Greetings, and welcome to the Green Dot Corporation Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dara Dierks, an associate from Green Dot Investor Relations. Ms. Dierks, you may begin.

Thank you, operator. By now everyone should have access to our second quarter 2011 press release. It can also be found at www.greendot.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share. This information is now calculated in accordance with GAAP and may be calculated differently than other companies' similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appears in today's press release and in the appendix of the presentation that accompanies this call. Also, we are providing 2011 guidance on a non-GAAP basis with a reconciliation to GAAP, which appears in the financial information section of our IR site. Finally, before we begin our formal remarks, we need to remind everyone that part of our discussion today will include forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and you should therefore not put undue reliance on them. Similar risks are mentioned in today's Form 8-K filing with the Securities and Exchange Commission. Others are discussed in our 2010 annual report on Form 10-K, which is available at sec.gov. With that, I would like to turn the call over to Steve Streit, Founder, Chairman and CEO of Green Dot Corporation. Steve?

Thank you, Dara, and welcome everyone to our Q2 earnings call. With me here at Monrovia, California headquarters is my close partner and Green Dot CFO, John Keatley. There's a lot of information we want to share with you today, including important updates on a variety of regulatory matters, and we appreciate you listening in. So first, let's start with our Q2 financial results. Every quarter since going public almost exactly 1 year ago, Green Dot has met or exceeded the guidance we gave on the road show, and we have consistently achieved the financial results needed to meet or beat our annual guidance for 2011. We know there was some concern from the street last quarter that Q1 was huge, but it's as good as it gets, and that we couldn't continue to grow at that pace. Well, while it's true that Q1 was our biggest season, we're proud to say our goal is to make sure that high growth is always in season at Green Dot, and in Q2 we've done that. The dot is green indeed, and I'll share with you some highlights. Non-GAAP total operating revenues increased 29% for the quarter to $119.4 million. Adjusted EBITDA grew 26% for the quarter to $29.1 million. On an apples-to-apples basis adjusted for the Walmart renewal in May of 2010, adjusted EBITDA actively grew a stunning 42%. I'm also pleased to report that while growing both revenue and adjusted EBITDA nicely, we also expanded margins by 2 percentage points on a pro forma basis despite the heavy investments we continue to make in staffing, product development, marketing and the bank holding company application. The number of new cards activated increased 23% year-over-year to 1.8 million new accounts activated in the quarter. New customers who reloaded their card for the…

Thanks, Steve. As Steve mentioned, we were pleased with our strong results in Q2. We continue to show very strong top line growth consistent with our guidance, and we're also demonstrating margin expansion despite the heavy investments we're making in our business. Let's review the financial results of the quarter in more detail as presented in the supplemental materials available on our website. Slide #9 shows the growth of the components of our non-GAAP total operating revenues. Overall, revenue grew faster than our active card portfolio, indicating that our revenue per card continues to grow. Card revenues, which consist primarily of monthly maintenance fees, ATM fees and new card fees, grew 28% in Q2 to $53.9 million for the quarter. We were encouraged to see that card revenues for active card increased year-over-year, despite the fact that more customers are having the monthly fees waived and taking advantage of our fee-free ATM network. Cash transfer revenues grew 33% in Q2 to $32.4 million, driven by heavy reload activity both from our own cardholders and from our network reload partners. Interchange revenues grew 26% year-over-year to $33.1 million in Q2. I want to provide some color on how interchange revenues grow for you. It used to be going back a few years that GDV and interchange grew somewhat in lock steps because most of our users loaded cash and spent the full value on purchase transactions, which generate interchange. But as our customer base has become more mainstream and our cardholders are increasingly using their cards as a bank account substitute, the relationship between GDV and interchange has become less tightly linked. The reason is that direct deposit customers tend to use their cards for a wide range of transactions needed to manage their finances. This includes online purchases, offline purchases…

Okay. Thanks. Very good, John, and now we'll go straight to Q&A. Operator, please open the phones.

