LOUISVILLE, Ky. - In the heart of Kentucky horse country, George Freibert is trying to mold his consulting firm into a thoroughbred.

Since its founding here in 1978, Mr. Freibert's company, Professional Bank Services, has rarely stayed static. Internal auditing and software production experiments have come and gone. The mergers and acquisitions department and the training and seminar planners are busier than ever, Mr. Freibert said. And the firm opened three new offices this year.

At the heart of the company, however, is compliance consulting. It built itself helping small understaffed Kentucky and Tennessee banks wade through the morass of regulations, and has stayed true to those first customers, said Mr. Freibert, who is president and chief executive officer.

But, he added, diversification is the key to long-term success. The firm has attempted to offer varied services throughout the nation but not spread itself too thin.

"As popular as compliance is, if you focus only on that area of consulting, you're vulnerable," Mr. Freibert said. "We don't want to rise too fast with the booms, or crash with the busts."

If its expansion in 1995 is any indicator, his company is riding the boom. Currently, PBS has about 60 employees. Most are based in Louisville but spend three-quarters of their time on the road.

A three-person Washington office opened, and Chicago- and Indianapolis- based consultants joined the firm earlier this year. Other consultants work out of Atlanta, Nashville, and Ocala, Fla.

Mr. Freibert said he isn't planning to open any other new offices in the near future.

Anita Newcomb, managing director of PBS's Washington office, said the expansion came about because Mr. Freibert "felt the firm needed to have a regular office outside Louisville. He thought they needed some presence in Washington to be closer to regulators."

The company still spends most of its time in rural areas, far from the big city. However, they are hardly unfamiliar with regulators. Mr. Freibert is a former examiner with the Federal Deposit Insurance Corp. - for which PBS conducts compliance examiner training - as are several of the firm's consultants.

The firm's compliance efforts are focused on helping banks recover from bad examination grades, or tweaking already successful compliance programs. They also take calls from banks with smaller questions.

Some of their larger customers include Banc One Corp., National City Corp., and PNC Bank Corp. But Mr. Freibert said the company has more community bank clients, including First State Bank and Trust Co., Plain Dealing, La.; First Community Bank, Chatom, Ala.; and First National Bank of Temple, Tex.

But some of its competitors say the firm lacks a strong presence outside its area of the country. Others say it lacks the manpower, though not the skills, to compete nationally with such personnel-laden companies such as the Big Six accounting firms.

"I rarely hear of them outside the Midwest," said Jeanine Catalano, a San Francisco-based senior manager with KPMG Peat Marwick's regulatory advisory practice. "It's really hard to serve banks long distance. You really need to have offices with several people in a lot of locations."

Ms. Catalano had worked with the Secura Group, another of PBS' competitors. She said she was offered a position with PBS earlier this year, but chose Peat Marwick because of its greater resources.

But JoAnn Barefoot, president of Barefoot, Marrinan & Associates, one of PBS's competitors, said being smaller and more removed from huge metropolitan areas like New York and Washington can sometimes help.

"Sometimes small banks are turned off by Washington types," Ms. Barefoot said.

Kim Wilkinson, credit analyst at First National Bank of Temple, Tex., a PBS customer since 1993, said the firm's small-town roots weren't important. Its personalized service made the difference.

"We could have chosen a huge firm, if they had provided the service that PBS did," Ms. Wilkinson said. "The thing that has impressed me is that when you call them with a question, they will get back to you on the same day."

Among the hottest issues that keeps PBS's phones ringing is determining how to handle the new Community Reinvestment Act data collection requirements. These rules, forcing banks to record the size of loans to small businesses and farms as well as the locations of the borrowers, are scheduled to take effect on Jan. 1.

But Wayne Barnes, a senior consultant at the firm, said many banks are "taking a wait-and-see approach" to developing collection systems, rather than trying to be proactive. He said bankers either believe that changes were forthcoming and any moves would be premature, or that they would be better served by waiting to train their employees, so any instruction could be fresher in their minds once the rules take effect.

This should not be surprising, Mr. Freibert said. He said many community bankers have had an attitude adjustment toward compliance that began in November 1994.

He calls it "the big backing-off."

"The 1994 elections were a watershed in compliance," Mr. Freibert said. "After that, a lot of bankers thought, 'Whew! Things are going to change now.' I think there was a real mental deemphasis of compliance among a lot of bankers."

He added that conversations with bankers around the country at seminars, conventions, and workplaces opened his eyes to the change in outlook. Now bankers are taking a more reactive approach to compliance, he said, thinking that more Republicans in Congress could mean less regulation.

Thus, he said, consulting firms can't rely solely on compliance for their livelihood. PBS provides merger and acquisition and chartering advice, runs seminars throughout the nation, and conducts due-diligence studies, among other things.

But not every new service has lasted. The firm tried its hand at being an ad agency, but stopped. It also tried internal auditing, but decided to pass their customers on to a specialist.

They also began producing compliance software, which it did until June 1994 when it sold the division to CFI ProServices, a Portland, Ore.-based compliance software specialist.

"We knew we'd never be a national player, like they are, in the software area," he said.

Still, Mr. Freibert is confident that his firm is, and will continue to be, just that in compliance consulting.

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