When Cogent Bank set out to serve Florida’s legal cannabis industry, its mission was to serve cannabis-related businesses the same way it does its other commercial clients. 

“We saw that other financial institutions in this space weren’t doing that,” said Chris Hartman, chief deposit officer at Orlando-based Cogent Bank. “They were basically taking deposits and offering accounts without all the other features and benefits that customers want. So we felt really strongly that we needed to do that and not make this industry pariahs.”

Because of marijuana’s status as a Schedule 1 drug at the federal level, most cannabis-related businesses have had to operate on the sidelines of the financial system. With major payment processors and large banks reluctant to work with the industry, most dispensaries are cash-only.

The cash-heavy nature of the industry, in addition to the strict compliance and regulatory hurdles associated with banking it, make the space a challenge for banks to navigate.

Cogent Bank did its due diligence before rolling out its cannabis banking program, and kept regulators in the loop throughout the process, Hartman said.

“We were completely transparent with our regulators, and we got complete board endorsement. And once we got up and running, we felt pretty confident that our program was sound,” she said.

To help broaden the program’s cannabis banking program, Cogent Bank partnered with Green Check Verified, a fintech that works with banks to provide compliant cannabis banking services.

“We knew we needed to be [cannabis-related businesses’] go-to bank for everything, and when we didn't have something they needed, we looked to partners that could provide that,” Hartman said.

Green Check’s flexibility in working with businesses that use a wide variety of point-of-sale systems allows the bank to monitor transactions and feel comfortable in its clients’ compliance with state regulations, Hartman said.

The ability to use a third-party vendor to broaden the bank’s cannabis banking services is critical, she said.

“For a bank of our size, a billion-dollar bank, we can't go develop these things on our own,” Hartman said. “So, given our robust onboarding process and due diligence process, and Green Check being a part of that — we also have a really knowledgeable compliance officer that is the go-to in this arena — once they're on boarded, we don’t want to treat them any differently than any other client.”

Cogent Bank offers treasury services, mobile deposit, online banking, online wires, access to the Automated Clearing House network and cash processing services to its cannabis-related clients.

Cash processing is an important service, Hartman said, since the bank doesn’t take cannabis cash in its banking centers, due to the liability of accepting large amounts of cash.

“And quite frankly,” Hartman added, “sometimes you can smell the cannabis on the cash and we don't want our banking centers to smell like marijuana.”

As part of its mission to approach cannabis banking the same way it does its other business lines, Cogent Bank has “dipped its toes” into real estate lending in the marijuana space, she said.

Lending in the cannabis space, however, still comes with its limits.

“We're doing primarily real estate loans for commercial real estate owners that are leasing space to dispensaries,” Hartman said. “We found that other banks were even unwilling to do that because they were concerned that if a developer developed a property and leased to marijuana, and then they got shut down, they would lose their revenue source to repay the loan.”

Cogent has been making loans to commercial real estate owners leasing to cannabis-related businesses for several years now, but is aware of a growing need outside of that realm, Hartman said.

“The biggest asset that a cannabis company has is their license, and we're still struggling on that side because we don't believe we can encumber the license or force a sale,” she said.

Identifying what the bank could take as collateral is a challenge, Hartman said.

“Clearly, we don't want to be in the marijuana growing business, so land or the facilities that process marijuana are not necessarily something we would want as collateral,” she said. “We might take a building. We're in the process of building that out, but we're not 100% there yet.”

‘A growing community’

With its cannabis banking program, Cogent Bank sees the opportunities beyond providing services to cannabis-touching businesses, such as servicing the industry’s vendors and ancillary businesses that are also often locked out of the banking space, Hartman said.

“Based on the data that we've seen, the cannabis industry is very lucrative and growing rapidly. We feel that it's a great opportunity not only to bank the licensees, but also the vendors that support them,” she said.

Cogent’s willingness to bank the industry comes with additional opportunities to serve accountants, attorneys and manufacturers that work with cannabis clients, Hartman said.

“It’s a growing community and we feel that it provides deposits as well as lending opportunities for us,” she said.

Cogent has branches in north, central and southwest Florida, where the cannabis is legal for medical purposes.