[Operator Instructions] Our first question comes from the line of Jason Kupferberg with Jefferies & Company. Jason Kupferberg - Jefferies & Company, Inc.: I wanted to just start with a follow-up Durbin question if I could. Just trying to get a little bit more clarity because I know there were some language in there about restricting ACH-based access to cards that are exempted from Durbin. So that has led some folks to think about bill pay features, for example, on your card. Is there any impact there at all in terms of your ability to continue offering bill pay in the context of some of those ACH restrictions?

Well, I can't go into the specifics of how we interpret the law because a lot of those conversations were held either with counselors, with regulators on a confidential basis. But let me help you give the right guidance. I think it's fair to say that whatever changes, Jason, we may need to make would be up the fringes -- way up the fringes of how the cardholders use our services and will not have any impact to usability of the product or growth projections of the company or margins or retention or usability or anything of that nature. So the answer is, we may need to reroute certain kinds of ACH transactions. In other words, where somebody gets a hold of their ACH number accidentally or in some other manner and we're looking at that. But nothing that would impact the vast majority of our users or would be noticeable in any financial model. Jason Kupferberg - Jefferies & Company, Inc.: Okay. Very good to know. And just a follow-up, we just like to get your high-level thoughts as you look out on the prepaid industry over the next 12 to 18 months for argument's sake. How do you see consumer pricing trending in the industry?

Well, we think its pretty much where it is. The Green Dot and Walmart products, for the types of products they are and the services they provide, are still far and away the cheapest in the market. And we know that there's a new entrants that have lower fees. Western Union and AMEX has some lower fees in some cases, and we may talk about that later. But we feel good about the pricing. We don't feel a pressure in that regard from our retailers or our customers. And the research continues to show that we're a great value, and we think the metrics that John Keatley just read off for you are the best evidence of that. So whether it's 12 or 18 months or going forward, we feel good about pricing where it is for our products. Jason Kupferberg - Jefferies & Company, Inc.: Okay. If I could just sneak a quick one, and just because you prompted me a little bit with some of your comments. But just thinking about the banks going forward post-Durbin, I know it's still early days, but the big money center banks, for example, any sense of what they might be planning to do in prepaid? And if so, how that could impact you guys? And I guess on one hand, it could further legitimize the whole market. But is that something you guys are thinking a lot about, or just kind of taking a wait-and-see approach on?

Well, I suppose, neither. I think we're thinking about it, but we don't have a strong belief that there's anything coming over the horizon that's significant from large banks, and really, less so now. When the new rules came out with Durbin from the Fed at the end of June, you almost could hear the air sucking out of the balloon at the major banks in terms of their desire to move forward with some of these programs. And we think and you may have heard it elsewhere, the reason we think this is the case -- and I'm trying to think how to best answer this in a way that's helpful but doesn't over-disclose. But there were a number of large banks who have thought about doing these kinds of programs, and to be fair, may still be thinking about it. But when Durbin came out, the interchange rate was so much higher than most banks had forecast on the one hand, so the loss in revenue wasn't all that big a deal based on their initial thoughts. And then at the same time, when all the new regulation came out on what a prepaid card has to be and that it has to include the first free ATM and then it can't have overdrafts, and we have this whole list of various things, combined with some of the new state regulatory pressure in Florida, my sense is that what a lot of the banks thought is, "Why are we doing this, and why are we bothering?" There's now so much more money to be made by calling it a checking account, even if it's a checklist checking account, and offering it to customers as they are today, the students and new entrants, into the bank branch that often a prepaid card just seems to make so much less sense today in a bank than it may have 2 months ago. So there may be some big money center banks, as you call them, looking to do something. We've seen a lot of that inbound activity at our company in-house [ph] slowed down in terms of inquiries from banks. And if I were a bank, I'd probably be making the same decision. So there could be something on the horizon, but nothing that we see or that had us excited or concerned, I guess, is the best way to say it.

