Just two years ago, Douglas M. Lester was arguably the highest-profile banker in Kentucky.

As chief executive of Bowling Green-based Trans Financial Inc. and chairman of the state Chamber of Commerce, Mr. Lester traversed the Blue Grass State in his company's twin-engine corporate jet, hobnobbing with the state's rich and powerful.

His stature derived from having built a slumbering $150 million-asset bank he took over in 1984 into one of the largest in Kentucky, a multiservice financial institution with $1.8 billion of assets.

But then board members started wondering whether the high-flying executive, who had ordered up a new corporate headquarters with a lavish office for himself, had created a royal mess for the bank. Many of the far- flung businesses he had pushed into, including a travel agency and human resource development firm, weren't performing.

Two months ago, the jig was up for the 53-year-old Mr. Lester.

During a tense board meeting in early June, described by a participant as "one of those boardroom dramas just like on TV," Mr. Lester was fired in a split vote.

Friends of Mr. Lester, a native of Topeka, Kan., said the dethroned CEO expects soon to leave the town he has called home for the past 12 years. He would not comment for this article.

The recent events at Trans Financial highlight several crucial questions that bank boards and chief executives nationwide probably grapple with monthly: How much oversight should a board exercise over the CEO? How much information should a CEO give the board? And finally, when has a CEO gone too far?

"I think the board was reluctant to rein in a CEO that was getting so much press and had such a high profile," said a person familiar with banking in Kentucky who requested anonymity.

Trans Financial executives and directors interviewed for this article said Mr. Lester strayed too far from core banking and lost his credibility with the board when that strategy proved unprofitable.

In the weeks since Mr. Lester's removal, Trans Financial has made a series of announcements that amount to a near total repudiation of Mr. Lester's strategy of building a one-stop multiservice financial services company.

Board members intend to sell nearly all the businesses that are not directly related to core banking, including the human development firm, a venture capital business about to be opened, several mortgage loan production offices, an insurance business, and the travel business. In addition, a deal announced in April to buy another travel company was squelched.

So far 50 employees, or about 5% of the work force, have been laid off.

Vince A. Berta, an executive vice president, has been appointed interim president and chief executive while the company looks for a permanent successor to Mr. Lester.

"We're not going back to old-style banking," said Michael J. Moser, a Trans Financial executive vice president, "but we're just going to go about what we're doing more appropriately. You could say we're getting back to our knitting.'

What's more, the company's recently completed, 30,000-square-foot corporate headquarters will be sold. What would have been Mr. Lester's office is indicative of another factor in his demise - his free-spending style.

The office boasts a wet bar and refrigerator, adjoining full bathroom, and huge windows that make up two walls of the spacious corner room. Construction was completed the week that Mr. Lester was fired. He was to have moved in in a matter of days.

"You know, all of this would've been O.K. if the company was doing well, but that wasn't the case," said Mr. Moser.

Indeed, the bank's returns on assets and equity never got above 0.92% and 12.9%, respectively, in the past three years. This is substantially below peer averages.

The company also recently sold the seven-seat Citation twin-engine corporate jet that had been even more unsettling to the board. Mr. Lester and other senior managers had used it to visit various company offices.

The jet irked directors and other bankers, in part, because the Trans Financial office farthest from Bowling Green was no more than a three-hour drive. (Several directors confirmed rumors that Mr. Lester occasionally used the plane for personal trips on weekends.)

The jet didn't come cheap. It cost several million dollars in early 1994 and more than $750,000 a year to operate and maintain. It was sold by the bank for $2.5 million.

"I don't think you can ever justify a jet, even for much larger banks," said John B. Moore, analyst at Morgan Keegan & Co., Memphis. "I can see a NationsBank executive needing to get into Texas real fast, but you don't need a jet when you're going from Bowling Green to Nashville," about 55 miles away.

The restructuring, including severance packages and several loan chargeoffs, contributed to a $5.8 million second-quarter loss, the company's first red-ink quarter in recent memory.

Officials said that the worst is behind them, and that they expect profitability again as early as this quarter.

Trans Financial's current disarray is a far cry from the early 1990s, when Mr. Lester acquired a string of banks and thrifts that more than tripled the company's size. He told American Banker at the time that he would plot acquisition strategy in the dead of night, boasting, "I don't need much sleep."

"He was well liked and very well respected in town," said Tommy W. Cole, a Trans Financial executive vice president and Bowling Green native.

It was Mr. Lester's local popularity and statewide visibility that helped give him the long leash he had, those interviewed said. He made many major decisions on his own, including the forays into venture capital and human development consulting, and he had little patience for those who questioned his actions, former colleagues said.

"People tried to have those discussions with him," said Mr. Cole, "but they were not a welcomed event by Doug." Mr. Cole said he often wouldn't see, let alone meet with, Mr. Lester for up to two weeks at a time.

But the bank was unable to assimilate its acquisitions, and expenses shot well above forecasts. The company's efficiency ratio was consistently about 12 percentage points worse than those of its peers and reached 73.12% in the first quarter. The stock price was languishing in the mid-teens, having dropped from as high as $24 per share a few years ago.

But what worried directors most were Mr. Lester's ventures into new business lines.

"Doug lost interest in banking about a year ago," said Ron Szejner, Trans Financial's chief trust officer. To underline the shift in focus, Mr. Lester dropped "Bancorp" from the company's name, replacing it with "Inc.," and he described Trans Financial as an "information company" in its new mission statement.

The beginning of the end for Mr. Lester could probably be traced to the board's annual retreat last November in a Chicago hotel. It was at that meeting, participants said, that the full implications of Mr. Lester's strategy became clear.

"It was the first time that many of us saw the whole thing laid out altogether at the same time," Mr. Szejner recalled. The chief executive, who had largely been getting the benefit of the doubt, began to endure more pointed questioning.

"It wasn't that we didn't want to go into the next era of banking," said Thomas R. Wallingford, a director who has stepped in as acting chairman, "but just that we were going into areas that we didn't know a thing about - and in most cases not making any money from them."

Mr. Wallingford acknowledged that the board often got scant information from Mr. Lester on his initiatives.

The chief executive's annual budgets often bore little resemblance to reality, Mr. Wallingford said. The jet's purchase was presented as a done deal, he recalled.

Stories vary on what was the final straw.

One says that, on May 31, four days before Mr. Lester's firing, a huge block of shares - more than one million - was put up for sale. The stock was owned by longtime institutional investors in the company, and its availability for purchase likely signaled a loss of patience with Mr. Lester.

The day after his dismissal, Trans Financial's stock jumped 10%, to $17.50, its highest price in six months.

Some stressed that Mr. Lester should be given credit for being an accomplished builder. His autocratic style worked well during that phase in the company's development, they said.

But when it came time to run the bank, they added, he just wanted to build some more.

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