GREEN DOT CORP

Previous wording

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, transaction losses and fraud management, and customer support and related expenses. 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 2024 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.

Current wording

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, transaction losses and fraud management, and customer support and related expenses. Our operations are aggregated amongst three reportable segments: 1) Business to Business ("B2B") Services, 2) Consumer 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 2024 Annual Report on Form 10-K "Part I, Item 1. Business" for more detailed information about our operations and Note 20—Segment Information in the notes to the accompanying unaudited consolidated financial statements.

Previous wording

Our consolidated results of operations for the three and six months ended June 30, 2025 and 2024 were as follows:

Current wording

Our consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 were as follows:

Previous wording

Our total operating revenues for the three and six months ended June 30, 2025 increased $97.1 million, or 24%, and $203.9 million, or 24%, respectively, over the prior year comparable periods, driven primarily by higher revenues in our B2B Services segment, partially offset by lower revenues earned in our Consumer Services segment. Continued growth of certain BaaS partner programs generated an increase of 20% in our total gross dollar volume for each of the three and six months ended June 30, 2025, and increased the number of consolidated active accounts during the three months ended June 30, 2025 by 2%, which increased our total operating revenues year-over-year. However, as discussed below, our total operating revenues were negatively impacted by unfavorable trends and factors in our deposit account programs, driving, among other things, a reduction in purchase volume and the effective interchange rates we earn thereon, and a reduction in the number of cash transfers of 8% and 6% for the three and six months ended June 30, 2025, respectively, over the prior year comparable periods.

Current wording

Our total operating revenues for the three and nine months ended September 30, 2025 increased $85.1 million, or 21%, and $289.0 million, or 23%, respectively, over the prior year comparable periods, driven primarily by higher revenues in our B2B Services segment, partially offset by lower revenues earned in our Consumer Services segment. Continued growth of certain BaaS partner programs generated an increase of 18% and 20% in our total gross dollar volume for the three and nine months ended September 30, 2025, respectively, over the prior year comparable periods, and increased the number of consolidated active accounts during three months ended September 30, 2025 by 1%, which together increased our total operating revenues year-over-year. However, as discussed below, our total operating revenues were negatively impacted by unfavorable trends and factors in our deposit account programs, driving, among other things, a reduction in purchase volume and the effective interchange rates we earn thereon, and a reduction in the number of cash transfers of 10% and 7% for the three and nine months ended September 30, 2025, respectively, from the prior year comparable periods.

Previous wording

In our B2B Services segment, revenues increased during the three and six months ended June 30, 2025 by 38% and 40%, respectively, over the prior year comparable periods. The increase was driven by strong year-over-year growth in our gross dollar volume, which increased during the three and six months ended June 30, 2025 by 23% and 24%, respectively, and to a lesser extent, growth in purchase volume, which increased by 1% and 2%, respectively, over the prior year comparable periods. The number of active accounts for the three months ended June 30, 2025 increased by 10% 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.

Current wording

In our B2B Services segment, revenues increased during the three and nine months ended September 30, 2025 by 32% and 37%, respectively, over the prior year comparable periods. The increase was driven by strong year-over-year growth in our gross dollar volume, which increased during the three and nine months ended September 30, 2025 by 22% and 23%, respectively, and to a lesser extent, growth in purchase volume, which increased by 1% and 2%, respectively, over the prior year comparable periods. The number of active accounts for the three months ended September 30, 2025 increased by 13% 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.

Previous wording

In our Consumer Services segment, revenues decreased during the three and six months ended June 30, 2025 by 4% and 5%, respectively, over the prior year comparable periods. Our gross dollar volume and purchase volume declined by 2% and 1%, respectively, for the three months ended June 30, 2025, and the number of active accounts and direct deposit accounts declined by 5% and 9%, respectively. Similarly, gross dollar volume and purchase volume each declined for the six months ended June 30, 2025 by 4%. While these declining trends have begun to moderate, we believe these decreases in our Consumer Services segment remain attributable to several factors, including macro-economic factors affecting consumer behavior and other competitive trends that have impacted account acquisition. These factors had a corresponding impact on the amount of accountholder fee revenue we earn from accounts, including monthly maintenance fees, ATM fees and interchange fees.

Current wording

In our Consumer Services segment, revenues decreased during the three and nine months ended September 30, 2025 by 10% and 6%, respectively, from the prior year comparable periods. Our gross dollar volume and purchase volume declined by 9% and 6%, respectively, for the three months ended September 30, 2025, and the number of active accounts and direct deposit accounts both declined by 9%. Similarly, both gross dollar volume and purchase volume declined for the nine months ended September 30, 2025 by 6% and 5%, respectively, from the prior year comparable period. While we are seeing some moderation in these declining trends, we believe these decreases in our Consumer Services segment remain attributable to several persistent factors, including macro-economic factors affecting consumer behavior and other competitive trends that have impacted account acquisition. These factors had a corresponding negative impact on the amount of accountholder fee revenue we earn from accounts, including monthly maintenance fees, ATM fees and interchange fees.

