GREEN DOT CORP 10-Q

ITEM 1. Financial Statements GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 2022 December 31, 2021 (unaudited) Assets (In thousands, except par value) Current assets: Unrestricted cash and cash equivalents $ 813,210 $ 1,322,319 Restricted cash 5,862 3,321 Settlement assets 409,174 320,377 Accounts receivable, net 67,352 80,401 Prepaid expenses and other assets 64,668 81,380 Income tax receivable 721 1,354 Total current assets 1,360,987 1,809,152 Investment securities available-for-sale, at fair value 2,393,796 2,115,501 Loans to bank customers, net of allowance for loan losses of $ 9,413 and $ 5,555 as of September 30, 2022 and December 31, 2021, respectively 20,600 19,270 Prepaid expenses and other assets 194,271 136,400 Property, equipment, and internal-use software, net 150,256 135,341 Operating lease right-of-use assets 8,880 10,967 Deferred expenses 6,493 16,855 Net deferred tax assets 107,536 15,048 Goodwill and intangible assets 449,714 466,943 Total assets $ 4,692,533 $ 4,725,477 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 115,571 $ 51,353 Deposits 3,476,643 3,286,889 Obligations to customers 169,107 124,221 Settlement obligations 23,332 15,682 Amounts due to card issuing banks for overdrawn accounts 616 513 Other accrued liabilities 91,452 128,294 Operating lease liabilities 3,145 6,918 Deferred revenue 14,365 28,903 Income tax payable 8,116 291 Total current liabilities 3,902,347 3,643,064 Other accrued liabilities 4,096 3,531 Operating lease liabilities 5,944 8,209 Total liabilities 3,912,387 3,654,804 Commitments and contingencies (Note 17) Stockholders’ equity: Class A common stock, $ 0.001 par value; 100,000 shares authorized as of September 30, 2022 and December 31, 2021; 52,502 and 54,868 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 53 55 Additional paid-in capital 357,050 401,055 Retained earnings 757,698 699,370 Accumulated other comprehensive loss ( 334,655 ) ( 29,807 ) Total stockholders’ equity 780,146 1,070,673 Total liabilities and stockholders’ equity $ 4,692,533 $ 4,725,477 See notes to unaudited consolidated financial statements 1 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands, except per share data) Operating revenues: Card revenues and other fees $ 219,577 $ 202,482 $ 650,979 $ 586,431 Cash processing revenues 41,318 47,516 198,813 205,256 Interchange revenues 71,407 85,888 226,301 298,229 Interest income, net 11,446 3,613 31,041 12,442 Total operating revenues 343,748 339,499 1,107,134 1,102,358 Operating expenses: Sales and marketing expenses 66,996 84,002 227,898 299,412 Compensation and benefits expenses 61,868 65,045 185,743 199,996 Processing expenses 125,261 95,731 349,741 287,716 Other general and administrative expenses 78,858 85,891 257,456 240,616 Total operating expenses 332,983 330,669 1,020,838 1,027,740 Operating income 10,765 8,830 86,296 74,618 Interest expense, net 27 38 143 113 Other (expense) income, net ( 4,249 ) 849 ( 9,057 ) 1,396 Income before income taxes 6,489 9,641 77,096 75,901 Income tax expense 1,793 2,306 18,768 17,898 Net income $ 4,696 $ 7,335 $ 58,328 $ 58,003 Basic earnings per common share: $ 0.09 $ 0.13 $ 1.08 $ 1.06 Diluted earnings per common share: $ 0.09 $ 0.13 $ 1.07 $ 1.04 Basic weighted-average common shares issued and outstanding: 53,053 54,221 53,840 53,961 Diluted weighted-average common shares issued and outstanding: 53,382 55,415 54,428 55,180 See notes to unaudited consolidated financial statements 2 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands) Net income $ 4,696 $ 7,335 $ 58,328 $ 58,003 Other comprehensive (loss) income Unrealized holding loss, net of tax ( 112,269 ) ( 4,010 ) ( 304,848 ) ( 17,902 ) Comprehensive (loss) income $ ( 107,573 ) $ 3,325 $ ( 246,520 ) $ 40,101 See notes to unaudited consolidated financial statements 3 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Three Months Ended September 30, 2022 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at June 30, 2022 53,740 $ 54 $ 376,902 $ 753,002 $ ( 222,386 ) $ 907,572 Common stock issued under stock plans, net of withholdings and related tax effects 71 — ( 655 ) — — ( 655 ) Stock-based compensation — — 10,806 — — 10,806 Repurchases of Class A Common Stock ( 1,309 ) ( 1 ) ( 30,003 ) — — ( 30,004 ) Net income — — — 4,696 — 4,696 Other comprehensive loss — — — — ( 112,269 ) ( 112,269 ) Balance at September 30, 2022 52,502 $ 53 $ 357,050 $ 757,698 $ ( 334,655 ) $ 780,146 Three Months Ended September 30, 2021 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at June 30, 2021 54,640 $ 55 $ 375,551 $ 702,558 $ ( 10,464 ) $ 1,067,700 Common stock issued under stock plans, net of withholdings and related tax effects 31 — ( 594 ) — — ( 594 ) Stock-based compensation — — 11,508 — — 11,508 Net income — — — 7,335 — 7,335 Other comprehensive loss — — — — ( 4,010 ) ( 4,010 ) Balance at September 30, 2021 54,671 $ 55 $ 386,465 $ 709,893 $ ( 14,474 ) $ 1,081,939 See notes to unaudited consolidated financial statements 4 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (UNAUDITED) Nine Months Ended September 30, 2022 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2021 54,868 $ 55 $ 401,055 $ 699,370 $ ( 29,807 ) $ 1,070,673 Common stock issued under stock plans, net of withholdings and related tax effects 569 1 ( 1,257 ) — — ( 1,256 ) Stock-based compensation — — 31,299 — — 31,299 Repurchases of Class A Common Stock ( 2,935 ) ( 3 ) ( 74,047 ) — — ( 74,050 ) Net income — — — 58,328 — 58,328 Other comprehensive loss — — — — ( 304,848 ) ( 304,848 ) Balance at September 30, 2022 52,502 $ 53 $ 357,050 $ 757,698 $ ( 334,655 ) $ 780,146 Nine Months Ended September 30, 2021 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2020 54,034 $ 54 $ 354,460 $ 651,890 $ 3,428 $ 1,009,832 Common stock issued under stock plans, net of withholdings and related tax effects 637 1 ( 5,106 ) — — ( 5,105 ) Stock-based compensation — — 37,111 — — 37,111 Net income — — — 58,003 — 58,003 Other comprehensive loss — — — — ( 17,902 ) ( 17,902 ) Balance at September 30, 2021 54,671 $ 55 $ 386,465 $ 709,893 $ ( 14,474 ) $ 1,081,939 See notes to unaudited consolidated financial statements 5 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, 2022 2021 (In thousands) Operating activities Net income $ 58,328 $ 58,003 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and internal-use software 42,881 42,446 Amortization of intangible assets 17,845 20,831 Provision for uncollectible overdrawn accounts from purchase transactions 10,569 14,201 Provision for loan losses 25,754 18,728 Stock-based compensation 31,299 37,111 Losses (earnings) in equity method investments 11,878 ( 1,314 ) Amortization of (discount) premium on available-for-sale investment securities ( 892 ) 2,330 Impairment of long-lived assets 4,134 — Other ( 2,392 ) 127 Changes in operating assets and liabilities: Accounts receivable, net 2,480 ( 20,920 ) Prepaid expenses and other assets 14,849 4,595 Deferred expenses 10,362 10,953 Accounts payable and other accrued liabilities 36,056 ( 17,706 ) Deferred revenue ( 14,331 ) ( 14,326 ) Income tax receivable/payable 7,110 ( 1,846 ) Other, net ( 3,849 ) ( 5,979 ) Net cash provided by operating activities 252,081 147,234 Investing activities Purchases of available-for-sale investment securities ( 922,039 ) ( 374,754 ) Proceeds from maturities of available-for-sale securities 244,969 124,482 Proceeds from sales and calls of available-for-sale securities 3,515 6,823 Payments for acquisition of property and equipment ( 60,605 ) ( 