Just one year into operation, St. Petersburg-based Climate First Bank is capitalizing on its early success and launching a fintech startup that will provide banking as a service (BaaS) solutions.
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 expanded into Central Florida with a Winter Park location, and a Lake County branch in Eustis is pending regulatory approval.
Despite opening during the pandemic, the bank has reached $211 million in assets, $142 million in loans and $171 million in deposits. In light of that success, CEO and founder Ken LaRoe is now raising capital for OneEthos, Climate First’s fintech spinoff.
“When we started, we knew we had to be very tech-centric,” said LaRoe. “But I’m a baby boomer, so it’s got to be super user-friendly tech-centric.”
Community banks are at a disadvantage in the technological space, said LaRoe, as they are “beholden” to a core processing system. He added that only around five exist in the U.S., and most “are just bad” because they utilize old tech.
He explained that operators know the shrinking pool of smaller institutions rely on their products, so they are reluctant to invest money into updating the systems.
Despite those limitations, LaRoe said the bank’s leadership knew Climate First needed robust mobile banking applications, including the ability for customers to open an account within three minutes through their phone. He said account holders also need full depositing capabilities from their homes or businesses – without ever setting foot in the bank.
“But the problem is how do you get there?” said LaRoe. “We were looking for the right person, and our CTO (chief technological officer) just kind of fell in our lap.”
That CTO is Marcio DeOliveira, also an executive vice president and chief digital banking officer. LaRoe said he reached out to Climate First after reading about the values-based and environmentally conscientious community bank. According to LaRoe, DeOliveira relayed that he needed to add some meaning to his life, “and you guys are it.”
After joining Climate First nearly a year ago, LaRoe said that DeOliveira has already written several proprietary codes and is hiring coders and engineers to “flesh out” the bank’s tech aspects.
“But in that process, we decided to spin off the division into a wholly-owned subsidiary of a holding company,” said LaRoe. “And that’s OneEthos.
“And what we’re doing there is we’re going to provide banking as a service through proprietary software as a service (SaaS) technology.”
According to a release, OneEthos will initially offer solutions to Climate First and eventually to other financial firms seeking a transition to sustainable finance. LaRoe said the fintech startup will launch “very, very soon.”
“We’re basically ready to go,” he added. “We just got to fund it at the holding company.”
LaRoe said funding OneEthos through the holding company is a little complicated. He explained that when raising capital for Climate First, he just had the bank charter, as establishing a holding company would have taken more time.
According to the release, LaRoe raised $44 million in capital before opening the bank, but he said regulations prevent him from moving that money into the holding company. Therefore, he must now raise new funding for the holding company, a mission he is undertaking through warrant exercises of current shareholders.
“I think I’ve got about $1.1 million at the holding company,” said LaRoe. “I’d like to get to $1.5 (million) before we actually spin it off.”
LaRoe said OneEthos differs from other fintech companies that refer to themselves as banks. He noted that people sometimes refer to them as “neobanks.”
Only businesses with access to the Federal Reserve are considered banks, said LaRoe. He explained that when companies offer checking accounts, they are just sending customers’ money to federally-recognized financial institutions. He said OneEthos would provide that service – along with anyone else needing white label banking solutions.
White label banking and BaaS allow third parties to build their own financial products by utilizing existing infrastructure.
“We want to be able to provide stuff like our solar lending platform as a white label to other banks,” said LaRoe. “Especially values-aligned banks, like members of the Global Alliance for Banking on Values.”
Climate First, also a member of mission-aligned networks like the 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 developed proprietary code to simplify the loan process, and consumers can now fill out the application “in three minutes” through a mobile device.
“In three seconds, you’ll have an answer, and in a day, you’ll have your closing documents ready to sign,” he said.
Through the first 11 months of operation, LaRoe said Climate First booked about $500,000 in residential solar loans, “which is nothing.” In the new platform’s first month, the bank saw $1.5 million approved.
“So, it’s just got tremendous action,” said LaRoe. “We’re confident it’s going to be a change agent.”
As part of its business plan, LaRoe said officials approved Climate First for four locations through its first three years in operation. After St. Pete, the Orlando area and Lake County, he said next on the list is Tampa.
As much as he looks forward to opening a branch across the bay, LaRoe said he is hesitant until he finds the right person. He also noted that Climate First is not “place-based,” and out of 43 employees, only five work in brick and mortar buildings.
“We opened during Covid and had those realities right from the start,” he said. “It just proved to be perfect … fortuitous timing.”
To learn more about Climate First Bank, visit the website here.