Previous wording

In our Money Movement Services segment, revenues decreased during the three months ended June 30, 2025 by 4% and increased by 3% during the six months ended June 30, 2025, over the prior year comparable periods. The decrease in our Money Movement Services revenue during the three months ended June 30, 2025 was driven by decreases in both our tax processing revenues and cash transfer revenues. Our tax processing revenues decreased during the three months ended June 30, 2025 due to an 11% decrease in the number of tax refunds processed and from lower ancillary tax program fees that are associated with tax refund transfers. Our money processing revenues decreased during the three months ended June 30, 2025 primarily due to an 8% decrease in the number of cash transfers processed from the comparable prior year period, partially offset by the mix of cash transfer types and locations where the transactions occurred, as the fees we receive vary depending on these factors. 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. We continued to experience an increase in the number of cash transfers processed for third-party programs, which has grown steadily on a year-over-year basis, and represented the majority of our total cash transfers as of June 30, 2025.

Current wording

In our Money Movement Services segment, revenues decreased during the three months ended September 30, 2025 by 6% and increased by 2% during the nine months ended September 30, 2025, from the prior year comparable periods. The decrease in our Money Movement Services revenue during the three months ended September 30, 2025 was primarily driven by a decrease in our cash transfer revenues, partially offset by an increase in tax processing revenues. The decrease in our cash transfer revenues was primarily due to a 10% decrease in the number of cash transfers processed from the comparable prior year period. The decline in the number of cash transfers processed was primarily due to a lower number of active accounts within our Consumer Services segment discussed above, and to a lesser extent, a lower number of cash transfers processed for third-party programs. 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. Although the number of cash transfers from third-party programs decreased slightly year over year, we continue to experience a strong concentration from our third-party programs, and represented the majority of our total cash transfers as of September 30, 2025. Our tax processing revenues increased during the three months ended September 30, 2025 due to a 3% increase in the number of tax refunds processed and from higher ancillary tax program fees that are associated with tax refund transfers.

Previous wording

The increase in our Money Movement Services segment during the six months ended June 30, 2025 was driven primarily by an increase in our tax processing revenues, partially offset by a decrease in money processing revenues. Although the number of tax refunds processed decreased by 13% for the six months ended June 30, 2025, as compared to the prior year period, our tax processing revenues increased due to the expansion of our taxpayer advance programs and a favorable mix-shift in the distribution channel in which the tax refund was processed. The decrease in the number of tax refunds processed in each of the three and six months ended June 30, 2025 was principally attributable to our online tax preparation partners. 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 tax processing revenues for the six months ended June 30, 2025 was partially offset by a 6% decline in the number of cash transfers processed from the prior year comparable period, due to the same reasons discussed above.

Current wording

The increase in our Money Movement Services segment during the nine months ended September 30, 2025 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 by 13% for the nine months ended September 30, 2025, as compared to the prior year period, our tax processing revenues increased due to the expansion of our taxpayer advance programs and a favorable mix-shift in the distribution channel in which the tax refund was generated. The decrease in the number of tax refunds processed during the nine months ended September 30, 2025 was principally attributable to our online tax preparation partners. 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 tax processing revenues for the nine months ended September 30, 2025 was partially offset by a 7% decline in the number of cash transfers processed from the prior year comparable period, due to the same reasons discussed above.

Previous wording

Revenues within our Corporate and Other segment were driven primarily by net interest income earned by Green Dot Bank, which increased by 46% and 57% for the three and six months ended June 30, 2025, respectively, over the prior year comparable periods. The increase in net interest income was primarily the result of yields earned from an increase in cash from deposit programs with our partners and net proceeds from investment securities sold, and to a lesser extent, higher yielding investments from our bond repositioning strategy, partially offset by an increase in interest shared with certain BaaS partners (a reduction of revenue).

Current wording

Revenues within our Corporate and Other segment were driven primarily by net interest income earned by Green Dot Bank, which increased by 41% and 51% for the three and nine months ended September 30, 2025, respectively, over the prior year comparable periods. The increase in net interest income was primarily the result of yields earned from an increase in cash from deposit programs with our partners and to a lesser extent, higher yielding investments from our bond repositioning strategy and a decrease in interest shared with certain BaaS partners (a reduction of revenue).

Previous wording

For the three months ended June 30, 2025, the increase in total operating expenses was driven primarily by an increase in our processing expenses from the growth in gross dollar volume associated with certain BaaS account programs within our B2B Services segment discussed above. To a lesser extent, total operating expenses 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 our BaaS account programs discussed above, and higher accrued bonus compensation expense due to our current financial performance relative to our annual targets, partially offset by a decrease in employee stock-based compensation expense due to forfeitures of awards. These increases were partially offset by lower other general and administrative expenses, which decreased during the three months ended June 30, 2025 primarily due to the timing of accruals in the prior year related to the civil money penalty under our Consent Order from the Federal Reserve Board, and to a lesser extent, a decrease in overall transaction losses attributable to lower customer dispute volume across our portfolios and favorable reductions in our dispute loss rates, and lower professional services fees related to our anti-money laundering ("AML") programs due to the year-over-year timing of spend on certain initiatives. These decreases were partially offset by an increase in software licenses and hosting costs due to investments in our platform and operations, and an increase from expenses associated with our strategic review process. Our sales and marketing expenses also decreased, principally due to a decrease in supply chain materials expenses, which are comprised of debit card plastics and related materials costs, from lower active accounts.

