GREEN DOT CORP 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may” and “assumes,” variations of such words and similar expressions are intended to identify forward-looking statements. 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 and the government's response to it, and those identified below, under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. 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. Overview 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: 1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services. Refer to our 2020 Annual Report on Form 10-K "Part 1, Item 1. Business" for more detailed information about our operations and Note 19—Segment Information in the notes to the accompanying unaudited consolidated financial statements. Consolidated Financial Results and Trends 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 % (In thousands, except percentages) Total operating revenues $ 339,499 $ 291,070 $ 48,429 16.6 % $ 1,102,358 $ 969,479 $ 132,879 13.7 % Total operating expenses 330,669 293,720 36,949 12.6 % 1,027,740 907,890 119,850 13.2 % 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. 26 Table of Contents Total operating revenues 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. We have seen a fundamental shift in consumer behavior towards electronic payments throughout the COVID-19 pandemic that has created a higher demand and usage of our products and services. Additionally, these two segments have benefited from economic stimulus funds and incremental unemployment benefits enacted by the U.S. federal government. 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 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. 27 Table of Contents Total operating expenses 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. We also expect our salaries and wages expenses to increase, which are also a component of compensation and benefits expenses, as we expect to expand our headcount in order to support our customer experience efforts and our implementation of a modernized banking platform. Additionally, we expect our implementation to increase components of other general and administrative expenses, such as software license and hosting costs. Income taxes 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 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. 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 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. 28 Table of Contents Consolidated Key Metrics We review a number of metrics to help us monitor the performance of, and identify trends affecting, our business. We believe the following measures are the primary indicators of our quarterly and annual revenues: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 Change % 2021 2020 Change % (In millions, except percentages) Gross Dollar Volume $ 16,404 $ 14,453 $ 1,951 13.5 % $ 54,469 $ 43,854 $ 10,615 24.2 % Number of Active Accounts* 5.37 5.72 (0.35) (6.1) % n/a n/a n/a n/a Purchase Volume $ 7,356 $ 7,600 $ (244) (3.2) % $ 26,671 $ 24,359 $ 2,312 9.5 % Cash Transfers 10.05 12.81 (2.76) (21.5) % 30.56 37.42 (6.86) (18.3) % 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 September 30, 2021 and 2020, respectively. See “Segment Results” for additional information and discussion regarding key metrics performance by segment. The definitions of our key metrics are as follows: Gross Dollar Volume — represents the total dollar volume of funds loaded to our account products from direct deposit and non-direct deposit sources. A substantial portion of our gross dollar volume is generated from direct deposit sources. We use this metric to analyze the total amount of money moving onto our account programs, and to determine the overall engagement and usage patterns of our account holder base. This metric also serves as a leading indicator of revenue generated through our Consumer Services and B2B Services segments, inclusive of fees charged to account holders and interchange revenues generated through the spending of account balances. Number of Active Accounts — represents any bank account within our Consumer Services and B2B Services segments that is subject to United States Patriot Act compliance and, therefore, requires customer identity verification prior to use and is intended to accept ongoing customer cash or ACH deposits. This metric includes checking accounts, general purpose reloadable prepaid card accounts, and secured credit card accounts in our portfolio that had at least one purchase, deposit or ATM withdrawal transaction during the applicable quarter. We use this metric to analyze the overall size of our active customer base and to analyze multiple metrics expressed as an average across this active account base. Beginning with the first quarter of 2021, we have provided certain key metrics at the realigned segment level and have revised our direct deposit active account metric. Following these changes, the direct deposit active accounts metric only consists of accounts in our Consumer Services segment and no longer include direct deposit active accounts in our B2B Services segment. Based on the economic structure of our partnerships within our B2B services segment, we believe that total active accounts is the most relevant key metric for the B2B Services segment. We also narrowed the definition of "direct deposit active account" to include only active accounts that have received one or more payroll or government benefit transaction during the period. Prior period metrics have been restated to conform to our current definition. Our direct deposit active accounts within our Consumer Services segment, on average, have