled $586.4 million for the nine months ended September 30, 2021, an increase of $145.7 million, or 33%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended September 30, 2021 and 2020—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $205.3 million for the nine months ended September 30, 2021, a decrease of $40.7 million, or 17%, from the comparable prior year period.

The decrease is primarily due to a decline in the number of cash transfers processed year-over-year, in part due to our decision not to renew a reload network agreement with a partner in the fourth quarter of 2020, and to a lesser extent, a lower number of tax refunds processed for the comparable periods in both our online consumer and professional tax channels as a result of extended tax filing deadlines in 2020, as discussed above.

Interchange Revenues — Interchange revenues totaled $298.2 million for the nine months ended September 30, 2021, an increase of $26.5 million, or 10%, from the comparable prior year period.

The increase was primarily due to an increase in the amount of purchase volume during the nine months ended September 30, 2021, compared to the prior year period, which is primarily attributed to the economic stimulus funds and enhanced unemployment benefits provided by the federal government.

Interest Income, net — Net interest income totaled $12.4 million for the nine months ended September 30, 2021, an increase of $1.4 million, or 13%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended September 30, 2021 and 2020—Operating Revenues—Interest Income, net."

Operating Expenses

The following table presents a breakdown of our operating expenses among sales and marketing, compensation and benefits, processing, and other general and administrative expenses:

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total

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Total operating expenses $ 1,027,740 93.2 % $ 907,890 93.6 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $215.4 million for the six months ended June 30, 2021, a decrease of $8.1 million, or 4% from the comparable prior year period.

This decrease was driven by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2021 and 2020—Operating Expenses—Sales and Marketing Expenses."

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $135.0 million for the six months ended June 30, 2021, an increase of $23.1 million or 21% from the comparable prior year period.

The increase was primarily due to higher third-party call center support costs to meet increased demand in our customer service center as a result of the federal relief programs described above, and higher salaries and wages, principally attributable to the timing of accrued bonus compensation.

Processing Expenses — Processing expenses totaled $192.0 million for the six months ended June 30, 2021, an increase of $49.5 million or 35% from the comparable prior year period.

This increase was driven by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2021 and 2020-—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $154.7 million for the six months ended June 30, 2021, an increase of $18.5 million or 14%, from the comparable prior year period.

This increase was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2021 and 2020—Operating Expenses—Other General and Administrative Expenses."

Sales and Marketing Expenses — Sales and marketing expenses totaled $299.4 million for the nine months ended September 30, 2021, a decrease of $20.3 million, or 6% from the comparable prior year period.

This decrease was driven by the same factors as discussed above under “Comparison of Three-Month Periods Ended September 30, 2021 and 2020—Operating Expenses—Sales and Marketing Expenses."

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $200.0 million for the nine months ended September 30, 2021, an increase of $27.0 million or 16% from the comparable prior year period.

The increase was primarily due to higher third-party call center support costs to meet increased demand in our customer service center from the volume of federal relief funds deposited onto our programs and our effort to improve our customer's overall experience.

Processing Expenses — Processing expenses totaled $287.7 million for the nine months ended September 30, 2021, an increase of $71.1 million or 33% from the comparable prior year period.

This increase was driven by the same factors as discussed above under “Comparison of Three-Month Periods Ended September 30, 2021 and 2020—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $240.6 million for the nine months ended September 30, 2021, an increase of $42.1 million or 21%, from the comparable prior year period.

This increase was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended September 30, 2021 and 2020—Operating Expenses—Other General and Administrative Expenses."

The following table presents a breakdown of our effective tax rate among federal, state, and other:

Six Months Ended June 30,

Nine Months Ended September 30,

federal statutory tax rate 21.0 % 21.0 %

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Effective tax rate 23.6 % 23.4 %

Our income tax expense totaled $15.6 million, a decrease of $0.2 million or 1% from the prior year comparable period resulting primarily due to a decrease of $1.1 million on the IRC 162(m) limitation on the deductibility of executive compensation and an increase of $3.1 million in excess tax benefits from stock-based compensation.

