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Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-09 · 182 added, 226 removed, 282 unchanged (59% of the section changed)

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

Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including increasing inflation and interest rates 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 below, under “Part II, Item 1A.

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 below, under “Part II, Item 1A.

Risk Factors,” and elsewhere herein.

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

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

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

Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all.

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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 our 2022 Annual Report on Form 10-K "Part 1, Item 1.

Refer to our 2023 Annual Report on Form 10-K "Part I, Item 1.

Business" for more detailed information about our operations and Note 19—Segment Information in the notes to the accompanying unaudited consolidated financial statements.

Consolidated Financial Results and Trends

Our consolidated results of operations for the three and nine months ended September 30, 2023 and 2022 were as follows:

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

2023 2022 Change % 2023 2022 Change %

Our consolidated results of operations for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

2024 2023 Change %

(In thousands, except percentages)

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Total operating expenses 441,434 365,385 76,049 20.8 %

Net (loss) income (6,265) 4,696 (10,961) * 30,325 58,328 (28,003) (48.0) %

* Change not meaningful

Net income 4,750 36,012 (31,262) (86.8) %

Refer to "Segment Results" below for a summary of financial results of each of our reportable segments.

Total operating revenues

Our total operating revenues for the three and nine months ended September 30, 2023 increased $9.3 million, or 2.7%, and $28.2 million, or 2.5%, respectively, over the prior year comparable periods, 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 33% and 36% for the three and nine months ended September 30, 2023, respectively.

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 for the first half of the 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 BaaS 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 three months ended September 30, 2023 by 15%, 17% and 9%, respectively, over the prior year comparable periods.

Similarly, our purchase volume and number of cash transfers decreased for the nine months ended September 30, 2023 by 15% and 5%, respectively, from the prior year comparable period.

While the total number of cash transfers declined in the periods presented, we continued to experience an increase in the number of cash transfers processed for third-party programs, which has grown steadily year-over-year in each of the periods presented and represented the majority of our total cash transfers as of September 30, 2023.

In our Consumer Services segment, revenues decreased during each of the three and nine months ended September 30, 2023 by 13% over the prior year comparable periods.

Gross dollar volume, the number of active accounts, the number of direct deposit active accounts and purchase volume declined year-over-year for the three months ended September 30, 2023 by 16%, 14%, 21% and 17%, respectively.

Gross dollar volume and purchase volume declined year-over-year by similar levels of 14% and 15%, respectively, for the nine months ended September 30, 2023.

We believe these decreases are attributable to the factors discussed above, including lower account acquisition from reduced marketing spend on GO2bank for the first half of 2023, 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, 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, as well as an increase in estimated breakage revenue on our gift card portfolio during the three months ended September 30, 2023.

In our B2B Services segment, revenues increased during the three and nine months ended September 30, 2023 by 26% and 27%, respectively, over the prior year comparable periods.

The increase was driven by strong year-over-year growth in our gross dollar volume, which increased during the three and nine months ended September 30, 2023 by 53% and 61%, respectively, despite reductions in purchase volume of 16% and 17%, respectively, and a decline in the number of active accounts by 17%.

Growth in gross dollar volume concentrated from certain BaaS programs 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 three and nine months ended September 30, 2023 by 15% and 5%, respectively, over the prior year comparable periods.

The decrease in our Money Movement Services segment was primarily attributable to a decrease in the number of cash transfers processed, which decreased for the three and nine months ended September 30, 2023 by 9% and 5%, respectively, from the prior year comparable periods.

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

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

In addition, the number of tax refunds processed during the three and nine months ended September 30, 2023 decreased by 29% and 3%, respectively, compared with the prior year periods, which to a lesser extent reduced revenues generated from this segment.

The decrease in the number of tax refunds processed during three months ended September 30, 2023 was primarily due to a timing shift within the tax season.

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, decreased by 26% and 6%, respectively, for the three and nine months ended September 30, 2023.

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.

Our total operating revenues for the three months ended March 31, 2024 increased $35.6 million, or 8.6%, over the prior year comparable period, driven primarily by higher revenues in our B2B Services and Money Movement Services segments, partially offset by lower revenues earned in our Consumer Services segment.

However, our total operating revenues were negatively impacted by several other factors impacting our deposit account programs, as discussed below, that impacted the number of consolidated active accounts, purchase volume and number of cash transfers, each of which decreased for the three months ended March 31, 2024 by 9%, 14% and 11%, respectively, over the prior year comparable period.

In our Consumer Services segment, revenues decreased during the three months ended March 31, 2024 by 28% over the prior year comparable period.

Gross dollar volume, the number of active accounts, the number of direct deposit active accounts and purchase volume declined year-over-year for the three months ended March 31, 2024 by 21%, 20%, 23% and 23%, respectively.

We believe these decreases in our Consumer Services segment are attributable to several factors, including our decision to wind-down many of our legacy accountholder 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 one of our retail partner programs as previously disclosed.

These factors had a corresponding impact on the amount of accountholder fee revenue we earn from accounts, including monthly maintenance fees, new card fees, ATM fees and interchange fees.

In our B2B Services segment, revenues increased by 41% during the three months ended March 31, 2024 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 three months ended March 31, 2024 by 49%, and to a lesser extent, increases in purchase volume and the number of active accounts by 7% and 10%, respectively.

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 certain other BaaS partners as previously disclosed.

Our Money Movement Services segment revenues increased by 5% for the three months ended March 31, 2024 over the prior year comparable period.