Current wording

For the three months ended September 30, 2025, the increase in total operating expenses was driven primarily by an increase in our processing expenses from the growth in gross dollar volume associated with certain BaaS account programs within our B2B Services segment discussed above. In addition, our total operating expenses increased due to an increase in other general and administrative expenses, driven primarily by an increase in overall transaction losses attributable to an increase in our dispute loss rates, higher professional services fees associated with our strategic review process and our anti-money laundering ("AML") regulatory compliance initiatives, and an increase in software licenses and hosting costs due to investments in our platform and operations. As discussed further below, we also recorded restructuring and other charges associated with our decision to exit our operations in China. To a lesser extent, compensation and benefits expenses increased, driven primarily by higher accrued bonus compensation expense due to our current financial performance relative to our annual targets, partially offset by a decrease in employee stock-based compensation expense due to forfeitures of awards. These increases were partially offset by lower sales and marketing expenses principally due to a decrease in supply chain materials expenses, which are comprised of debit card plastics and related materials costs, from fewer active accounts, a decrease in revenue-sharing arrangements in our tax processing business and a decrease in our marketing expenses in our Consumer Services business.

Previous wording

Our total operating expenses for the six months ended June 30, 2025 increased over the prior year comparable period, driven by similar factors as discussed above. Our processing expenses increased during the six months ended June 30, 2025, due to the same reasons discussed above. Compensation and benefits expenses also increased due to the same reasons discussed above, and were further partially offset from severance benefits that did not recur at the same magnitude in the current period as a result of our reduction in employee workforce in the comparable prior year period. Other general and administrative expenses decreased due to the same factors discussed above, and further decreased due to the settlement payment and impairment charges related to the termination of our partnership agreement to develop a new core banking system in the prior year comparable period that did not recur in the current period. Sales and marketing expenses also decreased due to the same factors discussed above and a decrease in revenue-sharing arrangements in our tax processing business, partially offset by an increase in sales commissions from higher revenues on products subject to tiered revenue-sharing agreements in our Consumer Services segment.

Current wording

Our total operating expenses for the nine months ended September 30, 2025 increased over the prior year comparable period, driven by similar factors as discussed above for the three months ended September 30, 2025. Sales and marketing expenses decreased due to the same factors discussed above. Compensation and benefits expenses increased for the same reasons discussed above, as well as because of an increase in third-party call center support costs associated with the growth of our BaaS account programs discussed above. Our processing expenses increased during the nine months ended September 30, 2025 due to the same factors discussed above. Other general and administrative expenses decreased primarily due to the timing of accruals in the prior year related to the civil money penalty under our Consent Order from the Federal Reserve Board that did not recur in the current period, and to a lesser extent, a decrease in overall transaction losses attributable to lower customer dispute volume across our portfolios and favorable reductions in our dispute loss rates, and lower professional services fees related to our AML programs due to the year-over-year timing of spend on certain initiatives. These decreases were partially offset by an increase in software licenses and hosting costs due to investments in our platform and operations, and an increase from expenses associated with our strategic review process. Other general and administrative expenses also decreased due to the settlement payment and impairment charges related to the termination of our partnership agreement to develop a new core banking system in the prior year comparable period that did not recur in the current period.

Previous wording

Other expense, net for the three and six months ended June 30, 2025 increased $70.2 million and $94.1 million, respectively, from the prior year comparable periods. These increases resulted principally from a $70 million incentive payment made by TailFin Labs, LLC ("TailFin") in connection with the extension of the Walmart MoneyCard agreement and related agreements, partially offset by higher income earned from bank-owned life insurance policies. In addition, during the first quarter of 2025, we determined we would sell certain available-for-sales securities in order to reposition the proceeds into higher yielding assets, which resulted in a realized loss of $24.8 million for the six months ended June 30, 2025.

Current wording

The increase in other expense, net for the nine months ended September 30, 2025 resulted principally from a $70 million incentive payment made by TailFin in connection with the extension of the Walmart MoneyCard agreement and related agreements in the second quarter of 2025. In addition, during the first quarter of 2025, we determined we would sell certain available-for-sales securities in order to reposition the proceeds into higher yielding assets, which resulted in a realized loss of $24.8 million for the nine months ended September 30, 2025. These increases were partially offset by higher income earned from bank-owned life insurance policies.

Previous wording

Our income tax benefit for the three months ended June 30, 2025 increased by $15.1 million from the prior year comparable period primarily due to an increase in our loss before taxes and a decrease in nondeductible expenses and penalties primarily related to the tax effect associated with the civil money penalty we incurred in 2024 for our Consent Order received from the Federal Reserve Board. Our effective tax rate for the six months ended June 30, 2025 was 27.4%, an increase from (8.0)% for the prior year comparable period. The increase in our effective tax rate was due to several factors, including a lower tax rate benefit from reduced general business credits, an increase in the amount of compensation expense that was subject to the Internal Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation, and a lower tax rate benefit from the cash surrender value in bank-owned life insurance policies. These increases in our effective tax rate were partially offset by a decrease in state income taxes expense, net of federal benefits, a decrease in tax expense associated with shortfalls from stock-based compensation, and a decrease in tax expense from nondeductible expenses and penalties primarily related to the civil money penalty under our Consent Order discussed above.

