What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-28 · 160 added, 152 removed, 490 unchanged (39% of the section changed)

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

government or regulator’s further responses to it, and those identified above, under “Part I, Item 1A.

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including the continuing impacts of the coronavirus ("COVID-19") pandemic, increasing inflation and interest rates and other macroeconomic impacts on our business, results of operations and financial condition and governmental and our responses to such events, including those identified above, under “Part I, Item 1A.

Risk Factors,” and elsewhere herein.

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

Green Dot Corporation is a financial technology and registered bank holding company committed to giving all people the power to bank seamlessly, affordably, and with confidence.

Green Dot Corporation is a financial technology and registered bank holding company ("BHC") 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.

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

Effective beginning with the first quarter of 2021, we have realigned our segment reporting based on how our current Chief Operating Decision Maker (our “CODM”) manages our businesses, including resource allocation and performance assessment.

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.

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.

As a result of this realignment, our operations are now aggregated amongst three reportable segments:

Our operations are aggregated amongst three reportable segments:

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

Net interest 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.

Prior periods presented have been recast to align with our revised segment presentation for the year ended December 31, 2021.

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 inter-segment 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 " Part 1, Item 1.

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Consolidated Financial Results and Trends

Our results of operations for the years ended December 31, 2021 and 2020 were as follows:

Our consolidated results of operations for the years ended December 31, 2022 and 2021 were as follows:

Year Ended December 31,

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Total operating revenues

Our total operating revenues for the year ended December 31, 2021 increased $179.4 million , or 14% over the prior year comparable period, generating revenue growth across our Consumer Services and B2B Services segments, partially offset by lower revenues earned from our Money Movement Services.

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

We have seen a fundamental shift in consumer behavior towards electronic payments throughout the COVID-19 pandemic that has created a higher demand and usage of our products and services.

Additionally, these two segments have benefited from economic stimulus funds and incremental unemployment benefits enacted by the U.S.

federal government.

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

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

As a result of these consumer trends and economic factors, our consolidated gross dollar volume and purchase volume grew by 22% and 8%, respectively, for the year ended December 31, 2021, despite a year-over-year decline in total active accounts.

This increase was driven by strong organic growth from new and existing partners in our B2B Services segment.

Within our B2B Services segment, gross dollar volume and purchase volume each grew 51%, and 18%, respectively, for the year ended December 31, 2021, and the average number of active accounts in this segment across the year grew 8%.

This growth resulted in an increase in program management service fee revenues earned from BaaS partners and interchange revenues.

In our Consumer Services segment, gross dollar volume declined 2% for the year ended December 31, 2021.

Gross dollar volume was impacted by the reduction in enhanced federal unemployment benefits, as the weekly benefit to cardholders was reduced by half in 2021 compared with the prior year period and discontinued in early September 2021.

The average number of active accounts and direct deposit accounts across the year declined by 6% and 3%, respectively, for the year ended December 31, 2021.

Active accounts and direct deposit accounts in this segment declined, principally in the second half of 2021, as a result of the timing of when stimulus funds were received by cardholders at the end of December 2020, which resulted in a sizable increase in new and existing customers utilizing our account programs in the prior year.

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

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

While many of our cardholders have benefited from federal relief programs, much of the enhanced pandemic related unemployment benefits provided by the federal government ended in September 2021.

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

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

Total Money Movement Services segment revenues for the year ended December 31, 2021 decreased by 17% compared with the prior year comparable period.

The decrease in our Money Movement Services was primarily attributable to the number of cash transfers processed, which also decreased by 17% compared with the prior year comparable period.

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

While the non-renewal of this agreement has impacted segment revenues and the number of cash transfers we process, the effect on segment profit was less impactful due to the higher than average sales commission rate associated with this agreement.

Any year-over-year growth or decline in cash transfers in 2022 will be dependent on multiple factors, including the level of growth of deposit account programs in our Consumer Services and B2B Services segments.

Our tax processing revenues have also decreased year-over-year for the year ended December 31, 2021 as a result of a decrease in the number of tax refunds processed of 3% for the comparable period.

The decrease in number of tax refunds processed for the year ended December 31, 2021 compared to the prior year period was attributable to lower volumes in both our online consumer and professional tax channels.

Tax processing revenues were also impacted by lower unit economics earned from refund transfers with one of our largest customers due to the terms that were agreed upon in connection with a new multi-year arrangement.

Our total operating revenues for the year ended December 31, 2022 increased $16.4 million , or 1% over the prior year comparable period, generating revenue growth from 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 provided under federal and state programs to new and existing customers in 2021.

Relief funds from such programs have since expired and the absence of these programs in 2022 has created more challenging year-over-year comparisons.

The timing and magnitude of these programs in 2021, as well as our strategic decision to reduce marketing spend on GO2bank in our Direct channel throughout 2022 due to higher than expected acquisition costs per account, have resulted in an 18% decrease in our consolidated active accounts and a 21% decrease in purchase volume, as compared to the year ended December 31, 2021.