39,644 ) Net changes in loans ( 25,158 ) ( 25,874 ) Investment in TailFin Labs, LLC ( 35,000 ) ( 35,000 ) Purchases of other investments ( 31,934 ) ( 55,000 ) Other investing activities ( 1,856 ) ( 688 ) Net cash used in investing activities ( 828,108 ) ( 399,655 ) Financing activities Borrowings on revolving line of credit 50,000 — Repayments on revolving line of credit ( 50,000 ) — Proceeds from exercise of options and ESPP purchases 3,443 5,283 Taxes paid related to net share settlement of equity awards ( 4,699 ) ( 10,388 ) Net changes in deposits 182,673 221,048 Net changes in settlement assets and obligations to customers ( 36,261 ) 351,753 Contingent consideration payments ( 1,647 ) ( 3,000 ) Repurchase of Class A common stock ( 74,050 ) — Net cash provided by financing activities 69,459 564,696 Net (decrease) increase in unrestricted cash, cash equivalents and restricted cash ( 506,568 ) 312,275 Unrestricted cash, cash equivalents and restricted cash, beginning of period 1,325,640 1,496,701 Unrestricted cash, cash equivalents and restricted cash, end of period $ 819,072 $ 1,808,976 Cash paid for interest $ 337 $ 1,174 Cash paid for income taxes $ 9,760 $ 19,394 Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period: Unrestricted cash and cash equivalents $ 813,210 $ 1,804,826 Restricted cash 5,862 4,150 Total unrestricted cash, cash equivalents and restricted cash, end of period $ 819,072 $ 1,808,976 See notes to unaudited consolidated financial statements 6 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1— Organization Green Dot Corporation (“we,” “our,” or “us” refer to Green Dot Corporation and its consolidated subsidiaries) is a financial technology and registered bank holding company committed to giving all people the power to bank seamlessly, affordably, and with confidence. 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. We were incorporated in Delaware in 1999 and became a bank holding company under the Bank Holding Company Act and a member bank of the Federal Reserve System in December 2011. Note 2— Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. We consolidated our wholly-owned subsidiaries and eliminated all significant intercompany balances and transactions. We have also prepared the accompanying unaudited consolidated financial statements in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X and, consequently, they do not include all of the annual disclosures required by GAAP. Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2021 for additional disclosures, including a summary of our significant accounting policies. There have been no material changes to our significant accounting policies during the nine months ended September 30, 2022, other than the adoption of the accounting pronouncements discussed herein. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available as of September 30, 2022 and through the date of this report. The accounting estimates used in the preparation of our consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. Actual results may differ from these estimates due to a variety of factors, including those identified under Part II, Item 1A. "Risk Factors" in this report. Recent Accounting Pronouncements Recently adopted accounting pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We adopted the provisions of ASU 2020-06 on January 1, 2022, the results of which did not have a material impact on our consolidated financial statements. Note 3— Revenues As discussed in Note 19 — Segment Informatio n, we determine our operating segments based on how our chief operating decision maker manages our operations, makes operating decisions and evaluates operating performance. Within our segments, we believe that the nature, amount, timing and uncertainty of our revenue and cash flows and how they are affected by economic factors can be further illustrated based on the timing in which revenue for each of our products and services is recognized. Our products and services are offered only to customers within the United States. 7 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 3—Revenues (continued) The following table disaggregates our revenues earned from external customers by each of our reportable segments: Three Months Ended September 30, 2022 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 86,888 $ 42,179 $ 36,890 $ 165,957 Transferred over time 45,154 120,410 781 166,345 Operating revenues (1) $ 132,042 $ 162,589 $ 37,671 $ 332,302 Three Months Ended September 30, 2021 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 102,089 $ 42,118 $ 44,636 $ 188,843 Transferred over time 60,040 86,043 960 147,043 Operating revenues (1) $ 162,129 $ 128,161 $ 45,596 $ 335,886 Nine Months Ended September 30, 2022 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 274,208 $ 125,869 $ 186,631 $ 586,708 Transferred over time 158,654 328,232 2,499 489,385 Operating revenues (1) $ 432,862 $ 454,101 $ 189,130 $ 1,076,093 Nine Months Ended September 30, 2021 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 328,665 $ 133,993 $ 198,471 $ 661,129 Transferred over time 188,572 236,704 3,511 428,787 Operating revenues (1) $ 517,237 $ 370,697 $ 201,982 $ 1,089,916 (1) Excludes net interest income, a component of total operating revenues, as it is outside the scope of ASC 606, Revenues. Also excludes the effects of intersegment revenues. Revenues recognized at a point in time are comprised of interchange fees, ATM fees, overdraft protection fees, other similar cardholder transaction-based fees, and substantially all of our cash processing revenues. Revenues recognized over time consists of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS (as defined herein) partner program management fees. As presented on our consolidated balance sheets, we record deferred revenue for any upfront payments received in advance of our performance obligations being satisfied. These contract liabilities consist principally of unearned new card fees and monthly maintenance fees. We recognized approximately $ 25.8 million and $ 26.6 million for the nine months ended September 30, 2022 and 2021, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance obligations satisfied in previous periods. Substantially all of the deferred revenue balances at the beginning of the periods are recognized in the first half of each year. Changes in the deferred revenue balance are driven primarily by the amount of new card fees recognized during the period, and the degree to which these reductions to the deferred revenue balance are offset by the deferral of new card fees associated with cards sold during the period. 