Current wording

Our income tax benefit for the three months ended September 30, 2025 increased by $4.6 million over the prior year comparable period primarily due to an increase in our loss before taxes and a decrease in nondeductible expenses and penalties primarily related to the tax effect associated with the civil money penalty we incurred in 2024 for our Consent Order received from the Federal Reserve Board. Our effective tax rate for the nine months ended September 30, 2025 was 19.9%, an increase from (4.6)% for the prior year comparable period. The increase in our effective tax rate was due to several factors, including a lower tax rate benefit from reduced general business credits, an increase in state income taxes expense, net of federal benefits, and a lower tax rate benefit from the cash surrender value in bank-owned life insurance policies. These increases in our effective tax rate were partially offset by a decrease in the amount of compensation expense that was subject to the Internal Revenue Code (the "IRC") Section 162(m) limitation on the deductibility of certain executive compensation, a decrease in tax expense associated with shortfalls from stock-based compensation, and a decrease in tax expense from nondeductible expenses and penalties primarily related to the civil money penalty under our Consent Order discussed above.

Previous wording

On July 4, 2025, H.R. 1, commonly referred to as the “One Big Beautiful Bill Act" (“OBBBA”) was signed into law, enacting significant changes to the U.S. federal tax code with various effective dates from 2025 to 2027. The OBBBA introduced several provisions that may affect our future financial results, including an elective deduction for domestic research expenditures, reinstatement of elective 100% first-year bonus depreciation, and modifications to GILTI, among other provisions. We are currently assessing the impact of these tax law changes on our effective tax rate and deferred tax assets in 2025 and future periods. A quantitative estimate of the specific financial effects cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of the tax provisions contained in the OBBBA will depend on our facts in each year and anticipated guidance from the U.S. Department of the Treasury. Furthermore, since the OBBBA was enacted subsequent to our balance sheet date, our tax provision for the three and six months ended June 30, 2025, does not incorporate the effects of these tax law changes. We will continue to monitor additional guidance as it becomes available and reflect the impact in future periods as appropriate.

Current wording

On July 4, 2025, H.R. 1, commonly referred to as the “One Big Beautiful Bill Act" (“OBBBA”) was signed into law, enacting significant changes to the U.S. federal tax code with various effective dates from 2025 to 2027. The OBBBA introduced several provisions that may affect our future financial results, including an elective deduction for domestic research expenditures, reinstatement of elective 100% first-year bonus depreciation, and modifications to GILTI, among other provisions. We are currently assessing the impact of these tax law changes on our effective tax rate and deferred tax assets in 2025 as well as future periods and evaluating multiple strategies for implementation of these tax law changes. The impact of the tax provisions contained in the OBBBA will depend on our facts in each year and anticipated guidance from the U.S. Department of the Treasury. We will continue to monitor additional guidance as it becomes available and reflect the impact in future periods as appropriate.

Previous wording

While we are still experiencing a difficult macro-economic environment, competitive headwinds and other factors that have contributed to declining trends in our consolidated operating results in recent periods, excluding any impact from our strategic review process and non-operating items such as our equity method losses in TailFin, we expect our core results of operations will stabilize on a full year basis year-over-year in 2025 based on our anticipated initiatives and cost reduction measures we have implemented. In March 2025, we announced that we had initiated a process to explore potential strategic alternatives. No assurances can be given as to the outcome or timing of the strategic review process, including without limitation that such process will result in a transaction or that any transaction, if pursued, will be successfully completed. We do not intend to disclose further developments regarding the process unless and until it is determined that further disclosure is appropriate.

Current wording

While we are still experiencing a difficult macro-economic environment, competitive headwinds and other factors that have contributed to declining trends in our consolidated operating results in recent periods, excluding any impact from our strategic review process and non-operating items such as our equity method losses in TailFin, we continue to expect our core results of operations will stabilize on a full year basis year-over-year in 2025 based on our anticipated initiatives and cost reduction measures we have implemented. In March 2025, we announced that we had initiated a process to explore potential strategic alternatives. No assurances can be given as to the outcome or timing of the strategic review process, including without limitation that such process will result in a transaction or that any transaction, if pursued, will be successfully completed. We do not intend to disclose further developments regarding the process unless and until it is determined that further disclosure is appropriate.

Previous wording

We have created synergies 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. In March 2025, we also initiated a re-alignment of teams and resources across the enterprise in a continual effort to better support our strategic priorities and growth channels, and improve our operating efficiency. We expect this re-alignment to further improve our cost structure year-over-year.

Current wording

We have created synergies 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. In March 2025, we also initiated a re-alignment of teams and resources across the enterprise in a continual effort to better support our strategic priorities and growth channels, and improve our operating efficiency. We expect these re-alignments, including the exit from our operational activities in China, to further improve our cost structure year-over-year.

Previous wording

Despite the meaningful reductions to our cost structure we have achieved across our organization through our various initiatives, we are incurring increased expenses in other areas as we conduct our strategic review process, incur or accrue for additional retention and interim officer compensation expenses and incur additional expenses in connection with our ongoing investments in our AML program, including improvements to our compliance controls, policies and procedures. While expenses related to our AML programs have decreased through the first half of 2025 on a year-over-year basis, this is in part a timing matter, and we expect to incur higher expenses in this area during the second half of the year. We believe investments in our AML program will ultimately help us continue to remediate matters identified in the Consent Order from the previous year, reduce our fraud losses over the long term and cost-efficiently scale our compliance and regulatory programs as we look to grow our business.

