What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-08 · 168 added, 158 removed, 360 unchanged (48% of the section changed)

17 unchanged sentences

1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services.

Net interest income and certain other investment income earned by our bank, eliminations of intersegment revenues and expenses, unallocated corporate expenses, and other costs that are not considered when our CODM evaluates the performance of our three reportable segments are recorded in Corporate and Other expenses.

Net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue), eliminations of intersegment revenues and expenses, and unallocated corporate expenses that are not considered when our CODM evaluates the performance of our three reportable segments are recorded in Corporate and Other expenses.

Refer to our 2021 Annual Report on Form 10-K "Part 1, Item 1.

1 unchanged sentence

Consolidated Financial Results and Trends

Our consolidated results of operations for the three and six months ended June 30, 2022 and 2021 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, 2022 and 2021 were as follows:

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

2022 2021 Change % 2022 2021 Change %

5 unchanged sentences

Total operating revenues

Our total operating revenues for the three and six months ended June 30, 2022 decreased $6.6 million, or 2%, and increased $0.5 million, or 0.1%, respectively, over the prior year comparable periods.

Net changes within each of these periods were driven by lower revenues earned from our Consumer Services and Money Movement Services segments, partially offset by higher revenues in our B2B Services segment and higher net interest income in our Corporate and Other segment.

Our total operating revenues for the three and nine months ended September 30, 2022 increased $4.2 million, or 1%, and $4.8 million, or 0.4%, respectively, over the prior year comparable periods.

Net changes within each of these periods were driven by higher revenues in our B2B Services segment and higher net interest income in our Corporate and Other segment, partially offset by lower revenues earned from our Consumer Services and Money Movement Services segments.

Our deposit account programs within our Consumer Services and B2B Services segments have previously benefited from shifts in consumer behavior towards electronic payments throughout the COVID-19 pandemic, which created a higher demand and usage of our products and services.

In part, this was driven by the economic stimulus funds and incremental unemployment benefits enacted by the U.S.

federal government distributed to new and existing customers.

In March 2021, an additional $1.9 trillion economic package was authorized under the American Rescue Plan Act of 2021, which provided for additional direct payments, enhanced unemployment benefits that expired in September 2021 and monthly child tax credit payments that expired in December 2021.

federal government that were distributed to new and existing customers in 2021 as disclosed in our prior filings.

No such economic stimulus packages have been enacted to date in 2022 and as a result, our key metrics have normalized, creating more challenging year-over-year comparisons.

The timing and magnitude of these federal relief programs in the prior year, as well as our strategic decision to reduce marketing spend on GO2bank during the first half of the year due to higher than expected acquisition costs per account, have resulted in a decrease in our consolidated active accounts year over year by 24% as of June 30, 2022.

These factors have also impacted gross dollar volume, which decreased 0.2% and 9% for the three and six months ended June 30, 2022, respectively, and purchase volume, which decreased 24% and 28% for the three and six months ended June 30, 2022, respectively, over the prior year comparable periods.

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

We expect our key performance indicators to continue to normalize on a year-over-year basis as the effect of federal and state governmental actions continues to lessen.

In our Consumer Services segment, revenues decreased during the three and six months ended June 30, 2022 by 17% and 15%, respectively, over the prior year comparable periods.

Gross dollar volume, the number of active accounts, direct deposit active accounts and purchase volume declined year-over-year for three months ended June 30, 2022 by 30%, 30%, 27% and 29%, respectively.

Gross dollar volume and purchase volume decreased by 33% and 29%, respectively, for the six months ended June 30, 2022.

We believe these decreases are primarily attributable to the timing of stimulus payments and other federal benefits received by our cardholders in 2021 as discussed above, as well as lower account acquisition from reduced marketing spend, which has impacted the amount of revenue we earn, such as monthly maintenance fees, ATM fees and interchange.

The timing and magnitude of these federal relief programs in the prior year, as well as our strategic decision to reduce marketing spend on GO2bank throughout this fiscal year due to higher than expected acquisition costs per account, have resulted in a decrease in our consolidated active accounts year-over-year by 19% as of September 30, 2022.

These factors have also impacted gross dollar volume, which decreased 2% for the nine months ended September 30, 2022, and purchase volume, which decreased 12% and 24% for the three and nine months ended September 30, 2022, respectively, over the prior year comparable periods.

Despite some of these macro environment trends, gross dollar value increased 14% for the three months ended September 30, 2022 driven by growth from certain BaaS partners.

We expect our key performance indicators to moderate on a year-over-year basis as the effect of federal and state governmental actions continues to lessen.

In our Consumer Services segment, revenues decreased during the three and nine months ended September 30, 2022 by 19% and 17%, respectively, over the prior year comparable periods.

Gross dollar volume, the number of active accounts, the number of direct deposit active accounts and purchase volume declined year-over-year for the three months ended September 30, 2022 by 19%, 26%, 20% and 17%, respectively.

Gross dollar volume and purchase volume decreased by 29% and 26%, respectively, for the nine months ended September 30, 2022.

We believe these decreases are attributable to several factors, including the timing of stimulus payments and other federal benefits received by our cardholders in 2021 as discussed above, and lower account acquisition from reduced marketing spend on GO2bank due to a higher than expected cost per account, as well as changes in consumer traffic within our retail locations.

These factors had a corresponding impact on the amount of revenue we earn, such as monthly maintenance fees, ATM fees and interchange.

These revenue declines in our Consumer Services segment were partially offset by the customer adoption of recent features, such as our optional overdraft protection program services made available to cardholders across our portfolios, 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.

Within our B2B Services segment, revenues increased during the three and six months ended June 30, 2022 by 27% over the prior year comparable periods.

