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The CU2.0 Podcast
This podcast explores contemporary, critical thinking and issues impacting the nation's credit unions. What do they need to be doing to not just survive but prosper?
The CU2.0 Podcast
CU 2.0 Podcast Episode 387 Safe Harbor's Terry Mendez on Cannabis Banking Now
Safe Harbor, the Golden CO based cannabis banking pioneer, is alive and growing and that’s the message of today’s guest Terry Mendez, the recently installed CEO.
Mendez took over the seat that had been occupied by Sundie Seefried, onetime ceo of Partner Colorado Credit Union who left that post to helm Safe Harbor. Sundie, by the way, was the guest in CU 2.0 Podcast #139 which posted 4+ years ago, link in the show notes.
A lot had happened in those intervening years and, to my eyes at least, Safe Harbor seemed on the edge of extinction.
But Mendez is on the show to share his optimism about growing the business, how it hit financial troubles in 2023-24, how he says the troubles were abated, and why now is the time for more credit unions to take a fresh look at cannabis banking.
Probably Mendez is right, probably legal cannabis now is with us and, indeed, reliable, legally compliant banking has to be part of that package and Safe Harbor says it is well positioned to provide those services to credit union customers.
The reality is that there are many wrinkles to cannabis banking. That’s where a Safe Harbor - a guide that knows the legal route - comes in.
Want to know more about CUs and cannabis? Listen to episode 364 where Wright-Patt Credit Union talks about its experiences.
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Welcome to the CU2.0 podcast.
SPEAKER_00:Hi, and welcome to the CU 2.0 podcast with big new ideas about credit unions and conversations about innovative technology with credit union and fintech leaders. This podcast is brought to you by Quillo, the real-time loan syndication network for credit unions, and by your host, longtime credit union and financial technology journalist Robert McGarvey. And now the CU 2.0 podcast with Robert McGarvey.
SPEAKER_02:Safe Harbor, the golden Colorado-based candidate banking pioneer, is alive and growing. And that's the message of today's podcast guest, Terry Mendez, the recently installed CEO. Mendes took over the seat that had been occupied by Sunday Seafried, a one-time CEO of Partner Colorado Credit Union, who left that position to help Safe Harbor. Sunday, by the way, was a guest in CU2.0 podcast number 139, which posted over four years ago. There's a link to that show in the show notes. A lot had happened in those intervening years, and to my eyes at least, Safe Harbor seemed on the edge of extinction. But Mendez is on the show to share his optimism about growing the business. How indeed it had hit financial troubles in 2023, 2024. Now he says the troubles have been abated, and now is also the time for more credit unions to take a fresh look at cannabis banking, he says. But probably Mendez is right. Probably Legal Cannabis now is with us. And indeed, reliable, legally compliant banking has to be a part of the package. It's been doing it for some time. And the reality is there are many wrinkles to cannabis banking. That's where Safe Harbor, a veteran guy that knows the legal route, can come in. Want to know more about credit unions in cannabis? Listen to episode 364 from May 2025, where WrightPad Credit Union talks about its experiences banking cannabis. That's a good show. Link in the show notes. Listen up to the Safe Harbor Podcast. So you're in an interesting job, Terry.
SPEAKER_01:Appreciate that. Thanks for having me.
SPEAKER_02:Sandy Seafried was on this show four and a half years ago. Sandy, at least in those days, was a delight to interview. She was really great fun. But the Safe Harbor was riding on a different wave at that point than it did in subsequent years. So what happened to Safe Harbor in 2024 when it seemed like the on the edge of extinction?