Despite some of these headwinds, gross dollar value increased 4% for the year ended December 31, 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 from federal and state governmental actions continues to lessen.

In our Consumer Services segment, revenues decreased during the year ended December 31, 2022 by 16% over the prior year comparable period.

As compared to the year ended December 31, 2021, gross dollar volume and purchase volume each declined 26% and 23%, respectively, while the average number of active accounts and direct deposit accounts declined by 26% and 24%, respectively.

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 and lower account acquisition from reduced marketing spend on GO2bank in our Direct channel as discussed above, as well as changes in consumer traffic within the retail locations of our distribution partners.

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

These revenue declines in our Consumer Services segment were partially offset by customer adoption of recently-introduced 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 by 30% during the year ended December 31, 2022 over the prior year comparable period.

Gross dollar volume grew by 28%, however, purchase volume decreased by 15%, and the average number of active accounts in this segment across the year decreased by 12% for the year ended December 31, 2022.

Overall, many of our BaaS partners within our B2B Services segment were impacted by similar trends seen in our Consumer Services segment, leading to a lower number of active accounts and lower purchase volume.

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 our BaaS partners.

Revenues within this segment also increased due to double-digit growth year-over-year in gross dollar volume and purchase volume in our Employer channel.

Money Movement Services segment revenues for the year ended December 31, 2022 decreased by 7% compared with the prior year comparable period.

The decrease in our Money Movement Services was primarily attributable to the number of cash transfers processed, which decreased by 11% compared with the prior year comparable period, partially offset by an increase in our tax processing revenues.

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 fewer active accounts within our Consumer Services and B2B Services segments discussed above.

Our tax processing revenues increased year-over-year for the year ended December 31, 2022 as a result of a 20% increase in the number of tax refunds processed.

The increase in number of tax refunds processed for the year ended December 31, 2022 was principally attributable to higher volumes from our online consumer tax channels.

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, increased for the year ended December 31, 2022 by 124% over the prior year comparable period.

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 the amount of net interest income generated compared to the prior year.

Total operating expenses

Our total operating expenses for the year ended December 31, 2021 increased $143.0 million, or 12%, over the prior year comparable period.

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

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

The increase in total operating expenses for the year ended December 31, 2021 was partially offset by a decrease in sales and marketing expenses due to a decrease in sales commissions from lower revenues within our Money Movement Services segment, as well as impairment charges we recorded during the fourth quarter 2020 that did not recur in 2021.

As a result of our shift to a remote workforce strategy in 2020, we recorded impairment charges in 2020 to our operating lease right-of-use assets and related property and equipment located at our office facilities, as well as certain internal-use software that were replaced by newer technology platforms.

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 marketing efforts for 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.

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.

Our total operating expenses for the year ended December 31, 2022 decreased $11.5 million, or 1%, over the prior year comparable period.

This net decrease was the 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 tiered revenue-sharing agreements and reduced marketing spend associated with GO2bank, and lower compensation and benefits expenses principally due to lower stock-based compensation, accrued bonus compensation and third-party call center support costs within our Consumer Services and B2B Services segments.

These decreases were 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 to improve our customers' overall experience.

These investments resulted in reduced third-party call center costs throughout 2022.

We have 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 and purchase volume across different segments, but also from improvements in operational efficiencies to more effectively manage customer disputes and fraud.

Other general and administrative expenses also decreased year-over-year due to lower professional services fees, telecommunication expenses and amortization of intangible assets.

Although we have seen reduced costs in these areas, our total other general and administrative expenses remained flat over the prior year comparable period.

These expenses were negatively impacted from a $13 million legal settlement with a prior business acquisition target earlier in 2022, as well as an increase in software licenses associated with our technology roadmap and the implementation of our modern banking platform, and impairment charges for certain internal-use software.

Our income tax expense for the year ended December 31, 2022 increased $3.5 million, or 22% over the prior year comparable period.

The increase in our income tax expense was due primarily to a 127% increase in income before taxes and an increase in our effective tax rate.

The increase in our income tax expense was due primarily to a 32% increase in income before taxes, partially offset by a decrease in our effective tax rate.

Our effective tax rate for the years ended December 31, 2022 and 2021 was 23.5% and 25.5%, respectively.

The increase in our effective tax rate was primarily attributable to lower tax benefits from general business credits, stock-based compensation and higher expenses related to state taxes, net of federal benefits.

COVID-19 Update

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

personnel continue to operate remotely.

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

leased office locations.

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

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

We have continued to experience a reduction in the amount of interest income we earn compared to recent periods prior to COVID-19.

While it is expected that the Federal Reserve will increase interest rates in 2022 to slow the effects of economic inflation tied to the COVID-19 pandemic, it is uncertain when or how many times interest rates will be increased.

The decrease in our effective tax rate was primarily attributable to a reduced IRC 162(m) limitation on the deductibility of certain executive compensation and higher tax benefits from general business credits, partially offset by tax shortfalls from stock-based compensation and higher expenses related to state taxes, net of federal benefits.

