Sage of Farm Finance

Denny Everson was impatient. Long-term, fixed-rate financing for farmers was stuck in the dust of a receding farm crisis. Federal Land Bank financing had subsided with the 1987 bailout of the Farm Credit System, and the post-bailout FCS looked more like a competitor than a partner. Everson was frustrated by his lack of options for providing long-term fixed-rate loans to farmland customers of his Yankton, S.D.-based First Dakota National Bank. He wanted to "keep that one-stop-shop look and still provide customers with fixed-rate financing for the long term.". Everson's answer—Dakota Mac—is today seen as a singularly successful venture into secondary markets for farm loans. It is one of many reasons why the American Bankers Association will present Everson with its annual Bruning Award for achievement in ag banking at its national agricultural bankers conference in Des Moines next month.. Dakota Mac is "kind of my baby," Everson said. He had been hired by First Dakota's chairman and CEO Larry Ness in 1984 as a one-man ag-lending department. Everson had tried other ways of delivering long-term, fixed-rate financing for farm customers, including a correspondent arrangement with Farm Credit of Omaha, Neb. Then he hit on a fresh idea: a dedicated First Dakota department that would underwrite, help close and then sell farm real estate loans to secondary markets. He discussed the idea with Ness, who said, "You've got the support you need; let's try it out.". Timing was crucial; Dakota Mac opened in 1992, just as the four-year old, federally chartered Farmer Mac emerged from its startup period, during which it had "struggled to get on its feet and really find a reason and a purpose," Everson said. Dakota Mac targeted the bank's agriculture customers, giving Everson the in-house answer he had hoped for. Soon it expanded to serve customers across the state, and later it grew to serve contiguous states. Today Dakota Mac does business in 17 states and is the country's dominant originator and seller of Farmer Mac loans. Everson currently serves on the Farmer Mac board of directors.. "Denny understood quickly how banks were probably going to have to lay off some of their credit risk, some of their interest rate risk, some of their funding and liquidity risk. So he started this secondary market outlet for farm real estate loans," said John Blanchfield, senior vice president of ABA's Center for Agricultural and Rural Banking. "There wasn't anybody else out there doing anything like that," he said.. "To this date there really isn't another Dakota Mac out there, clear across the United States," Everson said. "I'm not sure I know why, because it's been very successful." .A habit of leading. Soon after being selected as the 2008 Bruning Award recipient, Everson, who is president of First Dakota's agri-division, reflected on his career during a phone interview with NorthWestern Financial Review. He recounted that one of his earliest career ambitions was to join the ABA's Agricultural and Rural Banking committee, where he hoped to promote and strengthen ag lending.. After Dakota Mac began to thrive, Everson approached Blanchfield, saying "I've done this, and I'm one of a few in the country who has." Blanchfield asked Everson to join the influential committee in 1994, and Everson became committee chairman in 1998.. "It was pretty grim in '95, '96, '97, and those are years when Denny, at our request, showed real national vision and real leadership," Blanchfield said. Everson "almost single-handedly persuaded Congress to goose up funds and avert a real agricultural credit crisis," during that period, he said.. While he was working as an ag-lending advocate at the national level, Everson was also working doggedly on South Dakota agricultural leadership issues. He had joined the board of the South Dakota Livestock Foundation shortly after he moved to First Dakota in 1984. He had for most of that time pressed his colleagues on the point of future leadership. He and others hoped to launch a leader-training program to mitigate what seemed an inevitable brain drain from the industry.. "I just kept telling our board members, 'there's a rapidly declining number of farmers,' especially after the 1980s. More importantly, we're losing the well-trained leaders in the ag industry," Everson said.. In 1999, after more than a dozen years of discussion, Everson co-founded SDARL, South Dakota Agriculture and Rural Leadership, Inc., a nonprofit leadership program that enrolls farmers, ranchers and agri-businesspeople such as bankers and grain exchange operators. The two-year program has graduated four classes so far and selected 31 individuals for a fifth class. Graduates have gone on to become state legislators, as well as leaders in commodity groups and various