JEWELL, Kan. - In recent years, Jewell County farmer Tom Bartsch has watched his local community bank stray from its historical farm-lending niche.

"It used to be a really big ag bank," Mr. Bartsch said of $8.5 million- asset Heartland Bank. "The previous owners ran a lot of those customers off."

Not a good move, he said, for a bank in rural north-central Kansas, some 80 miles from the nearest airport, where farming reigns.

"I don't think a bank in this area can survive if it doesn't make ag loans," Mr. Bartsch said.

By the time new management took over early this year, Heartland's total core deposits were $6.6 million, down from $8.5 million in 1992. Farm loans had gone from about 75% in 1990, when they began decreasing steadily, to less than 25% in 1994.

For James E. Thiessen, Heartland's president, the bank's history is a cautionary tale: Don't forget where you came from.

Prior owners "had wanted to be a full-service financial services company," said James E. Thiessen, brought in as president after new management acquired the bank in January. "That is difficult to do even for large regional banks."

Now, Mr. Thiessen, 39, has come home to rebuild Heartland's farm loan portfolio.

In Jewell, population 600, commercial lending opportunities are few. Shuttered storefronts punctuate the blocks facing the town square, leaving agriculture as the most important economic activity.

The bank, organized early this century as Citizens State Bank, previously thrived on farm loans. But it suffered through the 1980s farm crisis and endured a succession of owners, ending with Kansas insurer Brooke Financial Corp. in 1989.

"I think Brooke made the decision to concentrate on the insurance business rather than the bank," Mr. Thiessen said. "None of them really had ag lending backgrounds."

The company renamed the bank Brooke State Bank, and management focused on real estate loans and required guarantees on most of the farm loans it maintained.

Subsequently, many farmers switched to other area lenders and farm notes dwindled to less than 20% of total loans, Mr. Thiessen said.

However, last year, when Brooke Financial opted to leave banking, Kansas City banker Michael V. Berlau, was seeking a bank. His criteria: liquidity, no loan problems, and affordability.

After buying the bank for about $775,000, he installed Mr. Thiessen as president in March and renamed it Heartland.

"I wanted to focus on the residential mortgage area," said Mr. Berlau, chairman, who is based in a Leawood, Kan., office that generates mortgages there and over the Internet for the secondary market.

But he didn't want to do that to the detriment of Jewell. "The community was not being serviced properly," he said. So he hired Mr. Thiessen, who grew up on a farm in nearby Beloit and had 15 years of banking experience in Kansas.

With the bank's focus on mortgages and agriculture, the loan-to-deposit ratio grew to nearly 60% at midyear .

And farmers have been glad to see a familiar, accessible face. "I've known Jim ... since we were in high school together," said farmer Scott Lienberger. "It's good to have someone that comes from an ag background."

First on Mr. Thiessen's agenda was meeting with existing customers. He has focused on monthly cash flow - and when farmers actually need funds - rather than just looking at annual data. During the winter, he said, he plans to make more personal calls on potential borrowers.

The bank's total farm real estate and operating loans annually peak near $600,000, he said.

In the next year, Mr. Thiessen hopes to add another half-million dollars in farm loans and hopes that 60% of the loans generated in Jewell eventually are farm loans.

But the process will be slow, he said.

"It's just going to take some time," he said. Farmers "may have developed some relationships" with new lenders, he said.

And Mr. Berlau stressed that the bank's mortgage business isn't minimizing lending in Jewell. "The bank had a great deal of liquidity. We're not taking anything away from the community."

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