Q3 2022 SHF Holdings Inc Earnings Call
Operator: Greetings and welcome to the Safe Harbor Financials third quarter 2022 earnings conference call. As a reminder, this conference is being recorded. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
As a reminder, this conference is being recorded.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad withdraw your question. Please press Star then two.
It's now my pleasure to turn the conference over to Phil Carlson from Case USA. Thank you, you may begin.
Phil Carlson: Thank you, operator. Good afternoon everyone and welcome to the third quarter 2022 earnings conference call for Safe Harbor Financials.
Before I begin the call, I'm obligated to remind everyone that during the course of this conference call management maybe making some forward-looking statements that are based on current expectations. They're subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These results are outlined in the risk factors section of the company's filings and disclosure materials. Any forward-looking statements should be considered in light of these factors.
They're subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations.
These results are outlined in the risk factors section of the company's filings and disclosure materials. Any forward-looking statements should be considered in light of these factors.
Please also note [inaudible] Safe Harbor any outlook presented is as of today and management does not undertake any obligations to revise any forward-looking statements in the future.
Presenting today will be Sundie Seefried, Chief Executive Officer, and Jim Dennedy, Chief Financial Officer of Safe Harbor. I'll now hand the call over to Sundie. Sundie, please go ahead.
Sundie Seefried: Thank you Phil, and welcome everyone to our inaugural earnings call. I'm excited to provide an overview of Safe Harbor Financial and update everyone on the recent events that have furthered our ability to provide a full suite of financial service solutions for the financial institutions to effectively serve the needs of cannabis-related businesses across the country.
Businesses across the country.
Safe Harbor holds a unique and critical position at the intersection of finance and cannabis industries, which is just beginning to be shared with and understood by the investment community.
Is just beginning to be shared with and understood by the investment community.
Let me take a step back and explain our business and how we have evolved over the past eight years into the leading provider of financial services to cannabis-related businesses, otherwise referred to as CRBs.
Safe Harbor was founded in 2015 as a wholly-owned subsidiary of Partner Colorado Credit Union or PCCU, a Colorado-based Credit Union to meet the underserved financial needs of the burgeoning cannabis industry. Given our decades of regulatory and banking experience and the mounting need for rapidly growing CRBs to gain access to reliable and compliant financial services, we created a best-in-class compliance program for financial institutions to serve this market.
growing CRVs to gain access to reliable and compliant financial services, we created a best-in-class compliance program for financial institutions to serve this market.
For this market.
Our offering includes onboarding, validation, and compliance monitoring of CRB accounts held at financial institutions, all of which are essential to mitigating the high risk of banking cannabis businesses, most of which operate as cash-intensive businesses. Simply put, Safe Harbor wrote the playbook that allows financial institutions to provide traditional banking services safely and legally. to the cannabis industry.
financial institutions to provide traditional banking services safely and legally. to the cannabis industry.
To the cannabis industry.
Since inception, our mission has been to strategically build a proprietary, fully compliant financial services platform and to become a market leader, which is exactly what we have achieved. As an early entrant into the high growth market with financial services and layering on additional services for our clients, we have amassed a significant client base of CRBs and financial institutions that rely on our services to support their growth.
We have amassed a significant client base of CRB and financial institutions that rely on our services to support their growth.
To scale our business and expand our suite of financial services even further, we entered into a business combination transaction with Northern Lights Acquisition Corp, which resulted in our listing on the NASDAQ at the end of September this year.
Today, we boast an experienced team and have the financial wherewithal to take advantage of the significant growth opportunities of this rapidly growing market and advance our position as the premier financial service provider for the cannabis industry.
The Premier financial service provider for the cannabis industry.
For those new to the company, Safe Harbor's business model centers on capitalizing on the opportunity to do what most financial institutions are unable to do on their own, provide CRBs access to traditional financial services.
Currently, both medical and recreational cannabis are illegal on the federal level, and until this changes, most financial institutions will remain unable or unwilling to provide services to CRBs that even when the Safe Banking Act passes which is designed to protect the banking institutions that choose to offer services to legitimate cannabis-related businesses, CRBs will continue to face difficulty securing financial services as the greatest hurdle remains meeting Bank Secrecy Act obligations.
services to legitimate cannabis-related businesses, CRBs will continue to face difficulty securing financial services as the greatest hurdle remains meeting Bank Secrecy Act obligations.
