What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-09 · 178 added, 170 removed, 368 unchanged (49% of the section changed)

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

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

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

Our Chief Operating Decision Maker (our "CODM" who is our Chief Executive Officer) organizes and manages our businesses primarily on the basis of the channels in which our product and services are offered and uses net revenue and segment profit to assess profitability.

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Consolidated Financial Results and Trends

Our consolidated results of operations for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 Change % 2024 2023 Change %

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Net (loss) income (7,840) (6,265) (1,575) 25.1 % (31,805) 30,325 (62,130) (204.9) %

* - not considered meaningful

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 six months ended June 30, 2024 increased $41.2 million or 11%, and $76.9 million, or 10%, respectively, over the prior year comparable periods, driven primarily by higher revenues in our B2B Services segment and to a lesser extent in our Money Movement Services segment, partially offset by lower revenues earned in our Consumer Services segment.

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 for the three and six months ended June 30, 2024 of 30% and 31%, respectively.

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 June 30, 2024 by 8%, 13% and 6%, respectively.

For the six months ended June 30, 2024, purchase volume and number of cash transfers decreased by similar levels of 13% and 8%, respectively, over the prior year comparable period.

In our Consumer Services segment, revenues decreased during the three and six months ended June 30, 2024 by 25% and 27%, respectively, 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 June 30, 2024 by 22%, 25%, 24% and 24%, respectively.

Similarly, gross dollar volume and purchase volume declined for the six months ended June 30, 2024 by 21% and 23%, respectively.

Our total operating revenues for the three and nine months ended September 30, 2024 increased $56.7 million or 16%, and $133.6 million, or 12%, respectively, over the prior year comparable periods, driven primarily by higher revenues in our B2B Services segment and to a lesser extent in our Money Movement Services segment, partially offset by lower revenues earned in our Consumer Services segment.

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 for the three and nine months ended September 30, 2024 of 35% and 32%, respectively.

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 September 30, 2024 by 6%, 9%, and 1% respectively.

For the nine months ended September 30, 2024, purchase volume and the number of cash transfers decreased by 12% and 6%, respectively, over the prior year comparable period.

In our Consumer Services segment, revenues decreased during the three and nine months ended September 30, 2024 by 17% and 24%, respectively, over the prior year comparable periods.

Gross dollar volume, the number of active accounts, the number of direct deposit active accounts and purchase volume each declined year-over-year for the three months ended September 30, 2024 by 14%, 18%, 15% and 18%, respectively.

Similarly, gross dollar volume and purchase volume declined for the nine months ended September 30, 2024 by 19% and 22%, 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 competitive 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 40% during each of the three and six months ended June 30, 2024 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 six months ended June 30, 2024 by 43% and 46%, respectively, and to a lesser extent, growth in purchase volume, which increased by 13% and 10%, respectively.

The number of active accounts for the three months ended June 30, 2024 also increased 21% over the prior year comparable period.

Revenues within this segment were also adversely impacted by a decrease in breakage revenue on our gift card portfolios for each of the comparable periods.

In our B2B Services segment, revenues increased by 39% and 40% during the three and nine months ended September 30, 2024, 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 each of the three and nine months ended September 30, 2024 by 46%, and to a lesser extent, growth in purchase volume, which also increased during each of the respective periods by 10%.

The number of active accounts for the three months ended September 30, 2024 increased by 11% over the prior year comparable period.

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 during the three and six months ended June 30, 2024 by 6% and 5%, respectively, over the prior year comparable periods.

The increase in our Money Movement Services segment was driven by an increase in our tax processing revenues.

The number of tax refunds processed during the three months ended June 30, 2024 increased over the prior year comparable period by 9% principally attributable to year-over-year timing of IRS refund volumes, while the number of tax refunds processed decreased for the six months ended June 30, 2024 by 2%.

Despite the 2% decrease in the number of tax refunds processed during the first half of 2024, our tax processing revenues increased for the six months ended June 30, 2024 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 increase in our Money Movement Services segment was partially offset by a decrease in the number of cash transfers processed, which decreased for the three and six months ended June 30, 2024 by 6% and 8%, respectively.

In our Money Movement Services segment, revenues decreased by less than 1% during the three months ended September 30, 2024 and increased by 4% during the nine months ended September 30, 2024 over the prior year comparable periods.

The decrease in our Money Movement Services revenues during the three months ended September 30, 2024 was driven by a decrease in cash transfer revenues.

Our cash transfer revenues decreased from the comparable prior year period primarily due to a 1% decrease in the number of cash transfers processed during the three months ended September 30, 2024, and an unfavorable mix of cash transfer types and locations where the transactions occurred, as the fees we receive vary depending on these factors.

Our tax processing revenues during the three months ended September 30, 2024 remained consistent year over year.

Due to the seasonal nature of our tax products and services, substantially all of our tax processing revenues are earned during the first half of each year.

The increase in our Money Movement Services segment during the nine months ended September 30, 2024 was driven primarily by an increase in our tax processing revenues, partially offset by a decrease in cash transfer revenues.

Although the number of tax refunds processed decreased for the nine months ended September 30, 2024 by 2%, 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.

These increases were partially offset by a 6% decline in the number of cash transfers processed for the nine months ended September 30, 2024 from the prior year comparable period.

The decline in the number of cash transfers processed was 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.

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 for the three and six months ended June 30, 2024 by 47% and 33%, respectively, over the prior year comparable periods.

