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Banking regulators blame bad loans made by former management for the failure of a Bountiful credit union and a $984,000 bailout by the federal credit union insurance agency.

Bonneville First Credit Union was seized by the state last week and sold to Deseret First Credit Union of Salt Lake City. Deseret First is made up of 21,000 LDS Church members and church employees.Bonneville's 3,000 members now are customers of Deseret and suffered no losses as a result of the takeover, said George Sutton, state financial institutions commissioner.

"The credit union had been struggling for some time," he said. "Current management was doing an excellent job, but we did not think they could get on top of the problems left over from previous management."

Deseret First has assets of about $45 million, while Bonneville had assets of $7 million, said Shane London, controller of Deseret First.

The acquisition makes Deseret the state's ninth-largest credit union.

Regulators discovered the bad loans about three years ago, Sutton said. The president of the credit union at that time was Stephen T. Hirst, whom the board dismissed in 1989.

Hirst refused to comment on his management of the credit union or Sutton's claim that Hirst made a significant number of bad loans. Hirst now works as a cashier in Centerville.

High operating expenses and poor loan quality led to the demise of Bonneville, said Stu Vernon, the state's credit union supervisor.

The credit union recently built a downtown Bountiful office building costing about $700,000. The high operating expenses helped cripple the credit union, Sutton said.

A $100,000 claim has since been filed with the insurance company that bonded Hirst, Sutton said.

The National Credit Union Share Insurance Fund will pay Deseret First $984,000 in subsidy to take on the assets and deposits of Bonneville, according to documents filed in 2nd District Court.

The Share Insurance Fund is guaranteed by the U.S. Treasury and is financed by insurance premiums paid by federally insured credit unions.

Sutton said loans were made to people with no jobs, to some who were involved in bankruptcy proceedings and to people with demonstrated poor loan payment performance.

Bonneville was once called the South Davis Credit Union, and membership was restricted to those members of the church who lived in the South Davis Stake.

Deseret's field of membership is restricted to members of the church, employees of the church and employees of subsidiaries of the church, London said.