Safe Harbor Financial (NASDAQ: SHFS) reported mixed financial results for the fourth quarter and full year of 2024 that ended Dec. 31, with revenue declines offset by growth in its lending business.

The company noted that its loan interest income increased 82% to approximately $1.8 million in the fourth quarter and jumped 123% to $6.6 million for the full year versus 2023.

Despite the growth in the lending segment, overall revenue declined to $15.2 million for 2024, down from $17.6 million in 2023. The company attributed the decrease primarily to reduced deposit activity and client onboarding income related to its previous Abaca acquisition.

“Throughout 2024, the lending arm of Safe Harbor was a driving force for the company,” said Terry Mendez, who joined as CEO earlier this year following the retirement of Sundie Seefried. “We continue to be an innovator in this sector as we instituted a new small business line of credit program while also originating several debt and credit facilities at market-competitive terms for numerous clients across the U.S.”

The company posted a sizable net loss of $48.3 million for 2024, versus a $17.3 million loss in 2023. That included around $43.9 million in non-cash valuation allowance on deferred tax assets and $9.1 million in goodwill and intangible asset impairment expenses.

Safe Harbor also said it had fully written down its goodwill and intangible assets to zero on its balance sheet as of the end of December.

Operating expenses fell significantly to $22.3 million in 2024, versus $38.3 million in 2023 – a 42% reduction. The company noted that compensation and employee benefits expenses decreased 25% due to lower stock-based compensation and headcount reductions.

In addition, Safe Harbor and Partner Colorado Credit Union (PCCU) entered into an amended commercial alliance agreement at the end of December that eliminates Safe Harbor’s indemnification obligations for any loan losses. The company also reported successfully modifying its debt obligation with PCCU in March, which it claims will unlock $6.4 million in cash flow over the next two years.

“This modification greatly improves our financial stability as we are able to unlock over $6 million in cashflow over the next two years and push the term of the debt obligation out to October 2030,” Mendez said.

Adjusted EBITDA was $2.9 million for 2024, down from $3.6 million in 2023. Safe Harbor also reported that its adjusted working capital stood at $2 million at year-end.

Cash and cash equivalents declined to $2.3 million at the end of 2024, versus $4.9 million at the end of 2023.

Safe Harbor noted that in January it had processed more than $25 billion in cannabis-related funds through its network of partner banks since its founding, a milestone the company reached on its 10th anniversary.

“One of the major reasons I joined Safe Harbor is the tremendous opportunity I see to build upon our strong foundation, to evolve from a single compliance solution into a provider of a broad array of services focused on addressing the needs of our clients,” Mendez said.

The company filed a notification of late filing with the SEC on Monday, saying it would need additional time to complete its annual report on Form 10-K. Safe Harbor cited the need to evaluate subsequent events including its debt modifications and valuation of deferred tax assets among the reasons for the delay.

Newly minted Safe Harbor Financial (NASDAQ: SHFS) CEO Terry Mendez outlined a four-point plan to transform the longstanding cannabis financial institution into a much broader resource hub for marijuana companies, during a call with shareholders on Thursday.

The plan, Mendez told Green Market Report prior to the call, is a means to an end. He said that Safe Harbor has been underutilizing its own assets and connections in the cannabis industry, which he argued could easily be monetized with the right approach to clients, boosting the company’s overall performance and bottom line.

The strategic “shift,” as Mendez called it, comes in the wake of several important financial milestones for Safe Harbor over the past year. First, the company fell out of compliance with Nasdaq listing requirements that companies be valued at a minimum of $1 per share, Mendez said. Then it had to weather the fallout from a failed acquisition of Abaca that cost Safe Harbor millions. That led to a recent $6 million debt restructuring, right after CEO Sundie Seefried announced her retirement and the appointment of Mendez.

Despite a January milestone when Safe Harbor surpassed $25 billion in cannabis-related transactions since its founding in 2015, the company posted just $353,817 in net income in its most recent quarter. Mendez believes Safe Harbor can do better.

Regaining Nasdaq compliance is one of Mendez’s top priorities, to which end, he asked shareholders to approve a reverse stock split. Beyond that, he believes there are several very easy ways for Safe Harbor to expand its services and bolster its bottom line.

“I envision a day where somebody can log into our Safe Harbor platform or portal and not only see their banking activity and transfer money and add new users, but see what’s going on with their insurance products, see what’s going on with their HR and payroll products, see what’s going on with their supply chain products,” Mendez said. “I want people to understand when they pay … for one of our accounts, they’re getting a team of people that are looking at their business and trying to help them be successful individually.”

Mendez cited one estimate that found the U.S. cannabis industry to be worth $76 billion, not including all the various ancillary companies selling cultivation equipment, paraphernalia and other tangential non-marijuana goods.

“If I can just participate in 1% of that, and if I can earn platform fees associated with 1% of that, that business alone will be twice the size of our core business today,” Mendez said.

Mendez said his plan is to roll out four new specific suites of services for cannabis companies:

• Safe Harbor Protects, to establish financial services for cannabis industry workers, not just businesses, to facilitate paycheck cashing, real estate loans and more.
• Safe Harbor Lends, to build a new network of financial providers of all stripes and create a one-stop-shop for marijuana businesses looking for capital.
• Safe Harbor Connects, to set up a consortium of businesses in order to leverage large-scale buying power, create a professional services network of providers and provide other resources.
• Safe Harbor Enables, a “low-cost center of excellence” where cannabis companies will be able to find quality professionals to help with payroll, human resources, accounting and other standard business services.

Some of the new services will come with added costs, but many will be built into the company’s existing cost structure, Mendez told Green Market Report.

The primary pivot, he emphasized, is away from a financial institution mindset and business model to a more all-encompassing general business services provider for marijuana companies. The new services will be rolled out on an ongoing basis in coming months.

His plans don’t stop where cannabis ends though. Mendez wants to get into any industry that doesn’t have reliable banking services. But, he said, that depends on expanding the number of banks that are part of Safe Harbor’s network.

“I would love to see a day where Safe Harbor is not only in cannabis, but we’re doing psilocybin, that we’re doing gaming, that we’re doing crypto, that we’re doing some other of these de-banked industries, but that requires us to have financial institutions that are willing to play ball with us,” he said. “If you have more financial institutions, you’re able to be more creative because each one of them have a different risk tolerance and what they’re willing to do.”