Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

References in this section to "we," "us," "our," "SHF" or the "Company" refer to SHF Holdings, Inc. References to "management" refer to our officers and board of managers. The following discussion and analysis of our financial performance and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

Founded in 2015 by Partner Colorado Credit Union ("PCCU") (please see "Business Reorganization" below for a description of SHF's organization), SHF was among the first financial institutions to provide banking services to Cannabis Related Businesses "CRB." SHF's mission is to provide access to reliable and compliant financial services for the legal cannabis, hemp, and related industries by enabling our Financial Institution ("FI") customers to provide compliance driven banking, lending and other financial services to our CRB clients.

Through our proprietary platform operating in 41 states and territories, SHF ensures our Financial Institution customers can compliantly provide the following banking related services to CRBs:

	●	Business and checking and savings accounts;
	●	Cash management accounts;
	●	Savings and investment options;
	●	Commercial lending;
	●	Courier services (via third-party relationships);
	●	Remote deposit services;
	●	Automated Clearing House (ACH) payments and origination; and
	●	Wire payments.

Due to limited availability of payment and other banking solutions for the cannabis industry, most CRBs transact with high volumes of cash. Our fintech platform benefits CRBs and financial institutions by providing CRBs with access to financial institutions and financial institutions access to increased deposits with the comfort of knowing that those deposits have been compliantly monitored and validated. By facilitating the daily movement of cash between CRBs and financial institutions, the risks associated with high cash on hand are mitigated, creating a safer atmosphere for the CRB's employees and the financial institutions at which the deposit accounts are held.

The Company is not a financial institution, and as such it does not hold customer deposits. All deposit accounts are held by the Company's financial institution customers and all transmissions of funds to and from deposit accounts are handled directly by the financial institutions. In an industry with limited capital and financing options, we offer access to loan options at what we believe to be competitive rates, often with more attractive terms than the current industry average. Our financial institution customers and strategic partners offer CRB's loan options including senior secured and operating lines of debt. Collateral types include real estate, equipment, and other business assets.

To ensure CRB's have access to consistent and dependable banking, we provide our compliance, validation and monitoring services to financial institutions ensuring strict adherence to the Bank Secrecy Act/FinCEN guidance and related anti money laundering provisions. Since inception, the Company has assisted in the processing of approximately $26 billion in cannabis related depository funds. Through its relationship with its financial institution clients, the Company has successfully navigated over 16 state and federal banking exams.

The Company has licensed its proprietary software or Safe Harbor Program (the "Program") to other financial institutions to provide compliance-related services to CRBs. As part of the Program, we provide the following to financial institutions interested in licensing the Program to assist in compliant cannabis banking:

	●	Initial customer due diligence - Know Your Customer;
	●	Customer application management;
	●	Program management support;
	●	Compliance monitoring; and
	●	Regulatory exam assistance.

Results of Operations

Revenue

The Company generates interest and fee income by providing a variety of services to our financial institution customers to facilitate their banking services to CRBs including, among other things, maintaining compliance with the Bank Secrecy Act ("BSA") and other regulatory compliance and reporting requirements, marketing and onboarding support, responding to customer service inquiries, and sourcing and originating loans. In addition, the Company provides outsourced support to financial institutions providing banking to the cannabis industry.

Operating Expenses

Operating expenses consist of compensation and benefits, professional services, rent expense, account hosting fees, advertising and marketing, and other general and administrative expenses.

Compensation and benefits consist of employee wages, stock-based compensation and associated benefits, while professional services consist of legal, board fees including stock-based compensation, general consulting and accounting fees.

The Company previously reported provisions for credit losses on indemnified loans. Prior to December 31, 2024, the Company indemnified PCCU against losses on sourced loans. The indemnification obligation ceased on December 31, 2024, when the Amended PCCU CAA took effect.

Three and Nine Months September 30, 2025 As Compared To September 30, 2024

Revenue

The following is the revenue for the three and nine months ended September 30, 2025 and September 30, 2024.

