After a net loss of $12.8 million in 2010, the $1.2 billion Kern Schools Federal Credit Union in Bakersfield, Calif., declared 2011 its best year for financial performance since 2007. The CU announced a net income of $22.4 million for 2011 and a net worth ratio that jumped from 4.31% in June 2010 to 7.73% in December 2011.
How did Kern Schools FCU turn red ink to black? The credit union said it made a painful operating expense reduction of more than $6 million, which included closing seven branches and cutting around 27% of its staff, and brought in a new vice president of collections who could whip its loan portfolio into shape.
President/CEO Steve Renock said when he began his current position at the end of 2009, he made the decision to reduce the credit union's expenses amidst a rough local economic climate.
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"In Kern County, where Bakersfield is located, we have a very high unemployment rate and real estate prices that have plunged by more than 50%," Renock said. "That was causing problems in our loan portfolio. Our expenses were very high at the time, so we decided to implement a new plan for 2010."
That plan included seven branch closings and the elimination of approximately 150 of its 550 employees.
"That isn't something I like to brag about, but it was something we had to do in order to survive," Renock said. "The credit union has been around for 70 years and we want it to be around for another 70 years, so we had to take drastic actions."
Executive Vice President/Chief Financial Officer Matthew Davidson said Kern Schools FCU also examined its approximately 300 vendor contracts and renegotiated a number of them, including its telephone, investment and janitorial services contracts, to cut costs. A core system upgrade in May 2011 to Fiserv Inc.'s XP2 core processing platform also helped slash overall costs, he said.
Renock said the CU's new vice president of collections, Hilary Appleby, has revamped Kern Schools' collections program. New collections department rules include working more closely with members on their loans and moving forward with charge-offs and foreclosures, if necessary. As a result, the credit union's total delinquent loans fell from 19.7 million in December 2010 to 17.2 million in December 2011, a decrease of 12.4%, according to its financial performance report.
Renock said the CU's improvements in defaulted loan activity and overall financial performance indicate a gradual recovery in Bakersfield's economy–several industries such as oil and agriculture have showed promise, he said.
This year, Kern Schools FCU plans to launch mobile banking and a rebranding campaign that will tie the credit union's name to certain products, such as auto loans.
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
