Comptroller of the Currency Eugene A. Ludwig used a speech at the Independent Bankers Association of America's annual convention to issue yet another credit-quality warning.

Mr. Ludwig said he continues to see "worrisome" trends in every phase of the underwriting process. For instance, banks are accepting "razor-thin" interest margins and entering into highly leveraged transactions.

"Our examiners have heard too many bankers say that they were making loans which, in the best case, would yield little or no profit, but which they were making anyway out of fear a customer may be lost to the competition."

Mr. Ludwig, who completes his five-year term next month, also questioned whether many banks are qualified to enter the subprime market or underwrite high-loan-to-value home equity loans.

"Please be cautious in these new lending areas until you have the expertise," he pleaded.

***

The comptroller was one of four federal regulators to speak during the four-day convention. On Tuesday, acting Federal Deposit Insurance Corp. Chairman Andrew C. Hove told community banks to brace themselves for fierce competition.

"Large, diversified financial and commercial companies would logically have a competitive advantage over traditional banks that cannot offer as broad an array of products and services," he said. "And an insurance agency providing banking services logically would offer a competitive challenge to bankers."

Mr. Hove stopped short of urging community bankers to drop their opposition to legislation that would eliminate the barriers between banking, securities, and insurance. But he said the industry must adapt to a new, more competitive environment.

"If we can judge the future by the past, then it is certain that banks will find a way to respond to the competitive challenges that technological change and regulatory decisions are bringing you," he said.

***

A last-minute addition to the agenda, Deputy Treasury Secretary Lawrence Summers, used his time before the bankers to laud the government's Asia strategy. "The crisis appears to be well contained, although continuous vigilance will be necessary," he said.

Speaking via a satellite link, Mr. Summers made the case for $18 billion in additional funding for the International Monetary Fund. "To not fund the IMF now would be like canceling life insurance right after you got sick," he said.

Community banks should support the funding because the success of the American economy depends on international trade, including sales to Asian countries. "Danger anywhere can cause problems everywhere," he said.

***

The convention included a changing of the guard. William J. McQuillan, president and chief executive officer of City National Bank, Greeley, Neb., was elected president. He succeeds William Sones, president and chief executive of State Bank and Trust Co., Brookhaven, Miss.

In his speech, Mr. McQuillan urged the bankers to lobby against credit union expansion. "Don't be content to sit on the sidelines and watch," he said. "Our best efforts will be unified efforts."

Robert N. Barsness, chairman and president of Prior Lake (Minn.) State Bank, is the new president-elect, and Thomas J. Sheehan, president of Grafton (Wis.) State Bank, was elected vice president.

***

The King is not dead. Elvis made two appearances at the convention, serenading guests Sunday night at a California bankers reception and cruising the boardwalk Monday evening at the IBAA beach party.

The King even sang about the evils of credit unions, offering to sell swampland to anyone who believes the nonprofit financial institutions serve low-income consumers or help taxpayers. Then he got political: "The point will be moot if we don't shut up Newt," Elvis crooned.

***

The convention attracted 2,797 bankers, exhibitors, and spouses to Hawaii. That's down from about 3,200 attendees at last year's meeting in Phoenix.

But newly formed banks are pushing the group's total membership numbers up for the first time since 1991. The IBAA recruited 342 new members in 1997, bringing the total membership to 5,500.

***

Bankers attending the convention debated a recent idea to double deposit insurance coverage. Bankers who favor the increase said it would prevent a loss of customers to larger banks that are too big to fail.

"I think we need higher deposit insurance levels," Mr. Sones said. "A hundred thousand dollars isn't what it used to be. I'm losing deposits on a weekly basis."

However, the IBAA's official position, adopted last week, simply asks Congress to increase protection to keep up with inflation.

Even this more modest stance did not go over well with the FDIC's Mr. Hove. "That would put a lot more exposure on the FDIC," he said at a press conference. "That means we would need a much larger fund."

***

A peer advisory discussion turned to other lobbying issues Monday when several community bankers said they were frustrated with the banking industry's lack of muscle in Washington.

"How can we support the IBAA so when people on the Hill hear 'IBAA,' they quake in their boots?" asked John W. Crombie, president and chief executive officer of Citizens Bank of Nevada County, Nevada City, Calif.

Mr. Crombie suggested that the IBAA double its annual dues to finance more lobbying. Another banker favored forming more alliances with other groups.

Ronald Ence, the IBAA's director of legislative affairs, agreed with both ideas, said members of Congress respond best to grassroots support. He said lawmakers respond when they receive thousands of postcards from credit union customers urging Congress to protect the status quo.

"Numbers really do count," he said. "We need to let Congress know there's another side to the story."

***

The Iowa Independent Bankers Association introduced its new leader at the convention. Don Hole, who signed a contract to lead the group hours before stepping on a plane to Hawaii, officially starts as the group's chief executive officer today.

Mr. Hole was executive vice president for personal computer banking at Norwest's Des Moines office.

***

Who said bankers aren't wild and crazy?

Convention goers lined up to take advantage of free hula lessons at a Sunday night reception in the exhibit hall.

"I was a hula girl in a former life," said Robert J. Mulder, president and chief executive officer of Feather River State Bank, Yuba City, Calif., who was trying to mimic the hip-wiggling moves of the woman giving the lesson.

The surf was up for banker Camden R. Fine on Monday. The president and CEO of Midwest Independent Bank, a bankers' bank in Jefferson City, Mo., "signed his life away" and took his first surfing lesson.

Despite taking a beating from the Hawaiian waves, Mr. Fine prevailed and was able to hang 10 by the end of the afternoon.

"I rode two or three good waves in," he said.

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