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Business Observer Friday, May 13, 2011 10 years ago

Cashing in on Green

A Lake County bank is betting there's money to be made in financing green projects. To show it's more than marketing, it's leading by example in the construction of its new bank.
by: Dan Ping Editor/Central Florida

Ken LaRoe believes so strongly in promoting green building practices that he's willing to give up a little profit.

LaRoe founded First Green Bank, the first bank in the Southeast that focuses on the environment as part of its mission statement. To prove its point, the bank will knock up to a half percent off loans for commercial projects that meet green building certifications as outlined by the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standards.

“It may not sound like a lot, but on a commercial project it could add up to big savings,” says LaRoe, noting that a half-percent discount would save about $30,000 on a $4 million loan over a five-year period, and even more over a longer period.

LaRoe is not some touchy-feely hippie who shuns profits in favor of causes. Quite the opposite. He's a 24-year veteran of the banking industry who started his first bank, Florida Choice Bank, in 1999 and sold it to Alabama National BanCorp. in 2005 for $110 million.

He is also passionate about the environment.

“I grew up in Eustis fishing and hunting. My parents always instilled in me the idea that you don't waste anything,” says LaRoe of his environmental values.

After selling Florida Choice, LaRoe and his wife embarked on a year-long RV trip across America. It was during that time he read “Let My People Go Surfing,” an autobiography/business philosophy book written by Yvon Chouinard, founder of Patagonia Inc.

“The book lays out a real wholistic approach to business, and I started thinking, 'Why not do a bank that focuses on the environment?'” LaRoe says.

He began looking for investors in 2008. LaRoe had a stable of potential investors to draw from thanks to his earlier success with Florida Choice, but his timing was terrible. Washington Mutual failed the same day his prospectus was ready to be distributed.

He eventually raised $17.2 million, and the bank opened for business Feb. 17, 2009. It now has $133 million in assets.

LaRoe is quick to point out that First Green is a traditional community bank. While LaRoe says it would be nice to finance only green-oriented projects, there simply isn't enough business yet.

“If we did just sustainable projects, we would be broke in a week,” LaRoe says. “We've got to create shareholder value.”

To date, the bank has yet to finance a commercial real estate project that meets LEED certification, though two projects are currently in the works. First Green has financed three houses that qualified for the green discount.

“That's been the real let down to this point, but given the economic situation it's not unexpected,” says LaRoe.

Developers are reluctant to pursue LEED certified projects because many perceive there are additional costs involved. Although that is not always the case, LaRoe says the current business environment has many developers focused on traditional projects.

LaRoe is not discouraged about the current lack of sustainable projects. His plan is to continue nurturing the young bank — which began earning it's first profits in October 2010 and has been profitable every month since — and looking for opportunities to “spread the gospel” of green.

“We certainly can't mandate that people be green, but we can educate,” says LaRoe.

As part of that education, all First Green loan officers have earned LEED accreditation to help advise clients about the process. And the bank is practicing what it preaches. Zero-interest loans are available for all employees who purchase a car that gets 30 miles per gallon or better.

“It looks like we're having a (Toyota) Prius convention at some of our board meetings,” LaRoe chuckles.

The bank also offers paid sabbaticals to employees who participate in environmentally responsible projects, and it encourages customers to opt for paperless statements. So far about 90% have.

First Green is nearing completion of its 12,000-square-foot headquarters in Eustis, about 40 miles northwest of Orlando. The building is LEED Platinum certified, the first bank in Florida to receive the designation.

The reaction to First Green has been mixed, LaRoe says. Some want to do business with the bank strictly because of its green approach. Others see a sly marketing attempt.

“I have to explain that I eat, sleep and breathe environmental issues,” says LaRoe, who estimates the trash collectors pick up about one bag of garbage every three weeks at the home he shares with his wife.

For the skeptics who think the First Green is a gimmick, LaRoe says there's only one way to prove otherwise: “We're going to be judged by our actions.”

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