Southern Bancorp gets third “Big Five” cash investment from Wall Street financial giants
October 4-10, 2021
By The Daily Record Staff
Arkansas’s largest Community Development Financial Institution (CDFI) received its third major cash investment from a Big Five, Wall Street financial institution in the aftermath of the George Floyd protests last summer.
On Monday, New York-based JPMorgan Chase announced additional investments and commitments exceeding $100 million in Black, Hispanic and Latino-owned and -led Minority Depository Institutions (MDIs) and CDFIs across the U.S., including Southern Bancorp Inc. in Little Rock.
Less than one year since announcing its $30 billion racial equity commitment, JPMorgan Chase said it has more than doubled its original $50 million pledge to MDIs and CDFIs by investing in a total of 14 diverse-led financial institutions, impacting more than 87 communities across 18 states and the District of Columbia.
JPMorgan Chase said it has increased its commitment after seeing the impact of its initial $40 million investment in four MDIs earlier this year. To date those MDIs have used the capital to hire staff, invest in technology enhancements and expand into new markets. Diverse financial institutions play an important role in providing vital financial services, such as mortgages and small business loans, to underserved communities, said the nation’s largest banking conglomerate with $3.7 trillion in assets.
Southern Bancorp is one of fourteen to receive a multi-million-dollar equity investment as part of the company’s $100 million commitment to minority-owned and -led financial institutions, which is in turn part of the company’s $30 billion racial equity commitment. Investment details were not disclosed.
“We’re focused on strengthening these critical institutions by providing additional access to capital, connections to institutional investors, and offering mentorship and training opportunities,” said Doug Petno, CEO of JPMorgan Chase’s commercial banking operations. “We know that every dollar invested in MDIs and CDFIs has a multiplying effect in our communities and we’re proud to help advance the sustainable change needed to close the racial wealth gap across the country.”
In addition to direct equity investments, MDIs and CDFIs working with JPMorgan Chase such as Southern Bancorp will also become J.P. Morgan clients and have access to the firm’s expertise, solutions and network, including more than 16,000 of the firm’s ATMs beginning Nov. 1. Chase said they will not charge a fee for participating MDI and CDFI customers who make a withdrawal at a company-owned ATM.
The fourteen Black-owned banks and CDFIs that are partnering with JPMorgan Chase will also receive customized training and advisory support from the firm’s Advancing Black Pathways Fellows and Service Corps programs.
“While many of corporate America’s leaders issued statements of condemnation after the murder of George Floyd, a select few made significant pledges to put their vast resources to work through organizations and institutions well-suited to serving communities of color,” said Southern Bancorp CEO Darrin Williams. “I applaud JPMorgan Chase for their significant commitment, and in turn we pledge to leverage their investment into developing new wealth building opportunities for minorities throughout our markets and expanding our impact into new communities.”
Additionally, JPMorgan Chase announced that investment recipients would also receive access to Chase’s 16,000 ATMs beginning November 1st, 2021, allowing Southern Bancorp customers to make withdrawals free of charge.
JPMorgan Chase also said its equity stake in Black banks and CDFIs is one of the firm’s initiatives to help close the racial wealth gap. Other initiatives include the recently announced $350 million a five-year global commitment to grow diverse-owned small businesses and help create a more inclusive recovery from the COVID-19 pandemic, which also encompasses $42.5 million to help scale the successful Entrepreneurs of Color Fund (EOCF) program.
Earlier this summer, JPMorgan officially opened the first of four planned bank branches in Central Arkansas, marking an important milestone in its Wall Street’s expansion plans as the first national bank to have a retail presence in all states in the contiguous U.S. under the Chase brand. Nationwide, Chase serves more than 60 million U.S. households with a broad range of financial services, including personal banking, credit cards, mortgages, auto financing, investment advice, small business loans and payment processing.
Before the Chase deal, Southern Bancorp also struck a similar partnership after Charlotte, N.C.-based Bank of America’s announcement in early September 2020 to make $50 million in direct equity investments to CDFIs and several of the nation’s top MDIs. That financial promise was part of the nation’s second largest bank’s $1 billion, four-year commitment to advance racial equality and economic opportunity, first announced amid nationwide protests following the George Floyd shooting on May 25, 2020.
Later on Oct. 26, 2020, Bank of America announced it had decided to direct its early $50 million commitment toward acquiring approximately 4.9% of common equity in 10 CDFIs and minority-owned banks, including Southern Bancorp. Bank of America CEO Brian Moynihan said the equity investments would foster benefits across multiple states and in the communities where CDFIs and smaller minority banks serve through lending, housing, neighborhood revitalization and other banking services.
Williams, who was appointed last month to the 15-member White House advisory council that advises President Joe Biden on the nation’s CDFI Fund, said Bank of America’s equity stake in Arkansas’s CDFI allows the Wall Street banking giant to put “skin in the game” with Southern Bancorp to serve minority and underserved communities. According to the U.S. Treasury Department, there are approximately 250 MDIs and CDFI banks insured by the FDIC with combined capital of less than $40 billion. Consequently, modest investments at any one of these institutions can have an enormous impact on their operations and the communities they serve.
“Quite honestly, most banks in America don’t need deposits. What you really need to grow is capital, and because of the power of leverage in a bank, equity investment in bank can be leveraged anywhere from five to 10 times,” said the acquisition-minded Williams, who has said in the past that he hopes to double Southern Bancorp total assets to more than $3 billion in the next decade.
In August, West Coast banking giant Wells Fargo also announced that it was handing out a total of $1.25 million in grants from its Open for Business Fund to Southern Bancorp and Communities Unlimited in Fayetteville, another Arkansas-based CDFI with operations across the state.
Wells Fargo said the Open for Business Fund is a $420 million small business recovery effort across the U.S. to help entrepreneurs rebuild and recover from the COVID-19 pandemic. The initiative focuses on three key areas: increasing access to capital through CDFIs, technical assistance, and long-term recovery and resiliency programs.
In April, Wells Fargo also announced a new pledge of equity investments of $50 million in five so-called Black-owned MDIs. Nationwide, the San Francisco banking giant has committed up to $1 billion in philanthropic capital to address the U.S. housing affordability crisis through 2025. The company has also pledged to create 250,000 Black homeowners by 2027 through lending $60 billion for home purchases, increasing the diversity of the sales team and supporting homebuyer education and counseling.
Still, the nation’s largest mortgager and fourth largest bank by assets is still attempting to recover from several scandals that led to the firing of two Wells Fargo CEOs and calls by top U.S. lawmakers for the banking giant’s operations to be dissolved.
The biggest of Wells Fargo’s corporate crimes involved millions of fraudulent savings and checking accounts set up on behalf of banking clients without their consent that was discovered in 2016. Other Wells Fargo lawsuits and regulatory fines over the last two decadeshave involved everything from adding insurance coverage and excessive fees to auto loan customers to overcharging minority, military and senior homeowners with higher fees and interest rates for mortgages and other financial products.
The California-based banking institution also has seen a steady stream of lawsuits nationwide alleging that the bank targets Black communities and disadvantaged borrowers with riskier loan and mortgage products compared to white customers.
On Sept. 9, however, the federal Office of the Comptroller of the Currency hit Wells Fargo Bank with a $250 million civil money penalty based on the bank’s unsafe or unsound practices related to deficiencies in its home lending loss mitigation program and violations of the 2018 consent order on the fraudulent savings and checking scheme. Unlike Bank of America and JPMorgan Chase, the nation’s two largest financial institutions, Wells Fargo does not have a retail presence in Arkansas anymore.