GREEN DOT CORP 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, (the "Securities Act") and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may” and “assumes,” variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including inflation and interest rate trends and impacts and other macro-economic impacts on our business, results of operations and financial condition and governmental and our responses to such events, including those identified below, under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. In this 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. Overview Green Dot Corporation is a financial technology and registered bank holding company ("BHC") committed to giving all people the power to bank seamlessly, affordably, and with confidence. Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all. Through 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. Segment profit reflects each segment's net revenue less direct costs, such as sales and marketing expenses, processing expenses, third-party call center support and transaction losses. Our operations are aggregated amongst three reportable segments: 1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services. Net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue), eliminations of inter-segment revenues and expenses, and unallocated corporate expenses that are not considered when our CODM evaluates the performance of our three reportable segments are recorded in Corporate and Other expenses. Refer to 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, 2024 and 2023 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 Change % 2024 2023 Change % (In thousands, except percentages) Total operating revenues $ 409,743 $ 353,029 $ 56,714 16.1 % $ 1,268,852 $ 1,135,285 $ 133,567 11.8 % Total operating expenses 412,675 359,868 52,807 14.7 % 1,284,897 1,086,343 198,554 18.3 % Net (loss) income (7,840) (6,265) (1,575) 25.1 % (31,805) 30,325 (62,130) (204.9) % Refer to "Segment Results" below for a summary of financial results of each of our reportable segments. 25 Table of Contents Total operating revenues 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. 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. 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. 26 Table of Contents 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 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. Included in the Consent Order was a civil money penalty related to these issues in the amount of $44 million which was subsequently paid in July 2024. We previously accrued an estimated liability of $20 million related to the Consent Order during the three months ended December 31, 2023, and the remaining portion was accrued during the three months ended June 30, 2024. 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." Income taxes 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. 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 27 Table of Contents 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"). 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 do not expect 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 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 as we seek to expand account programs. 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. In general, while increases in short-term interest rates benefit the yield we earn on our cash, certain of our BaaS partner arrangements allow for the BaaS partner to share in a significant portion of the interest earned from accountholder deposits (which are recorded as a reduction of revenue in our consolidated financial statements), and yields on our investment portfolio tend to lag interest rate increases as securities mature and proceeds are reinvested. Accordingly, the net effect has had and may continue to have a negative impact on our consolidated financial statements and will be dependent upon future interest rate changes enacted by the Federal Reserve. Further, the duration and magnitude of the continuing effects of macro-economic factors remain uncertain and dependent on various factors outside of our control. See Part II, Item 1A, "Risk Factors," for an additional discussion of risks related to macro-economic factors. 28 Table of Contents Consolidated Key Metrics We review a number of metrics to help us monitor the performance of, and identify trends affecting, our business. We believe the following measures are the primary indicators of our quarterly and annual revenues: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 Change % 2024 2023 Change % (In millions, except percentages) Gross dollar volume $ 33,473 $ 24,836 $ 8,637 34.8 % $ 96,358 $ 72,849 $ 23,509 32.3 % Number of active accounts* 3.46 3.67 (0.21) (5.7) % n/a n/a n/a n/a Purchase volume $ 4,887 $ 5,362 $ (475) (8.9) % $ 15,173 $ 17,241 $ (2,068) (12.0) % Number of cash transfers 8.22 8.31 (0.09) (1.1) % 24.14 25.67 (1.53) (6.0) % 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 September 30, 2024 and 2023, respectively. See “Segment Results” for additional information and discussion regarding key metrics performance by segment. The definitions of our key metrics are as follows: Gross Dollar Volume — Represents the total dollar volume of funds loaded to our account products from direct deposit and non-direct