Kern Schools Federal Credit Union's finances stabilizing
| Tuesday, Oct 27 2009 06:17 PM
Last Updated Tuesday, Oct 27 2009 06:17 PM
New federal data suggest that Kern Schools Federal Credit Union's finances may be stabilizing despite difficult economic conditions.
The county's largest financial institution registered slight improvement in its quarterly net income and only a small dip in its net worth-to-total assets ratio. Although neither figure was good by historical standards, the credit union's new leader said the immediate outlook appears to be improving.
"There are some bright spots out there," President and CEO Steve Renock said Tuesday. "It's just the consumers in Kern County continue to have a tough time. And while we hope these trends will continue, there's no guarantee that they will."
According to the latest data from the National Credit Union Administration, Kern Schools lost $4.6 million in the three months ended Sept. 30. That was a little better than the $4.7 million it lost over the previous quarter.
The credit union's net worth-to-total assets ratio came in at 4.90 percent on Sept. 30, down from 4.91 percent on June 30. The ratio was 7.6 percent on Sept. 30, 2008.
Last week Kern Schools issued a news release stating that the ratio stood at 5.55 percent. Renock acknowledged Tuesday that the higher figure did not take into account an unprofitable data-processing subsidiary in Alabama that Kern Schools co-owns with other credit unions. Excluding that unit provides a clearer picture of Kern Schools' own operations, he said.
The distinction is important because Kern Schools signed an agreement last month with the NCUA requiring the credit union to raise the ratio to 6 percent -- ideally 7 percent -- within six years. The latest NCUA data on Kern Schools does not exclude the money-losing subsidiary.
Among the credit union's less favorable results in the third quarter was the amount of loans that had recently fallen into delinquency. As of June 30, Kern Schools had about $28 million in loans to borrowers who had fallen between one and two months behind on payments -- an increase of 12 percent over March 31 totals. Then, between the end of the second and third quarters, the total rose again, this time by more than 20 percent.
Renock said many of the recent delinquencies result from a shortage of work this summer for many of the credit union's teacher members. "We're thinking that the worst of that is over now that we're past the summer months," he said.
Meanwhile, the credit union's net charge-offs (that is, the amount of loans written off, less the amount of money recovered on bad loans) grew to almost $25 million, year-to-date, as of Sept. 30. That's a little more than its net charge-offs at the end of last year.
Hidden in the recent data are signs of improvement between August and September, Renock said. Although the credit union expects to have a tough time well into 2010, he said things may be getting better.
"We are anxiously waiting to see how things will improve in October, November and December," he said.