We recognized an excess tax benefit on stock-based compensation of $1.9 million for the six months ended June 30, 2021, compared to a $1.2 million discrete tax expense on shortfalls from stock based compensation for the prior year comparable period.

Our income tax expense totaled $17.9 million, an increase of $3.5 million or 24% from the prior year comparable period and is primarily driven by the increase in our operating income, along with an increase of $2.0 million on the IRC 162(m) limitation on the deductibility of executive compensation.

This increase in tax expense was partially offset by a favorable increase of $1.5 million in excess tax benefits from stock-based compensation.

We recognized an excess tax benefit on stock-based compensation of $1.9 million for the nine months ended September 30, 2021, compared to a $0.5 million excess tax benefit for the prior year comparable period.

The "Other" category in our effective tax rate consists of a variety of permanent differences, none of which were individually significant.

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Consumer Services

The results of operations and key metrics of our Consumer Services segment for the three and six months ended June 30, 2021 and 2020 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The results of operations and key metrics of our Consumer Services segment for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Purchase Volume $ 5,166 $ 5,840 $ (674) (11.5) % $ 18,759 $ 17,518 $ 1,241 7.1 %

* Represents number of active and direct deposit active accounts as of June 30, 2021 and 2020, respectively.

Segment revenues within Consumer Services for the three and six months ended June 30, 2021 increased $19.5 million, or 12%, and $50.9 million, or 16%, respectively, compared to the prior year comparable periods, while our segment expenses for the three and six months ended June 30, 2021 increased $22.1 million, or 21%, and $50.4 million, or 24%, respectively.

Our gross dollar volume decreased 6% during the three months ended June 30, 2021, from the comparable prior year period and the total number of active accounts decreased by 3% as of June 30, 2021 year-over-year, largely due to the timing of stimulus funds.

In the second quarter of 2020, new and existing users utilized our platform to receive funds from the initial economic stimulus package.

Our cardholders benefited from the second and third economic stimulus packages primarily in the first quarter of 2021.

As a result of these timing differences, gross dollar volume and the number of active accounts declined year-over-year in the second quarter of 2021.

However, we generated revenue growth within this segment from interchange revenue earned on higher purchase volume of 5%, largely attributable to stimulus funds received in the first quarter of 2021 being spent in the second quarter of 2021, and the fees associated with the introduction of our new overdraft protection program, which is an optional service to our cardholders.

Consumer Services revenues also benefited from a favorable decrease in the estimated accrual of cash back rewards, which we recorded as a reduction to revenue, attributable to changes in consumer behavioral trends and estimated redemption amounts.

For the six months ended June 30, 2021, our revenue growth year-over-year was the result of increases in our gross dollar volume and purchase volume.

Total gross dollar volume on these deposit account programs increased 13% during the six months ended June 30, 2021, from the comparable prior year period due to organic growth as the demand for digital payments continues and from customers that have utilized our platform to receive stimulus funds and unemployment benefits enacted by the federal government this past year.

The increase in gross dollar volume has resulted in an increase in monthly maintenance fee assessments and ATM fees we earn on these portfolios.

Purchase volume increased by 16% during the six months ended June 30, 2021, from the comparable prior year period, resulting in an increase in the amount of interchange we earn.

Consumer Services expenses increased for the three and six months ended June 30, 2021, from the comparable prior year period principally due to increased staffing of third-party call center support to meet the increased demand in our customer service center as a result of the federal relief programs, marketing expenses to promote our recently launched GO2bank product, and growth in transaction losses as a result of the year-over-year increases in purchase volume and the introduction of our overdraft protection services.

Three Months Ended June 30, Six Months Ended June 30,

* Represents number of active and direct deposit active accounts as of September 30, 2021 and 2020, respectively.

