GREEN DOT CORP 10-Q

ITEM 1. Financial Statements GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 2023 December 31, 2022 (unaudited) Assets (In thousands, except par value) Current assets: Unrestricted cash and cash equivalents $ 711,399 $ 813,945 Restricted cash 4,036 5,900 Investment securities available-for-sale, at fair value 39,581 — Settlement assets 654,020 493,395 Accounts receivable, net 66,000 74,437 Prepaid expenses and other assets 64,888 78,155 Total current assets 1,539,924 1,465,832 Investment securities available-for-sale, at fair value 2,135,268 2,363,687 Loans to bank customers, net of allowance for loan losses of $ 15,552 and $ 9,078 as of September 30, 2023 and December 31, 2022, respectively 27,638 21,421 Prepaid expenses and other assets 220,570 192,901 Property, equipment, and internal-use software, net 174,570 160,222 Operating lease right-of-use assets 5,986 8,316 Deferred expenses 1,601 14,547 Net deferred tax assets 132,160 117,167 Goodwill and intangible assets 425,856 445,083 Total assets $ 4,663,573 $ 4,789,176 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 109,402 $ 113,891 Deposits 3,193,855 3,450,105 Obligations to customers 362,109 218,239 Settlement obligations 48,670 40,691 Amounts due to card issuing banks for overdrawn accounts 192 328 Other accrued liabilities 88,219 98,580 Operating lease liabilities 3,312 3,167 Deferred revenue 6,306 25,029 Income tax payable 4,305 11,641 Total current liabilities 3,816,370 3,961,671 Other accrued liabilities 21,562 5,777 Operating lease liabilities 3,520 5,247 Line of credit 27,000 35,000 Total liabilities 3,868,452 4,007,695 Commitments and contingencies (Note 17) Stockholders’ equity: Class A common stock, $ 0.001 par value; 100,000 shares authorized as of September 30, 2023 and December 31, 2022; 52,415 and 51,674 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 52 52 Additional paid-in capital 368,222 340,575 Retained earnings 793,907 763,582 Accumulated other comprehensive loss ( 367,060 ) ( 322,728 ) Total stockholders’ equity 795,121 781,481 Total liabilities and stockholders’ equity $ 4,663,573 $ 4,789,176 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, 2023 2022 2023 2022 (In thousands, except per share data) Operating revenues: Card revenues and other fees $ 253,407 $ 219,577 $ 735,380 $ 650,979 Cash processing revenues 36,256 41,318 191,925 198,813 Interchange revenues 54,968 71,407 178,950 226,301 Interest income, net 8,398 11,446 29,030 31,041 Total operating revenues 353,029 343,748 1,135,285 1,107,134 Operating expenses: Sales and marketing expenses 56,495 66,996 194,530 227,898 Compensation and benefits expenses 59,168 61,868 192,934 185,743 Processing expenses 162,375 125,261 460,555 349,741 Other general and administrative expenses 81,830 78,858 238,324 257,456 Total operating expenses 359,868 332,983 1,086,343 1,020,838 Operating (loss) income ( 6,839 ) 10,765 48,942 86,296 Interest expense, net 239 27 2,121 143 Other expense, net ( 802 ) ( 4,249 ) ( 6,050 ) ( 9,057 ) (Loss) income before income taxes ( 7,880 ) 6,489 40,771 77,096 Income tax (benefit) expense ( 1,615 ) 1,793 10,446 18,768 Net (loss) income $ ( 6,265 ) $ 4,696 $ 30,325 $ 58,328 Basic (loss) earnings per common share: $ ( 0.12 ) $ 0.09 $ 0.58 $ 1.08 Diluted (loss) earnings per common share $ ( 0.12 ) $ 0.09 $ 0.58 $ 1.07 Basic weighted-average common shares issued and outstanding: 52,367 53,053 52,127 53,840 Diluted weighted-average common shares issued and outstanding: 52,367 53,382 52,436 54,428 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, 2023 2022 2023 2022 (In thousands) Net (loss) income $ ( 6,265 ) $ 4,696 $ 30,325 $ 58,328 Other comprehensive loss Unrealized holding loss, net of tax ( 47,263 ) ( 112,269 ) ( 44,332 ) ( 304,848 ) Comprehensive loss $ ( 53,528 ) $ ( 107,573 ) $ ( 14,007 ) $ ( 246,520 ) 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, 2023 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, 2023 52,341 $ 52 $ 360,812 $ 800,172 $ ( 319,797 ) $ 841,239 Common stock issued under stock plans, net of withholdings and related tax effects 74 — ( 524 ) — — ( 524 ) Stock-based compensation — — 7,934 — — 7,934 Net loss — — — ( 6,265 ) — ( 6,265 ) Other comprehensive loss — — — — ( 47,263 ) ( 47,263 ) Balance at September 30, 2023 52,415 $ 52 $ 