SPEAKER_01:The edge of extinction, goodness. When it went public, it went from being part of a QSO or a bank organization to being a standalone company without a bank charter, right? And what it became was effectively a outsourced service provider for banks that want to compliantly bank cannabis. We went through a period of time though, about two, two and a half years, where because of the way we went public, we went public on something called a DSFAC. We had nearly 100% redemption, which meant the company was left with debt and no cash. And with debt and no cash, it put the company in this austerity budget type planning uh situation where it really couldn't go out and tell the world, because it didn't have the marketing dollars, the great works that it was doing and um you know could do on behalf of the credit unions and financial institutions that want to bank cannabis. So um it was uh put by behind the eight ball. And my job when I joined in 2025 was to fix this, and so that's what I've been working on.
SPEAKER_02:When you took it over in let me see, in 2024. 25. So I became the C no no in 2024, I think Safe Harbor had a net loss of 48.3 million. It did. Uh in 2023, it was 17.3. Somewhere along the line, partner credit union seemed to get uh well, I don't know if they got the whole 64.7 million, but they got some money from Safe Harbor. It's uh so a lot of money was going out the door.
SPEAKER_01:Yeah, so when we went public, again, this is a couple of years different. So in 2022, we went public. Um, the price of the company was$185 million. And because of the way we went public, the cash wasn't there to pay the purchase price. And so we were saddled with$56 million of debt related to Partners Colorado. They took a$30 plus million dollar write-off of that debt. And in 2025, they converted that debt into Series B uh preferred stock. So now the company's effectively uh debt-free, but those losses that you saw in 2024 all emanated from the way we went public. We wrote off a deferred tax asset um of 40-something million dollars, and we wrote off the goodwill associated with the acquisition, which was the same year we went public, of a company called Abaca, which is based out in Arkansas. And um, so we we wrote off that goodwill and we wrote off the deferred tax asset, which drove most of that loss.
SPEAKER_02:And what led you to to Safe Harbor? I think many people would have said, uh-uh, no, I'm going out the other door.
SPEAKER_01:Uh you know, Safe Harbor, I came in first as a um consultant for three months helping Sunday uh craft a uh strategic plan. And as I presented that strategic plan to her and then to the board, uh the board asked me, and Sunday's part of the board, um, whether or not I could be the person that implements the strategy. They thought of me as the co-CEO. And then Sunday said, you know what? Let's see if you can do it as the CEO of the company. But the idea initially was can I drive forward a strategy that changes the trajectory of this company? Um, and the the honest answer was with the roots that I have? 100% the answer is yes, presuming that um we know we can you know solve some of the financial difficulties. So the financial difficulties was first to solve. And then the strategy, I went out to the market, I think it was March 13th, and I shared a number of strategies, what we can do better on the banking side and the lending side, how we can participate on employee banking, how we can participate in the consulting side of the business, um, and many others, the support of the business, creating solutions. I'm a CEO of a multi-state operator. I was the CEO of a single state operator. And so for six or seven years, I lived the life of them of the client. And then um, prior to that, I was in you know, dot-com world in high-tech working for companies like Hitachi and our electronics. So I saw what Fortune 500 good looks like. I can see what the cannabis industry struggles with and marry really two things, the financial background and the uh cannabis industry background to create innovative products. And I think what we've done with fully managed services for banks is gonna you know change the number of banks that are out there um banking cannabis.
SPEAKER_02:Now, one of the problems and with the cannabis business, I'm I'm not presenting myself as an expert, just as a casual leader about it, is that the business really hasn't reached the heights that people thought it would, say 10 years ago. It's uh and in in California, it seems to be something of a train wreck, for instance. Uh different state. I live in Arizona, it's it seems to be functioning in Arizona.
SPEAKER_01:So so there's a couple of things to talk about there. 2020 was a boon year, 2021, boon years for the cannabis industry. Uh people were working from home due to COVID. Uh, people took some of that money that was given to them for the American Rescue Plan and invested in it in cannabis. Um, those years were great. And what you're seeing in California, Arizona, and many other states is what folks did is they invested in supply. And they went out and bought massive farms, indoor and outside, and outdoor grows, and supply chain, the supply increased. At the same time, you saw supply increase from alternatives. So whether it's opioids or other types of alternatives, uh, illegal cannabis coming from uh both Canada and you know south of our border, those things really put pressure on the industry. But at the end of the day, the legal cannabis industry is going to close 2025 around$34,$35 billion. People are projecting that by 2030, that number is$76 billion. And so legal cannabis representing$35 billion, yet it's only banked by less than 8% of the banks that um, you know, service the U.S. economy. I think there's more than 10,000 financial institutions, uh, about 680 file SARS, uh, less than 100 though are actively out there saying I bank cannabis.
SPEAKER_02:And why's that?
SPEAKER_01:What's what?
SPEAKER_02:Why why do so few banks do it and so many don't do it?
SPEAKER_01:Yeah, I think there's a fear factor around the incremental requirements um under the 2014 FinCEN uh framework that was given to us, as well as the two coal memos that are out there. Uh banks are required to do things they're not normally required to do. Uh, they need to understand that the um facilities are fully licensed. Uh, the rules of the jurisdictions within the states uh that could be very different one from another. Uh they need to understand and make sure that miners don't have access to uh cannabis, uh, looking at SKUs, the diligence around this. And this is what Safe Harbor has perfected. You know, we created and what I adopted from Sunday uh was the very first fully compliant platform that's been regulatorily evaluated time and time again. Uh, we just finished doing our$26 billion worth of depository validations. Um, so this platform has been regulatory tested and it combines a couple of things. You know, technology by itself is never good enough. You need to have bank compliance people and people that really know the cannabis industry. You need to have solid technology that allows you to timely file SARS and CTRs, uh, timely validate depository or withdrawal transactions, uh, be able to make good bets on loans and understand that you know jurisdictional level of uh lowest level of governmental requirement. Uh, but then you also have to have domain knowledge. And so, you know, you see a company like Safe Harbor being run by someone who's been a multi-state operator CEO, you know, we have some domain knowledge that most folks don't ever get to, you know, have within a the construct of a bank. And that's why financial institutions choose to partner with us, or you know, might you know, hopefully should choose to partner with us as as we go forward.
SPEAKER_02:How many financial institutions are working with you?
SPEAKER_01:Today there's five.
SPEAKER_02:Uh, how do they split between banks and credit unions?
SPEAKER_01:The largest and most successful is a credit union. So Partner Colorado Credit Union, we hold Red roughly 100 and well say manage on behalf of financial institutions, roughly 111 million dollars worth of um uh deposits. And I would say 90 plus million is with Partners Colorado Credit Union and the remainder with the um the other four. Um and so you know, you you have a credit union that wasn't shy about you saying that we want to bank cannabis and we've helped them be very successful.
SPEAKER_02:Hey, I talked a few months ago with Wright Pat Credit Union, which is a very big military-associated credit union in Ohio. They bank cannabis, and in part it was at the request of the state of Ohio to would you look into doing this? Because Ohio wanted to, let's say, regularize the banking of cannabis money. And right pat looked at it and said, Looks good to us. We're in.
SPEAKER_01:So yeah, you know, this is a grassroots industry. And when you get in early, and we're still early, when you get in early and you say that, you know, you're gonna provide normal banking solutions to the cannabis industry, um, you're gonna win. Now, look, there are financial institutions that are banking cannabis today. Um, the more um, the more options, the better. So, for example, one of the things that I'm trying to do is extend the lending program that we have. You know, we've lent over$100 million into the industry. We've never had a default, which is a phenomenal thing to say. Part of that has to do with that domain expertise, but we are launching products that will allow us to syndicate loans across credit unions and financials. So they all have their limitations on what they can lend, and we want to help them protect their deposit base. And so, as we help them protect that deposit base, giving them options like uh syndicated loans, places to go to sell those loans within the industry or repackage those loans, uh, give the employees options to bank with cannabis-friendly banks that are not going to close them down. You know, I had my mortgage uh called on me and my financial accounts called because the bank that I was with uh was not a cannabis-friendly bank. I had been with that bank for 17 years and uh, well, sorry, since I was 17 years old, and um just got a letter one day, you know, hey, you got to get your money out of here. Here's 30 days to get your money out. Um, and that's what happens in the industry. About 20% of the banks that choose to bank cannabis turn over within two years. And what that means is that um, you know, effectively they decided it wasn't profitable to be in the banking bank cannabis industry for them, um, however which way they chose to do it. And then they decide to tell their customer, hey, you have a certain amount of time to get off our platform. We just onboarded a customer that had more than 50 accounts, um, and we had to do that in record time because they need to make payroll. And so, you know, the banks that are kind of not supported correctly and that, you know, pull out of the industry, they're pulling out because they weren't able to attract the deposits. And so I wanted to solve for that problem. And the way to solve for that problem is to price our platform, our fully managed turnkey platform, but price the platform so that I win when you win. So as a percentage of assets under management or assets under deposits or loans, and so that um we never get too expensive. And um, you know, I'm going to, you know, Safe Harbor is going to help you be successful. And if you're successful, we're also successful.
SPEAKER_02:Credit union is working with you. What what is their responsibility? What what do they do at their end? And what do you do at your end?
SPEAKER_01:Sure. So at the Nirvana case, a credit union would say, look, we want to say yes, we want to partner with Safe Harbor, you know, and um our job being the credit union or the bank is to attract the the customer deposit. So we're gonna put out the shingle and say, hey, we're banking cannabis, we're going to treat our cannabis customers as well as I treat any other customer, our deli or our bike shop, and um we're going to you know make available to them everything that's allowed to be made available to them, online banking, remote deposit, all that kind of good stuff. And so the bank needs to design, and we of course help, but design their um their sales pitch and do customer acquisition. We're gonna do everything else. Now, some folks say, hey, we want the um, you know, the cannabis operator to walk into one of our um you know branches and be able to make a deposit. We can help facilitate with that and we can support the branch managers with tier one and tier two support as to what to do in those circumstances and train. Um, or we can provide full end-to-end service where we manage the armored car service that picks up the deposits, drop it off at the Fed, credit it to the bank account, perform the uh enhanced due diligence around know your customer validation deposits, all of the steps. We do that for you, and you enjoy the um the benefit of that deposit and the interest that you might earn on that deposit and the extended loan capabilities you have from that deposit. You got to remember, you know, cannabis deposits, um, the the you know, say differently, the loans that people make into the cannabis industry are north of significantly north of the money that is made by a credit union or bank on an auto loan or a mortgage. And so you see it's not unusual to see interest rates anywhere from 8% to 26%. What kind of default rate? Well, like I said, um, we have not seen defaults here at Safe Harbor. We've been very um strategic in how we do this, and it helps that we have this type of domain experience, but defaults have been prevalent. Look, the industry hasn't done well over the last um call it five years. And you've seen, like you mentioned earlier, the California market um dry up a little bit. And so um, you know, there are so there are risks that you're taking, but as you know the industry, you know your your your um your state, your industry, uh, you can take better bets. And so we see a lot now today, we see people taking discounts on the valuations that uh folks are getting to remove the cannabis uh aspect of that valuation and say uh what would be the um value if it was sold for generic use, and then giving a loan to value based on that discount rate, that discount valuation.
SPEAKER_02:I think of the risk involved in making loans to uh startup restaurants. It's uh I mean you want high risk, that's that's that's where you should dive in.
SPEAKER_01:Uh yeah, and you know, there's no you know, there's no um federal loans to the to the industry. So that's another reason why people are willing to pay more. You can't get an SBA loan uh for the cannabis industry.
SPEAKER_02:MasterCard and Visa won't work with cannabis companies, or they wouldn't the last time I looked into this. Is there any workaround for that at this point?
SPEAKER_01:There are there are several. Uh, you know, look, if you walk into a dispensary anywhere in the 41 states and territories that do business in cannabis, legal business in cannabis, you will find an ability to swipe your card. Uh, so there's numbers of solutions. There's uh cashless ATM and pin debit solutions that are out there. Uh, there are other rails that are out there. So there's folks that have uh created like the Venmo of cannabis, and there's a number of folks out there that are, you know, having these closed loop systems and are providing alternative rails to MasterCard and Visa. Now, all of these are not as easy for the consumer uh than swiping your credit card. And so there is always hope that MasterCard and Visa come in because if you if you need to sign a consumer up for a closed loop system, or they need to use their debit card, or they have to do something kind of odd here nor there, uh, it's just not the right customer experience for a CPG business. At the end of the day, a dispensary is no different than any other consumer packaged goods um company. Uh, but for cannabis, they're treated outside of the normal credit um rails that are available. And so we do have partnerships, and one of the things we help cannabis operators do is connect to the right partners that are sustainable, uh, that can accept you know alternative forms of payment.
SPEAKER_02:Um there are differences with the with retail cannabis. Before I interviewed Sunday, those years ago, I walked up to uh cannabis dispensary near where I live. And um to this to this at at that point and to this day, I never saw so many guns on employees. And I saw you look now now, they were harmless young men. I'm not complaining. I you know, I did not feel personally threatened, but I'm looking around and saying, oh my heavens, there's a lot of guns here.
SPEAKER_01:So and every state's a little different, right? I mean, it's when you walk into a dispensary today, you're gonna be on camera the minute you step on the um the curb. Um, you walk in, they ask you for your driver's license, they're gonna do a validation for you, they're gonna keep you in a separate area and then invite you into the kind of the the consumer area where you can pick what you you want to pick. And then when you you buy what you buy, um, they'll put it in an exit bag, they'll staple it like you went to the drugstore. And um, you can't consume it on the on the premises, and you got to walk out. That is a very, you know, and by the way, when you walk up, all the windows are shaded out. They might have advertising, they just may be blacked out. Uh, all the windows are shaded out, and that's not a normal consumer package good experience. And that's why you see folks getting a little upset when they start talking about the intoxicating hemp ban that came out with the government funding bill, uh, because it's you know largely the same plant. However, for whatever you know, loophole that was in the farm bill, um, it allowed it to be kind of normally treated, meaning you can find it at a circle K, you can um, you know, see it in a protected area, but effectively you could walk into a normal looking place and not have the sense of maybe I'm not doing the right thing, um, and walk out without feeling like you went to the pharmacy.
SPEAKER_02:Wow, I didn't know that. That's that's interesting. A year from now, how many institutions do you want to be signed up with you? You have five now, how many you want a year from now?
SPEAKER_01:Yeah, I'd like to I'd like to triple that. So, you know, a year from now, it'd be wonderful to be at 10. But I, you know, at 10 to 15 uh financial institutions, you really have full coverage of you know all the legal requirements, all of the legal programs in the United States. Um, and as you move beyond that, I think what happens is you you have that kind of normal competition, right? So you're gonna see the first adopters um carrying the 35 billion that assists today, you're gonna see the second adopters moving us up to that 76 billion projected for 2030. Um, and it'll become very normal. And as it becomes very normal, um, that's a good thing for safe harbor, right? Because as it becomes very normal, hopefully folks are choosing safe harbor to maintain compliance. Um, and as that, you know, compliance, you know, as we provide a service that is priced in a way that it never makes sense for you to invest in your own compliance program. Similar to like as you outsource ADP your payroll to ADP or paychecks, it'll never really make sense for you to do all that work yourself, even though you can, you know, maybe save a few dollars.
SPEAKER_02:Now, do you offer the most complete suite of services to private units and banks?
SPEAKER_01:So there's really two choices out there. You can rent it or let's say lease it from Safe Harbor, or you can build it yourself. And when you build it yourself, you're buying software. That software has a level of performance risk attached to it. Um, you're hiring people, and then you have to do customer acquisition. And our estimates say that's somewhere between a half a million dollars and a million dollars of investment to hope to get a deposit. And the folks that turn around, I said before, 20% of the banks that get in, get out, never really see the deposit growth for the investment. And so I wanted to solve that problem, right? And so the way we price our fully managed platform is as a percentage of the success of the credit union or the financial institution. The other side of this is um, hey, as you are um, you know, considering jumping into the cannabis industry, again, in absent any understanding of what people buy, what people sell, what good looks like, what is normal, it is very hard for you to get your regulators to understand um what you said yes to and allowed to go through your platform or your bank, uh, what you didn't allow to go through your bank. And regulators trust Safe Harbor. We've we've worked with them. And so building it yourself, you know, you lose the fact that Safe Harbor uh is there to help you with the regulatory side of the world. You lose the domain expertise. And the biggest piece that you have to try to network into is the solutions. And so Safe Harbor has added to its platform a consulting service. Um, and we have built solutions that allow for employee banking, for example, solutions that allow for enhanced payroll services or earned wage access, things like that that you know effectively help a depositor stay with the bank that they've chosen and feel like they're real partners, that they actually know the industry. It's easy for a bank to say, I understand a deli, I understand a bike shop, I understand a target. It's harder to say you understand the cannabis industry when you just open your doors to it.
SPEAKER_02:Well, uh, cannabis industry also looks to me at least well, I guess you could say the same thing about retail. It's the cannabis industry is fragmented. There's the retail portion, there's the growers, there's some kind of distribution mechanism between the two. And I'm sure there's a whole bunch of other things I don't know about.
SPEAKER_01:Yeah, so if you if you break it down, you have your growers, right? Or um, then you have your manufacturers, those are the people that take the um cannabis and might convert it to an edible or might convert it into an extracted product. Uh, then you have your wholesalers that will, you know, buy it and resell it and distribute it to your dispensaries, and then you have the dispensaries themselves uh that sell to the consumer. So each piece of that has a different level of regulatory requirement that we need to get to understand. Um and we need to make sure that it's not only compliant, but that compliance is documented, right? And so um understanding what what does a grower need when somebody says they're investing um in machinery, is that machinery really used in the production of cannabis? All the way to, hey, I want to, you know, I'm I'm you know, building a dispensary and I need a loan to um, you know, build out my first dispensary because I got a license, and understanding whether or not that dispensary in that location has a shot to be successful.
SPEAKER_02:Yeah, when a credit union, you you you said earlier that you'd estimate the cost for a credit union to do all this themselves would cost them, I don't know, I forget what you said. It's something like half a million to a million. You got it. And uh and so I say, okay, fine, I don't want to do that. I want to sign on with you. What's what's the cost to me to sign on with you?
SPEAKER_01:Yeah, so it costs nothing other than the time and effort to sign on with me. I'm not gonna charge you an upfront fee. Uh once we have our systems connected and we can talk about how to get all the systems connected. Once we have our systems connected and you can start taking deposits, uh, we will stand ready. And so there'll be a stand ready fee and then a percentage of your um a minimal stand ready fee and then a percentage of your assets under deposit. Similar to how you'd price software, but you're getting so much more than software. You're getting people, you're getting technology, you're getting domain expertise, and quite frankly, um the ability to stand up your program fast.
SPEAKER_02:Yeah, I don't honestly understand why a credit union would say, I want to do this, but I want to do it on my own. I I don't I don't get it.
SPEAKER_01:The reason they do it today, my my best guess, is because of what I said in the beginning. You know, we did not have the marketing dollars to go out there and tell everybody this is what we do. Many banks that I talked to today feel or felt as if we were out there competing with them for deposit dollars. We do not compete with the bank, with the credit union for deposit dollars. Just like ADP, we're just going to process this stuff for you and put you in the best position possibly to be compliant first and profitable.