Our next question comes from the line of Glenn Fodor with Morgan Stanley Smith Barney.

Just want to touch on the competitive environment given the recent dynamics out there. I mean, how do we think about how defensible your current position is with your retail partners? In the past, this has been couched as kind of like annuity stream that they receive from the cards issued historically, and merchants wouldn't want to give that up to switch providers. But when you think about the relatively short life for these cards, on average, about a year or so, I mean, can outstanding cards alone be enough to fend off new entrants who are going to try to pick off your retail partners?

Well, I think it's a lot of things, and John Keatley can address the value that the reload network brings mathematically. But it's not just about retention of any one card. It's about the growing portfolio base that continues to rise year-over-year, and the numbers of reload transactions on the reload network are pretty significant. They grow mildly year-over-year. John, what do we do on the past 12 months? That would be 30-some-odd [ph] million?

Yes, and we're up 29%, again, this year on reloads. And, Glenn, a large proportion of those reloads actually do come from older cards. So you're right that the average life of a card is around a year, but there's really a long tail on that. So actually significant portion of reloads come from very old cards.

And it's a big portfolio. So I wouldn't -- I don't mean to overplay that, but I wouldn't describe it as couching it or a minor issue. The numbers of money -- Green Dot, MoneyPak and reload transactions we do on retail are fairly significant. We sell a lot of cards, but there's more to it than that if you're a retailer. So let's pretend you're a retailer now and you're talking to a salesperson from another company. You have questions about the brand and the notoriety of the brand, meaning positive attributes and consumer perception. You have a lot of questions about regulation. You have a lot of questions about IT and how that IT integrates into their POS system at that retailer, which is a very, very, very long-term and highly complex integration. You don't just walk in to some place and do that overnight. You have issues of shelving and slotting and merchandising and marketing, and all that has to be worked through before a decision can be made to be to have a package put on the shelf, right? So a lot of things have to be considered for that. So we're not saying that we're unbeatable or that we'll never be replaced in a retailer or that kind of thing. I guess anything could happen, but it never has happened. We continue to renew contracts fairly regularly from all of our biggest retailers. And our notoriety with consumers and our popularity with consumers and others continues to grow, right? So I think there's more to it than just the network, and for all of those reasons, we feel good about our retail contracts. And of course, history shows that we've done a good job there. So it maybe that somebody gets put on the shelf next to us. That could certainly happen to retailers where we're not exclusive. If that happens, that happens. But for us to be replaced is not something that I can honestly say has ever come up in any conversation with any retailer ever.

Do you have any statistics you can share with us on, if you buy a card from a certain retailer, it's a 80% probability that they will reload at that same retailer? Do you have any color like that?

There's one stat that I can share in that regard. It varies retailer by retailer. But typically, a retailer will receive about half of their reloads on the Green Dot Network from cards that were not sold in that retail chain. So about half of the reload volume comes from the cards that they sold and roughly half come from other Green Dot programs or third-party programs like H&R Block and RushCard or others.

Our next question comes from the line of Julio Quinteros with Goldman Sachs.

This is actually Roman Leal in for Julio. Just one more follow-up on the Durbin issue. I think up until now, we've been focused on the large banks. But have you heard any rumblings or spoken to any of the smaller banks? I think that given that there -- especially those in the sub-$10 billion or in assets, they don't have any of these restrictions on ACH, et cetera, so they can offer a fairly more competitive product than a large bank could now given the final set of rules. Just curious to see if -- I mean, do you think that will -- would it be easier for you to partner with a smaller bank versus, say, a large bank?

The answer is that partnering with a smaller bank wouldn't be helpful for certain kinds of features and services. And of course, if we're successful at getting our own Green Dot bank, that would certainly be a bank that would qualify into that exemption. But there are other banks who are experts in the prepaid industry, Bancorp and others that are small banks and many more are getting into the market. So we do tend to see a -- that's a good question, Roman. We do tend to see a frenzy of smaller banks that say, "Hey, Green Dot, can we help? Can we play? Can we be part of this?" And there may be opportunities there, but we're in no huge rush to do anything because we're exempted as it is today. So there will be more of a belt and suspenders kind of a move going forward, and we always look at developments in that way.