Current wording

Despite the meaningful reductions to our cost structure we have achieved across our organization through our various initiatives, we are incurring increased expenses in other areas as we conduct our strategic review process, incur or accrue for additional retention and interim officer compensation expenses and incur additional expenses in connection with our ongoing investments in our AML program, including improvements to our compliance controls, policies and procedures. While expenses related to our AML programs decreased through the first half of 2025 on a year-over-year basis, this was in part a timing matter, and we have incurred and expect will continue to incur higher expenses in this area during the second half of the year. We believe investments in our AML program will ultimately help us continue to remediate matters identified in the Consent Order from the previous year, reduce our fraud losses over the long term and cost-efficiently scale our compliance and regulatory programs as we look to grow our business.

Previous 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 50 basis points during the fourth quarter 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 higher short-term interest rates benefit the yield we earn on our cash, certain of our BaaS partner arrangements allow for the BaaS partner to share in a significant portion of the interest earned from accountholder deposits (which are recorded as a reduction of revenue in our consolidated financial statements), and yields on our investment portfolio tend to lag interest rate increases as securities mature and proceeds are reinvested. Accordingly, the net effect has had and we expect will continue to have a negative impact on our consolidated financial statements and will be dependent upon future interest rate changes enacted by the Federal Reserve. To address some of this dynamic, we have begun to reposition a portion of our investment securities portfolio into variable rate debt securities to improve net yields and balance the effect of our interest sharing arrangements with BaaS partners.

Current wording

In October 2025, the Federal Reserve decreased interest rates by an additional 25 basis points to a current range of 3.75% to 4.00%. 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 higher short-term interest rates benefit the yield we earn on our cash, certain of our BaaS partner arrangements allow for the BaaS partner to share in a significant portion of the interest earned from accountholder deposits (which are recorded as a reduction of revenue in our consolidated financial statements), and yields on our investment portfolio tend to lag interest rate increases as securities mature and proceeds are reinvested. Accordingly, the net effect has had and we expect will continue to have a negative impact on our consolidated financial statements and will be dependent upon future interest rate changes enacted by the Federal Reserve. To address some of this dynamic, we have begun to reposition a portion of our investment securities portfolio and our cash into variable rate debt securities to improve net yields and balance the effect of our interest sharing arrangements with BaaS partners.

Previous wording

There have been no material changes during the six months ended June 30, 2025 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, 2024.

Current wording

There have been no material changes during the nine months ended September 30, 2025 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, 2024.

Previous wording

Card Revenues and Other Fees — Card revenues and other fees totaled $381.2 million for the three months ended June 30, 2025, an increase of $95.1 million, or 33%, 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 certain accountholder fees, such as monthly maintenance fees and ATM fees, as a result of a decline in active accounts in our Consumer Services segment during the current period.

Current wording

Card Revenues and Other Fees — Card revenues and other fees totaled $393.1 million for the three months ended September 30, 2025, an increase of $82.7 million, or 27%, 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 certain accountholder fees, such as monthly maintenance fees and ATM fees, as a result of a decline in the number of active accounts in our Consumer Services segment during the current period.

Previous wording

Interchange Revenues — Interchange revenues totaled $47.0 million for the three months ended June 30, 2025, a decrease of $2.6 million, or 5%, from the comparable prior year period. The decrease was primarily due to a lower effective interchange rate earned for the comparable periods, which 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 $45.3 million for the three months ended September 30, 2025, a decrease of $3.1 million, or 6%, from the comparable prior year period. The decrease was primarily due to a decrease in purchase volume of 3% and a decrease in the effective interchange rate earned from the comparable prior year period, which 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

Sales and Marketing Expenses — Sales and marketing expenses totaled $50.2 million for the three months ended June 30, 2025, a decrease of $2.7 million, or 5%, from the comparable prior year period. This decrease was driven primarily by a decrease in supply chain materials expenses, which are comprised of debit card plastics and related materials costs, from lower active accounts.

Current wording

Sales and Marketing Expenses — Sales and marketing expenses totaled $48.2 million for the three months ended September 30, 2025, a decrease of $4.4 million, or 8%, from the comparable prior year period. This decrease was driven primarily by a decrease in supply chain materials expenses, which are comprised of debit card plastics and related materials costs, from fewer active accounts, a decrease in revenue-sharing arrangements in our tax processing business and a decrease in our marketing expenses in our Consumer Services business.

Previous wording

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $63.8 million for the three months ended June 30, 2025, an increase of $2.5 million, or 4%, from the comparable prior year period. The increase was driven primarily by an increase in third-party call center support costs associated with the growth of the BaaS account programs within our B2B Services segment, and higher accrued bonus compensation expense due to our current financial performance relative to our annual targets, partially offset by a decrease in employee stock-based compensation expense due to forfeitures of awards.

Current wording

Compensation and Benefits Expenses — Compensation and benefits expenses totaled $63.4 million for the three months ended September 30, 2025, an increase of $1.6 million, or 3%, from the comparable prior year period. The increase was driven primarily by an increase in accrued bonus compensation expense due to our current financial performance relative to our annual targets, partially offset by a decrease in employee stock-based compensation expense due to forfeitures of awards.

