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Brian L. Johnson

Choice chooses growth: A Q&A with Brian L. Johnson, Choice Financial Group’s CEO

Editor’s note: From its start as a merger of four rural banks in 2001, Choice Financial of Fargo, N.D., has grown to be a community bank with 19 locations in 17 communities in North Dakota and Minnesota.

In this interview, Prairie Business talks with Brian L. Johnson, Choice Financial’s CEO and board member, about the bank’s history and plans for future growth.

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Q. Choice Financial began in 2001 with the merger of four local North Dakota banks. What decisions helped 1+1+1+1 to add up to more than 4?

A. At the time we merged, we had 60 employees and $160 million in assets. However, our message to employees consisted of two main themes:

● This was a merger for growth, not cost savings, and we wanted to gain new customers, especially in the ag sector, which we have a lot of knowledge about and expertise in.

● If we were going to be successful, we had to respect each market’s strengths and leadership in a collaborative fashion – rather than one market or one leader making all the decisions. This took time and effort, but it created more buy-in from the employees in having the organization meld together well.

Q. Choice grew "organically, then by acquisition," as one writer put it. Talk about some key moments in that transition.

A. Our intent to grow by acquisition came with me being named to CEO in February 2011. We had some success branching into the North Dakota cities of Fargo and Grand Forks, but that growth was leveling off.   

It is my belief that employees and customers want to be part of a successful, growing, progressive organization. Our acquisitions have felt more like partnerships where our team members work together to build up resources, and this continually changing and evolving environment creates new opportunities for everyone.

In the early stages, our team worked tirelessly on all angles of lending, technology and leadership skills in order to put together a “playbook” on how to successfully navigate through an acquisition. We were well aware that four out of five merger/acquisitions overpromise and underdeliver on the expectations of employees, customers and shareholders.  

Our management team took it as a direct challenge to outperform expectations.  

The plan is one thing.  The key is to make a deal come together, and this has two key factors:

● First, we need to be able to show the potential partner that the value is built post-acquisition, rather than focusing on what they sold for.  

Everyone gets focused on the sale price, because that’s what always gets asked. But if you can find some partners who’ll stay invested or reinvest, the conversation starts to shift to what value will we together create going forward.  

This puts the focus back on doing what is best for customers, employees and shareholders.   

● Second, much like Choice in 2001, the new teams/entities must be willing to meld together in a collaborative leadership effort and make progress over expecting perfection.

The results need to be judged over the long term or full nine-inning game, rather than focusing on every detail and judging inning-by-inning.  

Mergers and acquisitions require heavy lifting. It’s not easy, and takes significant commitment and buy-in from the board, shareholders, and employees to make it an effective strategy.

Q. Describe the bank's "geographically scattered leadership" and the role that it plays.

A. We are structurally unique, with executive leadership in Bismarck, N.D., Langdon, N.D., Grand Forks, Fargo and now Minneapolis. This can create challenges, and we recognize that we can’t have what are called “collision conversations” that occur spontaneously when folks run in to each other in the hallway and start a conversation.

However, our structure pays dividends locally as leaders build rapport with employees and customers, which keeps us in tune with what’s happening in our markets. This falls in line with our “PeopleFirst” approach: creating a culture to better the places we live, supported by employees who know they are empowered to make a difference for our customers, for our families and as leaders in contributing to causes that are important to our communities.

I wouldn’t trade the experience of this unique structure as it forces me to grow. It teaches me to delegate and trust because I can’t be there for every situation, question or decision.  

At times, it may not be as convenient, but I believe it has created a culture that brings us back to our roots, and keeps our focus on the employees and customers who have helped us grow into the regional presence we are today.  

Q. In 2017, Choice set out to raise $100 million for further expansion opportunities. First, tell us about the challenge of raising that money locally, rather than from a public offering or money centers on the coasts.

A. For both the organization and myself, this was a whole new chapter!  

Choice has been blessed with tremendous successes, and when it goes well, it can be a challenge for a board and leadership to carve out a completely new path.  