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 we believe 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.

To support our efforts in building a modern banking platform, we expect our hosting costs and software licenses, 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 in 2023.

We also expect to continue to incur duplicative processing and other costs associated with the implementation of our modern banking platform as we expect to continue to operate redundant platforms until our technology transformation is completed.

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, while we expect to continue to invest in and incur additional expenses in connection with our anti-money laundering ("AML") program, including improvements to our compliance controls, policies and procedures throughout 2023, we believe these investments will ultimately help mitigate and reduce our fraud losses over the long term.

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 only had a modest impact on our key metrics and financial results for the year ended

December 31, 2022.

However, we expect these non-renewals to have a greater negative impact on 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.

Over the past year, the Federal Reserve has announced several increases in the federal funds rate, resulting in a current range of 4.50% to 4.75%.

It is widely expected that the Federal Reserve will continue to maintain elevated 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, including the continued severity and transmission rate of the virus, new variants of the virus, the nature of and duration for which preventative measures remain in place, the extent and effectiveness of containment and mitigation efforts, including vaccination programs and mandates, and the type of stimulus measures and other policy responses that the U.S.

government may further adopt, if any.

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

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 in our consolidated financial statements), and yields on our investment portfolio tend to lag interest rate increases as securities mature and proceeds are reinvested.

Accordingly, we expect the net effect to have a negative impact on our consolidated financial statements in 2023 compared to 2022.

Based on the overall macro-economic environment, expected interest rate impacts, 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 risks related to the COVID-19 pandemic.

Consolidated Key Metrics

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Purchase volume $ 26,687 $ 33,736 $ (7,049) (20.9) % $ 33,736 $ 31,220 $ 2,516 8.1 %

Cash Transfers 40.51 48.71 (8.2) (16.8) % 48.71 46.04 2.67 5.8 %

Tax Refunds Processed 12.14 12.46 (0.32) (2.6) % 12.46 12.09 0.37 3.1 %

Number of cash transfers 36.06 40.51 (4.45) (11.0) % 40.51 48.71 (8.2) (16.8) %

Number of tax refunds processed 14.57 12.14 2.43 20.0 % 12.14 12.46 (0.32) (2.6) %

* Represents number of active accounts as of December 31, 2022 , 2021, and 2020 respectively.

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We use this metric to analyze the overall size of our active customer base and to analyze multiple metrics expressed as an average across this active account base.

Beginning with the first quarter of 2021, we have provided certain key metrics at the realigned segment level and have revised our direct deposit active account metric.

Following these changes, the direct deposit active accounts metric only consists of accounts in our Consumer Services segment and no longer include direct deposit active accounts in our B2B Services segment.

Based on the economic structure of our partnerships within our B2B services segment, we believe that total active accounts is the most relevant key metric for the B2B Services segment.

We also narrowed the definition of "direct deposit active account" to include only active accounts that have received one or more payroll or government benefit transaction during the period.

Prior period metrics have been restated to conform to our current definition.

Our direct deposit active accounts within our Consumer Services segment, on average, have the longest tenure and generate the majority of our gross dollar volume in any period and thus, generate more revenue over their lifetime than other active accounts.

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Bank fees generally vary based on the total number of tax refund transfers processed and gateway and network fees vary based on the numbers of disbursements made.

Other General and Administrative Expenses — Other general and administrative expenses consist primarily of professional service fees, telephone and communication costs, depreciation and amortization of our property and equipment, amortization of our intangible assets, impairment charges of long-lived assets, transaction losses (losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud), rent and utilities, and insurance.

Other General and Administrative Expenses — Other general and administrative expenses consist primarily of professional services fees, telephone and communication costs, depreciation and amortization of our property and equipment, amortization of our intangible assets, impairment charges of long-lived assets, transaction losses (losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud), rent and utilities, and insurance.

We incur telephone and communication costs primarily from customers contacting us through our toll-free telephone numbers.

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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

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Accordingly, actual results could differ significantly from the estimates made by our management.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the

accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

To the extent that there are differences between our estimates and actual results, our future financial

statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the critical accounting estimates discussed below are critical to understanding our historical and future performance, as these estimates involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant.

Revenue Recognition

As prescribed under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, we recognize revenues when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, as determined under a five-step process.

We charge new card fees, if applicable, when a consumer purchases a prepaid card, gift card, or a checking account product through our Retail channel.

We charge new card fees, if applicable, when a consumer purchases a prepaid card, gift card, or a demand deposit account product through our Retail channel.

Our new card fee provides our cardholders a material right and accordingly we defer and recognize new card fee revenues on a straight-line basis over the period commensurate with our performance obligation to our customers.

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Our estimated cash-back rewards are recorded as a reduction to card revenues and other fees on our consolidated statements of operations and as a component of other accrued liabilities on our consolidated balance sheets.

Cash rewards have decreased by approximately 51% for the year ended December 31, 2021 compared to the prior year period, as our cash-back programs have declined, principally from our decision to shift from our Green Dot Unlimited product to our recently launched GO2bank product which does not have a cash rewards feature.