SPEAKER_02:Would you turn down an institution that wanted to be your customer?
SPEAKER_01:The only reason to turn down an institution is if they're going to be um unsuccessful. And I don't want to partner with someone, I can't help be successful. And those institutions that um have challenges are ones that treat cannabis customers somehow different than their run-of-the-mill customer. You know, if you're going to disable online or remote deposits or online banking, if you're going to uh, you know, disable the ability for an employee to bank with you in addition to the um the company itself banking with you, those things make it a little harder for us to help them be successful. Because at the end of the day, you need to be able to loan into the Industry and support the industry and treat the industry as if you know you love them just as much as that bank shop or deli.
SPEAKER_02:Now, do you have competitors in your line who offer a similar suite of services?
SPEAKER_01:Um, not directly. So there's a company out in California that's a division of North Bay Credit Union that is similar in the way it was birthed, and also, you know, one of the first in the in the country to um bank cannabis, but local to California. We do all 41 states and territories. Um, but there's also some companies that allow you to build it themselves. There's software companies out there, and they provide a good software suite of products, but it's just software. And um you can buy that software from them and try to build it yourself. And so they enable the build-out. Um, but direct competition, the closest that I'm aware of, is um a division out of North Bay Credit Union in California.
SPEAKER_02:That's that's interesting. That gives you some running room. The the question is just getting banks and credit unions comfortable that they can, in fact, make money doing cannabis banking. And it's not a crime. And it's definitely not a crime.
SPEAKER_01:It's not a crime. Nobody's lost their license yet. Some people have made big mistakes. It's hit in the paper. Sometimes I wonder, like I wonder if they were on our platform if they wouldn't have made that big mistake. But here nor there, um, you know, I haven't seen a bank fail or regulator regulator shut down a program per se. You know, we we've written a couple of books. I think Sunday's written a book or two uh telling people how to do this well, and the framework is out there. Um, the challenge becomes when you do it yourself, you have people who, you know, this is not the only thing they do. When you're inside an organization, they're going to be doing the auto loans, the home loans, the um everything else. And so you have people that are multi-trained and not only trained on cannabis, and cannabis is very different. Um, you have a system, right, that you're hoping the software that you bought hopes, you know, you hope you use it correctly and it performs correctly for you. And then ultimately you have depositors that basically say, I'm depositing my money with you, but unless you can give me this loan, or unless, you know, you know, assume the company grows a little bit, unless you can meet this requirement, I'm moving my money. And so the money becomes transient because for whatever reason, you couldn't um, you know, meet the loan requirements. Maybe somebody else gave them a$20 million loan and the best you could do is 12. And that's where syndication comes in, so that we can, you know, help the credit unions work together to allow the depositor to retain, you know, be be retained in the credit union or bank as opposed to move on to someone who's giving them the largest loan.
SPEAKER_02:Do you offer the syndication only to existing bank and credit union customers or to other financial institutions?
SPEAKER_01:Well, we're we're we're partnering today. We've we've started partnerships with family offices, private equity. Um, so we're partnering today across the spectrum because ultimately I want somebody to come to Safe Harbor and say, this is what I need. And based on what they need, we can come out and design a solution for that depositor, right? And so maybe they need to bank with one of our credit unions, but at the same time, they need more than what a credit union can provide. And so a combination of credit union, family office, private equity comes together to solve the problem. And so um, you want a multi-channel solution because today, when somebody asks Safe Harbor, can you help me with a loan? About 92, 93 percent of the time, I say no, right? I'd like that to be, you know, 50% of the time, or you know, something smaller than 92%, so that we have all the options because as we have options to lend, there'll be options to deposit.
SPEAKER_02:Now when you started at Safe Harbor, from what I've read, you embarked on a lot of cost cutting.
SPEAKER_01:Yep.
SPEAKER_02:Uh, what kinds of costs did you cut?