Over the past few years, we’ve had a lot of offers from outside (East/West coast) investors to provide us capital for growth opportunities. However, our board recognized our heritage – how Choice was built by investment from local neighbors – and wanted to stay true to our origins. Board members decided that if we are raising money, we’ll do so locally again.  

Our target was set at $100 million.  Our market presidents and other team leaders made the contacts and set up the meetings for three dozen presentations throughout North Dakota in under six weeks.  

Personally, it was a great experience, because in six short weeks, I had the privilege of meeting so many incredible people across the state, a task that would’ve taken me five years to accomplish.  

In the course of one day, I started out in LaMoure, N.D., went to Jamestown, N.D., then to Dickinson, N.D., and then ended the evening east of Mahnomen, Minn. – making four stops in one day.

I joked that I now know why a preacher gives only a couple of sermons in a week … because when you do 36 in six weeks, it can really become a blur.

We were overwhelmed and humbled by the response, and filled the offering two days before Christmas. And to our delight, we have a substantial waiting list of potential investors who were not able to get into this offering.     

This showed me that we have a pretty good story and track record, and yes, people saw it as a good investment opportunity.  

But to raise that amount of money privately and locally shows what Choice does for the business and ag economy in the region, and in turn people wanted to support that.  

People have a lot of investment options, and the stock market has done well over the past year. So it is great to see individuals step up to a private company and say, “I believe in them and what they are trying to do.”

Q. Second, what's the purpose of the fundraising? In other words, how will the money be used?

A. When we put together the raise, the offering indicated that we wouldn’t take the money unless we needed it for a deal. This had a two-fold effect: it wouldn’t force us to spend the capital unless a deal was right, and it sent a message to any seller that our check was good.  

We conveyed to our new investors that our goal is to continue growing while keeping an organization that is in touch with and can make decisions at a local level.  

Our vision is to grow within the six-state region (North and South Dakota, Minnesota, Wisconsin, Iowa and Montana), in areas where we are specialized in business and agriculture services, while at the same time providing clients other financial services to meet all their financial needs.

If we weren’t able to make a deal, investor commitment would expire in December 2018.  Fortunately, we found a partner in Venture Bank – a local, private bank operating in the Twin Cities which coincidentally was started in 2001, just like Choice.  

This partnership will grow our asset base by about 60 percent to around $2.1 billion, and take our employee count up about 40 percent to more than 350 employees.  

Q. You're a Jamestown College (now the University of Jamestown) graduate with a degree in business management and economics. What key lesson did you learn in college that you still think about today?

A. I graduated in the late ’90s from the University of Jamestown, and I think they did a great job of setting expectations that college was not a finish line, but instead a bridge to the professional world.  

Their work study program placed me in an insurance agency and then a bank, which showed me that my degree was a doorway for opportunity, not entitlement.        

Q. You've also served on the Minneapolis Fed's Community Depository Institution Advisory Council and have represented the Ninth District in meetings in Washington. What did that experience teach you about community banking in the Midwest and nationwide?

A. I was honored to chair the regional Federal Reserve board, which allowed me to meet with the Board of Governors twice a year with 11 other community bankers from around the country.  It was a unique experience as I served under Chair Janet Yellen last year, and under Chairman Ben Bernanke the first two years.

In Washington, if politics isn’t involved, officials can care more about the people in the country over votes and power, and good things can get done. Chair Yellen and the board understood and cared deeply about what community banks do for the country in terms of small business and rural lending.  

I’ve served in a number of community banking roles that involve Washington, but it was truly great to be involved with the Fed, as the people there recognize how the government process has to work, while also knowing that their mission is driven by what works best for the citizens.

If the rest of Washington used this as a basis for decisions, it would make the country much stronger, and there would be far less division.

That is why I’m happy to come back home to the Midwest – even in January – because here I work with people who make decisions using PeopleFirst style of thinking, and who value their communities over power in politics.