Our next question comes from the line of John Rowan with Sidoti & Company. John Rowan - Sidoti & Company, LLC: John, do you have the average card lifetime?

Yes, we do. We disclosed it in our 10-K, I think, was the last time it was put out there of around 9 months, which is across all of our programs. That's the average life of the card that we disclosed for accounting purposes. John Rowan - Sidoti & Company, LLC: But it hasn't -- has it changed at all from that 9 months, or do you not, not have that?

Not materially, no. It hasn't.

Remember, we're a business of segments, right? So it's kind of when you put it all together as an average unless or how particularly indicative that is or helpful, but it is what it is. John Rowan - Sidoti & Company, LLC: Okay. And what are the securities that you hold in your balance sheet?

They are highly liquid, short-term investments. I guess, we haven't shared a lot of detail on them. They grew to $40 million this quarter, and it's highly rated commercial paper, corporate bonds and treasuries is essentially what's in there. John Rowan - Sidoti & Company, LLC: Okay. And just one last question. On the guidance, I mean, it shows $24 million for stock-based retailer compensation expense. It's obviously a lot higher than the run rate here for the quarter. Why is that number a $24 million? And is that what's used in the GAAP guidance of $39 million to $45 million?

Stock -- I'm sorry, where did -- which number are you referring to? John Rowan - Sidoti & Company, LLC: I was referring to the $24 million of retail -- of stock-based retailer compensation expense.

Yes. John Rowan - Sidoti & Company, LLC: [indiscernible] $24 million in the financial supplement.

Okay. Let me see. Yes, that sounds right. John Rowan - Sidoti & Company, LLC: Why is that meaningfully higher than the run rate in the quarter here of $4.4 million?

Okay. So you're talking about the stock that we gave to Walmart? John Rowan - Sidoti & Company, LLC: Yes, and just on the -- just looking at the financial supplement that you guys have out.

Sorry, but can you tell me which page you're on? John Rowan - Sidoti & Company, LLC: Sorry. Give me one second. I actually printed out the one page. I think it's 22.

Okay. Yes, you know what, John, maybe I should follow up with you on that one. If you're talking about the stock-based retailer and incentive comp, that's just the vesting of the stock that we gave to Walmart, which vests each month based upon our stock price at the end of the month. John Rowan - Sidoti & Company, LLC: No, I know. But it seems like the assumption there is for a $53 stock price where your stocks at $32. I just wanted to know if that's filtered into the net income guidance on the bottom of $39 million to $45 million?

Okay. Let me follow up with you. It's a good question.

Our next question comes from the line of Tien-Tsin Huang with JP Morgan Chase. Tien-Tsin Huang - JP Morgan Chase & Co: I guess, I'll ask a regulation question. The update was helpful. It sounds like it's mostly good news there. But I'm curious if the new Durbin rules, the way they wrote it out, changes your desire at all to buy the bank still here, the Bonneville Bank?

No. I mean, if anything, if it had any effect to make us more desirous of having that bank. But another reason we initially set off to buy the bank are the same today, and that's product innovation, the regulatory certainty and vertical integration. I think all those apply as much, if not more so now, than they did 1.5 years ago when we began the journey. Tien-Tsin Huang - JP Morgan Chase & Co: Okay. I just wanted to make sure. And on the competitive front, I know Jason asked the question, but you mentioned American Express. The fee-free product has gotten a lot of attention recently in the investment community. So I'm curious if that's had any implication at all for your business in terms of whatever share shift or mix shift, or if that's actually driving you guys to rethink your pricing strategies, especially with the Walmart card knowing that they're typically the low-cost leader?