The Bank Secrecy Act or BSA, is series of laws and regulations that were created to prevent criminals from using financial institutions to hide or launder illicit funds and it requires financial institutions to file regular reports with federal agencies for cash-intensive businesses, and in this case, cannabis operators. As you can imagine, banking for CRBs can be challenging for financial institutions that don't have access to proper procedures and compliance. Fortunately, this is where Safe Harbor excels. Safe Harbor takes this burden off financial institutions to ensure BSA obligations are fulfilled. Now having eight years of experience in fulfilling such, while such industry hurdles persist, the growth of the cannabis industry has continued its upward trajectory.
Series of laws and regulations that were created to prevent criminals from using financial institutions to hide or longer illnesses funds requires financial institutions to file regular reports with federal agencies for cash intensive businesses and in this case cannabis operators as you can imagine.
<unk> for CRB can be challenging for financial institutions that don't have access to proper procedures and compliance.
Fortunately this is where safe harbor itself say harbor takes this burden all financial institutions to ensure BSA obligations are fulfilled now having eight years of experience in fulfilling such while such industry hurdles persist the growth of the cannabis industry has continued its upward trajectory.
To reiterate, Safe Harbor plays a unique and important role in the financial services ecosystem with its ability to support both CRB and financial institutions by providing CRBs with access to financial services and financial institutions access to increased deposits with the comfort of knowing these deposits are consistently and compliantly being monitored and validated.
The comfort of knowing these deposits are consistently and compliance being monitored and validated.
By facilitating this process, risks associated with the cash-intensive business are mitigated, creating a safer environment for communities, CRB employees, and financial institutions. Since Safe Harbor is not a financial institution, we do not hold customer deposits. Instead, deposits are held by our financial institution partners, and all transmissions of funds to and from deposit accounts are handled directly by the financial institutions.
Our financial institution partners, and all transmissions of funds to and from deposit accounts are handled directly by the financial institutions.
Given the fact that the cannabis industry has limited access to capital and financing options, we launched a lending program in 202o to offer CRBs access to loan options at very competitive rates, especially when compared to what is currently being offered by others.
Our ability to offer competitive rates is a result of our understanding that CRBs' most pressing need is access to capital in order to grow and scale their operations, enter new markets, and fund acquisition opportunities. Our strong relationships with our financial institution partners allow us to operate with a cost of capital advantage compared to our peers. For example, Safe Harbor is able to offer the lowest risk-adjusted rates in the market, significantly more attractive rates as compared to specialty lenders or other competitors, most of whom rely on outside capital to finance loans, and therefore offer rates in the range of 18% to 36%.
with a cost of capital advantage compared to our peers. For example, Safe Harbor is able to offer the lowest risk-adjusted rates in the market, significantly more attractive rates as compared to specialty lenders or other competitors, most of whom rely on outside capital to finance loans, and therefore offer rates in the range of 18% to 36%.
Loans, and therefore offer rates in the range of 18% to 36% and.
In addition to our core service offering, we continue to build upon our end-to-end financial service platform to provide our customers with services that are standard to almost any other type of business outside of cannabis. Services include checking and savings accounts, cash management accounts, commercial mortgages, mobile and online banking access, payment systems, and other financial services. Since inception, Safe Harbor has onboarded over $14 billion in cannabis-related funds into the financial system. It is also noteworthy to highlight our high customer retention rate. While deposit levels fluctuate over time, high customer retention rate benefit Safe Harbors continued growth with a solid foundation and foothold in the industry.
Does this include checking and savings accounts cash management accounts commercial mortgages mobile and online banking access payment systems and other financial services since inception Safe Harbor has on boarded over $14 billion in canvas related funds into the financial system. It is awesome.
to highlight our high customer retention rate. While deposit levels fluctuate over time, high customer retention rate benefit Safe Harbors continued growth with a solid foundation and foothold in the industry.
high customer retention rate benefit Safe Harbors continued growth with a solid foundation and foothold in the industry.