Gross dollar volume grew overall during the three months ended June 30, 2022 by 26% year-over-year, while active accounts and purchase volume decreased by 11% and 10%, respectively.

For the six months ended June 30, 2022, gross dollar volume increased by 14% and purchase volume decreased by 24% over the prior year comparable periods.

Within our B2B Services segment, revenues increased during the three and nine months ended September 30, 2022 by 34% and 29%, respectively, over the prior year comparable periods.

Gross dollar volume grew overall during the three months ended September 30, 2022 by 37% year-over-year, while the number of active accounts and purchase volume decreased by 9% and 2%, respectively.

For the nine months ended September 30, 2022, gross dollar volume increased by 22%, while purchase volume decreased by 18% over the prior year comparable periods.

Overall, many of our BaaS partners within our B2B Services segment were impacted by similar trends seen in our Consumer Services segment;

however, growth in gross dollar volume from certain programs resulted in a net increase in segment revenue due to higher program management service fees earned from BaaS partners, despite a lower number of active accounts and lower purchase volume.

During the second quarter of 2022, we also engaged in contract renewal negotiations with several BaaS partners, but after extensive negotiations, could not agree upon terms that would best serve the long-term interests of both us and our BaaS partners.

We expect these non-renewals to have a modest impact on our B2B Services segment key metrics and financial results in the second half of 2022.

Total Money Movement Services segment revenues for the three and six months ended June 30, 2022 decreased by 18% and 3%, respectively, over the prior year comparable periods, driven primarily by a decrease in the number of cash transfers processed of 12% and 13%, respectively.

Total Money Movement Services segment revenues for the three and nine months ended September 30, 2022 decreased by 17% and 6%, respectively, over the prior year comparable periods, driven primarily by a decrease in the number of cash transfers processed of 9% and 12%, respectively.

The Green Dot Network is a service provider to accountholders in our Consumer Services and B2B Services segments, as well as third-party programs.

The decrease in cash transfers was the result of lower active accounts within our Consumer Services and B2B Services segments discussed above.

In addition, for the three months ended June 30, 2022, despite a higher number of tax refund transfers processed for the comparable periods, the amount of tax processing revenues decreased due to a mix-shift between our professional and consumer tax channels, which generated a lower revenue per refund transfer.

For the six months ended June 30, 2022, segment revenues were partially offset by an overall increase in

our tax processing revenues, driven by an overall increase in the number of tax refunds processed, which increased by 22% over the first half of the prior year tax season.

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, increased during the three and six months ended June 30, 2022 by 206% and 123%, respectively.

The increase in net interest income was attributable to the increase in the overall size of our investment securities portfolio, as well as an increase in short-term interest rates by the Federal Reserve, which are expected to result in an increase in net interest income compared to 2021 levels for the remainder of the fiscal year.

The decrease in cash transfers was the result of fewer active accounts within our Consumer Services and B2B Services segments discussed above.

Our tax processing revenues also decreased for the three months ended September 30, 2022 as a result of a timing shift in the number of tax refunds processed by the IRS during the comparable periods.

For the nine months ended September 30, 2022, our tax processing revenues increased year-over-year, driven by a 20% increase in the number of tax refunds processed for the comparable periods.

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, increased during the three and nine months ended September 30, 2022 by 217% and 150%, respectively.

The increase in net interest income was attributable to the increase in the overall size of our investment securities portfolio, as well as

an increase in short-term interest rates by the Federal Reserve, which have resulted in an increase in net interest income compared to the prior year.

Total operating expenses

Our total operating expenses for the three months ended June 30, 2022 were roughly flat relative to the prior year comparable period and decreased by $9.2 million, or 1%, for the six months ended June 30, 2022 year-over-year.

The decrease in total operating expenses for the six months ended June 30, 2022 was a result of several factors, including lower sales and marketing expenses principally due to a decrease in sales commissions from lower revenues on products subject to revenue-sharing agreements and reduced marketing spend associated with GO2bank, and lower compensation and benefits expenses principally due to lower employee stock-based compensation and third-party call center support costs within our Consumer Services and B2B Services segments.

Our total operating expenses for the three months ended September 30, 2022 increased $2.3 million, or 1%, and decreased by $6.9 million, or 1%, for the nine months ended September 30, 2022 year-over-year.

The net changes in total operating expenses for the comparable periods was a result of several factors, including lower sales and marketing expenses principally due to a decrease in sales commissions from lower revenues on products subject to revenue-sharing agreements and reduced marketing spend associated with GO2bank, and lower compensation and benefits expenses principally due to lower employee stock-based compensation, accrued bonus compensation and third-party call center support costs within our Consumer Services and B2B Services segments, partially offset by an increase in processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs.

Our third-party call center support costs have decreased in part due to a decline in active accounts, but also as a result of our efforts to improve our customer service over the course of 2021.

In 2021, we increased our third-party call center support costs to meet the increased demand in our customer service center in an effort to improve our customers' overall experience.

Benefits from these improvements with our customers included reduced third-party call center costs in the first half of 2022.

During the three months ended June 30, 2022, we have also seen meaningful improvements in overall transaction losses (a component within other general and administrative expenses) compared to the prior year period, in part as a result of decreases in gross dollar volume across the enterprise, but also from improvements in operational efficiencies to more effectively manage customer disputes and fraud.

These decreases were offset primarily due to an increase in processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs, and the $13 million legal settlement agreed to with Republic Bank as a result of our inability to consummate the Tax Refund Solutions acquisition (a component within other general and administrative expenses).

We intend to continue to make growth-oriented investments and incur other expenditures that will benefit our financial results in 2022 and beyond.