deposit sources. A substantial portion of our gross dollar volume is generated from direct deposit sources. We use this metric to analyze the total amount of money moving onto our account programs, and to determine the overall engagement and usage patterns of our 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. This metric includes checking accounts, general purpose reloadable prepaid card accounts, and secured credit card accounts in our portfolio that had at least one purchase, deposit or ATM withdrawal transaction during the applicable quarter. We use this metric to analyze the overall size of our active customer base and to analyze multiple metrics expressed as an average across this active account base. Our direct deposit active accounts within our Consumer Services segment, on average, have the longest tenure and generate the majority of our gross dollar volume in any period and thus, generate more revenue over their lifetime than other active accounts. Refer to sub-section entitled Consumer Services under “Segment Results” below for key metric results for direct deposit active accounts. Purchase Volume — Represents the total dollar volume of purchase transactions made by our 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. Number of Cash Transfers — Represents the total number of cash transfer transactions conducted by consumers, such as a point-of-sale swipe reload transaction, the purchase of a MoneyPak or an e-cash mobile remittance transaction marketed under various brand names, that we conducted through our retail distributors in a specified period. This metric excludes disbursements made through our wage disbursement platform. We review this metric as a measure of the size and scale of our retail cash processing network, as an indicator of customer engagement and usage of our products and services, and to analyze cash transfer revenue, which is a key component of our financial performance. Number of Tax Refunds Processed — Represents the total number of tax refunds processed in a specified period. The number of tax refunds processed is most concentrated during the first half of each year and is minimal during the second half of each year. We review this metric as a measure of the size and scale of our tax refund processing platform and as an indicator of customer engagement and usage of its products and services. 29 Table of Contents Key components of our results of operations Operating Revenues We classify our operating revenues into the following four categories: Card Revenues and Other Fees — Card revenues consist of monthly maintenance fees, ATM fees, new card fees and other revenues. We charge maintenance fees on prepaid cards, checking accounts and certain cash transfer products, such as MoneyPak, pursuant to the terms and conditions in our customer agreements. We charge ATM fees to 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 accountholders. Our cash-back rewards are recorded as a reduction to card revenues and other fees. Also included in card revenues and other fees are program management service fees earned from our BaaS partners for programs we manage on their behalf. Our aggregate monthly maintenance fee revenues vary primarily based upon the number of active accounts in our portfolio and the average fee assessed per account. Our average monthly maintenance fee per active account depends upon the mix of products in our portfolio at any given point in time and upon the extent to which fees are waived based on various incentives provided to customers in an effort to encourage higher usage and retention. Our aggregate ATM fee revenues vary based upon the number of 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. The average new card fee depends primarily upon the mix of products that we sell since there are variations in new account fees based on the product and/or the location or source where our products are purchased. The revenue we earn from each of these fees may also vary depending upon the channel in which the active accounts were acquired. For example, certain BaaS programs may not assess monthly maintenance fees and as a result, these accounts may generate lower fee revenue than other active accounts. Our aggregate other fees vary primarily based upon account sales of all types, gift card sales, purchase transactions and the number of active accounts in our portfolio. Cash Processing Revenues — Cash processing revenues consist of cash transfer revenues, tax refund processing service revenues, disbursement revenues and other tax processing service revenues. We earn cash transfer revenues when consumers fund their cards through a reload transaction at a Green Dot Network retail location. Our aggregate cash transfer revenues vary based upon the mix of locations where reload transactions occur, since reload fees vary by location. We earn tax refund processing service revenues at the point in time when a customer of a third-party tax preparation company chooses to pay his or her tax preparation fee through the use of our tax refund processing services. We earn disbursement fees from our business partners at the point in time payment disbursements are made. Interchange Revenues — We earn interchange revenues from fees remitted by the merchant’s bank, which are based on rates established by the payment