In order to build upon our market leadership position, we have laid out a multi-pronged growth strategy; organically growing our existing customer base relationships and deposits, capitalizing on our market position to gain new customers in current legal markets by optimizing business development activities, entering into new medical and recreational adult markets with an experienced team and a proven national platform, expand our lending opportunities to current and new customers, leading with lending to attract new clients, and exploring complementary M&A opportunities and other financial service providers to increase our offerings.
Organically growing our existing customer base relationships and deposits.
Capitalizing on our market position to gain new customers and current legal markets by optimizing business development activities.
entering into new medical and recreational adult markets with an experienced team and a proven national platform, expand our lending opportunities to current and new customers, leading with lending to attract new clients, and exploring complementary M&A opportunities and other financial service providers to increase our offerings.
And our lending opportunities to current and new customers, leading with lending to attract new clients and exploring complementary M&A opportunities and other financial service providers to increase our offerings.
Before I review our growth strategy, I first want to explain how Safe Harbor makes money. For the foreseeable future, the majority of our revenue will be dependent on current deposits and growth of deposits held at PCCU and other financial institutions we service. Safe Harbor also generates interest and fee income through providing a variety of services to PCCU to facilitate its banking services to CRBs, including, among other things, DSA and other regulatory compliance and reporting, on-boarding responding to account inquiries, responding to customer service inquiries related to CRB deposit accounts held at financial institution clients, and sourcing in originating loans. We also receive interest revenue from loans as well as investment income allocated by PCCU based upon specific customer basis.
For the foreseeable future the majority of our revenue will be dependent on current deposits and growth of deposits held at <unk> and other financial institutions. We service Safe Harbor also generates interest and fee income through providing a variety of services to <unk> to facilitate its banking services.
to CRBs, including, among other things, DSA and other regulatory compliance and reporting, on-boarding responding to account inquiries, responding to customer service inquiries related to CRB deposit accounts held at financial institution clients, and sourcing in originating loans. We also receive interest
revenue from loans as well as investment income allocated by PCCU based upon specific customer basis.
In addition, Safe Harbor provides similar services and outsourced support to other financial institutions, providing banking to the cannabis industry through our Safe Harbor Master Program agreement. The services provided through this agreement are done under a non-exclusive, non-transferable line to implement and utilize the Safe Harbor Program composed of two performance obligation, a onetime implementation fee and a service fee paid over the contract term as the compliance program is executed. An important aspects of our expansion plans is to increase our cannabis lending program and to capitalize on our existing customer base of nearly 700 CRB accounts, which provides us with an immediate and robust pipeline of potential lending opportunities.
Services provided through this agreement are done under a nonexclusive nontransferable right to implement and utilize the safe Harbor program composed of two performance obligation a onetime implementation fee and the service fee paid over the contract term is the compliance program is executed and <unk>.
Aspects of our expansion plans is to increase our candidates lending program and to capitalize on our existing customer base of nearly 700, CRV accounts, which provides us with immediate and robust pipeline of potential lending opportunities.
An important competitive advantage in our lending capabilities is our inate low cost of capital, which I mentioned earlier. We have a materially lower cost of capital relative to special finance lenders because our loans to date have been and we anticipate in the future will be collateralized by deposits held at PCCU and other financial institutions. We expect this capability to enable us to further deepen our relationships with clients and continue to support them through other capacities.
Deposits held at PCC, you and other financial institutions, we expect this capability to enable us to further deepen our relationships with clients and continue to support them through other capacities.
Turning to M&A strategies, our focus is on identifying targets that can expand our market share, increased lending capacity with additional deposits, and complement our service offerings. Our recent announcement of the binding agreement to acquire Abaca is a prime example of this strategy. Abaca works with its federally insured financial institution partners to enable traditional banking services for operators ranging from single dispensaries to multi-state and national operators.
<unk> works with its federally insured financial institution partners to enable traditional banking services for operators ranging from single dispensaries to Montana state and national operators.
Abaca's people, processes, and technology provide a complete cannabis solutions to sponsor financial institutions managing their regulatory risk at scale. This enables Abaca to provide cannabis businesses with a full suite of specialized financial and Treasury services available to the industry via its secure digital platform. Also to the Abaca acquisition, Safe Harbor will add 300 plus additional CRB accounts to our customer roster.
Cannabis businesses, a full suite of specialized financial and Treasury services available to the industry.
