An article posted on a regional payments association site on Sept. 7, 2025, reported how a small California credit union was successfully serving the cannabis industry.
"We had to either innovate or be merged out of existence … cannabis banking forced us to build a deep compliance expertise," North Bay Credit Union President/CEO Chris Call said.
Two months later, on Nov. 17, California's Department of Financial Protection and Innovation ordered the $114 million North Bay in Santa Rosa to merge because of its unsafe and unsound practices detailed in an examination report. Ironically, a cannabis CUSO established by the credit union – now mired in legal disputes for nearly three years – may have contributed to its financial deterioration and forced merger with the $969 million Alero Financial Credit Union in Elgin, Ill., in March.
In addition to the high costs of ongoing federal litigation since 2023 over a bitter dispute among the CUSO's partners, North Bay was compelled to provide a $16.4 million provisional credit to 235 cannabis business members. Those members were unable to access their funds, pay their bills or make payroll after the operator of an online banking platform – involved in the CUSO legal rift – shut it down over a $1.2 million payment disagreement.
Call, who led North Bay's initiative to serve California's recreational cannabis industry soon after it had been legalized by voters in November 2016, declined to comment when reached by CU Times. He retired in July 2025 and, according to his website, he has since returned to his first love – writing in the form of novels that "explore personal metamorphosis, a universal experience that everyone undergoes over the course of their lives."
During Call's tenure as CEO, North Bay underwent a metamorphosis that began with promise but ultimately unraveled. On Jan. 1, 2018, when legal retail sales of marijuana began, the credit union was managing about $49 million in assets and $32 million in loans. By December 2023, North Bay managed $120 million in assets and more than $100 million in loans. When the credit union's legal troubles began during the summer of 2023 just two years after the CUSO was established, North Bay's financial condition started to deteriorate.
North Bay's Losses Worsen
After recording gains of $1,056,559 in 2020, $1,704,002 in 2021 and $461,948 in 2022, North Bay ended 2023 with a small loss of $52,709.
But by December 2024, the credit union's loss significantly widened to $1,971,764. The Call Report showed the loss was driven by a huge spike in non-interest expense of $10,851,608 in December 2024 compared to non-interest expense of $8,756,702 in December 2023. Additionally, higher funding costs that reduced net interest income from $4,853,193 in 2023 to $4,506,577 in 2024 was likely due in part to higher funding costs.
Although the credit union's loans increased to $106 million in 2024 from $100 million in 2023, its assets dropped to $117 million in 2024 from $120 million in 2023.
By the end of 2025, North Bay's loss deepened to $2,215,400. The primary drivers for this loss were a $1,254,409 credit loss expense, rapidly rising nonaccrual loans, charge-offs and significant increase in the allowance for credit losses, which climbed to $1,336,169, compared to $245,689 in 2024, the Call Report showed.
What's more, North Bay reported $2,599,346 in commercial loans in non-accrual status in 2025, compared to zero in 2024 and 2023. The credit union's non-interest expense declined but only slightly, from $10,851,608 in 2024 to $10,806,571 in 2025.
The credit union's loans fell to $98.3 million in 2025 from $106 million in 2024, while its assets dropped to $114 million in 2025 from $117 million in 2024.
Legal Battles Begin
The cannabis CUSO, HigherGrowth LLC, dba Greenbax Marketplace (GBX), was formed in 2021 by North Bay along with MRB Direct Inc. (MRBD), a Silicon Valley fintech firm, and Austin Capital Trust Company (ACTC), which is owned by David Park of Nevada, founder and CEO of FinTech Automation and ACTC.After the CUSO was established, North Bay sold a 25% interest in GBX to Fintech Fund II, an entity managed by Park. This fintech-focused venture business also made an undisclosed investment in MRBD.
MRBD maintained GBX's online banking platform for a $10,000 monthly licensing fee, providing banking accounts and services for the credit union's cannabis business members. ACTC functioned as the CUSO's trust company, holding and managing money generated by the cannabis business members served by North Bay.
Relations among the CUSO partners, however, began to sour during the summer of 2023. By September, ACTC filed a lawsuit in Nevada federal court claiming the credit union "illegally withdrew" $2,525,565 from ACTC's account without authorization. The funds in ACTC's account were owned by GBX's North Bay members, but ACTC maintained custodial responsibility for them.
According to the lawsuit, the credit union failed to explain the $2.5 million withdrawal, making it impossible for ACTC to reconcile North Bay's account. ACTC demanded the credit union return the funds and provide a detailed accounting of the withdrawal. North Bay failed to satisfy either demand, according to the lawsuit.
The credit union countered in court filings that ACTC's lawsuit failed to allege the necessary facts and relied on conclusory claims. The lawsuit was dismissed in August 2024 because the Nevada court lacked personal jurisdiction over Call or North Bay.
ACTC did not refile this lawsuit.
North Bay's Jarring Allegations
In January 2024, North Bay filed a lawsuit against MRBD and David Park in Nevada federal court, claiming MRBD manufactured a billing dispute against GBX. MRBD sent GBX a letter in July 2023 demanding payment of more than $1.2 million in allegedly unearned fees in less than two business days or the company would shut down the online banking platform.
Even though North Bay paid $500,000 after negotiations with MRBD, the company shut down the GBX banking platform anyway on July 26, 2023.
North Bay suddenly faced a critical reputational crisis as 235 cannabis business members lost access to the GBX banking platform and could not receive and authorize payment transactions, make deposits or transfer funds, pay state and local taxes, verify balances or transaction histories and make payroll.
North Bay alleged in its lawsuit that it believed MRBD and David Park, who owned 25% of GBX's banking platform, conspired to take over North Bay's member relationships. The lawsuit also alleged Park and others offered cannabis business members immediate access to funds if they opened accounts with one of MRBD's affiliated entities.
MRBD and Park countered there have been no allegations that they did anything to interfere with North Bay's prospective business relationships because none of the credit union's members or purported prospective members have been identified, according to court filings.
As an interim measure to address the crisis, North Bay provided a $16.4 million provisional credit to its cannabis business members to meet payment obligations.
MRBD and Park also argued in court filings that North Bay's lawsuit was baseless and retaliatory, and failed to allege any wrongdoing. MRBD and Park have countersued the credit union, HigherGrowth Inc. and GBX.
Although the case is in arbitration, both sides have continued to file motions that will likely keep the legal fight going for months or longer.
GBX Continues Post-Merger
After the North Bay merger was announced, Alero Financial said it will continue GBX's operations to serve the cannabis industry, according to its website.
"We recognize the challenges that some GBX members have experienced in prior years and understand how important reliability and consistency are to your operations. This merger is a strategic decision designed to improve reliability, strengthen technology and deliver a more stable and predictable experience moving forward," the credit union stated. "Our focus is on building a stronger infrastructure and support model that provides greater confidence, continuity and long-term stability for your business."
Alero Financial President/CEO Stephanie Rupert declined to comment at this time because "the merger is so new, she's still getting her arms around everything."
Darlene Brown, a credit union consultant, who was appointed North Bay's CEO after Call's departure, did not respond to a CU Times request for comment.
Peter Strozniak can be reached at peter.strozniak@arc-network.com.
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