368,222 $ 793,907 $ ( 367,060 ) $ 795,121 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 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, 2023 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, 2022 51,674 $ 52 $ 340,575 $ 763,582 $ ( 322,728 ) $ 781,481 Common stock issued under stock plans, net of withholdings and related tax effects 741 — ( 85 ) — — ( 85 ) Stock-based compensation — — 27,732 — — 27,732 Net income — — — 30,325 — 30,325 Other comprehensive loss — — — — ( 44,332 ) ( 44,332 ) Balance at September 30, 2023 52,415 $ 52 $ 368,222 $ 793,907 $ ( 367,060 ) $ 795,121 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 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, 2023 2022 (In thousands) Operating activities Net income $ 30,325 $ 58,328 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and internal-use software 42,306 42,881 Amortization of intangible assets 18,593 17,845 Provision for uncollectible overdrawn accounts from purchase transactions 7,356 10,569 Provision for loan losses 21,404 25,754 Stock-based compensation 27,732 31,299 Losses in equity method investments 9,286 11,878 Amortization of discount on available-for-sale investment securities ( 1,724 ) ( 892 ) Impairment of long-lived assets — 4,134 Other ( 3,128 ) ( 2,392 ) Changes in operating assets and liabilities: Accounts receivable, net 1,081 2,480 Prepaid expenses and other assets 8,385 14,849 Deferred expenses 12,946 10,362 Accounts payable and other accrued liabilities ( 15,505 ) 36,056 Deferred revenue ( 19,363 ) ( 14,331 ) Income tax receivable/payable ( 7,859 ) 7,110 Other, net 613 ( 3,849 ) Net cash provided by operating activities 132,448 252,081 Investing activities Purchases of available-for-sale investment securities — ( 922,039 ) Proceeds from maturities of available-for-sale securities 131,559 244,969 Proceeds from sales and calls of available-for-sale securities 197 3,515 Payments for acquisition of property and equipment ( 55,501 ) ( 60,605 ) Net changes in loans ( 21,562 ) ( 25,158 ) Investment in TailFin Labs, LLC ( 35,000 ) ( 35,000 ) Purchases of other investments — ( 31,934 ) Other investing activities ( 1,273 ) ( 1,856 ) Net cash provided by (used in) investing activities 18,420 ( 828,108 ) Financing activities Borrowings on revolving line of credit 153,000 50,000 Repayments on revolving line of credit ( 161,000 ) ( 50,000 ) Proceeds from exercise of options and ESPP purchases 3,415 3,443 Taxes paid related to net share settlement of equity awards ( 3,500 ) ( 4,699 ) Net changes in deposits ( 238,417 ) 182,673 Net changes in settlement assets and obligations to customers ( 8,776 ) ( 36,261 ) Contingent consideration payments — ( 1,647 ) Repurchase of Class A common stock — ( 74,050 ) Net cash (used in) provided by financing activities ( 255,278 ) 69,459 Net decrease in unrestricted cash, cash equivalents and restricted cash ( 104,410 ) ( 506,568 ) Unrestricted cash, cash equivalents and restricted cash, beginning of period 819,845 1,325,640 Unrestricted cash, cash equivalents and restricted cash, end of period $ 715,435 $ 819,072 Cash paid for interest $ 3,615 $ 337 Cash paid for income taxes $ 17,100 $ 9,760 Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period: Unrestricted cash and cash equivalents $ 711,399 $ 813,210 Restricted cash 4,036 5,862 Total unrestricted cash, cash equivalents and restricted cash, end of period $ 715,435 $ 819,072 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, 2022 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, 2023. 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, 2023 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. 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 to customers within the United States and certain U.S. territories. The following table disaggregates our revenues earned from external customers by each of our reportable segments: Three Months Ended September 30, 2023 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 76,722 $ 35,383 $ 31,196 $ 143,301 Transferred over time 38,363 162,074 893 201,330 Operating revenues (1) $ 115,085 $ 197,457 $ 32,089 $ 344,631 7 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 3—Revenues (continued) 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 Nine Months Ended September 30, 2023 