Darrin Williams: Behind the Scenes at an Innovative CDFI

Homeownership, savings and holding down a job are three keys to financial well-being and moving out of generational poverty, so that’s what Southern Bancorp focuses on in its home Mississippi and Arkansas Delta region, one of the nation’s poorest. Southern CEO Darrin Williams talks about the bank’s high-touch focus on pairing in-depth financial counseling with a Bank On-certified checkless checking account to help reach the unbanked in the Delta. A former securities lawyer and state legislator, Williams joined Southern Bancorp in 2013. In 2020, he became a prominent advocate for coronavirus relief funding in America’s rural areas and was recognized by Bloomberg as one of the 50 most influential global leaders in business for 2020. Listen to the full interview

QTell us how Southern Bancorp got started.

AWe’re really at the genesis of the CDFI Fund itself. We were founded in the mid-1980s by then-Gov. Bill Clinton, looking for ways to stimulate economic activity in the Delta region of Arkansas—one of the most persistently poor communities of the United States. It had a largely agricultural base when cotton was king. It was a vibrant community, but as farms mechanized, we didn’t need as many people to bring in crops, and so over the years people left that community in large out-migration. There was not a lot of economic activity, so he was trying to find the ways in the 1980s to stimulate activity.

He came across probably the first development bank in country—a bank called South Shore Bank on the South Side of Chicago. Shore Bank was founded to really focus on racial equity, intentionally operating in South Side Chicago because they saw that community suffering from redlining. What Gov. Clinton saw was this bank making tremendous strides—homeownership rates are going up, small business startups are going up, jobs are being created. And he said, “Man, if that works in an economically depressed urban environment, I wonder, will that work in an economically depressed rural environment that also is largely African American?”

As governor, he pulled in several philanthropic and business leaders. Rob Walton [son of Walmart founder Sam Walton and former Walmart chairman]was on our first board and the Walton Family Foundation was one of the original investors in Southern. The Winthrop Rockefeller Foundation [founded by Winthrop Rockefeller, former governor of Arkansas and son of John D. Rockefeller Jr.]was also one of the founding shareholders, and both the Walton Family Foundation and Rockefeller Foundation still are to the largest investors in the organization. People came together and put this organization, together with about $10 million in seed capital. And today we’re at $1.6 billion in assets serving 49 locations throughout Arkansas and Mississippi.

TOOLKIT Learn more about ABA’s commitment to financial inclusion and joining the Bank On movement at aba.com/bankon.
And when Gov. Clinton becomes President Clinton, he takes his work with Shore Bank and Southern and says ‘I want to create at the Department of Treasury a fund that will be a public-private partnership and allow for investments into banks by the institutions that really want to serve underserved areas. His idea was to have 100 of these banks across the country—we’ve grown to about 1,000-plus banks, credit unions, loan funds and even venture funds that are seeing it work in underserved areas across America today.

QHow does Southern Bancorp work with other banks, both in your footprint and outside your footprint, to address some of these financial inclusion challenges in the Delta?

AWe are proud to work with a number of different partners. We always say we’re not the only game in town. We want to partner with whoever wants to partner with us. What’s unique about Southern is we’re really more than just a bank. We are really three CDFIs in one. So we have the holding company, the $1.6 billion dollar bank—both CDFIs—then we also have a 501(c)(3) CDFI loan fund in the bank: Community Partners.

It provides small-dollar lending, but it also provides really, really high-touch financial development services in counseling. We’ll have certified homebuyer counselors there. You know, very wealthy people have wealth advisers. Folks who are low-wealth also need wealth advisers. And so these counselors are more like wealth advisers.

Our work focuses on building a network around three strategies: homeownership, job training and retention and savings—because those three things have been proven to help build net worth. All three move a person, a family, out of generational poverty.

We partnered with a number of folks, including other banks in our region, to do that. We have several banks that have equity investments in Southern—Bank of America, BancorpSouth, Regions Bank, Simmons Bank. Of course they receive Community Reinvestment Act credit for those equity investments and receive a regular quarterly dividend.

They’re helping us to expand our impact and our reach. We have other family foundations and philanthropic investors. We also have regular people who’ve invested in our organization, people who really care about impact, and so we provide a very deep social return, really helping to let people out of poverty. We also provide a strong financial return as well.

Since the loan fund does not have a deposit base for which it makes loans, it receives program-related investments, and so an individual or organization or corporation will make usually a very, very low-interest loan. It may be $10 million for 10 years, and then the loan fund will take those dollars and re-lend them in our footprint to deserving customers. The spread is what keeps the nonprofit operational. Since the loan fund is not a regulated bank, we can be a very flexible in the types of loans and underwriting criteria that we are doing.

QHow are you reaching the unbanked and helping to overcome suspicions of the banking industry?

AIn Mississippi, there are more storefront payday lenders than there are McDonald’s, Burger Kings and Starbucks combined. So we have to try to meet our customers where they are and try to make them comfortable with coming into a bank. Our credit counselor actually go to people. We hold financial education workshops and classes at churches and community centers, and one-on-ones with individuals we serve.

We are also part of the Bank On movement. Our Bank On-certified product is a checkless checking account. You cannot overdraft this account. It’s a good way for people to enter or re-enter the banking space. One common reason people are unbanked is that they don’t trust banks; they don’t quite understand the fee structure. And so with this product, for a very, very low fee, you get access to our mobile products, to our deposit products, all the things that any fully banked person would have, but you know exactly how much it’s going to cost. So we try a number of ways to meet the customers where they are and to invite them into the banking space, because we know that a basic bank account is really the foundation of building wealth over the course of a person’s life.