When the going gets tough for First Dakota National Bank, executive vice president Dennis A. Everson gets creative.

The Yankton, S.D., agricultural banker faces a market in which the population is shrinking, farms are consolidating, and the economy is weakening. But he finds ways around all that.

His latest venture is a credit corporation made up of his bank and nine others. The for-profit venture-the first of its kind-would do what the banks cannot do individually: make large corporate loans.

"You shouldn't have to be a $1 billion bank to bid for these big loans" to mega-farm cooperatives and other sizable borrowers, Mr. Everson said.

The credit corporation still has some hurdles to clear before it becomes a reality. But those participating say it could become a model for small banks seeking to compete for big credits, somewhat as banks have teamed up to form community development corporations in inner cities.

"First Dakota is definitely on the leading edge," said Charles L. Hegerfeld, president of Corn Exchange Bank in Elkton, S.D. "Community banks are going to have to stick together or we'll be out of business."

Such innovation is not new to First Dakota, which has transformed and diversified itself over 15 years from a near-failing $38 million-asset bank to one with $300 million of assets.

First Dakota's approach is to offer products and services not available from other agricultural banks. Business lines such as mortgage processing and full-service brokerage have increased the bank's fee income and lessened its dependence on interest income.

The programs also have established First Dakota as a leader among midwestern agricultural banks. Mr. Everson, chairman of the American Bankers Association's agricultural bankers committee, describes First Dakota's ventures in detail to packed audiences at industry conventions.

"Denny has a willingness to share how things work and help others out," said John Blanchfield, manager of the ABA's agricultural bankers division. "I think the banking industry recognizes that contribution."

One of First Dakota's most successful divisions is Dakota Mac. It processes agricultural banks' mortgages for resale to Farmer Mac, a quasi- government agency that guarantees farm loans and sells them on the secondary market.

The service streamlines the resale process for small banks that do not have many mortgage customers and allows them to offer lower rates on long- term loans.

Now five years old, Dakota Mac has 45 client banks in 15 states. The business contributes about $280,000 in fee income annually, Mr. Everson said.

First Dakota hopes to build on Dakota Mac's success with its planned credit corporation. So far, nine banks in Iowa, Minnesota, and South Dakota have said they would like to own a portion of the company, which would offer operating lines of credit as well as intermediate- and long-term financing at fixed rates to large commercial clients.

Because its lending volume would be so high, the corporation could borrow cheaply and pass its savings on to member banks.

"Small banks would be able to offer a lower rate on a long-term, fixed- rate loan," said Laura Kribell, an independent bank consultant who is conducting a feasibility study on the proposal. "They could step up to the plate and compete with the regional banks."

For the smallest bank in the group, the new venture may be a key to survival. With only $20 million of assets, Corn Exchange Bank is too small to lend to large farm customers on its own, Mr. Hegerfeld said.

But before the banks can form the credit corporation, they will have to jump through some legal hoops.

Among the nine members are state charters from three states, as well as national bank charters and a thrift charter. The credit corporation would need approvals from seven different regulatory agencies-none of which has approved a similar structure before.

Still, Mr. Everson and First Dakota's other managers are not discouraged and hope to have the business up and running within a year.

"I've been talking about this for five years," Mr. Everson said. "You have to be patient."

Larry Ness, First Dakota's chief executive officer and largest shareholder, has heard the patience line before. Most of the bank's new lines of business took years to pay off. The five-year-old brokerage services department, which allows customers to buy and sell investment securities, is expecting to turn its first profit in 1998.

The slow-but-steady move toward profitability is all right with Mr. Ness, as long as he can track the venture's progress each month.

Mr. Everson appreciates Mr. Ness' support. "Every time I've suggested we do something other than the norm, there has never been any hesitation," he said.

Not that there haven't been failures. A credit card business flopped, mainly because of high administrative costs.

A farm management business was started a few years ago but never took off. For a fee, the bank helped producers to manage their operations and their costs, but farmers in the area were not interested in the bank's advice, Mr. Everson said.

"Our timing may have been off," he said.

Still, farmers are First Dakota's chief customers. Three years ago, Mr. Ness, Mr. Everson, and bank president James Ahrendt had agreed to aggressively seek out new farm customers within 100 miles of the bank's eight branches. The result was a 27% increase in ag loans.

"We already controlled most of the commercial and residential lending in our market," Mr. Ness said. "There was nowhere else to grow."

Though they plan to be more cautious in their farm lending amid record- low crop prices and weak export demand, they say they remain committed to their farm customers.

"All three of us have weathered severe times in the ag industry, and this will be no different," said Mr. Ahrendt, noting that First Dakota has never forced a farm foreclosure.

"I have to keep reminding myself, my staff, and my customers that this is a downturn, not the end of the world," Mr. Everson added.

Despite the setbacks, the First Dakota executives plan to keep experimenting with business development plans like that of the joint credit corporation. Mr. Ahrendt is also researching whether the bank should offer insurance products.

"We just have one rule," Mr. Ahrendt said. "We never bet the farm."

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