Mystery solved? Why First Green Bank backed away from weed business


Last summer, First Green Bank of Orlando made a splash when it announced it was collecting cash on behalf of most of Florida’s medical marijuana dispensaries.

Then, a few months later, First Green quietly stopped handling pot shops’ cash.

The reason for the about-face was a mystery -- until Seacoast Banking Corp. of Stuart announced late Monday that it would pay $133 million for First Green, which has $731 million in assets.

Bankers generally steer clear of marijuana, and Seacoast is an old-school bank that has been operating in Florida since the Great Depression. In a call with analysts Tuesday morning, Seacoast Chairman Dennis S. Hudson III said he began talking to First Green about a merger last year.

In an interview last year, First Green Chairman Ken LaRoe said his institution began handling dispensaries’ cash only after lengthy negotiations with banking regulators. The federal prohibition on marijuana makes sales a cash-only business, and First Green works with an armored-car company that carries currency directly from dispensaries to the nearest Federal Reserve location.

“We don’t touch the cash,” LaRoe said.

First Green Bank was the rare financial institution to venture into cannabis. Amid a wave of state marijuana legalization that began in Colorado and has spread to California and more than two dozen other states, bankers have deferred to federal law.

Banks are especially intertwined with the federal regulatory system. While banks can opt for state charters rather than federal charters, even state-regulated banks lean heavily on Washington to provide crucial services. The Federal Deposit Insurance Corp. guarantees customers’ balances. The Federal Reserve clears checks. The Treasury Department prints currency, and a host of federal agencies have the authority to investigate financial crime.

What’s more, a widely cited memo from a deputy attorney general in 2014 set a high bar for banks that do business with marijuana businesses allowed by state laws. Bankers could face criminal prosecution if money from organized crime makes it into pot companies’ bank accounts, the memo said.

With federal regulators looming large over financial institutions, few bankers have proven bold enough to accept deposits from the pot business. LaRoe said his executives spent months working with state regulators to persuade them that First Green Bank could handle cannabis cash responsibly.

“The state wants us to have a rock-solid kill switch,” LaRoe said.

In other words, if federal regulators order First Green to stop banking cannabis companies, the bank must close their accounts in 24 hours.

Alex Sanchez, head of the Florida Bankers Association, last year lauded First Green Bank for pushing into an untested industry.

“To their credit, they have checked every box,” Sanchez said. “They have done an incredible amount of due diligence to get to this point.”

In Colorado’s thriving marijuana sector, stories of cash-only operations have become legion. Employees are paid in cash, and even tax bills are satisfied with stacks of greenbacks. In Florida, marijuana companies like Surterra Wellness are able to issue paychecks because they have checking accounts.


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