Our growth-oriented investments are focused on increasing marketing initiatives in support of our GO2bank product for the remainder of the year 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.

To support our efforts in building a modern banking platform, we expect our software license and hosting costs, a component of other general and administrative expenses, and salary and wage expenses, a component of compensation and benefits expenses to increase year-over-year.

We also expect to invest in and incur additional expenses in connection with our anti-money laundering program, including improvements to our compliance controls, policies and procedures.

Our income tax expense for the six months ended June 30, 2022 increased $1.4 million, or 9%, on a year-over-year basis.

Benefits from these improvements with our customers included reduced third-party call center costs throughout 2022.

During the three and nine months ended September 30, 2022, we have also continued to see meaningful improvements in overall transaction losses (a component within other general and administrative expenses) compared to the prior year period, in part as a result of decreases in gross dollar volume across the enterprise, but also from improvements in operational efficiencies to more effectively manage customer disputes and fraud.

Although we have seen reduced costs associated with disputes and fraud, other general and administrative expenses in total have increased on a year to date basis as a result of a $13 million legal settlement earlier this year.

Our income tax expense for the nine months ended September 30, 2022 increased $0.9 million, or 5%, on a year-over-year basis.

The increase in our income tax expense was primarily due to an increase in our taxable income and an increase in our effective tax rate.

Our effective tax rate for the six months ended June 30, 2022 was 24.0%, compared to 23.5% for the prior year period.

The increase in our effective rate was primarily due to a decline in excess tax benefits from stock-based compensation, partially offset by a decrease in state income taxes expense and a reduction in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation.

COVID-19 Update

The health and safety of our employees remains a top priority for our business and in the U.S., we have closed most of our U.S.

leased office locations and shifted to a remote working strategy.

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

As a result of the resurgence of the COVID-19 pandemic’s Omicron variant in China during the first quarter of 2022, we closed our offices again in China and shifted to a remote workforce strategy in China.

While we have resumed normal operations in China, it is possible that we may continue to experience similar issues in the future due to the pandemic.

Our effective tax rate for the nine months ended September 30, 2022 was 24.3%, compared to 23.6% for the prior year period.

The increase in our effective rate was primarily due to a decline in excess tax benefits from stock-based compensation, partially offset by a decrease in state income taxes expense and a reduction in the amount of compensation expense that was subject to the Internal Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law.

The IRA contains a number of revisions to the IRC, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022.

These tax law changes have no immediate effect and we do not expect that they will have a material impact on our results of operations in future periods.

Outlook and Other Trends Affecting Our Business

We intend to continue to make growth-oriented investments and incur other expenditures that will benefit our long-term financial results.

Our growth-oriented investments are focused on re-engaging in marketing initiatives in support of our GO2bank product 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 2023, we expect to continue to incur duplicative costs associated with the implementation of our modern banking platform.

Once the implementation is completed, we expect a portion of our processing expenses to reduce and have a favorable impact to our margins.

In addition, we expect to invest in and incur additional expenses in connection with our anti-money laundering program, including improvements to our compliance controls, policies and procedures for the remainder of 2022 and throughout 2023.

During the second quarter of 2022, we announced contract renewal negotiations, but after extensive negotiations, could not agree upon terms that would best serve the long-term interests of both us and our partners.

These non-renewals have had only a modest impact on our key metrics and financial results during the third quarter of 2022, and we do not expect the impact to change during the fourth quarter of 2022.

However, we expect these

non-renewals to negatively impact our key metrics and financial results in our Consumer Services and B2B segments in 2023.

In response to the economic impact caused by COVID-19, the Federal Reserve announced reductions in short-term interest rates in March 2020, which in recent years has impacted the yields on our cash and investment balances.

Recently, the Federal Reserve has announced several increases in the federal funds rate, resulting in a range currently of 2.25% to 2.50%.

It is widely expected that the Federal Reserve will continue to increase interest rates in 2022 to control the effects of economic inflation.

Over the past year, the Federal Reserve has announced several increases in the federal funds rate, resulting in a range currently of 3.75% to 4.00%.

It is widely expected that the Federal Reserve will continue to increase interest rates until the effects of economic inflation are abated.

The Federal Reserve's decision-making policies for 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.

In general, while increases in short-term interest rates benefit the yield we earn on our cash, certain of our BaaS partner arrangements allow for the BaaS partner to share in a significant portion of the interest earned from accountholder deposits (which are recorded as a reduction of revenue).

Meanwhile, yields on our investment portfolio increase but at a slower rate as securities mature and proceeds are reinvested.

As a result, despite an environment of rising interest rates, the net effect on our consolidated financial statements will be lesser in magnitude.

Based on the overall macro-economic environment, interest rates, our commitment to making growth-oriented investments and the timing of the related expense savings from our technology transformation, the non-renewals in our Consumer Services and B2B segments, and trends occurring within our retail channel in our Consumer Services segment, we believe our consolidated operating profit will decline year-over-year in fiscal year 2023.

Further, the duration and magnitude of the continuing effects of COVID-19 remain uncertain and dependent on various factors.

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

2 unchanged sentences

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,

2022 2021 Change % 2022 2021 Change %

5 unchanged sentences

Tax Refunds Processed 0.28 0.43 (0.15) (34.9) % 14.37 12.02 2.35 19.6 %

* Represents the number of active accounts as of June 30, 2022 and 2021, respectively.

* Represents the number of active accounts as of September 30, 2022 and 2021, respectively.

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

7 unchanged sentences

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.

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.

lifetime than other active accounts.

Refer to sub-section entitled Consumer Services under “Segment Results” below for key metric results for direct deposit active accounts.

30 unchanged sentences

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 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.

28 unchanged sentences

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.