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 253,500 $ 103,745 $ 177,898 $ 535,143 Transferred over time 124,154 444,552 2,406 571,112 Operating revenues (1) $ 377,654 $ 548,297 $ 180,304 $ 1,106,255 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 (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 inter-segment 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 $ 0.7 million and $ 0.3 million in revenue for the three months ended September 30, 2023 and 2022, respectively, and $ 22.6 million and $ 25.8 million for the nine months ended September 30, 2023 and 2022, 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. During the three months ended September 30, 2023, we recorded an increase in revenue from our gift card program, a component of “Card revenues and other fees” on our Consolidated Statements of Operations. The change was the result of an update in our estimated breakage rates to better reflect current customer spending patterns on remaining gift card portfolios. This change amounted to approximately $ 10 million during the three months ended September 30, 2023. The impact of this change on our card revenues and other fees is not material to future periods. 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, 2023 Corporate bonds $ 10,000 $ — $ ( 584 ) $ 9,416 Agency bond securities 240,402 — ( 52,101 ) 188,301 Agency mortgage-backed securities 2,381,995 2 ( 426,735 ) 1,955,262 Municipal bonds 29,413 — ( 7,543 ) 21,870 Total investment securities $ 2,661,810 $ 2 $ ( 486,963 ) $ 2,174,849 December 31, 2022 Corporate bonds $ 10,000 $ — $ ( 654 ) $ 9,346 Agency bond securities 240,272 — ( 47,166 ) 193,106 Agency mortgage-backed securities 2,511,958 8 ( 373,704 ) 2,138,262 Municipal bonds 29,613 — ( 6,640 ) 22,973 Total investment securities $ 2,791,843 $ 8 $ ( 428,164 ) $ 2,363,687 As of September 30, 2023 and December 31, 2022, 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, 2023 Corporate bonds $ — $ — $ 9,416 $ ( 584 ) $ 9,416 $ ( 584 ) Agency bond securities — — 188,301 ( 52,101 ) 188,301 ( 52,101 ) Agency mortgage-backed securities 9,414 ( 78 ) 1,943,368 ( 426,657 ) 1,952,782 ( 426,735 ) Municipal bonds — — 21,870 ( 7,543 ) 21,870 ( 7,543 ) Total investment securities $ 9,414 $ ( 78 ) $ 2,162,955 $ ( 486,885 ) $ 2,172,369 $ ( 486,963 ) December 31, 2022 Corporate bonds $ — $ — $ 9,346 $ ( 654 ) $ 9,346 $ ( 654 ) Agency bond securities 8,972 ( 457 ) 184,133 ( 46,709 ) 193,105 ( 47,166 ) Agency mortgage-backed securities 892,068 ( 67,569 ) 1,243,588 ( 306,135 ) 2,135,656 ( 373,704 ) Municipal bonds 16,333 ( 3,370 ) 6,641 ( 3,270 ) 22,974 ( 6,640 ) Total investment securities $ 917,373 $ ( 71,396 ) $ 1,443,708 $ ( 356,768 ) $ 2,361,081 $ ( 428,164 ) 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, 2023 or 2022 on our available-for-sale investment securities. Unrealized losses as of September 30, 2023 and December 31, 2022 are the result of 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, 2023 and December 31, 2022 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, and general volatility in market conditions. We do not currently 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. 9 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4—Investment Securities (continued) As of September 30, 2023, the contractual maturities of our available-for-sale investment securities were as follows: Amortized cost Fair value (In thousands) Due in one year or less $ 40,055 $ 39,581 Due after one year through five years 81,179 70,076 Due after five years through ten years 144,223 110,948 Due after ten years 54,413 38,564 Mortgage and asset-backed securities 2,341,940 1,915,680 Total investment securities $ 2,661,810 $ 2,174,849 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, 2023 December 31, 2022 (In thousands) Trade receivables $ 24,459 $ 26,083 Reserve for uncollectible trade receivables ( 94 ) ( 169 ) Net trade receivables 24,365 25,914 Overdrawn cardholder balances from purchase transactions 7,621 3,821 Reserve for uncollectible overdrawn accounts from purchase transactions ( 2,158 ) ( 2,230 ) Net overdrawn cardholder balances from purchase transactions 5,463 1,591 Cardholder fees 2,307 2,480 Receivables due from card issuing banks 524 3,211 Fee advances, net 8,830 28,924 Other receivables 24,511 12,317 Accounts receivable, net $ 