Despite a decrease in the number of tax refunds processed by 6% during the three months ended March 31, 2024, our tax processing revenues increased due to a favorable mix-shift in the distribution channel in which the tax refund was processed and from the expansion of our taxpayer advance programs.

The decrease in the number of tax refunds processed is principally attributable to year-over-year timing of IRS refund volumes.

The increase in our Money Movement Services segment was partially offset by an 11% decrease in the number of cash transfers processed for the three months ended March 31, 2024 over the prior year comparable period.

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

The decrease in the number of cash transfers was due to a lower number of active accounts within our Consumer Services segment discussed above.

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, increased by 19% for the three months ended March 31, 2024 from the prior year comparable period.

The increase in net interest income was the result of higher yields on our cash balances driven by increases in short-term interest rates by the Federal Reserve, partially offset by an increase in interest shared with certain BaaS partners (a reduction of revenue).

Total operating expenses

Our total operating expenses for the three and nine months ended September 30, 2023 increased $26.9 million, or 8%, and $65.5 million, or 6%, respectively, over the prior year comparable periods.

The increase in our total operating expenses for the three months ended September 30, 2023 was driven primarily by an increase in processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs discussed above, and an increase in other general and administrative expenses, driven primarily by higher transaction loss rates attributable to an increase in the amount of customer dispute volume across our portfolios.

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, and lower compensation and benefits expenses, primarily due to lower stock-based compensation expense as a result of a higher number of forfeited equity awards through employee attrition.

The increase in our total operating expenses for the nine months ended September 30, 2023 was driven primarily by an increase in processing expenses within our B2B Services segment associated with the growth of certain BaaS account programs and an increase in compensation and benefits expenses, driven primarily by an increase in third-party call center support costs associated with the growth of certain programs also within our B2B Services segment.

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 for the first half of the year in response to market trends.

Other general and administrative expenses decreased during the nine months ended September 30, 2023 primarily due to a $13 million legal settlement and certain impairment charges of internal-use software we recorded in the prior year comparable period that in each case did not recur, partially offset by an increase in overall transaction losses attributable in part to an increase in the amount of customer dispute volume across our portfolios.

Our income tax expense for the three and nine months ended September 30, 2023 decreased by $3.4 million, or 190%, and $8.3 million, or 44%, respectively, from the prior year comparable periods.

Our total operating expenses for the three months ended March 31, 2024 increased $76.0 million, or 21%, over the prior year comparable period.

The increase in our total operating expenses for the three months ended March 31, 2024 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 processor migration to our in-licensed card management platform.

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, expenses and impairment charges associated with the termination of our partnership agreement for our core banking system that is discussed directly below, and higher professional services fees related to our anti-money laundering ("AML"), including improvements to our compliance controls, policies and procedures.

Additionally, in February 2024, we 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.

During the three months ended March 31, 2024, we elected to discontinue pursuing the development of a new core banking system with our service provider and mutually agreed to terminate our partnership agreement, resulting in a settlement payment of $5.5 million and impairment charges of $6.4 million related to internal-use software and other related assets previously recorded.

Each of these charges associated with the termination of this agreement are recorded as a component of other general and administrative expenses.

Increases in total operating expenses 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, and lower compensation and benefits expenses, primarily due to lower salary and wages from the reduction in employee workforce we initiated in the beginning of the year as previously disclosed and lower third-party call center support costs, partially offset by severance benefits associated with the reduction in force.

Our income tax expense for the three months ended March 31, 2024 decreased by $7.8 million, or 75%, from the prior year comparable period.

The decrease in our income tax expense was primarily due to a decrease in our taxable income, partially offset by a higher effective tax rate.

Our effective tax rate for the nine months ended September 30, 2023 was 25.6%, compared to 24.3% for the same period in the prior year.

The increase in our effective tax rate was primarily due to an increase in state income taxes expense, net of federal benefits, and an increase in tax expense associated with shortfalls from stock-based compensation.

These increases were partially offset by the impact of general business credits, tax benefits from bank owned life insurance policies, and a reduction in the amount of compensation expense that was subject to the Internal Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation.

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.

Our effective tax rate for the three months ended March 31, 2024 was 34.8%, compared to 22.3% for the same period in the prior year.

The increase in our effective tax rate was primarily due to incremental taxes we incurred for the initiated surrender and restructuring of a portion of our existing bank owned life insurance policies and an increase in tax expense associated with shortfalls from stock-based compensation.

These increases were partially offset by a decrease in state income taxes expense, net of federal benefits, the impact of general business credits, tax benefits from bank owned life insurance policies, and a reduction in the amount of compensation expense that was subject to the Internal Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation.

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 processor migration to our in-licensed card management platform, the previously-disclosed non-renewals in our Consumer Services and B2B Services segments, our decision to wind-down many of our legacy accountholder programs in support of GO2bank, trends occurring within our retail channel in our Consumer Services segment, and our investments in our compliance programs, we have experienced declining trends in our consolidated operating results in recent periods.

However, we do not expect some of these trends or events to recur over the course of 2024, such as partner non-renewals and the discontinuation of certain legacy accountholder programs.

Based on our anticipated growth initiatives and cost reduction measures we have implemented, we expect our 2024 financial results will stabilize on a year-over-year basis.

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 cost-effectively re-engaging in strategic marketing initiatives in support of our GO2bank product and continuing to build a modern and scalable core banking and card management platform that reduces our reliance on third-party processors and increases our ability to innovate and preserve margins.

