Community State Bank of St. Charles, Mich., has been run by Robert F. Loomis for nearly half a century.

His son heads the lending department, his daughter runs the mortgage department, and the family, all told, owns more than 10% of the company's stock.

Though the Loomis family loves it, many management experts say too much control can lead to serious accountability issues for directors.

A CEO and his or her family exert such control over thousands of the nation's privately held banks, many of which have been controlled by one person or family since their inception.

Executives and consultants say that such a structure has bred some success stories, but that there can be pitfalls. It can lead to an autocratic management style and a lifeless, rubber-stamp board of directors.

The arrangement has worked, however, at $89 million-asset Community State.

"Management has an interest in seeing the bank do well," said James F. Delemeester, president of the bank. "The biggest advantage is that we all have our personal fortunes, so to speak, invested in the company."

The bank reported $490,000 in net income for the second quarter, 12% more than a year earlier.

Although many investors praise managements that own lots of stock, some of the most sensational cases of insider abuse ever - specifically the widespread S&L failures - have been at banks where senior management held disproportionate amounts of stock.

Such large ownership in some cases leads managers to believe that they need answer to no one, including their boards of directors.

"I have seen examples where the CEO owns so much stock that they really have a puppet board," said Marilyn Seymann, president of M One Inc., a bank consulting firm in Phoenix. "It doesn't truly open up the CEO to objective input."

Furthermore, giving one person too much control renders the bank rudderless should the CEO fall ill or die, consultants said. And no one's judgment is infallible.

"I have actually seen it in board minutes where the board has agreed that if the president wants to do something, well, he's the owner, so we have to approve it," said Richard B. Foster, president of Banconsult, a bank consulting firm in Okemos, Mich.

Stanford C. Stoddard, the former chairman of Michigan National Corp., was ousted in 1984 by regulators after being convicted of fraud in connection with leasing a building to his bank at a higher-than- normal price, among other charges.

The conviction was overturned, and Mr. Stoddard has been exonerated. Michigan National was founded by his father, and the family retained a high percentage of the company's stock.

More recently, in June, Kentucky's Trans Financial Corp. fired longtime CEO Douglas M. Lester, blaming him for taking the bank into business lines that led to years of poor performance.

Mr. Lester, chief executive for 12 years, made many major decisions autonomously and without meaningful board input, bank officials and directors said.

In addition to a dynamic, take-charge style, Mr. Lester had 130,695 shares of bank stock, or 1.16%, the second-largest number among insiders.

The other problem with stock-heavy CEOs is that when they want to sell their stock, it usually means selling the entire company.

"That's the main reason why these little banks are selling, isn't it?" said Mr. Delemeester.

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