The increase in net interest income was the result of an increase in cash from deposit programs with our partners and higher yields earned 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).

Net interest income earned by Green Dot Bank, a component of our Corporate and Other segment, increased for the three and nine months ended September 30, 2024 by 92% and 50%, respectively, over the prior year comparable periods.

The increase in net interest income was primarily the result of an increase in cash from deposit programs with our partners and yields earned at 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 six months ended June 30, 2024 increased $69.7 million, or 19% , and $145.7 million, or 20%, respectively, over the prior year comparable periods.

The increase in our total

operating expenses was driven primarily by an increase in processing expenses and other general and administrative expenses, partially offset by a decrease in sales and marketing expenses and to a lesser extent, a decrease in compensation and benefits expenses.

The increase in our total operating expenses for the three months ended June 30, 2024 was driven primarily by an increase in processing expenses associated with the growth of certain BaaS account programs within our B2B Services segment as 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 during the three months ended June 30, 2024 primarily due to an increase in our accrual related to the consent order we received from the Federal Reserve Board, as more fully discussed below, higher professional services fees related to our anti-money laundering ("AML"), including improvements to our compliance controls, policies and procedures, and certain impairment charges of internal-use software no longer expected to be utilized.

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 salary and wages driven by the reduction in employee workforce we initiated in February 2024 as previously disclosed, and lower employee stock-based compensation expense, primarily due to a higher number of forfeited awards.

Our total operating expenses for the three and nine months ended September 30, 2024 increased $52.8 million, or 15% , and $198.6 million, or 18%, respectively, over the prior year comparable periods.

The increase in our total operating expenses for the three months ended September 30, 2024 was driven primarily by an increase in processing expenses associated with the growth of certain BaaS account programs within our B2B Services segment as discussed above, partially offset by reductions in processor costs realized from the processor migration to our in-licensed card management platform.

To a lesser extent, our total operating expenses also increased due to an increase in compensation and benefits expenses, driven primarily by an increase in third-party call center support costs associated with the growth of the BaaS account programs discussed above, partially offset by lower salary and wages driven by the reduction in employee workforce we initiated in February 2024, as previously disclosed (the "Headcount Reduction").

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 other general and administrative expenses, primarily driven by a decrease in transaction losses due to a decrease in the amount of customer dispute volume across our portfolios and favorable reductions in our dispute loss rates.

This decrease in other general and administrative expenses was partially offset by higher professional services fees related to our anti-money laundering ("AML") programs, including improvements to our compliance controls, policies and procedures.

Our total operating expenses for the nine months ended September 30, 2024 increased over the prior year comparable period.

Processing expenses increased during the nine months ended September 30, 2024 due to the same factors discussed above.

Other general and administrative expenses increased due to penalties paid under the consent order (the "Consent Order") we received from the Federal Reserve Board, as previously disclosed and discussed further below, higher professional services fees related to our AML programs, and the settlement payment and impairment charges related to internal-use software and other related assets associated with the termination of our partnership agreement to develop a new core banking system, as previously disclosed during the first quarter of 2024.

Other general and administrative expenses also increased during the nine months ended September 30, 2024 due to an increase in overall transaction losses 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 due to the same factors discussed above, and lower compensation and benefits expenses, primarily due to lower salary and wages driven by the Headcount Reduction and lower employee stock-based compensation expense, primarily due to a higher number of forfeited awards.

As previously disclosed, on July 19, 2024, we and our subsidiary bank received a Consent Order from the Federal Reserve Board relating principally to various aspects of compliance risk management, including consumer compliance and compliance with anti-money laundering regulations.

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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."

Our total operating expenses for the six months ended June 30, 2024 increased over the prior year comparable period for the same reasons as discussed above.

In addition, other general and administrative expenses increased in the first half of 2024 due to an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios, and the settlement payment and impairment charges related to internal-use software and other related assets associated with the termination of our partnership agreement to develop a new core banking system, as previously disclosed during the first quarter of 2024.

Our income tax expense for the three and six months ended June 30, 2024 decreased by $2.5 million, or 143%, and $10.3 million, or 85% from the prior year comparable periods.

The decrease in our income tax expense was primarily due to a decrease in our taxable income.

Our effective tax rate for the six months ended June 30, 2024 was a benefit of 8%, compared to 25% for the comparable prior year period.

The decrease in our effective tax rate was primarily due to 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.

These decreases were partially offset by incremental taxes and surrender penalty we incurred for the initiated surrender and restructuring of a portion of our existing bank owned life insurance policies, an increase in tax expense associated with shortfalls from stock-based compensation, and an increase in tax expense due to nondeductible expenses and penalties.

The increase in nondeductible expenses and penalties for the six months ended June 30, 2024 is primarily related to the tax effect associated with the civil money penalty accrual for our consent order received from the Federal Reserve Board discussed above.

Our income tax benefit for the three months ended September 30, 2024 decreased by $1.2 million, or 77%, from the prior year comparable period primarily due to the impact of the surrender of our existing bank owned life insurance policies, and our income tax expense for the nine months ended September 30, 2024 decreased by $9.0 million, or 87%, from the prior year comparable period primarily due to a decrease in our year-to-date taxable income.

Our effective tax rate for the nine months ended September 30, 2024 was 5%, a decrease from 26% for the comparable prior year period.

Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation.

These decreases were partially offset by incremental taxes and penalties ("surrender penalties") we incurred in connection with the surrender and restructuring of our existing bank owned life insurance policies, an increase in tax expense associated with shortfalls from stock-based compensation, and an increase in tax expense due to nondeductible expenses and penalties.