66,000 $ 74,437 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, 2023 2022 2023 2022 (In thousands) Balance, beginning of period $ 2,692 $ 2,033 $ 2,230 $ 3,394 Provision for uncollectible overdrawn accounts from purchase transactions 1,827 3,162 7,356 10,569 Charge-offs ( 2,361 ) ( 3,076 ) ( 7,428 ) ( 11,844 ) Balance, end of period $ 2,158 $ 2,119 $ 2,158 $ 2,119 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, 2023 Residential $ — $ — $ — $ — $ 4,822 $ 4,822 Commercial — — — — 2,695 2,695 Installment 3 — — 3 4,411 4,414 Consumer 2,294 — — 2,294 19,751 22,045 Secured credit card 820 699 3,356 4,875 4,339 9,214 Total loans $ 3,117 $ 699 $ 3,356 $ 7,172 $ 36,018 $ 43,190 Percentage of outstanding 7.2 % 1.6 % 7.8 % 16.6 % 83.4 % 100.0 % December 31, 2022 Residential $ — $ — $ — $ — $ 4,264 $ 4,264 Commercial — — — — 2,542 2,542 Installment — — — — 1,407 1,407 Consumer 2,261 — — 2,261 12,185 14,446 Secured credit card 712 722 2,239 3,673 4,167 7,840 Total loans $ 2,973 $ 722 $ 2,239 $ 5,934 $ 24,565 $ 30,499 Percentage of outstanding 9.8 % 2.4 % 7.3 % 19.5 % 80.5 % 100.0 % We offer an optional overdraft protection program service on certain demand deposit account programs that allows customers who opt-in and meet certain criteria to spend up to a pre-authorized amount in excess of their available 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 customer. A portion of our secured credit card portfolio is classified as loans held for sale. These loans are included in the long-term portion of prepaid and other assets on our consolidated balance sheets. Changes in valuation allowances are recorded as a component of other income and expenses on our consolidated statement of operations. As of September 30, 2023 and December 31, 2022, the fair value of the loans held for sale amounted to approximately $ 4.9 million and $ 5.3 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, 2022 for further information on the criteria for classification as nonperforming. September 30, 2023 December 31, 2022 (In thousands) Residential $ 52 $ 153 Installment 83 96 Secured credit card 3,356 2,239 Total loans $ 3,491 $ 2,488 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, 2023 December 31, 2022 Non-Classified Classified Non-Classified Classified (In thousands) Residential $ 4,770 $ 52 $ 4,035 $ 229 Commercial 2,695 — 2,542 — Installment 4,331 83 1,306 101 Consumer 22,045 — 14,446 — Secured credit card 5,858 3,356 5,601 2,239 Total loans $ 39,699 $ 3,491 $ 27,930 $ 2,569 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, 2023 2022 2023 2022 (In thousands) Balance, beginning of period $ 12,641 $ 10,204 $ 9,078 $ 5,555 Provision for loans 5,664 7,302 21,397 25,754 Loans charged off ( 2,825 ) ( 8,093 ) ( 15,074 ) ( 21,896 ) Recoveries of loans previously charged off 72 — 151 — Balance, end of period $ 15,552 $ 9,413 $ 15,552 $ 9,413 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, 2023 and December 31, 2022, our net investment in TailFin Labs amounted to approximately $ 109.4 million and $ 82.4 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 $ 0.8 million and $ 3.2 million for the three months ended September 30, 2023 and 2022, respectively, and $ 8.0 million and $ 10.3 million for the nine months ended September 30, 2023 and 2022, 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 $ 3.5 million and $ 4.8 million at September 30, 2023 and December 31, 2022, respectively. Equity in earnings from this investment for the three and nine months ended September 30, 2023 and 2022 were de minimis. Note 8— Deposits Deposits are categorized as non-interest bearing or interest-bearing deposit accounts as follows: September 30, 2023 December 31, 2022 (In thousands) Non-interest bearing deposit accounts $ 3,175,777 $ 3,427,799 Interest-bearing deposit accounts Checking accounts 1,532 2,461 Savings 6,320 7,899 Secured card deposits 5,476 6,933 Time deposits, denominations greater than or equal to $250 790 2,275 Time deposits, denominations less than $250 3,960 2,738 Total interest-bearing deposit accounts 18,078 22,306 Total deposits $ 3,193,855 $ 3,450,105 The scheduled contractual maturities for total time deposits are presented in the table below: September 30, 2023 (In thousands) Due in 2023 $ 379 Due in 2024 846 Due in 2025 994 Due in 2026 536 Due in 2027 