SHF Holdings, Inc. (NASDAQ:SHFS), a $21.8 million market cap company specializing in finance services, has amended its Commercial Alliance Agreement with Partner Colorado Credit Union (PCCU), extending the partnership through December 31, 2028. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, despite facing recent market challenges. This extension, effective from December 30, 2024, also includes automatic renewal clauses for additional two-year periods.
The original agreement, established on March 29, 2023, outlined SHF Holdings' role in underwriting and servicing loans, with the company receiving all interest income after a monthly fee based on the loan's outstanding principal balance. The initial agreement also stipulated a revenue split from deposit balances and account-related services.
Under the revised terms, SHF Holdings will continue to handle a significant portion of loan underwriting activities. However, the method for calculating interest income received by the company has been updated to a loan yield allocation formula, which considers the Constant Maturity US Treasury Rate and a proprietary risk rating formula.
Additionally, the amended agreement eliminates per account servicing fees and the company's obligations to indemnify for account-related fraud losses, replacing them with a fixed fee based on the average daily balance of account relationships generated by the company.
During fiscal years 2023 and 2022, the partnership with PCCU contributed significantly to SHF Holdings' revenue, amounting to $5.1 million and $5.6 million, respectively, out of the total revenue generated from deposits, activities, and client onboarding. For the nine months ended September 30, 2024, the partnership accounted for $3.1 million of the total $3.5 million in revenue.
The company maintains strong profitability metrics, with a 100% gross profit margin and positive return on assets of 8.4%. Want deeper insights? InvestingPro subscribers have access to over 10 additional key metrics and exclusive ProTips about SHFS's financial health and growth potential.
Despite recent management changes, InvestingPro data shows the company maintains a "GOOD" overall financial health score, with analysts expecting profitable performance this year. Discover comprehensive analysis and expert insights in the Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Safe Harbor Financial has reported a significant increase in its net income for the third quarter of 2024, despite facing challenges in the cannabis sector. The company's net income rose by 147% year-over-year to $354,000, and its loan interest income also saw robust growth. However, the company did experience a decline in revenue for Q3 2024 from the previous quarter.
Amid these developments, Safe Harbor is making strategic moves to attract new cannabis entities and has secured a new credit facility for a Missouri-based operator.
In parallel, SHF Holdings, Inc. announced the departure of Daniel Roda, its Chief Credit Officer, amid a legal dispute involving a payment related to the company's merger with Rockview Digital Solutions.
The dispute concerns a $3 million payment to Abaca's former stockholders, which has resulted in a legal challenge in Denver's District Court. This development has triggered internal changes within the company's executive team and could have implications for SHF Holdings' financial obligations.
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