It's secure digital platform.
So key to the <unk> acquisition Safe Harbor will add 300, plus additional CRB accounts to our customer roster.
We expect to increase our access to balance sheet capacity on which we can grow both deposits and lending, add additional financial institution relationships, and we will deepen our talent, providing additional experience to scale the business in a market where such talent is not readily available.
I fully expect that additional opportunities to acquire CRB portfolios from financial institutions will come across our desk for the simple reason that Safe Harbor successfully built a best-in-class specialized platform to support the industry, where others have not, and will be unable to replicate the same without a lot of pain, time, and substantial financial contribution.
Time and substantial financial contribution.
With those comments complete, I would like to turn the call over to Jim to discuss our financial results as of September 30th, 2022. Jim?
Jim Dennedy: Thank you Sundie, and good afternoon, everyone.
For the three months ended September 30, 2022, Safe Harbor reported revenue of $2.4 million, up 38.6% from $1.7 million in the comparable prior year period.
For the nine months ended September 30, 2022, Safe Harbor reported revenue of $5.9 million, an increase of 11.4% from $5.3 million for the year-ago period.
An increase of 11, 4% from $5 $3 million for the year ago period.
Looking at revenue in greater detail and to provide clarity on our revenue segments, we have deposit activity and onboarding, investment income, loan interest income, and Safe Harbor program income.
Deposit activity on Onboarding.
Investment income.
Loan interest income.
Safe Harbor program income.
Deposit activity and onboarding revenue decreased 8.3% or $125,000 compared to the third quarter of fiscal 2021 to $1.37 million or 58% of total revenue. This is primarily due to lower account balances across most client accounts. This segment income consists of deposit account fees, activity fees, and onboarding income.
This is primarily due to lower account balances across most client accounts.
This segment income consists of deposit account fees activity fees and Onboarding income.
Historically, Safe Harbor has received from PCCU fees based on cannabis-related deposit account activity. During 2021, we reduced our fee percentage for cannabis specific accounts in order to ensure we were competitive with the market. In January 2022, we implemented a flat fee for certain CRB accounts based on historical and anticipated deposit levels.
During 2021, we reduced our fee percentage for Canada specific accounts in order to ensure we were competitive with the market.
In January 2022, we implemented a flat fee for certain CRB accounts based on historical and anticipated deposit levels in.
In addition, we receive a flat fee and lower rates for ancillary accounts, which are accounts that are provided to businesses servicing the cannabis industry in general, but that do not manufacture, possess, distribute, or transport cannabis. Investment income revenue increased 400% from $448,000 to $559,000 compared to the third quarter of fiscal 2021 or 23% of total revenue, largely as a result of higher interest rates on our balance sheet. The growth in investment income is linked to federal reserve interest rate increases.
Investment income revenue increased 400%.
$448000 to $559000 compared to the third quarter of fiscal 2021 or 23% of total revenue largely as a result of higher interest rates on our balance sheet.
The growth in investment income is linked to federal reserve interest rate increases.
Loan interest revenue grew 1,350% or $384,000 to $412,000 compared to the third quarter of fiscal 2021 or 17% of total revenue as a result of placing a greater volume of high-quality loans in the market. At the end of 2020, Safe Harbor serviced two loans as compared to four at the end of 2021.
<unk> thousand, 350% or $384000 to $412000 compared to the third quarter of fiscal 2021 or 17% of total revenue as a result of placing a greater volume of high quality loans in the market.
At the end of 2020 Safe Harbor serviced two loans as compared to four at the end of 2021 and.
In addition to the period ending September 30, 2022, Safe Harbor sourced six incremental loans funded by PCCU under the loan servicing agreement. Safe Harbor anticipates significantly increasing its loan services during 2022 with approximately $24.4 million of Safe Harbor-originated loans in underwriting as of November 22, 2022.
<unk> Harbor anticipate significantly increasing its loan services during 2022 with approximately $24 $4 million of safe Harbor originated loans and underwriting as of November <unk> 2022.
Safe Harbor program revenue was $38,600 compared to $83,200 in the third quarter of 2021, and representing 1% of total revenue. These revenues have intentionally decreased as we've strategically narrowed the financial institutions permitted to license the program.
