Brought back from the brink four years ago by Bedford-Stuyvesant residents looking to preserve a precious economic resource for their neighborhood, the Central Brooklyn Federal Credit Union won a second chance for survival. It didn’t make it. Last Tuesday, federal regulators declared the 1,150-member 10-year-old financial institution insolvent and merged it with the Suffolk County-based People’s Alliance Federal Credit Union, which currently operates a branch in Long Island College Hospital on Atlantic Avenue.

Regulators say the shutdown was unavoidable. “Eventually, we make a decision for the members and the insurance fund to make sure their interests were protected,” said Layne Bumgardner, regional director for the National Credit Union Administration (NCUA). “That’s what we’ve done.”

This is not the first time his agency has stepped into Central Brooklyn’s affairs. In 1998, NCUA took the ailing institution into conservatorship, citing high operating costs and problems with loan delinquency. The credit union was returned to members in January 2000.

Board members acknowledge that the credit union was having serious financial trouble in its final year. Central Brooklyn had a loan delinquency rate of 27 percent as of June 2002, according to NCUA records, compared with an average of 2 percent at other credit unions. (Just a year earlier, delinquencies were less than 6 percent.) That same month, its books recorded a cash deficit of $16,946. Board chair Sidney Wayman claims that some of the credit union’s funds cannot be accounted for and that the board is seeking compensation from its insurance company.

Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions and a member of the Central Brooklyn Federal Credit Union, calls its takeover “a sad event for all of us,” but suggests that the board moved too slowly to address the accounting inconsistencies: “That situation should have been dealt with as a top priority, and it should have been dealt with months ago.” He describes the credit union board as reluctant to accept assistance from other financial institutions and “extremely difficult to communicate with.” Responds Wayman, “No one can tell me that we didn’t do everything we could to make this work.”

There were other factors contributing to the credit union’s precarious finances. Like many other investors, it has suffered huge interest cuts on money market accounts, with returns declining from 6 percent to 1 percent. And changes in federal banking law have put credit unions under newly strict minimum capital standards. As of June, Central Brooklyn had assets of $3.1 million and just $351,000 out in loans.

The credit union’s woes were also tied to its mission: To the end, it maintained a willingness to work out deals with borrowers who would be considered too risky by other lenders. Unlike People’s Alliance, which was founded by and for the employees of Pan Am, Central Brooklyn Federal Credit Union was chartered to provide banking services to poor local residents. Says Wayman, “I don’t think an outside institution can do that. I’m hoping [People’s Alliance] proves me wrong.”

One of the credit union’s founders, Errol Louis, now a reporter for the New York Sun, sees the merger as a good thing, providing members with services, like computer banking, that Central Brooklyn never could. In the course of trying to save the credit union the first time around, said Louis, “I looked at people saying, ‘We want to keep it under local ownership and control,’ and I said, ‘Be ready for lots of underpaid work. If it’s too much to bear, don’t think twice about finding another institution.’”