Previous wording

Processing Expenses — Processing expenses totaled $293.2 million for the three months ended June 30, 2025, an increase of $85.3 million, or 41%, from the comparable prior year period. This increase was principally due to growth in gross dollar volume on certain BaaS account programs within our B2B Services segment.

Current wording

Processing Expenses — Processing expenses totaled $309.3 million for the three months ended September 30, 2025, an increase of $81.1 million, or 36%, from the comparable prior year period. This increase was principally due to growth in gross dollar volume on certain BaaS account programs within our B2B Services segment.

Previous wording

Our income tax benefit totaled $15.9 million for the three months ended June 30, 2025, representing an increase of $15.1 million from the prior year comparable period, primarily due to an increase in our loss before taxes and a decrease in nondeductible expenses and penalties primarily related to the tax effect associated with the civil money penalty we incurred in 2024 for our Consent Order from the Federal Reserve Board.

Current wording

Our income tax benefit totaled $4.9 million for the three months ended September 30, 2025, representing an increase of $4.6 million from the prior year comparable period, primarily due to an increase in our loss before taxes and a decrease in nondeductible expenses and penalties primarily related to the tax effect associated with the civil money penalty we incurred in 2024 for our Consent Order from the Federal Reserve Board.

Previous wording

The increase in our effective tax rate for the three months ended June 30, 2025 from the prior year comparable period was due to several factors, including an increase of $1.7 million in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation, a decrease of $0.2 million in the amount of general business credits, and a lower tax rate benefit from bank-owned life insurance policies income. These increases in our effective tax rate were partially offset by a decrease of $0.5 million in the tax expense associated with shortfalls from stock-based compensation, a decrease of $0.3 million in state income taxes expense, net of federal benefits, and a decrease of $14.4 million in tax expense due to nondeductible expenses and penalties discussed above for the three months ended June 30, 2025.

Current wording

The increase in our effective tax rate for the three months ended September 30, 2025 from the prior year comparable period was due to several factors, including an increase of $0.2 million in the amount of compensation expense that was subject to the IRC Section 162(m) limitation on the deductibility of certain executive compensation, an increase of $2.6 million in the valuation allowance on the deferred tax assets of our China subsidiary, a lower tax rate benefit due to a decrease of $0.3 million in the amount of general business credits, and a lower tax rate benefit from bank-owned life insurance policies income. These increases in our effective tax rate were partially offset by a decrease of $1.8 million in state income taxes expense, net of federal benefits, a decrease of $0.2 million in the tax expense associated with shortfalls from stock-based compensation, a decrease of $4.7 million in tax expense due to nondeductible expenses and penalties discussed above, and a decrease of $1.6 million related to our bank owned life insurance surrender penalties we incurred in connection with the surrender and restructuring of our existing bank owned life insurance policies completed in 2024.

Previous wording

Comparison of Consolidated Results for the Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Consolidated Results for the Nine Months Ended September 30, 2025 and 2024

Previous wording

Card Revenues and Other Fees — Card revenues and other fees totaled $757.2 million for the six months ended June 30, 2025, an increase of $189.6 million, or 33%, 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, 2025 and 2024—Operating Revenues—Card Revenues and Other Fees." In addition, this net increase was further partially offset by lower breakage revenue on our gift card portfolio.

Current wording

Card Revenues and Other Fees — Card revenues and other fees totaled $1,150.2 million for the nine months ended September 30, 2025, an increase of $272.2 million, or 31%, 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, 2025 and 2024—Operating Revenues—Card Revenues and Other Fees." In addition, this net increase was further partially offset by lower breakage revenue on our gift card portfolio.

Previous wording

Cash Processing Revenues — Cash processing revenues totaled $167.9 million for the six months ended June 30, 2025, an increase of $4.3 million, or 3%, from the comparable prior year period. In our Money Movement Services segment, although the number of tax refunds processed decreased by 13% during the six months ended June 30, 2025, our tax processing revenues increased from the expansion of our taxpayer advance program and a favorable mix-shift in the distribution channel in which the tax refund was processed. The decrease in the number of tax refunds processed is principally attributable to our online tax preparation partners. The increase in tax processing revenues was partially offset by a 6% decline in the number of cash transfers processed during the six months ended June 30, 2025 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.

Current wording

Cash Processing Revenues — Cash processing revenues totaled $201.6 million for the nine months ended September 30, 2025, an increase of $3.2 million, or 2%, from the comparable prior year period. In our Money Movement Services segment, our tax processing revenues increased from the expansion of our taxpayer advance program and a favorable mix-shift in the distribution channel in which tax refunds were generated, despite a 13% decline in the number of tax refunds processed. The decrease in the number of tax refunds processed is principally attributable to our online tax preparation partners. The increase in tax processing revenues was partially offset by a 7% decline in the number of cash transfers processed during the nine months ended September 30, 2025 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.

Previous wording

Interchange Revenues — Interchange revenues totaled $94.9 million for the six months ended June 30, 2025, a decrease of $5.7 million, or 6%, from the comparable prior year period. The decrease was primarily due to a decrease in purchase volume of 2% and a decrease in the effective interchange rate earned as discussed under “Comparison of Three-Month Periods Ended June 30, 2025 and 2024—Operating Revenues—Interchange Revenues."

