Safe Harbor Financial Modifies Commercial Alliance Agreement with Partner Colorado Credit Union

Rhea-AI Summary

Safe Harbor Financial (NASDAQ: SHFS) has announced a significant modification to its commercial alliance agreement with Partner Colorado Credit Union (PCCU). The updated agreement, effective January 1, 2025, includes a four-year extension and eliminates the $1.2 million indemnity liability from Safe Harbor's balance sheet that was reported as of September 30, 2024.

Under the modified terms, Safe Harbor will no longer be required to record loan loss reserves on its income statement when facilitating loans for clients with PCCU. CEO Sundie Seefried highlighted that these changes will simplify business processes, better align expenses with income, and address contingent liability exposure on the loan portfolio while strengthening the PCCU partnership.

Positive

• Elimination of $1.2 million indemnity liability from balance sheet
• Removal of requirement to record loan loss reserves on income statement
• Four-year extension of commercial alliance agreement with PCCU
• Expected improvement in financial performance through better expense-income alignment

Negative

• None.

Insights

Financial Analyst

The modification of Safe Harbor Financial's commercial alliance agreement with PCCU represents a material improvement to the company's financial position. The elimination of the $1.2 million indemnity liability directly strengthens the balance sheet, while the removal of loan loss reserve requirements will positively impact future income statements. This dual benefit enhances SHFS's financial flexibility and risk profile in the challenging cannabis financial services sector. The restructured agreement allows for better expense-revenue alignment and reduced contingent liabilities, which is particularly important given the company's modest market cap of $22 million. For a small-cap company operating in the cannabis banking space, this liability reduction represents approximately 5.5% of market capitalization - a meaningful improvement to their risk profile. The four-year extension also provides operational stability and predictability for medium-term planning.

Risk Management Expert

This agreement modification significantly reduces Safe Harbor's risk exposure in their cannabis lending operations. The elimination of loan indemnification requirements removes a substantial contingent liability that could have impacted the company's financial stability in case of loan defaults. The cannabis industry's regulatory complexity and federal illegality make lending particularly risky, so this restructuring effectively transfers more risk back to PCCU. The removal of loan loss reserve requirements on the income statement will reduce earnings volatility and provide more predictable financial results. The four-year term of the agreement also provides important stability in a rapidly evolving regulatory landscape. This restructuring demonstrates sophisticated risk management strategy, particularly valuable in the high-risk cannabis financial services sector.

Loan Indemnification between Companies Eliminated; Change Expected to Strengthen Safe Harbor’s Balance Sheet

GOLDEN, Colo., Jan. 07, 2025 (GLOBE NEWSWIRE) -- 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 a four year extension and modification of its commercial alliance agreement with Partner Colorado Credit Union (“PCCU”). As a result, the $1.2 million of indemnity liability reported on the balance sheet as of September 30, 2024, has been eliminated, and went into effect on January 1, 2025. In addition, as Safe Harbor continues to facilitate loans for its clients with PCCU, the Company will no longer be required to record a loan loss reserve on its income statement.

“The modified agreement with PCCU represents a positive and pivotal development for Safe Harbor,” said Sundie Seefried, Chief Executive Officer of Safe Harbor Financial. “Not only does the updated agreement simplify our business processes and better align expenses with income, it addresses exposure to contingent liability on our loan portfolio and reaffirms the strength of our longstanding partnership with PCCU. By adjusting our fee structures and eliminating loan indemnification, Safe Harbor is well-positioned to drive improved financial performance and deliver increased value to shareholders.”

About Safe Harbor
Safe Harbor is among the first service providers to offer compliance, monitoring and validation services to financial institutions, providing traditional banking services to cannabis, hemp, CBD, and ancillary operators, making communities safer, driving growth in local economies, and fostering long-term partnerships. Safe Harbor, through its financial institution clients, implements high standards of accountability, transparency, monitoring, reporting and risk mitigation measures while meeting Bank Secrecy Act obligations in line with FinCEN guidance on cannabis-related businesses. Over the past eight years, Safe Harbor has facilitated more than $23 billion in deposit transactions for businesses with operations spanning over 41 states and US territories with regulated cannabis markets. For more information, visit www.shfinancial.org.

Cautionary Statement Regarding Forward-Looking Statements
Certain information contained in this press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included herein may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Forward-looking statements may include, but are not limited to, statements with respect to trends in the cannabis industry, including proposed changes in U.S and state laws, rules, regulations and guidance relating to Safe Harbor’s services; Safe Harbor’s growth prospects and Safe Harbor’s market size; Safe Harbor’s projected financial and operational performance, including relative to its competitors and historical performance; new product and service offerings Safe Harbor may introduce in the future; the impact volatility in the capital markets, which may adversely affect the price of Safe Harbor’s securities; the outcome of any legal proceedings that may be instituted against Safe Harbor; and other statements regarding Safe Harbor’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “outlook,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Safe Harbor’s filings with the U.S. Securities and Exchange Commission. Safe Harbor undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

Contact Information
Safe Harbor Investor Relations
ir@SHFinancial.org

KCSA Strategic Communications
Ellen Mellody
safeharbor@kcsa.com

FAQ

How will the elimination of $1.2M indemnity liability affect SHFS's balance sheet?

The elimination of the $1.2M indemnity liability will strengthen Safe Harbor Financial's balance sheet by removing this contingent liability, effective January 1, 2025.

What changes were made to SHFS's loan loss reserve requirements?

Under the modified agreement, Safe Harbor Financial will no longer be required to record loan loss reserves on its income statement when facilitating loans for clients with Partner Colorado Credit Union.

When does SHFS's modified commercial alliance agreement with PCCU take effect?

The modified agreement went into effect on January 1, 2025, and includes a four-year extension of the commercial alliance.

How will the new PCCU agreement impact SHFS's financial performance?

The agreement is expected to improve financial performance through better expense-income alignment, simplified business processes, and elimination of loan indemnification requirements.