1,078 Thereafter 917 Total time deposits $ 4,750 13 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 9— Debt In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. The credit agreement 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, 2023, the outstanding balance on the 2019 Revolving Facility was $ 27 million. In March 2023, we amended the terms of our agreement to replace LIBOR with the Secured Overnight Financing Rate ("SOFR"). At our election, loans made under the credit agreement bear interest at 1) an adjusted SOFR rate (the “SOFR 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) an adjusted SOFR rate plus 1.0 % (the “Base Rate"), plus in either case, an applicable margin. The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25 % to 2.00 % for SOFR Rate loans and 0.25 % to 1.00 % for Base Rate loans. The interest rate on our outstanding balance as of September 30, 2023 was approximately 6.67 %. 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 SOFR Rate loans. 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, 2023, 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 incurred total cash interest expense during the three and nine months ended September 30, 2023 of approximately $ 0.2 million and $ 2.0 million, respectively. We did not incur any interest expense during the three and nine months ended September 30, 2022. Note 10— Income Taxes Income tax expense for the nine months ended September 30, 2023 and 2022 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, 2023 2022 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 1.7 1.3 General business credits ( 4.5 ) ( 1.9 ) Stock-based compensation 7.1 2.4 IRC 162(m) limitation 1.1 2.0 Bank owned life insurance ( 1.5 ) ( 0.8 ) Nondeductible expenses 1.1 0.6 Other ( 0.4 ) ( 0.3 ) Effective tax rate 25.6 % 24.3 % 14 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) The effective tax rate for the nine months ended September 30, 2023 and 2022 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, stock-based compensation, cash value growth in bank owned life insurance policies, and the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation. The net increase in the effective tax rate for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 is primarily due to the impact of an increase of $ 0.3 million in state income taxes, net of federal benefits, and the impact of a $ 1.0 million increase in tax expense associated with shortfalls from stock-based compensation. We recognized a discrete tax expense related to tax shortfalls from stock-based compensation of $ 2.9 million for the nine months ended September 30, 2023, compared to a $ 1.9 million discrete tax expense for the prior year comparable period. These increases were partially offset by a decrease of $ 1.1 million in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation and the impact of general business credits. The Inflation Reduction Act of 2022 (the "IRA") levies a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases. To date, these tax law revisions have had 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, 2023 and 2022, 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, 2023 and 2022, 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 2022. 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, 2023. We do not expect the outcome of these examinations will have any material impact on our consolidated financial statements. As of September 30, 2023, we have federal net operating loss carryforwards of approximately $ 15.2 million and state net operating loss carryforwards of approximately $ 102.3 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 $ 59.0 million will expire between 2026 and 2042, while the remaining balance of approximately $ 43.3 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 $ 20.9 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will start to expire on December 31, 2023 and continue to expire through December 31, 2027. As of September 30, 2023 and December 31, 2022, we had a liability of $ 12.6 million and $ 11.2 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: 15 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) Nine Months Ended September 30, 2023 2022 (In thousands) Beginning balance $ 11,178 $ 10,972 Increases related to positions taken during