Safe Harbor Financial Q1 Revenue Grows 150% YoY, Surpasses $1.1B In Quarterly Deposits

On Monday, SHF Holdings, Inc., d/b/a/ Safe Harbor Financial (NASDAQ:SHFS), announced its financial results for the quarter ended March 31, 2023, revealing net revenue of $4.2 million in Q1 2023, an increase of 150% compared to $1.7 million in Q1 2022.

Q1 2023 Financial Highlights

• Processed deposits increased 33% to $1.1 billion compared to $808.5 million in Q1 2022.
• The monthly average number of accounts held with a financial institution (“FI”) clients increased 68% to 993, compared to 590 in Q1 2022.
• Monthly average balances on deposits held with FI clients increased 55% to $213.6 million, compared to $137.7 million in Q1 2022.
• Balance sheet debt decreased approximately 60%; resolving more than $68.6 million of debt payables reported at year-end 2022.
• Ended Q1 2023 with $8.6 million in cash.

Q1 2023 Financial Results:

• Q1 2023 total revenue increased to $4.2 million, compared to $1.7 million in the prior year period, driven by higher investment and income from deposits, activity, and onboarding.
• Operating expenses for Q1 2023 rose to $5.8 million, compared to $1.2 million in the prior year period, mainly due to increased compensation, stock-based compensation, professional services, advertising, and depreciation expenses.
• Q1 2023 net loss was $1.4 million, compared to a net income of $0.5 million in the prior year period, primarily due to higher operating expenses and losses on financial instruments related to the business combination transaction.
• As of March 31, 2023, the company had $8.6 million in cash and cash equivalents, slightly up from $8.4 million on December 31, 2022.

“For the first time in Safe Harbor’s history, we surpassed $1 billion in quarterly processed deposits, which reflects the regulated cannabis industry’s continued need for reliable and fully compliant financial services,” said Sundie Seefried, CEO at Safe Harbor.

“During the quarter, our monthly average balances on deposit also reached a new high, putting the Company in an even better position as we continue to build our lending portfolio. Given this strong momentum, our recently announced partnership with Five Star Bank comes at an opportune time in Safe Harbor’s evolution: by increasing our capacity to accept up to an additional $1 billion in cannabis-business-related deposits, this partnership supports Safe Harbor’s continued investment and deposit income growth, while enabling us to deliver the most robust and affordable cannabis banking solution available.”

First Quarter 2023 Operational Highlights

• Karl A. Racine joined Safe Harbor's Board of Directors on February 8, 2023, after leaving the Washington, D.C. Attorney General's office.
• Safe Harbor reached agreements with Partner Colorado Credit Union (PCCU) on March 30, 2023, settling a deferred payable of approximately $64.7 million. The settlement included $14.5 million in serviceable debt payable over five years and 11.2 million shares of Class A common stock valued at $50,162,549.
• Safe Harbor resolved around $68.6 million in debt obligations, including the deferred payable to PCCU and remaining debt, through negotiations in early 2023. This involved a payment of $1.7 million in cash and $700,000 in serviceable debt payable over one year.
• Douglas Fagan, President and CEO of PCCU, was appointed to Safe Harbor's Board of Directors on April 20, 2023.

Safe Harbor partnered with Five Star Bank, a subsidiary of Financial Institutions, Inc. (NASDAQ:FISI), on May 11, 2023, to expand cannabis banking nationwide. This partnership allows up to $1 billion in deposit capacity, enabling greater access to credit facilities and comprehensive cannabis banking services for cannabis businesses of all sizes.

2023 Financial Outlook

Safe Harbor expects a significant increase in full-year 2023 revenue, projecting a minimum 50% growth compared to the $9.4 million reported in 2022. Furthermore, the company anticipates positive Adjusted EBITDA and positive cash flow from operating activities for the entire year of 2023. This positive outlook is driven by expectations of deposits processed and associated investment income, loan interest income, and consistent quarterly operating expenses.

Price action: On Monday at market close, SHFS shares were trading 4.70% lower at $0.41 per share.

Image by Gino Crescoli from Pixabay