To support our efforts to transition to a modern banking platform, which we refer to as our technology transformation, our hosting costs and software licenses, a component of other general and administrative expenses, have increased and will continue to increase year-over-year in 2023.

We also have incurred duplicative processing and other costs associated with the implementation of our modern banking platform.

During the third quarter of 2023, we completed the final account migrations of our processor conversion.

While we expect this development to favorably impact our processing expenses and margins beginning in the fourth quarter of 2023, we may not realize these impacts in full until the period after we have completed our overall technology transformation as we expect to continue to make investments through at least 2024 toward reaching additional milestones.

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

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

Since then, the Federal Reserve has announced a number of increases in the federal funds rate and we expect that an elevated interest rate environment will persist for the foreseeable future.

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.

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 accountholder programs in support of GO2bank will continue to impact our year-over-year growth rates in the first half of 2024.

We have begun to see reductions in our processing expenses from our processor conversion and expect the implementation of our card management platform will allow us to continue to realize reductions in our processing expenses during the remainder of 2024.

We also expect the reduction in workforce to improve our cost structure during the remainder of 2024 and beyond.

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 disclosed previously and mitigate and reduce our fraud losses over the long term.

As previously disclosed, 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 March 31, 2024.

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 II, Item 1A, "Risk Factors."

During 2023, the Federal Reserve continued to raise rates by an additional 100 basis points, which further contributed to a market slowdown.

While the general market consensus is that interest rates will gradually decrease by the end of 2024, there remains a possibility 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 we expect will continue to have, a negative impact on our consolidated financial statements in 2023 compared to 2022.

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

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

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 outside of our control.

See Part II, Item 1A, "Risk Factors," for an additional discussion of risks related to macro-economic factors.

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We believe the following measures are the primary indicators of our quarterly and annual revenues:

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

2023 2022 Change % 2023 2022 Change %

Three Months Ended March 31,

2024 2023 Change %

(In millions, except percentages)

Gross dollar volume $ 30,755 $ 23,289 $ 7,466 32.1 %

Number of active accounts* 3.67 4.33 (0.66) (15.2) % n/a n/a n/a n/a

Number of active accounts* 3.51 3.84 (0.33) (8.6) %

Purchase volume $ 5,274 $ 6,145 $ (871) (14.2) %

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Number of tax refunds processed 9.28 9.91 (0.63) (6.4) %

* Represents the number of active accounts as of September 30, 2023 and 2022, respectively.

* Represents the number of active accounts as of March 31, 2024 and 2023, respectively.

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

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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.

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 accountholder 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 accountholders 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.

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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 platform fee.

Purchase Volume — Represents the total dollar volume of purchase transactions made by our accountholders.

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.

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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 ATM fees to accountholders when they withdraw money at certain ATMs in accordance with the terms and conditions in our accountholder 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 fees earned from our BaaS partners for programs we manage on their behalf.

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 ATM fee revenues vary based upon the number of accountholder 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 accountholders 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.

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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 (which we have previously referred to as processing and settlement services revenues) consist of cash transfer revenues, tax refund processing service revenues, Simply Paid disbursement revenues and other tax processing service revenues.

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.

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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 and on the mix of cardholder purchases between those using signature identification technologies and those using personal identification numbers and the corresponding rates.

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 accountholder 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.

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We classify our operating expenses into the following four categories:

and distributing card packages, placards and promotional materials to our retail distributors and personalized debit cards to consumers who have activated their cards.

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.

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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 numbers of disbursements made.

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.

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Our income tax expense consists of the federal and state corporate income taxes accrued on income resulting from the sale of our products and services.

As discussed above, while the IRA includes a number of revisions to the 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

Reference is made to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Comparison of Three Months Ended September 30, 2023 and 2022

There have been no material changes during the three months ended March 31, 2024 to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Comparison of Consolidated Results for the Three Months Ended March 31, 2024 and 2023

Operating Revenues

The following table presents a breakdown of our operating revenues among card revenues and other fees, cash processing revenues, interchange revenues and net interest income:

Three Months Ended September 30,

Three Months Ended March 31,

Amount % of Total

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Total operating revenues $ 451,988 100.0 % $ 416,380 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $253.4 million for the three months ended September 30, 2023, an increase of $33.8 million, or 15%, from the comparable prior year period.

Card Revenues and Other Fees — Card revenues and other fees totaled $281.5 million for the three months ended March 31, 2024, an increase of $41.6 million, or 17%, 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, as well as an increase in estimated breakage revenue on our gift card portfolios.

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

Cash Processing Revenues — Cash processing revenues totaled $36.3 million for the three months ended September 30, 2023, a decrease of $5.0 million, or 12%, from the comparable prior year period.

The decrease was primarily due to lower cash transfer revenues as a result of a 9% decline in the number of cash transfers processed, driven by fewer active accounts within our Consumer Services and B2B Services segments despite 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 tax processing revenues, as a result of a 29% decrease in the number of tax refunds processed primarily due to a timing shift within the tax season.

Interchange Revenues — Interchange revenues totaled $55.0 million for the three months ended September 30, 2023, a decrease of $16.4 million, or 23%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume of 17% during the three months ended September 30, 2023, as well as a lower effective interchange rate earned for the comparable periods.

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

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 $8.4 million for the three months ended September 30, 2023, a decrease of $3.0 million, or 26%, 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.

