Reliabank expanding in Sioux Falls as family business enters third generation

His eventual business, Farmers State Bank of Estelline, was established by Fred Beskow in 1920 with $25,000 cash. Originally located in South Shore, it moved to Strandburg and then Estelline, where it became state chartered in 1944 – the same year Walter Johnson became managing officer.

Eventually, Walter Johnson approached Beskow about buying the business. Beskow, who was in his 60s, was willing to sell, but only if Walter bought it from his estate.

They agreed, but it would take 24 years to complete the transaction. Beskow lived into his 90s.

In 1968, Walter Johnson became the owner, becoming the first generation in what would become a family banking business.

Second-generation leadership

Walter’s son David learned the banking business as a teenager.

The youngest of five siblings, he remembers cleaning out bank ashtrays when he was 14 and later worked as a teller during school vacations.

He didn’t anticipate going into the business, but a Fourth of July trip home during graduate school changed his thinking.

“My dad told me he’d decided to sell the bank,” he said. “And as he was saying who he was going to sell it to, I felt a little sense of remorse and thought maybe I could try. He was overjoyed.”

So Johnson unenrolled for his fall semester and started at the bank.

“The minute I’d said I was coming home, my dad got it in his head that we needed to expand,” he said. “So he and I bought property across from the Watertown post office. We had a new property, we had debt and no life insurance.”

The following March, Walter Johnson died unexpectedly at age 68.

Thrown full-on into the business, with large financial obligations, Johnson got to work.  One of his first major decisions was to sell the Watertown property he and his father had just purchased.

Under Johnson’s leadership, the family bank flourished. In 1991, the bank acquired neighboring banks in Hayti and Hazel. In 1997, a new Watertown location opened, and the bank changed its name from Farmers State Bank to Reliabank.

“We wanted to make sure people realized we weren’t exclusively for farmers,” Johnson said.

The 2000s brought a new branch in Hartford and an acquisition that took the bank into Humboldt and Tea.

In August 2015, Reliabank opened a mortgage office in Sioux Falls on West 57th Street. Its first full-service branch in the city is under construction on 85th Street west of Minnesota Avenue and is expected to open after Labor Day.

“South Dakota community banks of our size are not very common. They’re either bigger or smaller,” said Johnson’s wife, Jan, who has been on the board since 1991.

“It’s big enough that we can offer services everyone else does, but we’re still small enough that we pride ourselves on knowing our customers. It’s not a cookie-cutter bank. We get to know the people who bank with us, what their needs and dreams are and how we can help them be successful.”

Family ties

There now are nine branches and 85 employees of Reliabank, and family remains at the center of the company.

Jan Johnson takes an active role, chairing the audit committee, serving on the technology committee, overseeing communications, editing the company newsletter and acting as a sort of “liaison for employees and human resources, being a confidante and advice-giver,” she said.

Their older son, Reid, has worked at the bank for 10 years. He has a marketing background and also grew up working as a teller at the Estelline branch during high school and at another bank during college.

Their younger son, Ethan, is a business banker at Reliabank and took over managing the company’s bond portfolio from his father. He also worked in customer service and loan review at Reliabank during high school and college, and had his first full-time job at another bank.

Having both sons experience other banks was by design, Johnson said.

“I wanted them to understand the competitive nature of the marketplace,” he said. “And I wanted them to get a feeling as to what it was to be an employee as I did when I was working for my family.”

The newest family additions are Johnson’s great nephew, Zach Scott, a 2018 University of Sioux Falls graduate and personal banker, and his nephew, Mark Lee, who has held leadership roles in Sioux Falls at University Center and the Sioux Falls Area Chamber of Commerce. Lee became Sioux Falls market president at the beginning of 2018.

While they considered working together for years, the timing wasn’t right for Lee until now. With the new bank opening in Sioux Falls, the proverbial stars aligned.

“I can’t think of a better last chapter in my career than working in a bank that’s meant so much to my family over so many years,” Lee said.

The bank has always had a small-town feel, he said, “and we don’t plan to lose sight of that in Sioux Falls – remaining true to our heritage as a community bank interested in helping the community flourish and developing relationships with organizations and schools and community groups that demonstrate we want to grow together with you.”

Since joining the family business, Lee said he has noticed a strong commitment to developing employees and a sense of working together to meet customers’ needs.

“And I think it’s outstanding,” he said. “It’s almost an extension of family. It really feels that way.”

That’s a point of pride among the owners too.

“I’m particularly proud of our staff,” Jan Johnson said. “I think the way we train and treat staff leads to very low turnover. Our staff buys in because they feel like Reliabank is their bank.”

Looking toward the future

Johnson bought out his siblings’ shares in the business in 1988 and 2002. As he looks toward the future, the Prairie Family Business Association is a key resource.

The Prairie Family Business Association holds two alternating retreats: the Next Generation Retreat being planned for Summer/Fall 2022 and the Family Business Retreat scheduled for August 11-13 at the Paul Nelson farm near Gettysburg.

“We really got serious about it the last four years,” Johnson said. “The most dynamic thing we’ve done has been the family meetings at the Paul Nelson farm.”

Last fall’s event helped connect the Johnsons to a consultant “who identifies much more succinctly the generational issues that can probably be a little fuzzy between parents and children,” he continued.

The Johnsons also have found regular family meetings with an agenda to be beneficial as they look toward an eventual transition from active participation at the bank.

“Maybe the best thing it helps is communication,” Jan Johnson said. “That’s absolutely essential to a smooth transition, and it’s not always easy when family is involved.”

Before working with Prairie Family Business Association, the bank didn’t have a formal succession plan.

“And right now, we haven’t got it all nailed down as to when I’m going to exit, but we do have a succession plan that has been formalized not only for the family but for bank regulators,” Johnson said. “I even got complimented on it by the FDIC.”

In addition to participating in the retreat, the Johnsons also volunteer their Watertown location as a training site where other Prairie Family Business members can come to participate in remote education offered through Lunch & Learn webinars.

“We know schedules are really tight for family businesses, particularly farm families, but I encourage anyone who would like to come,” Johnson said. “We have some loyal participants and really find it valuable.”

The Johnsons are a valuable asset and example for other family businesses, said Laura Schoen Carbonneau, executive director of the Prairie Family Business Association.

“It’s wonderful to see Reliabank preparing to transition to its third generation,” she said. “They have created a wonderful company culture that clearly has created an exceptional workplace for family and nonfamily alike.”

To learn more about the association or the upcoming retreats, click here.