8 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4— Investment Securities Our available-for-sale investment securities were as follows: Amortized cost Gross unrealized gains Gross unrealized losses Fair value (In thousands) September 30, 2022 Corporate bonds $ 10,000 $ — $ ( 742 ) $ 9,258 Agency bond securities 240,228 — ( 48,653 ) 191,575 Agency mortgage-backed securities 2,550,535 13 ( 380,405 ) 2,170,143 Municipal bonds 29,617 — ( 6,958 ) 22,659 Asset-backed securities 161 — — 161 Total investment securities $ 2,830,541 $ 13 $ ( 436,758 ) $ 2,393,796 December 31, 2021 Corporate bonds $ 10,000 $ — $ ( 27 ) $ 9,973 Agency bond securities 230,841 — ( 9,245 ) 221,596 Agency mortgage-backed securities 1,879,793 806 ( 32,268 ) 1,848,331 Municipal bonds 28,135 288 ( 243 ) 28,180 Asset-backed securities 7,326 99 ( 4 ) 7,421 Total investment securities $ 2,156,095 $ 1,193 $ ( 41,787 ) $ 2,115,501 As of September 30, 2022 and December 31, 2021, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows: Less than 12 months 12 months or more Total fair value Total unrealized loss Fair value Unrealized loss Fair value Unrealized loss (In thousands) September 30, 2022 Corporate bonds $ 9,258 $ ( 742 ) $ — $ — $ 9,258 $ ( 742 ) Agency bond securities 8,910 ( 476 ) 182,664 ( 48,177 ) 191,574 ( 48,653 ) Agency mortgage-backed securities 1,618,570 ( 250,033 ) 548,776 ( 130,372 ) 2,167,346 ( 380,405 ) Municipal bonds 19,692 ( 5,072 ) 2,967 ( 1,886 ) 22,659 ( 6,958 ) Asset-backed securities — — 160 — 160 — Total investment securities $ 1,656,430 $ ( 256,323 ) $ 734,567 $ ( 180,435 ) $ 2,390,997 $ ( 436,758 ) December 31, 2021 Corporate bonds $ 9,973 $ ( 27 ) $ — $ — $ 9,973 $ ( 27 ) Agency bond securities 52,865 ( 2,128 ) 168,730 ( 7,117 ) 221,595 ( 9,245 ) Agency mortgage-backed securities 1,661,091 ( 27,899 ) 106,510 ( 4,369 ) 1,767,601 ( 32,268 ) Municipal bonds 9,678 ( 243 ) — — 9,678 ( 243 ) Asset-backed securities 2,358 ( 4 ) — — 2,358 ( 4 ) Total investment securities $ 1,735,965 $ ( 30,301 ) $ 275,240 $ ( 11,486 ) $ 2,011,205 $ ( 41,787 ) Our investments generally consist of highly rated securities, substantially all of which are directly or indirectly backed by the U.S. federal government, as our investment policy restricts our investments to highly liquid, low credit risk assets. As such, we have not recorded any significant credit-related impairment losses during the three and nine months ended September 30, 2022 or 2021 on our available-for-sale investment securities. Unrealized losses as of September 30, 2022 and December 31, 2021 are the result of continued increases in interest rates as our investment portfolio is comprised predominantly of fixed rate securities. Substantially all of the underlying securities within our investment portfolio were in an unrealized loss position as of September 30, 2022 and December 31, 2021 due to the timing of our investment purchases, as a significant portion of our investments were purchased prior to recent increases in interest rates by the Federal Reserve. 9 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4—Investment Securities (continued) We do not intend to sell our investments, and we have determined that it is more likely than not that we will not be required to sell our investments before recovery of their amortized cost bases, which may be at maturity. As of September 30, 2022, the contractual maturities of our available-for-sale investment securities were as follows: Amortized cost Fair value (In thousands) Due after one year through five years $ 29,386 $ 26,612 Due after five years through ten years 180,842 145,300 Due after ten years 69,617 51,580 Mortgage and asset-backed securities 2,550,696 2,170,304 Total investment securities $ 2,830,541 $ 2,393,796 The expected payments on mortgage-backed and asset-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations. Note 5— Accounts Receivable Accounts receivable, net consisted of the following: September 30, 2022 December 31, 2021 (In thousands) Trade receivables $ 28,728 $ 33,921 Reserve for uncollectible trade receivables ( 24 ) ( 82 ) Net trade receivables 28,704 33,839 Overdrawn cardholder balances from purchase transactions 3,709 5,395 Reserve for uncollectible overdrawn accounts from purchase transactions ( 2,119 ) ( 3,394 ) Net overdrawn cardholder balances from purchase transactions 1,590 2,001 Cardholder fees 2,259 4,054 Receivables due from card issuing banks 4,275 4,645 Fee advances, net 6,169 20,643 Other receivables 24,355 15,219 Accounts receivable, net $ 67,352 $ 80,401 Activity in the reserve for uncollectible overdrawn accounts from purchase transactions consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands) Balance, beginning of period $ 2,033 $ 5,512 $ 3,394 $ 1,653 Provision for uncollectible overdrawn accounts from purchase transactions 3,162 3,988 10,569 14,201 Charge-offs ( 3,076 ) ( 6,608 ) ( 11,844 ) ( 12,962 ) Balance, end of period $ 2,119 $ 2,892 $ 2,119 $ 2,892 10 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6— Loans to Bank Customers The following table presents total outstanding loans, gross of the related allowance for credit losses, and a summary of the related payment status: 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Total Current or Less Than 30 Days Past Due Total Outstanding (In thousands) September 30, 2022 Residential $ — $ — $ — $ — $ 4,376 $ 4,376 Commercial — — — — 2,567 2,567 Installment — — — — 1,331 1,331 Consumer 2,565 — — 2,565 11,796 14,361 Secured credit card 635 731 2,065 3,431 3,947 7,378 Total loans $ 3,200 $ 731 $ 2,065 $ 5,996 $ 24,017 $ 30,013 Percentage of outstanding 10.7 % 2.4 % 6.9 % 20.0 % 80.0 % 100.0 % December 31, 2021 Residential $ — $ — $ — $ — $ 3,722 $ 3,722 Commercial — — — — 3,392 3,392 Installment — — 3 3 1,340 1,343 Consumer 2,244 — — 2,244 7,788 10,032 Secured credit card 43 98 853 994 5,342 6,336 Total loans $ 2,287 $ 98 $ 856 $ 3,241 $ 21,584 $ 24,825 Percentage of outstanding 9.2 % 0.4 % 3.5 % 13.1 % 86.9 % 100.0 % We offer an optional overdraft protection program service on certain demand deposit account programs that allows cardholders who opt-in to spend up to a pre-authorized amount in excess of their available card balance. When overdrawn, the purchase related balances due on these deposit accounts are reclassified as consumer loans. Fees due from our cardholders for our overdraft service are included as a component of accounts receivable. Overdrawn balances are unsecured and considered immediately due from the cardholder. In December 2021, we made the determination to sell a portion of our secured credit card portfolio and reclassified these assets as loans held for sale. These loans are included in the long-term portion of prepaid and other assets on our consolidated balance sheets. Upon re-classification, we reversed any previous allowance for credit loss on these portfolios and recorded an estimated valuation allowance to reflect the portfolio at its estimated fair value. Changes in valuation allowances are recorded as a component of other income and expenses on our consolidated statement of operations. As of September 30, 2022 and December 31, 2021, the fair value of the loans held for sale amounted to approximately $ 4.1 million and $ 5.1 million, respectively. Nonperforming Loans The following table presents the carrying value, gross of the related allowance for credit losses, of our nonperforming loans. See Note 2 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 for further information on the criteria for classification as nonperforming. September 30, 2022 December 31, 2021 (In thousands) Residential $ 163 $ 195 Installment 101 115 Secured credit card 2,065 853 Total loans $ 2,329 $ 1,163 11 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6—Loans to Bank Customers (continued) Credit Quality Indicators We closely monitor and assess the credit quality and credit risk of our loan portfolio on an ongoing basis. We continuously review and update loan risk classifications. We evaluate our loans using non-classified or classified as the primary credit quality indicator. Classified loans include those designated as substandard, doubtful, or loss, consistent with regulatory guidelines. Secured credit card loans are considered classified if they are greater than 90 days past due. However, our secured credit card portfolio is collateralized by cash deposits made by each cardholder in an amount