the current year 1,500 1,434 Decreases related to positions settled with tax authorities ( 90 ) — Ending balance $ 12,588 $ 12,406 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 12,129 $ 12,074 As of September 30, 2023 and 2022, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.3 million and $ 1.1 million, respectively. Note 11— Stockholders' Equity Stock Repurchase Program In February 2022, our Board of Directors authorized a $ 100 million increase to our stock repurchase program. As of September 30, 2023, we had an authorized $ 4.5 million remaining under our stock repurchase program for additional 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 . 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 allowed for $ 10 million of monthly share repurchases through December 31, 2022 until the contract amount was reached, unless otherwise terminated. In December 2022, we early terminated the agreement just prior to completing the entire $ 75 million of repurchases. We repurchased 3,150,181 shares at a volume-weighted average price of $ 22.39 under the 10b5-1 plan. 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 vested in equal monthly increments through December 1, 2022; however, Walmart was 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 were included in our total Class A shares outstanding. All shares issued to Walmart were fully vested as of December 31, 2022. 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 $ 7.9 million and $ 10.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 27.7 million and $ 31.3 million for the nine months ended September 30, 2023 and 2022, 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, 2023: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2022 1,555 $ 34.08 Restricted stock units granted 1,352 18.11 Restricted stock units vested ( 609 ) 35.17 Restricted stock units canceled ( 259 ) 30.33 Outstanding at September 30, 2023 2,039 $ 23.64 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity for the nine months ended September 30, 2023 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2022 644 $ 32.40 Performance restricted stock units granted 724 18.13 Performance restricted stock units vested ( 99 ) 35.82 Performance restricted stock units canceled ( 161 ) 28.15 Adjustment for completed performance periods 15 46.82 Outstanding at September 30, 2023 1,123 $ 23.70 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. 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, 2023 was as follows: Options Weighted-Average Exercise Price (In thousands, except per share data) Outstanding at December 31, 2022 1,171 $ 26.97 Options exercised ( 8 ) 16.34 Options canceled ( 139 ) 50.89 Outstanding at September 30, 2023 1,024 $ 23.81 Exercisable at September 30, 2023 1,024 $ 23.81 We did not issue 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 and Loss per Common Share The calculation of basic and diluted (loss) earnings per share (EPS) was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (In thousands, except per share data) Basic earnings per Class A common share Numerator: Net (loss) income $ ( 6,265 ) $ 4,696 $ 30,325 $ 58,328 Amount attributable to unvested Walmart restricted shares — ( 10 ) — ( 204 ) Net (loss) income allocated to Class A common stockholders $ ( 6,265 ) $ 4,686 $ 30,325 $ 58,124 Denominator: Weighted-average Class A shares issued and outstanding 52,367 53,053 52,127 53,840 Basic (loss) earnings per Class A common share $ ( 0.12 ) $ 0.09 $ 0.58 $ 1.08 Diluted earnings per Class A common share Numerator: Net (loss) income allocated to Class A common stockholders $ ( 6,265 ) $ 4,686 $ 30,325 $ 58,124 Re-allocated earnings — — — 2 Diluted net (loss) income allocated to Class A common stockholders $ ( 6,265 ) $ 4,686 $ 30,325 $ 58,126 Denominator: Weighted-average Class A shares issued and outstanding 52,367 53,053 52,127 53,840 Dilutive potential common shares: Stock options — 16 — 108 Service-based restricted stock units — 127 173 178 Performance-based restricted stock units — 143 75 245 Employee stock purchase plan — 43 61 57 Diluted weighted-average Class A shares issued and outstanding 52,367 53,382 52,436 54,428 Diluted (loss) earnings per Class A common share $ ( 0.12 ) $ 0.09 $ 0.58 $ 1.07 The restricted shares issued to Walmart contained non-forfeitable rights