The increase in nondeductible expenses and penalties for the nine months ended September 30, 2024 is primarily related to the tax effect associated with the civil money penalty for the Consent Order.

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").

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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.

After taking into consideration the one-time nature of our consent order accrual, we expect our results of operations will stabilize on a year-over-year basis over the second half of 2024 based on our anticipated growth initiatives and cost reduction measures we have implemented.

Based on the overall macro-economic environment, the effect of elevated 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 persist, such as partner non-renewals and the discontinuation of certain legacy accountholder programs.

After taking into consideration the one-time nature of our Consent Order accrual and other charges, we expect our results of operations will stabilize on a year-over-year basis over the remainder of 2024 based on our anticipated initiatives and cost reduction measures we have implemented.

We intend to continue to make growth-oriented investments and incur other expenditures that we believe will benefit our long-term financial results.

Our growth-oriented investments are focused on, among other things, cost-effectively re-engaging in strategic marketing initiatives in support of our GO2bank product and other initiatives across our account programs with the objective of returning to active account growth.

We have seen 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.

During 2023, the Federal Reserve raised rates by an additional 100 basis points and we remain in an elevated interest rate environment, although, the general market consensus is that interest rates will begin gradually decreasing by the end of 2024.

We have seen our cost reduction initiatives partially offset by increases in other areas, as we have incurred additional expenses in connection with our continued investments in our AML program, including improvements to our compliance controls, policies and procedures, which we believe will ultimately help us to continue to remediate matters identified in the Consent Order and mitigate and reduce our fraud losses over the long term.

In September 2024, the Federal Reserve decreased interest rates by 50 basis points, the first rate cut in over four years, and further reduced interest rates by an additional 25 basis points in early November 2024.

Although we remain in an elevated interest rate environment, the general market consensus is that interest rates will gradually decrease further over the near term.

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.

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

Three Months Ended June 30, Six Months Ended June 30,

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

2024 2023 Change % 2024 2023 Change %

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Number of tax refunds processed 0.19 0.20 (0.01) (3.0) % 13.67 13.98 (0.31) (2.2) %

* Represents the number of active accounts as of June 30, 2024 and 2023, respectively.

* Represents the number of active accounts as of September 30, 2024 and 2023, respectively.

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

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Costs associated with professional services, depreciation and amortization of our property and equipment, amortization of our acquired intangible assets, impairment charges of long-lived assets, rent and utilities vary based upon our investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics.

Income Tax Expense

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

Income Tax Expense (Benefit)

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

Critical Accounting Estimates

There have been no material changes during the six months ended June 30, 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 June 30, 2024 and 2023

There have been no material changes during the nine months ended September 30, 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 September 30, 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 June 30,

Three Months Ended September 30,

Amount % of Total

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Total operating revenues $ 409,743 100.0 % $ 353,029 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $286.1 million for the three months ended June 30, 2024, an increase of $44.0 million, or 18%, from the comparable prior year period.

Card Revenues and Other Fees — Card revenues and other fees totaled $310.4 million for the three months ended September 30, 2024, an increase of $57.0 million, or 22%, 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.

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 $56.7 million for the three months ended June 30, 2024, an increase of $2.9 million, or 5%, from the comparable prior year period.

The number of tax refunds processed increased by 9% during the three months ended June 30, 2024, an increase principally attributable to year-over-year timing of IRS refund volumes.

Our tax processing revenues also increased due to a favorable mix-shift in the distribution channel in which the tax refund was processed.

These increases were partially offset by a 6% 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 $49.6 million for the three months ended June 30, 2024, a decrease of $10.4 million, or 17%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume of 13% during the three months ended June 30, 2024 over the comparable prior year period, as well as a lower effective interchange rate earned for the comparable periods.

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." In addition, the increase in card revenues and other fees was partially offset by a decrease in breakage revenue on our gift card portfolios.

Cash Processing Revenues — Cash processing revenues totaled $34.9 million for the three months ended September 30, 2024, a decrease of $1.4 million, or 4%, from the comparable prior year period.

The decrease was driven by lower cash transfer revenues.

Interchange Revenues — Interchange revenues totaled $48.4 million for the three months ended September 30, 2024, a decrease of $6.6 million, or 12%, from the comparable prior year period.

The decrease was primarily due to a decrease in purchase volume of 9% during the three months ended September 30, 2024, 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 $14.7 million for the three months ended June 30, 2024, an increase of $4.7 million, or 47%, from the comparable prior year period.

Interest Income, net — Net interest income totaled $16.1 million for the three months ended September 30, 2024, an increase of $7.7 million, or 92%, from the comparable prior year period.

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 June 30,

Three Months Ended September 30,

Amount % of Total

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Total operating expenses $ 412,675 100.7 % $ 359,868 102.0 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $52.9 million for the three months ended June 30, 2024, a decrease of $9.9 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, partially offset by higher supply chain expenses, which consist of debit card plastics and related materials costs, due to notifications of terms and conditions we mailed to accountholders in our B2B Services segment.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $61.3 million for the three months ended June 30, 2024, a decrease of $3.7 million, or 6%, from the comparable prior year period.

The decrease was driven primarily by lower salary and wages as a result of our reduction in employee workforce that we initiated in February 2024 as previously disclosed and lower employee stock-based compensation expense, primarily due to a higher number of forfeited awards versus the prior year comparable period.

