Southern Bancorp continues financial hot streak with multimillion dollar equity investment from Square Inc.

June 21-27, 2021

Silicon Valley-based Square Inc., known for its cashless credit card payment apps and solutions, has made an equity investment in fast-growing Southern Bancorp Inc. as part of its $100 commitment to minority and underserved communities.

The new investment, announced on June 10, is part of growing list of national accolades and major accomplishments by the Arkansas-based Community Development Financial Institutions (CDFIs) that operates a bank holding company, one of the nation’s largest rural development banks, and a nonprofit development finance and lending arm under “Southern” banner.

Like several Wall Street and Silicon Valley’s making ongoing commitments to ongoing social justice and racial equity movement following the George Floyd murder last summer, Square is making its multimillion-dollar investment in several CDFIs and minority depositary institutions (MDIs) across the U.S.

According to Southern Bancorp, Square will invest $25 million of its $100 million commitment in CDFIs and minority-owned banks to increase their capacity to make loans to local small business owners. Those funds will also go toward helping minority-owned small businesses grow through finance and providing “unbanked individuals” with access to savings and other financial tools that have historically been limited to those with privilege.

“Like the millions of voices raised in protest following the murder of George Floyd, countless corporations voiced their own outrage and support for racial equality. However, when words begged for action, only a few pledged to address those inequities,” said Southern Bancorp CEO Darrin. “Square is showing the country how profits can coincide with purpose, by investing in companies like ours that are committed to closing the racial wealth gap by building communities and changing lives. It’s about leading the way for corporate America to move beyond words and toward action.”

In addition to its equity investment in minority-owned banks and CDFIs, Square is also committing $25 million each to a Black Development Empowerment Fund led by the Wall Street-based Local Initiatives Support Corporation (LISC) and Netflix. It will also provide $25 million financial backing for the Keeper’s Fund held by the National Bankers Association, the Washington, D.C.-based trade group for the nation’s remaining 20 Black-owned MDIs.

Square’s remaining commitment will be split three ways to create an $10 million international fund focused on minority and underserved, a $10 million set aside for LISC’s Entrepreneurs of Color Fund, and $5 million earmarked for the company’s bitcoin grant program.

“We believe it is critical to ensure that access to financial services is not reserved for those with privilege. Unfortunately, over centuries, we’ve seen racism and structural inequality codified into U.S. law and advanced by legacy financial institutions,” Square CEO and co-founder Jack Dorsey wrote in the company’s recently released Racial Equity and Social Impact Investment Memo. 

“To push back against this history of discrimination, in 2019 we began working with CDFIs MDIs— organizations dedicated to offering responsible, affordable financial services to communities that have historically seen less investment—by placing deposits in several CDFIs and MDIs across the U.S.,” After successful partnership with a handful of institutions, and recognizing the need to do more, we looked for opportunities to scale our efforts,” said Dorsey said of the Silicon Valley online payment giant that reported first quarter gross profits of $956 million on revenue of $5.06 billion.

Williams thanked Square for its commitment and vision for reaching minority and underserved communities. As Arkansas’ largest CDFI, Southern Bancorp must commit at least 60% of their lending capacity to the same under U.S. Treasury rules.

“This investment will allow us to further expand our reach and impact to underserved communities, undercapitalized small businesses, and underbanked families seeking to build wealth for a better future,” said Williams. “We encourage like-minded companies seeking to leverage investment capital in the fight to close the racial wealth gap and rebuild communities following the pandemic to consider joining us and other CDFIs and MDIs working to make a difference.”

Besides its social justice commitments, Square also recently began a foray into traditional banking after announcing in March that its industrial bank, Square Financial Services, had begun operations after completing the charter approval process with the Federal Deposit Insurance Corporation (FDIC).

Square also announced in March that it had reached a deal to acquire a majority ownership stake in Tidal, the music streaming service owned by Black billionaire and rapper Shawn Carter, known widely as “Jay-Z” and the husband of singer and actress “Beyonce” Knowles. Square said it expects to pay a mix of cash and stock totaling $350 million for a significant majority ownership stake in Tidal. After the deal was closed in early May, Tidal began operating independently within Square, alongside the company’s Seller and Cash App businesses. Carter was also named to the Square’s board as an independent director.