to dividends and were 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, 2023 2022 2023 2022 (In thousands) Class A common stock Options to purchase Class A common stock 1,024 1,154 1,071 139 Service-based restricted stock units 694 1,230 807 1,177 Performance-based restricted stock units 365 734 318 616 Unvested Walmart restricted shares — 109 — 189 Total 2,083 3,227 2,196 2,121 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, 2022. As of September 30, 2023 and December 31, 2022, our assets carried at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Fair Value September 30, 2023 (In thousands) Assets Investment securities: Corporate bonds $ — $ 9,416 $ — $ 9,416 Agency bond securities — 188,301 — 188,301 Agency mortgage-backed securities — 1,955,262 — 1,955,262 Municipal bonds — 21,870 — 21,870 Loans held for sale — — 4,866 4,866 Total assets $ — $ 2,174,849 $ 4,866 $ 2,179,715 December 31, 2022 Assets Investment securities: Corporate bonds $ — $ 9,346 $ — $ 9,346 Agency bond securities — 193,106 — 193,106 Agency mortgage-backed securities — 2,138,262 — 2,138,262 Municipal bonds — 22,973 — 22,973 Loans held for sale — — 5,324 5,324 Total assets $ — $ 2,363,687 $ 5,324 $ 2,369,011 We based the fair value of our fixed income securities held as of September 30, 2023 and December 31, 2022 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, 2023 or 2022. 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, 2022 . 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. 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, 2023 and December 31, 2022 are presented in the table below. September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Financial Assets Loans to bank customers, net of allowance $ 27,638 $ 27,411 $ 21,421 $ 18,201 Financial Liabilities Deposits $ 3,193,855 $ 3,193,770 $ 3,450,105 $ 3,450,017 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 $ 0.8 million and $ 1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 2.8 million and $ 3.3 million for the nine months ended September 30, 2023 and 2022, 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, 2023 Cash paid for operating lease liabilities (in thousands) $ 1,890 Weighted average remaining lease term (years) 3.9 Weighted average discount rate 5.1 % Maturities of our operating lease liabilities as of September 30, 2023 are as follows: Operating Leases (In thousands) Remainder of 2023 $ 995 2024 3,935 2025 1,288 2026 280 2027 248 Thereafter 1,386 Total 8,132 Less: imputed interest ( 1,300 ) Total lease liabilities $ 6,832 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 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, regulatory, supervisory, and governmental matters as well as actions which are asserted to be maintainable as class action suits, employment claims, and or enforcement actions. 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, would not be likely to have a material adverse impact on our financial condition or results of operations. Nonetheless, given the inherent unpredictability of these matters, an adverse outcome could, from time to time, have a material adverse impact on our financial condition or results of operations. 21 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) On October 20, 2023, an alleged class action captioned Lyons v. Walmart Inc. et al ., was filed in the U.S. District Court for the Middle District of Alabama, alleging that Walmart, Green Dot Corporation, and Green Dot Bank breached implied warranties of merchantability and fitness for a particular purpose, and were otherwise negligent in the packaging of gift cards at Walmart stores, resulting in the unauthorized tampering with, and loss of stored values, on four gift cards sold in advance of the 2022 Christmas holiday season but that were later used at another location in January 2023. The suit seeks to represent a nationwide class of persons who purchased a Visa Prepaid card issued by us and subjected to unauthorized use by a third party after purchase but prior to the first authorized use, at a Walmart retail store located in a state that has adopted Article 2 of the Uniform Commercial Code (thereby excluding Louisiana). On October 24, 2023 the court on its own initiative ordered plaintiff to re-plead the action based on insufficient jurisdictional