Processing Expenses — Processing expenses totaled $207.9 million for the three months ended June 30, 2024, an increase of $54.8 million, or 36%, from the comparable prior year period.

Sales and Marketing Expenses — Sales and marketing expenses totaled $52.6 million for the three months ended September 30, 2024, a decrease of $3.9 million, or 7%, 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.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $61.8 million for the three months ended September 30, 2024, an increase of $2.6 million, or 4%, from the comparable prior year period.

The increase was driven primarily by third-party call center support costs associated with the growth of certain BaaS programs within our B2B Services segment, partially offset by lower salary and wages driven by the Headcount Reduction.

Processing Expenses — Processing expenses totaled $228.2 million for the three months ended September 30, 2024, an increase of $65.8 million, or 41%, 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 $108.6 million for the three months ended June 30, 2024, an increase of $28.4 million, or 35%, from the comparable prior year period.

This increase was primarily due to an increase in our accrual related to the consent order we received from the Federal Reserve Board discussed above in "Overview" and higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures, and certain impairment charges of internal-use software no longer expected to be utilized.

Income Tax Expense

Other General and Administrative Expenses — Other general and administrative expenses totaled $70.0 million for the three months ended September 30, 2024, a decrease of $11.8 million, or 14%, from the comparable prior year period.

This decrease was primarily driven by a decrease in transaction losses due to a decrease in the amount of customer dispute volume across our portfolios and favorable reductions in our dispute loss rates, partially offset by higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures.

Income Tax Expense (Benefit)

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

Three Months Ended June 30,

Three Months Ended September 30,

federal statutory tax rate 21.0 % 21.0 %

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Bank owned life insurance income (13.0) (1.3)

Bank owned life insurance surrender (19.2) —

Nondeductible expenses and penalties 57.5 4.3

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Effective tax rate 4.6 % 20.5 %

Our income tax benefit totaled $0.8 million for the three months ended June 30, 2024, compared to a $1.7 million income tax expense for the three months ended June 30, 2023, representing a decrease of $2.5 million, or 143%, 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 June 30, 2024 as compared to the three months ended June 30, 2023 was primarily due to 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.

These decreases in our effective tax rate were partially offset by increases in tax expense associated with shortfalls from stock-based compensation and tax expense due to nondeductible expenses and penalties.

The increase in nondeductible expenses and penalties for the three months ended June 30, 2024 is primarily related to the tax effect associated with the civil money penalty accrual for our consent order received from the Federal Reserve Board discussed in "Overview."

Our income tax benefit totaled $0.4 million for the three months ended September 30, 2024, compared to a $1.6 million income tax benefit for the three months ended September 30, 2023, representing a decrease of $1.2 million, or 77%, from the prior year comparable period, primarily due to the impact of the surrender of our existing bank owned life insurance policies, as discussed further below.

The decrease in our effective tax rate for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to the impact of general business credits, tax benefits from bank owned life insurance policies, and a decrease of $0.4 million in the tax expense associated with shortfalls from stock-based compensation.

These decreases in our effective tax rate were partially offset by an increase of $0.9 million in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation, incremental taxes of $1.1 million and surrender penalties of $0.5 million, and tax expense due to nondeductible expenses and penalties.

The increase in nondeductible expenses and penalties for the three months ended September 30, 2024 is primarily related to the tax effect associated with the civil money penalty for the Consent Order.

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

Comparison of Consolidated Results for the Six Months Ended June 30, 2024 and 2023

Comparison of Consolidated Results for the Nine Months Ended September 30, 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:

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total

8 unchanged sentences

Total operating revenues $ 1,268,852 100.0 % $ 1,135,285 100.0 %

Card Revenues and Other Fees — Card revenues and other fees totaled $567.6 million for the six months ended June 30, 2024, an increase of $85.6 million, or 18%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $163.6 million for the six months ended June 30, 2024, an increase of $7.9 million, or 5%, from the comparable prior year period.

While the number of tax refunds processed decreased by 2% during the six months ended June 30, 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.

This increase was partially offset by an 8% decline in the number of cash transfers processed during the six months ended June 30, 2024 due to a lower number of active accounts within our Consumer Services segment, as discussed above in "Overview."

Interchange Revenues — Interchange revenues totaled $100.6 million for the six months ended June 30, 2024, a decrease of $23.4 million, or 19%, 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-Month Periods Ended June 30, 2024 and 2023—Operating Revenues—Interchange Revenues."

Interest Income, net — Net interest income totaled $27.4 million for the six months ended June 30, 2024, an increase of $6.8 million, or 33%, from the comparable prior year period.

This increase was driven by increases in short-term interest rates for the comparable period, as discussed under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Revenues—Interest Income, net."

Card Revenues and Other Fees — Card revenues and other fees totaled $878.0 million for the nine months ended September 30, 2024, an increase of $142.6 million, or 19%, from the comparable prior year period.

This increase was driven principally by the same factors discussed above under “Comparison of Three-Month Periods Ended September 30, 2024 and 2023—Operating Revenues—Card Revenues and Other Fees."

Cash Processing Revenues — Cash processing revenues totaled $198.4 million for the nine months ended September 30, 2024, an increase of $6.5 million, or 3%, from the comparable prior year period.

Although the number of tax refunds processed decreased by 2% during the nine months ended September 30, 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.

These increases were partially offset by a 6% decline in the number of cash transfers processed during the nine months ended September 30, 2024 due to a lower number of active accounts within our Consumer Services segment, as discussed above in "Overview."