Current wording

Interchange Revenues — Interchange revenues totaled $140.2 million for the nine months ended September 30, 2025, a decrease of $8.8 million, or 6%, from the comparable prior year period. The decrease was primarily due to a decrease in purchase volume of 2% and a decrease in the effective interchange rate earned as discussed under “Comparison of Three-Month Periods Ended September 30, 2025 and 2024—Operating Revenues—Interchange Revenues."

Previous wording

Interest Income, net — Net interest income totaled $43.1 million for the six months ended June 30, 2025, an increase of $15.7 million, or 57%, 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, 2025 and 2024—Operating Revenues—Interest Income, net."

Current wording

Interest Income, net — Net interest income totaled $65.8 million for the nine months ended September 30, 2025, an increase of $22.3 million, or 51%, 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, 2025 and 2024—Operating Revenues—Interest Income, net."

Previous wording

Processing Expenses — Processing expenses totaled $578.5 million for the six months ended June 30, 2025, an increase of $174.9 million, or 43%, from the comparable prior year period. This increase was driven primarily by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2025 and 2024—Operating Expenses—Processing Expenses."

Current wording

Processing Expenses — Processing expenses totaled $887.8 million for the nine months ended September 30, 2025, an increase of $256.0 million, or 41%, from the comparable prior year period. This increase was driven primarily by the same factors discussed above under “Comparison of Three-Month Periods Ended September 30, 2025 and 2024—Operating Expenses—Processing Expenses."

Previous wording

Other General and Administrative Expenses — Other general and administrative expenses totaled $83.6 million for the three months ended June 30, 2025, a decrease of $25.0 million, or 23%, from the comparable prior year period. This decrease was driven primarily by the timing of accruals in the prior year period related to the civil money penalty under our Consent Order from the Federal Reserve Board, and to a lesser extent, a decrease in overall transaction losses attributable to lower customer dispute volume across our portfolios and favorable reductions in our dispute loss rates, and lower professional services fees related to our AML programs due to the year-over-year timing of spend on certain initiatives, partially offset by an increase in software licenses and hosting costs due to investments in our platform and operations, and an increase from expenses associated with our strategic review process.

Current wording

Other General and Administrative Expenses — Other general and administrative expenses totaled $257.3 million for the nine months ended September 30, 2025, a decrease of $37.9 million, or 13%, from the comparable prior year period. This decrease was driven primarily by the timing of accruals in the prior year period related to the civil money penalty under our Consent Order from the Federal Reserve Board, and to a lesser extent, a decrease in overall transaction losses attributable to lower customer dispute volume across our portfolios and favorable reductions in our dispute loss rates, and lower professional services fees related to our AML programs due to the year-over-year timing of spend on certain initiatives. These decreases were partially offset by an increase in software licenses and hosting costs due to investments in our platform and operations, and an increase from expenses associated with our strategic review process. Other general and administrative expenses also decreased due to the settlement payment and impairment charges related to the termination of our partnership agreement to develop a new core banking system in the prior year comparable period that did not recur in the current period.

Previous wording

Other expense, net totaled $74.7 million for the three months ended June 30, 2025, an increase of $70.2 million, from the prior year comparable period. This increase was driven by our equity method losses associated with TailFin and resulted principally from a $70 million incentive payment that TailFin made in connection with the extension of the Walmart MoneyCard agreement and related agreements, partially offset by higher income earned from bank-owned life insurance policies. We recorded the incentive payment as a component of equity in losses attributable to TailFin during the three months ended June 30, 2025 under our HLBV method of accounting.

Current wording

Other expense, net totaled $101.7 million for the nine months ended September 30, 2025, an increase of $91.7 million, from the prior year comparable period. This increase was driven by our equity method losses associated with TailFin and resulted principally from a $70 million incentive payment that TailFin made in connection with the extension of the Walmart MoneyCard agreement and related agreements in the second quarter of 2025. We recorded the incentive payment as a component of equity in losses attributable to TailFin during the second quarter of 2025 under our HLBV method of accounting. In addition, during the first quarter of 2025, we determined we would sell certain available-for-sales securities in order to reposition the proceeds into higher yielding assets, which resulted in a realized loss of $24.8 million for the nine months ended September 30, 2025. These increases were partially offset by higher income earned from bank-owned life insurance policies.

Previous wording

Our income tax benefit totaled $8.0 million for the six months ended June 30, 2025, representing an increase of $9.8 million, or 550%, from the prior year comparable period, driven primarily by the same factors discussed above under “Comparison of Three-Month Periods Ended June 30, 2025 and 2024—Income Tax Expense and Benefit."

Current wording

Our income tax benefit totaled $12.9 million for the nine months ended September 30, 2025, representing an increase of $14.4 million from the prior year comparable period, driven primarily by the same factors discussed above under “Comparison of Three-Month Periods Ended September 30, 2025 and 2024—Income Tax Expense and Benefit."

Previous wording

The increase in our effective tax rate for the six months ended June 30, 2025 from the prior year comparable period was due to several factors, including an increase of $1.0 million in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, a reduced tax rate benefit due to a decrease of $0.6 million in general business credits, an increase of $0.9 million in state income taxes expense, net of federal benefits, and a lower tax rate benefit from the cash surrender value in bank-owned life insurance policies. These increases were partially offset by a decrease of $0.8 million in tax expense associated with shortfalls from stock-based compensation, a decrease of $0.7 million related to bank-owned life insurance surrender penalties we incurred in connection with the surrender and restructuring of our existing bank-owned life insurance policies in 2024, and a decrease of $14.5 million in tax expense from nondeductible expenses and penalties associated with the civil money penalty we incurred in 2024 for our Consent Order.