equal to the user's available credit limit, which mitigates the risk of any significant credit losses we expect to incur. The table below presents the carrying value, gross of the related allowance for credit losses, of our loans within the primary credit quality indicators related to our loan portfolio: September 30, 2022 December 31, 2021 Non-Classified Classified Non-Classified Classified (In thousands) Residential $ 4,147 $ 229 $ 3,481 $ 241 Commercial 2,567 — 3,392 — Installment 1,230 101 1,228 115 Consumer 14,361 — 10,032 — Secured credit card 5,313 2,065 5,483 853 Total loans $ 27,618 $ 2,395 $ 23,616 $ 1,209 Allowance for Credit Losses Activity in the allowance for credit losses on our loan portfolio consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands) Balance, beginning of period $ 10,204 $ 6,693 $ 5,555 $ 757 Provision for loans 7,302 8,585 25,754 18,728 Loans charged off ( 8,093 ) ( 7,873 ) ( 21,896 ) ( 12,198 ) Recoveries of loans previously charged off — 46 — 164 Balance, end of period $ 9,413 $ 7,451 $ 9,413 $ 7,451 Note 7— Equity Method Investments On January 2, 2020, we effectuated our agreement with Walmart to jointly establish a new fintech accelerator under the name TailFin Labs, LLC (“TailFin Labs”), with a mission to develop innovative products, services and technologies that sit at the intersection of retail shopping and consumer financial services. The entity is majority-owned by Walmart and focuses on developing tech-enabled solutions to integrate omni-channel retail shopping and financial services. We hold a 20 % ownership interest in the entity, in exchange for annual capital contributions of $ 35.0 million per year from January 2020 through January 2024. We account for our investment in TailFin Labs under the equity method of accounting in accordance with ASC 323 , Investments – Equity Method and Joint Ventures . Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for, among other things, its proportionate share of earnings or losses. However, given the capital structure of the TailFin Labs arrangement, we apply the Hypothetical Liquidation Book Value ("HLBV") method to determine the allocation of profits and losses since our liquidation rights and priorities, as defined by the agreement, differ from our underlying ownership interest. The HLBV method calculates the proceeds that would be attributable to each partner in an investment based on the liquidation provisions of the agreement if the partnership was to be liquidated at book value as of the balance sheet date. Each partner’s allocation of income or loss in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions. 12 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 7—Equity Method Investments (continued) Any future economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties. As of September 30, 2022 and December 31, 2021, our net investment in TailFin Labs amounted to approximately $ 86.2 million and $ 61.5 million, respectively, and is included in the long-term portion of prepaid expenses and other assets on our consolidated balance sheets. We recorded equity in losses from TailFin Labs of approximately $ 3.2 million for the three months ended September 30, 2022 and minimal equity in losses for the three months ended September 30, 2021, and $ 10.3 million and $ 2.3 million for the nine months ended September 30, 2022 and 2021, respectively. These amounts are recorded as a component of other income and expense on our consolidated statements of operations. Our equity method investments also include an investment held by our bank, which amounted to $ 4.8 million and $ 6.4 million at September 30, 2022 and December 31, 2021, respectively. We recorded equity in losses from this investment of $ 2.0 million and $ 1.6 million for the three and nine months ended September 30, 2022, respectively, and equity in earnings of $ 0.7 million and $ 3.6 million for the three and nine months ended September 30, 2021, respectively. Note 8— Deposits Deposits are categorized as non-interest or interest-bearing deposits as follows: September 30, 2022 December 31, 2021 (In thousands) Non-interest bearing deposit accounts $ 3,452,187 $ 3,258,650 Interest-bearing deposit accounts Checking accounts 3,207 5,900 Savings 8,590 7,398 Secured card deposits 7,518 9,673 Time deposits, denominations greater than or equal to $250 2,266 2,497 Time deposits, denominations less than $250 2,875 2,771 Total interest-bearing deposit accounts 24,456 28,239 Total deposits $ 3,476,643 $ 3,286,889 The scheduled contractual maturities for total time deposits are presented in the table below: September 30, 2022 (In thousands) Due in 2022 $ 1,356 Due in 2023 1,429 Due in 2024 506 Due in 2025 479 Due in 2026 798 Thereafter 573 Total time deposits $ 5,141 13 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 9— Debt 2019 Revolving Facility In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. The credit facility provides for a $ 100.0 million five-year revolving line of credit (the "2019 Revolving Facility"), maturing in October 2024. We use the proceeds of any borrowings under the 2019 Revolving Facility for working capital and other general corporate purposes, subject to the terms and conditions set forth in the credit agreement. We classify amounts outstanding as long-term on our consolidated balance sheets; however, we may make voluntary repayments at any time prior to maturity. As of September 30, 2022, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use. 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) a daily rate equal to one-month LIBOR rate plus 1.0 % (the “Base Rate"), plus in either case, an applicable margin. The margin is dependent upon 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 also pay a commitment fee, which varies from 0.20 % to 0.35 % per annum on the actual daily unused portions of the 2019 Revolving Facility. Letter of credit fees are payable in respect of outstanding letters of credit at a rate per annum equal to the applicable margin for LIBOR Rate loans. The terms of our existing agreement also provide for a method to determine an alternative benchmark interest rate, which will apply when the LIBOR rates cease to be available in June 2023. This alternative benchmark rate will be selected between the parties taking into consideration recommendations from regulatory bodies or based on prevailing market conventions at the time the alternative rate is established, and may include the Secured Overnight Financing Rate. The 2019 Revolving Facility contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements. We must also maintain a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as set forth in the credit agreement. At September 30, 2022, we were in compliance with all such covenants. If an event of default shall occur and be continuing under the facility, the commitments may be terminated and the principal amounts outstanding under the 2019 Revolving Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable. We did no t incur any meaningful cash interest expense related to our debt during the three and nine months ended September 30, 2022 and 2021. Note 10— Income Taxes Income tax expense for the nine months ended September 30, 2022 and 2021 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows: Nine Months Ended September 30, 2022 2021 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 1.3 0.8 General business credits ( 1.9 ) ( 1.9 ) Employee stock-based compensation 2.4 ( 2.5 ) IRC 162(m) limitation 2.0 6.4 Nondeductible