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:

Three Months Ended September 30,

Amount % of Total

Operating Revenues Amount % of Total

Operating Revenues

(In thousands, except percentages)

Operating expenses:

Sales and marketing expenses $ 56,495 16.0 % $ 66,996 19.5 %

Compensation and benefits expenses 59,168 16.8 61,868 18.0

Processing expenses 162,375 46.0 125,261 36.4

Other general and administrative expenses 81,830 23.2 78,858 22.9

Total operating expenses $ 359,868 102.0 % $ 332,983 96.8 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $56.5 million for the three months ended September 30, 2023, a decrease of $10.5 million, or 16% from the comparable prior year period.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues generated from certain products that are subject to tiered revenue-sharing agreements, and lower supply chain expenses due to a decline in the number of active accounts over the comparable prior year period and the non-renewal of certain BaaS partner programs as previously disclosed.

These decreases were partially offset by an increase in marketing expenditures over the prior year comparable period in support of GO2bank within our Consumer Services segment.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $59.2 million for the three months ended September 30, 2023, a decrease of $2.7 million or 4% from the comparable prior year period.

The decrease was primarily driven by a decrease in stock-based compensation expense of $2.9 million, primarily due to a higher number of forfeited equity awards through employee attrition.

Processing Expenses — Processing expenses totaled $162.4 million for the three months ended September 30, 2023, an increase of $37.1 million or 30% from the comparable prior year period.

This increase was principally due to growth in certain BaaS account programs within our B2B Services segment.

Other General and Administrative Expenses — Other general and administrative expenses totaled $81.8 million for the three months ended September 30, 2023, an increase of $2.9 million or 4%, from the comparable prior year period.

The increase in other general and administrative expenses was primarily due to an increase in overall transaction losses, attributable primarily to an increase in the amount of customer dispute volume across our portfolios, partially offset by a $13 million legal settlement charge incurred in the prior year that did not recur in the current year period.

Our income tax benefit totaled $1.6 million for the three months ended September 30, 2023, compared to a $1.8 million income tax expense for the three months ended September 30, 2022, representing a decrease of $3.4 million or 190% from the prior year comparable period, primarily due to a decrease in our taxable income.

The decrease in our effective tax rate for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily due to a decrease in state income taxes, net of federal benefits, a decrease in tax expense associated with shortfalls from stock-based compensation, a decrease in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation, and a decrease in nondeductible expenses.

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

Comparison of Nine Months Ended September 30, 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:

Nine Months Ended September 30,

Amount % of Total

Operating Revenues Amount % of Total

Operating Revenues

(In thousands, except percentages)

Operating revenues:

Card revenues and other fees 735,380 64.8 % 650,979 58.8 %

Cash processing revenues 191,925 16.9 198,813 18.0

Interchange revenues 178,950 15.7 226,301 20.4

Interest income, net 29,030 2.6 31,041 2.8

Total operating revenues $ 1,135,285 100.0 % $ 1,107,134 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $735.4 million for the nine months ended September 30, 2023, an increase of $84.4 million, or 13%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $191.9 million for the nine months ended September 30, 2023, a decrease of $6.9 million, or 3%, from the comparable prior year period.

Cash processing revenues decreased primarily as a result of a decline in the number of cash transfers processed, which decreased by 5% for the same reasons discussed above under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Revenues—Cash Processing Revenues." To a lesser extent, cash processing revenues also decreased due to a lower number of tax refunds processed, which decreased by 3% for the comparable periods.

Interchange Revenues — Interchange revenues totaled $179.0 million for the nine months ended September 30, 2023, a decrease of $47.3 million, or 21%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume and effective interchange rate earned as discussed under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Revenues—Interchange Revenues."

Interest Income, net — Net interest income totaled $29.0 million for the nine months ended September 30, 2023, a decrease of $2.0 million, or 6%, from the comparable prior year period.

This decrease was driven by the same factors as discussed under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Revenues—Interest Income, net."

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

Cash Processing Revenues — Cash processing revenues totaled $106.8 million for the three months ended March 31, 2024, an increase of $5.0 million, or 5%, from the comparable prior year period.

While the number of tax refunds processed decreased by 6% during the three months ended March 31, 2024, our tax processing revenues increased due to a favorable mix-shift in the distribution channel in which the tax refund was processed and from the expansion of our taxpayer advance programs.

The decrease in the number of tax refunds processed is principally attributable to year-over-year timing of IRS refund volumes.

These increases were partially offset by an 11% decline in the number of cash transfers processed due to a lower number of active accounts within our Consumer Services segment, as discussed above in "Overview."

Interchange Revenues — Interchange revenues totaled $51.0 million for the three months ended March 31, 2024, a decrease of $13.0 million, or 20%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume of 14% during the three months ended March 31, 2024 over the comparable prior year period, as well as a lower effective interchange rate earned for the comparable periods.

Our interchange rate declined due to a mix-shift toward categories of consumer purchases with lower effective rates.

In addition, 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.

Interest Income, net — Net interest income totaled $12.7 million for the three months ended March 31, 2024, an increase of $2.0 million, or 19%, from the comparable prior year period.

The increase in net interest income was the result of higher yields on our cash balances, driven by increases in short-term interest rates by the Federal Reserve, partially offset by an increase in interest shared with certain BaaS partners (a reduction of revenue).

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:

Nine Months Ended September 30,

Three Months Ended March 31,

Amount % of Total

8 unchanged sentences

Total operating expenses $ 441,434 97.7 % $ 365,385 87.7 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $194.5 million for the nine months ended September 30, 2023, a decrease of $33.4 million, or 15% from the comparable prior year period.