These revenues have intentionally decreased as we've strategically narrow the financial institutions permitted to license the program.
Under this revenue element, Safe Harbor licenses similar account services and outsource support the other financial institutions, providing banking to the cannabis industry. These services are provided under the Safe Harbor Master program agreement.
These services are provided under the Safe Harbor Master program agreement.
The average number of active accounts increased to 659 active accounts for the three months ended September 30, 2022, compared to 546 active accounts from the year-ago period. The average account size and account fees, however, have decreased. The average account size, otherwise known as average monthly ending deposit balance, was $159 million for the three months ended September 30, 2022, a decrease of 18% from $193 million for the same three months ended September 30, 2021. This is a result of some churn of larger clients being replaced by smaller businesses. We expect this trend to reverse as we lead with our lending program typically requiring borrowers to place deposits with financial institutions with which we have relationships.
The average account size and account fees, however have decreased.
The average account size otherwise known as average monthly ending deposit balance was $159 million for the three months ended September 32022, a decrease of 18% from $193 million for the same three months ended September 32021.
This is a result of some churn of larger clients being replaced by smaller businesses.
We expect this trend to reverse as we lead with our lending program typically requiring borrowers to place deposits with financial institutions with which we have relationships.
For the three months ended September 30, 2022, Safe Harbor has reported total operating expenses of $1.55 million compared to $771,000 in the same period last year. Total operating expenses include employee compensation and benefits, professional services, rent, provision for loan losses, sales and marketing, and general and administrative expenses. The increase in operating expenses were largely driven by an increase in employee compensation and benefit-related expenses, professional service expenses, and provision for loan losses.
Total operating expenses includes employee compensation and benefits professional services rent provision for loan losses sales and marketing and general and administrative expenses the.
The increase in operating expenses were largely driven by an increase in employee compensation and benefit related expenses professional service expenses and provision for loan losses.
The higher compensation-related expenses are attributable to a higher head count resulting from standalone operations separate from Partner Colorado Credit Union. The increase in professional services expenses is largely associated with the [inaudible] transaction, expenses that we do not expect to repeat in future periods. The increase in loan loss expense is attributable to the higher amount of credit placed in the third quarter of 2022 versus the comparable prior year period.
The increase in professional services expenses is largely associated with the <unk> transaction.
Expenses that we do not expect to repeat in future periods.
The increase in loan loss expense is attributable to the higher amount of credit placed in the third quarter of 2022 versus the comparable prior year period.
As we place more credit into service, our policy is to immediately book a fixed percentage of the credit placed as an estimate for future loan losses that we may or may not actually realize.
At the end of the third quarter of 2022, our adjusted EBITDA was $1.3 million, up from approximately $947,000 adjusted EBITDA from the third quarter of 2021.
For the nine months ended September 30, 2022, Safe Harbor reported adjusted EBITDA of $2.4 million, down from $2.6 million from the year-ago period. The decrease in our adjusted EBITDA for the nine months ended September 30, 2022 is due to the decreased revenue and increased operating expenses. This leads to an overall operating income of approximately $825,000 for the third quarter of fiscal 2022 compared to operating income of $946,000 in the prior-year period.
Down from $2 6 billion from the year ago period.
The decrease in our adjusted EBITDA for the nine months ended September 30, 2022 is due to the decreased revenue and increased operating expenses.
This leads to an overall operating income of approximately $825,000 for the third quarter of fiscal 2022 compared to operating income of $946,000 in the prior-year period.
Net income for the quarter was $1.1 million or 6 cents per diluted share compared to net income of $946,000 or 5 cents per diluted share in the third quarter of fiscal 2021.
Moving to the balance sheet and cash flow statement, cash and marketable securities as of September 30, 2022 was $7,273,000 compared to $5,496,000 for the period ended December 31, 2021. The increase in cash reflects approximately $1.78 million.
Cash and marketable securities as of September 32022, with $7 million $273000 compared to $5 million $496000. The period ended December 31 2021.
The increase in cash reflects approximately $1 $78 million.
Cash provided for the operations for the nine months of 2022 was $1.97 million versus $2.18 million for the nine months of fiscal 2021.
Cash used in investing activities was $484,000 in the nine months ended 2022 versus $416, 000 in 2021.