No, and I mean, the answer is it hasn't. And I guess I can talk -- if it's helpful about the AMEX card and about competition and pricing in general, but the short answer to your question is no. And then if you like me to go more in-depth, I'm happy to, I guess. Tien-Tsin Huang - JP Morgan Chase & Co: Now if you could, maybe just compare and contrast the product for us. That will be helpful.

Okay. Well, so first of all, I think everybody on the call knows we're partnered with American Express as their reload network for this and their other products. So in that context, we wish them all the success in the world because we hope to drive significant reload volumes to our network. But here's our thought about the AMEX product, and then we'll talk about competition and price compression in general, which is I think part of what you're asking and what we've heard elsewhere. So on the new AMEX product, looking at the marketing collateral and reading the terms and conditions, which you all may have done, it's fairly clear that AMEX is marketing this product to more of an upscale user, someone who already has a primary checking account, let's say, at a bank or maybe somebody already has an AMEX credit card. And the card does not appear to have the right utility for a customer who is unbanked or under-banked, who is our primary customer and that has no utility for somebody looking for a bank account replacement product and let me tell you why. So first, the AMEX prepaid card is not issued by a bank and it is not FDIC-insured. And the implication of that is that the card cannot be legally used for the direct deposit of government benefits, tax refunds or any other kind of government disbursement. And the card today does not allow any kind of payroll or direct deposit. So you can't have your wages or payroll put to the card. The card is also not designed, Tien-Tsin, for customers to easily withdraw cash on a regular basis. The reason is they have low ATM withdrawal limits. In other words, you can only get out $200 in cash, and the…

Thank you. Everybody else on the call, we have extra time for Q&A for those of you waiting. But I think it's important to cover, right, because these are the kinds of things that people keep asking about. Okay. So maybe it's helpful for me to give you a sense of how our customers react to competition in general. So AMEX may or may not be competitive to Green Dot at the fringes as we discussed, and large banks may or may not one day roll out a GPR card with various features and pricing like we got asked earlier in the call. But there's really, in my view, no need to speculate on theoretical competition because there are many programs that exist today in the marketplace for real that do in fact compete with Green Dot head on, dead on, right now, everyday on a MasterCard or Visa acceptance mark. So maybe we can look at some of those real life comparisons to provide some color. So reality today we compete head-to-head with NetSpend, Western Union, RushCard, Blackhawk Network, AccountNow, H&R Block, First Data and something like over 800 other smaller GPR programs targeting unbanked and under-banked Americans, all of them on a MasterCard or Visa label. We're not sure if all this competition has expanded the market to be honest or stolen market share from us, we don't know. But whatever the case may or may not be, our growth rates and active card rates are real despite of, or because of, this competition that's in the market today. On the matter of price compression and price competition, competitors selling cards at low fees or no fees is nothing new to the category. And for those of you who cover the category, you now that H&R Block has…

Our next question comes from Ashwin Shirvaikar with Citibank.

My first question is for John. Did you say that sequential growth patterns would be sort of similar to the past, sort of flattish sequentially for the next quarter and slightly above that for the one after?

Yes, I said -- I think on the last call I said sequential patterns would be similar to last year. I think it's probably playing out slightly differently this year. I guided that Q3 revenues would be roughly flat with Q2 this year, which is pretty similar to last year. And that we're expecting a little more of a sequential bump in Q4 this year. We have some initiatives in place, and we expect to deliver some extra growth in the last quarter of the year.

Could you go into some of those factors perhaps because if it's a -- it may take a fairly substantial bump to take you beyond anything more than the lower half of the range that you have?

Yes, well, I can't go into a lot of detail on these initiatives because they're confidential with our retailers at this point. But Steve did mention at the front of the call that we have significant in-store merchandising and promotional activities lined up for the fourth quarter of the year at 4 of our top 5 retailers, which together account for more than 90% of our sales. And we're expecting some good results from those initiatives.

