As CEO of one of Colorado’s first financial institutions to serve the marijuana industry, Safe Harbor Financial, Sundie Seefried remembers when business owners paid million-dollar tax bills in cash.
“It was crazy,” she recalls. “That’s why we got into it, though, was those stories and the safety factors these business owners dealt with.”
Just over eight years later, Safe Harbor has processed over $11 billion in transactions, and is about to join a company listed on the NASDAQ stock exchange.
Northern Lights Acquisition Corp., a New York firm, just announced that it will pay $185 million to acquire Safe Harbor from parent company Partner Colorado Credit Union. The deal includes $70 million in cash and $115 million in Northern Lights stock, with Seefried set to retain her role after the transaction is closed.
Because of the plant’s federal prohibition, the majority of retail marijuana transactions are done in cash. The federal government has taken a hands-off approach to banks serving state-legal marijuana businesses trying to deposit the cash, but other financial actions have been largely limited to local and regional institutions, which are more willing to operate under the risk of technically breaking federal drug laws.
Founded shortly after Colorado voters legalized recreational marijuana in 2012, Safe Harbor Financial intentionally started slow in order to comply with state and federal guidelines, but has grown with the industry itself. Annual deposits started at $153 million in 2015, and increased to around $4 billion in 2021, according to the company.
Safe Harbor primarily handled deposits for the pot industry in its early years, but has since branched out to more financial services, including commercial loans and processing business mergers. After Safe Harbor becomes part of Northern Lights, Seefried expects that more services for marijuana businesses will become available.
“Once our clients in Colorado got their depository services taken care of and weren’t dealing in cash all the time, they started getting licenses in other states,” she says. “We want to add investment services, broker-dealer services and the same kind of services our clients are getting thrown out of banks for.”
Around sixty of Safe Harbor’s clients are Colorado businesses, according to Seefried; once the deal is closed, Northern Lights plans to increase Safe Harbor’s reach outside of Colorado.
“Safe Harbor is one of the only multi-state financial service organizations to successfully navigate the highly regulated cannabis banking industry, providing services that operators in other industries take for granted,” Northern Lights says in a statement announcing the deal, adding that Safe Harbor “is uniquely positioned to scale.”
Navigating a market that is still federally illegal has never been easy, Seefried points out, but legal pot’s fast evolution and laws that differ from state to state made her line of work increasingly difficult as marijuana industry mergers and acquisitions increased. “Every time it changes, we have to change our risk-mitigating strategies, and that’s going to continue to be challenging as along as the market continues to merge.”
Colorado Congressman Ed Perlmutter’s SAFE Banking Act would protect banks and financial institutions that serve marijuana businesses from federal enforcement. The legislation has successfully passed the House a handful of times, but has yet to receive a hearing in the Senate. Although Perlmutter isn’t seeking reelection in 2022, Seefried believes another House member will take up the torch, and she’s optimistic about SAFE Banking’s chances.
“I do believe it has a shot. There are so many priorities in Washington right now, so it’s hard to say,” she adds. “I am one of those hopeful people.”
If marijuana banking is eventually allowed at the federal level, Seefried doesn’t worry about national banks taking over the business, though. She compares marijuana banking to financial services for the liquor, gambling and gas station industries, which all operate with large amounts of cash.
“I always think the smaller community banks and credit unions will have and advantage in doing this,” Seefried says. “If you ask ten big banks if they do money-intensive services, I’d say maybe two actually offer them.”
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