networks, at the point in time when customers make purchase transactions using our products. Our aggregate interchange revenues vary based primarily on the number of active accounts in our portfolio, the average transactional volume of the active accounts in our portfolio, the merchant category of spend, and on the mix of 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. Interest-earning assets include cash from customer deposits, loans, and investment securities. Our interest-bearing liabilities held at Green Dot Bank include interest-bearing deposits. Our net interest income and our net interest margin fluctuate based on changes in the federal funds interest rates and changes in the amount and composition of our interest-bearing assets and liabilities. Operating Expenses We classify our operating expenses into the following four categories: Sales and Marketing Expenses — Sales and marketing expenses consist primarily of the commissions we pay to our retail distributors, brokers and partners, advertising and marketing expenses, and the costs of manufacturing and distributing card packages, placards and promotional materials to our retail distributors and personalized debit 30 Table of Contents cards to consumers who have activated their cards. We generally establish commission percentages in long-term distribution agreements with our retail distributors and partners. Aggregate commissions with our retail distributors are determined by the number of account products and cash transfers sold at their respective retail stores. Commissions with our partners and, in certain cases, our retail distributors are determined by the revenue generated from the ongoing use of the associated card programs. We incur advertising and marketing expenses for television, sponsorships, online and in-store promotions. Advertising and marketing expenses are recognized as incurred and typically deliver a benefit over an extended period of time. For this reason, these expenses do not always track changes in our operating revenues. Our manufacturing and distribution costs vary primarily based on the number of accounts activated by consumers. Compensation and Benefits Expenses — Compensation and benefits expenses represent the compensation and benefits that we provide to our employees and the payments we make to third-party contractors. While we have an in-house customer service function, we employ third-party contractors to conduct call center operations, handle routine customer service inquiries and provide consulting support in the area of IT operations and elsewhere. Compensation and benefits expenses associated with our customer service and loss management functions generally vary in line with the size of our active account portfolio, while the expenses associated with other functions do not. Processing Expenses — Processing expenses consist primarily of the fees charged to us by the payment networks, which process transactions for us, the third-party card processors that maintain the records of our customers' accounts and process transaction authorizations and postings for us and the third-party banks that issue our accounts. These costs generally vary based on the total number of active accounts in our portfolio and gross dollar volume transacted by those accounts. Also included in processing expenses are bank fees associated with our tax refund processing services and gateway and network fees associated with our disbursement services. Bank fees generally vary based on the total number of tax refund transfers processed and gateway and network fees vary based on the number of disbursements made. Other General and Administrative Expenses — Other general and administrative expenses consist primarily of professional services fees, telephone and communication costs, depreciation and amortization of our property and equipment, amortization of our intangible assets, impairment charges of long-lived assets, transaction losses (losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud), rent and utilities, and insurance. We incur telephone and communication costs primarily from customers contacting us through our toll-free telephone numbers. These costs vary with the total number of active accounts in our portfolio, as do losses from customer disputed transactions, unrecovered customer purchase transaction overdrafts and fraud. Costs associated with professional services, depreciation and amortization of our property and equipment, amortization of our acquired intangible assets, impairment charges of long-lived assets, rent and utilities vary based upon our investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics. Income Tax Expense (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 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. 31 Table of Contents 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 September 30, 2024 2023 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating revenues: Card revenues and other fees $ 310,372 75.8 % $ 253,407 71.7 % Cash processing revenues 34,897 8.5 36,256 10.3 Interchange revenues 48,397 11.8 54,968 15.6 Interest income, net 16,077 3.9 8,398 2.4 Total operating revenues $ 409,743 100.0 % $ 353,029 100.0 % 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." 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. 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. 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 $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. 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). 32 Table of Contents Operating Expenses The following table presents a breakdown of our operating expenses among sales and marketing, compensation and benefits, processing, and other general and administrative expenses: Three Months Ended September 30, 2024 2023 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating expenses: Sales and marketing expenses $ 52,626 12.8 % $ 56,495 16.0 % Compensation and benefits expenses 61,795 15.1 59,168 16.8 Processing expenses 228,227 55.7 162,375 46.0 Other general and administrative expenses 70,027 17.1 81,830 23.2 Total operating expenses $ 412,675 100.7 % $ 359,868 102.0 % 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 $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 September 30, 2024 2023 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit (8.7) 0.8 Foreign tax rate differential (2.6) (0.5) General business credits (24.4) 2.8 Stock-based compensation (2.6) (7.8) IRC 162(m) limitation (6.3) 5.0 Bank owned life insurance income (13.0) (1.3) Bank owned life insurance surrender (19.2) — Nondeductible expenses and penalties 57.5 4.3 Global intangible low-tax income tax 3.0 (3.9) Other (0.1) 0.1 Effective tax rate 4.6 % 20.5 % 33 Table of Contents 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 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: Nine Months Ended September 30, 2024 2023 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating revenues: Card revenues and other fees $ 878,002 69.2 % $ 735,380 64.8 % Cash processing revenues 198,447 15.6 191,925 16.9 Interchange revenues 148,950 11.8 178,950 15.7 Interest income, net 43,453 3.4 29,030 2.6 Total operating revenues $ 1,268,852 100.0 % $ 1,135,285 100.0 % 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." 34 Table of Contents Operating Expenses The following table presents a breakdown of our operating expenses among sales and marketing, compensation and benefits, processing, and other general and administrative expenses: Nine Months Ended September 30, 2024 2023 Amount % of Total Operating Revenues Amount % of Total Operating Revenues (In thousands, except percentages) Operating expenses: Sales and marketing expenses $ 167,948 13.2 % $ 194,530 17.1 % Compensation and benefits expenses 189,967 15.0 192,934 17.0 Processing expenses 631,789 49.8 460,555 40.6 Other general and administrative expenses 295,193 23.3 238,324 21.0 Total operating expenses $ 1,284,897 101.3 % $ 1,086,343 95.7 % 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. 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 $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. 35 Table of Contents Income Tax Expense The following table presents a breakdown of our effective tax rate among federal, state, and other: Nine Months Ended September 30, 2024 2023 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 6.1 1.7 Foreign tax rate differential 1.4 (0.6) General business credits 11.6 (4.5) IRC 162(m) limitation (10.0) 1.1 Stock-based compensation 3.8 7.1 Bank owned life insurance income 2.8 (1.5) Bank owned life insurance surrender (7.4) — Nondeductible expenses and penalties (32.3) 0.3 Global intangible low-tax income tax (1.5) 0.8 Other (0.1) 0.2 Effective tax rate (4.6) % 25.6 % 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. 36 Table of Contents Segment Results Consumer Services 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 % (In thousands, except percentages) Financial Results Segment revenues $ 98,046 $ 118,204 $ (20,158) (17.1) % $ 295,278 $ 387,128 $ (91,850) (23.7) % Segment expenses 58,657 75,778 (17,121) (22.6) % 188,181 247,678 (59,497) (24.0) % Segment profit $ 39,389 $ 42,426 $ (3,037) (7.2) % $ 107,097 $ 139,450 $ (32,353) (23.2) % Key Metrics (In millions, except percentages) Gross dollar volume $ 3,983 $ 4,619 $ (636) (13.8) % $ 12,497 $ 15,418 $ (2,921) (18.9) % Number of active accounts* 1.78 2.16 (0.38) (17.6) % n/a n/a n/a n/a Direct deposit active accounts* 0.44 0.52 (0.08) (15.4) % n/a n/a n/a n/a 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 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: 2024 2023 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Gross dollar volume $ 3,983 $ 4,014 $ 4,500 $ 4,290 $ 4,619 $ 5,122 $ 5,677 Number of active accounts * 1.78 1.76 1.93 2.05 2.16 2.35 2.41 Direct deposit active accounts * 0.44 0.45 0.46 0.49 0.52 0.59 0.60 Purchase volume $ 2,904 $ 3,036 $ 3,339 $ 3,312 $ 3,553 $ 3,984 $ 4,344 * Represents total number of active accounts as of the end of each quarter. 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, 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 37 Table of Contents 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. B2B Services 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 % (In thousands, except percentages) Financial Results Segment revenues $ 276,402 $ 199,206 $ 77,196 38.8 % $ 769,658 $ 551,150 $ 218,508 39.6 % Segment expenses 248,666 180,323 68,343 37.9 % 704,561 492,342 212,219 43.1 % Segment profit $ 27,736 $ 18,883 $ 8,853 46.9 % $ 65,097 $ 58,808 $ 6,289 10.7 % Key Metrics (In millions, except percentages) Gross dollar volume $ 29,490 $ 20,217 $ 9,273 45.9 % $ 83,861 $ 57,431 $ 26,430 46.0 % Number of active accounts* 1.68 1.51 0.17 11.3 % n/a n/a n/a n/a Purchase volume $ 1,983 $ 1,809 $ 174 9.6 % $ 5,894 $ 5,360 $ 534 10.0 % * 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: 2024 2023 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Gross dollar volume $ 29,490 $ 28,116 $ 26,255 $ 22,065 $ 20,217 $ 19,602 $ 17,612 Number of active accounts* 1.68 1.65 1.58 1.52 1.51 1.36 1.43 Purchase volume $ 1,983 $ 1,976 $ 1,935 $ 1,961 $ 1,809 $ 1,750 $ 1,801 * 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, 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 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 38 Table of Contents 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 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 % (In thousands, except percentages) Financial Results Segment revenues $ 31,854 $ 32,089 $ (235) (0.7) % $ 187,967 $ 180,304 $ 7,663 4.3 % Segment expenses 19,137 19,239 (102) (0.5) % 74,112 76,654 (2,542) (3.3) % Segment profit $ 12,717 $ 12,850 $ (133) (1.0) % $ 113,855 $ 103,650 $ 10,205 9.8 % Key Metrics (In millions, except percentages) Number of cash transfers 8.22 8.31 (0.09) (1.1) % 24.14 25.67 (1.53) (6.0) % Number of tax refunds processed 0.19 0.20 (0.01) (3.0) % 13.67 13.98 (0.31) (2.2) % As additional supplemental information, our key metrics within our Money Movement Services segment is presented on a quarterly basis as follows: 2024 2023 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (In millions) Key Metrics Number of cash transfers 8.22 8.15 7.77 8.19 8.31 8.66 8.70 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 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 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 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 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. 39 Table of Contents 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, 2024 and 2023 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 Change % 2024 2023 Change % (In thousands, except percentages) Financial Results Unallocated revenue and inter-segment eliminations $ (283) $ (928) $ 645 (69.5) % $ 3,095 $ 3,496 $ (401) (11.5) % Unallocated corporate expenses and inter-segment eliminations 51,244 49,496 1,748 3.5 % 167,599 160,257 7,342 4.6 % Total $ (51,527) $ (50,424) $ (1,103) 2.2 % $ (164,504) $ (156,761) $ (7,743) 4.9 % Revenues within Corporate and Other are comprised of net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue) and eliminations of inter-segment revenues. Unallocated corporate expenses include eliminations of inter-segment expenses and our fixed expenses such as salaries, wages and related benefits for our employees, professional services fees, software licenses, telephone and communication costs, rent, utilities and insurance. These costs are not considered when our CODM evaluates the performance of our three reportable segments since they are not directly attributable to any reporting segment. Non-cash expenses such as stock-based compensation, depreciation and amortization of long-lived assets, impairment charges and other non-recurring expenses that are not considered by our CODM when evaluating our overall consolidated financial results are excluded from our unallocated corporate expenses above. Refer to Note 19—Segment Information to the Consolidated Financial Statements included herein for a summary reconciliation. 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. 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 the Headcount Reduction. Liquidity and Capital Resources The following table summarizes our major sources and uses of cash for the periods presented: Nine Months Ended September 30, 2024 2023 (In thousands) Total cash provided by (used in) Operating activities $ 104,395 $ 132,448 Investing activities 85,818 18,420 Financing activities 576,878 (255,278) Increase (decrease) in unrestricted cash, cash equivalents and restricted cash $ 767,091 $ (104,410) 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, cash flows from operations, and net proceeds from the issuance and sale of our senior unsecured 40 Table of Contents 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. We continue to monitor the impact of material trends on our business to ensure our liquidity and capital resources remain appropriate throughout this period of uncertainty. Cash Flows from Operating Activities Our $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 $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 $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 $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 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. 41 Table of Contents Material Cash Requirements While the overall macro-economic environment, the effect of high inflation and interest rates, and other factors described in "Outlook and Other Trends Affecting Our Business" above have created economic uncertainty and impacted how we manage our liquidity and capital resources, we anticipate that we will continue to develop and invest in property, equipment and internal-use software as necessary in the normal course of our business. The amount and timing of these payments and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the rate of change of computer hardware and software used in our business and our business outlook as a result of macro-economic uncertainties. We intend to continue to invest in new products and programs, including GO2bank, new features for our existing products and IT infrastructure in order to scale and operate effectively to meet our strategic objectives. We expect our capital expenditures in 2024 to be lower compared to our capital expenditures in 2023, but at similar levels compared to our annual investments in recent years. We expect to fund these capital expenditures primarily through our cash flows provided by operating activities. We have used cash to acquire businesses and technologies and we anticipate that we may continue to do so in the future. The nature of these transactions, however, makes it difficult to predict the amount and timing of such cash requirements. Additionally, we may make periodic cash contributions to our subsidiary bank, Green Dot Bank, to maintain its capital, leverage and other financial commitments at levels we have agreed to with our regulators. If another economic relief package is signed into law that provides for substantial additional direct payments and unemployment benefits, we may need to increase the size of our cash contributions to Green Dot Bank to maintain its capital, leverage and other financial commitments. Contractual Obligations 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. 42 Table of Contents Capital Requirements for Bank Holding Companies Our subsidiary bank, Green Dot Bank, is a member bank of the Federal Reserve System and our primary regulators are the Federal Reserve Board and the Utah Department of Financial Institutions. We and Green Dot Bank are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines, we and Green Dot Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Basel III rules, which were promulgated by the Federal Reserve and other U.S. banking regulators, provide for risk-based capital, leverage and liquidity standards. Under the Basel III rules, we must maintain a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6%, a ratio of total capital to risk-weighted assets of at least 8% and a minimum Tier 1 leverage ratio of 4.0%. Either or both of Green Dot Corporation and Green Dot Bank may qualify for and opt to use, from time to time, the community bank leverage ratio framework under the Federal Reserve’s version of the U.S. Basel III Rules. Under the community bank leverage ratio framework, a qualifying community banking organization may generally satisfy its capital requirements (and capital conservation buffer) under the U.S. Basel III rules provided that it has a Tier 1 leverage ratio greater than 9% and satisfies other applicable conditions. 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, 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, 2024 which management believes would have changed our category as "well capitalized." The definitions associated with the amounts and ratios below are as follows: Ratio Definition Tier 1 leverage ratio Tier 1 capital divided by average total assets Common equity Tier 1 capital ratio Common equity Tier 1 capital divided by risk-weighted assets Tier 1 capital ratio Tier 1 capital divided by risk-weighted assets Total risk-based capital ratio Total capital divided by risk-weighted assets Terms Definition Tier 1 capital and Common equity Tier 1 capital Includes common stock and retained earnings, adjusted for items primarily related to accumulated OCI, goodwill, deferred tax assets and intangibles. Total capital Tier 1 capital plus supplemental capital items such as the allowance for credit losses, subject to certain limits Average total assets Average total consolidated assets during the period less deductions and adjustments primarily related to goodwill, deferred tax assets and intangibles assets Risk-weighted assets Represents the amount of assets or exposure multiplied by the standardized risk weight (%) associated with that type of asset or exposure. The standardized risk weights are prescribed in the bank capital rules and reflect regulatory judgment regarding the riskiness of a type of asset or exposure 43 Table of Contents 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 (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 740,637 15.6 % 4.0 % n/a Common equity Tier 1 capital $ 740,637 44.6 % 4.5 % n/a Tier 1 capital $ 740,637 44.6 % 6.0 % 6.0 % Total risk-based capital $ 763,352 46.0 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 349,469 7.5 % 4.0 % 5.0 % Common equity Tier 1 capital $ 349,469 29.6 % 4.5 % 6.5 % Tier 1 capital $ 349,469 29.6 % 6.0 % 8.0 % Total risk-based capital $ 357,295 30.3 % 8.0 % 10.0 % December 31, 2023 Amount Ratio Regulatory Minimum "Well-capitalized" Minimum (In thousands, except ratios) Green Dot Corporation: Tier 1 leverage $ 730,459 17.9 % 4.0 % n/a Common equity Tier 1 capital $ 730,459 38.0 % 4.5 % n/a Tier 1 capital $ 730,459 38.0 % 6.0 % 6.0 % Total risk-based capital $ 749,623 39.0 % 8.0 % 10.0 % Green Dot Bank: Tier 1 leverage $ 404,559 9.8 % 4.0 % 5.0 % Common equity Tier 1 capital $ 404,559 27.8 % 4.5 % 6.5 % Tier 1 capital $ 404,559 27.8 % 6.0 % 8.0 % Total risk-based capital $ 412,966 28.4 % 8.0 % 10.0 % 44 Table of Contents