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BAKERSFIELD, Calif.-After a very difficult three-year stretch during which it lost $77.7 million, Kern Schools Federal Credit Union welcomed black ink back to its books in 2011.
The $1.2-billion CU's net income for 2011 was $25.2 million, excluding assessments. Kern Schools paid $2.8 million to the Corporate Stabilization Fund, leaving it with net income of $22.3 million.
Those numbers follow some tough years. Its net loss for 2010 was $12.8 million, including more than $3.5 million in assessments. In 2009 it lost $40.6 million, including $13 million in assessments. And in 2008 it lost $24.3 million.
Its numbers across the board are looking up now, however. KSFCU's net worth ratio for 2011 was 7.72% ("well capitalized"), up from 5.4% in 2010 and 4.89% in 2009 (both years "undercapitalized"). Its net worth ratio bottomed out in June 2010 at 4.31%.
Like many credit unions, Kern Schools' bottom line has gotten a boost from a reduction in its Allowance for Loan Losses, which was $28 million in 2011, compared to $51.1 million in 2010 and $50.9 million in 2009.
President and CEO Steve Renock told Credit Union Journal the turnaround started in 2010, "even though our 2010 results did not look very good."
"We cut expenses by $20 million in 2010, and then another $6 million in 2011," he reported. "The single biggest impact was closing seven branches, three out of town and four here in Bakersfield. That reduced our headcount from 550 to 400. That was not easy or fun to do, because it affects peoples' lives, but we needed to make sure the credit union, which has been around for 70 years, will be around for the next 70 years."
KSFCU's EVP/Chief Financial Officer Matthew Davidson said he and his team searched for every possible expense line item for review, including some 300 vendor contracts ranging from ATM processing to janitorial to insurance to landscaping.
"Many of these contracts automatically rolled over, so we stopped that and examined each one," he said. "We talked to the vendors about getting bids. We were in difficult shape because our operating expenses were so high."
Kern Schools FCU switched its core data processing and IT platform, which not only saved $2-million per year but allowed it to...