Cash rewards have decreased by approximately 36% for the year ended December 31, 2022 compared to the prior year period, as our cash-back programs have declined, principally from our decision to shift from our legacy products to our GO2bank product which does not have a cash rewards feature.

Increases or decreases in our estimate of cash-back rewards is dependent upon cardholder behavioral changes and we periodically evaluate our estimation process and assumptions based on developments in redemption patterns, dollars redeemed and other cardholder behavioral trends.

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However, we are exposed to losses from any unrecovered overdrawn account balances.

The probability of recovering these amounts is primarily related to the number of days that have elapsed since an account had transaction activity, such as a purchase, ATM transaction or fee assessment.

We generally recover approximately 50-60% of overdrawn account balances in accounts that have

had transaction activity in the last 30 days and less than 10% when more than 30 days have elapsed.

The probability of recovering these amounts is primarily related to the

number of days that have elapsed since an account had transaction activity, such as a purchase, ATM transaction or fee assessment.

We generally recover approximately 50-60% of overdrawn account balances in accounts that have had transaction activity in the last 30 days and less than 10% when more than 30 days have elapsed.

As such, we establish a reserve for uncollectible overdrawn accounts.

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We include our provision for uncollectible overdrawn accounts related to purchase transactions in other general and administrative expenses in our consolidated statements of operations.

See Note 5—Accounts Receivable for more information.

Allowance for Credit Losses

We establish an allowance for estimated credit losses inherent in our loan portfolio over the life of the loans, including our secured credit cards and overdrawn balances associated with our overdraft protection program.

We establish an allowance for estimated credit losses inherent in our loan portfolio over the life of the loans, including our secured credit cards.

For each portfolio of loans, we analyze historical loss rates and other factors to determine a loss rate, and consider if adjustments are needed for current conditions, and other reasonable and supportable forecasts beyond our balance sheet date that may differ from historical results.

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We separately establish specific allowances for impaired loans based on the present value of changes in cash flows expected to be collected, or for impaired loans that are considered collateral dependent, the estimated fair value of the collateral less estimated costs to sell, if any.

Overdrawn balances associated with our overdraft protection program are subject to a similar reserve methodology discussed above under "Reserve for Uncollectible Overdrawn Accounts." See Note 6—Loans to Bank Customers for more information.

Goodwill and Intangible Assets

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No impairment charges were recognized related to our intangible assets for the years ended December 31, 2022 and 2021.

See Note 9—Goodwill and Intangible Assets for more information.

Results of Operations

Pursuant to instruction 1 of the instructions to paragraph 303(a) of Regulation S-K, discussion of the results of operations for the fiscal year ended December 31, 2020 to fiscal year ended December 31, 2019 has been omitted.

Such omitted discussion can be found under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 26, 2021.

Pursuant to instruction 1 of the instructions to paragraph 303(b) of Regulation S-K, discussion of the results of operations for the fiscal year ended December 31, 2021 to fiscal year ended December 31, 2020 has been omitted.

Such omitted discussion can be found under "Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022.

Comparison of Consolidated Results for the Years Ended December 31, 2022 and 2021

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Card Revenues and Other Fees — Card revenues and other fees totaled $876.3 million for the year ended December 31, 2022, an increase of $87.5 million, or 11%, from the comparable prior year period.

Our card revenues and other fees increased in part as a result of an increase in total gross dollar volume of 22%.

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

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

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

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 our BaaS partners.

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 $235.4 million for the year ended December 31, 2022, a decrease of $10.1 million, or 4%, from the comparable prior year period.

The decrease is primarily due to a decline in the number of cash transfers processed year-over-year, largely due to our decision not to renew a reload network agreement with a partner in the fourth quarter of 2020.

Additionally, we experienced a lower number of tax refunds processed between the comparable periods and lower unit economics earned from refund transfers with one of our largest customers due to the terms that were agreed upon in connection with a new multi-year arrangement.

Interchange Revenues — Interchange revenues totaled $380.0 million for the year ended December 31, 2021, an increase of $28.2 million, or 8%, from the comparable prior year period.

The increase was primarily due to an increase in purchase volume during the year ended December 31, 2021.

The decrease is primarily due to a decline in the number of cash transfers processed year-over-year as a result of fewer active accounts within our Consumer Services and B2B Services segments, partially offset by higher overall tax processing revenues due to a 20% increase in the number of tax refunds processed.

Interchange Revenues — Interchange revenues totaled $295.6 million for the year ended December 31, 2022, a decrease of $84.4 million, or 22%, from the comparable prior year period.

The decrease was primarily due to a 21% decrease in purchase volume during the year ended December 31, 2022.

Interest Income, net — Net interest income totaled $42.2 million for the year ended December 31, 2022, an increase of $23.4 million, or 124%, 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 increases in deposit accounts attributed to economic stimulus funds and other government benefit programs, as well as organic growth in certain deposit account programs.

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.

