Press Release: Safe Harbor Financial Reports Financial Results for Third Quarter and Nine Months Ended September 30, 2024

–Net Income increased to $0.4 million in the third quarter of 2024

–Loan Interest Income increased 48% and 143.5% year-over-year for three and nine months ended September 30, 2024, respectively

–Operating Expenses decreased 13.2% versus Q3 2023 and by 66.4% for the nine-month period in 2024

GOLDEN, Colo., November 12, 2024 — SHF Holdings, Inc., d/b/a/ Safe Harbor Financial (“Safe Harbor” or the “Company”) (NASDAQ: SHFS), a leader in facilitating financial services and credit facilities to the regulated cannabis industry, announced today its financial results for the third quarter and nine months ended September 30, 2024.

Third Quarter 2024 Financial and Operational Summary

 

• Net Income increased to approximately $0.4 million, compared to a net loss of approximately $750,000 in the same period of 2023;
• Revenue was approximately $3.5 million, compared to approximately $4.3 million for the third quarter of 2023;
• Operating Expenses decreased to $3.3 million, compared to $3.8 million in the third quarter of 2023;
• Loan Interest Income increased 48.0% from approximately $900,000 in the third quarter of 2023 to approximately $1.3 million in the third quarter of 2024;
• Adjusted EBITDA⁽¹⁾ decreased 27.4% to approximately $0.76 million, compared to approximately $1.1 million for the third quarter of 2023⁽¹⁾.

Nine-month 2024 Financial & Operational Summary

• Net Income increased to approximately $3.3 million, compared to a net loss of approximately $19.8 million in the first nine months of 2023;
• Revenue was approximately $11.6 million, compared to approximately $13.1 million for the first nine months of 2023;
• Operating Expenses decreased to approximately $10.8 million, compared to approximately $32.1 million in the first nine months of 2023;
• Loan Interest Income increased 143.5% from approximately $1.9 million in the first nine months of 2023 to approximately $4.8 million in the first nine months of 2024;
• Adjusted EBITDA⁽¹⁾ increased 22.1% to approximately $2.8 million, compared to approximately $2.3 million for the first nine months of 2023⁽¹⁾.

(1) Adjusted EBITDA is a non-GAAP financial metric. A reconciliation of non-GAAP to GAAP measures is included below in this earnings release.

“Throughout the third quarter of 2024, Safe Harbor Financial continued to make meaningful progress on our strategic priorities focused on innovation, operational excellence, and client service,” said Sundie Seefried, Chief Executive Officer of Safe Harbor Financial. “During the third quarter of 2024, we delivered strong loan interest income growth of 48% and improved net income by approximately 147%, year-over-year. We accomplished this while remaining intensely disciplined in expense management, resulting in a 12% decrease in operating expenses, compared to the same period last year.

“Subsequent to the quarter end, the Company originated an initial $1.07 million secured credit facility with a multi-state operator, representing the first tranche of a $5 million commitment, further solidifying our role as a trusted financial partner. Our recent executive team restructuring, contract extensions and ongoing expense management all underscore our commitment to long-term growth and shareholder value. While the current regulatory environment remains highly challenging for cannabis related business, we are confident that Safe Harbor is well-positioned to capitalize on the significant opportunities that lie ahead.”

 

Third Quarter 2024 Operational Highlights

• On July 9, 2024, the Company announced it successfully exited a $3.1 million loan in default, collecting 100% of principal, as well as over $200,000 in accrued interest.
• On July 25, 2024, Safe Harbor announced it was teaming up with BIPOCann to empower minority-owned cannabis businesses.
• On September 4, 2024, the Company announced it had secured key executive team members with strategic contract extensions.

Subsequent Operational Highlights

• On October 29, 2024, Safe Harbor announced it had originated a $1.07 million secured credit facility for a Missouri cannabis operator.

Third Quarter 2024 Financial Results

For the third quarter ended September 30, 2024, total revenue was $3.50 million, compared to $4.3 million in the prior year period. The decrease in revenue was due to a reduction in deposit, activity and onboarding income, which was primarily attributable to a decrease in the number of accounts related to the Abaca acquisition. In the three months ended September 30, 2024, PCCU accounted for $1,354,036 of the revenue generated from deposits, activities and client onboarding. Related to this revenue, the Company recognized $131,002 in account hosting expenses, in accordance with the PCCU CAA. In the three months ended September 30, 2023, PCCU contributed $1,287,669 to the revenue from similar sources, with account hosting expenses amounting to $54,729 as per the Loan Servicing Agreement provisions.

Operating expenses for the third quarter 2024 decreased to approximately $3.3 million, compared to approximately $3.8 million in the prior year period, which was comprised of the following:

• Compensation and employee benefits decreased in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as a result of stock-based compensation and the decrease in the headcount.
• Rent expenses decreased in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due to a reduction in the number of lease properties.
• (Benefit)/ Provision for credit losses increased in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due to an increase in loan portfolio amount.
• For the three months ended September 30, 2024, general and administrative expenses decreased across various categories including: i) approximately $177,069 in investment hosting fees due to a reduction in investment income, and (ii) approximately $128,014 in amortization and depreciation due to a reduction in the gross value of intangible assets from impairment recorded in 2023.

Third quarter 2024 net income was approximately $0.35 million, compared to a net loss of approximately $748,000 in the prior year period. The improvement in net income in the third quarter of 2024 was the result of lower expenses across the Company and a greater number of performing loans at better interest rates than the prior year period.

First Nine Months 2024 Financial Results

For the nine-months ended September 30, 2024, total revenue was $11.6 million, compared to approximately $13.1 million in the prior year period. The decrease in revenue for the first nine months of 2024 was due to a reduction in deposit activity and onboarding income and was primarily attributable to a decrease in the number of accounts related to the Abaca acquisition. In the nine months ended September 30, 2024, PCCU accounted for $3,778,633 of the revenue generated from deposits, activities and client onboarding. Related to this revenue, the Company recognized $356,369 in account hosting expenses, in accordance with the CAA. For the nine months ended September 30, 2023, PCCU contributed $4,051,353 to the revenue from similar sources, with account hosting expenses amounting to $170,987 as per the Loan Servicing Agreement provisions.

First nine-months of 2024 operating expenses decreased to $10.8 million, compared to $32.1 million in the prior year period, which was comprised of the following:

• Compensation and employee benefits decreased in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of stock-based compensation and also related to a reduction in force.
• Rent expenses decreased in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, due to reduction in the number of lease properties.
• (Benefit)/ Provision for credit losses increased in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, due to an increase in loan portfolio amount.
• For the nine months ended September 30, 2024, general and administrative expenses decreased across various categories including: i) approximately $ 604,080 in investment hosting fees due to a reduction in investment income, and ii) approximately $535,179 in amortization and depreciation due to the reduction in the gross value of intangible assets from impairment recorded in 2023.

Net income for the first nine-months of 2024 was approximately $3.3 million, compared to a net loss of approximately $19.8 million in the prior year period. The driver of net income produced in the first nine months of 2024 was lower expenses across the Company and a greater number of performing loans at better interest rates than the prior year period.

As of September 30, 2024, the Company had cash and cash equivalents of $5.9 million, compared to $4.9 million at December 31, 2023.

For more information on the Company’s third quarter 2024 financial results, please refer to our Form 10-Q for the quarter ended September 30, 2024 filed with the U.S. Securities & Exchange Commission (the “SEC”) and accessible at www.sec.gov.