expenses 0.5 0.1 Other ( 1.0 ) ( 0.3 ) Effective tax rate 24.3 % 23.6 % The effective tax rate for the nine months ended September 30, 2022 and 2021 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, employee stock-based compensation, and the Internal Revenue Code (the "IRC") 162(m) limitation on the 14 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) deductibility of executive compensation. The net 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 $ 3.8 million decline in excess tax benefits from stock-based compensation and an increase of $ 0.4 million in state income taxes, net of federal benefits. We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.9 million for the nine months ended September 30, 2022, compared to a $ 1.9 million excess tax benefit for the prior year comparable period. These increases were partially offset by the impact of general business credits and a decrease of $ 3.4 million subject to the IRC 162(m) limitation on the deductibility of 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 revisions have no immediate effect and we do not expect that they will have a material impact on our results of operations in the future. We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the nine months ended September 30, 2022 and 2021, the provision for GILTI tax expense was not material to our financial statements. We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2022 and 2021, we did no t have a valuation allowance on any of our deferred tax assets as we believe it is more-likely-than-not that we will realize the benefits of our deferred tax assets. We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax return for the years ended December 31, 2017 through 2021. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates that the returns were filed. The IRS initiated an examination of our 2017 U.S. federal tax return during the second quarter ended June 30, 2020, and the examination remains ongoing as of September 30, 2022. We do not expect the outcome of these examinations will have any material impact on our consolidated financial statements. As of September 30, 2022, we have federal net operating loss carryforwards of approximately $ 17.2 million and state net operating loss carryforwards of approximately $ 89.1 million, which will be available to offset future income. If not used, the federal net operating losses will expire between 2029 and 2034. Of our total state net operating loss carryforwards, approximately $ 57.3 million will expire between 2026 and 2041, while the remaining balance of approximately $ 31.8 million does not expire and carries forward indefinitely. The net operating losses are subject to an annual IRC Section 382 limitation, which restricts their utilization against taxable income in future periods. In addition, we have state business tax credits of approximately $ 20.7 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will expire between 2023 and 2027. As of September 30, 2022 and December 31, 2021, we had a liability of $ 12.4 million and $ 11.0 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows: Nine Months Ended September 30, 2022 2021 (In thousands) Beginning balance $ 10,972 $ 9,518 Increases related to positions taken during prior years — — Increases related to positions taken during the current year 1,434 1,470 Ending balance $ 12,406 $ 10,988 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 12,074 $ 10,798 As of September 30, 2022 and 2021, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.1 million and $ 0.7 million, respectively. 15 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 11— Stockholders' Equity Stock Repurchase Program In May 2017, our Board of Directors authorized, subject to regulatory approval, $ 150 million for our stock repurchase program under which we repurchased $ 100 million of shares in 2019. In February 2022, our Board of Directors provided authorization to increase our remaining stock repurchase limit to $ 100 million for any future repurchases. Accelerated Share Repurchases In March 2022, we entered into an accelerated share repurchase arrangement ("ASR") with a financial institution for an up-front payment of $ 25 million. Final settlement of the ASR was completed in April 2022. The final number of shares received upon settlement for the ASR was determined based on the volume-weighted average price of our common stock over the term of the agreement less an agreed upon discount and subject to adjustments pursuant to the terms and conditions of the ASR. Total shares repurchased under the ASR amounted to 914,037 shares at a volume-weighted average price of $ 27.35 . The up-front payment was accounted for as a reduction to shareholders’ equity on our consolidated balance sheets in the period the payments were made. The ASR was accounted for in two separate transactions: 1) a treasury stock repurchase for the initial shares received and 2) a forward stock purchase contract indexed to our own stock for the unsettled portion of the ASR. The par value of the shares received were recorded as a reduction to common stock with the remainder recorded as a reduction to additional paid-in capital. The ASR met all of the applicable criteria for equity classification, and therefore was not accounted for as a derivative instrument. The initial repurchase of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The shares were retired upon repurchase, but remain authorized for registration and issuance in the future. Other Repurchases In March 2022, we also entered into a repurchase plan under Rule 10b5-1 of the Exchange Act for $ 75 million that went into effect at the conclusion of the ASR. The agreement allows for $ 10 million of monthly share repurchases through the remainder of 2022 until the contract amount is reached. The timing and amount of purchases depend on a variety of factors, including market conditions and the volume limit defined by Rule 10b-18. As of September 30, 2022, we have repurchased 2,020,952 shares at a volume-weighted average price of $ 24.27 under our 10b5-1 plan, with approximately $ 26 million available for additional purchases. Walmart Restricted Shares On January 2, 2020, we issued Walmart, in a private placement, 975,000 restricted shares of our Class A Common Stock. The shares vest in equal monthly increments through December 1, 2022; however, Walmart is entitled to voting rights and to participate in any dividends paid from the issuance date on the unvested balance. As such, the total amount of restricted shares issued are included in our total Class A shares outstanding. As of September 30, 2022, there were 81,253 unvested shares outstanding. The estimated grant-date fair value of the restricted shares is recorded as a component of stock-based compensation expense over the related period we expect to benefit under the term of our relationship with Walmart. Note 12— Stock-Based Compensation We currently grant restricted stock unit awards to employees, directors and non-employee consultants under our 2010 Equity Incentive Plan and from time to time may also grant stock option awards. Through our 2010 Employee Stock Purchase Plan, employees are also able to purchase shares of our Class A common stock at a discount through payroll deductions. We have reserved shares of our Class A common stock for issuance under these plans. The total stock-based compensation expense recognized was $ 10.8 million and $ 11.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 31.3 million and $ 37.1 million for the nine months ended September 30, 2022 and 2021, respectively. 