GREEN DOT CORP 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the "Securities Act") and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may” and “assumes,” variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including inflation and interest rate trends and impacts and other macro-economic 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. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. In this 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. Overview 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. 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. 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 I, Item 1. Business " for more detailed information about our operations and Note 24—Segment Information to the Consolidated Financial Statements. Consolidated Financial Results and Trends Our consolidated results of operations for the years ended December 31, 2023 and 2022 were as follows: Year Ended December 31, 2023 2022 Change % (In thousands, except percentages) Total operating revenues $ 1,501,328 $ 1,449,566 $ 51,762 3.6 % Total operating expenses 1,478,658 1,355,191 123,467 9.1 % Net income 6,722 64,212 (57,490) (89.5) % Refer to "Segment Results" below for a summary of financial results of each of our reportable segments. 32 Table of Contents Total operating revenues Our total operating revenues for the year ended December 31, 2023 increased $51.8 million , or 4% over the prior year comparable period, driven primarily by higher revenues in our B2B Services segment, partially offset by lower revenues earned in our Consumer Services and Money Movement Services segments. Our consolidated total operating revenues increased year-over-year due to the continued growth of certain BaaS partner programs, which generated an increase in our total gross dollar volume of 35% for the year ended December 31, 2023. However, our total operating revenues were negatively impacted by several other factors impacting our deposit account programs, including our strategic decision to reduce marketing spend on GO2bank in the beginning of the fiscal year in response to market trends, our decision to wind-down many of our legacy cardholder programs in support of GO2bank, macro-economic factors leading to economic challenges for consumers and other trends that have impacted acquisition at retail locations, and the non-renewal of certain partner programs as previously disclosed. These factors impacted the number of consolidated active accounts, purchase volume and number of cash transfers, each of which decreased for the year ended December 31, 2023 by 14%, 16% and 6%, respectively, from the prior year comparable period. In our Consumer Services segment, revenues decreased during the year ended December 31, 2023 by 15% from the prior year comparable period. As compared to the year ended December 31, 2022, gross dollar volume and purchase volume each declined 15% and 16%, respectively, and the average number of active accounts and direct deposit accounts for the fiscal year declined by 16% and 17%, respectively. We believe these decreases are attributable to the factors discussed above, including lower account acquisition from reduced marketing spend on GO2bank in the beginning of fiscal year 2023 in our Direct channel in response to market trends, our decision to wind-down many of our legacy cardholder programs in support of GO2bank, observed changes in consumer traffic within our retail locations and the non-renewal of one of our retail partner programs. These factors had a corresponding impact on the amount of revenue we earn from accounts, including through monthly maintenance fees, new card fees, ATM fees and interchange fees. These declines in revenue from our Consumer Services segment were partially offset by the continued adoption of our optional overdraft protection program services available to accountholders across our portfolios. In our B2B Services segment, revenues increased by 30% during the year ended December 31, 2023 over the prior year comparable period. The increase was driven by strong year-over-year growth in our gross dollar volume, which increased during the year ended December 31, 2023 by 58%, despite a year-over-year reduction in purchase volume by 14%, and a year-over-year decline in the average number of active accounts by 20%. The growth in gross dollar volume was driven primarily by certain BaaS programs that do not generate interchange fees and resulted in a net increase in segment revenue due to higher program management service fees earned from these BaaS partners, partially offset by the non-renewals of other BaaS partners as previously disclosed. Our Money Movement Services segment revenues decreased for the year ended December 31, 2023 by 6% from the prior year comparable period. The decrease in our Money Movement Services segment was primarily attributable to the number of cash transfers processed, which decreased by 6% from the prior year comparable period, and to a lesser extent, a 3% decrease 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 lower active accounts within our Consumer Services and B2B Services segments discussed above. However, we continued to experience an increase in the number of cash transfers processed for third-party programs, which has grown steadily on a year-over-year basis, and represented the majority of our total cash transfers as of December 31, 2023. Our tax processing revenues decreased for the year ended December 31, 2023 from the prior year comparable period, as a result of a 3% year-over-year decrease in the number of tax refunds processed. The decrease in number of tax refunds processed was principally attributable to lower volumes from our online consumer tax channels. Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, decreased for the year ended December 31, 2023 by 11% from the prior year comparable period. The decrease in net interest income was the result of an increase in interest shared with certain BaaS partners (a reduction of revenue), partially offset by higher yields on our cash balances, each driven by increases in short-term interest rates by the Federal Reserve. 33 Table of Contents Total operating expenses Our total operating expenses for the year ended December 31, 2023 increased $123.5 million, or 9%, over the prior year comparable period. As discussed in more detail below, the increase in our total operating expenses was driven primarily by an increase in processing expenses within our B2B Services segment, and to a lesser extent, a net increase in other general and administrative expenses, partially offset by a decrease in sales and marketing expenses, and lower compensation and benefits expenses. The increase in our total operating expenses for the year ended December 31, 2023 was driven primarily by an increase in processing expenses associated with the growth of certain BaaS account programs within our B2B Services segment discussed above, partially offset by reductions in processor costs realized from the migration to our in-licensed card management system. Other general and administrative expenses increased during the year ended December 31, 2023 in part due to an estimated accrual we recorded based on a proposed consent order we and our subsidiary bank received from the Federal Reserve Board, as discussed in more detail below. Other general and administrative expenses also increased due to an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios and higher professional services fees related to our anti-money laundering program ("AML"), including improvements to our compliance controls, policies and procedures, partially offset by a $13 million legal settlement and certain impairment charges of internal-use software that were recorded in the prior year comparable period, which in each case did not recur in 2023. These increases were partially offset by lower sales and marketing expenses, principally due to decreases in sales commissions from lower revenues on products subject to tiered revenue-sharing agreements, as well as reduced marketing spend associated with GO2bank as discussed above. In addition, our marketing expenses decreased as a result of 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 and the non-renewal of certain partner programs as previously disclosed. Compensation and benefits expenses decreased, primarily due to lower accrued bonus compensation expense, partially offset by an increase in third-party call center support costs associated with the growth of certain programs within our B2B Services segment. We and our subsidiary bank received a proposed consent order from the Federal Reserve Board relating principally to various aspects of compliance risk management, including consumer compliance and compliance with AML regulations. The matters addressed in the proposed consent order relate to activities and practices that commenced prior to our CEO transition in 2020. Included in the proposed consent order are proposals for civil money penalties related to these