This decrease was driven primarily by the same factors as discussed above under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Expenses—Sales and Marketing Expenses." In addition, sales and

marketing expenses decreased for the nine months ended September 30, 2023 as a result our strategic decision to reduce marketing spend on GO2bank for the first half of the year in response to market trends.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $192.9 million for the nine months ended September 30, 2023, an increase of $7.2 million, or 4% from the comparable prior year period.

The increase was primarily due to an increase in third-party call center support costs associated with the growth of certain programs within our B2B Services segment and an increase in other employee benefits, partially offset by decreases in stock-based compensation expense of $3.6 million, principally due to forfeited equity awards through employee attrition.

Processing Expenses — Processing expenses totaled $460.6 million for the nine months ended September 30, 2023, an increase of $110.9 million, or 32% from the comparable prior year period.

This increase was driven by the same factors as discussed above under “Comparison of Three Months Ended September 30, 2023 and 2022—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $238.3 million for the nine months ended September 30, 2023, a decrease of $19.2 million, or 7%, from the comparable prior year period.

The decrease in other general and administrative expenses was primarily due to a $13 million legal settlement and certain impairment charges of internal-use software we recorded in the prior year comparable period that in each case did not recur, as well as reductions in professional services fees.

These decreases were partially offset by an increase in overall transaction losses, attributable in part to an increase in the amount of customer dispute volume across our portfolios.

Sales and Marketing Expenses — Sales and marketing expenses totaled $62.4 million for the three months ended March 31, 2024, a decrease of $12.8 million, or 17%, from the comparable prior year period.

This decrease was primarily driven by a decrease in sales commissions due to lower revenues generated from certain products that are subject to tiered revenue-sharing agreements and, to a lesser extent, 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 $66.8 million for the three months ended March 31, 2024, a decrease of $2.0 million, or 3%, from the comparable prior year period.

The decrease was driven primarily by lower salary and wages from our reduction in employee workforce that we initiated in February 2024 and lower third-party call center support costs, partially offset by severance benefits associated with the reduction in force.

Processing Expenses — Processing expenses totaled $195.7 million for the three months ended March 31, 2024, an increase of $50.6 million, or 35%, from the comparable prior year period.

This increase was principally due to growth in certain BaaS account programs within our B2B Services segment, partially offset by reductions in processor costs realized from the processor migration to our in-licensed card management platform.

Other General and Administrative Expenses — Other general and administrative expenses totaled $116.6 million for the three months ended March 31, 2024, an increase of $40.3 million, or 53%, from the comparable prior year period.

This increase was driven primarily by an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios, expenses and other write-offs associated with our election to terminate our partnership agreement for our core banking system discussed above in "Overview," and higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures.

Income Tax Expense

The following table presents a breakdown of our effective tax rate among federal, state, and other:

Nine Months Ended September 30,

Three Months Ended March 31,

federal statutory tax rate 21.0 % 21.0 %

State income taxes, net of federal tax benefit (1.4) 0.8

Foreign tax rate differential (1.5) (0.5)

General business credits (11.5) (3.4)

Stock-based compensation 7.1 2.4

IRC 162(m) limitation (3.6) 1.6

Bank owned life insurance (1.5) (0.8)

Stock-based compensation 22.7 3.7

Bank owned life insurance income (2.9) (1.6)

Bank owned life insurance surrender 9.3 —

Nondeductible expenses 2.6 0.8

1 unchanged sentence

Effective tax rate 34.8 % 22.3 %

Our income tax expense totaled $10.4 million for the nine months ended September 30, 2023, a decrease of $8.3 million or 44% from the prior year comparable period primarily due to a decrease in our taxable income, partially offset by an increase in our effective tax rate.

The increase in the effective tax rate for the nine months ended September 30, 2023 from the prior year comparable period was primarily due to an increase in state income taxes expense, net of federal benefits, and an increase in tax expense associated with shortfalls from stock-based compensation.

These increases were partially offset by the impact of general business credits, tax benefits from bank owned life insurance policies, and a reduction in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation.

Our income tax expense totaled $2.5 million for the three months ended March 31, 2024, compared to a $10.3 million income tax expense for the three months ended March 31, 2023, representing a decrease of $7.8 million, or 75%, from the prior year comparable period, primarily due to a decrease in our taxable income.

The increase in our effective tax rate for the three months ended March 31, 2024 from the prior year comparable period was primarily due to an increase in shortfalls from stock-based compensation which increased tax expense by $0.2 million and due to the initiated surrender and restructuring of a portion of our existing bank owned life insurance policies, which resulted in a tax charge of $0.5 million and a surrender penalty of $0.2 million.

These increases were partially offset by a decrease in state income tax expense, net of federal benefits, the impact of general business credits, tax benefits from bank owned life insurance policies, and a reduction in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation.

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

1 unchanged sentence

Consumer Services

The results of operations and key metrics of our Consumer Services segment for the three and nine months ended September 30, 2023 and 2022 were as follows:

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

2023 2022 Change % 2023 2022 Change %

The results of operations and key metrics of our Consumer Services segment for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

2024 2023 Change %

(In thousands, except percentages)

5 unchanged sentences

Gross dollar volume $ 4,500 $ 5,677 $ (1,177) (20.7) %

Number of active accounts* 2.16 2.51 (0.35) (13.9) % n/a n/a n/a n/a

Direct deposit active accounts* 0.52 0.66 (0.14) (21.2) % n/a n/a n/a n/a

Number of active accounts* 1.93 2.41 (0.48) (19.9) %

Direct deposit active accounts* 0.46 0.60 (0.14) (23.3) %

Purchase volume $ 3,339 $ 4,344 $ (1,005) (23.1) %

* Represents total number of active and direct deposit active accounts as of September 30, 2023 and 2022, respectively.

