2016 Rising Stars in Banking: Darin Johnson

Since Darin Johnson took over as president and CEO of Security State Bank, Sutherland, Iowa, in 2004, he has taken the bank from 34th for return on assets to the top three for ROA in the state..In 2015, the $118 million bank earned a 2.60 percent ROA and a 28.75 percent return on equity; the industry average for banks under $150 million in assets was 0.90 percent ROA and 7.50 percent ROE in 2015. The average for Iowa banks is 1.19 percent ROA and an 11.10 percent ROE..NorthWestern Financial Review is honoring Johnson as a Rising Star in Banking for 2016, along with seven other bankers.."Darin has taken a good bank and made it stronger," said Jim Johnson, Darin's father and chairman of the bank's board. Jim Johnson bought Security State Bank in 1982 with a partner. "He has grown the bank at a very safe but reasonable rate during a time when most banks have not grown. He has made the bank a work-friendly place for its staff and customers while empowering the top staff to make decisions on their own.".Growing up, Johnson saw the difficulties in ag banking in the 1980s. He wasn't sure he wanted a career in banking. At first, he attended Iowa State University, Ames, with the intention of getting an engineering degree. Not too far in, though, he decided to change his major to finance and marketing. "That was the first time I thought seriously about going into banking," he said..After graduating from Iowa State in 1996, Johnson worked for UMB Bank in Kansas City until 1999. While there, Johnson and his father tossed around the possibility of returning to the family bank, but he never felt pressured to return..Johnson's wife Jenny also is from the Sutherland area of Iowa, and the two had always planned to move back. When she got a job in Sutherland in 1999, Johnson came home to work as a loan officer for Security State. Johnson completed the Graduate School of Banking at the University of Wisconsin, Madison, in 2004. That same year he bought his father's 50 percent stake in the bank, which had $54 million in assets at the time..After moving headquarters to Sutherland from Paullina, Iowa, in 2006, Johnson bought out his father's partner in 2009. With controlling ownership in the bank, he began work on the strategies that have driven Security State Bank's performance..In 2009, Johnson brought the bank's key lenders into ownership, authorized them to make credit decisions and to help farmers even when a loan request was not in the works. "We have two of the best ag lenders we could have ever asked for," Jim Johnson said. "Darin has empowered them to make decisions without going to the loan committee; they make every credit decision and they decide the structure. It has allowed us to be very competitive from a relationship banking standpoint.".Bringing lenders into ownership coincided with Johnson's decision to go into ag lending. It also coincided with the run-up in ag commodity prices and farmland values. The bank found loan growth by embracing the one-stop shop model. It differentiated itself from other lenders by helping customers analyze their financial decisions to ensure their business plans would work..Security State Bank has earned its high ROA and ROE with increased income from its loan growth. The bank has no non-current loans. The average Iowa bank has 0.55 percent noncurrent loans. Johnson gives credit to the experience of his lenders and of his father in managing risk. "If only I had a nickel for all the times Dad brings up the 1980s," Johnson joked. "Dad knows what the really ugly workouts look like. Just having him here with his having managed the bank through the 1980s is a very positive asset.".Loan growth also has powered higher income because of the bank's funding strategy, developed by Johnson, which uses leverage to meet loan growth. Since 2009, Security State Bank's loan to deposits ratio has climbed steadily from 107 percent to 152 percent at year end 2015.."We are in a market where our liquidity needs have outpaced the deposits available. Darin has managed the bank so that our funding meets our loan growth," Johnson said. "One of his major contributions has been managing and measuring the risk on the liquidity side of the bank very well. He was willing to take the liquidity risk and developed the stress testing and controls to manage that risk.".The third contributor to Security State Bank's success is its efficiency. The bank runs at a 34.32 percent efficiency ratio compared to the average of 61.84 percent for banks in Iowa. "We do scrutinize expenses closely," Darin Johnson said. "Most of the efficiency, though, comes from having the best staff and officers that a banker could ask for.".Other 2016 Rising Stars in Banking honorees:Andy Schornack, Flagship Bank, Eden Prairie, Minn.Steven Erickson, Oregon Community Bank, Oregon, Wis.Krista Heiss, NebraskaLand National Bank, North Platte, Neb.Darla Kauffman, First State Bank of Middlebury, Ind.Dave Mason, First International Bank & Trust, Bismarck, N.D.Bryan Toft, Community Bank Owatonna, Minn.Joel Rochleau, Security State Bank, Springville, Iowa