Segment revenues within Consumer Services for the three and nine months ended September 30, 2021 increased $16.9 million, or 11%, and $67.8 million, or 15%, respectively, compared to the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2021 increased $8.3 million, or 8%, and $58.7 million, or 19%, respectively.

Our gross dollar volume, purchase volume, the total number of active accounts and direct deposit active accounts decreased by 18%, 12%, 15% and 9%, respectively, during the three months ended September 30, 2021 from the comparable prior year period, due to the timing of tax refund payments in the prior year, decreases in enhanced federal unemployment benefits, and to a lesser extent, enhanced fraud monitoring controls implemented in the current quarter, as described above under "Overview."

Despite these decreases in our key metrics, we generated total revenue growth within this segment for three months ended September 30, 2021 from customer adoption of new features, such as the introduction of our recent overdraft protection program, which is an optional service to our cardholders, and a favorable decrease in the estimated accrual of cash back rewards.

Our cash back rewards are recorded as a reduction to revenue and is attributable to changes in consumer behavioral trends and estimated redemption amounts.

These increases were partially offset by decreases in the amount of monthly maintenance fees, ATM revenue and interchange revenues as a result of the decreases in each of our key metrics stated above.

In addition to the same factors that impacted revenue growth for the third quarter of 2021, our revenue increase for the nine months ended September 30, 2021 was the result of increases in our gross dollar volume and purchase volume.

Total gross dollar volume on these deposit account programs increased 2% during the nine months ended September 30, 2021 from the comparable prior year period due to organic growth as the demand for digital payments continues and from customers that have utilized our platform to receive federal stimulus funds and enhanced unemployment benefits this past year.

The increase in gross dollar volume has resulted in an increase in monthly maintenance fee assessments and ATM fees that we earn on these portfolios.

Purchase volume increased by 7% during the nine months ended September 30, 2021 from the comparable prior year period, resulting in an increase in the amount of interchange we earn.

Consumer Services expenses increased for the three and nine months ended September 30, 2021 from the comparable prior year periods, principally due to increased staffing of third-party call center support to meet the increased demand in our customer service center as a result of our effort to improve our customer's overall experience and growth in transaction losses, in part due to the introduction of our overdraft protection services.

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Purchase Volume $ 2,190 $ 1,760 $ 430 24.4 % $ 7,912 $ 6,841 $ 1,071 15.7 %

* Represents number of active accounts as of June 30, 2021 and 2020, respectively.

Segment revenues within our B2B Services for the three and six months ended June 30, 2021 increased $36.0 million, or 47%, and $68.1 million, or 45%, respectively, compared to the prior year comparable periods, while our segment expenses for the three and six months ended June 30, 2021 increased $34.1 million, or 57%, and $68.6 million, or 60%, respectively.

Our total gross dollar volume increased 43% and 50% during the three and six months ended June 30, 2021, from the comparable prior year periods, despite the number of active accounts decreasing by 4% year-over-year as of June 30, 2021 for the reasons noted in our Consumer Services segment above.

Although impacted by the timing of stimulus payments as discussed above, we also continue to experience organic growth in certain BaaS programs as the demand for digital payments continues.

Purchase volume also increased approximately 3% and 13% for the three and six months ended June 30, 2021 from the comparable prior year periods.

The increase in gross dollar volume and purchase volume drove an increase in our BaaS program management service fee revenues earned from our platform partners and increases in interchange revenue and monthly maintenance fee assessments, partially offset by lower Simply Paid disbursement revenues due to the effects of the COVID-19 pandemic on the rideshare industry.

Despite year-over-year revenue growth for the three and six months ended June 30, 2021, our segment profit has been impacted by the increased staffing of third-party call center support to meet the increased demand in our customer service center and growth in disputed transaction losses for the same reasons discussed above.

This segment also experienced margin compression because some of our BaaS partnerships were structured based on a flat profit and therefore, our segment profit for these arrangements has not scaled with revenue growth.

* Represents number of active accounts as of September 30, 2021 and 2020, respectively.

Segment revenues within our B2B Services for the three and nine months ended September 30, 2021 increased $41.1 million, or 53%, and $109.2 million, or 48%, respectively, compared to the prior year periods, while our segment expenses for the three and nine months ended September 30, 2021 increased $39.0 million, or 64%, and $107.5 million, or 61%, respectively.

Our total gross dollar volume increased 57% and 52% during the three and nine months ended September 30, 2021 from the comparable prior year periods, and the number of active accounts increased by 14% year-over-year as of September 30, 2021 as we continue to experience organic growth in certain BaaS programs, both new and existing, as the demand for digital payments continues.

Purchase volume also increased approximately 24% and 16% for the three and nine months ended September 30, 2021 from the comparable prior year periods, as result of this increased gross dollar volume.

The increase in gross dollar volume and purchase volume drove an increase in our BaaS program management service fee revenues earned from our platform partners and an increase in the amount of interchange revenue earned.

Despite year-over-year revenue growth for the three and nine months ended September 30, 2021, our segment profit has been impacted by the increased staffing of third-party call center support to meet the increased demand in our customer service center and growth in transaction losses as a result of the year-over-year increases in gross dollar volume and purchase volume.

This segment also experienced margin compression because certain BaaS partnerships were structured based on a fixed profit and therefore, our segment profit for these arrangements has not scaled with revenue growth.

BaaS is our newest channel of business and we remain focused on investing in it and exploring new partnership agreements moving forward.

Money Movement Services

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Tax Refunds Processed 0.43 0.75 (0.32) (42.7) % 12.02 12.35 (0.33) (2.7) %

Segment revenues within our Money Movement services for the three and six months ended June 30, 2021 increased $0.4 million, or 0.5%, and decreased $29.3 million, or 15.8%, respectively, from the comparable prior year periods, and segment expenses for the three and six months ended June 30, 2021 decreased $10.0 million, or 26.4%, and $21.8 million, or 23.9%, respectively.

Tax processing revenues increased during the three months ended June 30, 2021, primarily due to timing shifts in the number of tax refunds processed for the comparable periods.

The decrease in revenues and expenses for the six months ended June 30, 2021 from the comparable prior year period is attributable to the same reasons discussed above.

Segment revenues within our Money Movement services for the three and nine months ended September 30, 2021 decreased $10.9 million, or 19.4%, and $40.3 million, or 16.6%, respectively, from the comparable prior year periods, and segment expenses for the three and nine months ended September 30, 2021 decreased $11.7 million, or 30.3%, and $33.5 million, or 25.8%, respectively.

Our tax processing revenues increased for the three months ended September 30, 2021 despite a lower number of tax refunds processed, primarily due to an increase in other ancillary tax processing services offered through our tax business.

Tax processing revenues decreased during the nine months ended September 30, 2021 due to a decrease in the number of tax refunds processed and lower unit economics earned from refund transfers with one of our largest customers, which was agreed upon in exchange for securing a multi-year arrangement.

In addition, the number of cash transfers processed decreased for the three and nine months ended September 30, 2021, in part due to our decision not to renew a reload partner agreement in the fourth quarter of 2020.

Corporate and Other

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 Change % 2021 2020 Change %

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Refer to Note 19— Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation.

Net interest income increased slightly year-over-year for the three months ended June 30, 2021 as a result of an increase in the size of our investment securities portfolio and customer funds on deposit.

However, total net interest income in the first half of the year has remained flat to prior year comparable period as a result of lower yields on our investment securities portfolio due to the rate decreases by the Federal Reserve in March 2020.

Unallocated corporate expenses for the three and six months ended June 30, 2021 decreased year-over-year by approximately 11% and 5%, respectively, as a result of lower corporate reserves, professional expenses and rent expense.

These decreases were partially offset by higher salaries and wages and related employee benefits, principally due to the timing of accrued bonus compensation, and higher software licenses and telecommunication expenses.

Net interest income increased year-over-year for the three and nine months ended September 30, 2021 as a result of an increase in the size of our investment securities portfolio and customer funds on deposit.

Unallocated corporate expenses for the three months ended September 30, 2021 increased by approximately 3% as a result of higher professional expenses and higher software licenses, partially offset by lower salaries and wages and related employee benefits, principally due to the timing of accrued bonus compensation.

Unallocated corporate expenses for the nine months ended September 30, 2021 decreased year-over-year by approximately 2%, as a result of lower rent expense and corporate reserves, partially offset by higher software licenses and telecommunication expenses.

Liquidity and Capital Resources

The following table summarizes our major sources and uses of cash for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Increase in unrestricted cash, cash equivalents and restricted cash $ 312,275 $ 1,075,914

For the six months ended June 30, 2021 and 2020, we financed our operations primarily through our cash flows generated from operations and customer funds held on deposit.

For the nine months ended September 30, 2021 and 2020, we financed our operations primarily through our cash flows generated from operations and customer funds held on deposit.

From time to time, we may also finance short term working capital activities through our borrowings under our credit facility.

As of June 30, 2021, our primary source of liquidity was unrestricted cash and cash equivalents totaling $1.9 billion.

As of September 30, 2021, our

primary source of liquidity was unrestricted cash and cash equivalents totaling $1.8 billion.

We also consider our $1.2 billion of available-for-sale investment securities to be highly-liquid instruments.

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Cash Flows from Operating Activities

Our $119.5 million of net cash provided by operating activities during the six months ended June 30, 2021 was the result of $50.7 million of net income, adjusted for certain non-cash operating items of $88.1 million and decreases in net changes in our working capital assets and liabilities of $19.3 million.

Our $161.5 million of net cash provided by operating activities during the six months ended June 30, 2020 was the result of $50.1 million of net income, adjusted for certain non-cash operating items of $71.0 million and increases in net changes in our working capital assets and liabilities of $40.3 million.

Our $147.2 million of net cash provided by operating activities during the nine months ended September 30, 2021 was the result of $58.0 million of net income, adjusted for certain non-cash operating items of $134.5 million and decreases in net changes in our working capital assets and liabilities of $45.2 million.

Our $198.9 million of net cash provided by operating activities during the nine months ended September 30, 2020 was the result of $47.1 million of net income, adjusted for certain non-cash operating items of $108.8 million and increases in net changes in our working capital assets and liabilities of $42.9 million.

Cash Flows from Investing Activities

Our $265.7 million of net cash used in investing activities during the six months ended June 30, 2021 was primarily due to purchases of available-for-sale investment securities, net of proceeds from sales and maturities, of $139.8 million, the purchase of bank-owned life insurance policies of $50.0 million, capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, and the acquisition of property and equipment of $23.8 million.

Our $24.7 million of net cash used in investing activities during the six months ended June 30, 2020 was primarily due to the acquisition of property and equipment of $31.4 million, and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, partially offset by proceeds from the sale and maturities of available-for-sale investment securities, net of purchases, of $40.9 million.

Our $399.7 million of net cash used in investing activities during the nine months ended September 30, 2021 was primarily due to purchases of available-for-sale investment securities, net of proceeds from sales and maturities, of $243.4 million, the purchase of bank-owned life insurance policies of $55.0 million, capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, and the acquisition of property and equipment of $39.6 million.

Our $105.9 million of net cash used in investing activities during the nine months ended September 30, 2020 was primarily due to the acquisition of property and equipment of $43.9 million, capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, and purchases of available-for-sale investment securities, net of proceeds from sales and maturities, of $26.6 million.