As discussed above, while the recently enacted IRA includes a number of revisions to the IRC, these tax law revisions have no immediate effect and we do not expect that they will have a material impact on our results of operations going forward.

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, 2021.

Comparison of Three-Month Periods Ended June 30, 2022 and 2021

Comparison of Three-Month Periods Ended September 30, 2022 and 2021

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

8 unchanged sentences

Total operating revenues $ 343,748 100.0 % $ 339,499 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $218.6 million for the three months ended June 30, 2022, an increase of $20.7 million, or 10.5%, from the comparable prior year period.

Card Revenues and Other Fees — Card revenues and other fees totaled $219.6 million for the three months ended September 30, 2022, an increase of $17.1 million, or 8.4%, from the comparable prior year period.

Card revenues and other fees increased primarily due to growth in gross dollar volume in our B2B Services segment programs, which resulted in higher program management service fees earned from BaaS partners.

In addition, card revenues and other fees also increased due to optional features launched on our card programs, such as our overdraft protection program, as well as an increase in gift card breakage revenue relative to the prior year period.

In addition, card revenues and other fees also increased due to customer adoption of optional features 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 back 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.

These increases were partially offset by decreases in cardholder fees, such as monthly maintenance fees and ATM fees for the reasons discussed above in our "Overview."

Cash Processing Revenues — Cash processing revenues totaled $57.5 million for the three months ended June 30, 2022, a decrease of $9.3 million, or 14%, from the comparable prior year period.

The decrease is primarily due to the decline in the number of cash transfers processed as a result of lower active accounts within our Consumer Services and B2B Services segments, and lower overall tax processing revenues.

Despite a higher number of tax refund transfers processed for the comparable periods, the amount of tax processing revenues decreased due to a mix-shift between our professional and consumer tax channels, which generated a lower revenue per refund transfer.

Interchange Revenues — Interchange revenues totaled $76.0 million for the three months ended June 30, 2022, a decrease of $25.1 million, or 25%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume during the three months ended June 30, 2022, as the effective interchange rate earned remained consistent for the comparable periods.

Our interchange fees have both fixed and variable components, and as a result, the effective rate we earn may vary based on the size of transactions, amongst other factors.

Interest Income, net — Net interest income totaled $10.7 million for the three months ended June 30, 2022, an increase of $7.2 million, or 206%, from the comparable prior year period.

Cash Processing Revenues — Cash processing revenues totaled $41.3 million for the three months ended September 30, 2022, a decrease of $6.2 million, or 13%, from the comparable prior year period.

The decrease is primarily due to the decline in the number of cash transfers processed as a result of fewer active accounts within our Consumer Services and B2B Services segments, and lower overall tax processing revenues.

Interchange Revenues — Interchange revenues totaled $71.4 million for the three months ended September 30, 2022, a decrease of $14.5 million, or 17%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume during the three months ended September 30, 2022, as well as a lower effective interchange rate earned for the comparable periods.

Our interchange fees have both fixed and variable components, and as a result, the effective rate we earn may vary based on the size of transactions, among other factors.

The effective interchange rate earned on purchase volume also declined year-over-year as a result of a higher concentration in customer spend to merchant categories that carry a lower interchange rate (e.g., necessity goods such as fuel and groceries).

Interest Income, net — Net interest income totaled $11.4 million for the three months ended September 30, 2022, an increase of $7.8 million, or 217%, 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, funded primarily from the use of our cardholder deposit account programs.

2 unchanged sentences

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

8 unchanged sentences

Total operating expenses $ 332,983 96.8 % $ 330,669 97.4 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $77.4 million for the three months ended June 30, 2022, a decrease of $19.1 million, or 20% 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 and a decrease in marketing expenses as a result of our strategic decision to reduce marketing spend on GO2bank during the first half of the year due to higher than expected acquisition costs per account.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $57.6 million for the three months ended June 30, 2022, a decrease of $2.4 million or 4% from the comparable prior year period.

The decrease was primarily due to lower employee stock-based compensation driven by fluctuations in the expected achievement of certain performance-based awards and a reduction in third-party call center support costs due to a decline in active accounts and our efforts to improve customer service over the course of 2021.

These decreases were partially offset by an increase in salary and wage expenses and related benefits as a result of our growth-oriented initiatives discussed above in our "Overview."

Processing Expenses — Processing expenses totaled $112.4 million for the three months ended June 30, 2022, an increase of $18.1 million or 19% from the comparable prior year period.

Sales and Marketing Expenses — Sales and marketing expenses totaled $67.0 million for the three months ended September 30, 2022, a decrease of $17.0 million, or 20% 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 and lower supply chain expenses, which consists of debit card plastics and related materials, as a result of a lower number of active accounts for the comparable periods.

In addition, our marketing expenses decreased as a result of our strategic decision to reduce marketing spend on GO2bank due to higher than expected acquisition costs per account.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $61.9 million for the three months ended September 30, 2022, a decrease of $3.1 million or 5% from the comparable prior year period.

The decrease was primarily driven by a reduction in third-party call center support costs due to a decline in active accounts and our efforts to improve customer service over the course of 2021.

In addition, accrued bonus compensation and employee stock-based compensation decreased driven by fluctuations in the expected achievement of certain performance targets.

These decreases were partially offset by an increase in salary and wage expenses and related benefits as a result of our growth-oriented investments discussed above in our "Overview."

Processing Expenses — Processing expenses totaled $125.3 million for the three months ended September 30, 2022, an increase of $29.6 million or 31% from the comparable prior year period.

This increase was principally due to growth in certain 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 $91.5 million for the three months ended June 30, 2022, an increase of $4.7 million or 5%, from the comparable prior year period.

