Nov. 1—Verdes Foundation, one of New Mexico's largest medical cannabis companies, is set to open its first Santa Fe shop — a dispensary on downtown Shelby Street — at the end of November. It plans another new store in the city in 2022, when the state will launch legal sales of recreational cannabis.

The company, which now operates in Albuquerque and Rio Rancho, won't be funding these expansions with bank loans.

"We self-capitalize our growth," Verdes CEO Rachael Speegle said. "We don't borrow any money."

That's because no traditional banks or credit unions in New Mexico lend to cannabis businesses.

Only two — Southwest Capital Bank and U.S. Eagle Federal Credit Union — openly accept account deposits from the industry. Both are considering cannabis lending in the future, top officials said.

The New Mexico Finance Authority also wants to create a $5 million loan fund for cannabis microbusiness operators, but the proposal stalled in mid-October.

So far, 36 states have legalized medicinal cannabis and 18 have approved marijuana for adult recreational use, with New Mexico sales expected to begin in April. A push to legalize cannabis at the federal level also has been gaining momentum. Still, the banking sector has been reluctant to serve cannabis businesses.

Marijuana banking expert Becky Postar said she doesn't believe even federal legalization will entice banks into the marijuana game en masse.

"Even if it is legalized, this is still a high-risk client," said Postar, chief operating officer at HD Compliance, a cannabis-focused consulting firm for financial institutions. "The cannabis industry will always have a banking shortage. It is considered a high risk for money laundering."

Banks have to submit suspicious-activity reports to the U.S. Treasury's Financial Crimes Enforcement Network to prevent money laundering in drugs, sex and terrorism. As of June 30, 518 banks and 188 credit unions nationwide that filed the reports had provided banking services to marijuana-related businesses.

The federal government doesn't warn banks against serving cannabis businesses or threaten penalties, Postar said, and nothing is written prohibiting banks from working with the industry. "Banks that are practicing enhanced due diligence and proper monitoring reports are not being asked to exit the cannabis industry," she added.

Both U.S. Eagle and Southwest Capital have set up separate operations with expertise in handling accounts for cannabis businesses. U.S. Eagle started a division called Aery Group and Southwest Capital contracts the work to HD Compliance.

Postar said HD Compliance assists Southwest Capital with writing a risk-assessment policies, training staff and board members, vetting cannabis businesses, monitoring accounts and reporting.

Southwest Capital and U.S. Eagle charge higher fees for cannabis account deposits to cover all the additional regulatory expenses.

"There are risks involved," said Patty Lindley, U.S. Eagle's director of compliance and quality. "... We looked at the risk and how much we can mitigate that."

That comes with added costs.

"All the employees in the Aery Group are certified Bank Security Act officers," Lindley said, "and we have a certified anti-money laundering specialist. ... We have an agreement with a courier service to bring in cash."

Southwest Capital has about 100 cannabis clients, a mix of those that "touch the plant" and those that support the industry. Talbert said about 5 percent of the bank's deposits are from the cannabis sector. U.S. Eagle, which began serving cannabis-related businesses two years ago, has 50 to 60 clients. Less than 1 percent of its deposits are from the industry, CEO Marsha Majors said.

Lindley and Majors said the credit union is planning loan options for cannabis companies.

"We are definitely looking at what that can and should be," Majors said. "Recreational is going to expand business."

Southwest Capital CEO Lonnie Talbert said the bank also is preparing for cannabis lending.

Verdes Foundation, which began operating in 2010, started banking with Southwest Capital six years ago. Before then, the company had to improvise to avoid stuffing cash under mattresses, Speegle said.

"We had personal bank accounts at three different banks and could only make deposits under $5,000 a day at each bank," she recalled.

Had bank lending been an option, Verdes might have expanded cultivation in 2016, she said, noting cannabis growers now need to increase their supply to ensure there is enough for the 124,000 patients enrolled in the New Mexico Medical Cannabis Program as the new recreational market gets underway.

"We're planning on increasing cultivation of cannabis by 40 percent over 16 months to protect the Medical Cannabis Program," Speegle said.

Bank lending, she added, would have allowed the company "to expand without diluting resources for medical. That allows us to grow at a rate to keep up with demand. That would be a game changer."

Southwest Capital Bank is a pioneer when it comes to banking with the cannabis industry. Bank owner Greg Levenson met with medicinal marijuana growers and sellers in 2014 just as Talbert came on board.

Talbert wasn't aware at the time cannabis banking would become a fixture of his tenure. But he welcomed the opportunity.

"I always considered myself the non-normal banker," he said. "A lot of times you are not going to be handed a job to think outside the box. This is the ability to make a difference in an industry."

The rationale was simple, he said: Go where no New Mexico bank and very few banks across the country had gone before.

"Our philosophy as a bank is CARE: community, accountability, relationships, entrepreneurial spirit," Talbert said. "This cannabis program is all about entrepreneurial spirit."

It's also about serving a legitimate business sector, Postar said.

"The No. 1 reason why banks I talk to do it is because they are serving their community. There was a need. They had clients in the industry that wanted banking," she said.

"We felt a growing legitimate business need for banking services," said Majors, who was a keynote speaker in mid-October at the first Credit Union Cannabiz Conference in Las Vegas, Nev. "When we launched our programs, we recognized a great need. We recognize they are entitled to have services."

The goal for many in the cannabis business is for the state's burgeoning market to be regarded as a mainstream industry rather than a black market — and they say banking services, including lending, are key to making that happen.

"We want to keep people from going to street drug dealers," Speegle said. "I'm very hopeful for safe access to capital that will allow us to grow at an organic pace."