Okay. And then one question I have was, again, going back to Durbin, not to belabor that way too much. But with regards to the final set of rules, did that -- through your own process of investigation, does that cause you to potentially modify any product features that you might have been planning in the future and to potentially walk away from those kind of features?

Well, it's certainly going to influence our thinking as we do the compliance review. In other words, whenever we do a new feature or service whatever it might be, there's a whole change, control and compliance review process that has to happen before that product gets quoted and rolled out. So clearly, a cautious review of the Durbin rules will now be part of that compliance review, right. So it's hard to say would there be something impacted or not. But clearly, we're going to have them on our mind as we roll out any new feature.

Okay. And last -- I guess my last question is with regards -- I probably missed this, Walmart as a percent of revenues?

Yes, that's right. We haven't put that out this time. We'll put it in the Q after we complete calculating the rev shares in some of the other products, but we haven't shared that yet.

No dramatic changes there.

Our next question comes from the line of Andrew Jeffrey with SunTrust.

Just taking a step back, you've performed really consistently relative to your guidance, and I appreciate that clarity on the regulatory because I think that addresses just about every issue I've heard in the market and that's all pretty favorable. When you think about this business longer term and how early-stage we are in terms of customer adoption and the fact that I assume a lot of the noise in the market may be has forestalled fast adoption of the cards, are the growth rates you're currently experiencing in card activations and in revenue kind of consistent with how you view the business over the next several years? Or, is there something we should think about in terms of any change potentially in the trajectory either up or down?

Well, so I'll let John address the modeling question on growth. I think the simple answer is, is that we forecast based on what we know and what we expect firmly because we don't ever want to miss guidance, right, and we haven't done that and we'd consider that a horrible failure if we did. So we forecast to make sure that we're doing what we know and what we feel confident in. But we always reserve the right to accelerate new initiatives or to come up with a great idea or to do some other things. And we're always working on those behind the scenes, but they're not necessarily always in the forecast. So the growth rates that we project are the growth rates we project. I don't know if that makes any sense, John, if you agree, but...

Yes, well, if you look historically over the last 10 years at Green Dot, there have been periods where our growth has come almost entirely from organic growth and same-store growth and there have been periods of accelerated growth when we've been rolling out new retailers or major new initiatives. If you look over the past 2 years roughly, we have not had a major new retailer or really major product change. So the growth rates you're seeing right now year-over-year are really driven by organic growth and same-store sales growth. Our expectation is that there will be new initiatives in the future, significant product enhancements and other kind of step change growth opportunities. But I think what you're seeing right now is consistent with our long-term organic growth rate.

Okay. So based on the current distribution?

Right. Exactly right. But like I said, if something big happens, we'll let you know about it and you can get excited about that as to whatever happened. And then the other part of that though is -- I forgot, what is the other part of the question? Which I want to answer. So it's about growth -- Andrew, help me out here. Is it about the growth?

You said once we get past this wall, once we get past all the noise about the industry.

Yes, I kind of like this sort of an S-curve. If you drive a car and you're stuck in traffic and you go around all this traffic and all this. Now once you breakthrough to the straightaway, you tend to get back up to speed. And there's no question that our industry, because it has hit maybe critical mass or is beginning to hit critical mass at the earlier stages, has attracted the attention appropriately of just a tremendous number of newspaper writers and regulatory interest. And this is appropriate in part of the maturing of a really big idea. But once we get past this and we're able to answer the questions and move to a steady-state operating environment, which is what we were talking about earlier about expenses in the quarter, it certainly seems like an opportunity we were going to hit the gas maybe in the way that we couldn't hit previously. Okay. Is that a fair way to answer it?

Yes, that's very helpful, which is a good segue to my follow-up, which should just be around the pipeline for new distribution and whether now that some of the regulatory step seems to be getting cleared up, if you think you might have some -- I don't know if there's step change kind of announcements or relationships, but new distribution deals that you might be able to talk about that could give us some clarity or insight into how you might perform over the next several quarters as opposed to the back half of '11 specifically?