Interchange Revenues — Interchange revenues totaled $149.0 million for the nine months ended September 30, 2024, a decrease of $30.0 million, or 17%, 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-Month Periods Ended September 30, 2024 and 2023—Operating Revenues—Interchange Revenues."

Interest Income, net — Net interest income totaled $43.5 million for the nine months ended September 30, 2024, an increase of $14.5 million, or 50%, from the comparable prior year period.

The increase in net interest income was primarily the result of an increase in cash from deposit programs with our partners and increases in short-term interest rates for the comparable period, as discussed under “Comparison of Three-Month Periods Ended September 30, 2024 and 2023—Operating Revenues—Interest Income, net."

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:

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total

8 unchanged sentences

Total operating expenses $ 1,284,897 101.3 % $ 1,086,343 95.7 %

Sales and Marketing Expenses — Sales and marketing expenses totaled $115.3 million for the six months ended June 30, 2024, a decrease of $22.7 million, or 16%, from the comparable prior year period.

This decrease was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Expenses—Sales and Marketing Expenses."

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $128.2 million for the six months ended June 30, 2024, a decrease of $5.6 million, or 4%, from the comparable prior year period.

This decrease was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Expenses—Compensation and Benefits Expenses." In addition, compensation and benefits expenses were partially offset by severance benefits associated with the previously disclosed reduction in force in the first quarter of 2024.

Processing Expenses — Processing expenses totaled $403.6 million for the six months ended June 30, 2024, an increase of $105.4 million, or 35%, from the comparable prior year period.

This increase was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $225.2 million for the six months ended June 30, 2024, an increase of $68.7 million, or 44%, from the comparable prior year period.

This increase was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended June 30, 2024 and 2023—Operating Expenses—Other General and Administrative Expenses." Other general and administrative expenses also increased due to an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios, and the settlement payment and impairment charges related to internal-use software and other related assets associated with the termination of our partnership agreement to develop a new core banking system, as previously disclosed during the first quarter of 2024.

Sales and Marketing Expenses — Sales and marketing expenses totaled $167.9 million for the nine months ended September 30, 2024, a decrease of $26.6 million, or 14%, from the comparable prior year period.

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $190.0 million for the nine months ended September 30, 2024, a decrease of $2.9 million, or 2%, from the comparable prior year period.

The decrease was driven primarily by lower salary and wages as a result of our Headcount Reduction and lower employee stock-based compensation expense, primarily due to a higher number of forfeited awards versus the prior year comparable period.

These decreases were partially offset by third-party call center support costs associated with the growth of certain BaaS programs within our B2B Services segment and severance benefits associated with the Headcount Reduction.

Processing Expenses — Processing expenses totaled $631.8 million for the nine months ended September 30, 2024, an increase of $171.2 million, or 37%, from the comparable prior year period.

This increase was driven primarily by the same factors as discussed above under “Comparison of Three-Month Periods Ended September 30, 2024 and 2023—Operating Expenses—Processing Expenses."

Other General and Administrative Expenses — Other general and administrative expenses totaled $295.2 million for the nine months ended September 30, 2024, an increase of $56.9 million, or 24%, from the comparable prior year period.

This increase was primarily due to penalties paid under the Consent Order and higher professional services fees related to our AML program, including improvements to our compliance controls, policies and procedures.

Other general and administrative expenses also increased due to an increase in overall transaction losses attributable to an increase in the amount of customer dispute volume across our portfolios, and the settlement payment and impairment charges related to internal-use software and other related assets associated with the termination of our partnership agreement to develop a new core banking system, as previously disclosed during the first quarter of 2024.

Income Tax Expense

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

Six Months Ended June 30,

Nine Months Ended September 30,

federal statutory tax rate 21.0 % 21.0 %

10 unchanged sentences

Effective tax rate (4.6) % 25.6 %

Our income tax expense totaled $1.8 million for the six months ended June 30, 2024, compared to a $12.1 million income tax expense for the six months ended June 30, 2023, representing a decrease of $10.3 million, or 85%, from the prior year comparable period, primarily due to a decrease in our taxable income.

The decrease in our effective tax rate for the six months ended June 30, 2024 from the prior year comparable period was primarily due to 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 of $2.5 million in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation.

These decreases in our effective tax rate were partially offset by an increase of $0.5 million in the tax expense associated with shortfalls from stock-based compensation, an increase in tax expense due to nondeductible expenses and penalties, and a tax charge of $0.5 million and a surrender penalty of $0.2 million related to the initiated surrender and restructuring of a portion of our existing bank owned life insurance policies.

Our income tax expense totaled $1.4 million for the nine months ended September 30, 2024, compared to a $10.4 million income tax expense for the nine months ended September 30, 2023, representing a decrease of $9.0 million, or 87%, from the prior year comparable period, primarily due to a decrease in our year-to-date taxable income.

The decrease in our effective tax rate for the nine months ended September 30, 2024 from the prior year comparable period was primarily due to 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 of $1.6 million in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation.

These decreases in our effective tax rate were partially offset by an increase of $0.2 million in the tax expense associated with shortfalls from stock-based compensation, an increase in tax expense due to nondeductible expenses and penalties, and a tax charge of $1.5 million and a surrender penalty of $0.7 million.

The increase in nondeductible expenses and penalties for the nine months ended September 30, 2024 is primarily related to the tax effect associated with the civil money penalty for the Consent Order.