issues. While we are still in discussions with the Federal Reserve Board regarding these proposals, we accrued an estimated liability of $20 million related to the proposed consent order during the three months ended December 31, 2023. We believe the estimate of the aggregate range of reasonably possible losses (meaning the likelihood of losses is more than remote but less than likely), is up to $50 million as of December 31, 2023. This estimated range of reasonably possible losses is based on currently available information for those proceedings in which we are involved and considers our best estimate of such losses for those matters for which an estimate can be made. However, there can be no assurance that our accrual is sufficient or that losses from the proposed consent order will not exceed the estimated range. For further discussion, see the headings "As a bank holding company, we are subject to extensive and potentially changing regulation and are required to serve as a source of strength for Green Dot Bank" and “Litigation or investigations could result in significant settlements, sanctions, fines or penalties” included as part of our risk factor disclosures in "Part I, Item 1A, Risk Factors," of this Annual Report on Form 10-K. Income taxes Our income tax expense for the year ended December 31, 2023 decreased $11.8 million, or 60% over the prior year comparable period. The decrease in our income tax expense was due primarily to an 83% decrease in our income before taxes, partially offset by an increase in our effective tax rate. Our effective tax rate for the years ended December 31, 2023 and 2022 was 54.1% and 23.5%, respectively. The increase in our effective tax rate was primarily attributable to the expense associated with tax shortfalls from stock-based compensation, expense related to nondeductible penalties, and higher expenses related to state taxes, net of federal benefits, partially offset by higher tax benefits from general business credits and cash value growth in bank owned life insurance policies. The increase in nondeductible penalties for the year ended December 31, 2023 is related to the tax effect associated with the estimated accrual for our proposed consent order received from the Federal Reserve Board discussed above. 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 changes have had no immediate effect and we do not expect that they will have a material impact on our results of operations in future periods. 34 Table of Contents In December 2021, the Organization for Economic Cooperation and Development ("OECD") released model rules introducing a 15% global minimum tax rate for large multinational corporations ("Pillar Two"). Certain countries in which we operate have enacted legislation consistent with the OECD model rules effective beginning in 2024. We are monitoring legislative developments and continuing to evaluate the potential impact of Pillar Two on our consolidated financial statements, but we do not expect that it will have a material impact on our results of operations in future periods. Outlook and Other Trends Affecting Our Business Based on the overall macro-economic environment, the effect of high inflation and interest rates, our commitment to making growth-oriented investments and the timing of the related expense savings from our ongoing technology transformation, the previously-disclosed non-renewals in our Consumer Services and B2B Services segments, our decision to wind-down many of our legacy cardholder programs in support of GO2bank, trends occurring within our retail channel in our Consumer Services segment, and our investments in our compliance programs, our consolidated operating profit has declined year-over-year in 2023. However, we do not expect some of these trends or events to recur in 2024. Based on our anticipated growth initiatives and cost reduction measures we have put in place, we expect our 2024 financial results will moderate on a year-over-year basis. We expect the previously-disclosed non-renewals in our Consumer Services and B2B Service segments and our decision to wind-down many of our legacy cardholder programs in support of GO2bank will impact our year-over-year growth rates in the first half of 2024. 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, among other things, cost-effectively re-engaging in strategic marketing initiatives in support of our GO2bank product and other initiatives across our account programs with the objective of returning to active account growth. During the third quarter of 2023, we completed the final account migrations of our processor conversion. While we will continuously seek opportunities to enhance and invest in our overall technology platform, we expect the implementation of our card management platform will allow us to begin fully realizing reductions in our processing expenses in 2024. Additionally, in February 2024, we also initiated a reduction in workforce that impacted approximately 10% of our global employees. This strategic reduction in force is intended to improve our cost structure, streamline operations, and refocus resources on core strategic priorities. We expect these cost reduction initiatives to be partially offset by increases in other areas, as we will continue to invest in and incur additional expenses in connection with our AML program, including improvements to our compliance controls, policies and procedures, which we believe will ultimately help us to continue to remediate regulatory matters discussed above and mitigate and reduce our fraud losses over the long term. During 2022, the Federal Reserve raised interest rates by an aggregate of 425 basis points. During 2023, the Federal Reserve raised rates by an additional 100 basis points, which further contributed to a market slowdown. The market consensus is that interest rates will decrease during 2024, but we expect that an elevated interest rate environment may persist for the foreseeable future. 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. 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, the net effect has had and may continue to have a negative impact on our consolidated financial statements, and will be dependent upon future interest rate changes enacted by the Federal Reserve. Further, the duration and magnitude of the continuing effects of macro-economic factors remain uncertain and dependent on various factors. See "Part I, Item 1A, Risk Factors," for an additional discussion of risks related to macro-economic factors. 35 Table of Contents Consolidated Key Metrics We review a number of metrics to help us monitor the performance of, and identify trends affecting, our business. We believe the following measures are the primary indicators of our revenues: Year Ended December 31, Year Ended December 31, 2023 2022 Change % 2022 2021 Change % (In millions, except percentages) Gross dollar volume $ 99,204 $ 73,484 $ 25,720 35.0 % $ 73,484 $ 70,822 $ 2,662 3.8 % Number of active accounts* 3.57 4.15 (0.58) (14.0) % 4.15 5.07 (0.92) (18.1) % Purchase volume $ 22,514 $ 26,687 $ (4,173) (15.6) % $ 26,687 $ 33,736 $ (7,049) (20.9) % Number of cash transfers 33.86 36.06 (2.2) (6.1) % 36.06 40.51 (4.45) (11.0) % Number of tax refunds processed 14.14 14.57 (0.43) (3.0) % 14.57 12.14 2.43 20.0 % * Represents number of active accounts as of December 31, 2023 , 2022, and 2021 respectively. See “Segment Results” for additional information and discussion regarding key metrics performance by segment. The definitions of our key metrics are as follows: Gross Dollar Volume — Represents the total dollar volume of funds loaded to our account products from direct deposit and non-direct deposit sources. A substantial portion of our gross dollar volume is generated from direct deposit sources. We use this metric to analyze the total amount of money moving onto our account programs, and to determine the overall engagement and usage patterns of our account holder base. This metric also serves as a leading indicator of revenue generated through our Consumer Services and B2B Services segments, inclusive of fees charged to account holders and interchange revenues generated through the spending of account balances. Number of Active Accounts — Represents any bank account within our Consumer Services and B2B Services segments that is subject to the USA PATRIOT Act of 2001 compliance and, therefore, requires customer identity verification prior to use and is intended to accept ongoing customer cash or ACH deposits. This metric includes checking accounts, general purpose reloadable prepaid card accounts, and secured credit card accounts in our portfolio that had at least one purchase, deposit or ATM withdrawal transaction during the applicable quarter. We use this metric to analyze the overall size of our active customer base and to analyze multiple metrics expressed as an average across this active account base. 