Well, we're always working constantly on new initiatives that have impact. There's never been a time in our 10-year history that there isn't something on the horizon that we're excited about. But I can't tell you what those might be or give you any specific guidance, unfortunately, for all the right reasons.

Okay. And then, well, one last one if I may. John, you mentioned the relationship that exists between GDV and interchange and how that's changing vis-à-vis higher ratio of direct deposit. But is it reasonable to think -- you've had a couple of now very strong GDV quarters, especially relative to the other card metrics, which I assume is a function of direct deposit increasing as a ratio. Is there some way to think about the time period over which those money -- those funds get spent off the cards? Because at some point I would think maybe with a lag, that catches up on the revenue per card basis, right?

Well, yes, but I don't want to -- the money is not pulling off on cards and it's all going to come off in spend and generate a lot of interchange. I mean, the money is coming off the cards. It's just when you have a direct deposit customer, more of it comes off in the form of ATM withdrawal, cash back at point of sale, more PIN debit transactions, the share of total purchase transactions, I mean, direct deposit customers as compared to non-direct deposit customers. So our revenue per card is continuing to grow, and direct deposit customers do have higher revenue per card. So, I think you are seeing the impact of those direct deposit customers to some degree already. But the GDV does not necessarily track closely to interchange revenue or even that closely to revenue in general. It's just the direct deposit customer has a different revenue yield or revenue less percent of GDV than do non-direct deposit customers. Does that make sense?

Yes. It does.

Our next question comes from the line of Chris Mammone with Deutsche Bank.

I guess just a couple follow-ups on some topics already discussed. I think you mentioned in one of your inter-quarter appearances that you're maybe even close to signing a partnership with a top 10 bank. I guess in the wake of the final rules and your comments on sort of the wind taken out of the sails there, does that affect that likely announcement?

I would say that inbound activity of those major banks has certainly slowed down quite a bit. There's nothing on the -- I don't think I said there's any on the horizon back either. But we were certainly engaged with a number of discussions, and I think that the frequency of discussions have died down. And after the release of the Durbin rules, there's been radio silence. Now to be fair, you can deduce from that what you want. Our sales team feels that there's just a lot less interest, and I've heard that from others. But I can't say that with precision.

Okay. And then last question on Durbin, is there anything in there and based on your interpretation that might change Walmart's relationship with the GE Money as the issuer on a go-forward basis?

Well, nothing that I could comment on, or that would be appropriate to comment on. But Green Dot, GE and Walmart have been partners in this business going back to 2006, and we remain so. And to the extent that there ever would be changes, we'd all agree to it mutually and figure out what's right. But there's certainly nothing in offing or in the planning stages at this point.

And then just on, I guess, on the treasury. Have you heard anything new on that front? We had heard that I think they were contemplating putting out a pilot for a second year as opposed to a full-pledged rollout next year, so it might be more like a 2013 timing for the full program. Is that consistent with what you've heard?

Well, it's probably consistent with what I've heard in terms of what could happen, but nothing in an official capacity. The official word on that program is that it's currently in review by the House Ways and Means Committee and by the U.S. Treasury, and then need to make a decision together on how they want to move forward. And that decision is on what scope and under what terms and how the product might look and all those things that maybe worked out through that process. And I think until that process is finalized, we wouldn't have any official word one way or the other.

Okay. And then last question for me. Just both of my expectations, it looks like churn was a bit higher than we're modeling. I don't think you called out anything on that front. Are there any call ups on the churn rate in the quarter?

No. We probably look at churn a little bit differently than a lot of the analysts do. I mean, we typically look at it on a cohort basis. I guess one thing that I can point to that's related to churn is we did share the first time reloader number for the first time. We've given year-over-year growth rates before. We haven't given the number. You can see that our first time reloaders as a share of new card activations increased year-over-year. So we're continuing to see that more customers are reloading, and reloading customers make up a larger share of our active card portfolio. So those are good indicators of churn as we see it, and we continue to see improvement in those metrics.

