After just one year in business, St. Petersburg-based Climate First Bank is capitalizing on its early successes and launching a fintech start-up that will provide banking solutions as a service (BaaS).
June marks the first anniversary of Climate First Bank – a full-service community bank focused on environmental sustainability. In addition to the St. Petersburg flagship, the bank has expanded into central Florida with a location in Winter Park, and a Lake County branch in Eustis is pending regulatory approval.
Despite being open during the pandemic, the bank reached $211 million in assets, $142 million in loans and $171 million in deposits. In light of this success, CEO and Founder Ken LaRoe is now raising capital for OneEthos, the fintech spin-off of Climate First.
“When we started, we knew we had to be very tech-centric,” LaRoe said. “But I’m a baby boomer, so it has to be super friendly and tech-centric.”
Community banks are at a disadvantage in the tech space, LaRoe said, because they are “beholden” to a basic processing system. He added that there are only about five in the United States, and most “are just bad” because they use old technology.
He explained that operators know that the dwindling number of small institutions depend on their products, so they are hesitant to invest money in updating systems.
Despite these limitations, LaRoe said bank management knew Climate First needed robust mobile banking apps, including the ability for customers to open an account in three minutes through their phone. He said account holders also need full deposit capabilities from home or business – without ever setting foot in the bank.
“But the problem is how to get there?” said LaRoe. “We were looking for the right person, and our CTO (Chief Technology Officer) came across us.”
That CTO is Marcio DeOliveira, also Executive Vice President and Head of Digital Banking. LaRoe said he contacted Climate First after reading about the values-based and environmentally friendly community bank. According to LaRoe, DeOliveira explained that he needed to add meaning to his life, “and you are.”
After joining Climate First nearly a year ago, LaRoe said DeOliveira had already written several proprietary codes and was hiring coders and engineers to “flesh out” the technology aspects of the bank.
“But in this process, we decided to turn the division into a wholly owned subsidiary of a holding company,” LaRoe said. “And that’s OneEthos.
“And what we’re doing there is we’re going to deliver banking as a service through proprietary software-as-a-service (SaaS) technology.”
According to a press release, OneEthos will initially offer solutions to Climate First and eventually to other financial companies seeking a transition to sustainable finance. LaRoe said the fintech startup will launch “very, very soon.”
“We are basically ready to go,” he added. “We just have to fund it at the holding company.”
LaRoe said funding OneEthos through the holding company is a bit complicated. He explained that when raising funds for Climate First, he only had the banking charter, as setting up a holding company would have taken longer.
According to the release, LaRoe raised $44 million in capital before opening the bank, but he said regulations prevented him from moving that money into the holding company. Therefore, he must now raise new funds for the holding company, a mission he undertakes through exercises of warrants from current shareholders.
“I think I have about $1.1 million at the holding company,” LaRoe said. “I’d like to get to $1.5 (million) before I spin it.”
LaRoe said OneEthos differs from other fintech companies that refer to themselves as banks. He noted that people sometimes call them “neobanks.”
Only companies with access to the Federal Reserve are considered banks, LaRoe said. He explained that when companies offer checking accounts, they simply send customers’ money to federally recognized financial institutions. He said OneEthos would provide this service, as well as anyone else needing white label banking solutions.
White label banking and BaaS allow third parties to build their own financial products using existing infrastructure.
“We want to be able to provide things like our white label solar lending platform to other banks,” LaRoe said. “Especially values-aligned banks, such as members of the Global Alliance for Banking on Values.”
Climate First, also a member of mission-aligned networks like Net-Zero Banking Alliance and 1% For The Planet, launched a digital solar lending platform in May to dramatically streamline the process of borrowing money to install solar panels. .
LaRoe said DeOliveira has developed proprietary code to simplify the loan process, and consumers can now complete the application “in three minutes” via mobile device.
“In three seconds you’ll have a response, and in one day you’ll have your closing documents ready to sign,” he said.
In the first 11 months of operation, LaRoe said Climate First set aside about $500,000 in residential solar loans, “which is nothing.” In the first month of the new platform, the bank saw $1.5 million approved.
“So there’s just tremendous action,” LaRoe said. “We are confident that it will be an agent of change.”
As part of its business plan, LaRoe said officials approved Climate First for four sites in its first three years of operation. After St. Pete, the Orlando area and Lake County, he said next on the list was Tampa.
Although he looks forward to opening a branch across the bay, LaRoe said he hesitates until he finds the right person. He also noted that Climate First is not “localized” and that out of 43 employees, only five work in brick-and-mortar buildings.
“We opened during Covid and had these realities from the start,” he said. “It turned out to be perfect… fortuitous timing.”
To learn more about Climate First Bank, visit the website here.