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BANKING & FINANCIAL SERVICES

How this credit union became the

banker for more than 270
Washington cannabis businesses

Brett Ballman, vice president of

member business services at Salal,
says the credit union aims to reach
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SALAL CREDIT UNION

IN THIS ARTICLE

Credit Unions
Topic

Cannabis
Topic

Salal Credit Union

Company

Brett Ballman
Person


By Rick Morgan

Inno Senior Reporter, Puget Sound Business Journal

Jan 20, 2022

Salal Credit Union doesn't run from a little uncertainty.

The Seattle-based credit union, which was founded in 1948,

has just over $1 billion in total assets, according to Brett
Ballman, vice president of member business services at Salal.
Despite its relatively small size, the credit union provides
services to roughly 272 licensed and ancillary cannabis
businesses in Washington state.

"We pride ourselves in helping

CREATE YOUR FREE
underserved banking markets," Ballman
ACCOUNT
said. "Washington legalized (cannabis) in
the state, so therefore they should have
BECOME A
every opportunity to have a bank account MEMBER
just like any other business in this state. Join the Puget Sound
We wanted to help not only get them off Business Journal to unlock
even more insights!
the ground from a business standpoint,
but they have to pay their taxes. They
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have to pay their employees. We provide
all those services to them."
Password * Show

Washington legalized recreational

cannabis in 2012. Salal began looking into ZIP Code *

the space in 2012 but got more serious

Become a
about it by 2014, when the credit union
started talking to the board and
employees, as well as drafting procedures, according to
Ballman.

A major catalyst for Salal was 2014 guidance from the

Financial Crimes Enforcement Network on banking cannabis
businesses. Ballman said with regulators putting out guidance
it became apparent they understood these businesses would
 need financial services, even if cannabis was still federally
illegal.

According to Ballman, Salal opened its first cannabis deposit

account and made its first loan to a cannabis business in 2014.

Despite Salal's successes, providing financial services to

cannabis businesses comes with challenges. Because pot is
still federally illegal, the credit union operates in an uncertain
regulatory environment and needs to conduct thorough
vetting before onboarding new cannabis clients, Ballman said.
He added that Salal has a significant amount of compliance
staff compared with its peers, and although the credit union is
upfront with third-party vendors about its cannabis efforts,
vendors have dropped Salal in the past because of its
involvement in cannabis.

A major benefit to providing banking services to cannabis

business is helping the industry move away from cash, which
can prove dangerous when the public knows just how much
cash is sitting inside pot shops. Uncle Ike's cannabis shop in
Lake City and Canna West Seattle were both robbed at
gunpoint
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in year. As for benefits to Salal, Ballman said
although the credit union makes money from interest and
fees, those are largely offset by the compliance burden.

Salal offers conventional financial services to consumers like

credit cards, checking and savings accounts, and personal
loans. Its services for the cannabis industry include employee
accounts, payroll and commercial real estate loans.

Moving ahead, the effort to help cannabis businesses access

banking services nationwide has been challenging. The Secure
and Fair Enforcement (SAFE) Banking Act, which would allow
banks to work with legitimate cannabis businesses, was put
into the annual military spending bill, but the language was
removed in December. Critics wanted a more comprehensive
 reform, like full federal legalization, while supporters wanted
at least something in place now.

Federal legalization could have a negative effect on small

credit unions like Salal that already bank cannabis businesses,
as it would allow large banks to move into the space and eat
into the market. Ballman said, however, there would still be
room for smaller lenders.

"There's always going to be those national cannabis companies

once this gets legalized, kind of like the alcohol industry or the
beer industry," Ballman said. "Huge conglomerates, we would
never be able to bank them, just because of our asset size. But
what we do feel is that there's going to be a middle market
there, just like other industries, that we're going to be able to
serve."

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