Bank chief executives give their directors high marks for watching the bottom line but say they should bring in more business, according to a study to be released next week.

Nearly 94% of the bankers surveyed rated their boards' performance in monitoring finances as excellent or good and 82% gave directors top grades for protecting shareholder interests. However, only 27.4% said they were satisfied with their boards' role in business development.

The survey by Professional Bank Services of Louisville, Ky., covered a range of directors' issues and was mailed to more than 3,000 banks. More than 500 banks with assets of $11 million to $57 billion responded to the survey; 90% of the respondents were community banks with assets of less than $1 billion.

George Freibert, chairman of Professional Bank Services, said part of the problem is that most banks-83.2%-have no job description for directors. And without a written set of responsibilities, directors often do not understand that business development is part of their job, Mr. Freibert said.

But directors share some of the blame. Mr. Freibert said board members need to better understand what products their banks offer and which customers they target.

"Most board members spend little or no time preparing for meetings or on outside reading," he said.

Dallas Enger, president and chief executive officer of Linn-Benton Bank in Albany, Ore., agrees that directors must take an active role in bringing in business.

Though he does not expect directors to make sales calls, he said it is up to the bank directors to provide the leads for the bank's running top 10 list of potential prospects.

The survey also found that the smallest community banks have more trouble than bigger ones in finding qualified directors. More than 34% of banks with less than $100 million of assets said they always or almost always have difficulty recruiting board members. In contrast, only 16% of banks with assets between $500 million and $1 billion said they struggle to find qualified directors.

Location could be one handicap.

"A lot of these banks are operating in a trade area where there are fewer people to choose from," said Mr. Freibert.

Smaller banks are also less likely to set mandatory retirement ages for directors. Just 35% of the smallest institutions force directors to retire, compared with 70% at banks and thrifts with more than $1 billion of assets.

Mr. Freibert advocates that banks of all sizes establish mandatory retirement policies, asserting that they keep boards "vibrant, diverse, and attentive."

But John F. Murphy, president and chief executive officer of Bay State Federal Savings in Brookline, Mass., dismissed the notion that older board members can be out of touch. "I inherited a board that was old with regard to age but quite young with regard to intellect," said Mr. Murphy, who has headed the bank since 1976. The $300 million-asset bank has no mandatory retirement policy for its directors.

The study showed little link between mandatory retirement and bank performance. Of the 256 institutions rated "superior" performers, 53% have mandatory retirement policies.

Respondents were assigned a performance grade based on second-quarter- 1998 data. Forty-nine percent were rated superior, 41.2% average or above average, and 9.8% were judged below-average performers.

Among the survey's other findings:

60.2% of all bank directors are between the ages of 51 and 60 and 21.4% are between 61 and 70. Only 1.2% are under 40 and 2.1% are over 70.

66.5% of the banks pay directors to attend meetings, but 58.3% do not pay them an annual salary.

Only 6.6% said their boards are more racially diverse today than they were five years earlier.

In examining the results, Mr. Freibert said bank presidents and CEOs need to communicate better with directors. It is no coincidence, he said, that nearly 34% of the banks rated superior performers hold annual board retreats to discuss business strategy, compared with 19% of the below- average performers.

"Better-performing banks tend to understand what's important, and communication is important," he said.

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