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 six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The results of operations and key metrics of our Consumer Services segment for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 Change % 2024 2023 Change %

9 unchanged sentences

Purchase volume $ 2,904 $ 3,553 $ (649) (18.3) % $ 9,279 $ 11,881 $ (2,602) (21.9) %

* Represents total number of active and direct deposit active accounts as of June 30, 2024 and 2023, respectively.

* Represents total number of active and direct deposit active accounts as of September 30, 2024 and 2023, respectively.

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

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 Q1 Q4 Q3 Q2 Q1

(In millions)

4 unchanged sentences

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

Segment revenues within Consumer Services for the three and six months ended June 30, 2024 decreased $32.5 million, or 25%, and $71.7 million, or 27%, respectively, from the prior year comparable periods, while our segment expenses for the three and six months ended June 30, 2024 decreased by $22.6 million, or 27%, and $42.4 million, or 25%, respectively.

Our gross dollar volume, number of active accounts, direct deposit active accounts and purchase volume each decreased during the three months ended June 30, 2024 by 22%, 25%, 24%, and 24% respectively, from the comparable prior year period, primarily due to each of the several factors discussed above in "Overview." These factors include macro-economic factors leading to economic challenges for consumers and other competitive trends that have impacted acquisition at 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 gross dollar volume and purchase volume decreased year-over-year by similar levels during the six months ended June 30, 2024 for the same reasons discussed above.

Segment revenues within Consumer Services for the three and nine months ended September 30, 2024 decreased $20.2 million, or 17%, and $91.9 million, or 24%, respectively, from the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2024 decreased by $17.1 million, or 23%, and $59.5 million, or 24%, respectively.

Our gross dollar volume, number of active accounts, number of direct deposit active accounts and purchase volume each decreased during the three months ended September 30, 2024 by 14%, 18%, 15% and 18%, respectively, from the comparable prior year period, primarily due to each of the several factors discussed above in "Overview." These factors include macro-economic factors leading to economic challenges for consumers and other competitive trends that have impacted acquisition at 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 gross dollar volume and purchase volume decreased year-over-year by similar levels during the nine months ended September 30, 2024 for the same reasons discussed above.

As a result of these decreases in each of our key metrics, our monthly maintenance fee revenues, new card fee revenues, ATM fee revenues and interchange revenues decreased year-over-year.

In addition, our interchange rate declined due to a mix-shift toward categories of consumer purchases with lower effective rates.

Consumer Services segment expenses for the three and six months ended June 30, 2024 decreased 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 decrease in processing expenses from lower volumes in this segment, as well as our processor migration, as discussed above in "Overview." Transactions losses for the three months ended June 30, 2024 decreased from the prior year comparable period, however, remain higher year to date, attributable to an increase in customer dispute volume across our portfolios during the

first quarter of the year.

Overall, segment profit decreased for the three and six months ended June 30, 2024 by approximately 22% and 30%, respectively, from the prior year comparable periods.

The results of operations and key metrics of our B2B Services segment for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

In addition, our interchange rate declined due to a mix-shift toward categories of consumer purchases with lower effective rates, as well as a decrease in breakage revenue on our gift card portfolios for each of the comparable periods.

Consumer Services segment expenses for the three and nine months ended September 30, 2024 decreased 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 decrease in processing expenses from lower volumes in this segment, as well as our processor migration, as discussed above in "Overview." Transactions losses for the three and nine months ended September 30, 2024 decreased from the prior year

comparable periods, attributable to a decrease in the amount of customer dispute volume across our portfolios in this segment and favorable reductions in our dispute loss rates.

Overall, segment profit decreased for the three and nine months ended September 30, 2024 by approximately 7% and 23%, respectively, from the prior year comparable periods.

The results of operations and key metrics of our B2B Services segment for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 Change % 2024 2023 Change %

8 unchanged sentences

Purchase volume $ 1,983 $ 1,809 $ 174 9.6 % $ 5,894 $ 5,360 $ 534 10.0 %

* Represents total number of active accounts as of June 30, 2024 and 2023, respectively.

* Represents total number of active accounts as of September 30, 2024 and 2023, respectively.

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

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 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 six months ended June 30, 2024 increased $71.4 million, or 40%, and $141.3 million, or 40%, respectively, compared to the prior year periods, while our segment expenses for the three and six months ended June 30, 2024 increased $70.0 million, or 43% and $143.9 million, or 46%, respectively.

Our gross dollar volume, number of active accounts and purchase volume each increased during the three months ended June 30, 2024 by 43%, 21% and 13%, 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.

Segment revenues within our B2B Services for the three and nine months ended September 30, 2024 increased $77.2 million, or 39%, and $218.5 million, or 40%, respectively, compared to the prior year periods, while our segment expenses for the three and nine months ended September 30, 2024 increased $68.3 million, or 38% and $212.2 million, or 43%, respectively.

Our gross dollar volume, number of active accounts and purchase volume each increased during the three months ended September 30, 2024 by 46%, 11% and 10%, 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 but do not generate comparable levels of interchange fees.

The growth in gross dollar volume from these BaaS 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 the non-renewals of certain other BaaS partners, as previously disclosed.

Our gross dollar volume and purchase volume increased year-over-year by similar levels during the six months ended June 30, 2024 for the same reasons discussed above.

B2B Services segment expenses increased for the three and six months ended June 30, 2024 from the comparable prior year periods, 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.

Overall, our segment profit increased for the three ended June 30, 2024 by approximately 8% and decreased for the six months ended June 30, 2024 by approximately 6% from the prior year comparable periods.