In the nine months ended 2022, the company received $288,000 of cash from financing activities versus a use of $413,000 of cash from financing activities in 2021. This resulted in a net cash increase for the period ending September 2022 of $1.78 million compared to an increase of $1.35 million for the comparable prior year period.
This resulted in a net cash increase for the period ending September 2022 of $1 $708 million compared to an.
An increase of 1.35 million for the comparable prior year period.
We are pleased that notwithstanding the intense activities of the [inaudible] transaction, the business generated net cash from operating activities for the nine months ended September 2022.
Turning next to our liquidity, while the business had $7.27 million of cash as of September 30, 2022, the company had a networking capital deficit of $28.2 million. The driver of the working capital deficit is the current portion of the long-term payable [inaudible] the seller Partner Colorado Credit Union or PCCU from the [inaudible] transaction. The payment obligation that the PCCU developed in response to more than 99% of the $115 million trust electing to be redeemed versus remaining invested in the transaction. To prevent the [inaudible] transaction to complete, PCCU agreed to an unsecured future payment obligation of $56.9 million, the current portion of which is $33.6 million.
While the business had $7 $7 million of cash as of September 32022, The company has a networking capital deficit of $28 $2 million.
The driver of the working capital deficit.
As the current portion of the long term payable.
The seller partner, Colorado credit Union or <unk> from the <unk> transaction.
The payment obligation that <unk> developed in response to more than 99% of the $115 million trust electing to be redeemed versus remaining invested in the transaction.
To prevent the lease back transaction to complete PCC, you agreed to an unsecured future payment obligation of $56 $9 million.
The current portion of which is $33 $6 million.
This large payment is offset by $4.1 million in proceeds we expect from a pipe offering currently held in escrow to be released when our S1 becomes effective. And proceeds from the four purchase agreement we could expect the market post effectiveness of the S1. As announced in an 8-K filing in October, PCCU has agreed to a six-month forbearance agreement with the company while the parties negotiated solution regarding the company's payment obligation to PCCU.
As announced in an 8-K filing in October <unk> has agreed to a six month forbearance agreement with the company while the parties negotiated solution regarding the company's payment obligation to <unk>.
With regards to our outlook for the fourth quarter of fiscal 2022, we expect a continuation of the growth trends we have seen throughout the year, especially in the third quarter of 2022. Our core business remains solid and profitable. As we distance ourselves from the drag in expense of the [inaudible] transaction, we expect improved results from operations of the business and the continued generation of cash flow from operations.
Especially in the third quarter of 2022.
Our core business remains solid and profitable.
As we distance ourselves from the drag in expense of the <unk> transaction, we expect improved results from operations of the business and the continued generation of cash flow from operations.
In closing, we are pleased with the results for the quarter and the progress we are making across many aspects of the business and initiatives to increase lending capacity, acquire deposits, and grow the value of quality issued credit. The underlying drivers of our business remain healthy, and we continue to be the dominant financial services provider to the legal cannabis industry. With that, let's open the call for questions. Amy, please go ahead.
The underlying drivers of our business remain healthy and we continue to be the dominant financial services provider to the legal cannabis industry with that let's open the call for questions Amy.
Amy Please go ahead.
Operator: Thank you. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, it's star one to ask a question. We'll pause momentarily to assemble our roster.
If you can think a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then.
Once again it Scott I wanted to ask a question, we'll pause momentarily to assemble our roster.
And we will take our first question from Michael [inaudible] with Jeff Hutton.
Okay.
Unknown Speaker: Hey, guys, thanks for taking my question. First off really nice and thorough detailed overview of the business. Congrats on the acquisition. I have a few questions. I kind of want to walk through a few things here, but I think I just kind of missed the number, but how many accounts post-acquisition are you looking at now?
And a thorough detailed overview of the business.
Congrats on the acquisition I have a few questions kind of want to walk through a few things here, but.
I think I'd, just kind of missed the number but how many accounts post acquisition are you looking at now.
Multiple speakers: [Sundie Seefried] So post acquisition of Abaca? [Unknown Speaker] Yes.
Sundie Seefried: Okay, so they come with over 300 accounts added to our about 700 accounts, so we should have over 1000 accounts.