The increase in other general and administrative expenses was primarily due to the $13 million legal settlement associated with our inability to consummate the Tax Refund Solutions acquisition, partially offset by decreases in transaction losses as a result of lower gross dollar volume in our Consumer Services segment and improvements in operational efficiencies over how we manage customer disputes and fraud.

Other General and Administrative Expenses — Other general and administrative expenses totaled $78.9 million for the three months ended September 30, 2022, a decrease of $7.0 million or 8%, from the comparable prior year period.

The decrease in other general and administrative expenses was primarily due to a decrease in transaction losses as a result of lower incoming dispute volume and improvements in operational efficiencies over how we manage customer disputes and fraud, as well as lower professional services expense and amortization of intangible assets.

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 %

3 unchanged sentences

IRC 162(m) limitation (1.2) 6.2

Banked owned life insurance (1.5) —

Nondeductible expenses 1.3 0.1

1 unchanged sentence

Effective tax rate 27.6 % 23.9 %

Our income tax expense totaled $4.9 million for the three months ended June 30, 2022, a decrease of $3.6 million or 43% from the prior year comparable period, primarily due to a decrease in taxable income and our effective tax rate.

The decrease in our effective tax rate for the three months ended June 30, 2022 as compared to

the three months ended June 30, 2021 is primarily due to a decrease in state income taxes expense and a reduction in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation.

These decreases were partially offset by the decline in excess tax benefits from stock-based compensation and higher nondeductible expenses during the quarter.

Our income tax expense totaled $1.8 million for the three months ended September 30, 2022, a decrease of $0.5 million or 22% from the prior year comparable period, primarily due to a decrease in taxable income and our effective tax rate.

The increase in our effective tax rate for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 is primarily due to a decline in excess tax benefits from stock-based compensation and an increase in state income taxes expense, net of federal benefits.

These increases were partially offset by the impact of general business credits and a reduction in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain 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, 2022 a n d 2021

Comparison of Nine-Month Periods Ended September 30, 2022 and 2021

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

8 unchanged sentences

Total operating revenues $ 1,107,134 100.0 % $ 1,102,358 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $431.4 million for the six months ended June 30, 2022, an increase of $47.5 million, or 12%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2022 and 2021—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $157.5 million for the six months ended June 30, 2022, and remained consistent from the comparable prior year period.

Card Revenues and Other Fees — Card revenues and other fees totaled $651.0 million for the nine months ended September 30, 2022, an increase of $64.6 million, or 11%, 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, 2022 and 2021—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $198.8 million for the nine months ended September 30, 2022, a decrease of $6.5 million, or 3% from the comparable prior year period.

Cash processing revenues decreased as a result of a decline in the number of cash transfers processed due to lower active accounts within our Consumer Services and B2B Services segments, partially offset by an increase in the number of tax refunds processed.

Interchange Revenues — Interchange revenues totaled $154.9 million for the six months ended June 30, 2022, a decrease of $57.4 million, or 27%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume during the six months ended June 30, 2022.

Interest Income, net — Net interest income totaled $19.6 million for the six months ended June 30, 2022, an increase of $10.8 million, or 123%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2022 and 2021—Operating Revenues—Interest Income, net."

Interchange Revenues — Interchange revenues totaled $226.3 million for the nine months ended September 30, 2022, a decrease of $71.9 million, or 24%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume during the nine months ended September 30, 2022.

Interest Income, net — Net interest income totaled $31.0 million for the nine months ended September 30, 2022, an increase of $18.6 million, or 150%, 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, 2022 and 2021—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

8 unchanged sentences

Total operating expenses $ 1,020,838 92.3 % $ 1,027,740 93.2 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $160.9 million for the six months ended June 30, 2022, a decrease of $54.5 million, or 25% 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, 2022 and 2021—Operating Expenses—Sales and Marketing Expenses."

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $123.9 million for the six months ended June 30, 2022, a decrease of $11.1 million or 8% from the comparable prior year period.

The decrease was primarily due to a reduction in third-party call center support costs due to a decline in active accounts and our efforts to improve customer service over the course of 2021, as well as lower employee stock-based compensation driven by fluctuations in the expected achievement of certain performance-based awards for the comparable periods.

Processing Expenses — Processing expenses totaled $224.5 million for the six months ended June 30, 2022, an increase of $32.5 million or 17% 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, 2022 and 2021—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $178.6 million for the six months ended June 30, 2022, an increase of $23.9 million or 15%, from the comparable prior year period.

This increase was primarily due to the $13 million legal settlement associated with our inability to consummate the Tax Refund Solutions acquisition, as well as higher professional fees and software license expenses as a result of our investments in our modern banking platform and higher impairment charges associated with certain capitalized internal-use software.

These increases were partially offset by lower telephone and communication expenses as a result of decreases in third-party call center support.

Sales and Marketing Expenses — Sales and marketing expenses totaled $227.9 million for the nine months ended September 30, 2022, a decrease of $71.5 million, or 24% 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, 2022 and 2021—Operating Expenses—Sales and Marketing Expenses."

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $185.7 million for the nine months ended September 30, 2022, a decrease of $14.3 million or 7% 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, 2022 and 2021—Operating Expenses—Compensation and Benefits Expenses."

Processing Expenses — Processing expenses totaled $349.7 million for the nine months ended September 30, 2022, an increase of $62.0 million or 22% 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, 2022 and 2021—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $257.5 million for the nine months ended September 30, 2022, an increase of $16.9 million or 7%, from the comparable prior year period.

This increase was primarily due to the $13 million legal settlement earlier in the year, as well as higher software license expenses as a result of our investments in our modern banking platform and higher impairment charges associated with certain capitalized internal-use software.

