By all accounts, Hawaii's tourism economy is experiencing a bigwave of double-digit increases in visitor arrivals and spendingover the past year. However, Hawaii credit unions reported a flatreturn on average assets during second quarter 2012, according tothe NCUA's Quarterly U.S. Map Review.

With 62 basis points worth of profit that lags behind thenational average of 86 basis points, the Aloha State's creditunions could use a couple of mai tais to get them through theyear.

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“Our economy is highly dependent on tourism and in that regardthings are looking up,” said Dennis Tanimoto, president ofthe Hawaii Credit Union League in Honolulu.“Unfortunately, our credit unions here in Hawaii are just notgenerating enough loan volume to bring us back to where we werefour years ago.”

Also during the second quarter, Hawaii's credit unions reporteda12-month loan growth of -2.6%, compared to 3.2% nationally, andjust 67% of the Aloha state's credit unions reported a positivereturn on average assets, compared to a 74% national average.

The state's tourism economy is on pace for a record year throughJuly as the Hawaiian Tourism Authority reported 1,800 more visitorseach day and an additional $17 per person in daily spendingcompared to 2011. This activity has resulted in total visitorarrivals increasing 9.8% to 4.7 million visitors and totalexpenditures jumping 20.8% to $8.4 billion, up $1.4 billion fromlast year.

Year-to-date visitor spending has generated an estimated $915million in state tax revenues and will help to sustain more than160,000 Hawaiian jobs in 2012. Tanimoto hopes this wave of touristdollars will eventually spill over into the pockets of the morethan 800,000 credit union members in Hawaii.

“Besides tourism we have a strong Navy and Pentagonmembership base,” Tanimoto said. “There are other industriesbesides tourism in Hawaii so we are really starting to see theeconomy turning around for the better.”

According to the latest U.S. Census report, Hawaii had thenation's largest percentage drop in median income and biggestpercentage spike in poverty rate during the last two years of therecession.

The cost of living in Hawaii is already among the highest in theUnited States. The basics of life — housing, food, utilities — areconsiderably higher than in the mainland, and research shows that85% of credit union members in Hawaii are low-income, earning lessthan 80% of the state's median family income.

Tourist numbers dropped dramatically during the recession, andthe state's tourism industry suffered a second blow when the 2011Japanese earthquake and tsunami stifled the flow of big-spendingJapanese vacationers to the islands. However, in 2012, visitorsfrom all over the world are coming back to the sandy beaches,tropical weather and Aloha spirit.

Andrew Rosen, president/CEO of the $1.1 billion Hawaii StateFederal Credit Union, said the Hawaiian economy tends to lag behindthe mainland economy by about six to 12 months.

Despite the recession, the nearly 75-year-old credit union,located in Honolulu, has experienced a 50% jump in membership since2001, Rosen said. It also is one of the few credit unions in thecountry to provide members with bonus dividends and interestrebates, returning more than $37 million in earnings since1996.

HSFCU counts 74,339 members and a ROAA of 0.82%, lower than itspeer average of 0.92%. However, delinquent loan numbers as of Juneare an impressive 0.27%, compared with a 1.12% peer average.

“We owe our strong ROAA to focusing on the basics, lending toour members and helping them save,” Rosen said. “The differencebetween Hawaii State Federal Credit Union and our peers is reallydue to the lag in our recovery and lower loan demand.”

Rosen said his employees work very closely with members to meettheir credit needs and ensure they can manage their debtresponsibly.

“Our negative loan growth is a reflection of two factors,” hesaid. “The first is the slow recovery of the economy, and thesecond is our active management of long-term interest raterisk. We have stopped putting long-term, fixed real estateloans on our books, although we broker mortgages and refinances formembers. With record low interest rates we are adjusting ourbalance sheet to reduce long-term interest rate risk.”

The credit union's field of membership includes all state,city and county employees in Hawaii and their families.

“As the economy improves we're beginning to see greater demandfor loans,” Rosen said. “We have some really revolutionaryproducts in the planning stage to better meet members' long-termneeds in a rapidly changing financial landscape. Overall wehave a great member base and we are striving for new ways to servethem in this rapidly changing economy.”

Hawaii has a long relationship with credit unions. In 1936,Archie C. Jackson, founder of Hawaii's first credit union, BigIsland Teachers' FCU, would hand deliver loan or withdrawal checks,making the long drive from his office in Hilo to Kau, Kohala andKona.

Jackson's checks weren't big. In 1936, he reported that hiscredit union had 65 members, with $2,149.54 on deposit and 12 loanstotaling $1,260. However, the country was in the middle of theGreat Depression, when money was hard to come by and harder tokeep.

The now $1.3 billion Hawaii USA Federal CreditUnion, headquartered in Honolulu, opened its doors on Nov. 6,1936, as Oahu Teachers No. 3 Federal Credit Union. In 2000,the credit union changed its name to Hawaii USA.

Like the rest of the country, educators are having a tough timein Hawaii, but President/CEO Karl Yoneshige said his membership mixof government employees, students and their families are slowlyturning the tide on the recession.

“As for the educators who are our members, they have seen a lotof changes occur in their benefits and it's been pretty tough onthem,” Yoneshige said. “Because of this a lot of them have gonedelinquent on their loans and we've had a number of write-offs.Overall things are improving but it's slow in coming.”

Charge offs peaked at 0.84% as of Dec. 31, 2011, but as of June30 the number had fallen to 0.44%, well below the peer average of0.74%. Like HSFCU, Hawaii USA's 0.67% ROAA lags behind the 0.92%ROAA reported by their $1 billion asset peers. A low loan to shareratio – just 40% as of June 30 compared to the peer average ofnearly 70% – will continue to make revenue a challenge.

“Our lending is slowly improving and with all the credit unionsand banks in Hawaii there is a lot of competition, so we arelooking at some positive numbers headed our way,” Yoneshige said.“The economy really isn't that much different here in Hawaii thanit is on the mainland except we might have more sunshine and it'sstill free.”