16 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 12—Stock-Based Compensation (continued) Restricted Stock Units Restricted stock unit activity for awards subject to only service conditions was as follows for the nine months ended September 30, 2022: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2021 1,596 $ 42.71 Restricted stock units granted 789 29.38 Restricted stock units vested ( 529 ) 41.30 Restricted stock units canceled ( 226 ) 42.13 Outstanding at September 30, 2022 1,630 $ 36.80 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity for the nine months ended September 30, 2022 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2021 1,377 $ 35.36 Performance restricted stock units granted 115 32.75 Performance restricted stock units vested ( 53 ) 49.78 Performance restricted stock units canceled ( 511 ) 34.32 Outstanding at September 30, 2022 928 $ 34.78 We grant performance-based restricted stock units to certain employees that are subject to the attainment of pre-established internal performance conditions, market conditions, or a combination thereof (collectively referred to herein as "performance-based restricted stock units"). The actual number of shares subject to the award is determined at the end of the performance period and may range from 0 % to 200 % of the target shares granted depending upon the terms of the award. These awards generally contain an additional service component after each performance period is concluded and the unvested balance of the shares after the performance metrics are achieved will vest over the remaining requisite service period. Compensation expense related to these awards is recognized using the accelerated attribution method over the vesting period based on the grant date fair value of the award. Stock Options Total stock option activity for the nine months ended September 30, 2022 was as follows: Options Weighted-Average Exercise Price (In thousands, except per share data) Outstanding at December 31, 2021 1,204 $ 26.62 Options exercised ( 7 ) 18.19 Outstanding at September 30, 2022 1,197 $ 26.67 Exercisable at September 30, 2022 1,031 $ 27.12 We have not issued any stock option awards from our 2010 Equity Incentive Plan for the periods presented in these consolidated financial statements. 17 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 13— Earnings per Common Share The calculation of basic and diluted earnings per share (EPS) was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands, except per share data) Basic earnings per Class A common share Numerator: Net income $ 4,696 $ 7,335 $ 58,328 $ 58,003 Amount attributable to unvested Walmart restricted shares ( 10 ) ( 58 ) ( 204 ) ( 547 ) Net income allocated to Class A common stockholders $ 4,686 $ 7,277 $ 58,124 $ 57,456 Denominator: Weighted-average Class A shares issued and outstanding 53,053 54,221 53,840 53,961 Basic earnings per Class A common share $ 0.09 $ 0.13 $ 1.08 $ 1.06 Diluted earnings per Class A common share Numerator: Net income allocated to Class A common stockholders $ 4,686 $ 7,277 $ 58,124 $ 57,456 Re-allocated earnings — 1 2 12 Diluted net income allocated to Class A common stockholders $ 4,686 $ 7,278 $ 58,126 $ 57,468 Denominator: Weighted-average Class A shares issued and outstanding 53,053 54,221 53,840 53,961 Dilutive potential common shares: Stock options 16 506 108 483 Service-based restricted stock units 127 417 178 440 Performance-based restricted stock units 143 252 245 277 Employee stock purchase plan 43 19 57 19 Diluted weighted-average Class A shares issued and outstanding 53,382 55,415 54,428 55,180 Diluted earnings per Class A common share $ 0.09 $ 0.13 $ 1.07 $ 1.04 The restricted shares issued to Walmart contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing EPS pursuant to the two-class method. The computation above excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator. For the periods presented, we excluded certain restricted stock units and stock options outstanding, which could potentially dilute basic EPS in the future, from the computation of diluted EPS as their effect was anti-dilutive. Additionally, we have excluded any performance-based restricted stock units where the performance contingency has not been met as of the end of the period, or whereby the result of including such awards was anti-dilutive. The following table shows the weighted-average number of anti-dilutive shares excluded from the diluted EPS calculation: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In thousands) Class A common stock Options to purchase Class A common stock 1,154 139 139 139 Service-based restricted stock units 1,230 108 1,177 204 Performance-based restricted stock units 734 829 616 771 Unvested Walmart restricted shares 109 434 189 514 Total 3,227 1,510 2,121 1,628 18 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 14— Fair Value Measurements Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value. For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021. As of September 30, 2022 and December 31, 2021, our assets and liabilities carried at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Fair Value September 30, 2022 (In thousands) Assets Investment securities: Corporate bonds $ — $ 9,258 $ — $ 9,258 Agency bond securities — 191,575 — 191,575 Agency mortgage-backed securities — 2,170,143 — 2,170,143 Municipal bonds — 22,659 — 22,659 Asset-backed securities — 161 — 161 Loans held for sale — — 4,108 4,108 Total assets $ — $ 2,393,796 $ 4,108 $ 2,397,904 December 31, 2021 Assets Investment securities: Corporate bonds $ — $ 9,973 $ — $ 9,973 Agency bond securities — 221,596 — 221,596 Agency mortgage-backed securities — 1,848,331 — 1,848,331 Municipal bonds — 28,180 — 28,180 Asset-backed securities — 7,421 — 7,421 Loans held for sale — — 5,148 5,148 Total assets $ — $ 2,115,501 $ 5,148 $ 2,120,649 Liabilities Contingent consideration $ — $ — $ 1,347 $ 1,347 We based the fair value of our fixed income securities held as of September 30, 2022 and December 31, 2021 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three and nine months ended September 30, 2022 or 2021. A reconciliation of changes in fair value for Level 3 assets or liabilities are not considered material to these consolidated financial statements and therefore are not presented for any of the periods presented. 