GREEN DOT CORP

Previous wording

Green Dot Corporation is a financial technology and registered bank holding company ("BHC") committed to giving all people the power to bank seamlessly, affordably, and with confidence. Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all. Through our bank, we offer a suite of financial products to consumers and businesses including debit, prepaid, checking, credit and payroll cards, as well as robust money processing services, such as tax refund processing, cash deposits and disbursements.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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).

Current wording

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).

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

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."

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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 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."

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

Comparison of Consolidated Results for the Nine Months Ended September 30, 2024 and 2023

Previous wording

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."

Current wording

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."

Previous wording

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."

Current wording

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."

Previous wording

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."

Current wording

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."

Previous wording

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."

Current wording

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."

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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."

Current wording

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."

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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. 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 in "Overview."

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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.