Three Months Ended September 30,		2025				2024				Change ($)				Change (%)
Account fee income		$	963,098			$	1,646,888			$	(683,790	)			(41.5	)%
Loan interest income			510,754				1,341,501				(830,747	)			(61.9	)%
Investment income			340,688				475,011				(134,323	)			(28.3	)%
Safe Harbor Program income			19,230				19,230				-				-	%
Total		$	1,833,770			$	3,482,630			$	(1,648,860	)			(47.3	)%

Nine Months Ended September 30,		2025				2024				Change ($)				Change (%)
Account fee income		$	3,045,292			$	4,949,478			$	(1,904,186	)			(38.5	)%
Loan interest income			1,606,947				4,814,349				(3,207,402	)			(66.6	)%
Investment income			901,527				1,749,447				(847,920	)			(48.5	)%
Safe Harbor Program income			57,690				57,690				-				-	%
Total		$	5,611,456			$	11,570,964			$	(5,959,508	)			(51.5	)%

Account fee income consists of (a) fees earned from banking services such as deposit account fees, activity fees and onboarding income and (b) merchant income earned through referral arrangements with third-party payment processors, under which the Company receives a percentage of the net revenue generated by referred merchants. The Company receives a flat fee and lower rates for ancillary accounts, which are accounts provided to businesses servicing the cannabis industry in general but do not manufacture, possess, distribute or transport cannabis.

The decrease in the account fee income was primarily attributable to a decrease in the comparative average monthly ending deposit balance, a revised revenue-sharing arrangement between a large merchant and a participating third-party payment processor, and a promotion geared to retaining and expanding our average monthly deposit balance. Under the updated revenue-sharing arrangement, the merchant's retainage increased, which in turn reduces both the total revenue available to the payment processor and the Company's corresponding share of that revenue compared with the prior year.

The following is the account fee income by financial institutions for the three and nine months ended September 30, 2025 and September 30, 2024.

Three Months Ended September 30,		2025				2024				Change ($)				Change (%)
PCCU		$	763,999			$	1,106,139			$	(342,140	)			(30.9	)%
Pacific Valley Bank			15,145				8,472				6,673				78.8	%
Five Star Bank			-				156,577				(156,577	)			(100.0	)%
Others			183,954				375,700				(191,746	)			(51.0	)%
Total		$	963,098			$	1,646,888			$	(683,790	)			(41.5	)%

Nine Months Ended September 30,		2025				2024				Change ($)				Change (%)
PCCU		$	2,341,954			$	3,459,224			$	(1,117,270	)			(32.3	)%
Pacific Valley Bank			53,157				28,845				24,312				84.3	%
Five Star Bank			(16,389	)			419,965				(436,354	)			(103.9	)%
Other			666,570				1,041,445				(374,875	)			(36.0	)%
Total		$	3,045,292			$	4,949,479			$	(1,904,187	)			(38.5	)%

Investment Income

Certain financial institutions pay us interest on daily account balances as per the rates outlined in the customer agreement. The decrease in investment income was primarily attributable to a reduction in average daily deposit balances, the launch of interest-bearing money market accounts in the first quarter of 2025, and federal rate cuts enacted in the fourth quarter of 2024 and in September 2025.

Loan Interest Income

Loan interest income is generated from loans issued predominantly under the Company's Commercial Alliance Agreement (the "PCCU CAA") with PCCU, as amended.

The majority of the Company's loan portfolio consists of CRB loans originated by PCCU and primarily serviced by SHF. Under the original PCCU CAA in 2024, the Company received 100% of the loan interest income associated with these loans and was obligated to pay PCCU a servicing fee equal to 0.25-0.35% of the outstanding loan balance.

Effective December 31, 2024, the method for calculating loan interest income was revised. The new loan yield allocation formula factors in the Constant Maturity U.S. Treasury Rate and a proprietary risk rating to determine the interest income split for each loan.

The reduction in loan interest income for the period is mainly attributed to the implementation of the new formula. Under the Amended PCCU CAA, the Company's interest income on all loans is now calculated using a loan yield allocation formula that considers the Constant Maturity US Treasury Rate from the Federal Reserve's website, along with a proprietary risk rating formula to determine the fee split between the Company and PCCU. The amendment introduced a new interest income split between the Company and PCCU. The interest income split under the new loan yield allocation formula is approximately 39% to the Company, with the remainder retained by PCCU. The interest income split will vary depending on changes to the loan portfolio.