SPEAKER_01:Sure. So I I got rid of a lot of the administrative overhead. So the uh money that was tied to compensation to uh to you know top 10 executives, for example, uh money that was tied to paying down or paying the board of directors, and it's really changed the the attribution of that money to stock-based compensation, which was very rarely used, um, from from away from cash. What I did not cut was the core banking solution. The people that were in our banking system, most of us have been, most of them have been with us seven, eight, nine years. Um, and so we don't have a lot of turnover in our experts. They're all BSA certified. Uh, they've all been through extensive enhanced due diligence, know your customer AML training. It's very hard to replace those types of people that are also cannabis people. They also understand the cannabis industry. So we kept the folks that knew the core of the system, we kept our software development team, and we really focused on making sure the money was going to those key operations as opposed to you know highly paid executives.
SPEAKER_02:Now, I assume you don't see any realistic probability of a national bank getting involved in cannabis in the foreseeable future.
SPEAKER_01:Yeah, it it's it's unlikely, right? So if you think about it, there are numerous industries from gaming to adult to travel agencies that you know national banks tend to stay away from because of their elevated risk around anti-money laundering. You know, cannabis is a whole different level. In the coal memos, it's requiring banks to make sure that miners don't have access to cannabis, right? For example, there's 10 or 12 requirements there. Um, there's a requirement that instead of just knowing beneficial owners, that you need to know all the owners uh and do criminal background checks and um histories on all the owners. And so all of the requirements layered on, I don't see a national bank jumping in and saying, yes, I want to do this, right? Similar to the way they've not banked certain other industries that they feel that are higher risk. And so um it provides an incredible opportunity for uh regional banks and and and credit unions to step into an industry absent that type of competition.
SPEAKER_02:Yeah, yeah. The analogy I see is between uh cannabis banking and crypto.
SPEAKER_01:Very similar, right?
SPEAKER_02:Where we're big banks now. I I know Chase is making noises about stable coin, for instance, but stablecoin is not that's not Bitcoin, man. That's that's it's stable. It's it's right, it's not volatile coin.
SPEAKER_01:I mean I don't you're a hundred percent right. So, you know, those banks that are you know not banking the crypto because of the incremental risk, and and it's interesting. I've been to and I've spoken at some of the crypto conferences, and there are plenty of inline know-your customer bank, you know, AML, BSA tools that are out there that are quite interesting. Um, and so you know, as I think about what we built Safe Harbor for, you know, in the future, I'm not gonna say the next five years or the next three years, but in the future, crypto could be one of those areas where Safe Harbor helps regional banks and credit unions uh participate.
SPEAKER_02:That could be a great opportunity because as I say, I see these two businesses as very, very similar. From from a financial institution point of view.
SPEAKER_01:What we really need is those credit unions and regional banks to just say, hey, I want to learn more. And as we are able to allow those banks to learn more and understand more, the fear factor is going to go away. I've spoken on many boards where you hear the fear factor of, you know, if I allow this, will there be, you know, increased intoxicated driving? Would they, you know, and and care for the community? And I'll tell you, we care for that community. And so that's why we do, and what we built uh what we built, is for you for you to be able to say yes to the economics of it, but also to understand the the the other questions that a board could come up with that have nothing to do with the economics.
SPEAKER_02:Before we go, think hard about how you can help support this podcast so we can do more interviews with more thoughtful leaders in the credit union world. What we're trying to figure out here in these podcasts is what's next for credit unions. What can they do to really, really, really make a difference in the financial scene? Can't all be mega banks, can it? It's my hope it won't all be mega banks. It'll always be a place for credit unions. That's what we're discussing here. So figure out how you can help. Get in touch with me. This is RJMegarvey at gmail.com, Robert McGarvey again, and that's RJ MegGarvey at gmail.com. Get in touch, we'll figure out a way that you can help. We need your support, we want your support, we thank you for your support. The C U 2.0 podcast.