Vermont State Employees Credit Union was attracting new clients so fast that it had to stop doing so altogether as it adds more staff. Meanwhile, another New England lender, Needham Bank, has entered the market through acquisition and is fast signing clients of its own.
The $1.1 billion-asset Vermont State Employees Credit Union in Montpelier has temporarily stopped opening new cannabis banking relationships until it can catch up from a staffing standpoint and provide the necessary oversight, said the credit union's President and CEO Rob Miller.
"The growth of the new cannabis relationships exceeded our expectations," he said. "We currently have over 90 relationships — we're the largest in the state by a pretty wide margin — and we've been in the business for quite some time with respect to Vermont's medicinal marijuana industry."
Vermont State Employees has been servicing medicinal marijuana companies for at least five years, he said.
None of the credit union's employees are focused solely on cannabis banking, but rather workers in its business services group and compliance group handle the bulk of the work, Miller said. The company plans to add more staffing in compliance, and those new employees will work exclusively with the cannabis companies, he said.
Those banking relationships are primarily depository in nature, and the credit union does only a "minor" amount of leading in the space, Miller said.
But that is not true for $3 billion-asset Needham Bank, based in Needham, Massachusetts. Needham Bank
After thinking things over, Eastern opted to quit the marijuana business and made the deal with Needham.
This month, Needham announced it had made a loan to Rochester Hills, Michigan-based Glorious Cannabis Co. Though Needham, a depositor-owned mutual bank founded in 1892, did not disclose the size of the loan, it noted that proceeds would support construction of a 30,000-square-foot cultivation facility in Uxbridge, Massachusetts.
"Needham Bank is helping Glorious Cannabis Company expand their brand into the Massachusetts market," Michelle Haughton, the bank's vice president, structured finance, said in a press release. "I look forward to seeing Glorious thrive."
Needham hired Houghton in March to assist with the growth of its commercial-and-industrial structured finance business line. This includes handling cannabis-related business loans greater than $10 million in commitment size.
According to the Financial Crimes Enforcement Network's most recent marijuana banking update, 202 credit unions and 553 banks are serving the marijuana industry, up from 188 and 518 respectively in June 2021.
Speaking this month at the Payments, Banking and Compliance Conference, National Credit Union Administration board member Rodney Hood addressed the issue unfolding with Vermont State Employees Credit Union.
Since Vermont legalized medical marijuana in the state almost two decades ago, Vermont State Employees is "pretty far ahead" in having addressed a lot of the challenges that many other states are struggling with now, in terms of determining how to manage financial services for cannabis businesses, Hood said.
But the credit union's decision to pause new business highlights the challenges of operating in the cannabis banking market, he said.
"To look at the situation in Vermont, it's almost as if things are actually moving backward," Hood said. "Speaking as someone who has been out front working on this issue, I find that deeply disappointing."
Hood said it is essential that Congress take legislative action to clarify and harmonize the laws and regulations surrounding the state-legal cannabis industry and marijuana-related businesses, so the industry can take part in the legitimate financial services industry.
"That was my message last year," Hood said at the conference. "And I wish that I could say that we've seen great progress toward reform. But unfortunately, I'm not sure that's the case."
Miller at Vermont State Employees said he is unsure how many more clients the credit union could take on if it had the capacity. The market in Vermont is still unfolding, and the state has just begun issuing licenses for retail cannabis outlets, he said.
"We would have a few more [clients], but I think we got through a large part of the cultivator and processing licenses, and it's really a matter of when the retail licenses start to come out and being there for them," he said.
And the portfolio pause for Vermont State Employees comes amid its plans for a huge merger. The two largest credit unions headquartered in Vermont — New England Federal Credit Union in Williston and Vermont State Employees — announced
Vermont State Employees sent voting packages out to its members last week, and Miller said he is "hopeful and confident" that members will see the value in the merger.
Needham CEO Joe Campanelli was unavailable for comment.