This segment also experienced margin compression during each period because certain BaaS partnerships are structured based on a fixed profit and, therefore, our segment profit for certain arrangements will not scale with revenue growth.

Our gross dollar volume and purchase volume increased year-over-year by similar levels during the nine months ended September 30, 2024 for the same reasons discussed above.

B2B Services segment expenses increased for the three and nine months ended September 30, 2024 from the comparable prior year periods, principally due to higher processing expenses with the growth of certain BaaS account programs, as well as higher third-party call center support costs as a result of an increase in gross dollar volume and the number of active accounts.

Transaction losses decreased during the three months ended September 30, 2024 due to favorable reductions in our dispute loss rates, and increased during the nine months ended September 30, 2024 on a year over year basis.

Overall, our segment profit increased for the three and nine months ended September 30, 2024 by approximately 47% and 11%, respectively, from the prior year comparable periods.

This segment also experienced margin compression during each period because certain BaaS

partnerships are 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 six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The results of operations and key metrics of our Money Movement Services segment for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 Change % 2024 2023 Change %

8 unchanged sentences

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

Q2 Q1 Q4 Q3 Q2 Q1

Q3 Q2 Q1 Q4 Q3 Q2 Q1

(In millions)

1 unchanged sentence

Number of tax refunds processed 0.19 4.20 9.28 0.16 0.20 3.87 9.91

Segment revenues within our Money Movement services for the three and six months ended June 30, 2024 increased $3.0 million, or 6%, and $7.9 million, or 5%, respectively, from the comparable prior year periods.

Segment expenses for the three and six months ended June 30, 2024 decreased $2.5 million, or 13%, and $2.4 million, or 4%, respectively.

The increase in segment revenues for the three and six months ended June 30, 2024 was driven primarily by an increase in our tax processing revenues.

Our tax processing revenues increased for the three months ended June 30, 2024 primarily due to a 9% increase in the number of tax refunds processed over the prior year comparable period.

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

Despite a 2% decrease in the number of tax refunds processed during the first half of the year, our tax processing revenues increased for the six months ended June 30, 2024 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.

These increases were partially offset by a decrease in the number of cash transfers processed during the three and six months ended June 30, 2024 of 6% and 8%, respectively.

This decrease was due to a lower number of active accounts within our Consumer Services segment discussed above.

Segment revenues within our Money Movement services for the three and nine months ended September 30, 2024 decreased $0.2 million, or 1%, and increased $7.7 million, or 4%, respectively, from the comparable prior year periods.

Segment expenses for the three and nine months ended September 30, 2024 decreased $0.1 million, or 1%, and $2.5 million, or 3%, respectively.

The decrease in segment revenues for the three months ended September 30, 2024 was driven by lower cash transfer revenues.

Our tax processing revenues during the three months ended September 30, 2024 remained consistent year over year.

Due to the seasonal nature of our tax products and services, substantially all of our tax processing revenues are earned during the first half of each year.

The increase in segment revenues for the nine months ended September 30, 2024 was driven primarily by an increase in our tax processing revenues, partially offset by a decrease in cash transfer revenues.

While the number of tax refunds processed decreased by 2% during the nine months ended September 30, 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.

These increases were partially offset by a 6% decline in the number of cash transfers processed during the nine months ended September 30, 2024.

This decline was 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.

Segment expenses decreased during the three and six months ended June 30, 2024 primarily from decreases in sales commissions from lower cash transfer revenues, partially offset by third-party costs and related expenses due to growth across our tax processing services.

Segment expenses decreased during the three and nine months ended September 30, 2024 primarily from decreases in sales commissions from lower cash transfer revenues, partially offset by third-party costs and related expenses due to growth across our tax processing services.

Corporate and Other

The results of operations and key metrics of our Corporate and Other segment for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

The results of operations and key metrics of our Corporate and Other segment for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 Change % 2024 2023 Change %

9 unchanged sentences

Refer to Note 19—Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation.

Revenues within our Corporate and Other segment decreased primarily due to the portion of interest we share with certain BaaS partners (a reduction of revenue).

Net interest income increased for the three and six months ended June 30, 2024 by 47% and 33%, respectively, over the prior year comparable periods as a result of an increase in cash from deposit programs with our partners and higher yields earned 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).

Unallocated corporate expenses for the three and six months ended June 30, 2024 increased by approximately 3% and 5%, respectively, over the prior year comparable period.

The increases were 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.

Revenues within our Corporate and Other segment were driven primarily by an increase in net interest income for the three and nine months ended September 30, 2024 by 92% and 50%, respectively, over the prior year comparable periods, partially offset by the portion of interest shared with certain BaaS partners (a reduction of revenue).

Net interest income increased as a result of an increase in cash from deposit programs with our partners and yields earned at the Federal Reserve.

Unallocated corporate expenses for the three and nine months ended September 30, 2024 increased by approximately 4% and 5%, respectively, over the prior year comparable periods.

Liquidity and Capital Resources

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

4 unchanged sentences

Increase (decrease) in unrestricted cash, cash equivalents and restricted cash $ 767,091 $ (104,410)

For the six months ended June 30, 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 June 30, 2024, our primary source of liquidity was unrestricted cash and cash equivalents totaling $1.3 billion.

For the nine months ended September 30, 2024 and 2023, we financed our operations primarily through our cash flows provided by operating activities, and from time to time, our short-term working capital activities through our borrowings under our credit facility.

As of September 30, 2024, our primary source of liquidity was unrestricted cash and cash equivalents totaling $1.5 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 and cash flows from operations 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 continue to evaluate alternative sources of funding.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations, and net proceeds from the issuance and sale of our senior unsecured

notes will be sufficient to meet our working capital, capital expenditures, and any other capital needs for at least the next 12 months.

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

1 unchanged sentence

Cash Flows from Operating Activities

Our $120.7 million of net cash provided by operating activities during the six months ended June 30, 2024 was the result of $24.0 million of net loss, adjusted for certain non-cash operating items of $97.4 million and increases in net changes in our working capital assets and liabilities of $47.2 million, attributable primarily to the timing of the accrual related to our consent order and the collection of fee advances outstanding as of the beginning of the year.

Our $127.8 million of net cash provided by operating activities during the six months ended June 30, 2023 was the result of $36.6 million of net income, adjusted for certain non-cash operating items of $85.8 million and increases in net changes in our working capital assets and liabilities of $5.4 million.

Our $104.4 million of net cash provided by operating activities during the nine months ended September 30, 2024 was the result of $31.8 million of net losses, adjusted for certain non-cash operating items of $139.5 million and decreases in net changes in our working capital assets and liabilities of $3.3 million, which includes the payment of $44 million for the civil money penalty included in our Consent Order.

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.

Cash Flows from Investing Activities

Our $7.8 million of net cash provided by investing activities during the six months ended June 30, 2024 was primarily due to net proceeds from maturities of available-for-sale securities of $94.8 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 $31.5 million and net changes in loans of $20.2 million.

Our $85.8 million of net cash provided by investing activities during the nine months ended September 30, 2024 was primarily due to proceeds from maturities of available-for-sale securities, net of purchases, of $143.1 million and the surrender of a portion of our bank-owned life insurance policies of $55.1 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 $52.2 million and net changes in loans of $24.4 million.

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

Our $9.6 million of net cash used in investing activities during the six months ended June 30, 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 $38.1 million and net changes in loans of $17.9 million, partially offset by proceeds from maturities of available-for-sale securities of $82.3 million.

Our $18.4 million of net cash provided by investing activities during the nine months ended September 30, 2023 was primarily due to 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.

Cash Flows from Financing Activities

Our $502.3 million of net cash provided by financing activities during the six months ended June 30, 2024 was principally the result of a net increase in customer deposits of $613.3 million, partially offset by a net decrease of $113.0 million in obligations to customers.

Our $272.6 million of net cash used in financing activities during the six months ended June 30, 2023 was principally the result of a net decrease in customer deposits of $216.3 million and a decrease of $21.7 million in obligations to customers.

We also repaid $35.0 million, net of borrowings, on our revolving line of credit during the six months ended June 30, 2023.

Our $576.9 million of net cash provided by financing activities during the nine months ended September 30, 2024 was principally the result of a net increase in customer deposits of $547.5 million and in obligations to customers of $46.0 million.

Refer to additional discussion below for our borrowings and repayments of debt.

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.

Other Sources of Liquidity

Senior Unsecured Notes

In September 2024, we issued and sold senior unsecured notes (the "Notes") in an aggregate principal amount of $45 million.

The Notes have a five-year term, maturing September 15, 2029.

The principal amounts bear interest at a fixed rate of 8.75% per annum, payable semi-annually in arrears.

The net proceeds of the offering were used to repay outstanding indebtedness under our revolving credit facility discussed below, and for general corporate purposes.

In October 2024, we issued and sold additional Notes in an aggregate principal amount of $5 million.

2019 Revolving Facility

In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto.

The credit 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 June 30, 2024, the outstanding balance on the 2019 Revolving Facility was $62.0 million and we had $38.0 million available for use.

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

At our election, loans made under the credit agreement bear interest at 1) an adjusted SOFR rate (the “SOFR Rate") or 2) a base rate determined by reference to the highest of (a) the United States federal funds rate plus 0.50%, (b) the Wells Fargo prime rate, and (c) an adjusted SOFR rate plus 1.0% (the “Base Rate"), plus in either case, an applicable margin.

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

The interest rate on our outstanding balance as of June 30, 2024 was approximately 7.08%.

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 June 30, 2024, we were in compliance with all such covenants.

The credit agreement provided for a $100.0 million five-year revolving line of credit (the "2019 Revolving Facility"), which matured in October 2024.

The proceeds of any borrowings under the 2019 Revolving Facility were used for working capital and other general corporate purposes, subject to the terms and conditions set forth in the credit agreement.

As of September 30, 2024, the then-outstanding balance on the 2019 Revolving Facility was repaid in full, and the 2019 Revolving Facility terminated at its maturity date.

Material Cash Requirements

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Contractual Obligations

There have been no material changes during the six months ended June 30, 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.

There have been no material changes during the nine months ended September 30, 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.

As of June 30, 2024 and December 31, 2023, we and Green Dot Bank were categorized as "well capitalized" under applicable regulatory standards.

As of September 30, 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 June 30, 2024 which management believes would have changed our category as "well capitalized."

There were no conditions or events since September 30, 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 June 30, 2024 and December 31, 2023 were as follows:

June 30, 2024

The actual amounts and ratios, and required "well capitalized" minimum capital amounts and ratios at September 30, 2024 and December 31, 2023 were as follows:

September 30, 2024

Amount Ratio Regulatory Minimum "Well-capitalized" Minimum

24 unchanged sentences

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