the longest tenure and generate the majority of our gross dollar volume in any period and thus, generate more revenue over their lifetime than other active accounts. Purchase Volume — represents the total dollar volume of purchase transactions made by our account holders. This metric excludes the dollar volume of ATM withdrawals and volume generated by certain BaaS programs where the BaaS partner receives interchange and we earn a platform fee. We use this metric to analyze interchange revenue, which is a key component of our financial performance. Number of Cash Transfers — represents the total number of cash transfer transactions conducted by consumers, such as a point-of-sale swipe reload transaction, the purchase of a MoneyPak or an e-cash mobile remittance transaction marketed under various brand names, that we conducted through our retail distributors in a specified period. This metric excludes disbursements made through our Simply Paid wage disbursement platform. We review this metric as a measure of the size and scale of our retail cash processing network, as an indicator of customer engagement and usage of our products and services, and to analyze cash transfer revenue, which is a key component of our financial performance. Number of Tax Refunds Processed — represents the total number of tax refunds processed in a specified period. Due to seasonality, the number of tax refunds processed is most concentrated during the first half of each year and is minimal during the second half of each year. We review this metric as a measure of the size and scale 29 Table of Contents of our tax refund processing platform and as an indicator of customer engagement and usage of its products and services. Key components of our results of operations Operating Revenues We classify our operating revenues into the following four categories: Card Revenues and Other Fees — Card revenues consist of monthly maintenance fees, ATM fees, new card fees and other revenues. We charge maintenance fees on GPR cards, checking accounts and certain cash transfer products, such as MoneyPak, pursuant to the terms and conditions in our customer agreements. We charge ATM fees to cardholders when they withdraw money at certain ATMs in accordance with the terms and conditions in our cardholder agreements. We charge new card fees, if applicable, when a consumer purchases a GPR card, gift card, or a checking account product. Other revenues consist primarily of revenue associated with our gift card program, annual fees associated with our secured credit card portfolio, transaction-based fees, fees associated with optional products or services, such as our overdraft protection program, and cash-back rewards we offer to cardholders. Our cash-back rewards are recorded as a reduction to card revenues and other fees. Also included in card revenues and other fees are program management fees earned from our BaaS partners for programs we manage on their behalf. Our aggregate monthly maintenance fee revenues vary primarily based upon the number of active accounts in our portfolio and the average fee assessed per account. Our average monthly maintenance fee per active account depends upon the mix of products in our portfolio at any given point in time and upon the extent to which fees are waived based on various incentives provided to customers in an effort to encourage higher usage and retention. Our aggregate ATM fee revenues vary based upon the number of cardholder ATM transactions and the average fee per ATM transaction. The average fee per ATM transaction depends upon the mix of products in our portfolio at any given point in time and the extent to which cardholders use ATMs within our free network that carry no fee for cash withdrawal transactions. Our aggregate new card fee revenues vary based upon the number of GPR cards and checking accounts activated and the average new card fee. The average new card fee depends primarily upon the mix of products that we sell since there are variations in new account fees based on the product and/or the location or source where our products are purchased. The revenue we earn from each of these fees may also vary depending upon the channel in which the active accounts were acquired. For example, certain BaaS programs may not assess monthly maintenance fees and as a result, these accounts may generate lower fee revenue than other active accounts. Our aggregate other fees vary primarily based upon account sales of all types, gift card sales, purchase transactions and the number of active accounts in our portfolio. Cash Processing Revenues — Cash processing revenues (which we have previously referred to as processing and settlement services revenues) consist of cash transfer revenues, tax refund processing service revenues, Simply Paid disbursement revenues and other tax processing service revenues. We earn cash transfer revenues when consumers fund their cards through a reload transaction at a Green Dot Network retail location. Our aggregate cash transfer revenues vary based upon the mix of locations where reload transactions occur, since reload fees vary by location. We earn tax refund processing service revenues at the point in time when a customer of a third-party tax preparation company chooses to pay his or her tax preparation fee through the use of our tax refund processing services. We earn Simply Paid disbursement fees from our business partners at the point in time payment disbursements are made. Interchange Revenues — We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates established by the payment networks, at the point in time when customers make purchase transactions using our products. Our aggregate interchange revenues vary based primarily on the number of active accounts in our portfolio, the average transactional volume of the active accounts in our portfolio and on the mix of cardholder purchases between those using signature identification technologies and those using personal identification numbers and the corresponding rates. Interest Income, net — Net interest income represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities held at Green Dot Bank. Interest-earning assets include cash from customer deposits, loans, and investment securities. Our interest-bearing liabilities held at Green Dot Bank include interest-bearing deposits. Our net interest income and our net interest margin fluctuate based on changes in the federal funds interest rates and changes in the amount and composition of our interest-bearing assets and liabilities. 30 Table of Contents Operating Expenses We classify our operating expenses into the following four categories: Sales and Marketing Expenses — Sales and marketing expenses consist primarily of the commissions we pay to our retail distributors, brokers and platform partners, advertising and marketing expenses, and the costs of manufacturing and distributing card packages, placards and promotional materials to our retail distributors and personalized debit cards to consumers who have activated their cards. We generally establish commission percentages in long-term distribution agreements with our retail distributors and platform partners. Aggregate commissions with our retail distributors are determined by the number of account products and cash transfers sold at their respective retail stores. Commissions with our platform partners and, in certain cases, our retail distributors are determined by the revenue generated from the ongoing use of the associated card programs. We incur advertising and marketing expenses for television, sponsorships, online and in-store promotions. Advertising and marketing expenses are recognized as incurred and typically deliver a benefit over an extended period of time. For this reason, these expenses do not always track changes in our operating revenues. Our manufacturing and distribution costs vary primarily based on the number of accounts activated by consumers. Compensation and Benefits Expenses — Compensation and benefits expenses represent the compensation and benefits that we provide to our employees and the payments we make to third-party contractors. While we have an in-house customer service function, we employ third-party contractors to conduct call center operations, handle routine customer service inquiries and provide consulting support in the area of IT operations and elsewhere. Compensation and benefits expenses associated with our customer service and loss management functions generally vary in line with the size of our active account portfolio, while the expenses associated with other functions do not. Processing Expenses — Processing expenses consist primarily of the fees charged to us by the payment networks, which process transactions for us, the third-party card processors that maintain the records of our customers' accounts and process transaction authorizations and postings for us and the third-party banks that issue our accounts. These costs generally vary based on the total number of active accounts in our portfolio and gross dollar volume transacted by those accounts. Also included in processing expenses are bank fees associated with our tax refund processing services and gateway and network fees associated with our Simply Paid disbursement services. Bank fees generally vary based on the total number of tax refund transfers processed and gateway and network fees vary based on the numbers of disbursements made. Other General and Administrative Expenses — Other general and administrative expenses consist primarily of professional service fees, telephone and communication costs, depreciation and amortization of our property and equipment and intangible assets, changes in contingent consideration, transaction losses (losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud), rent and utilities, and insurance. We incur telephone and communication costs primarily from customers contacting us through our toll-free telephone numbers. These costs vary with the total number of active accounts in our portfolio, as do losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud. Costs associated with professional services, depreciation and amortization of our property and equipment, amortization of our acquired intangible assets, rent and utilities vary based upon our investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics. Income Tax Expense Our income tax expense consists of the federal and state corporate income taxes accrued on income resulting from the sale of our products and services. Critical Accounting Estimates 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. 31 Table of Contents 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 September 30, 2021 2020 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating revenues: Card revenues and other fees $ 202,482 59.6 % $ 146,648 50.3 % Cash processing revenues 47,516 14.0 57,526 19.8 Interchange revenues 85,888 25.3 84,876 29.2 Interest income, net 3,613 1.1 2,020 0.7 Total operating revenues $ 339,499 100.0 % $ 291,070 100.0 % 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. 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 $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. 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, partially offset by higher tax processing revenues. 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. 32 Table of Contents 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 September 30, 2021 2020 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating expenses: Sales and marketing expenses $ 84,002 24.7 % $ 96,189 33.0 % Compensation and benefits expenses 65,045 19.2 61,077 21.0 Processing expenses 95,731 28.2 74,158 25.5 Other general and administrative expenses 85,891 25.3 62,296 21.4 Total operating expenses $ 330,669 97.4 % $ 293,720 100.9 % 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 $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. Income Taxes The following table presents a breakdown of our effective tax rate among federal, state, and other: Three Months Ended September 30, 2021 2020 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit (1.4) (27.9) General business credits (2.0) (64.0) Employee stock-based compensation 0.2 38.1 IRC 162(m) limitation 6.2 57.5 Nondeductible expenses 0.1 5.7 Other (0.2) 0.7 Effective tax rate 23.9 % 31.1 % 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 33 Table of Contents 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 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: Nine Months Ended September 30, 2021 2020 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating revenues: Card revenues and other fees $ 586,431 53.2 % $ 440,723 45.5 % Cash processing revenues 205,256 18.6 246,042 25.4 Interchange revenues 298,229 27.1 271,712 28.0 Interest income, net 12,442 1.1 11,002 1.1 Total operating revenues $ 1,102,358 100.0 % $ 969,479 100.0 % 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." 34 Table of Contents 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: Nine Months Ended September 30, 2021 2020 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating expenses: Sales and marketing expenses $ 299,412 27.2 % $ 319,738 33.0 % Compensation and benefits expenses 199,996 18.1 173,009 17.8 Processing expenses 287,716 26.1 216,624 22.3 Other general and administrative expenses 240,616 21.8 198,519 20.5 Total operating expenses $ 1,027,740 93.2 % $ 907,890 93.6 % 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." Income Taxes The following table presents a breakdown of our effective tax rate among federal, state, and other: Nine Months Ended September 30, 2021 2020 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 0.8 1.3 General business credits (1.9) (2.6) Employee stock-based compensation (2.5) (0.7) IRC 162(m) limitation 6.4 4.5 Nondeductible expenses 0.1 0.4 Other (0.3) (0.5) Effective tax rate 23.6 % 23.4 % 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. 35 Table of Contents Segment Results Consumer Services 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 % (In thousands, except percentages) Financial Results Segment revenues $ 167,455 $ 150,554 $ 16,901 11.2 % $ 533,889 $ 466,115 $ 67,774 14.5 % Segment expenses 107,371 99,060 8,311 8.4 % 364,488 305,824 58,664 19.2 % Segment profit $ 60,084 $ 51,494 $ 8,590 16.7 % $ 169,401 $ 160,291 $ 9,110 5.7 % Key Metrics (In millions, except percentages) Gross Dollar Volume $ 6,811 $ 8,333 $ (1,522) (18.3) % $ 25,155 $ 24,577 $ 578 2.4 % Active Accounts* 3.38 3.98 (0.6) (15.1) % n/a n/a n/a n/a Direct Deposit Active Accounts* 0.83 0.91 (0.08) (8.8) % n/a n/a n/a n/a 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 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. 36 Table of Contents B2B Services Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 Change % 2021 2020 Change % (In thousands, except percentages) Financial Results Segment revenues $ 118,171 $ 77,064 $ 41,107 53.3 % $ 336,735 $ 227,523 $ 109,212 48.0 % Segment expenses 99,670 60,692 38,978 64.2 % 282,527 174,997 107,530 61.4 % Segment profit $ 18,501 $ 16,372 $ 2,129 13.0 % $ 54,208 $ 52,526 $ 1,682 3.2 % Key Metrics (In millions, except percentages) Gross Dollar Volume $ 9,593 $ 6,120 $ 3,473 56.7 % $ 29,314 $ 19,277 $ 10,037 52.1 % Active Accounts* 1.99 1.74 0.25 14.4 % n/a n/a n/a n/a Purchase Volume $ 2,190 $ 1,760 $ 430 24.4 % $ 7,912 $ 6,841 $ 1,071 15.7 % * 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 September 30, Nine Months Ended September 30, 2021 2020 Change % 2021 2020 Change % (In thousands, except percentages) Financial Results Segment revenues $ 45,596 $ 56,536 $ (10,940) (19.4) % $ 201,982 $ 242,255 $ (40,273) (16.6) % Segment expenses 26,878 38,562 (11,684) (30.3) % 96,258 129,720 (33,462) (25.8) % Segment profit $ 18,718 $ 17,974 $ 744 4.1 % $ 105,724 $ 112,535 $ (6,811) (6.1) % Key Metrics (In millions, except percentages) Cash Transfers 10.05 12.81 (2.76) (21.5) % 30.56 37.42 (6.86) (18.3) % 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 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. 37 Table of Contents 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. 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. Corporate and Other Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 Change % 2021 2020 Change % (In thousands, except percentages) Financial Results Unallocated revenue and intersegment eliminations $ (2,298) $ (4,710) $ 2,412 (51.2) % $ (5,939) $ (9,889) $ 3,950 (39.9) % Unallocated corporate expenses and intersegment eliminations 48,759 47,441 1,318 2.8 % 140,864 144,406 (3,542) (2.5) % $ (51,057) $ (52,151) $ 1,094 (2.1) % $ (146,803) $ (154,295) $ 7,492 (4.9) % Revenues within Corporate and Other are comprised of net interest income earned by our bank and inter-segment eliminations. Unallocated corporate expenses include our fixed expenses such as salaries, wages and related benefits for our employees, professional service fees, software licenses, telephone and communication costs, rent and utilities, insurance and inter-segment eliminations. These costs are not considered when our CODM evaluates the performance of our three reportable segments since they are not directly attributable to any reporting segment. Non-cash expenses such as stock-based compensation, depreciation and amortization of long-lived assets, and other non-recurring expenses that are not considered by our CODM when evaluating our overall consolidated financial results are excluded from our unallocated corporate expenses above. Refer to Note 19— Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation. 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: Nine Months Ended September 30, 2021 2020 (In thousands) Total cash provided by (used in) Operating activities $ 147,234 $ 198,851 Investing activities (399,655) (105,938) Financing activities 564,696 983,001 Increase in unrestricted cash, cash equivalents and restricted cash $ 312,275 $ 1,075,914 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 September 30, 2021, our 38 Table of Contents 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. We use trend and variance analysis as well as our detailed budgets and forecasts to project future cash needs, making adjustments to the projections when needed. We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditures, equity method investee capital commitments, and any other capital needs for at least the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months. We continue to monitor the impact of COVID-19 on our business to ensure our liquidity and capital resources remain appropriate throughout this period of uncertainty. Cash Flows from Operating Activities 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 $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 $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 $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: 2019 Revolving Facility In October 2019, we entered into a revolving credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. 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. 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 September 30, 2021, we were in compliance with all such covenants. Material Cash Requirements While the effect of COVID-19 has created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and purchase property and equipment as necessary in the normal course of our business. 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 39 Table of Contents 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, 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. Additionally, we may make periodic cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments at levels we have agreed to with our regulators. Contractual Obligations There have been no material changes in our contractual obligations 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. 40 Table of Contents Capital Requirements for Bank Holding Companies Our subsidiary bank, Green Dot Bank, is a member bank of the Federal Reserve System and our primary regulators are the Federal Reserve Board and the Utah Department of Financial Institutions. We are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines, we must meet specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Basel III rules, which were promulgated by the Federal Reserve and other U.S. banking regulators, provide for risk-based capital, leverage and liquidity standards. 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 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 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: Ratio Definition Tier 1 leverage ratio Tier 1 capital divided by average total assets Common equity Tier 1 capital ratio Common equity Tier 1 capital divided by risk-weighted assets Tier 1 capital ratio Tier 1 capital divided by risk-weighted assets Total risk-based capital ratio Total capital divided by risk-weighted assets Terms Definition Tier 1 capital and Common equity Tier 1 capital Primarily includes common stock, retained earnings and accumulated OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles. Total capital Tier 1 capital plus supplemental capital items such as the allowance for loan losses, subject to certain limits Average total assets Average total consolidated assets during the period less deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles assets Risk-weighted assets Represents the amount of assets or exposure multiplied by the standardized risk weight (%) associated with that type of asset or exposure. 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 41 Table of Contents 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 (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 623,964 16.0 % 4.0 % n/a Common equity Tier 1 capital $ 623,964 64.8 % 4.5 % n/a Tier 1 capital $ 623,964 64.8 % 6.0 % 6.0 % Total risk-based capital $ 634,561 65.9 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 315,865 9.1 % 4.0 % 5.0 % Common equity Tier 1 capital $ 315,865 50.4 % 4.5 % 6.5 % Tier 1 capital $ 315,865 50.4 % 6.0 % 8.0 % Total risk-based capital $ 323,508 51.6 % 8.0 % 10.0 % December 31, 2020 Amount Ratio Regulatory Minimum "Well-capitalized" Minimum (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 515,134 17.5 % 4.0 % n/a Common equity Tier 1 capital $ 515,134 57.8 % 4.5 % n/a Tier 1 capital $ 515,134 57.8 % 6.0 % 6.0 % Total risk-based capital $ 518,358 58.2 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 253,895 10.1 % 4.0 % 5.0 % Common equity Tier 1 capital $ 253,895 46.1 % 4.5 % 6.5 % Tier 1 capital $ 253,895 46.1 % 6.0 % 8.0 % Total risk-based capital $ 254,855 46.3 % 8.0 % 10.0 % 42 Table of Contents