Current wording

The increase in our effective tax rate for the nine months ended September 30, 2025 from the prior year comparable period was due to several factors, including a reduced tax rate benefit due to an increase of $0.8 million in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, a decrease of $1.0 million in general business credits, an increase of $2.6 million in the valuation allowance on the deferred tax assets of our China subsidiary, and a lower tax rate benefit from the cash surrender value in bank-owned life insurance policies. These increases were partially offset by a decrease of $0.9 million in state income taxes expense, net of federal benefits, a decrease of $1.2 million in tax expense associated with shortfalls from stock-based compensation, a decrease of $2.3 million related to bank-owned life insurance surrender penalties we incurred in connection with the surrender and restructuring of our existing bank-owned life insurance policies in 2024, and a decrease of $9.7 million in tax expense from nondeductible expenses and penalties associated with the civil money penalty we incurred in 2024 for our Consent Order.

Previous wording

Segment revenues within our B2B Services for the three and six months ended June 30, 2025 increased $96.6 million, or 38%, and $197.4 million, or 40%, respectively, compared to the prior year periods, while our segment expenses for the three and six months ended June 30, 2025 increased $87.7 million, or 38%, and $179.6 million, or 39%, respectively.

Current wording

Segment revenues within our B2B Services for the three and nine months ended September 30, 2025 increased $87.8 million, or 32%, and $285.2 million, or 37%, respectively, over the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2025 increased $86.0 million, or 35%, and $265.6 million, or 38%, respectively.

Previous wording

Our gross dollar volume, purchase volume, and number of active accounts increased during the three months ended June 30, 2025 by 23%, 1%, 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.

Current wording

Our gross dollar volume, purchase volume, and number of active accounts increased during the three months ended September 30, 2025 by 22%, 1%, and 13%, respectively, over the prior year comparable period. Our gross dollar volume and purchase volume increased year-over-year by similar levels during the nine months ended September 30, 2025. 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.

Previous wording

Segment expenses increased for the three and six months ended June 30, 2025 from the comparable prior year periods, principally due to higher processing expenses associated 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, partially offset by lower transaction losses due to favorable reductions in our dispute loss rates. As a result of these factors, our segment profit increased for the three and six months ended June 30, 2025 by approximately 47% and 48%, respectively, from the prior year comparable periods. Although limited, our segment profit margin increased year-over-year from improvement in our cost structure and revised economics of certain partnerships, despite the impact of certain BaaS partnerships largely providing for a fixed profit.

Current wording

Segment expenses increased for the three and nine months ended September 30, 2025 over the prior year comparable periods, principally due to higher processing expenses associated with the growth of certain BaaS account programs. Additionally, segment expenses increased for the three months ended September 30, 2025 over the prior year comparable period from higher transaction losses due to increases in our dispute loss rates and dollar volume and higher third-party call center support costs as a result of increases in gross dollar volume and the number of active accounts. Segment expenses for the nine months ended September 30, 2025 was driven by these same factors, however, our transaction losses decreased slightly due to favorable reductions in our dispute loss rates on a full year basis.

Previous wording

Segment revenues within Consumer Services for the three and six months ended June 30, 2025 decreased $3.5 million, or 4%, and $8.9 million, or 5%, respectively, from the prior year comparable periods, while our segment expenses for the three and six months ended June 30, 2025 decreased by $2.2 million, or 3%, and $7.9 million, or 6%, respectively.

Current wording

Segment revenues within Consumer Services for the three and nine months ended September 30, 2025 decreased $9.7 million, or 10%, and $18.6 million, or 6%, respectively, from the prior year comparable periods, while our segment expenses for the three and nine months ended September 30, 2025 decreased by $2.0 million, or 3%, and $9.9 million, or 5%, respectively.

Previous wording

Our gross dollar volume and purchase volume declined by 2% and 1%, respectively, for the three months ended June 30, 2025, and the number of active accounts and direct deposit accounts declined by 5% and 9%, respectively, from the comparable prior year periods, primarily due to each of the factors discussed above in "Overview." These factors include macro-economic factors leading to economic challenges for consumers and other competitive trends that have impacted account acquisition. Our gross dollar volume and purchase volume decreased year-over-year by similar levels during the six months ended June 30, 2025. As a result of these decreases in each of our key metrics, our monthly maintenance 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 for the comparable period, and a lower average spend per transaction.

Current wording

Our gross dollar volume and purchase volume declined by 9% and 6%, respectively, for the three months ended September 30, 2025, and both the number of active accounts and direct deposit accounts declined by 9% from the prior year comparable periods, primarily due to each of the factors discussed above in "Overview." These factors include macro-economic factors leading to economic challenges for consumers and other competitive trends that have impacted account acquisition. Our gross dollar volume and purchase volume decreased year-over-year by similar levels during the nine months ended September 30, 2025. As a result of these decreases in each of our key metrics, our monthly maintenance 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 for the comparable period, and a lower average spend per transaction.