Jennifer Williams, a teacher from Mississippi, has now paid off her nine payday loans and hasn’t had any for two years. She is a success story for Southern Bancorp.
Modeled after Shore Bank, which failed during the Great Recession, Southern Bancorp was curated by a collection of Arkansas’ most prominent people, including Governor Bill Clinton and Rob Walton, a member of the Walton family. Unlike Shore Bank, Southern Bancorp is now profitable and growing.
“Governor Clinton wanted to create economic opportunity and stimulate the economy in the Arkansas Delta region, one of the poorest communities in all of America,” CEO Darrin Williams said today. He notes that Hillary Clinton served on the bank’s founding board of directors.
When it launched more than 30 years ago, the biggest concern was that what worked for Shore Bank in the urban suburbs of Chicago and later Detroit and Cleveland might not work in rural Arkansas and the United States. Mississippi. The acid test of the past decade suggests that the model is working very well in the rural communities it serves.
The bank operates 46 branches in Arkansas and Mississippi, 37% of those branches are in “desert banks” where the Southern Bancorp branch is either the only bank operating in the zip code or one of the two. In addition, 28 percent of the population in the banking market lives below the federal poverty line.
CEO Williams explains the market and the bank’s strategy: “Often our competition is not another bank; often our competitors are a payday lender or a pawnbroker or someone who provides alternative forms of capital or credit that really destroys wealth. So we really do a lot of outreach. We don’t wait for people to come to the bank. We bring them the bank.
The market served by Southern Bancorp is large when viewed globally. According to world Bank, about 2 billion people in the world are unbanked or underbanked. In the United States, an FDIC report in 2015, 9 million households were unbanked and 24.5 million households were underbanked.
Mr. Williams notes: “It costs a lot to be poor. Unbanked customers are forced to pay systematically for services that banked customers receive at low or no cost, from cashing checks to check writing privileges. Check cashing services charge up to 10% of the face value of a check, and purchasing a money order costs several dollars.
To be an asset to the communities it serves, the $ 1.2 billion asset bank operates three community development financial institutions, or CDFIs. The bank holding company and the bank are the first two; the third is a non-profit organization called Southern Bancorp Community Partners.
Mike Myers, vice president, chief financial officer and treasurer of the nonprofit Winrock International, which partners with Southern Bancorp on some efforts, said: “By providing finance capital in geographies too small for big banks are profitable, Southern protects economically disadvantaged people from predatory lenders (pawn shops, payday lenders, etc.) In addition, Southern provides practical financial advice to teach people how to use credit rather than using it .
Mr. Williams explains that the bank focuses on measures of net worth because it helps break intergenerational poverty. For many, the difference is as simple as home ownership. The bank, he says, has three “big, bold and hairy goals:”
- Help 10,000 people gain access to property
- Help create 100,000 jobs
- Give 1 million people to save money
He was quick to point out that helping people save money will come mainly from the bank’s advocacy work rather than providing savings accounts to 1 million people.
Mr. Williams has his work cut out for him. “We know that so many people are suspicious of banks.”
He explains that a typical overdraft fee of $ 25 or $ 30 turns customers around on a loop. They don’t always like the bank providing them with a short-term credit facility and paying for the service. The effective interest rate on such overdrafts can, in fact, be just as precarious as the payday lenders that Ms. Williams, unrelated to the CEO, has learned to avoid.
One way Southern Bancorp tries to deal with unexpected charges is by setting up a checking account without a check. Customers have access to their money through a debit card. If there are insufficient funds in the account for the transaction, the transaction is declined and no fees are charged. This way the client picks up where it left off after the next deposit. The bank offers several accounts with no minimum balance and no monthly or low fees.
The 380-employee bank makes it a point of honor for clients of banks that have had problems with banks in the past to help them regain a better financial footing. Banks usually use ChexSystems to identify customers whose accounts have been closed by other banks, typically refusing to open new accounts for them. Southern Bancorp uses the system only to detect fraud. Everyone is welcome, says Williams.
Financial education is one of the keys to the success of the bank. This is how Ms Williams first logged in to Southern Bancorp. “My friend and I were browsing the newspaper one day and saw an ad for a credit counseling course offered by Southern Bancorp. We called and inquired about the course and started the course immediately,” she reports.
“By combining traditional banking and lending services with financial development tools ranging from credit counseling to public policy advocacy, Southern Bancorp is helping underserved families and communities grow financially stronger, regardless of zip code.” , notes Mr. Williams.
Mr Williams, who was a litigator and also served in the Arkansas House of Representatives before joining Southern Bancorp as CEO, likes to ask, “Do you know where your money spends the night? “
He emphasizes that every deposit in the bank is a simple form of impact investing. Not only does the bank use the money to provide traditional loans to people in the communities it serves, but it also invests in school bonds, water bonds, and other community infrastructure. “I would say that your bank account is really a primary means of living your values. “
The bank receives deposits from all over the country from people who wish to support the bank’s mission. Williams points out that the bank is working on a new platform to make it easier for customers outside of the bank’s service area to make deposits there.
The bank is currently mobilizing additional capital to support its growth and impact.
“We believe that wealth creation is not just for the rich. So we are creators of wealth for everyone, ”said Williams.
Myers praises Southern’s work: “Look at the impact… the number of loans under $10,000, EIC amounts recovered through free tax preparation, jobs created and supported, home ownership leading to wealth creation. No other organization in the region has the mission, the tools, the approach, the passion… or the impact. If Southern doesn’t, who will? “
Ms. Williams is also a fan. “I think Southern Bancorp really cares about its customers. I feel like they put a lot of effort into promoting credit counseling and helping people build their credit. They make you feel comfortable and make you want to share your information with them. Even after class, on several occasions Ms. Harris called to check on my progress and encouraged me to continue and work on my credit. I think Southern Bancorp goes well beyond the basic obligations of the typical services provided by banks.