DEA Registration Pulls Lawyers and Payroll Firms Into Cannabis Banking
In today’s Trade To Black podcast presented by Flowhub, Shadd Dales and Anthony Varrell kick off cannabis earnings season early with Safe Harbor Financial (NASDAQ: SHFS) CEO Terry Mendez, who walks through the company’s preliminary Q3 numbers. With the MSO earnings calendar just weeks away, we also explain why year-over-year growth matters more than sequential swings in what is typically the industry’s weakest quarter. He also explains more about the DEA registration process.
Safe Harbor reported trailing 14-day average deposits of $119.3 million as of September 30. That’s up 7.4% year over year and roughly 25% above the May 2025 low of $95.3 million. Deposits grew 9.6% sequentially, more than double the 4.1% gain in Q2.
Mendez says the growth comes from both new and existing clients. New wins have come largely from ancillary businesses, and Safe Harbor now banks three of the top five cannabis payroll companies and two of the top five payment processors. He adds that September, usually a soft month, came in solid as new capital flowed into cannabis companies.
He also sees new business coming from the DEA registration process. As operators disclose their vendors, law firms, accountants and payroll providers serving them may need cannabis-friendly accounts of their own. Mendez urges them to start early, since the vetting can take weeks and delays can mean missed payroll.
Because client deposits sit at partner financial institutions rather than on Safe Harbor’s balance sheet, the company earns income from overnight interest rates. Mendez says the Federal Reserve’s 25 basis point increase adds roughly $150,000 in annualized investment income. He warns that if rates fell back toward 1% or 2%, cannabis banking would become highly unprofitable.
Mendez sees Vireo Growth’s $60 million real estate loan at 8.5% as an exception rather than a template. With so little spread, he says, a lender would struggle to sell the note and would likely have to hold it to maturity.
On Section 280E, Mendez explains that dual-license operators will need a formal tax apportionment study and an accounting team capable of following it. He advises lining up advisors now, before tax season gets busy.
Finally, Mendez says larger banks entering the space should be a windfall for Safe Harbor. They can either partner with the company and launch within weeks, or spend months building programs of their own.
Hear the full conversation as earnings season gets underway.
