Massachusetts financial institutions Eastern Bank and Needham Bank have formed an asset purchase agreement that will see Eastern transfer its cannabis-related and money service business operations to Needham.
“We have spent considerable time reviewing the cannabis banking operation and remain very impressed with how these businesses have been served,” Bob Rivers, Eastern’s CEO and board chair, said in a news release Friday (Jan. 14).
“However, we have determined the business is not well-aligned with our approach to serving our business customers due to the special handling required with meeting the banking needs of cannabis-related businesses at this time,” Rivers said. “Needham Bank has solid capabilities to provide extensive service to this important business sector, and we applaud the strong commitment they are making to support the industry.”
Needham Bank President and CEO Joseph Campanelli added that the transaction “presents an exciting opportunity and excellent entry into this evolving and dynamic segment.”
Eastern Bank said the cannabis-related assets were acquired when it merged with Century Bancorp last spring in a $642 million deal.
The Eastern/Needham deal is expected to close in the first half of the year, subject to regulatory approval and closing conditions. The banks did not disclose terms of the transactions.
In the next few months, Eastern’s cannabis banking customers will receive updates, including how steps on to prepare for the transition, pending regulatory approval.
Recreational cannabis use is legal in 18 states, the District of Columbia, the Northern Mariana Islands and Guam, while another 13 states and the U.S. Virgin Islands have decriminalized its use. And 36 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands have approved the use of medical marijuana.
But despite all these moves towards legalization on the state level, cannabis is still a federally-classified Schedule 1 drug, which has kept many financial institutions from wanting to work with businesses in the space.