Cash Flows from Financing Activities

Our $0.5 billion of net cash provided from financing activities during the six months ended June 30, 2021 was principally the result of a net increase in customer deposits of $125.5 million and a net increase of $425.8 million in obligations to customers.

Our $564.7 million of net cash provided from financing activities during the nine months ended September 30, 2021 was principally the result of a net increase in customer deposits of $221.0 million and a net increase of $351.8 million in obligations to customers.

Total customer deposit balances have increased year-over-year, principally as a result of additional economic stimulus funds and other government benefits received by our cardholders.

Our $734.5 million of net cash provided from financing activities during the six months ended June 30, 2020 was principally the result of a net increase in customer deposits of $826.2 million, offset by a net decrease of $56.6 million in obligations to customers and net repayments on our revolving credit facility of $35.0 million.

Our $983.0 million of net cash provided from financing activities during the nine months ended September 30, 2020 was principally the result of a net increase in customer deposits of $1.1 billion, partially offset by a net decrease of $84.3 million in obligations to customers and net repayments on our revolving credit facility of $35.0 million.

Other Sources of Liquidity:

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The credit agreement provides for a $100 million five-year revolving facility and matures in October 2024.

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 United States federal funds rate plus 0.50%, (b) the Wells Fargo prime rate, and (c) one-month LIBOR rate plus 1.0% (the “Base Rate"), plus in either case an applicable margin.

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 United States federal funds rate plus 0.50%, (b) the Wells Fargo prime rate, and (c) 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 1.25% to 2.00% for LIBOR Rate loans and 0.25% to 1.00% for Base Rate loans.

We are also subject to certain financial covenants, which include maintaining a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as defined in the agreement.

At June 30, 2021, we were in compliance with all such covenants.

At September 30, 2021, we were in compliance with all such covenants.

Material Cash Requirements

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The amount and timing of these payments and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of new employees, the rate of change of computer hardware and software used in our business and our business outlook as a result of the COVID-19 pandemic.

We intend to continue to invest in new products and programs we believe are critical, including GO2bank, new features for our existing products and IT infrastructure to scale and operate effectively to meet our strategic objectives.

However, we do not expect these capital expenditures will exceed the amount of our capital expenditures in 2020.

We intend to continue to invest in new products and programs we believe

are critical, including GO2bank, new features for our existing products and IT infrastructure to scale and operate effectively to meet our strategic objectives.

However, for 2021 we do not expect these capital expenditures will exceed the amount of our capital expenditures in 2020.

We expect to fund these capital expenditures primarily through our cash flows provided by operating activities.

We have used cash to acquire businesses and technologies, including most recently, our commitment to purchase Tax Refund Solutions, a business segment of Republic Bank & Trust Company, for approximately $165 million in cash, and we anticipate that we may continue to do so in the future.

We have used cash to acquire businesses and technologies, and we anticipate that we may continue to do so in the future.

The nature of these transactions, however, makes it difficult to predict the amount and timing of such cash requirements.

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Under the Basel III rules, we must maintain a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6%, a ratio of total capital to risk-weighted assets of at least 8% and a minimum Tier 1 leverage ratio of 4.0%.

As of June 30, 2021 and December 31, 2020, we were categorized as "well capitalized" under the regulatory framework for prompt corrective action.

As of September 30, 2021 and December 31, 2020, we were categorized as "well capitalized" under the regulatory framework for prompt corrective action.

To be categorized as "well capitalized," we must maintain specific total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below.

There are no conditions or events since June 30, 2021 which management believes would have changed our category as "well capitalized."

There are no conditions or events since September 30, 2021 which management believes would have changed our category as "well capitalized."

The definitions associated with the amounts and ratios below are as follows:

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The standardized risk weights are prescribed in the bank capital rules and reflect regulatory judgment regarding the riskiness of a type of asset or exposure

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at June 30, 2021 and December 31, 2020 were as follows:

June 30, 2021

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at September 30, 2021 and December 31, 2020 were as follows:

September 30, 2021

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis