by Mark Friedman on Monday, Aug. 23, 2004 12:00 am
"The answer was no," said Baldwin, the president and CEO of Southern Development Bancorporation of Arkadelphia, which had provided the loans since in 1988.
It was at that point that Baldwin realized Southern Development Bancorporation needed an overhaul.
Southern Development is the largest rural development banking company in the country, with nearly $500 million in assets. Its mission is to provide economic development lending, low-income housing, work force training and financial literacy training programs to people in the Delta.
In 2001, Southern Development offered services to more than 45 counties in
Arkansas and several in western Mississippi.
"We were too spread out over all the regions," Baldwin said.
Baldwin then decided to try a new approach: Focus on one county and bombard it with services from health care to housing. If it's successful, the effects will spread out to neighboring areas until the Delta's decades of depression ends.
Since December, local leaders and others in the community have been meeting at least once a month to hammer out a 15-year strategic plan to turn around the county. The plan is expected to be finished in December and implementation is set to begin shortly thereafter.
"I'll say that we learned a lot in our 15 years, and we are now onto an idea that will make a difference," he said.
While Baldwin said Southern Development isn't abandoning the other counties, it will pay more attention to Phillips County, which certainly needs the help. The county of about 25,000 people had a median household income of $22,000 in 1999 compared to $32,000 for the state. And nearly 33 percent of the people were below the poverty line in 1999, compared to about 16 percent for the state.
The latest unemployment statistics also show Phillips County has one of the highest rates in the state at 12.1 percent.
Some think focusing on one county might work.
"It seems to me concentrating your resources on a particular territory is a really worthwhile idea," said Richard Taub, a professor at the University of Chicago whose research book on Southern Development's first 10 years, "Doing Development in Arkansas," is scheduled for publication in September by the University of Arkansas Press. (A Winthrop Rockefeller Foundation grant allowed Taub to write the book, over which he had editorial control.)
"But without having a sense of the [program], it's hard to know if you're just throwing money at a problem."
While Baldwin attempts to turn around the Delta, he also is improving the multi-bank holding company since becoming its CEO in 2002.
Under his leadership, the bank's net income has increased 803 percent from $333,000 in 2001 to $3 million in 2003.
The Turnaround Plan
In 2000, Baldwin needed a change in his life. He left the director of financial reporting position at Dillard's Inc. in Little Rock, where he had been for about a year, to join Southern Development as president and chief operating officer.
Baldwin, who had been a CPA with Ernst & Young for 12 years, thought he could make a difference in the Delta.
"Here I am 46 years old, and what have I really accomplished with my life other than doing a bunch of 10-Ks?" he said.
By 2002, Baldwin was CEO of a most unusual organization that includes three commercial banks and five nonprofits. The profit the banks generate are funneled to the nonprofits.
Financial Partners, one of Southern Developments' nonprofits, is heading the community and economic development effort in Phillips County. The Walton Family Foundation has agreed to spend an undisclosed amount to fund the ideas, Baldwin said.
A number of the towns in Phillips County are eager for Southern to start dispersing money, but it won't until the plan is finished, he said. The town gatherings are the cornerstone of the strategic plan because the meetings should improve race relations, create leaders and encourage people to become entrepreneurs, Baldwin said.
And Phillips County needs leaders, said Ashley Moore, executive director of Main Street Helena.
"We have some real weak leadership, or I wouldn't call it weak; we have a total lack of leadership," Moore said.
Moore said she has high hopes for the plans. And she has seen some improvements, such as the $500,000 in federal funds the city of Helena received to repair the roofs of several historic down-town buildings.
But Baldwin said turning Phillips County around could take up to 20 years.
"Systemic change doesn't happen overnight," he said.
To determine if the project is a success, officials are recording everything from unemployment rates and ACT scores to numbers of dilapidated housing units. Those scores will be monitored throughout the years to measure the project's effectiveness.
If the numbers get worse, adjustments will be made, Baldwin said.