Our next question comes from the line of Gil Luria with Wedbush Securities.

First of all, so more tactical one on the acquisition of the bank, the potential acquisition of the bank. Is it correct for us to think of it as, if you get the bank, your margins will go up because you don't have to pay the issuer portion, you'll get to keep that. And if you don't get the bank, you'll be able to roll off all the professional expenses that you have to incur during this process because you'll have certainty. So either way, certainty, anytime this year will help you bump up margins a little bit?

Yes, that's right. I mean, one is sort of a safe, it's capped. There's a certain amount. The other one is unsafe that we continue to grow with our business, so we much prefer to get safe if it comes with getting the bank charter. But you're right, either way at the end of this process, we will see some cost savings.

Yes, that's right. We don't -- but as John said, we don't look at it that way. But your point is well taken more broadly, Gil. We're going through some very expensive times here at the company. For anyone who has ever gone through a bank holding company application, especially this day and time, or who has gone through some of the change and growth that a company like ours is going through, we are spending a lot of money on those kinds of initiatives and still delivering the kind of growth and margin expansion, which is one of the reasons why John and I are so optimistic about the company.

And then forgive me for asking you to repeat, but I think you said that you expect all of your cards to be exempt for interchange based on the road map for the Walmart products around the first ATM transaction for free, and then minor modifications, none of which you expect to have a material impact. Is that right? Were you talking about all of your cards then that by that point in 2012, you expect them to go forward as complying with what would be required to be exempt from Durbin?

Yes, we're exempt today. Although by July 2012, under the rules, we'd have to provide the first ATM for free. And today, we do that at Walmart through cash back at the POS, but that doesn't qualify to Durbin. So we need to have a fee-free ATM network. The good news is -- and we've already planned to do that anyhow for Walmart. And so what I meant to say and what I think I did say in my prepared remarks was that as it happens, our product road map will also fulfill the requirement, more than fulfill it because all our ATMs are free, for example, once we do this network participating machines. So more than fulfill that requirement. So we were going to do that either way. It just so happens that we lucked out and that also will qualify for Durbin.

The only footnote to that, Gil, is that we do have a relatively small portfolio of gift cards that would not be exempt. But all of our GPR cards will be exempt.

That's right. I'm talking about GPR not POS.

And finally, there was a very comprehensive discussion of American Express, the competitive product set. So let me just add one aspect of that. They went into the market. I mean, they've had products. But they went in with a tremendous amount of PR, publicity, advertising, et cetera, during the quarter. Did you not see any impact in terms of eliminating card activation, pressure from your retailers? I would expect that with that amount of -- with that heavy of a launch, with that much PR, there would be some impact during the quarter.

Well, I think their PR campaign may have been aimed at analysts and investors. No, I'm just kidding. We certainly got a lot of questions about it, and there was a lot of curiosity from retailers as well and we answered a lot of questions. I think once people got comfortable with the nature of the product, this is, if you will, the AMEX of prepaid cards really designed for higher end usage for new segment of customers, and they realize that the products really have very little in common with the Green Dot products, those questions went away. So certainly, people are curious about it. There was a lot of PR, a lot of articles written. A lot of confusion, frankly, from consumer organizations who just assume the card was FDIC-insured and assumed the card was issued by a bank. And so you've seen a lot of retractions in this and new articles come out, and it's been a little destroyed in that way. But, no -- yes, of course, we have a lot of curiosity from everybody at it.

Mr. Streit, that is all the questions we have at this time. I would like to turn the floor back over to you for closing comments.

Great. Thank you very much. We enjoyed the hour and giving you the presentation. We always enjoy the questions and are happy to take more. I know we have a lot of panels coming up. But going forward, hopefully, we'll meet many of you at. And we appreciate your participation and look forward to speaking with you again next quarter.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.