In addition, the Federal Reserve has instituted several increases in interest rates in 2022 to manage the effects of inflation, which also increased the amount of interest income we earn on our deposits and recent investments.

Operating Expenses

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Sales and Marketing Expenses — Sales and marketing expenses totaled $297.9 million for the year ended December 31, 2022, a decrease of $84.3 million, or 22% compared to the year ended December 31, 2021.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues within our Money Movement Services segment, partially offset by higher advertising and supply chain expenses in connection with the continued roll-out of GO2bank, which we launched in the first quarter of 2021.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $264.7 million for the year ended December 31, 2021, an increase of $31.5 million, or 14%, compared to the year ended December 31, 2020.

The increase was primarily due to higher third-party call center support costs to meet increased demand in our customer service center from the volume of federal relief funds deposited into our account programs and our effort to improve our customer's overall experience, partially offset by lower employee stock-based compensation due to the acceleration of awards in the prior year period associated with certain former executive employees.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues generated from certain products that are subject to tiered 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 in our Direct channel to manage our acquisition costs per account.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $243.9 million for the year ended December 31, 2022, a decrease of $20.8 million, or 8%, compared to the year ended December 31, 2021.

The decrease was primarily due to lower stock-based compensation, principally due to forfeited awards associated with certain former executive employees and fluctuations in the expected achievement of certain performance-based equity awards, as well as a reduction in third-party call center support costs due to a decline in active accounts and our investments to improve customer service over the course of 2021.

Processing Expenses — Processing expenses totaled $481.5 million for the year ended December 31, 2022, an increase of $92.2 million, or 24%, compared to the year ended December 31, 2021.

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

This increase was principally due to growth in gross dollar volume on 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 $331.9 million for the year ended December 31, 2022, an increase of $1.3 million, or 0.4%, from the comparable prior year period.

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

These increases were partially offset by lower rent expenses as a result of our office closures in the U.S and related impairment charges of long-lived assets recorded during the year ended December 31, 2020.

Other general and administrative expenses increased primarily due to a $13 million legal settlement associated with a previous business acquisition target in 2022, as well as an increase in software licenses associated with our technology roadmap and the implementation of our modern banking platform, and impairment charges for certain internal-use software, partially offset by decreases in professional services fees, telecommunication expenses and amortization of intangible assets.

Income Tax Expense

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General business credits (3.2) (2.2)

Employee stock-based compensation (2.6) (7.7)

Stock-based compensation 3.2 (2.6)

IRC 162(m) limitation 0.8 8.0

Non-deductible penalties — 1.1

Capital loss valuation allowance release — (1.1)

Other (0.5) 0.1

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Our income tax expense totaled $19.7 million for the year ended December 31, 2022, representing an increase of $3.5 million from the comparable prior year period.

The increase in income tax expense was primarily driven by the increase in our operating income.

The increase in income tax expense was primarily driven by the increase in our operating income, partially offset by a decrease in our effective tax rate.

Our effective tax rate for the year ended December 31, 2022 is higher than our statutory federal income tax rate primarily due to higher taxes from non-deductible executive compensation, tax shortfalls from stock-based compensation, and expenses related to state taxes, net of federal benefits.

Our effective tax rate for the year ended December 31, 2021 is higher than our statutory federal income tax rate primarily due to higher taxes from non-deductible executive compensation and expenses related to state taxes, net of federal benefits.

Our effective tax rate for the year ended December 31, 2020 was lower than our statutory federal income tax rate primarily due to tax benefits from general business credits and stock-based compensation, offset by higher taxes from non-deductible executive compensation.

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

Segment Results

Supplemental financial results and key metric data under our revised reportable segments structure for the fiscal year ended December 31, 2019 may be referenced on Form 8-K filed with the SEC on May 3, 2021.

These changes had no impact on our previously reported consolidated financial results for the year ended December 31, 2019.

Consumer Services

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Gross dollar volume $ 23,257 $ 31,455 $ (8,198) (26.1) %

Active Accounts* 3.10 3.73 (0.63) (16.9) %

Number of active accounts* 2.37 3.10 (0.73) (23.5) %

Direct deposit active accounts* 0.63 0.76 (0.13) (17.1) %

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Purchase volume $ 4,229 $ 4,302 $ 4,588 $ 5,017 $ 4,881 $ 5,166 $ 6,455 $ 7,138

Segment revenues within Consumer Services for the year ended December 31, 2021 increased $74.3 million, or 12%, compared to the prior year comparable period, while our segment expenses for the year ended December 31, 2021 increased $62.9 million, or 15%.

Our gross dollar volume and the average number of active accounts and direct deposit active accounts across the year decreased by 2%, 6% and 3%, respectively, during the year ended December 31, 2021 from the comparable prior year period, due to varying factors, including decreases in enhanced federal unemployment benefits in 2021, the timing of economic stimulus received by cardholders at the end of December 2020, and to a lesser extent, enhanced fraud monitoring controls implemented in the current year, as described above under "Overview." Purchase volume increased by 4% during the year ended December 31, 2021 from the comparable prior year period.

