As the number of full-time farmers in his area has diminished in recent years, rural Iowa banker Ross W. Stuedemann has begun exploring ways to target new niches. The latest: city folk becoming part-time farmers.

"Since the ag crisis, there's just been a steady decline in regular commercial farmers," said Mr. Stuedemann, president of $18 million-asset First Trust and Savings bank, Oxford, Iowa. "We're seeing more farmland broken up in smaller tracts."

His area is not unique in the decline of full-time farmers or the increase in part-time ones, experts said.

Some part-time farmers evolve when full-timers scale back. But the phenomenon of people going back to their rural roots or wanting to escape city life is growing on the outskirts of urban areas, observers said.

"I read stories that it's expanding because of people wanting to get out away from the city and crime," said agriculture economics professor Arthur Barnaby of Kansas State University.

"I would think this certainly could be a new market" for small rural banks close to urban markets, he said.

That's the case with Mr. Stuedemann in Iowa, who's near Iowa City and Cedar Rapids.

Such part-timers can be relatively low-risk credits for small rural farm banks.

"Because many of them have good jobs in the city, they should be good credit risks," Mr. Barnaby said.

The fact that some have no farming experience isn't a big concern, he said. If he were a farmer, "I'm going to wrap my loan around their off-farm job," he said.

Mr. Stuedemann is examining how to design new loan products for part- time farmers and hopes to roll out something later this spring.

"With these, I visualize much smaller loans," he said. "It needs to be a different delivery system than what we do for the commercial farmer."

Right now, First Trust and Savings does few of these loans, he said. And the ones it does, "We are ... handling very similar to commercial farmers."

"It's probably not cost effective to handle small lines of credit" that way.

Thus, as the bank works to develop potential part-time farm customer lists, management also is exploring how to implement a streamlined way to gather financial information, while not using the extensive analysis and employee hours spent on full-time farm credits.

First Trust also needs to design documents and interest rate and collateral structures, he said.

And Mr. Stuedemann stresses that if bankers stay alert, related niches and business can appear.

Case in point: one of his current part-time farmers began with a fruit and vegetable farm, which has developed into a profitable side business producing jams.

"I liken that to what we've got to do in banking," Mr. Stuedemann said. "We've got to follow what our customers want. It may evolve into something else we haven't even though of yet."

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