These increases were partially offset by lower telephone and communication expenses as a result of decreases in third-party call center support, lower transaction losses as a result of lower incoming dispute volume and improvements in operational efficiencies over how we manage customer disputes and fraud, and lower amortization of intangible assets.

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 %

6 unchanged sentences

Effective tax rate 24.3 % 23.6 %

Our income tax expense totaled $17.0 million for the six months ended June 30, 2022, an increase of $1.4 million or 9% from the prior year comparable period, primarily due to an increase in taxable income and our effective tax rate.

The increase in the effective tax rate for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is primarily due to a decline in excess tax benefits from stock-based compensation and an increase in state income taxes expense.

Our income tax expense totaled $18.8 million for the nine months ended September 30, 2022, an increase of $0.9 million or 5% from the prior year comparable period, primarily due to an increase in taxable income and our effective tax rate.

The increase in the effective tax rate for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 is primarily due to a decline in excess tax benefits from stock-based compensation and an increase in state income taxes expense, net of federal benefits.

2 unchanged sentences

Consumer Services

The results of operations and key metrics of our Consumer Services segment for the three and six months ended June 30, 2022 and 2021 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, 2022 and 2021 were as follows:

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

2022 2021 Change % 2022 2021 Change %

9 unchanged sentences

Purchase Volume $ 4,302 $ 5,166 $ (864) (16.7) % $ 13,907 $ 18,759 $ (4,852) (25.9) %

* Represents number of active and direct deposit active accounts as of June 30, 2022 and 2021, respectively.

* Represents number of active and direct deposit active accounts as of September 30, 2022 and 2021, respectively.

As additional supplemental information, our key metrics within our Consumer Services segment is presented on a quarterly basis as follows:

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 Q1 Q4 Q3 Q2 Q1

(In millions)

3 unchanged sentences

Purchase volume $ 4,302 $ 4,588 $ 5,017 $ 4,881 $ 5,166 $ 6,455 $ 7,138

Segment revenues within Consumer Services for the three and six months ended June 30, 2022 decreased $31.1 million, or 17%, and $56.7 million, or 15%, respectively, compared to the prior year comparable periods, while our segment expenses for the three and six months ended June 30, 2022 decreased $35.7 million, or 28%, and $62.1 million, or 24%, respectively.

Our gross dollar volume, purchase volume, total number of active accounts and direct deposit active accounts decreased during the three months ended June 30, 2022 by 30%, 29%, 30% and 27%, respectively, from the comparable prior year period primarily due to the timing of stimulus payments and other federal benefits received by our cardholders in 2021.

Segment revenues within Consumer Services for the three and nine months ended September 30, 2022 decreased $31.7 million, or 19%, and $88.4 million, or 17%, respectively, compared to the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2022 decreased $25.5 million, or 24%, and $87.6 million, or 24%, respectively.

Our gross dollar volume, purchase volume, total number of active accounts and direct deposit active accounts decreased during the three months ended September 30, 2022 by 19%, 17%, 26% and 20%, respectively, from the comparable prior year period primarily due to the timing of stimulus payments and other federal benefits received by our cardholders in 2021.

No such economic stimulus packages have been enacted to date in 2022.

For similar reasons, gross dollar volume and purchase volume decreased for the six months ended June 30, 2022 from the prior year comparable period.

In addition, we have reduced marketing spend on GO2bank due to a higher than expected cost per account and observed changes in consumer traffic within our retail locations, both of which have negatively impacted account acquisition.

For similar reasons, gross dollar volume and purchase volume decreased for the nine months ended September 30, 2022 from the prior year comparable period.

Our monthly maintenance fees, ATM revenue and interchange revenues decreased as a result of the decreases in each of our key metrics stated above.

These decreases were partially offset by increasing customer adoption 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.

Consumer Services expenses decreased for the three and six months ended June 30, 2022 from the comparable prior year period due to several factors, including a decrease in sales commissions from lower revenues on products subject to revenue-sharing agreements, a decrease in third-party call center support costs in part due to a decline in active accounts, but also as a result of our efforts to improve our customer service over the course of 2021, a decrease in transactions losses due to lower gross dollar volume and improvement in loss rates, and a decrease in marketing and supply chain expenses in connection with GO2bank.

As a result, despite lower revenues, our segment profit increased for the three and six months ended June 30, 2022 by 8% and 5%, respectively.

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

Consumer Services expenses decreased for the three and nine months ended September 30, 2022 from the comparable prior year period due to several factors, including a decrease in sales commissions from lower revenues on products subject to revenue-sharing agreements, a decrease in third-party call center support costs in part due to a decline in active accounts, but also as a result of our efforts to improve our customer service over the course of 2021, a decrease in transactions losses due to lower gross dollar volume and improvement in loss rates, and a decrease in marketing and supply chain expenses in connection with GO2bank.

As a result, our segment profit decreased for the three and nine months ended September 30, 2022 by 10% and 0.5%, respectively.

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

2022 2021 Change % 2022 2021 Change %

8 unchanged sentences

Purchase Volume $ 2,141 $ 2,190 $ (49) (2.2) % $ 6,488 $ 7,912 $ (1,424) (18.0) %

* Represents number of active accounts as of June 30, 2022 and 2021, respectively.

* Represents number of active accounts as of September 30, 2022 and 2021, respectively.

As additional supplemental information, our key metrics within our B2B Services segment is presented on a quarterly basis as follows:

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 Q1 Q4 Q3 Q2 Q1

(In millions)

2 unchanged sentences

Purchase volume $ 2,141 $ 2,172 $ 2,175 $ 2,184 $ 2,190 $ 2,415 $ 3,307

Segment revenues within our B2B Services for the three and six months ended June 30, 2022 increased $30.9 million, or 27%, and $58.9 million, or 27%, respectively, compared to the prior year periods, while our segment expenses for the three and six months ended June 30, 2022 increased $26.3 million, or 28% and $49.5 million, or 27%, respectively.