* Represents total number of active and direct deposit active accounts as of March 31, 2024 and 2023, respectively.

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

Q3 Q2 Q1 Q4 Q3 Q2 Q1

Q1 Q4 Q3 Q2 Q1

(In millions)

3 unchanged sentences

Purchase volume $ 3,339 $ 3,312 $ 3,553 $ 3,984 $ 4,344

Segment revenues within Consumer Services for the three and nine months ended September 30, 2023 decreased $17.6 million, or 13%, and $58.4 million, or 13%, respectively, from the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2023 decreased by $6.0 million, or 7% and $29.2 million, or 11%, respectively.

Our gross dollar volume, total number of active accounts, direct deposit active accounts and purchase volume decreased during the three months ended September 30, 2023 by 16%, 14%, 21%, and 17% respectively, primarily from each of the several factors discussed above in "Overview," including our strategic decision to reduce marketing spend on GO2bank for the first half of the year in response to market trends and observed changes in consumer traffic within our retail locations, both of which have negatively impacted account acquisition, as well as the non-renewal of one of our retail partner programs as previously disclosed.

Our gross dollar volume and purchase volume decreased year-over-year by similar levels during the nine months ended September 30, 2023.

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

Segment revenues within Consumer Services for the three months ended March 31, 2024 decreased $39.2 million, or 28%, from the prior year comparable period, while our segment expenses for the three months ended March 31, 2024 decreased by $19.7 million, or 23%.

Our gross dollar volume, number of active accounts, direct deposit active accounts and purchase volume each decreased during the three months ended March 31, 2024 by 21%, 20%, 23%, and 23% respectively, from the comparable prior year period, primarily from each of the several factors discussed above in "Overview." These factors include observed changes in consumer traffic within our retail locations, our decision to wind-down many of our legacy accountholder 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 continued customer adoption of optional features on our card programs, such as our overdraft protection program, as well as an increase in estimated breakage revenue on our gift card portfolios during the three months ended September 30, 2023.

Consumer Services expenses decreased for the three and nine months ended September 30, 2023 from the comparable prior year periods due to several factors, including a decrease in sales commissions from lower revenues on products subject to tiered revenue-sharing agreements, and a year to date decrease in marketing spend on GO2bank as discussed above, partially offset by an increase in transactions losses that was attributable in part to an increase in customer dispute volume across our portfolios.

As a result of these multiple factors, our segment profit decreased for the three and nine months ended September 30, 2023 by approximately 21% and 17%, respectively.

The results of operations and key metrics of our B2B Services segment for the three and nine months ended September 30, 2023 and 2022 were as follows:

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

2023 2022 Change % 2023 2022 Change %

Our segment profit decreased for the three months ended March 31, 2024 by approximately 37% from the prior year comparable period.

Consumer Services expenses for the three months ended March 31, 2024 decreased from the comparable prior year period due to several factors, including a decrease in sales commissions from lower revenues on products subject to tiered revenue-sharing agreements, 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.

The results of operations and key metrics of our B2B Services segment for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

2024 2023 Change %

(In thousands, except percentages)

5 unchanged sentences

Gross dollar volume $ 26,255 $ 17,612 $ 8,643 49.1 %

Number of active accounts* 1.51 1.82 (0.31) (17.0) % n/a n/a n/a n/a

Number of active accounts* 1.58 1.43 0.15 10.5 %

Purchase volume $ 1,935 $ 1,801 $ 134 7.4 %

* Represents total number of active accounts as of September 30, 2023 and 2022, respectively.

* Represents total number of active accounts as of March 31, 2024 and 2023, respectively.

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

Q3 Q2 Q1 Q4 Q3 Q2 Q1

Q1 Q4 Q3 Q2 Q1

(In millions)

3 unchanged sentences

* Represents total number of active accounts as of the end of each quarter.

Segment revenues within our B2B Services for the three and nine months ended September 30, 2023 increased $41.0 million, or 25.9% and $115.5 million, or 27%, respectively, compared to the prior year periods, while our segment expenses for the three and nine months ended September 30, 2023 increased $44.5 million, or 32.8%, and $124.1 million, or 34%, respectively.

Our gross dollar volume during the three and nine months ended September 30, 2023 increased 53% and 61%, respectively, from the comparable prior year periods, despite the number of active accounts within this segment decreasing by 17% year-over-year.

Segment revenues within our B2B Services for the three months ended March 31, 2024 increased $69.9 million, or 40.8%, compared to the prior year period, while our segment expenses for the three months ended March 31, 2024 increased $73.8 million, or 49.5%.

Our gross dollar volume, number of active accounts and purchase volume each increased during the three months ended March 31, 2024 by 49%,10% and 7%, respectively, from the prior year comparable period.

We have continued to experience organic growth from both new and existing users concentrated 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 during the three and nine months ended 16% and 17%, respectively, due to the non-renewals of certain BaaS partners as previously disclosed, resulting in a lower amount of interchange revenue earned from the prior year comparable periods.

B2B Services expenses increased for the three and nine months ended September 30, 2023 from the comparable prior year periods, principally due to higher processing expenses with the growth of certain BaaS account programs and higher third-party call center support costs as a result of the increase in gross dollar volume.

