Arkansas Bankers Seize a National Moment


Arkansas Bankers Seize a National Moment
Darrin Williams, CEO of Southern Bancorp Inc. (Karen E. Segrave)

George Floyd’s death in May in Minneapolis set off protests against police brutality and racism nationwide, but it had an unforeseen effect on Arkansas banking.

Darrin Williams, the CEO of Southern Bancorp Inc. in Little Rock, said officials from companies, big and small, white and black, reached out to him as Black Lives Matter protests roiled the nation. Southern Bancorp, with nearly $1.5 billion in assets, is one of the largest rural development banks in the nation, and Williams is its prominent Black leader.

“We have had people call us, in the wake of George Floyd’s murder, knowing that we focused on serving underserved populations, including a significant amount of people of color and African Americans; they want to open up accounts and put money on deposit here,” Williams said. “Money in the bank is actually impactful. We take those dollars and invest them in communities across Arkansas and Mississippi that are diverse. Folks want to support that.”

There probably isn’t a proper way to phrase the opportunity Floyd’s death has presented, Williams said, but it’s important that that opportunity to shine a light on the effects of financial inequality isn’t wasted. Four police officers were fired and have been charged in his death, including a second-degree murder charge against Derek Chauvin, who was shown on video kneeling on Floyd’s neck for more than eight minutes.

“Help is the wrong word, but there is a ton of discussion now around structural racism and structural inequality,” Williams said. “What happened with George Floyd, the structural racism that African Americans and people of color have been subject to in the criminal justice space is not limited to the criminal justice space. It happens in every facet of life.

“In a capitalistic society, if you don’t have access to capital it is really hard to progress and live the American dream. We know unfortunately with the history of our country, banks had a role. We didn’t have our knee on the necks of people killing them like the George Floyd murder, but banks have been guilty of denying credit and access to people of color.”

The Great Unbanked

Williams said his bank doesn’t specifically target any ethnic or racial minority but, as a certified Community Development Financial Institution, it tries to bring banking services to the unbanked and underbanked people in its geographical realm. Southern Bancorp has 47 locations in Arkansas and Mississippi, including many in the Mississippi River Delta, so there are plenty of underbanked of every color and background.

The FDIC considers someone underbanked if he or she has a bank account of some sort but also relies on services outside of the banking system. An unbanked person has no accounts whatsoever.

An FDIC national survey in 2017 found approximately 54% of Black households may be either unbanked or underbanked, compared with 50% for Hispanic households, 30% for Asian households and 23% for white households. The numbers were equally bleak depending on the household’s family income.

Doing something about those numbers was the driving force behind Bank On Arkansas, a cooperative program between several Arkansas banks and community organizations to bring more people together with banks. Southern Bancorp, First Security Bank in Searcy and Simmons Bank in Pine Bluff are among the participants.

The community outreach groups act as the bank’s wingman, reaching and educating people who otherwise don’t know or don’t trust anything about banks.

“The hard thing for all banks is educating non- and underbanked consumers about the benefits of a bank account,” said Scott Brady, senior vice president of marketing for First Security. “There are trust issues there. There are concerns about how bank accounts work. The good thing about the coalition is they do a lot of that for banks. They have a relationship with those who are trying to get on their feet financially. A lot of times we never see those customers because of their apprehension about coming into a bank. They help bridge that gap.”

Brady said First Security doesn’t have minority-specific programs but tries to tackle the underserved communities in the course of good business.

First Security, for example, partners with Our House, a homeless support nonprofit in Little Rock. First Security has signed up more than 150 Our House clients for free bank accounts, along with showing them how to use debit cards and spending trackers to save money.

“They seem to be helping people from the goodness of their hearts,” said Ben Goodwin, the executive director of Our House. “It is certainly a holistic community view that they take. In the long run it is best for everybody if we help people get out of poverty.”

Mission and Margin

The importance of having a bank account was driven home with the onslaught of the COVID-19 pandemic.

Government stimulus checks for individuals were deposited fairly quickly into bank accounts associated with tax returns. For some of those without such conveniences, a paper check had to be cashed — one of the expenses of being unbanked.

First Security and Southern Bancorp were among the banks that waived check-cashing fees for nonmembers, even though it was a bit of a money drain since nothing would be deposited. The alternative to paying a bank fee — $50 in First Security’s case — was to visit a check-cashing retailer that can charge hefty fees.

“We had to put more cash in the branches,” Williams said. “The reason we did that is because many check-cashing places and even other banks would sometimes charge as much as 10% of the face value of the check. We thought those folks needed as much as possible.

“It is expensive to be poor in America.”

Williams said it was in line with the bank’s dual motives of making money but also making a societal impact, which are inseparable goals. Williams said the aim for the bank is to be “profitable with a purpose.”

Miguel Lopez, chief community outreach officer at Encore Bank in Little Rock, said a Hispanic customer called him in a panic after the pandemic hit because the stock market had dropped. The man, who had previously kept his money under his mattress, was worried the money he had entrusted with the bank was in danger, unaware of FDIC insurance on deposits.

“It really hit home for a lot of communities of color, black and brown, when COVID hit because you saw folks who wanted to make sure their money was safe,” Lopez said.

Southern Bancorp’s reach into underserved communities showed in its Paycheck Protection Program, which has given out $112 million in loans. Williams said 89% of the loans were for less than $150,000 and 79% were for businesses that employed 10 or fewer.

Lopez said Encore did a PPP loan for just $5,000 but it was an important amount to the recipient. Small loans are generally less profitable for lenders.

“It’s just the right thing to do,” Lopez said. “In business there are some things you do for the margin and some things you do for the mission. They’re not mutually exclusive.”


American Households’ Banking Status in 2017

Race/Ethnicity

Unbanked

Underbanked

Unknown

Black

16.9%

30.4%

6.9%

Hispanic

14.0%

28.9%

7.4%

Asian

2.5%

17.5%

10.8%

White

3.0%

14.1%

5.7%

 

Income

 

 

 

Less than $15,000

25.7%

20.9%

5.7%

$15,000 to $30,000

12.3%

22.4%

7.0%

$30,000 to $50,000

5.1%

22.8%

6.8%