industries allied with agriculture.. Everson said that SDARL is closely modeled on similar programs he first saw in Nebraska and Kansas in the 1980s. It was easy, he said, to keep pushing for the leadership program because "I could see what it did for the participants and especially for the states, in terms of the voice of agriculture in politics and leadership. It was easy for me to keep promoting the heck out of it." . Whether through SDARL or the ag-lending function at First Dakota (which has expanded to include about 20 employees) Everson has attracted, mentored and encouraged people who are committed to agriculture and ag lending. His support for the new generation of agricultural industry leaders figured importantly in his selection for the Bruning Award.. "There isn't a college you can go to and get a degree in agricultural banking," Blanchfield said. Experienced executives like Everson are crucial sources of knowledge and inspiration for younger bankers, he said. .In tall cotton. Denny Everson is the 12th person to be recognized with the Bruning Award, which was first presented in 1997 to the award's namesake, Frank Bruning, chairman of Bruning State Bank in Bruning, Neb. Richard Pamperin, chairman of Premier Community Bank, Marion, Wis., was the 2007 recipient.. "Denny is in some pretty tall cotton, when you look at the list of who has received the award over the years," Blanchfield said.. Everson said that he knew most of the past years' recipients, that they were "not only good friends but people that I fought in the trenches with for ag lending and community lending." When asked what he thinks the recipients have in common he said: "these folks have, like I have, huge passion for this industry called agriculture and financing agriculture.". Recipients distinguished themselves by "how unselfish they were with their time," he said. They could have limited themselves to being leaders within their banks and communities only, but "they saw the need and benefit to become involved and have a say in the overall industry, not just within the confines of bricks and mortar," he said.. The caliber of his Bruning Award brethren "makes it even more spectacular," to be chosen for the award, Everson said.. As for his own success, Everson credits his colleagues at First Dakota. He is very proud of his staff, which "is second to none; I put them up against anybody in the ag-lending business in the United States." In fact, he said, several staff members could in time become Bruning Award winners themselves "if they so choose to [sustain] the commitment to finance agriculture.". Everson also praised the smart and supportive leadership of First Dakota. By allocating the money and separate staff for Dakota Mac, the bank succeeded where others failed. Several other companies tried to start similar programs "but I think in every instance they failed to dedicate the resources they needed to make it work as a standalone service or even entity to their bank. That's something our board approved and did," Everson said.. "We did stuff that everybody said, well, you just can't do that," Everson said.. "The day I retire from this business, Dakota Mac will be one of those programs that I helped develop," he said. "I'm proud of it." .Everson on the economy. No credit freeze: "In the Midwest, North Dakota to Texas, predominantly ag country, I don't anticipate a freeze in credit markets. We're not short of money. This market is simply short of confidence. In ag finance I think the question is, 'will we see any new, big developments, new projects, new ethanol plants, new bio-energy plants developing and requesting financing for next year in all this turmoil?' No, we aren't going to, and that's because no one is going to jump into big developments right now. Ag, like other sectors, is going to hunker down a bit and just see where this takes us. Ag will be affected, but in these volatile times we're not sure just how. I don't see a big freeze as it relates to operating credit.". How it's supposed to be: "Even in the housing market, I can go downstairs to our real estate department, and if I'm a qualified applicant, I can get a house loan. I don't know whether you can do that in Baltimore or Virginia but I suspect you can. The secondary market hasn't dried up. It's just that underwriting is tougher. If we had made it tougher five years ago we wouldn't be here today. The truly qualified will qualify, and that's how it's supposed to be. People weren't supposed to be able to live in $500,000 homes with $100,000-a-year incomes.. "In the Midwest we're in a bit of a bubble. I'm not saying we're doing it wrong and everybody else is right. I'm saying that I'm kind of glad to see some conservatism. If that's where we're at then that's where we need to be. That's just the reality of it."