He said there's no guarantee that the project will work.
"But I'm a big believer in the power of the human spirit," he said. "And there's a lot of human spirit over there that wants to make this work."
One of the keys to making it work will be getting people motivated to become entrepreneurs, said Jeff Collins, director of the University of Arkansas' Center for Business and Economic Research.
A person can have access to capital and work force training, "but in the end, the question is can you lead a horse to water?" he said. "Yeah, but can you make him drink?"
He said people must become interested in being entrepreneurs and then provided with the skills to succeed.
"And that's a lot to ask," Collins said. "But you have to start somewhere, right. I don't think you give up."
Baldwin said Southern Development has made a difference in downtown Arkadelphia.
In 1993, the occupancy rate for downtown buildings was 40 percent. Opportunity Lands Corp., a Southern Development nonprofit, invested $1 million in buying and renovating two vacant, rundown buildings, which sparked a downtown revival.
Now the occupancy rate is 80-90 percent, Baldwin said.
"We are not the only reason why that happened, but we're part of it," he said.
Other people have their own success stories.
Doris Wright, who along with her husband owns Global Construction of Little Rock, said she was turned down six times in 1998 for bank loans.
As a last resort, she turned to Southern Development.
There, the vice president of commercial lending looked at Wright's situation and determined her company needed a line of credit, not a loan.
Wright said the move was correct. Without the line of credit, Global Con-struction wouldn't have been able to work on large or medium-sized projects as a general contractor, she said.
As a result, the company's revenue went from $12,000 to $250,000.
But overall the history of the Delta is not one of success stories.
"If you make a loan here and you make a loan there, there are people who come out better for that," said Taub, the university professor. "But it doesn't have the ripple effect going through the community."
Collins said even with all the initiatives to improve the Delta, "if we were to gage success, we would have to say it's been spotty at best. And the question is why.
"And I think until you answer the 'why' question that it's not really obvious to me that you can do anything," he said.
Over the past 15 years, more than 250 articles have been written on how to turn the Delta around. Most of the idea weren't implemented, and practically all that were failed.
Baldwin said they failed because someone from outside the Delta swooped down, offered a laundry list of ways to save area and then fled.
"The programs for change were never adopted by the community as theirs," he said. "This is only successful if the people from Phillips County say, 'This is our program.'"
But Southern Development has the advantage of owning the largest bank in Phillips County, First National Bank of Phillips County with assets of about $190 million.
"It's been there since 1931, and it's going to be there in 2031," Baldwin said. "So we can be very persistent, and we can take the long-term perspective."
But even Southern Development has seen setbacks. Taub said Southern Development has been learning and improving, but it hasn't done everything it said it would, Taub said.
The plan was for Southern to work on Arkadelphia and nearby counties and then the rest of the state, Tom McRae, then director of the Rockefeller Foundation in Little Rock, wrote in a 1988 column in the Arkansas Gazette.
"Quality development takes time, commitment and patience," he wrote. "Southern is a unique partnership of philanthropy, business and government that must occur if Arkansas is to prosper. Because of this co-operation, we should see a measurable improvement in Arkansas' economy in the next 10 to 15 years."
Taub said Southern started out as "an incredibly creative and important invention," but it wasn't reasonable for Southern to expect to transform the economy of the Delta in that timeframe.
The Holding Company
While Southern is working on repairing the Delta, the financials of the holding company are improving. Baldwin said he can't take all the credit.
Years ago, the theory was you didn't have to expect a lot from Southern Development in terms of net income, he said.
"But I expect our company to earn just as much as other bank holding companies," Baldwin said. "My theory is you have to run high-performing business, then you use that to be a high-performing development organization."
He said he has focused on getting Southern to be more efficient. Southern Development is also trying to expand its lending in the communities that it serves to increase the loan-to-deposit ratio.
"We can make more money if we do that," he said.
"My goal is let's be very lean and very mean and hire really good people," Baldwin said. "And let's use the money we save to put into the communities and make a difference in the towns."
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