PACOIMA, Calif.–The effect one bad loan can have on a small CU can be seen in a merger taking place here. The $3-million Pacoima Development FCU, which was founded to serve this community in 2005, said it plans to merge into Gain FCU in Burbank, Calif., as the result of financial struggles.
Roberto Barragan, the founder of the Pacoima Development FCU, told the Los Angeles Daily News the credit union has been looking to merge for some time before Gain FCU agreed to a combination. Gain FCU has said it will retain PDFCU’s employees.
According to Barragan, the credit union suffered a financial hit from a single borrower–an apparel company that did not repay a loan–leading to a $190,205 loss as of March 2019.
“Having to write off that loan, if anything, that was probably the impetus for us to eagerly accepting the Gain proposal,” Barragan told the Los Angeles Daily News. The apparel company has filed for bankruptcy.
Gain FCU has $345 million in assets.
Members Agree to Combine
According to the credit union, members of the credit unions have voted in favor of the merger and NCUA has approved the deal. The merger is set to be completed by July 29.
“We appreciate the trust that the board of directors for Pacoima Development FCU has placed in the management of Gain FCU,” Darin Guggenheimer, the CEO of Gain FCU, said in a statement. “We recognize the important mission that Pacoima Development has served and look forward to continuing that mission in the community and with those who make up the membership of PDFCU.”
Pacoima Development FCU, which has billed itself an alternative to payday lenders, has approximately 1,200 members.