Despite these decreases in some of our key metrics, we generated total revenue growth within this segment for the year ended December 31, 2021 from higher interchange revenue associated with the increase in purchase volume, customer adoption of new features, such as the introduction of our recent overdraft protection program, which is an optional service offered to our cardholders, and a favorable decrease in the estimated accrual of cash back rewards.

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

These increases were partially offset by decreases in the amount of monthly maintenance fees and ATM revenue as a result of the decreases in our gross dollar volume stated above.

Consumer Services expenses increased for the year ended December 31, 2021 from the comparable prior year period, principally due to increased staffing of third-party call center support to meet the increased demand in our customer service center as a result of our effort to improve our customer's overall experience and growth in transaction losses, in part due to the introduction of our overdraft protection services.

Expenses in our Consumer Services segment also increased due to higher advertising and supply chain expenses in connection with the continued roll-out of GO2bank.

* Represents number of active and direct deposit active accounts as of each period end.

Segment revenues within Consumer Services for the year ended December 31, 2022 decreased $107.9 million, or 16%, compared to the prior year comparable period, while our segment expenses for the year ended December 31, 2022 decreased $106.5 million, or 23%.

Our gross dollar volume, the average number of active accounts and the average number of direct deposit active accounts across the year decreased during the year ended December 31, 2022 by 26%, 26% and 24%, 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.

Relief funds from such programs have since expired and no such economic stimulus packages were enacted in 2022.

In addition, we reduced marketing spend on GO2bank to manage our acquisition costs per account and observed changes in consumer traffic within the retail locations of our distribution partners, both of which negatively impacted account acquisition.

In turn, our purchase volume decreased by 23% during the year ended December 31, 2022 from the comparable prior year 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 increased 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.

Despite a sizable decrease in total revenue, our segment profit for the year ended December 31, 2022 decreased by less than 1%.

Consumer Services expenses for the year ended December 31, 2022 decreased from the comparable prior year period due to several factors, including a decrease in sales commissions from lower revenues on products subject to tiered 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 investments 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.

Year Ended December 31,

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Gross dollar volume $ 50,227 $ 39,367 $ 10,860 27.6 %

Active Accounts* 1.97 1.72 $ 0.25 14.5 %

Number of active accounts* 1.78 1.97 (0.19) (9.6) %

Purchase volume $ 8,551 $ 10,096 $ (1,545) (15.3) %

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Purchase volume $ 2,063 $ 2,141 $ 2,172 $ 2,175 $ 2,184 $ 2,190 $ 2,415 $ 3,307

* Represents number of active accounts as of each period end.

Segment revenues within our B2B Services for the year ended December 31, 2022 increased $135.9 million, or 30%, compared to the prior year period, while our segment expenses for the year ended December 31, 2022 increased $122.7 million, or 32%.

Our total gross dollar volume increased 51% during the year ended December 31, 2021 from the comparable prior year period, and the average number of active accounts within our B2B Services segment across the year increased by 8% year-over-year as of December 31, 2021 as we continued to experience organic growth from both new and existing users in certain BaaS programs as the demand for digital payments continues, as well as economic stimulus received by our partner programs.

Purchase volume also increased approximately 18% for the year ended December 31, 2021 from the comparable prior year periods, as result of this increased gross dollar volume.

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

Despite year-over-year revenue growth for the year ended December 31, 2021, our segment profit has been impacted by the increased staffing of third-party call center support to meet the increased demand in our customer service center and growth in transaction losses as a result of the year-over-year increases in gross dollar volume and purchase volume.

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

revenue growth.

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

Our total gross dollar volume during the year ended December 31, 2022 increased by 28% from the comparable prior year period, despite the average number of active accounts across the year decreasing by 12% year-over-year.

We have continued to experience organic growth from both new and existing users in certain BaaS programs that tend to yield higher gross dollar volume per active user, in addition to the general demand that remains prevalent for digital payments.

Purchase volume decreased by approximately 15% for the year ended December 31, 2022.

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.

Revenues within this segment also increased due to double-digit growth year-over-year in gross dollar volume and purchase volume in our Employer channel.

As a result of our revenue growth in this segment for the year ended December 31, 2022, our segment profit increased by approximately 18% over the comparable prior year period.

B2B Services expenses increased for the year ended December 31, 2022 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.

Money Movement Services

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Key Metrics (In millions, except percentages)

Cash Transfers 40.51 48.71 (8.2) (16.8) %

Tax Refunds Processed 12.14 12.46 (0.32) (2.6) %

Number of cash transfers 36.06 40.51 (4.45) (11.0) %

Number of tax refunds processed 14.57 12.14 2.43 20.0 %

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

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Segment revenues within our Money Movement services for the year ended December 31, 2022 decreased $17.5 million, or 7%, from the comparable prior year period, and segment expenses for the year ended December 31, 2022 decreased $19.4 million, or 16%.

The number of cash transfers processed decreased for the year ended December 31, 2021, was largely due to our decision not to renew a reload partner agreement in the fourth quarter of 2020.

While the non-renewal of this agreement has impacted segment revenues and the number of cash transfers we process, the effect on segment profitability was less impactful due to the higher than average sales commission rate associated with this agreement.

In addition, our tax processing revenues decreased for the year ended December 31, 2021 primarily due to a lower number of tax refunds processed and lower unit economics earned from refund transfers with one of our largest customers due to the terms that were agreed upon in connection with a new multi-year arrangement.

The decrease in segment revenues for the year ended December 31, 2022 was driven primarily by a lower number of cash transfers processed, which decreased by 11% from the prior year comparable period.

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.

This decrease was partially offset by an increase in our tax processing revenues, driven by a 20% increase in the number of tax refunds processed from the prior year comparable period.

Although segment revenues decreased by 7%, our segment expenses declined for the year ended December 31, 2022 by 16% and segment profit increased by approximately 2% year-over-year.

Segment expenses decreased for the year ended December 31, 2022 primarily due to a decrease in sales commissions from lower cash transfer volumes.

Corporate and Other

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$ (187,596) $ (195,761) $ 8,165 (4.2) %

Revenues within Corporate and Other are comprised of net interest income earned by our bank and inter-segment eliminations.

Unallocated corporate expenses include our fixed expenses such as salaries, wages and related benefits for our employees, professional service fees, software licenses, telephone and communication costs, rent and utilities, insurance and inter-segment eliminations.

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

Unallocated corporate expenses include eliminations of inter-segment expenses and our fixed expenses such as salaries, wages and related benefits for our employees, professional

services 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.

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.

Refer to Note 24—Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation.

Net interest income increased year-over-year for the year ended December 31, 2021 as a result of an increase in the size of our investment securities portfolio.

Unallocated corporate expenses for the year ended December 31, 2021 increased year-over-year by approximately 4%, as a result of higher professional services expenses, software licenses and telecommunication expenses, partially offset by lower corporate reserves and rent expenses.

Net interest income increased year-over-year for the year ended December 31, 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 year ended December 31, 2022 increased year-over-year by approximately 9%, as a result of higher salaries and wages 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, partially offset by lower professional services fees, accrued bonus compensation and telecommunication expenses.

Capital Requirements for Bank Holding Companies

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Basel III rules provided that it has a Tier 1 leverage ratio greater than 9% and satisfies other applicable conditions.

In 2021, Green Dot Corporation and Green Dot Bank qualified for (including, in the case of Green Dot Bank, through grace periods) and opted to use the community bank leverage ratio framework.

Going forward, we expect that Green Dot Corporation will continue to qualify for and use the community bank leverage ratio framework, and that Green Dot Bank will calculate and disclose its risk-based capital ratios and Tier 1 leverage ratio under standardized approach of the U.S.

Commencing in 2021, Green Dot Corporation and Green Dot Bank qualified for (including, in the case of Green Dot Bank, through grace periods) and opted to use the community bank leverage ratio framework.

We expect that Green Dot Corporation will continue to qualify for and use the community bank leverage ratio framework, and that Green Dot Bank will calculate and disclose its risk-based capital ratios and Tier 1 leverage ratio under standardized approach of the U.S.

Basel III Rules.

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Tier 1 capital and

Common equity Tier 1 capital Primarily includes common stock, retained earnings and accumulated OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles.

Common equity Tier 1 capital Includes common stock and retained earnings, adjusted for items primarily related to accumulated OCI, goodwill, deferred tax assets and intangibles.

Total capital

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Financing activities 36,707 1,030,393

(Decrease) increase in unrestricted cash, cash equivalents and restricted cash $ (171,061) $ 430,547

Decrease in unrestricted cash, cash equivalents and restricted cash $ (505,795) $ (171,061)

During the years ended December 31, 2022 and 2021, we financed our operations primarily through our cash flows provided by operating activities and customer funds held on deposit.

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

At December 31, 2021, our primary source of liquidity was unrestricted cash and cash equivalents totaling $1.3 billion.

As of December 31, 2022, our primary source of liquidity was unrestricted cash and cash equivalents totaling $813.9 million.

We also consider our $2.4 billion of investment securities available-for-sale to be highly-liquid instruments.

We use trend and variance analysis as well as our detailed budgets and forecasts to project future cash needs, making adjustments to the projections when needed.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditures, equity method investee capital commitments, and any other capital needs for

at least the next 12 months.

We are currently not aware of any trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

We continue to monitor the impact of COVID-19 on our business to ensure our liquidity and capital resources remain appropriate throughout this period of uncertainty.

We continue to monitor the impact of material trends on our business to ensure our liquidity and capital resources remain appropriate throughout this period of uncertainty.

Cash Flows from Operating Activities

Our $162.5 million of net cash provided by operating activities in the year ended December 31, 2021 principally resulted from $47.5 million of net income, adjusted for certain non-cash operating expenses of $184.9 million, and a decrease in net working capital assets and liabilities of $69.8 million.