allegations, and an amended complaint was filed October 30, 2023. On October 25, 2023, a putative class action, Brockingon v. Green Dot Corporation, was filed in the Circuit Court of the 7th Judicial District for Volusia County, Florida, alleging the company violated Florida debt collection law by emailing, monthly, several email communications that her “Green Dot Account statement is ready” that were received between 5:58 a.m. and 6:02 a.m., outside the permitted communication times of 8:01 a.m. to 8:59 p.m. Plaintiff alleges that these communications are debt collection communications covered by the Florida Consumer Collection Practices Act, and seeks to represent a class of persons with Florida addresses who received communications between the hours of 9 p.m and 8 a.m. in connection with the collection of a consumer debt. On October 27, 2023, an alleged class action, Hester v. Green Dot Corporation , was filed in District Court for Travis County, Texas, alleging he was unable to access funds in his account for an extended period, and that we have similarly blocked access for other customers. The complaint purports to allege three causes of action for breach of contract, breach of fiduciary duty, and deceptive trade practices in violation of the Texas Deceptive Trade Practices Act. Texas Bus. and Comm. Code, Ch. 17. The proposed class is all Texas residents and GO2bank customers or account holders who “had their accounts or funds blocked, closed, or otherwise restricted” for more than 72 hours at any time during the four years (or the length of the longest applicable statute of limitations for any asserted claim) immediately preceding the filing of this action continuing through the date of judgment. 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. 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 was 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 Koffsmon 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. 22 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) 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, 2023 2022 2023 2022 Walmart 17 % 19 % 17 % 20 % In addition, approximately 47 % and 35 % of our total operating revenues for the three months ended September 30, 2023 and 2022, respectively, and 39 % and 29 % for the nine months ended September 30, 2023 and 2022, 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"). 23 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) 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 inter-segment revenues and expenses, and unallocated corporate expenses, which include 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. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. 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, 2023 2022 2023 2022 Segment Revenue (In thousands) Consumer Services $ 118,204 $ 135,763 $ 387,128 $ 445,479 B2B Services 199,206 158,224 551,150 435,638 Money Movement Services 32,089 37,671 180,304 189,130 Corporate and Other ( 928 ) 5,542 3,496 16,732 Total segment revenues 348,571 337,200 1,122,078 1,086,979 BaaS commissions and processing expenses 5,168 7,314 15,346 22,255 Other income ( 710 ) ( 766 ) ( 2,139 ) ( 2,100 ) Total operating revenues $ 353,029 $ 343,748 $ 1,135,285 $ 1,107,134 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. 24 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Segment Profit (In thousands) Consumer Services $ 42,426 $ 53,941 $ 139,450 $ 168,605 B2B Services 18,883 22,396 58,808 67,435 Money Movement Services 12,850 14,669 103,650 106,280 Corporate and Other ( 50,424 ) ( 45,513 ) ( 156,761 ) ( 138,953 ) Total segment profit 23,735 45,493 145,147 203,367 Reconciliation to (loss) income before income taxes Depreciation and amortization of property, equipment and internal-use software 14,720 14,482 42,307 42,881 Stock based compensation and related employer taxes 7,966 10,871 28,255 31,810 Amortization of acquired intangible assets 5,648 5,664 18,593 17,845 Impairment charges — — — 4,134 Legal settlements and related expenses 545 2,864 1,964 16,359 Other expense 1,695 847 5,086 4,042 Operating (loss) income ( 6,839 ) 10,765 48,942 86,296 Interest expense, net 239 27 2,121 143 Other expense, net ( 802 ) ( 4,249 ) ( 6,050 ) ( 9,057 ) (Loss) income before income taxes $ ( 7,880 ) $ 6,489 $ 40,771 $ 77,096 25 Table of Contents