Unknown Speaker: Okay, thank you. And then regarding your deposit base, you talked a little bit about I think the average account size. I think I heard like a 150 K. There is an expectation of that trend to kind of increase. Can you just provide a little bit more color as to why that is?
Regarding your deposit base.
Yes.
Talked a little bit about I think.
Average account size I think I heard of it like a 150 K.
There is an expectation of that trend to kind of increase can you just provide a little bit more color as to why that is.
Sundie Seefried: Well, I'm not quite sure that the deposit balances are going to increase. I think as we see the other states legalizing, we're seeing pricing pressures on the cannabis industry, which means we're probably going to have to pick it up in volume of accounts more than a balance per account. So I think that with the [inaudible] transaction, we're going to have that talent onboard to assist us with actually increasing at a faster pace.
A balance per account, so I think that with the epic transaction, we're going to have that talent onboard to assist us with actually increasing at a faster pace.
Unknown Speaker: Got it, okay. [inaudible] Okay, thank you. And then, just shifting over to the loan portfolio, I think there was 24 million and an underwriting currently, what's the typical length of that underwriting process? I mean is that 24 million you could expect to close in the next quarter here? Would it take a little bit longer [inaudible] Any information on that would be helpful.
Just shifting over to the loan portfolio I think there was 24 million and an underwriting currently.
Whats the typical.
Length of that underwriting process. I mean is that 24 million you could expect to close in the next quarter here.
Take a little bit longer, but it was a very.
Any information on that would be helpful.
Sundie Seefried: A good portion of what's in underwriting right now is really more simplistic real estate-based lending with actual landlords kind of and so those will close much more quickly than when we start putting any type of equipment or working capitals. So these are not complex loans that we're looking at, so I would say that a 60-day turnaround is very possible for a simple real estate loan, and it really does depend at that point in time that we get the documentation and from the CRB, they're the ones who really have a lot of control over that pipeline. I think that our rates are still very competitive, and with this rising rate environment we're expecting now to close sooner than later so that they can take advantage of the rates presently.
That 60 day turnaround is very possible for a simple real estate loan and it really does depend at that point in time that we get the documentation and from the <unk>, they're the ones, who really have a lot of control over that pipeline.
Think that our rates are still very competitive and with this rising rate environment, where incentive now to close sooner than later, so that they can take advantage of the rates presently.
Unknown Speaker: Got it, thank you. And then the $24 mill that's on top of--Did I read it right in your press release, 18 mill that's already been originated, so essentially you're are looking at 24, little over $40 million loan portfolio assuming, 24 mill in underwriting?
Read it right in your press release 18 mill.
It's already been originated so essentially you are looking at.
24.
Little over $40 million loan portfolio assuming.
24 melanoma car underwriting.
Sundie Seefried: That's correct, as of 2022 numbers.
2022 numbers.
Unknown Speaker: Okay, great. And then, what are the average duration of the loans you're looking at?
And then.
And what are the average duration of the loans Youre looking at.
There.
Sundie Seefried: They have a five-year balloon, but they are amortizing anywhere from 15 to 20 years.
Unknown Speaker: Got it. Okay, thank you, that's very helpful. And I think that's pretty much it from me. I can get back in the queue if I have any other questions.
Okay. Thank you that's very helpful.
Okay.
And I think that's pretty much it for me.
I can get back in the queue. If I have any other questions that can both backlog.
Sundie Seefried: Thanks, Mike.
Unknown Speaker: Thank you.
Operator: We show no other questions at this time, so this concludes our question and answer session. I would like to turn the conference back over to Sundie Seefried for any closing remarks.
Sundie Seefried: I would like to thank everyone again for joining us on today's call and for your interest in Safe Harbor Financial. We look forward to having follow-up conversations with many of you and seeing many of you in the upcoming events.
As we continue on executing on our growth strategy, we are confident we will expand our footprint as a premier provider of financial services with a structured commercial lending platform, delivering market-leading rates for CRBs that will work to normalize access to financial services and scale our business alongside the ever growing cannabis industry. With that, thank you, and have a great day.
<unk> and scale, our business alongside the ever growing cannabis industry with that thank you and have a great day.
Operator: The conference has now concluded, thank you for attending today's presentation. You may now disconnect.
Okay. [music]. Sure. [music].
[music].
Sure.
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