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Phillip Neal Baldwin
ARKADELPHIA – Phillip Baldwin was the director of corporate finance for Dillard Department Stores six years ago when he got the opportunity to change his career – and his life. “I was only a bean counter, working on a 10K [an annual financial disclosure report] for the lawyers in New York City,” he recalls. ‘And I sat back in my chair and realized that nobody, other than lawyers and accountants, would care, even five months from now.
“I decided to do something more with my life. And I had this opportunity with this really neat community development bank that promised to do neat things in rural Arkansas.”
Bill Brandon, the then-chief executive officer of Southern Bancorp, a holding company for three community development banks – Elk Horn Bank & Trust Co. in Arkadelphia, First Bank of the Delta in Helena-West Helena and Delta Southern Bank in Ruleville, Miss. – recruited Baldwin as his chief financial officer in 2000. Baldwin succeeded Brandon as CEO in 2002.
When he took charge, the bank company was operating in 48 rural counties, but wasn’t accomplishing much.
“I refined and focused” the company, he says, “and also brought in some business background. We were not doing a lot of good. We were a mile wide and an inch deep.” I concentrated the geographical focus to within a 70-mile radius of where we have a bank.”
Before Baldwin came onboard, the company at its peak was earning $500,000 a year; now it earns between $3 million and $3.5 million a year.
“We turn the profits back into the community,” Baldwin says. “In order to do good, you have to do well.”
The three banks maintain 40 locations in rural and small-town Arkansas and Mississippi, employing 250 people. The company’s assets amount to $550 million, with a total equity of $5 million, and it has funded $1.6 billion in community development loans.
Unlike most banks, however, “It’s not just about the money,” Baldwin says.
Community development banks work to help economically distressed areas by making loans to people and institutions to whom regular banks won’t normally lend because they’re considered bad risks, with poor or insufficient credit history, or just plain without enough income to qualify.
Southern Bancorp was founded in 1988 as Southern Development Bancorporation by Arkansas business and civic leaders who, Baldwin explains, wanted to make possible the otherwise impossible task of attracting capital development in poorer cities and rural areas.
The banks continue to operate as full-service operations, but the money customers put into savings, checking and mortgage accounts provides financing for local development projects.
The company’s initial board included such notable Arkansas names as Hillary Clinton, Tom McRae, Thomas F. “Mack” McLarty and Walter Smiley.
With the help of the Winthrop Rockefeller Foundation, a stockholder, the fledgling company bought Arkadelphia’s Elk Horn Bank, one of the state’s oldest, chartered in 1884.
Among the other stockholders: Alltel Corp., Arkansas Best Corp., Arkansas Community Foundation, International Paper, the MacArthur Foundation, Metropolitan Life Foundation, Regions Bank, Stephens Group and the Walton Family Foundation, all of which invested in the company “for community development and philanthropic purposes, not for financial return, “says Little Rock lawyer Garland W. Binns Jr., a financial services attorney with Dover Dixon Horne and one of Baldwin’s champions.
“I’ve pretty much known him throughout his career,” Binns says. “He understands the goals of the institution; he’s a people person, but at the same time he understands numbers and financial statements.
“I know his leadership efforts. He spends endless time raising money for those efforts. I know he believes in what he’s doing. He has a unique mix of outstanding business acumen, mixed with a great sense of social responsibility,” Smiley says. “You don’t find that real often. He’s got that balance right, and it’s a hard thing to get right.”
Smiley was CEO of Systematics Inc. when he served on the Southern Bancorp board that hired Baldwin. He went on to found Smiley Technologies, a bank data processing company that he says his children run.
DIVISIONS AND SUBDIVISIONS
Southern Bancorp also has several for-profit and nonprofit divisions, including Southern Property Corp. and Southern Community Development Corp., which deal in real estate and nonprofit real estate, respectively; Southern Financial Partners, which provides micro-loan funding for low-income clients; and the Southern Good Faith Fund, which among other projects provides work-force training through community colleges.
The company and its subsidiaries are all designated by the U.S. Treasury Department as community development financial institutions, which make them eligible for federal government funding – about 15 percent of its total. It is one of more than 20 federally designated organizations and one of the largest rural community development banks in the country.
Southern Bancorp, Binns notes is “really most unique of its nature in the United States, by far the leader in its efforts to enhance economically depressed areas.”
The company specializes in working in the economically depressed areas of the Delta. Subsidiary Southern Property Corp. has built low-income, rent-subsidized housing in Arkadelphia, DeWitt, Clarendon, Pine Bluff and Helena-West Helena.
Southern Bancorp also makes available individual development accounts, with $3 to $1 deposit matches through funding from Entergy and government and foundation sources. Clients can save up to $8,000 to start a business, buy a house or go back to school.
Baldwin cites the example of Twyana Dunlap, “on welfare in Pine Bluff with three kids,” he says, “who trained to be a certified nursing assistant. In front of 300 people at her graduation ceremony, she cried and said, ‘I never graduated from anything before.”’
Dunlap went on to earn her certificate as a licensed practical nurse and has become a registered nurse.” She did that on her own,” Baldwin says, proudly.
The financial industry has started to pay more attention to micro-financing since Muhammad Yunus received the Nobel Peace Prize for offering microloans in Bangladesh.
“The Southern Good Faith Fund is using the same model,” Baldwin says. “They lend money to the community, and the community sees that the loan is paid back.”
Loans as small as $200 to fix a -refrigerator, for example, are generally too small for a normal bank, and the only other choice for most people is to go to a pay day lender and risk exorbitant fees and interest.
“But by and large they’re successful,” Baldwin says. “The default rate is no greater” than for regular bank loans.
Among the accomplishments Baldwin is proudest of was helping fractious Phillips County develop a five-year strategic plan.
“In downtown Helena, 50 percent of the population out-migrated since the 1960s,” Baldwin says. And in 2003 the mayors of Helena and West Helena were suing each other over an unpaid $80,000 landfill debt that Helena allegedly owed West Helena. That in turn was delaying work on a big Mississippi River bridge project.
“Southern offered to pay $60,000 toward the landfill bill if West Helena would forgive $20,000,” Baldwin says. In exchange, Southern asked the cities to start enforcing and update city codes, and agreed to pay the salary of a joint enforcement officer, and the cities started working together on the strategic planning document.
Out of joining the fire and police departments grew the eventual merger of the two towns. “It’s the only time in Arkansas history that two cities of that size merged,” Baldwin says.
The code enforcement led to a formal condemnation process and the tearing down of about 120 abandoned houses, the removal of 200 abandoned cars and the acquisition of key properties for green space. Southern Bancorp, through First Bank of the Delta, paid for the house-leveling and debris removal.
“In those neighborhoods, people are planting flowers and mowing lawns, and the cars are not jacked up on blocks,” Baldwin says.
The key to the strategic plan, Baldwin says, is that it developed from the inside and didn’t come from the top down.
“It took two years of work by local people in Phillips County,” he says. “I could see all the people behind it. It’s their plan, not my plan.”
The plan has also helped bring in new industry – a $40 million biodiesel plant and a $2 million sweet potato distribution center.
“Sweet potatoes are more profitable to grow than cotton or corn” Baldwin says, and there’s a market right here in Arkansas – a Gerber baby food plant in Fort Smith.
On the horizon is a plan for a four-lane highway from Brinkley to Helena – West Helena, along the current route of U.S. 49 to that big, new trans-Mississippi bridge.
“They have big dreams, and transportation is a big part of that,” Baldwin says.
Business interests in Tunica, Miss., just across the river, are providing support. So are convention and tourism officials in Memphis, especially since the new route would ease traffic at the intersection of interstates 40 and 55 at West Memphis and 40 and 240 in Memphis.
RAISING TEST SCORES
Southern Bancorp also had a hand in funding the KIPP School in Helena-West Helena (the name is, in part, an acronym for “Knowledge Is Power”), a public charter school with a 98 percent black enrollment. Before the bank became involved, students in the fifth grade were scoring in the 15th percentile in national standardized tests.
Funding was split between the First Bank of the Delta and Southern Financial Partners.
“No other bank would lend them the money,” Baldwin says. Now the school has students in grades 5-8 and the eighth graders, who as fifth-graders scored so low, are now scoring in the 82nd percentile.
“Not only are kids changing their own lives, but the lives of their families and the community,” Baldwin crows.
In the wake of Hurricane Katrina, the MacArthur Foundation out of Chicago, one of the company’s largest stockholders, approached Baldwin about redeveloping areas of the Gulf Coast.
Baldwin was initially reluctant, but eventually became convinced that “we had a responsibility to do something.” Delta
Southern Bank has extended more than $1 million towards projects in Bay St. Louis and Waveland, which Baldwin says, were “totally wiped out” by the storm.
We’re taking the same approach we’ve taken in Helena-West Helena and Arkadelphia,” he says. That includes opening a couple of branch banks in the area.