Despite shedding jobs, cutting pay, trimming benefits, curbingservices and expanding the tax base, the state of Rhode Island isin deep financial trouble, and credit unions there are doing theirbest to stay afloat.

Rhode Island's credit unions reported a soggy 38 basis pointsworth of profit during first quarter 2012, according to the NCUA'sQuarterly U.S. Map Review, well below the national ROAA averageof 86 basis points. But in spite of the gloomy outlook, thingsaren't completely underwater in the Ocean State.

“We have a lot of challenges in this state,” said Karl Kozak, president/CEO of the $1.3 billion Pawtucket Credit Union in Pawtucket, R.I. “Tough times arestill in our face but we have a good charter and we've had somepositive growth this year. We're hopeful.”

With an ROAA of 0.70% as of June 30, Kozak is steering hiscredit union forward and opening new branches: two in 2011 and onemore this year. And despite the state's unemployment rate at 10.7%,PCU hasn't had any layoffs – ever – and the credit union wasrecently awarded first place, for the second consecutive year, inthe Providence Business News' “Best Places to Work inRhode Island” survey.

“This program is the gold standard for recognizing businessesthat value their employees,” Kozak said. “In our 85-year history,there's never been a layoff. We continue to expand and that has alot to do with our employees. Our employees are our most valuableasset.”

Pawtucket's delinquency rates have improved from 0.14% as ofJune 30, 2011 to 0.05% one year later. The credit union alsoboasts a 12-month loan growth of 3.97% as of June 30, mostly as aresult of positive real estate lending, commercial lending andindirect boat lending, Kozak said.

“I don't have a magic bullet, but we have a strong collectiondepartment and a strong loan and share ratio,” Kozak said. “We'regoing to find ways to get through this.”

Charge-offs among Rhode Island's federally insured credit unionswas 0.46% as of June 30, well below the national average of 0.75%. Delinquencies are below national averages, with Rhode Islandreporting 0.92% of total loans delinquent as of June 30 compared to1.2% nationally, according to the NCUA's latest statistics.

That's heartening news, because the smallest state in the nationis still struggling big time with the highest foreclosure rate inNew England.

During the 12 months ended July 31, Rhode Island reported 2,664foreclosures, according to CoreLogic, the Santa Ana, Calif.-basedreal estate data firm. Rhode Island's foreclosure inventory was2.9% during July, compared with 3.2% in July 2011.

Turning Rhode Island's economy around, erasing the state'srating as a bad place to do business, and finding innovativemethods to attract job creators to this New England state is goingto take time.

“Rhode Island continues to struggle with one of the mostchallenging economic climates we have ever faced,” said Gov.Lincoln Chafee. “Rhode Islanders are hurting, struggling to makeends meet. We knew, however, that problems decades in the makingwould not be solved overnight.”

Although Rhode Island continues to face daunting challenges, thegovernor said he is confident in the state's ability to make theright decisions.

“We want to make forward-looking investments that will bringabout a brighter future for our great state,” he said.

For $1.3 billion Navigant Credit Union in Smithfield, R.I., an ROAA of 0.34%does not exactly spell recovery. Contributing to a low ROAA isNavigant's loans-to-assets ratio, which at 65% as of June 30 islower than the state average of nearly 69%, but higher than thepeer average of 59%.

“Navigant has a larger investment portfolio and this results inlower income,” said its president/CEO, Gary Furtado. “Navigantprides itself on its high-touch personal service model, whichtranslates into a higher cost structure.”

Delinquencies rates have gone up since last year, from 0.95% asof June 30, 2011 to 1.03% one year later, but Furtado said that onthe positive side, Navigant doesn't have any sub-prime loans on itsbooks.

“We were not adversely affected at the beginning of therecession. Rhode Island has had, and continues to have, a veryhigh unemployment rate of roughly 12%,” he said. “Theprolonged unemployment is now affecting our members and theirability to repay.”

On Sept. 20, Rhode Island Attorney General Peter Kilmartinannounced a nearly $1.6 million grant that will help prevent ordelay foreclosure on an estimated 1,800 homes in the state.

The grant for Rhode Island Legal Services came from the state'sportion of a national mortgage settlement between five of thenation's largest mortgage providers and attorneys generalnationwide.

Rhode Island Legal Services can assist homeowners facingforeclosure in bankruptcy court, provide housing and foreclosureprevention counseling, negotiate with lenders on loan modificationsand file lawsuits against predatory lenders.

Kilmartin says the money is essential because many RhodeIslanders cannot afford to hire a private attorney to help themfight foreclosure. He says more grants from Rhode Island's $8.9million portion of the national settlement will soon beannounced.

Recovery in the housing market would mean good news forNavigant's real estate loan portfolio, which is performing well andcontributed to the credit unions 14% loan growth figure last year.Furtado said his credit union has always been a very active realestate lender.

“In this low interest environment, real estate loans, includingfirst mortgages, home equities and lines of credit, continue to bestrong,” he said. Commercial mortgage loans are also strong, hesaid.

Keeping with a philosophy of returning value to members,Navigant maintains competitive rates and low fees, with fee incomethat is much lower than peers, Furtado added.

We've skated through the foreclosure crisis and we've only had12 foreclosures out of an $800 million portfolio,” he said. “Inthis economy, I would have to say we've done very well.”

Navigant has been a state-chartered, community-based financialinstitution since its inception in 1915 and brands itself as acommunity banking partner. Furtado said the credit union has beenactive in and supportive of all the communities in which itserves.

In spite of the economy, Navigant's strong financial positionhas supported a growth strategy which includes adding new branchesand employees over the last several years, and Furtado said heplans to expand and to continue to experience strong membershipgrowth, deposit growth and loan growth.