“It comes down to one simple idea: finding new ways for artists to support their work,” said Dorsey,  also CEO of social media giant, Twitter. “New ideas are found at intersections, and we believe there’s a compelling one between music and the economy. I knew Tidal was something special as soon as I experienced it, and it will continue to be the best home for music, musicians, and culture.”

“I said from the beginning that Tidal was about more than just streaming music, and six years later, it has remained a platform that supports artists at every point in their careers,” added Carter. “Artists deserve better tools to assist them in their creative journey. Jack and I have had many discussions about TIDAL’s endless possibilities that have made me even more inspired about its future. This shared vision makes me even more excited to join the Square board. This partnership will be a game-changer for many. I look forward to all this new chapter has to offer.”

For Southern Bancorp, this is not the first Fortune 500 financial institution to partner with Arkansas largest CDFI following last’s summer social unrest and nationwide protests concerning racial inequities, including long-held discriminatory practices in the nation’s bank system. In late October, Bank of America announced it had decided to direct its early $50 commitment toward acquiring approximately 4.9% of common equity in 10 CDFIs and minority-owned banks, including Little Rock-based Southern Bancorp. 

These investments were part of Bank of America’s $1 billion-plus commitment to racial equality and economic opportunity following the George Floyd protests a year ago. 

Other major accomplishments by Southern Bancorp in the past year include the following: 

Southern and Pine Bluff-based Simmons First Bank announced plans to lead the state’s first multi-million-dollar venture fund for black-and Hispanic-owned businesses and investors during the recent virtual Black Founders Summit on Oct. 22. The summit, sponsored by Little Rock-based ReMix Ideas Inc. brought together over 100 black-owned businesses, entrepreneurs, policymakers and local and state government officials in a first-of-its-kind virtual event to support black businesses that have been negatively impacted COVID-19.

Southern and Simmons started the fund with an initial investment of $2 million to kick-start fundraising efforts over the next year. Williams – who has appeared on several national financial news shows, including Fox News Business and Bloomberg Markets in the past year to discuss the bank’s pandemic relief efforts – stressed Southern will be the manager and facilitator of the fund with hopes to raise $5 million over the next year.

On May 17, Southern Bancorp closed on its acquisition of DeWitt First Bankshares Corp. and its wholly owned subsidiary, Arkansas County Bank. The acquisition, which was announced in January 2021, closed on May 14, adding three new bank branches to the Southern Bancorp network, two in Arkansas County in DeWitt and Stuttgart, and one in Sevier County in Lockesburg. Today, Southern now has a total of 52 branch locations in Arkansas and Mississippi to 52 with assets of more than $1.9 billion.

On June 8, Southern Bancorp was appointed to the board of directors of the Little Rock Branch of the Federal Reserve Bank of St. Louis, the expansive Eighth District of the Federal Reserve that is composed of 339 counties in Missouri, Illinois, Indiana, Kentucky, Tennessee and Mississippi, and all of Arkansas. Williams will fill the unexpired portion of a three-year term ending Dec. 31, 2023.

Members of the St. Louis Fed’s board of directors and those of its branch boards in Little Rock, Louisville, Ky., and Memphis, Tenn., are familiar with the economic and credit conditions of their respective regions. Fed board members provide observations— along with the economic data and information gathered and analyzed by St. Louis Fed’s staff— to help ensure that conditions of Main Street America are represented in the Federal Open Market Committee (FOMC). The influential 12-member FOMC panel led by Federal Reserve Chair Jerome Powell sets the nation’s monetary policy, including adjusting interest rates based on current U.S. employment levels and inflation.

On June 15, the U.S. Department of the Treasury awarded $3.3 in COVID-19 relief funds to Southern to respond to economic challenges created by the COVID-19 pandemic, particularly in underserved communities. The awards were announced Monday by Vice President Kamala Harris at the White House with Treasury Secretary Janet L. Yellen. They are part of more than $1.25 billion awarded to 863 CDFIs made through Treasury’s CDFI Rapid Response Program (CDFI RRP) and will provide necessary capital for CDFIs.