It didn’t merit many headlines in the mainstream press, but the passage of the Emergency Capital Investment Program in December 2020 as part of a COVID stimulus package may end up having a profound impact on the community development financial institutions it was designed to help.

Under the program, the Treasury Department will provide $8.3 billion in funding for CDFIs and minority depository institutions to support small businesses and consumers in underserved areas. For many eligible banks, the result is a windfall of capital at a time when they desperately need it—and a significant chance to chart a new future for their institution.

To learn more about how ECIP will impact CDFIs, MDIs, and banking in general, I recently sat down with Darrin Williams, CEO of the Arkansas-based CDFI Southern Bancorp, for an episode of Banking with Interest. We also discussed the biggest challenges facing Southern and how Darrin aims to sustain the momentum from the broader social awakening that took place in 2020.

What follows is our conversation, edited for length and clarity.

Tell me about Southern Bancorp.

We’re a CDFI that was founded in the mid-80s. Since then, we’ve become a $2.5 billion institution with 54 locations across the Arkansas Delta, the Mississippi Delta, and Shelby County, Tennessee. Our mission is to create economic opportunities and help underserved people build wealth—not just through loans, but also through education. We focus on supporting entrepreneurs and creating jobs in the markets we serve, and we work on public policy that removes barriers for low-wealth people. That's who we are.

How has the pandemic changed the market?

We serve some of the most persistently poor communities in the U.S., where at least 20% of the population has lived below the federal poverty line for 30 years or more. These communities were already suffering pre-Covid, but the pandemic exacerbated issues such as low educational attainment, low unemployment, and a lack of economic opportunities, to name a few. Without investment, those communities will have a much harder time recovering.

One bright spot has been ECIP, which has placed about $8.7 billion dollars into CDFIs like yours. Southern announced it was eligible for about $237.5 million—do I have that right?

Actually, some CDFIs chose not participate, so we ended up receiving $250 million.

Just to put that in context, you told me on a panel recently that you’d been working for years on a $50 million investment. This is $250 million all at once. How does that change Southern?

It's transformational. Since I came to the bank, before receiving the ECIP funds, we’d grown from $1 billion in assets to more than $2 billion. But that growth had come slowly. Getting this much capital at once allows us to think more broadly about serving disadvantaged populations. We’re still facing challenges, but capital is not one of them. At least, not for the foreseeable future.

Post-ECIP, what's Southern’s growth strategy?

ECIP will allow us to continue to grow organically and through M&A. It will allow us to think about bigger deals and new markets that were previously out of reach. But it’s important and incumbent on us to use our ECIP resources responsibly. We have to balance margin with mission.

For instance, we plan to open a branch in Little Rock’s 12th Street Corridor, a community that hasn’t had a bank in decades. We're moving into a facility that’s part of a substation, meaning the building has a police station but the bottom half of the facility is empty. The city really wanted the private sector to bring amenities to that community, so we’re bringing a bank.

We’re also partnering with the University of Arkansas Medical Science Campus—which is going to teach culinary medicine and sell fresh fruits and vegetables at the facility—and with Philander Smith College, a local HBCU that’s going to house its criminal justice program there.

What kind of impact do you see ECIP having beyond Southern?

I hope we get greater scale. CDFIs that received ECIP funds won’t get a break just because we have great missions. We still have to abide by the same regulatory requirements as other banks, which are costly. If you've got scale, you can spread those costs out. We’re also going to have more impact. There's a lot of work to be done, and this capital is going to allow us to do it and attract more attention—and, hopefully, more people—to the cause.

Is there a fear that the CDFIs that didn't receive ECIP will be left behind?

Unfortunately, there is. Just because a CDFI didn’t get ECIP funds doesn’t mean it can’t be successful, but ECIP is a huge benefit, and the CDFIs that didn’t get it will have limited opportunities and ability to scale.

Could this capital turn some CDFIs into acquisition targets?

Sure, though CDFIs with limited ability to scale will be targets whether they got ECIP or not. Twenty years ago, there were 15,000 banks in America. Today, there are less than 5,000. There's a reason for that: Scale matters.

After the murder of George Floyd in 2020, a lot of corporate money flowed into CDFIs and MDIs. Separate from ECIP, what's been the impact of that?

It made corporate America think more seriously about race relations. CDFIs like Southern, which serve predominantly rural communities where there aren’t many large banks with CRA overlap that could invest in us, now have the attention of those large banks and other corporations. Bank of America and JPMorgan have invested in Southern. Large regionals such as Regions Bank, Simmons Bank, and Cadence have invested in Southern. Corporate partners like Block (formerly Square) have invested in Southern.

Many of these banks recently held conferences for the CDFIs and MDIs they've invested in to share knowledge and explore opportunities to work together. These kinds of partnerships are only going to make us stronger and more profitable. Hopefully we can sustain the momentum. We need to make sure that this is a movement, not just a moment.

How do you do that when culture is always moving to the next thing? Obviously CDFIs and MDIs became more visible during the social-justice awakening that occurred in 2020, but how do you make sure they don't fall off the radar?

We have to get better at telling our stories. People drive past banks every day and don't realize that not everybody's welcome in the branch, or that not everybody can access capital. That’s where we come in.

We've got to spread the word about people like Vernetha Jackson, a 63-year-old first-time homebuyer who’d always dreamed of owning a home, but had no path to doing that before coming to Southern. We put her into an IDA program and a match savings program, and she worked with one of our HUD-certified housing counselors to learn about all aspects of homeownership. Now she owns her home and is building wealth. She’s got a place for her kids and grandkids to inherit, so that they can build wealth, too.

We need to tell the stories of business folks. One family here in town had been operating an events center in Little Rock for years. People always knew they were good business owners. Yet when the building they were renting came available for purchase and they wanted to buy it, they went to seven different banks trying to get a loan. Every one turned them down. Then they came to Southern.

It took a while—the pandemic wasn’t the best time to buy an events center—but we were able to get them an SBA loan. They now have a wonderful new facility with an events center and a charter school. Not only are they running a great business, but they’re also building equity. There are countless stories like that.

What’s the biggest challenge facing Southern right now?

A big one—not just for Southern, but for the whole industry—is how technology is changing banking. We have to keep up with all the innovation. No matter our mission, customers still expect quality service.

How do you think Southern specifically, and the CDFI industry in general, will change over the next 2 to 5 years?

The future is bright—I think both Southern and the industry are going to have a deeper, broader reach. People are increasingly wanting to partner with banks that do meaningful work. Recently, I was asked to be the keynote speaker for the community banking conference the Federal Reserve has every year. I think that was the first time the Federal Reserve has had a keynote speaker from a CDFI, so that’s a great sign.