Our total gross dollar volume during the three and six months ended June 30, 2022 increased 26% and 14% respectively, from the comparable prior year periods as we continued to experience organic growth from both new

and existing users in certain BaaS programs as the demand for digital payments continues.

Total gross dollar volume increased despite the number of active accounts decreasing within this segment by 11% year-over-year and purchase volume decreasing for the three and six months ended June 30, 2022 by approximately 10% and 24% respectively, from the comparable prior year periods.

Segment revenues within our B2B Services for the three and nine months ended September 30, 2022 increased $40.1 million, or 34%, and $98.9 million, or 29%, respectively, compared to the prior year periods, while our segment expenses for the three and nine months ended September 30, 2022 increased $36.2 million, or 36% and $85.7 million, or 30%, respectively.

Our total gross dollar volume during the three and nine months ended September 30, 2022 increased 37% and 22% respectively, from the comparable prior year periods as we continued to experience organic growth from both new and existing users in certain BaaS programs as the demand for digital payments remains prevalent.

Total gross dollar volume increased despite the number of active accounts decreasing within this segment by 9% year-over-year, which is attributable to growth in certain BaaS programs that tend to yield higher gross dollar volume per active user.

Purchase volume decreased for the three and nine months ended September 30, 2022 by approximately 2% and 18% respectively, from the comparable prior year periods.

Overall, many of our BaaS partners within our B2B Services segment were impacted by similar trends seen in our Consumer Services segment, however, growth in gross dollar volume from certain programs resulted in a net increase in segment revenue due to higher program management service fees earned from BaaS partners, despite a lower number of active accounts and lower purchase volume.

This increase was partially offset by a decrease in the amount of interchange revenue earned associated with the decrease in purchase volume.

B2B Services expenses increased for the three and six months ended June 30, 2022 from the comparable prior year period, principally due to higher processing expenses with the growth of certain BaaS account programs and higher overall transaction losses as a result of the increase in gross dollar volume.

B2B Services expenses increased for the three and nine months ended September 30, 2022 from the comparable prior year period, principally due to higher processing expenses with the growth of certain BaaS account programs and higher overall transaction losses as a result of the increase in gross dollar volume.

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

We expect these non-renewals to have a modest impact on our B2B Services segment key metrics and financial results in the second half of 2022.

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,

2022 2021 Change % 2022 2021 Change %

8 unchanged sentences

As additional supplemental information, our key metrics within our Money Movement Services segment is presented on a quarterly basis as follows:

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 Q1 Q4 Q3 Q2 Q1

(In millions)

1 unchanged sentence

Number of tax refunds processed 0.28 4.48 9.61 0.12 0.43 4.15 7.44

Segment revenues within our Money Movement services for the three and six months ended June 30, 2022 decreased $11.9 million, or 18%, and $4.9 million, or 3%, respectively, from the comparable prior year periods, and segment expenses for the three and six months ended June 30, 2022 decreased $3.8 million, or 14%, and $9.5 million, or 14%, respectively.

The decrease in segment revenues for the three and six months ended June 30, 2022 was driven primarily by a lower number of cash transfers processed, which decreased by 12% and 13%, respectively, from the prior year comparable periods.

Segment revenues within our Money Movement services for the three and nine months ended September 30, 2022 decreased $7.9 million, or 17%, and $12.9 million, or 6%, respectively, from the comparable prior year periods, and segment expenses for the three and nine months ended September 30, 2022 decreased $3.9 million, or 14%, and $13.4 million, or 14%, respectively.

The decrease in segment revenues for the three and nine months ended September 30, 2022 was driven primarily by a lower number of cash transfers processed, which decreased by 9% and 12%, respectively, from the prior year comparable periods.

The Green Dot Network is a service provider to accountholders in our Consumer Services and B2B Services segments, as well as third-party programs.

The decrease in cash transfers was the result of lower active accounts within our Consumer Services and B2B Services segments discussed above.

Segment revenues for the three months ended June 30, 2022 also decreased from the prior year comparable period as a result of lower tax processing revenues.

Despite a higher number of tax refund transfers processed for the comparable periods, the amount of tax processing revenues decreased due to a mix-shift between our

professional and consumer tax channels, which generated a lower revenue per refund transfer.

Our tax processing revenues increased for the six months ended June 30, 2022, due to an increase in the number of tax refunds processed.

The number of tax refunds processed during the first half of 2022 increased by 22% over the first half of the prior year tax season.

Segment expenses decreased during the three and six months ended June 30, 2022, primarily due to a decrease in sales commissions from lower cash transfer revenues and lower third-party costs in support of our tax refund processing services.

Our tax processing revenues also decreased for the three months ended September 30, 2022 as a result of a timing shift in the number of tax refunds processed during the prior year comparable period.

Segment revenues for the nine months ended September 30, 2022 also decreased from the prior year comparable period as a result of lower cash transfers, partially offset by the number of tax refunds processed.

The decrease in cash transfers was for the same reasons discussed above.

For the nine months ended September 30,

2022, our tax processing revenues increased primarily as a result of a 20% increase in the number of tax refunds processed.

Segment expenses decreased during the three and nine months ended September 30, 2022, primarily due to a decrease in sales commissions from lower cash transfer revenues and lower third-party costs in support of our tax refund processing services.