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. Refer to sub-section entitled Consumer Services under “Segment Results” below for key metric results for direct deposit active accounts. Purchase Volume — Represents the total dollar volume of purchase transactions made by our account holders. This metric excludes the dollar volume of ATM withdrawals and volume generated by certain BaaS programs where the BaaS partner receives interchange fees and we earn a program management service fee. We use this metric to analyze interchange revenue, which is a key component of our financial performance. Number of Cash Transfers — Represents the total number of cash transfer transactions conducted by consumers, such as a point-of-sale swipe reload transaction, the purchase of a MoneyPak or an e-cash mobile remittance transaction marketed under various brand names, that we conducted through our retail distributors in a specified period. This metric excludes disbursements made through our Simply Paid wage disbursement platform. We review this metric as a measure of the size and scale of our retail cash processing network, as an indicator of customer engagement and usage of our products and services, and to analyze cash transfer revenue, which is a key component of our financial performance. Number of Tax Refunds Processed — Represents the total number of tax refunds processed in a specified period. The number of tax refunds processed is most concentrated during the first half of each year and is minimal during the second half of each year. We review this metric as a measure of the size and scale of our tax refund processing platform and as an indicator of customer engagement and usage of its products and services. 36 Table of Contents Key components of our results of operations Operating Revenues We classify our operating revenues into the following four categories: Card Revenues and Other Fees — Card revenues consist of monthly maintenance fees, ATM fees, new card fees and other revenues. We charge maintenance fees on prepaid cards, checking accounts and certain cash transfer products, such as MoneyPak, pursuant to the terms and conditions in our customer agreements. We charge ATM fees to cardholders when they withdraw money at certain ATMs in accordance with the terms and conditions in our cardholder agreements. We charge new card fees, if applicable, when a consumer purchases a prepaid card, gift card, or a checking account product through our Retail channel. Other revenues consist primarily of revenue associated with our gift card program, annual fees associated with our secured credit card portfolio, transaction-based fees, fees associated with optional products or services, such as our overdraft protection program, and cash-back rewards we offer to cardholders. Our cash-back rewards are recorded as a reduction to card revenues and other fees. Also included in card revenues and other fees are program management service fees earned from our BaaS partners for programs we manage on their behalf. Our aggregate monthly maintenance fee revenues vary primarily based upon the number of active accounts in our portfolio and the average fee assessed per account. Our average monthly maintenance fee per active account depends upon the mix of products in our portfolio at any given point in time and upon the extent to which fees are waived based on various incentives provided to customers in an effort to encourage higher usage and retention. Our aggregate ATM fee revenues vary based upon the number of cardholder ATM transactions and the average fee per ATM transaction. The average fee per ATM transaction depends upon the mix of products in our portfolio at any given point in time and the extent to which cardholders use ATMs within our free network that carry no fee for cash withdrawal transactions. Our aggregate new card fee revenues vary based upon the number of prepaid cards and checking accounts activated and the average new card fee. The average new card fee depends primarily upon the mix of products that we sell since there are variations in new account fees based on the product and/or the location or source where our products are purchased. The revenue we earn from each of these fees may also vary depending upon the channel in which the active accounts were acquired. For example, certain BaaS programs may not assess monthly maintenance fees and as a result, these accounts may generate lower fee revenue than other active accounts. Our aggregate other fees vary primarily based upon account sales of all types, gift card sales, purchase transactions and the number of active accounts in our portfolio. Cash Processing Revenues — Cash processing revenues consist of cash transfer revenues, tax refund processing service revenues, Simply Paid disbursement revenues and other tax processing service revenues. We earn cash transfer revenues when consumers fund their cards through a reload transaction at a Green Dot Network retail location. Our aggregate cash transfer revenues vary based upon the mix of locations where reload transactions occur, since reload fees vary by location. We earn tax refund processing service revenues at the point in time when a customer of a third-party tax preparation company chooses to pay his or her tax preparation fee through the use of our tax refund processing services. We earn Simply Paid disbursement fees from our business partners at the point in time payment disbursements are made. Interchange Revenues — We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates established by the payment networks, at the point in time when customers make purchase transactions using our products. Our aggregate interchange revenues vary based primarily on the number of active accounts in our portfolio, the average transactional volume of the active accounts in our portfolio, the merchant category of spend, and on the mix of cardholder purchases between those using signature identification technologies and those using personal identification numbers and the corresponding rates. Interest Income, net — Net interest income represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities held at Green Dot Bank. Interest-earning assets include cash from customer deposits, loans, and investment securities. Our interest-bearing liabilities held at Green Dot Bank include interest-bearing deposits. Our net interest income and our net interest margin fluctuate based on changes in the federal funds interest rates and changes in the amount and composition of our interest-bearing assets and liabilities. 37 Table of Contents Operating Expenses We classify our operating expenses into the following four categories: Sales and Marketing Expenses — Sales and marketing expenses consist primarily of the commissions we pay to our retail distributors, brokers and partners, advertising and marketing expenses, and the costs of manufacturing and distributing card packages, placards and promotional materials to our retail distributors and personalized debit cards to consumers who have activated their cards. We generally establish commission percentages in long-term distribution agreements with our retail distributors and partners. Aggregate commissions with our retail distributors are determined by the number of account products and cash transfers sold at their respective retail stores. Commissions with our partners and, in certain cases, our retail distributors are determined by the revenue generated from the ongoing use of the associated card programs. We incur advertising and marketing expenses for television, sponsorships, online and in-store promotions. Advertising and marketing expenses are recognized as incurred and typically deliver a benefit over an extended period of time. For this reason, these expenses do not always track changes in our operating revenues. Our manufacturing and distribution costs vary primarily based on the number of accounts activated by consumers. Compensation and Benefits Expenses — Compensation and benefits expenses represent the compensation and benefits that we provide to our employees and the payments we make to third-party contractors. While we have an in-house customer service function, we employ third-party contractors to conduct call center operations, handle routine customer service inquiries and provide consulting support in the area of IT operations and elsewhere. Compensation and benefits expenses associated with our customer service and loss management functions generally vary in line with the size of our active account portfolio, while the expenses associated with other functions do not. Processing Expenses — Processing expenses consist primarily of the fees charged to us by the payment networks, which process transactions for us, the third-party card processors that maintain the records of our customers' accounts and process transaction authorizations and postings for us and the third-party banks that issue our accounts. These costs generally vary based on the total number of active accounts in our portfolio and gross dollar volume transacted by those accounts. Also included in processing expenses are bank fees associated with our tax refund processing services and gateway and network fees associated with our Simply Paid disbursement services. Bank fees generally vary based on the total number of tax refund transfers processed and gateway and network fees vary based on the number of disbursements made. 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. These costs vary with the total number of active accounts in our portfolio, as do losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud. Costs associated with professional services, depreciation and amortization of our property and equipment, amortization of our acquired intangible assets, impairment charges of long-lived assets, rent and utilities vary based upon our investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics. Income Tax Expense Our income tax expense consists of the federal and state corporate income taxes accrued on income resulting from the sale of our products and services. As discussed above, while the IRA includes a number of revisions to the Internal Revenue Code ("IRC"), 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 going forward. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, current circumstances and various other assumptions that our management believes to be reasonable under the circumstances. In many instances, we could reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period to period. 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 38 Table of Contents 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 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. We consider the performance obligation period to be the average card lifetime, which is currently less than one year for our deposit account programs acquired through our Retail channel. The average card lifetime is determined based on recent historical data using the period from sale (or activation) of the card through the date of last positive balance. We reassess average card lifetime quarterly for prepaid cards and checking accounts and annually for gift cards. Average card lifetimes may vary in the future as cardholder behavior changes relative to historical experience because customers are influenced by changes in the pricing of our services, the availability of substitute products, and other factors. We also defer commissions paid to retail distributors related to new card sales as costs to obtain contracts and expense ratably over the average card lifetime commensurate with our deposit account programs acquired through our Retail channel. Transaction prices related to our account services are based on stand-alone fees stated within the terms and conditions and may also include certain elements of variable consideration depending upon the product’s features, such as cash-back rewards and fee assessments that may overdraw an account. We estimate such amounts using historical data and customer behavior patterns to determine these estimates which are recorded as a reduction to the corresponding fee revenue. Additionally, while the number of transactions that a cardholder may perform is unknown, any uncertainty is resolved at the end of each daily service contract. The amount of cash-back rewards on our programs varies based on multiple factors, including the terms and conditions for cardholder eligibility, the redemption amount based on cardholder activity, and the cardholder redemption rates. 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 13% for the year ended December 31, 2023 compared to the prior year period, as our cash-back programs have declined, principally from our 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. A relatively small change in any of our assumptions could result in a sizable increase or decrease in the amount of cash-back rewards we accrue. For example, on our Green Dot Unlimited product, a combination of a 1% increase in cardholder eligibility and a $1 increase in the average redemption amount would translate to additional cash rewards of approximately $0.5 million. Differences between actual results and our estimates are adjusted in the period that each cardholder's annual rewards cycle is completed. Reserve for Uncollectible Overdrawn Accounts For cardholders who are not enrolled or do not meet the eligibility requirements of our overdraft protection program, we generally decline authorization attempts for amounts that exceed the available balance in a cardholder’s account, however, the application of card association rules, the timing of the settlement of transactions and the assessment of the card’s monthly maintenance fee, among other things, can still result in overdrawn accounts. These overdrawn account balances are deemed to be receivables due from cardholders, and are included as a component of accounts receivable, net, on our consolidated balance sheets. We generally recover overdrawn account balances from those cardholders that perform a reload transaction and, in some cases, through enforcement of payment network rules, which allow us to recover the amounts from the merchant where the purchase transaction was conducted. 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 39 Table of Contents 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. We classify overdrawn accounts by transaction type and age groups based on the number of days since the account last had activity. We then calculate a reserve factor for each transaction type and age group based on the average recovery rate for the most recent six months discussed above. These factors are applied to these groups to estimate our overall reserve. We rely on these historical rates because they have remained relatively consistent over time. Generally, when more than 60 days have passed without any activity in an account, we consider recovery to be remote and charge off the full amount of the overdrawn account balance against the reserve for uncollectible overdrawn accounts. Our actual recovery rates and related estimates thereof may change in the future in response to factors such as customer behavior, product pricing and features that impact the frequency and velocity of reloads and other deposits to such accounts. 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 to the Consolidated Financial Statements included herein 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. 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. We also consider adjustments based on qualitative factors which in our judgment may affect the expected credit losses including, but not limited to, changes in prevailing economic or market conditions and the estimated value of the underlying collateral for collateral dependent loans. 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 to the Consolidated Financial Statements included herein for more information. Goodwill and Intangible Assets We review the recoverability of goodwill at least annually or whenever significant events or changes occur, which might impair the recovery of recorded costs. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill may not be recoverable include a decline in our stock price and market capitalization, declines in the market conditions of our products, reductions in our future cash flow estimates, and significant adverse industry or economic market trends. We test for impairment of goodwill by first assessing various qualitative factors with respect to developments in our business and the overall economy to determine if it is more likely than not our goodwill is impaired. In the event it is more likely than not the carrying value of our reporting units is greater than its fair value, we calculate the estimated fair value of the reporting unit and record an impairment charge for the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill. The estimate of fair value requires management to make a number of assumptions and projections, which could include, but would not be limited to, future revenues, earnings and the probability of certain outcomes. We completed our annual goodwill impairment test as of September 30, 2023 and concluded there was no impairment in any of our reporting units. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Certain factors which may occur and indicate that an impairment exists include, but are not limited to, the following: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the underlying assets; and significant adverse industry or market economic trends. In reviewing for impairment, we compare the carrying value of such assets to the estimated undiscounted future net cash flows expected from the use of the assets and their eventual disposition. In the event that the carrying value of assets is determined to be unrecoverable, we would estimate the fair value of the assets and record an impairment charge for the excess of the carrying value over the fair value. The estimate of fair value requires management to make a number of assumptions and projections, which could include, but would not be limited to, future revenues, earnings and the probability of certain outcomes. No impairment charges were recognized related to our intangible assets for the years ended December 31, 2023 and 2022. See Note 9—Goodwill and Intangible Assets to the Consolidated Financial Statements included herein for more information. 40 Table of Contents Results of Operations 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, 2022 to fiscal year ended December 31, 2021 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, 2022, filed with the SEC on March 1, 2023. Comparison of Consolidated Results for the Years Ended December 31, 2023 and 2022 Operating Revenues The following table presents a breakdown of our operating revenues among card revenues and other fees, cash processing revenues, interchange revenues and net interest income: Year Ended December 31, 2023 2022 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating revenues: Card revenues and other fees $ 1,007,565 67.1 % $ 876,318 60.5 % Cash processing revenues 225,416 15.0 235,445 16.2 Interchange revenues 231,003 15.4 295,646 20.4 Interest income, net 37,344 2.5 42,157 2.9 Total operating revenues $ 1,501,328 100.0 % $ 1,449,566 100.0 % Card Revenues and Other Fees — Card revenues and other fees totaled $1,007.6 million for the year ended December 31, 2023, an increase of $131.3 million, or 15%, from the comparable prior year period. Card revenues and other fees increased primarily due to growth in gross dollar volume in our B2B Services segment programs, which resulted in higher program management service fees earned from 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. These increases were partially offset by decreases in cardholder fees, such as monthly maintenance fees, new card fees and ATM fees for the reasons discussed above in "Overview." Cash Processing Revenues — Cash processing revenues totaled $225.4 million for the year ended December 31, 2023, a decrease of $10.0 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 as a result of lower active accounts within our Consumer Services and B2B Services segments, partially offset by an increase in the number of cash transfers processed for third-party programs as discussed above in "Overview." To a lesser extent, cash processing revenues also decreased due to lower overall tax processing revenues, as a result of a 3% decrease in the number of tax refunds processed. Interchange Revenues — Interchange revenues totaled $231.0 million for the year ended December 31, 2023, a decrease of $64.6 million, or 22%, from the comparable prior year period. The decrease was primarily due to a 16% decrease in purchase volume during the year ended December 31, 2023, as well as a lower effective interchange rate for the comparable periods. Our interchange fees have both fixed and variable components, and as a result, the effective rate we earn may vary based on the size of transactions, among other factors. In addition, our interchange rate declined due to a mix shift toward categories of consumer purchases with lower effective rates. Interest Income, net — Net interest income totaled $37.3 million for the year ended December 31, 2023, a decrease of $4.9 million, or 11%, from the comparable prior year period. The decrease in net interest income was the result of an increase in interest shared with certain BaaS partners (a reduction of revenue), partially offset by higher yields on our cash balances, each driven by increases in short-term interest rates by the Federal Reserve. 41 Table of Contents Operating Expenses The following table presents a breakdown of our operating expenses among sales and marketing, compensation and benefits, processing, and other general and administrative expenses: Year Ended December 31, 2023 2022 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating expenses: Sales and marketing expenses $ 245,325 16.3 % $ 297,900 20.6 % Compensation and benefits expenses 238,528 15.9 243,939 16.8 Processing expenses 639,228 42.6 481,460 33.2 Other general and administrative expenses 355,577 23.7 331,892 22.9 Total operating expenses $ 1,478,658 98.5 % $ 1,355,191 93.5 % Sales and Marketing Expenses — Sales and marketing expenses totaled $245.3 million for the year ended December 31, 2023, a decrease of $52.6 million, or 18% compared to the year ended December 31, 2022. 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 our strategic decision to reduce marketing spend on GO2bank in the beginning of the fiscal year in our Direct channel in response to market trends. In addition, our sales and marketing expenses decreased as a result of 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 and the non-renewal of certain partner programs as previously disclosed. Compensation and Benefits Expenses — Compensation and benefits expenses totaled $238.5 million for the year ended December 31, 2023, a decrease of $5.4 million, or 2%, compared to the year ended December 31, 2022. The decrease was primarily due to lower accrued bonus compensation expense, partially offset by an increase in third-party call center support costs associated with the growth of certain programs within our B2B Services segment. Processing Expenses — Processing expenses totaled $639.2 million for the year ended December 31, 2023, an increase of $157.7 million, or 33%, compared to the year ended December 31, 2022. This increase was principally due to growth in gross dollar volume on certain BaaS account programs within our B2B Services segment, partially offset by reductions in processor costs realized from the migration to our in-licensed card management system. Other General and Administrative Expenses — Other general and administrative expenses totaled $355.6 million for the year ended December 31, 2023, an increase of $23.7 million, or 7%, from the comparable prior year period. The increase in other general and administrative expenses during the year ended December 31, 2023 was in part due to an estimated accrual we recorded based on a proposed consent order we and our subsidiary bank received from the Federal Reserve Board, as discussed above in "Overview." Other general and administrative expenses also increased due to an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios and higher professional services fees related to our AML program, partially offset by a $13 million legal settlement and certain impairment charges of internal-use software that were recorded in the prior year comparable period, which in each case did not recur in 2023. 42 Table of Contents Income Tax Expense The following table presents a breakdown of our effective tax rate among federal, state and other: Year Ended December 31, 2023 2022 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 2.0 2.2 Foreign tax rate differential (1.5) (0.3) General business credits (25.0) (3.2) Stock-based compensation 28.8 3.2 IRC 162(m) limitation 0.4 0.8 Bank owned life insurance (4.2) (0.7) Nondeductible penalties 29.1 0.1 Global intangible low-taxed income tax 2.0 0.3 Other 1.5 0.1 Effective tax rate 54.1 % 23.5 % Our income tax expense totaled $7.9 million for the year ended December 31, 2023, representing a decrease of $11.8 million from the comparable prior year period. The decrease in income tax expense was primarily driven by the decrease in our operating income, partially offset by an increase in our effective tax rate. Our effective tax rate for the year ended December 31, 2023 is higher than our statutory federal income tax rate primarily due to the expense associated with tax shortfalls from stock-based compensation, the expense related to nondeductible penalties, and higher expenses related to state taxes, net of federal benefits, partially offset by higher tax benefits from general business credits and cash value growth in bank owned life insurance policies. The increase in nondeductible penalties for the year ended December 31, 2023 is related to the tax effect associated with the estimated accrual for our proposed consent order received from the Federal Reserve Board discussed above in "Overview." 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 tax shortfalls from stock-based compensation, and higher expenses related to state taxes, net of federal benefits, partially offset by higher tax benefits from general business credits. The "Other" category in our effective tax rate consists of a variety of permanent differences, none of which were individually significant. Segment Results Consumer Services Year Ended December 31, 2023 2022 Change % (In thousands, except percentages) Financial Results Segment revenues $ 498,617 $ 586,798 $ (88,181) (15.0) % Segment expenses 321,427 364,650 (43,223) (11.9) % Segment profit $ 177,190 $ 222,148 $ (44,958) (20.2) % Key Metrics (In millions, except percentages) Gross dollar volume $ 19,708 $ 23,257 $ (3,549) (15.3) % Number of active accounts* 2.05 2.37 (0.32) (13.5) % Direct deposit active accounts* 0.49 0.63 (0.14) (22.2) % Purchase volume $ 15,193 $ 18,136 $ (2,943) (16.2) % * Represents number of active and direct deposit active accounts as of December 31, 2023 and 2022, respectively. 43 Table of Contents As additional supplemental information, our key metrics within our Consumer Services segment is presented on a quarterly basis as follows: 2023 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Gross dollar volume $ 4,290 $ 4,619 $ 5,122 $ 5,677 $ 5,426 $ 5,495 $ 5,715 $ 6,621 Number of active accounts* 2.05 2.16 2.35 2.41 2.37 2.51 2.78 3.04 Direct deposit active accounts* 0.49 0.52 0.59 0.60 0.63 0.66 0.67 0.69 Purchase volume $ 3,312 $ 3,553 $ 3,984 $ 4,344 $ 4,229 $ 4,302 $ 4,588 $ 5,017 * 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, 2023 decreased $88.2 million, or 15%, compared to the prior year comparable period, while our segment expenses for the year ended December 31, 2023 decreased $43.2 million, or 12%. Our gross dollar volume, purchase 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, 2023 by 15%, 16%, 16% and 17%, respectively, from the comparable prior year period, primarily from each of the several factors discussed above in "Overview." These factors include our strategic decision to reduce marketing spend on GO2bank in the beginning of the fiscal year in response to market trends and observed changes in consumer traffic within our retail locations, both of which have negatively impacted account acquisition, our decision to wind-down many of our legacy cardholder programs in support of GO2bank, as well as the non-renewal of one of our retail partner programs as previously disclosed. Our monthly maintenance fee revenues, new card fee revenues, ATM fee revenues and interchange revenues decreased as a result of the decreases in each of our key metrics stated above. In addition, our interchange rate declined due to a mix shift toward categories of consumer purchases with lower effective rates. These decreases were partially offset by increased customer adoption of optional features launched on our card programs, such as our overdraft protection program. Our segment profit for the year ended December 31, 2023 decreased by approximately 20% from the prior year comparable period. Consumer Services expenses for the year ended December 31, 2023 decreased year-over-year due to several factors, including a decrease in sales commissions from lower revenues on products subject to tiered revenue-sharing agreements, a decrease in marketing spend on GO2bank, lower supply chain expenses, and lower processing expenses from our processor migration, each as discussed above, partially offset by an increase in transactions losses attributable in part to an increase in customer dispute volume across our portfolios. B2B Services Year Ended December 31, 2023 2022 Change % (In thousands, except percentages) Financial Results Segment revenues $ 772,991 $ 594,468 $ 178,523 30.0 % Segment expenses 695,688 508,096 187,592 36.9 % Segment profit $ 77,303 $ 86,372 $ (9,069) (10.5) % Key Metrics (In millions, except percentages) Gross dollar volume $ 79,496 $ 50,227 $ 29,269 58.3 % Number of active accounts* 1.52 1.78 (0.26) (14.6) % Purchase volume $ 7,321 $ 8,551 $ (1,230) (14.4) % * Represents number of active accounts as of December 31, 2023 and 2022, respectively. 44 Table of Contents As additional supplemental information, our key metrics within our B2B Services segment is presented on a quarterly basis as follows: 2023 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Gross dollar volume $ 22,065 $ 20,217 $ 19,602 $ 17,612 $ 14,584 $ 13,187 $ 11,641 $ 10,815 Number of active accounts* 1.52 1.51 1.36 1.43 1.78 1.82 1.83 1.89 Purchase volume $ 1,961 $ 1,809 $ 1,750 $ 1,801 $ 2,063 $ 2,141 $ 2,172 $ 2,175 * Represents number of active accounts as of each period end. Segment revenues within our B2B Services for the year ended December 31, 2023 increased $178.5 million, or 30%, compared to the prior year period, while our segment expenses for the year ended December 31, 2023 increased $187.6 million, or 37%. Our total gross dollar volume during the year ended December 31, 2023 increased by 58% from the prior year comparable period, despite the average number of active accounts across the year decreasing by 20% 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. The growth in gross dollar volume from these programs resulted in a net increase in segment revenue due to higher program management service fees earned from these BaaS partners. This increase was partially offset by a decrease in active accounts and the associated purchase volume, which decreased due to the non-renewals of certain other BaaS partners as previously disclosed, resulting in a lower amount of interchange revenue earned year-over-year. Purchase volume decreased by approximately 14% for the year ended December 31, 2023 from the prior year comparable period. B2B Services expenses increased for the year ended December 31, 2023 principally due to higher processing expenses and third-party call center support costs, each associated with the growth of certain BaaS account programs, and higher overall transaction losses as a result of the increase in gross dollar volume. This segment also experienced margin compression because certain BaaS partnerships were structured based on a fixed profit and therefore, our segment profit for certain arrangements will not scale with revenue growth. Money Movement Services Year Ended December 31, 2023 2022 Change % (In thousands, except percentages) Financial Results Segment revenues $ 209,674 $ 222,192 $ (12,518) (5.6) % Segment expenses 96,498 104,362 (7,864) (7.5) % Segment profit $ 113,176 $ 117,830 $ (4,654) (3.9) % Key Metrics (In millions, except percentages) Number of cash transfers 33.86 36.06 (2.2) (6.1) % Number of tax refunds processed 14.14 14.57 (0.43) (3.0) % As additional supplemental information, our key metrics within our Money Movement Services segment is presented on a quarterly basis as follows: 2023 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Number of cash transfers 8.19 8.31 8.66 8.70 9.03 9.16 9.00 8.87 Number of tax refunds processed 0.16 0.20 3.87 9.91 0.20 0.28 4.48 9.61 Segment revenues within our Money Movement services for the year ended December 31, 2023 decreased $12.5 million, or 6%, from the comparable prior year period, and segment expenses for the year ended December 31, 2023 decreased $7.9 million, or 8%. 45 Table of Contents The decrease in segment revenues for the year ended December 31, 2023 was driven primarily by a lower number of cash transfers processed, which decreased by 6% 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, partially offset by an increase in the number of cash transfers processed for third-party programs. To a lesser extent, this decrease was also driven by a decrease in our tax processing revenues, as the number of tax refunds processed decreased by 3% from the prior year comparable period principally due to lower volumes from our online consumer tax channels. Money Movement Services segment expenses decreased for the year ended December 31, 2023 by 8% and segment profit increased by approximately 4% year-over-year. Segment expenses decreased for the year ended December 31, 2023 primarily due to a decrease in third-party call center support costs as a result of lower volumes from our tax refund processing services and tax platform efficiencies, and decreases in sales commissions from lower cash transfer revenues. Corporate and Other Year Ended December 31, 2023 2022 Change % (In thousands, except percentages) Financial Results Unallocated revenue and inter-segment eliminations $ 2,513 $ 20,151 $ (17,638) (87.5) % Unallocated corporate expenses and inter-segment eliminations 199,308 207,747 (8,439) (4.1) % $ (196,795) $ (187,596) $ (9,199) 4.9 % 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. Refer to Note 24—Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation. Revenues within our Corporate and Other segment decreased primarily due to the portion of interest we share with certain BaaS partners (a reduction of revenue). Net interest income decreased by 11% for the year ended December 31, 2023 from the prior year comparable period. The increase in interest shared with certain BaaS partners (a reduction of revenue) was partially offset by higher yields on our cash, each driven by increases in short-term interest rates by the Federal Reserve. Unallocated corporate expenses for the year ended December 31, 2023 decreased year-over-year by approximately 4%, driven primarily by lower salary and wage expenses and related benefits for the comparable periods due to lower accrued bonus compensation, partially offset by higher professional services fees related to our AML program, and higher hosting costs and software licenses as a result of our technology transformation. 46 Table of Contents Capital Requirements for Bank Holding Companies Our subsidiary bank, Green Dot Bank, is a member bank of the Federal Reserve System and our primary regulators are the Federal Reserve Board and the Utah Department of Financial Institutions. We and Green Dot Bank are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines, we and Green Dot Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Basel III rules, which were promulgated by the Federal Reserve and other U.S. banking regulators, provide for risk-based capital, leverage and liquidity standards. Under the Basel III rules, we must maintain a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6%, a ratio of total capital to risk-weighted assets of at least 8% and a minimum Tier 1 leverage ratio of 4.0%. Either or both of Green Dot Corporation and Green Dot Bank may qualify for and opt to use, from time to time, the community bank leverage ratio framework under the Federal Reserve’s version of the U.S. Basel III Rules. Under the community bank leverage ratio framework, a qualifying community banking organization may generally satisfy its capital requirements (and capital conservation buffer) under the U.S. Basel III rules provided that it has a Tier 1 leverage ratio greater than 9% and satisfies other applicable conditions. 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. As of December 31, 2023 and 2022, we and Green Dot Bank were categorized as "well capitalized" under applicable regulatory standards. To be categorized as "well capitalized," we and Green Dot Bank must maintain specific total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There were no conditions or events since December 31, 2023 which management believes would have changed our category as "well capitalized." The definitions associated with the amounts and ratios below are as follows: Ratio Definition Tier 1 leverage ratio Tier 1 capital divided by average total assets Common equity Tier 1 capital ratio Common equity Tier 1 capital divided by risk-weighted assets Tier 1 capital ratio Tier 1 capital divided by risk-weighted assets Total risk-based capital ratio Total capital divided by risk-weighted assets Terms Definition Tier 1 capital and Common equity Tier 1 capital Includes common stock and retained earnings, adjusted for items primarily related to accumulated OCI, goodwill, deferred tax assets and intangibles. Total capital Tier 1 capital plus supplemental capital items such as the allowance for credit losses, subject to certain limits Average total assets Average total consolidated assets during the period less deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles assets Risk-weighted assets Represents the amount of assets or exposure multiplied by the standardized risk weight (%) associated with that type of asset or exposure. The standardized risk weights are prescribed in the bank capital rules and reflect regulatory judgment regarding the riskiness of a type of asset or exposure 47 Table of Contents The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at December 31, 2023 and 2022, were as follows: December 31, 2023 Amount Ratio Regulatory Minimum "Well-capitalized" Minimum (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 730,459 17.9 % 4.0 % n/a Common equity Tier 1 capital $ 730,459 38.0 % 4.5 % n/a Tier 1 capital $ 730,459 38.0 % 6.0 % 6.0 % Total risk-based capital $ 749,623 39.0 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 404,559 9.8 % 4.0 % 5.0 % Common equity Tier 1 capital $ 404,559 27.8 % 4.5 % 6.5 % Tier 1 capital $ 404,559 27.8 % 6.0 % 8.0 % Total risk-based capital $ 412,966 28.4 % 8.0 % 10.0 % December 31, 2022 Amount Ratio Regulatory Minimum "Well-capitalized" Minimum (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 661,404 16.6 % 4.0 % n/a Common equity Tier 1 capital $ 661,404 40.1 % 4.5 % n/a Tier 1 capital $ 661,404 40.1 % 6.0 % 6.0 % Total risk-based capital $ 675,043 40.9 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 389,541 9.6 % 4.0 % 5.0 % Common equity Tier 1 capital $ 389,541 31.2 % 4.5 % 6.5 % Tier 1 capital $ 389,541 31.2 % 6.0 % 8.0 % Total risk-based capital $ 397,870 31.8 % 8.0 % 10.0 % Liquidity and Capital Resources The following table summarizes our major sources and uses of cash for the periods presented: Year Ended December 31, 2023 2022 (In thousands) Total cash provided by (used in) Operating activities $ 97,519 $ 277,686 Investing activities 33,157 (820,188) Financing activities (264,019) 36,707 Decrease in unrestricted cash, cash equivalents and restricted cash $ (133,343) $ (505,795) During the years ended December 31, 2023 and 2022, 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. As of December 31, 2023, our primary source of liquidity was unrestricted cash and cash equivalents totaling $682.3 million. We also consider our $2.2 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 48 Table of Contents 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 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 $97.5 million of net cash provided by operating activities during the year ended December 31, 2023 principally resulted from $6.7 million of net income, adjusted for certain non-cash operating expenses of $158.9 million, and a decrease in net working capital assets and liabilities of $68.1 million. The year-over-year decrease in our net cash provided by operating activities during the year ended December 31, 2023 is principally due to a $57.5 million decline in net income and net working capital changes associated with cash paid for taxes, increases in volume of fee advances, and timing impacts associated with the non-renewal of programs discussed above. Our cash paid for taxes was adversely impacted by the requirement to capitalize and amortize research and development expenses under Section 174 of the IRC. Although Congress is considering legislation that would reinstate and extend Section 174 expensing for certain research and experimental expenditures, the possibility that this will happen is uncertain. See Note 14—Income Taxes of the Consolidated Financial Statements included herein for additional information. 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. Cash Flows from Investing Activities Our $33.2 million of net cash provided by investing activities during the year ended December 31, 2023 primarily reflects net proceeds from sales and maturities of our available-for-sale investment securities of $176.9 million, payments for property, equipment and internal-use software of $75.9 million, net changes in loans of $29.0 million, and capital contributions related to our investment in TailFin Labs, LLC of $35.0 million. The year-over-year increase in our net cash provided by investment activities during the year ended December 31, 2023 is principally associated with maturities of our investment securities and our decision not to reinvest the proceeds into new investment securities. 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 property, equipment and internal-use software 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. Cash Flows from Financing Activities Our $264.0 million of net cash used in financing activities for the year ended December 31, 2023 was principally the result of a net decrease in customer deposits of $159.4 million and a net decrease in obligations to customers of $132.2 million, partially offset by net borrowings on our revolving credit facility of $26.0 million. 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. Other Sources of Liquidity: 2019 Revolving Facility In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. The credit facility provides for a $100.0 million five-year revolving line of credit (the "2019 Revolving Facility"), maturing in October 2024. We use the proceeds of any borrowings under the 2019 Revolving Facility for working capital and other general corporate purposes, subject to the terms and conditions set forth in the credit agreement. We classify amounts outstanding on our consolidated balance sheets based on the remaining duration of the credit facility, however, we may make voluntary repayments at any time prior to maturity. As of December 31, 2023, the outstanding balance on the 2019 Revolving Facility was $61.0 million, with $39.0 million available for use. 49 Table of Contents 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 December 31, 2023 was 7.23%. We are also subject to certain financial covenants, which include maintaining a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as defined in the agreement. At December 31, 2023, we were in compliance with all such covenants. Material Cash Requirements While the overall macro-economic environment, the effect of high inflation and interest rates, and other factors described in "Outlook and Other Trends Affecting Our Business" above 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, equipment and internal-use software 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 rate of change of computer hardware and software used in our business and our business outlook as a result of macro-economic uncertainties. We intend to continue to invest in new products and programs, including GO2bank, new features for our existing products and IT infrastructure in order to scale and operate effectively to meet our strategic objectives. We expect our capital expenditures in 2024 to be lower compared to our capital expenditures in 2023, but at similar levels compared to our annual investments in recent years. We expect to fund these capital expenditures primarily through our cash flows provided by operating activities. We have used cash to acquire businesses and technologies and we anticipate that we may continue to do so in the future. The nature of these transactions, however, makes it difficult to predict the amount and timing of such cash requirements. Additionally, we may make periodic cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments at levels we have agreed to with our regulators. If another economic relief package is signed into law that provides for substantial additional direct payments and unemployment benefits, we may need to increase the size of our cash contributions to Green Dot Bank to maintain its capital, leverage and other financial commitments. Contractual Obligations On January 2, 2020, we effectuated our agreement with Walmart to jointly establish a new fintech accelerator under the name TailFin Labs, LLC, with a mission to develop innovative products, services and technologies that sit at the intersection of retail shopping and consumer 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. Our final payment under this commitment was paid in January 2024. See Note 7—Equity Method Investment to the Consolidated Financial Statements included herein for additional information. Our remaining leases have terms of less than 1 year to approximately 9 years, subject to renewal options of varying terms, and as of December 31, 2023, we had a total lease liability of $6.1 million. See Note 20—Leases to the Consolidated Financial Statements included herein for additional information regarding our lease liabilities as of December 31, 2023. 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. While our contractual commitments will have an impact on our future liquidity, we believe that we will be able to adequately fulfill these obligations through cash generated from operations and from our existing cash balances. 50 Table of Contents Statistical Disclosure by Bank Holding Companies The following section presents supplemental information for Bank Holding Companies. The tables in this section include Green Dot Bank information only. Distribution of Assets, Liabilities and Stockholders' Equity The following table presents average balance data and interest income and expense data for our banking operations, as well as the related interest yields and rates for the years ended December 31, 2023, 2022 and 2021: Year ended December 31, 2023 2022 2021 Average balance Interest income/ interest expense Yield/ rate Average balance Interest income/ interest expense Yield/ rate Average balance Interest income/ interest expense Yield/ rate (In thousands, except percentages) Assets Interest-bearing assets Loans (1) $ 23,801 $ 2,315 9.7 % $ 19,608 $ 2,273 11.6 % $ 25,101 $ 2,316 9.2 % Taxable investment securities 2,671,049 49,920 1.9 2,581,235 40,349 1.6 1,271,329 13,831 1.1 Non-taxable investment securities 29,491 814 2.8 27,852 727 2.6 28,956 712 2.5 Federal reserve stock 7,794 345 4.4 7,693 324 4.2 7,069 322 4.6 Fee advances 13,068 3,276 25.1 9,672 2,061 21.3 6,756 1,491 22.1 Cash 548,044 29,981 5.5 965,070 13,085 1.4 2,012,597 2,539 0.1 Total interest-bearing assets 3,293,247 86,651 2.6 % 3,611,130 58,819 1.6 % 3,351,808 21,211 0.6 % Non-interest bearing assets 311,643 258,260 286,441 Total assets $ 3,604,890 $ 3,869,390 $ 3,638,249 Liabilities Interest-bearing liabilities Checking accounts $ 1,461 $ 7 0.5 % $ 2,204 $ 38 1.7 % $ 5,345 $ 5 0.1 % Savings deposits 23,945 15 0.1 16,004 128 0.8 26,745 25 0.1 Time deposits, denominations greater than or equal to $250 1,320 26 2.0 1,833 40 2.2 1,827 26 1.4 Time deposits, denominations less than $250 3,599 56 1.6 3,313 31 0.9 3,142 37 1.2 Total interest-bearing liabilities 30,325 104 0.3 % 23,354 237 1.0 % 37,059 93 0.3 % Non-interest bearing liabilities 3,495,342 3,683,481 3,304,652 Total liabilities 3,525,667 3,706,835 3,341,711 Total stockholders' equity 79,223 162,555 296,538 Total liabilities and stockholders' equity $ 3,604,890 $ 3,869,390 $ 3,638,249 Net interest income/yield on earning assets $ 86,547 2.3 % $ 58,582 0.6 % $ 21,118 0.4 % ___________ (1) Non-performing loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis. The following table presents the amount of changes in interest income and interest expense due to changes in both average volume and average rate for the years ended: 51 Table of Contents December 31, 2023 December 31, 2022 Total Change in Interest Income/ Expense Change Due to Rate (1) Change Due to Volume (1) Total Change in Interest Income/ Expense Change Due to Rate (1) Change Due to Volume (1) (In thousands) Interest-earning assets Loans $ 42 $ (128) $ 170 $ (43) $ (294) $ 251 Taxable investment securities 9,571 8,126 1,445 26,518 7,896 18,622 Non-taxable investment securities 87 43 44 15 40 (25) Federal reserve stock 21 17 4 2 (13) 15 Fee advances 1,215 406 809 570 (50) 620 Cash 16,896 19,701 (2,805) 10,546 11,141 (595) Change in interest income $ 27,832 $ 28,165 $ (333) $ 37,608 $ 18,720 $ 18,888 Interest-bearing liabilities Checking accounts $ (31) $ (16) $ (15) $ 33 $ 34 $ (1) Savings deposits (113) (245) 132 103 109 (6) Time deposits, denominations greater than or equal to $250 (14) (4) (10) 14 14 — Time deposits, denominations less than $250 25 22 3 (6) (8) 2 Change in interest expense (133) (243) 110 144 149 (5) Change in net interest income and expense $ 27,965 $ 28,408 $ (443) $ 37,464 $ 18,571 $ 18,893 ___________ (1) The change in interest income and expense not solely due to changes in volume or rate has been allocated on a pro-rata basis to the volume and rate columns. Maturities and Sensitivities to Changes in Interest Rates The following table presents contractual maturities of loans by type. All of our loans due after one year are based upon fixed interest rates under the stated terms of the loan agreements: Due in one year or less Due after one year through five years Due after five years through fifteen years Due after fifteen years Total (In thousands) Residential $ 35 $ 537 $ 4,523 $ — $ 5,095 Commercial 2,517 41 158 — 2,716 Installment 1,063 668 2,626 — 4,357 Consumer 20,019 — — — 20,019 Secured credit card 9,730 — — — 9,730 Total fixed-income securities $ 33,364 $ 1,246 $ 7,307 $ — $ 41,917 52 Table of Contents Allocation of Reserve of Credit Losses The following table shows the reserve for credit losses allocated to each loan category: December 31, 2023 December 31, 2022 Amount Percent of loans in each category to total loans Amount Percent of loans in each category to total loans (In thousands, except percentages) Residential $ 67 0.6 % $ 83 0.9 % Commercial 31 0.3 29 0.3 Installment 66 0.6 38 0.4 Consumer 10,032 88.1 7,880 86.8 Secured credit card 1,187 10.4 1,048 11.6 Total $ 11,383 100.0 % $ 9,078 100.0 % Deposits The following table shows Green Dot Bank’s average deposits and the annualized average rate paid on those deposits for the years ended December 31, 2023, 2022, and 2021: December 31, 2023 December 31, 2022 December 31, 2021 Average Balance Weighted-Average Rate Average Balance Weighted-Average Rate Average Balance Weighted-Average Rate (In thousands, except percentages) Interest-bearing deposit accounts Checking accounts $ 1,461 0.5 % $ 2,204 1.7 % $ 5,345 0.1 % Savings deposits 23,945 0.1 16,004 0.8 26,745 0.1 Time deposits, denominations greater than or equal to $250 1,320 2.0 1,833 2.2 1,827 1.4 Time deposits, denominations less than $250 3,599 1.6 3,313 0.9 3,142 1.2 Total interest-bearing deposit accounts 30,325 0.3 % 23,354 1.0 % 37,059 0.3 % Non-interest bearing deposit accounts 3,220,323 3,286,137 2,926,280 Total deposits $ 3,250,648 $ 3,309,491 $ 2,963,339 Our aggregate deposits in denominations that met or exceeded FDIC limits were $310 million, $215 million and $180 million as of December 31, 2023, 2022 and 2021, respectively. Our time deposits portfolio in excess of FDIC limits is not material at December 31, 2023. Key Financial and Credit Ratios The following tables show certain of Green Dot Bank’s key financial and credit ratios for the years ended December 31, 2023, 2022, and 2021: December 31, 2023 December 31, 2022 December 31, 2021 Net return on assets 2.3 % 3.3 % 2.0 % Net return on equity 104.2 79.2 24.6 Equity to assets ratio 2.2 4.2 8.1 Allowance for credit losses to total loans outstanding 27.2 29.8 22.4 Nonaccrual loans to total loans outstanding 6.1 7.3 3.4 Allowance for credit losses to nonaccrual loans 442.1 405.4 648.9 December 31, 2023 December 31, 2022 December 31, 2021 Net charge-offs during the period to average loans outstanding: (In thousands) Consumer Net charge-off during the period $ 20,111 $ 25,521 $ 18,798 Average amount outstanding 10,036 16,337 7,578 Secured credit card Net charge-off during the period 3,895 3,308 1,382 Average amount outstanding 12,398 10,924 14,062 53 Table of Contents