Our $209.2 million of net cash provided by operating activities in the year ended December 31, 2020 principally resulted from $23.1 million of net income, adjusted for certain non-cash operating expenses of $157.5 million, and an increase in net working capital assets and liabilities of $28.6 million.

Our $277.7 million of net cash provided by operating activities during the year ended December 31, 2022 principally resulted from $64.2 million of net income, adjusted for certain non-cash operating expenses of $168.7 million, and an increase in net working capital assets and liabilities of $44.8 million.

Our $167.0 million of net cash provided by operating activities during the year ended December 31, 2021 principally resulted from $47.5 million of net income, adjusted for certain non-cash operating expenses of $184.9 million, and a decrease in net working capital assets and liabilities of $65.3 million.

Cash Flows from Investing Activities

Our $1.4 billion of net cash used in investing activities in the year ended December 31, 2021 primarily reflects purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $1.2 billion, payments for the development and acquisition of property and equipment of $57.4 million, purchases of bank-owned life insurance policies of $55.0 million, and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million.

Capital commitment relief granted to us at the end of 2020 by the Federal Reserve on our prepaid card deposits has provided greater flexibility in how we can utilize our cash and cash equivalents, and as a result, we purchased additional available-for-sale investment securities compared to the prior year period.

Our $785.8 million of net cash used in investing activities in the year ended December 31, 2020 primarily reflects purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $687.8 million, payments for the development and acquisition of property and equipment of $59.0 million and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million.

Our $820.2 million of net cash used in investing activities during the year ended December 31, 2022 primarily reflects purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $634.3 million, payments for the development and acquisition of property and equipment of $84.3 million, net changes in loans of $32.1 million, purchases of bank-owned life insurance policies of $31.9 million, and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million.

Our $1.4 billion of net cash used in investing activities during the year ended December 31, 2021 primarily reflects purchases of available-for-sale investment securities, net of proceeds from sales and maturities of $1.2 billion, payments for the development and acquisition of property and equipment of $57.4 million, net changes in loans of $28.4 million, purchases of bank-owned life insurance policies of $55.0 million and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million.

Cash Flows from Financing Activities

Our $36.7 million of net cash provided by financing activities for the year ended December 31, 2022 was principally the result of a net increase in customer deposits of $157.1 million and net borrowings on our revolving credit facility of $35.0 million, partially offset by share repurchases of our Class A common stock of $95.5 million and a net decrease in obligations to customers of $54.0 million.

Our $1.0 billion of net cash provided by financing activities for the year ended December 31, 2021 was principally the result of a net increase in customer deposits of $555.1 million, and a net increase in obligations to customers of $488.7 million.

Our $1.0 billion of net cash provided by financing activities for the year ended December 31, 2020 was principally the result of a net increase in customer deposits of $1.6 billion, partially offset by a net decrease in obligations to customers of $512.5 million and net repayments on our revolving credit facility of $35.0 million.

Total customer deposit balances increased substantially for the years ended December 31, 2021 and 2020 driven primarily by stimulus funds and other government benefits received by our cardholders under the CARES Act and the American Rescue Plan Act.

Other Sources of Liquidity:

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The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25% to 2.00% for LIBOR Rate loans and 0.25% to 1.00% for Base Rate loans.

The interest rate on our outstanding balance as of December 31, 2022 was 5.52%.

The terms of our existing agreement also provide for a method to determine an alternative benchmark interest rate in anticipation of the discontinuation of LIBOR under reference rate reform.

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.

As of December 31, 2021, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use.

As of December 31, 2022, we had $35.0 million outstanding on the 2019 Revolving Facility, with $65.0 million available for use.

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.

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Material Cash Requirements

While the effect of COVID-19 has created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and purchase property and equipment as necessary in the normal course of our business.

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

We intend to continue to invest in new products and programs we believe are critical, 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, increasing inflation and interest rates and other macro-economic events have 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.

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 in 2023 will be at similar levels to our capital expenditures in 2022, 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.

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See Note 7—Equity Method Investment of the Notes to our Consolidated Financial Statements for additional information.

In response to our remote employee workforce strategy in the U.S., we have closed most our leased office locations.

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

Our remaining leases have terms of less than 1 year to approximately 10 years, subject to renewal options of varying terms, and as of December 31, 2022, we had a total lease liability of $8.4 million.

See Note 20—Leases of the Notes to our Consolidated Financial Statements for additional information regarding our lease liabilities as of December 31, 2022.

Our definitive agreement to acquire all of the equity interests of UniRush provides for a minimum $4 million annual earn-out payment for five years following the closing, ending in February 2022.

In the normal course of business, we enter into various agreements with our vendors and retail distributors that may subject us to minimum annual requirements.

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December 31, 2022 December 31, 2021

Amount Percentage Amount Percentage

Amount Percent of loans in each category to total loans Amount Percent of loans in each category to total loans

(In thousands, except percentages)

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

What changed 10-K

Item 7. Management’s Discussion and Analysis