Ensign Federal Credit Union of Henderson shuts down

EDS Credit Union, a large Texas institution, took over insolvent Ensign Federal Credit Union today, which served 7,900 members of the Church of Jesus Christ of Latter-day Saints.

Members of Henderson-based Ensign will not lose deposits because EDS Credit Union is assuming Ensign’s deposits and loans in a transaction arranged by the National Credit Union Administration.

Service will continue without interruption, said John McKechnie, NCUA director of public and congressional affairs. Members of Ensign now are members of EDS Credit Union with a maximum of $250,000 in federal deposit insurance each.

“It’s a very seamless transaction,” McKechnie said.

The federal agency seeks to find a “most suitable merger partner” able to provide the same kind of service, rather than focusing on geography, he said.

EDS Credit Union “is a very up to date credit union that is known for its member service,” McKechnie said. EDS Credit Union was chartered in 1974 to serve workers of the similarly named technology company founded by Ross Perot.

An unsuccessful candidate for president, Perot sold EDS in 1984. The company now is part of Hewlett Packard Co. and does business as HP Enterprise Services.

The Texas credit union is financially strong with $772 million in assets and 58,000 members. It’s headquarters are in Plano where EDS was located, but it has a branch in Santa Ana, Calif., and other locations in Michigan, Pennsylvania, New Jersey and Virginia.

Analysts describe Ensign as a victim of the continuing Nevada recession. Losses mounted at Ensign as members lost their jobs and were unable to pay back loans.

It had $98 million in assets on Sept. 30, but it had a negative net worth of 1.2 percent or $1.2 million, down from $475,000 three months earlier.

Ensign lost $10 million in the first nine months of this year as its delinquent and charged off loans totaled $13.4 million.

The credit union was founded in 1961. It kept a low profile in the news and did not respond to news media inquiries in recent months. However, Ensign’s Web site displays a favorable 2007 story about the credit union that appeared in the Las Vegas Business Press.

CEO Diane Whitaker was quoted saying the credit union was open to devout LDS members and nonpracticing Mormons as well. The church did not operate the credit union, but Ensign emphasized the church in programs and advertising.

A spot on the Web site offers a checking account for Mormon missionaries, which comes with a $100 cash bonus. The credit union industry has its historical roots in religious affinity groups. The first credit union, called St. Mary’s Bank, was started in 1908 in Manchester, N.H., McKechnie said. The credit union concept, in which financial institutions are owned by members, spread to other parishes and religious groups.

In recent decades, credit unions more commonly served a corporation’s employees or workers in a particular sector, such as casino operators or teachers. Some credit unions became community-based and served anyone living or working within a given area.

Ensign is the 13th federally insured credit union to be liquidated this year. In Nevada, Ensign became the fourth ailing credit union taken over with the assistance of regulators.

Federal and state regulators have selected out-of-state credit unions to merge with Nevada credit unions. With the devastating downturn in Nevada’s economy, many credit unions here may lack the ability or appetite to assume the deposits and loans of a failed credit union.

America First Credit Union of Utah took over Community One Federal Credit Union of Las Vegas in August. The next month, regulators seized Clearstar Financial Credit Union of Reno and transferred Clearstar deposits to United Federal Credit Union of Michigan. In October, Cumorah Credit Union Las Vegas was merged with Credit Union 1 of Rantoul, Ill.

The scenario reminds some of the 1980s in Texas when the collapse of oil prices led to the collapse of the state’s major banks and out-of-state banks replaced them. So far, local banks acquired the deposits of three failed banks. However, Community Bank was liquidated and First National Bank became Mutual of Omaha Bank, which is headquartered in Nebraska.

The Silver State has lost five banks since July 2008 when the recession led to increasing numbers of loan defaults.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.