Corporate and Other

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

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

2022 2021 Change % 2022 2021 Change %

3 unchanged sentences

Unallocated corporate expenses and intersegment eliminations 51,055 48,759 2,296 4.7 % 155,685 140,864 14,821 10.5 %

$ (45,754) $ (49,232) $ 3,478 (7.1) % $ (93,440) $ (95,746) $ 2,306 (2.4) %

Revenues within Corporate and Other are comprised of net interest income and other investment 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.

Total $ (45,513) $ (51,057) $ 5,544 (10.9) % $ (138,953) $ (146,803) $ 7,850 (5.3) %

Revenues within Corporate and Other are comprised of net interest income, other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue) and eliminations of intersegment revenues.

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, utilities, insurance and eliminations of intersegment expenses.

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.

1 unchanged sentence

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 six months ended June 30, 2022 as a result of an increase in the size of our investment securities portfolio and recent increases in interest rates by the Federal Reserve.

Unallocated corporate expenses for the three and six months ended June 30, 2022 increased year-over-year by approximately 12% and 14%, respectively, as a result of higher salaries and wages, professional services expenses and software licenses, each in support of our investments to build a modern and scalable core banking and card management platform, as well as other growth initiatives.

Net interest income increased year-over-year for the three and nine months ended September 30, 2022 as a result of an increase in the size of our investment securities portfolio and recent increases in interest rates by the Federal Reserve.

This increase was partially offset by a portion of the interest we share with certain BaaS partners.

Unallocated corporate expenses for the three and nine months ended September 30, 2022 increased year-over-year by approximately 5% and 11%, respectively, as a result of higher salaries and wages, professional services expenses and software licenses, each in support of our investments to build a modern and scalable core banking and card management platform, as well as other growth initiatives.

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)

4 unchanged sentences

(Decrease) increase in unrestricted cash, cash equivalents and restricted cash $ (506,568) $ 312,275

For the six months ended June 30, 2022 and 2021, we financed our operations primarily through our cash flows generated from operations.

For the nine months ended September 30, 2022 and 2021, we financed our operations primarily through our cash flows generated from operations.

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

As of June 30, 2022, our primary source of liquidity was unrestricted cash and cash equivalents totaling $776.3 million.

As of September 30, 2022, our primary source of liquidity was unrestricted cash and cash equivalents totaling $813.2 million.

We also consider our $2.4 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 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 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.

1 unchanged sentence

Cash Flows from Operating Activities

Our $187.5 million of net cash provided by operating activities during the six months ended June 30, 2022 was the result of $53.6 million of net income, adjusted for certain non-cash operating items of $95.7 million and increases in net changes in our working capital assets and liabilities of $38.1 million.

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 $252.1 million of net cash provided by operating activities during the nine months ended September 30, 2022 was the result of $58.3 million of net income, adjusted for certain non-cash operating items of $141.1 million and increases in net changes in our working capital assets and liabilities of $52.7 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.

Cash Flows from Investing Activities

Our $649.5 million of net cash used in investing activities during the six months ended June 30, 2022 was primarily due to purchases of available-for-sale investment securities, net of proceeds from sales and maturities, of $525.8 million, the purchase of other bank investments of $31.9 million, capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, and the acquisition of property and equipment of $36.5 million.

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 other bank investments 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 $828.1 million of net cash used in investing activities during the nine months ended September 30, 2022 was primarily due to purchases of available-for-sale investment securities, net of proceeds from sales and maturities, of $673.6 million, the purchase of other bank investments of $31.9 million, capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, and the acquisition of property and equipment of $60.6 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.

Cash Flows from Financing Activities

Our $81.1 million of net cash used in financing activities during the six months ended June 30, 2022 was principally the result of a decrease of $120.1 million in obligations to customers and share repurchases of our Class A common stock of $44.0 million, partially offset by a net increase in customer deposits of $85.2 million.

We also borrowed and have repaid $50.0 million on our revolving line of credit during the six months ended June 30, 2022.

Our $544.8 million 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.

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

Our $69.5 million of net cash provided from financing activities during the nine months ended September 30, 2022 was principally the result of a net increase in customer deposits of $182.7 million, partially offset by a decrease of $36.3 million in obligations to customers and share repurchases of our Class A common stock of $74.1 million.

We also borrowed and have repaid $50.0 million on our revolving line of credit during the nine months ended September 30, 2022.

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.

Other Sources of Liquidity:

7 unchanged sentences

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, 2022, we were in compliance with all such covenants.

At September 30, 2022, 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, including GO2bank, new features for our existing products and IT infrastructure such as our core banking and card management systems in order to scale and operate effectively to meet our strategic objectives.

While we expect these capital expenditures will exceed the amount of our capital expenditures in 2021, we expect to fund these capital expenditures primarily through our cash flows provided by operating activities.

While the effect of COVID-19 and other world events has created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and invest in 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, including GO2bank, new features for our existing products and IT infrastructure such as our core banking and card management systems in order to scale and operate effectively to meet our strategic objectives.

While these capital expenditures will exceed the amount of our capital expenditures in 2021, 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.

21 unchanged sentences

Basel III Rules.

As of June 30, 2022 and December 31, 2021, we and Green Dot Bank were categorized as "well capitalized" under applicable regulatory standards.

As of September 30, 2022 and December 31, 2021, we and Green Dot Bank were categorized as "well capitalized" under applicable regulatory standards.

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

There were no conditions or events since June 30, 2022 which management believes would have changed our category as "well capitalized."

There were no conditions or events since September 30, 2022 which management believes would have changed our category as "well capitalized."

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

18 unchanged sentences

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, 2022 and December 31, 2021 were as follows:

June 30, 2022

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at September 30, 2022 and December 31, 2021 were as follows:

September 30, 2022

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

24 unchanged sentences

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