Hawai'i's largest state employee union is alerting major banks that its members may soon be asking for leniency with financial obligations, in a sign of the ailing economy in the state.

In a recent letter to First Hawaiian Bank, Bank of Hawaii, American Savings Bank and Central Pacific Bank, the head of the Hawai'i Government Employees Association asked that those financial institutions be aware that union members are facing financial hardships.

Union executive director Randy Perreira said state employees are paying significantly higher medical insurance premiums, and hundreds also face layoffs or furloughs under plans promoted by Gov. Linda Lingle to help close the state's projected $786 million budget shortfall.

"People seem to have managed that initial shock of the increase in medical" expenses, Perreira said. "Now they're facing something in addition and that's what causing the alarm.

"There is great fear about making mortgage or other loan obligations (and) the possibility of having to borrow" for college tuition and other items, he added.

Many of the union's 29,000 members have spouses or significant others who also work for the state or in industries that are experiencing difficult times, such as tourism and construction, Perreira added.

Shawn Lathrop, a senior probation officer on the Big Island, said he and his wife are anxious about their first home, which they now are in the process of buying. He said they can purchase the property even if Lathrop is furloughed two days a month.

But he said the purchase won't work if he is furloughed an additional day each month, as Lingle has proposed for all state workers.

"The biggest fear for us right now is that we're basically going to have to pull out and we won't be able to get that $8,000 first-time homebuyer's tax credit," said Lathrop, 36.

Those kind of situations are occurring to all kinds of customers, said Donald Horner, chairman and chief executive officer of First Hawaiian Bank. His institution is using several methods to help those with loan problems, including payment deferrals and restructuring, he said.

"Those are a few of the ways we could modify the loans if we feel it is warranted," Horner said. "But the first step is for the customer to proactively contact their banker."

Bank of Hawaii spokesman Stafford Kiguchi said his institution is sympathetic about the uncertainties facing state workers.

"As with other customers who may be facing similar hardships, we would want to work with them to help minimize adverse impacts that may result from their situation," he said.