19 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 15— Fair Value of Financial Instruments The following describes the valuation technique for determining the fair value of financial instruments, whether or not such instruments are carried at fair value on our consolidated balance sheets. Short-term Financial Instruments Our short-term financial instruments consist principally of unrestricted and restricted cash and cash equivalents, settlement assets and obligations, and obligations to customers . These financial instruments are short-term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. Under the fair value hierarchy, these instruments are classified as Level 1. Investment Securities The fair values of investment securities have been derived using methodologies referenced in Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 . Under the fair value hierarchy, our investment securities are classified as Level 2. Loans We determined the fair values of loans by discounting both principal and interest cash flows expected to be collected using a discount rate commensurate with the risk that we believe a market participant would consider in determining fair value. Under the fair value hierarchy, our loans are classified as Level 3. Deposits The fair value of demand and interest checking deposits and savings deposits is the amount payable on demand at the reporting date. We determined the fair value of time deposits by discounting expected future cash flows using market-derived rates based on our market yields on certificates of deposit, by maturity, at the measurement date. Under the fair value hierarchy, our deposits are classified as Level 2. Contingent Consideration The fair value of contingent consideration obligations, such as the earn-out associated with our acquisition of UniRush LLC ("UniRush") in 2017, is estimated through valuation models designed to estimate the probability of such contingent payments based on various assumptions. Estimated payments are discounted using present value techniques to arrive at an estimated fair value. Our contingent consideration payable is classified as Level 3 because we use unobservable inputs to estimate fair value, including the probability of achieving certain earnings thresholds and appropriate discount rates. Changes in fair value of contingent consideration are recorded through operating expenses. Debt The fair value of our revolving line of credit is based on borrowing rates currently available to a market participant for loans with similar terms or maturity. The carrying amount of our outstanding revolving line of credit approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the revolving line of credit is classified as a Level 2 liability in the fair value hierarchy. Fair Value of Financial Instruments The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value, at September 30, 2022 and December 31, 2021 are presented in the table below. September 30, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Financial Assets Loans to bank customers, net of allowance $ 20,600 $ 16,021 $ 19,270 $ 17,481 Financial Liabilities Deposits $ 3,476,643 $ 3,476,395 $ 3,286,889 $ 3,286,837 20 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 16— Leases Our leases consist of operating lease agreements principally related to our corporate and subsidiary office locations. Currently, we do not enter into any financing lease agreements. Our leases have remaining lease terms of less than 1 year to approximately 10 years, most of which generally include renewal options of varying terms. Our total lease expense amounted to approximately $ 1.0 million for the three months ended September 30, 2022 and 2021, and $ 3.3 million and $ 2.8 million for the nine months ended September 30, 2022 and 2021, respectively. Our lease expense is generally based on fixed payments stated within the agreements. Any variable payments for non-lease components and other short term lease expenses are not considered material. Additional Information Additional information related to our right of use assets and related lease liabilities is as follows: September 30, 2022 Cash paid for operating lease liabilities (in thousands) $ 6,490 Weighted average remaining lease term (years) 3.40 Weighted average discount rate 4.9 % Maturities of our operating lease liabilities as of September 30, 2022 is as follows: Operating Leases (In thousands) Remainder of 2022 $ 333 2023 3,973 2024 3,935 2025 1,288 2026 280 Thereafter 1,634 Total 11,443 Less: imputed interest ( 2,354 ) Total lease liabilities $ 9,089 Note 17— Commitments and Contingencies Financial Commitments As discussed in Note 7 — Equity Method Investments , we are committed to making annual capital contributions in TailFin Labs, LLC of $ 35.0 million per year from January 2020 through January 2024. Litigation and Claims In the ordinary course of business, we are a party to various legal proceedings, including, from time to time, actions which are asserted to be maintainable as class action suits. We review these actions on an ongoing basis to determine whether it is probable and estimable that a loss has occurred and use that information when making accrual and disclosure decisions. We have provided reserves where necessary for all claims and, based on current knowledge and in part upon the advice of legal counsel, all matters are believed to be adequately covered by insurance, or, if not covered, we do not expect the outcome in any legal proceedings, individually or collectively, to have a material adverse impact on our financial condition or results of operations. On December 18, 2019, an alleged class action entitled Koffsmon v. Green Dot Corp., et al. , No. 19-cv-10701-DDP-E, was filed in the United States District Court for the Central District of California, against us and two of our former officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business strategy. Plaintiff alleges that defendants made statements that were misleading because they allegedly failed to disclose details regarding our customer acquisition strategy and its impact on our financial performance. The suit is purportedly brought on behalf of purchasers of our securities between May 9, 2018 and November 7, 2019, and seeks compensatory damages, fees and costs. 21 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) On October 6, 2021, the Court appointed the New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff, and on April 1, 2022, plaintiff filed its First Amended Complaint. Defendants filed a motion to dismiss the First Amended Complaint on May 31, 2022, and the motion is scheduled to be heard on December 12, 2022. On February 18, 2020, a shareholder derivative suit and securities class action entitled Hellman v. Streit, et al., No. 20-cv-01572-SVW-PVC was filed in United States District Court for the Central District of California, against us and certain of our officers and directors. The suit avers purported breach of fiduciary duty and unjust enrichment claims, as well as claims under Sections 10(b), 14(a) and 20(a) of the Exchange Act, on the basis of the same wrongdoing alleged in the first lawsuit described above. The suit does not define the purported class allegedly damaged. These cases have been related and, pursuant to a stipulated agreement between the parties, the Hellman suit is stayed pending resolution of any motions to dismiss in the Koffsman case reference above, after which time the parties will meet and confer on a case schedule, including the schedule for defendants to respond to the complaint. We have not yet responded to the complaints in these matters. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of these matters. Given the uncertainty of litigation and the preliminary stage of these claims, we are currently unable to estimate the probability of the outcome of these actions or the range of reasonably possible losses, if any, or the impact on our results of operations, financial condition or cash flows, except as disclosed. Other Legal Matters We monitor the laws of all 50 states to identify state laws or regulations that apply (or may apply) to our products and services. We have obtained money transmitter licenses (or similar such licenses) where applicable, based on advice of counsel or when we have been requested to do so. If we were found to be in violation of any laws and regulations governing banking, money transmitters, electronic fund transfers, or money laundering in the United States or abroad, we could be subject to penalties or could be forced to change our business practices. From time to time, we enter into contracts containing provisions that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to: (i) contracts with our card issuing banks, under which we are responsible to them for any unrecovered overdrafts on cardholders’ accounts; (ii) certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities, and other claims arising from our use of the premises; (iii) certain agreements with our officers, directors, and employees, under which we may be required to indemnify these persons for liabilities arising out of their relationship with us; and (iv) contracts under which we may be required to indemnify our retail distributors, suppliers, vendors and other parties with whom we have contracts against claims arising from certain of our actions, omissions, violations of law and/or infringement of patents, trademarks, copyrights and/or other intellectual property rights. Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be reasonably estimated. With the exception of overdrafts on cardholders’ accounts, historically, we have not been required to make payments under these and similar contingent obligations, and no liabilities have been recorded for these obligations in our consolidated balance sheets. For additional information regarding overdrafts on cardholders’ accounts, refer to Note 5 — Accounts Receivable. Note 18— Significant Retailer and Partner Concentration A credit concentration may exist if customers are involved in similar industries, economic sectors, and geographic regions. Our retail distributors operate in similar economic sectors, but diverse domestic geographic regions. The loss of a significant retail distributor could have a material adverse effect upon our card sales, profitability, and revenue growth. Revenues derived from our products sold at retail distributors constituting greater than 10% of our total operating revenues were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Walmart 19 % 23 % 20 % 23 % 22 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 18—Significant Retailer and Partner Concentration (continued) In addition, approximately 35 % and 23 % of our total operating revenues for the three months ended September 30, 2022 and 2021, respectively, and 29 % and 19 % for the nine months ended September 30, 2022 and 2021, respectively, were generated from a single BaaS partner, but without a corresponding concentration to gross profit for the periods. Note 19— Segment Information Our Chief Operating Decision Maker (our "CODM" who is our Chief Executive Officer) organizes and manages our businesses primarily on the basis of the channels in which our product and services are offered and uses net revenue and segment profit to assess profitability. Segment profit reflects each segment's net revenue less direct costs, such as sales and marketing expenses, processing expenses, third-party call center support and transaction losses. Our operations are aggregated amongst three reportable segments: 1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services. Our Consumer Services segment consists of revenues and expenses derived from deposit account programs, such as consumer checking accounts, prepaid cards, secured credit cards, and gift cards that we offer to consumers (i) through distribution arrangements with more than 90,000 retail locations and thousands of neighborhood Financial Service Center locations (the "Retail" channel), and (ii) directly through various marketing channels, such as online search engine optimization, online displays, direct mail campaigns, mobile advertising, and affiliate referral programs (the "Direct" channel). Our B2B Services segment consists of revenues and expenses derived from (i) our partnerships with some of the United States' most prominent consumer and technology companies that make our banking products and services available to their consumers, partners and workforce through integration with our banking platform (the "Banking-as-a-Service", or "BaaS" channel), and (ii) a comprehensive payroll platform that we offer to corporate enterprises (the "Employer" channel) to facilitate payments for today’s workforce. Our products and services in this segment include deposit account programs, such as consumer and small business checking accounts and prepaid cards, as well as our Simply Paid Disbursements services utilized by our partners. Our Money Movement Services segment consists of revenues and expenses generated on a per transaction basis from our services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as money processing services and tax refund processing services. Our money processing services, such as cash deposit and disbursements, are marketed to third-party banks, program managers, and other companies seeking cash deposit and disbursement capabilities for their customers. Those customers, including our own cardholders, can access our cash deposit and disbursement services at any of the locations within our network of retail distributors and neighborhood Financial Service Centers. We market our tax-related financial services through a network of tax preparation franchises, independent tax professionals and online tax preparation providers. Our Corporate and Other segment primarily consists of 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, which 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, and insurance. 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, impairment charges, 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. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. 23 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) The following tables present financial information for each of our reportable segments for the periods then ended: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Segment Revenue (In thousands) Consumer Services $ 135,763 $ 167,455 $ 445,479 $ 533,889 B2B Services 158,224 118,171 435,638 336,735 Money Movement Services 37,671 45,596 189,130 201,982 Corporate and Other 5,542 ( 2,298 ) 16,732 ( 5,939 ) Total segment revenues 337,200 328,924 1,086,979 1,066,667 BaaS commissions and processing expenses 7,314 10,575 22,255 35,691 Other income ( 766 ) — ( 2,100 ) — Total operating revenues $ 343,748 $ 339,499 $ 1,107,134 $ 1,102,358 Segment revenue adjustments represent commissions and certain processing-related costs associated with our BaaS products and services, which are netted against our B2B Services revenues when evaluating segment performance, as well as certain other investment income earned by our bank, which is included in Corporate and Other. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Segment Profit (In thousands) Consumer Services $ 53,941 $ 60,084 $ 168,605 $ 169,401 B2B Services 22,396 18,501 67,435 54,208 Money Movement Services 14,669 18,718 106,280 105,724 Corporate and Other ( 45,513 ) ( 51,057 ) ( 138,953 ) ( 146,803 ) Total segment profit 45,493 46,246 203,367 182,530 Reconciliation to income before income taxes Depreciation and amortization of property, equipment and internal-use software 14,482 15,265 42,881 42,446 Stock based compensation and related employer taxes 10,871 11,579 31,810 37,205 Amortization of acquired intangible assets 5,664 6,944 17,845 20,831 Impairment charges — — 4,134 — Legal settlement expenses 2,864 2,300 16,359 2,310 Other expense 847 1,328 4,042 5,120 Operating income 10,765 8,830 86,296 74,618 Interest expense, net 27 38 143 113 Other (expense) income, net ( 4,249 ) 849 ( 9,057 ) 1,396 Income before income taxes $ 6,489 $ 9,641 $ 77,096 $ 75,901 24 Table of Contents