While Florida and Nevada posted positive returns, they weren't much to speak of: 0.02% ROA in each state. California and Arizona fared even worse, with overall state ROAs of negative 0.06% and negative 0.58%, respectively.

Both California and Arizona numbers suffered due to big losses at individual credit unions in those states. California saw two credit unions liquidated in the second quarter, and Grand Canyon state numbers include massive losses at Arizona's second largest credit union. Both events pushed otherwise positive state ROA into the red. However, without those figures, the states are still performing on par with Florida and Nevada.

In California, continuing mortgage woes and high gas prices are the one-two punch affecting the

state's staggering economy. California is a high commute state, according to California Credit Union League Analyst Daniel Penrod, so when gas prices double, California disposable spending takes an even bigger hit.

"Also, because Californians saw a large increase in the wealth effect, meaning when homes were increasing in price, they felt like they had more money; they spent more on things they may not have needed, like a new car or a boat, more along the line of toys," Penrod said. "Now that wealth effect has reversed, and the first things to go are those types of items, meaning loan payments on them are late, whether they were purchased directly or put on a credit card."

Not surprisingly, inland areas are suffering more than coastal regions. Inland cities like Riverside and Oakland have experienced the greatest real estate value losses, Penrod said; and, those who live there frequently commute into Los Angeles or San Francisco each day, making gas prices an even bigger factor.

Andy Hunter, president/CEO of $4.2 billion Patelco Credit Union, agreed that inland areas are hardest hit in Northern California. Patelco absorbed two failed inland Bay Area credit unions, Cal State 9 and Sterlent, effective July 1.

"This is a big commute area, and when you think of the areas that gained new housing developments in this last boom, these were homes buyers could barely get into, plus they're commuting long distances, and many in SUVs," Hunter said. "It's a triple whammy. Good people are finding themselves in hard situations."

Patelco was strong enough to assume the two failed credit unions, but even one of the nation's largest cooperatives is still experiencing losses. The normally robust Patelco logged a negative 0.19% ROA in the second quarter, numbers that don't include the July 1 assumption of Cal State 9 and Sterlent.

"We're seeing higher than normal losses across our portfolios," Hunter said. "We're well-capitalized, so the scale of losses is certainly minimal. Still, it's not something we're used to or enjoy."

Hunter said he's beefed up his collections department but cut back everywhere else. Collectors and loan officers are also working with members on a case-by-case basis, attempting to salvage as many loans as possible.

"We are certainly doing everything we can to keep our members in their homes and paying on their loans," he said. "That's the most important thing. It's both our social and financial mission, and it's ultimately in the member's and the credit union's best interests."

Unemployment is also on the rise, up to 7.3% in July, higher than the national average, said California league Analyst Terrin Griffiths.

"While the unemployment is definitely trending upward, we're also hearing about people working less hours, going from full- to part-time, and taking on multiple jobs to make up for lost income," Griffiths said.

The state of California has also been operating without a budget since July 1, and Governor Arnold Schwarzenegger was scheduled to appear in court Sept. 12 to argue his right to drop state employee pay down to the federal minimum wage. If approved, the move will affect 200,000 state workers and the credit unions that support them.

Despite the bad news, though, Californians aren't fleeing the state in big numbers, Griffiths said.

"If anything, people are still coming to California for job opportunities," she said. The state's export industry, driven by large ports in Long Beach and Oakland, is strong, as is agriculture, Griffiths added.

Nevada, however, lacks California's economic diversity, Griffiths said. While California's tourism industry has suffered due to higher gas prices and lower disposable incomes, it hasn't made as big an impact on the state's economy as in Nevada.

The state was hopeful that a weak U.S. dollar would attract more foreign tourists to Las Vegas, especially Europeans. Griffiths said she was recently in Las Vegas, and a cabbie told her that he has noticed more European tourists in Sin City. However, those

visitors haven't made up for the lack of weekend gamblers that regularly flocked from Southern California and Arizona.

Penrod said decreased business travel and reduced conference spending is also hurting the state, too.

"While conventions haven't been canceled, per se, attendance is down," he said. "And, the whole reason they have conventions in Las Vegas isn't to make money off the convention alone; they're assuming there will be a heavy amount of gambling and extra spending. A struggling individual might attend the conference but won't be doing as many extracurricular activities, if any at all."

The Nevada housing market is being further hampered by the large numbers of speculative buyers who are willing to cut losses and sell low, further driving down home values, he said.

Things are even tougher in Florida, according to industry representatives there. Not only is the state facing the same real estate woes, job losses and economic stagnation as in the West, it shares California's much-publicized budget and infrastructure problems.

"I am convinced the problems among Florida financial institutions is deeper than just the current real estate trend," said Guy Hood, president/CEO of the Florida Credit Union League. "I think our economy is precarious, we're not sufficiently diversified, we have a very small manufacturing employment base, and we have tremendous burdens on our state infrastructure."

Construction and tourism form the cornerstones of Florida's economy, and with both industries in a slump, the state is unable to produce enough tax revenue to keep up with new infrastructure demands; for example, the state gains almost 60,000 additional public school students each year.

Hood said a big part of the problem lies with legislative term limits that kick lawmakers out of office before they can see long-term solutions through.

Bucky Sebastian, president/CEO of $2.2 billion GTE Federal Credit Union, didn't mince words when asked how his Tampa-based credit union slipped from a nearly $6 million profit in June of last year to more than $19 million in losses year-to-date recorded this past June.

"The economy here is just awful, and I'll make no bones about it. If the rest of country is flirting with a recession, we're in a depression, no doubt about it," Sebastian said. Agreeing with Hood's comments that Florida's problems extend beyond the real estate market, Sebastian added that this year's active hurricane season isn't helping matters any.

"When you look at the big picture, if hurricanes are perceived to be a continued threat, fewer people will come here this fall to visit, fewer people will retire here and fewer businesses will relocate here," Sebastian said. "Not only do we have a very large supply of homes for sale, we're also a state that depends upon tourism for revenue. We're a sales tax driven economy, we don't have a state income tax, so that makes things even worse."

According to the Sept. 9 issue of the Orlando Sentinel, Florida's unemployment rate increased to 6.1% in July, the state's worst market in 13 years. Sebastian said he thinks actual unemployment figures are worse than that because many in the state have already left after unsuccessfully looking for jobs.

"I don't know how many, but we've seen a lot of notes on closed accounts that say the member moved to look for work to places like Ohio or Texas, and they'll show up on those states' unemployment numbers, not here."

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