For the three months and nine months ended September 30, 2025, the Company recognized $0.5 million and $1.6 million in loan interest income attributable to PCCU activities. In comparison, for the three months and nine months ended September 30, 2024, the Company recognized $1.3 million and $4.8 million in loan interest income from the same activities.

Operating Expenses

Three Months Ended September 30,		2025				2024				Change ($)				Change (%)
Compensation and employee benefits		$	1,695,786			$	1,839,244			$	(143,458	)			(7.8	)%
General and administrative expenses			856,389				929,406				(73,017	)			(7.9	)%
Professional services			442,312				463,452				(21,140	)			(4.6	)%
Rent expense			56,529				66,170				(9,641	)			(14.6	)%
Provision (benefit) for credit losses			-				7,449				(7,449	)			(100.0	)%
Total		$	3,051,016			$	3,305,721			$	(254,705	)			(7.7	)%

Nine months Ended September 30,		2025				2024				Change ($)				Change (%)
Compensation and employee benefits		$	4,651,318			$	6,384,213			$	(1,732,895	)			(27.1	)%
General and administrative expenses			2,305,018				2,915,390				(610,372	)			(20.9	)%
Professional services			2,654,183				1,428,129				1,226,054				85.9	%
Rent expense			180,720				199,805				(19,085	)			(9.6	)%
Provision (benefit) for credit losses			-				(158,586	)			158,586				(100.0	)%
Total		$	9,791,239			$	10,768,951			$	(977,712	)			(9.1	)%

For the three months ended September 30, 2025, compared to September 30, 2024, the Company reduced operating expenses by $0.26 million, or 7.7%. For the nine months ended September 30, 2025, compared to the same period in 2024, operating expenses decreased by $1.0 million, or 9.1%.

The Company has been implementing cost-reduction measures since the prior year, including workforce realignments, vendor consolidation, and tighter discretionary spending controls. The benefits of these cost actions were partially offset by expenses incurred to implement certain of these initiatives. In addition, reported operating expenses include higher one-time non-cash stock-based compensation associated with new executive and consultant equity awards granted in 2025, which increased by approximately $1.0 million year over year. Management is using stock-based compensation awards to reduce the cash component of employee compensation and align incentives with the performance of the Company's Class A Common Stock.

Excluding these non-recurring transition costs and non-cash compensation, total operating costs would have shown a more significant year-over-year decline. The Company believes these results demonstrate that its cost-containment initiatives are generating sustainable reductions in ongoing cash expenditures, the full effect of which is expected to become more evident in 2026.

Compensation and employee benefits

During the three months ended September 30, 2025, compensation and employee benefits decreased by $0.1 million or 7.8%, primarily due to a reduction in headcount. The reduction in headcount resulted in a cost savings of approximately $0.4 million offset in part by an increase of non-cash stock-based compensation of approximately $0.3 million.

For the nine month period ended September 30, 2025, these expenses declined by $1.7 million, or 27.1%, reflecting $1.0 million in decrease from headcount reductions and $0.9 million decrease in stock compensation expense partially offset by $0.1 million expense to a former employee.

General and administrative expenses

For the three months ended September 30, 2025, general and administrative expenses decreased by $0.07 million, or 7.9%, compared to the three months ended September 30, 2024. This decrease was primarily due to a $0.2 million reduction in intangible asset amortization as certain assets became fully amortized.

Beginning in 2025, investment hosting fees and loan servicing fees were combined into the account hosting fees following the Amended PCCU CAA. On a combined basis, total hosting-related fees increased by $0.04 million ($0.18 million increases in account hosting fees less $0.10 million of investment hosting fees and $0.04 million of loan servicing fees incurred in the prior period), reflecting the impact of the Amended PCCU CAA offset by the termination of the Company's customer relationship with Five Star Bank.

For the nine months ended September 30, 2025, general and administrative expenses decreased by $0.6 million, or 20.9%, compared to the same period in 2024. This decrease was primarily due to a $0.5 million reductions in intangible asset amortization as certain assets became fully amortized.

Beginning in 2025, investment hosting fees and loan servicing fees were combined into account hosting fees following the Amended PCCU CAA. On a combined basis, total hosting-related fees increased by $0.03 million ($0.5 million increase in account hosting fees less $0.4 million of investment hosting fees and $0.1 million of loan servicing fees incurred in the prior period), reflecting the impact of the Amended PCCU CAA offset by the termination of the Company's customer relationship with Five Star Bank.

Account hosting fees

The account hosting fees increased for both periods primarily due to the Amended PCCU CAA, which became effective on December 31, 2024. Under the prior CAA, PCCU charged a monthly per-account fee ranging from $26.08 to $28.69 for accounts hosted on its platform. Under the Amended PCCU CAA, the Company now pays PCCU a fixed asset hosting fee calculated as 0.01 multiplied by the average daily balance of account relationships generated by the Company, divided by the number of days in the year, and multiplied by the number of days in the applicable month. This new structure incorporated the investment hosting fee and loan hosting fee that existed under the prior agreement and has resulted in higher total account hosting costs compared to the prior fee schedule.

Beginning in 2025, investment hosting fees and loan servicing fees are reported within account hosting fees following the Amended PCCU CAA. The following is the account hosting fee by financial institutions for the three and nine months ended September 30, 2025 and September 30, 2024:

Three Months Ended September 30,		2025				2024				Change ($)				Change (%)
PCCU		$	322,795			$	131,002			$	191,793				146.4	%
Pacific Valley Bank			8,091				5,466				2,625				48.0	%
Five Star Bank			-				18,782				(18,782	)			(100.00	)%
Total		$	330,886			$	155,250			$	175,636				113.1	%

Nine Months Ended September 30,		2025				2024				Change ($)				Change (%)
PCCU		$	914,539			$	356,369			$	558,170				156.6	%
Pacific Valley Bank			20,357				10,748				9,609				89.4	%
Five Star Bank			(2,795	)			52,483				(55,278	)			(105.3	)%
Total		$	932,101			$	419,600			$	512,501				122.1	%

Professional services

For the three months ended September 30, 2025, professional services expense decreased by $0.03 million or 4.6% compared to the same period in 2024, primarily reflecting lower negotiated rates with several service providers and reduced audit and accounting fees following completion of the Company's auditor transition earlier in the year.

For the nine months ended September 30, 2025, professional services expense increased by $1.2 million or 85.9% compared to September 30, 2024. The increase was driven primarily by transition-related legal and advisory costs incurred as the Company outsourced its internal legal and compliance functions to external counsel, as well as other non-recurring professional fees primarily related to shareholder litigation. Key components of the increase include:

	●	External legal and compliance transition costs, including migration of SEC reporting, governance, and regulatory matters previously handled internally;
	●	Fees related to the resolution of a former-employee matter;
	●	Fees associated with shareholder-related litigation;
	●	Fees associated with the transition of auditors and the restatement of our Quarterly Report for the quarter ended March 31, 2025, and
	●	Higher non-cash stock-based compensation for directors, who agreed to reduce cash compensation in exchange for additional equity awards under the Company's 2022 Stock Option and Incentive Plan.

These increases were partially offset by the elimination of prior-year external counsel retainers, lower recurring audit and accounting fees after the auditor transition, and rate reductions achieved through vendor consolidation. The Company expects that, following completion of the legal and auditor transitions, annualized professional service costs will decline compared with maintaining both internal and multiple external service providers.

Provision (benefit) for credit losses

For both the three- and nine-month periods ended September 30, 2025, there was no credit loss (benefit) expense, compared to an expense of $0.0 million and a benefit of $0.2 million, respectively, in the comparable 2024 periods. Effective with the Amended PCCU Commercial Alliance Agreement, the Company is no longer indemnifying loans issued by PCCU, thereby eliminating the prior credit-loss exposure.

Other Income / (Expenses)

Three Months Ended September 30,		2025				2024				Change ($)				Change (%)
Change in the fair value of deferred consideration		$	(40,565	)		$	(68,811	)		$	28,246				(41.0	)%
Interest expense			(252,640	)			(161,716	)			(90,924	)			56.2	%
Gain on extinguishment of debt			3,336,213				-				3,336,213				-	%
Other issuance costs			(988,837	)			-				(988,837	)			-	%
Change in fair value of warrant liabilities			(657,417	)			414,272				(1,071,689	)			(258.7	)%
		$	1,396,754			$	183,745			$	1,213,009				660.2	%

Nine Months Ended September 30,		2025				2024				Change ($)				Change (%)
Change in the fair value of deferred consideration		$	79,475			$	327,259			$	(247,784	)			(75.7	)%
Interest expense			(480,767	)			(484,718	)			3,951				(0.8	)%
Gain on extinguishment of debt			3,336,213				-				3,336,213				-	%
Other issuance costs			(988,837	)			-				(988,837	)			-	%
Change in fair value of warrant liabilities			596,823				2,756,045				(2,159,222	)			(78.3	)%
		$	2,542,907			$	2,598,586			$	(55,679	)			(2.1	)%

For the three and nine months ended September 30, 2025, other income (expenses) primarily reflects the impact of financing-related transactions and fair-value adjustments associated with the Company's capital restructuring completed in connection with the Series B Convertible Preferred Stock and Series B Warrant issuance.

Deferred Consideration (Abaca Acquisition)

During the three and nine months ended September 30, 2025, we recorded a loss of $0.04 million and a gain of $0.08 million, respectively, related to changes in the fair value of the contingent consideration liability associated with our 2022 acquisition of Abaca. The decrease in the liability was primarily due to the elimination of the interest component from the deferred consideration arrangement, which more than offset the impact of the increase in our stock price during the period. The third anniversary payment was made on October 3, 2025 through the issuance of 37,517 shares of our Class A Common Stock.

Interest Expense

Interest expense for the three months ended September 30, 2025, increased by $0.1 million compared to the same period in 2024. The increase was primarily due to $0.1 million of non-cash interest expense related to the original issue discount on convertible notes issued in September 2025. This increase was partially offset by a decrease in interest expense on the Senior Secured Promissory Note.

Interest expense for the nine months ended September 30, 2025, decreased by $0.004 million compared to the same period in 2024. While the interest rate on the Senior Secured Promissory Note remained unchanged, interest expense decreased due to a lower average principal balance following $2.2 million in principal repayments in 2024. This decrease of approximately $0.1 million was substantially offset by $0.1 million of non-cash interest expense related to the original issue discount on convertible notes issued in September 2025.

Gain on Extinguishment of Debt

The Company recognized a $3.2 million gain on extinguishment of debt predominately related to the settlement of its FPA obligations. The Company settled its FPA obligation of $7.3 million by issuance of 5,002 shares of Series B Convertible Preferred Stock and Series B Warrants to purchase 322,111 shares of Class A Common Stock, whose aggregate fair value of $4.0 million was lower than the carrying amount of the liability, producing the gain.

Expenses incurred to secure financing

During the three months ended September 30, 2025, the Company incurred $1.0 million of costs related to establishing its equity line of credit or ELOC, of which $0.8 million was non-cash. These costs were expensed during the three and nine months ended September 30, 205 in accordance with ASC 505-10-45-2.

Change in Fair Value of Warrant Liabilities

The Company's Public, Private Placement, and PIPE warrants are recorded as liabilities and remeasured at fair value each period using the Black-Scholes-Merton model. The Company's Abaca warrants are recorded as liabilities and remeasured at fair value using a Monte Carlo simulation model. As of September 30, 2025, all outstanding warrants were out of the money. Changes in the Company's stock price and related volatility during the period were the primary drivers of the fair-value adjustments.

Income Taxes

Income tax (benefit) expense for the three months ended September 30, 2025 was $0 as compared to income tax of $0.007 million for the three months ended September 30, 2024. Income tax (benefit) expense for the nine months ended September 30, 2025 was $0.06 million as compared to an income tax credit of $0.05 million for the nine months ended September 30, 2024. The change in income tax (benefit) resulted from a reversal of estimated accrual.

Key Metrics

In addition to the measures presented in our unaudited condensed consolidated financial statements, our management regularly monitors certain measures in the operation of our business. These key metrics are discussed below.

Non-GAAP Financial Measures

In addition to financial measures presented in accordance with accounting principles generally accepted in the United States of America (GAAP), this document contains non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.

Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net profit before taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net profit (the most directly comparable GAAP financial measure) to EBITDA and from EBITDA to Adjusted EBITDA.

We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

EBITDA and Adjusted EBITDA have limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

	●	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
	●	EBITDA and Adjusted EBITDA do not reflect changes in our cash requirements for our working capital needs; and
	●	EBITDA and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available to us.

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net profit and our other GAAP results.

A reconciliation of net profit to non-GAAP EBITDA and Adjusted EBITDA is as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
Net (loss) income		$	179,508			$	353,817			$	(1,578,406	)		$	3,345,020
Interest expense			252,640				161,716				480,767				484,718
Depreciation and amortization			637				160,857				3,155				551,356
Provision (benefit) for income taxes			-				6,837				(58,470	)			55,579
EBITDA			432,785			$	683,227				(1,152,954	)			4,436,673
Other adjustments -
Credit loss (benefit) expense			-				7,449				-				(158,586	)
Change in the fair value of warrants and forward purchase derivatives			657,417				(414,272	)			(596,823	)			(2,756,045	)
Change in the fair value of deferred consideration			40,565				68,811				(79,475	)			(327,259	)
Gain on extinguishment of debt			(3,336,213	)			-				(3,336,213	)			-
Other issuance costs			988,837				-				988,837				-
Stock compensation expense			596,131				387,662				1,379,880				1,551,923
Deferred loan origination fees and costs			-				31,408				-				78,581
Adjusted EBITDA		$	(620,478	)		$	764,285			$	(2,796,748	)		$	2,825,287

Other Metrics

The Company monitors the following key metrics for its business operations.

Total account balances, number of accounts and average account balances

Our ability to originate loans for PCCU is dependent on the size of our managed deposit base and number of active accounts. In addition, fees are generated based on open accounts and account activity. We monitor account activity including deposits, withdrawals and ending account balance daily. Total account balances represent the balance of onboarded and monitored deposits on hand at financial institution clients at period end. Average account balance represents the total account balance divided by the number of accounts at the period end.

Account Fees Per Average Active Accounts Managed

Currently a significant amount of our fees is generated from active accounts and account activity. As a result, we monitor account openings and closings on a daily, weekly and monthly basis. We strive to meet the appropriate balance between depository balances and fees and therefore review account fees per average number of active accounts managed.

Three Months Ended September 30,				2025				2024				Change				Change (%)
Average monthly deposit balance		(1)		$	107,976,219			$	111,202,938			$	(3,226,719	)			(2.9	)%
Average Account fees		(2)			270,501				410,776				(140,275	)			(34.1	)%
Average active accounts		(3)			774				745				29				3.9	%
Average account balance					139,444				149,199				(9,755	)			(6.5	)%
Average fees per account					349				551				(202	)			(36.7	)%

Nine Months Ended September 30,				2025				2024				Change				Change (%)
Average monthly deposit balance		(1)		$	105,178,610			$	120,969,270			$	(15,790,660	)			(13.1	)%
Average Account fees		(2)			280,456				425,517				(145,061	)			(34.1	)%
Average active accounts		(3)			773				750				23				3.1	%
Average account balance					136,105				161,292				(25,187	)			(15.6	)%
Average fees per account					363				567				(204	)			(36.0	)%

	(1)	2025 represents the average of the daily account balance for the three and nine months therein; 2024 represents the average of the ending account balances for each of the three and nine months therein.
	(2)	Reported account activity fee revenue per month.
	(3)	Represents the average of ending active accounts for each of the three and nine months therein.

Average monthly deposit balances declined 13.1% year-over-year for the nine months to date, but declined 2.9% year over year for the third quarter as deposit outflows have begun to stabilize. Despite lower balances, active accounts increased 3.9% for the quarter and 3.0% for the nine months to date, demonstrating continued client retention and modest new-account growth. The decline in average fees per account of 34% year over year for both the three- and nine-months end September 30th was driven primarily by the loss of higher-performing accounts that generated greater transaction-based activity, such as ACH and wire services. Average account balances also declined as a result of broader economic pressures within the U.S. cannabis industry, including reduced wholesale pricing and constrained operator liquidity. Looking ahead, the Company believes that improvement in overall U.S. economic conditions, particularly increased discretionary spending, and potential regulatory easing, including federal rescheduling of cannabis, could contribute to higher account balances and transaction activity over time. The current depositor mix remains more diversified, reducing concentration risk and positioning the Company to benefit from any industry recovery.

Liquidity, Capital Resources and Capital Resources.

Liquidity refers to the Company's ability to meet expected cash obligations, including operating costs and general business expenditures.

As of June 30, 2025, the Company had a working-capital deficit of $7.4 million, cash and cash equivalents of $0.2 million and limited access to external funding sources. During the third quarter ended September 30, 2025, the Company completed its Series B Convertible Preferred Stock and Series B Warrant financing, raising gross proceeds of $6.3 million, excluding money received from management and a board member. The Company received $5.9 million shortly after the closing. As a result, on September 30, 2025, the Company held cash and cash equivalent $0.9 million, had no material debt outstanding, and no longer reported a working-capital deficit. The improvement in liquidity was primarily driven by the equity raise and repayment or conversion of substantially all debt obligations.

The Company also entered into an Equity Line of Credit ("ELOC") with an investor, providing the ability, once the related registration statement becomes effective and to an extent pending shareholder approval, to sell up to $150 million of newly issued common stock, with potential expansion to $500 million upon mutual agreement. These arrangements, together with lower ongoing debt service obligations, substantially strengthen the Company's short-term liquidity position.

While deposit and fee revenue remain below prior-year levels, management expects continued cost reductions and improved cash generation as operational efficiencies take hold. Based on current forecasts, existing cash resources, combined with potential access to the ELOC, are expected to be sufficient to fund operations for at least 12 months beyond the issuance date of these unaudited condensed consolidated financial statements.

Cash Flows

For the nine months ended September 30, 2025, the Company used $2.4 million of cash in operating activities to fund its net loss of $1.6 million. Operating cash flows benefited from positive working capital changes of $0.7 million and offset by $1.5 million for non-cash income. For the nine months ended September 30, 2024, the Company generated $3.2 million of cash from operating activities, primarily driven by net income of $3.3 million and favorable changes in operating assets and liabilities of $1 million, partially offset by non-cash income of $1.1 million.

For the nine months ended September 30, 2025, and September 30, 2024, the Company generated cash from investing activities was $0.4 million and $0.008 million from the proceeds of loan, respectively.

For the nine months ended September 30, 2025, the Company generated $0.5 million of net cash from financing activities. This amount primarily reflects proceeds of $0.55 million raised through the issuance of a convertible notes and $0.22 million in gross proceeds from Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common Stock. This is offset by the repayment of a senior secured promissory note totaling $0.3 million. For the nine months ended September 30, 2024, the Company used $2.2 million in financing activities resulting from the repayment of Senior Security Promissory Note PCCU.

Critical Accounting Estimates

As of September 30, 2025, there were no significant changes in the application or the nature of accounting estimates that are considered critical in nature from those presented in our Annual Report on Form 10-K and Form 10-K/A.

Emerging Growth Company Status

The Company is an emerging growth company ("EGC"), as defined in the JOBS Act. Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued until such time as those standards apply to private companies. In electing this relief, the JOBS Act does not preclude an EGC from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies. SHF has elected to use this relief and will do so until the earlier of the date that it (a) is no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result of the elected JOBS Act relief, these combined and unaudited condensed consolidated financial statements may not be comparable to companies that do not elect JOBS Act relief or choose to early adopt different accounting pronouncements than SHF.

Internal Control Over Financial Reporting

In connection with our management assessment of internal control over financial reporting as of and for the nine months ended September 30, 2025, the Company has identified material weaknesses within our internal controls over financial reporting. Refer to Item 4A of this document for additional details.

Related Party Relationships

PCCU is considered a related party as it holds a significant ownership interest in the Company, is our most significant financial institution customer, and is where we maintain the majority of the Company's deposits. Refer to Note 9 Related Party Transactions, to the accompanying unaudited condensed consolidated financial statements that describe the related party transactions.