Banking services are not something marijuana companies enjoy. In fact, they cannot even deposit money into a bank account, as financial institutions studiously avoid any business dealings with them. This is why the new strategy of First Green Bank is so revolutionary: Based in Orlando, the banking firm is aggressively marketing its services to Florida’s cannabusinesses.
In an interview on Wednesday, Ken LaRoe, founder and chairperson of First Green Bank, said, “It is our understanding we are the only one doing it.” Because 71 percent of voters in Florida approved medical marijuana last year, weed shops have mushroomed across the state. According to LaRoe, six of the seven state-licensed marijuana companies in Florida bank with First Green Bank.
Despite its name, First Green Bank does not reference ganja at all. Instead, the “Green” in its name credits the bank’s motivation to help environmentally sustainable projects, and since that is exactly what marijuana is, the bank handles cash for dispensaries, while maintaining a decidedly hands-off approach to their business dealings.
Federal prohibition of weed forces marijuana companies to operate on a cash-only basis. This makes them targets for criminals and endangers their safety. First Green uses an armored-vehicle company to transport currency directly from cannabusinesses to the Federal Reserve location closest to them. LaRoe emphasizes that “We do not touch the cash.”
As financial institutions go, First Green Bank is the unique exception venturing into marijuana. Amidst a spreading wave of states legalizing marijuana, which started in Colorado and spread to California and over two dozen other states, bankers have shown deference to federal law. This is understandable, as the federal regulatory system intertwined itself into financial institutions long ago.
Although banks are able to choose state charters over federal charters, even banks regulated by the state are heavily dependent on Washington to provide essential services. The Federal Deposit Insurance Corporation is the guarantor of customer balances. Checks clear through the Federal Reserve. The Treasury Department prints money willy-nilly, and several federal agencies investigate financial crimes.
Furthermore, former deputy attorney general, James Cole, initiated a memorandum in 2014 that sets a precedent for banks doing business with cannabusinesses in states that allow it. If cash from organized crime ends up in a weed company’s bank account, bankers themselves could face federal criminal charges, penalties, and possibly jail time.
With federal regulators consistently scrutinizing financial institutions, no bankers have proven sufficiently brave to accept deposits from cannabusinesses. According to LaRoe, executives at First Green Bank spent months working with and convincing state regulators that its bank could manage marijuana monies responsibly.
LaRoe said, “The state wants us to have a rock-solid kill switch.” In plain speak, this means that if federal authorities decide to stop First Green Bank from providing services to cannabusinesses, the bank must have a system in place to close their accounts within 24 hours. Florida Bankers Association head, Alex Sanchez, praised First Green Bank’s bravery in navigating this unchartered territory.
“To their credit, they have checked every box,” Sanchez lauded. “They have done an incredible amount of due diligence to get to this point.” In the thriving pot market of Colorado, there are legions of stories about cash-only operations. Employers pay staff in cash. Stacks of greenbacks even pay tax bills, but in Florida, cannabusinesses can issue paychecks simply because they have to check accounts.
Jim Whitcomb, Chief Financial Officer of Surterra Wellness, a Florida-based marijuana company, said, “We would certainly be in a tough spot without First Green. It would be difficult for the industry to scale in Florida without banking relationships.” According to LaRoe, First Green has already amassed roughly $30 million in deposits from pot firms.
As of March 31, the FDIC reported the bank as having $485 million in total deposits. Although First Green is accepting pot cash, it is not yet willing to extend loans to weed companies. It does make exceptions, however, and in one such case, the bank issued a $2.6 million mortgage on a building on North Dixie Highway, Lake Worth. The property will house tenants, one of which will be a pot dispensary.
LaRoe named several disadvantages of loaning money to weed companies: Any properties are subject to seizure by federal authorities, contracts can prove unenforceable under the law, and disentangling loans from the bank’s books is not easy. LaRoe felt compelled to offer banking services to pot firms, partly because of his wife’s experiences, who found pot helped her overcome a cycling brain injury.
According to LaRoe, after prescription drugs did not work, his wife tried medical marijuana, which cured her seizure disorder. For the time being, First Green Bank is enjoying a monopoly of Florida’s medical pot industry. For LaRoe, it gives his bank pricing power, but he would prefer it if more banking institutions started accepting deposits from canna-businesses.
“I would like to see other banks getting into it,” LaRoe claimed, “just because there is strength in numbers.”
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