This increase was partially offset by the non-renewals of certain other BaaS partners as previously disclosed.

B2B Services expenses increased for the three months ended March 31, 2024 from the comparable prior year period, principally due to higher processing expenses with the growth of certain BaaS account programs, as well as higher overall transaction losses and third-party call center support costs, each 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

The results of operations and key metrics of our Money Movement Services segment for the three and nine months ended September 30, 2023 and 2022 were as follows:

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

2023 2022 Change % 2023 2022 Change %

The results of operations and key metrics of our Money Movement Services segment for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

2024 2023 Change %

(In thousands, except percentages)

7 unchanged sentences

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

Q3 Q2 Q1 Q4 Q3 Q2 Q1

Q1 Q4 Q3 Q2 Q1

(In millions)

1 unchanged sentence

Number of tax refunds processed 9.28 0.16 0.20 3.87 9.91

Segment revenues within our Money Movement services for the three and nine months ended September 30, 2023 decreased $5.6 million, or 15% and $8.8 million, or 5%, respectively, from the comparable prior year periods.

Segment expenses for the three and nine months ended September 30, 2023 decreased $3.8 million, or 16%, and $6.2 million, or 7%, respectively.

The decrease in segment revenues for the three and nine months ended September 30, 2023 was driven primarily by a decline in the number of cash transfers processed, which decreased by 9% and 5%, respectively, from the prior year comparable periods.

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

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

The decrease in cash transfers processed for our own deposit accounts was partially offset by an increase in the number of cash transfers processed for third-party programs as discussed in "Overview" above.

In addition, our tax processing revenues decreased during the three and nine months ended September 30, 2023 due to a decline in the number of tax refunds processed, which decreased by 29% and 3%, respectively, from the prior year comparable period.

The decrease in the number of tax refunds processed during three months ended September 30, 2023 was primarily due to a timing shift between the tax season.

The lower number of tax refunds processed during the tax season was partially offset from ancillary tax services offered to taxpayers.

Money Movement Services expenses decreased during the three and nine months ended September 30, 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.

Segment revenues within our Money Movement services for the three months ended March 31, 2024 increased $4.9 million, or 5%, from the comparable prior year period.

Segment expenses for the three months ended March 31, 2024 increased $0.1 million, or 0.2%.

The increase in segment revenues for the three months ended March 31, 2024 was driven primarily by an increase in our tax processing revenues despite a lower number of tax refunds processed due to a favorable mix-shift in the distribution channel in which the tax refund was processed and from the expansion of our taxpayer advance programs.

The decrease in the number of tax refunds processed is principally attributable to year-over-year timing of IRS refund volumes.

This increase in tax-related revenue was partially offset by an 11% decrease in the number of cash transfers processed due to a lower number of active accounts within our Consumer Services segment discussed above.

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

Money Movement Services expenses during the three months ended March 31, 2024 remained consistent with the prior year comparable period.

Segment expenses increased primarily from third-party costs and related expenses due to growth across our tax processing services, offset by decreases in sales commissions from lower cash transfer revenues.

Corporate and Other

The results of operations and key metrics of our Corporate and Other segment for the three and nine months ended September 30, 2023 and 2022 were as follows:

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

2023 2022 Change % 2023 2022 Change %

The results of operations and key metrics of our Corporate and Other segment for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

2024 2023 Change %

(In thousands, except percentages)

3 unchanged sentences

Total $ (58,157) $ (53,454) $ (4,703) 8.8 %

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

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.

2 unchanged sentences

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 26% for the three months ended September 30, 2023, and decreased by 6% during the nine months ended September 30, 2023 from the prior year comparable periods.

The decrease in net interest income was the result of an increase in interest shared with certain BaaS partners, 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 three months ended September 30, 2023 decreased year-over-year by approximately 3% and for the nine months ended September 30, 2023 increased year-over-year by approximately 3%.

The decrease for the three months ended September 30, 2023 was driven primarily by lower salary and wage expenses and related benefits for the comparable periods, partially offset by higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures.

The increase for the nine months ended September 30, 2023 was a result of higher software licenses and technology costs in support of our investments to build a modern and scalable core banking and card management platform, as well as other growth initiatives as discussed above in "Overview." These increases were partially offset by reductions in professional services fees, which did not recur at similar levels to the prior year comparable periods.

Net interest income increased by 19% during the three months ended March 31, 2024 from the prior year comparable period as a result of higher yields on our cash balances driven by increases in short-term interest rates by the Federal Reserve, partially offset by an increase in the portion we share with certain BaaS partners.

Unallocated corporate expenses for the three months ended March 31, 2024 increased year-over-year by approximately 7%, driven primarily from higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures, partially offset by lower salary and wages from our reduction in employee workforce and a decrease in third-party call center support costs.

Liquidity and Capital Resources

The following table summarizes our major sources and uses of cash for the periods presented:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Financing activities 347,877 (161,648)

Decrease in unrestricted cash, cash equivalents and restricted cash $ (104,410) $ (506,568)

For the nine months ended September 30, 2023 and 2022, we financed our operations primarily through our cash flows generated from operations.

Increase (decrease) in unrestricted cash, cash equivalents and restricted cash $ 432,528 $ (93,836)

For the three months ended March 31, 2024 and 2023, we financed our operations primarily through our cash flows provided by operating activities.

