Alan W. Ott will turn 65 in December, so he'll have to step down as chief executive of Michigan's Chemical Financial Corp.

It's his own fault. He set the rule, 23 years ago, and announced this week at the bank's annual meeting that he'd abide by it.

"I want to do it anyway," he said in an telephone interview. "I think you've got to make room for other people to come in."

Though many big banks have policies that set a retirement age for executives, most community banks don't, observers said.

Jeffrey Vorwald of American Trust and Savings Bank in Dubuque, Iowa, said some community banks in his state and in Illinois and Wisconsin have established age ceilings for directors but few have done so for executives.

His own $350 million-asset bank isn't one of them. "That would totally be in the big holding companies," said Mr. Vorwald, American Trust's vice president of commercial lending and correspondent banking.

Many small, family-owned banks have built-in management succession that doesn't seem to necessitate a specific retirement age. "It's usually a gradual transition, where the younger generation gradually gets more responsibility," Mr. Vorwald said.

At $41 million-asset Citizens State Bank in Paola, Kan., president and chief executive L.M. Schwartz wasn't required to turn the reins over to his son David. But he did, in 1992 - at age 81.

"Community banks have flexibility and more lenient attitudes toward such things," David Schwartz said. "If someone can make a meaningful contribution to your organization, it would be foolish to force them to retire."

The elder Mr. Schwartz, who became chairman, still works nearly 40 hours a week and manages the bank's investment portfolio.

In contrast, Carl Dargene, who retired last year as president and chief executive of Amcore Financial Inc., Rockford, Ill., to become chairman, now works about half-time for the company and also is learning the piano, Italian, and computers.

"It was a policy that I instigated and support," Mr. Dargene said of retiring at 65. "I think it offers other executives who aspire for growth some upward mobility."

Although he said he understands the argument that age shouldn't be a factor if a talented executive wants to stay, "I feel really strongly that the pluses outweigh the minuses," he said. He remains on the board and is a resource to the new chief executive, he said.

In Michigan, Mr. Ott of $1.6 billion-asset Chemical Financial will follow a similar route. He's now chairman and chief executive of the Midland-based holding company and its lead bank, and also president of the holding company. After Dec. 31 he'll be only chairman of both.

"I think it's a good interim stage," said Mr. Ott, who added that the company always can change its policy if another chief executive doesn't want to retire at 65.

However, banks with no age ceiling could find themselves with an incapable executive who resists resignation.

Mr. Vorwald of American Trust said he's seen boards scale back responsibilities or bring in new people to help executives who couldn't keep up.

"In certain situations, it could clearly be a problem," conceded the younger Mr. Schwartz of Citizens State in Kansas - but not at his bank, where his father remains chairman. L.M. Schwartz "has seen people decline," his son said. "I think he is able to make an accurate appraisal of his ability."

Ultimately, not all bank executives are hankering to work through their golden years anyway. David Schwartz, 46, said he doesn't expect to duplicate his father's long tenure. "Don't expect me to be here when I'm 85."

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