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

As of September 30, 2023, our primary source of liquidity was unrestricted cash and cash equivalents totaling $711.4 million.

As of March 31, 2024, our primary source of liquidity was unrestricted cash and cash equivalents totaling $1.1 billion.

We also consider our $2.2 billion of available-for-sale investment securities to be highly liquid instruments.

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

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditures, equity method investee capital commitments, and any other capital needs for at least the next 12 months.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity under our credit facility will be sufficient to meet our working capital, capital expenditures, and any other capital needs for at least the next 12 months.

As discussed further below, our 2019 Revolving Facility is set to mature in October 2024 and we remain in discussions with various lending partners to enter into new borrowing arrangements.

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.

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Cash Flows from Operating Activities

Our $132.4 million of net cash provided by operating activities during the nine months ended September 30, 2023 was the result of $30.3 million of net income, adjusted for certain non-cash operating items of $121.8 million and decreases in net changes in our working capital assets and liabilities of $19.7 million.

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

Our $89.2 million of net cash provided by operating activities during the three months ended March 31, 2024 was the result of $4.8 million of net income, adjusted for certain non-cash operating items of $47.2 million and increases in net changes in our working capital assets and liabilities of $37.2 million, attributable in part to the collection of fee advances outstanding as of the beginning of the year.

Our $100.5 million of net cash provided by operating activities during the three months ended March 31, 2023 was the result of $36.0 million of net income, adjusted for certain non-cash operating items of $42.5 million and increases in net changes in our working capital assets and liabilities of $22.0 million.

Cash Flows from Investing Activities

Our $18.4 million of net cash provided by investing activities during the nine months ended September 30, 2023 was primarily due proceeds from maturities of available-for-sale securities of $131.8 million, partially offset by capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, the acquisition of property and equipment of $55.5 million and net changes in loans of $21.6 million.

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

Our $4.5 million of net cash used in investing activities during the three months ended March 31, 2024 was primarily due to capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, net changes in loans of $39.9 million, and the acquisition of property and equipment of $14.5 million, partially offset by net proceeds from maturities of available-for-sale securities of $45.9 million and the surrender of a portion of our bank-owned life insurance policies of $39.1 million.

Our final payment under our commitment with TailFin Labs, LLC was made in January 2024.

Our $32.7 million of net cash used in investing activities during the three months ended March 31, 2023 was primarily due to capital contributions related to our investment in TailFin Labs, LLC of $35.0 million, the acquisition of property and equipment of $19.5 million and net changes in loans of $15.1 million, partially offset by proceeds from maturities of available-for-sale securities of $37.1 million.

Cash Flows from Financing Activities

Our $255.3 million of net cash used in financing activities during the nine months ended September 30, 2023 was principally the result of a net decrease in customer deposits of $238.4 million and a net decrease of $8.8 million in obligations to customers.

We also repaid $8.0 million, net of borrowings, on our revolving line of credit during the nine months ended September 30, 2023.

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

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

Our $347.9 million of net cash provided from financing activities during the three months ended March 31, 2024 was principally the result of a net increase in customer deposits of $452.0 million, partially offset by a net decrease of $86.7 million in obligations to customers and repayments of $16.0 million, net of borrowings, on our revolving line of credit during the three months ended March 31, 2024.

Our $161.6 million of net cash used in financing activities during the three months ended March 31, 2023 was principally the result of a net decrease in customer deposits of $104.4 million and a decrease of $19.9 million in obligations to customers.

We also repaid $35.0 million, net of borrowings, on our revolving line of credit during the three months ended March 31, 2023.

Other Sources of Liquidity:

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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 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 March 31, 2024, the outstanding balance on the 2019 Revolving Facility was $45.0 million and we had $55.0 million available for use.

In March 2023, we amended the terms of our agreement to replace LIBOR with the Secured Overnight Financing Rate ("SOFR").

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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%.

As of September 30, 2023, the outstanding balance on the 2019 Revolving Facility was $27 million and we had $73 million available for use.

The interest rate on our outstanding balance as of March 31, 2024 was approximately 6.93%.

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 September 30, 2023, we were in compliance with all such covenants.

At March 31, 2024, we were in compliance with all such covenants.

Material Cash Requirements

While the lasting effects of COVID-19, increasing inflation and interest rates, and other macro-economic factors have created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and invest in property and equipment as necessary in the normal course of our

The amount and timing of these payments and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of new employees, the rate of change of computer hardware and software used in our business and our business outlook as a result of 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 such as our core banking and card management systems in order to scale and operate effectively to meet our strategic objectives.

We expect our capital expenditures in 2023 to be lower compared to our capital expenditures in 2022, but higher than our average level of annual investments in recent years.

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.

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Contractual Obligations

There have been no material changes in our contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes during the three months ended March 31, 2024 to our contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Capital Requirements for Bank Holding Companies

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

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.

Green Dot Corporation and Green Dot Bank qualify for and opt into use of 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 September 30, 2023 and December 31, 2022, we and Green Dot Bank were categorized as "well capitalized" under applicable regulatory standards.

As of March 31, 2024 and December 31, 2023, 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 September 30, 2023 which management believes would have changed our category as "well capitalized."

There were no conditions or events since March 31, 2024 which management believes would have changed our category as "well capitalized."

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

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The standardized risk weights are prescribed in the bank capital rules and reflect regulatory judgment regarding the riskiness of a type of asset or exposure

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at September 30, 2023 and December 31, 2022 were as follows:

September 30, 2023

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis