Wings to take over troubled City-County credit union

The state's largest credit union just gobbled up its second competitor in less than a month.

Wings Financial Credit Union announced Tuesday that it was absorbing the financially troubled City-County Federal Credit Union -- an entity with about half as many members but less than a fifth of its assets.

City-County, based in Brooklyn Center, was the state's ninth-largest credit union at the end of the first quarter with 66,000 members and $471 million in assets. The merger gives Apple Valley-based Wings, already more than twice as big as No. 2 Affinity in terms of assets, access to more customers in the north metro area, where it recently began expanding.

"The biggest challenge I think Wings or any financial institution today faces is to attract a new member, or to pull a member from another financial institution," Paul Parish, Wings Financial's president and CEO, said in an interview Tuesday. He said City-County's membership, which spans seven counties stretching from Stillwater to Elk River, represents "many years of growth for Wings."

But that growth will weigh on Wings' bottom line for a while.

"In the short term, it dings our net worth a little bit," Parish acknowledged. "Over time our pro-forma models indicate we will earn that back." In the meantime, he said, Wings Financial will remain "in the very well-capitalized category" of credit unions.

Financially precarious

It has been digging its way out of a hole it created by making 100 percent loan-to-value residential mortgages as recently as 2008, when the plunge in property values was well underway.

City-County's public performance figures are only available through the first quarter from the National Credit Union Administration (NCUA).

Those figures show that its net-worth ratio, which measures equity to assets, was a precarious 2.98 percent at the end of March, compared with an average of 10.11 percent for its peers.

"I think there's no question that the net worth position at City-County in the last few years has deteriorated," Parish said. But he said its performance has improved somewhat in the first half of 2010.

Jon Seeman, president of City-County, said its board decided it nonetheless needed a partner to protect its members. A merger with Wings offered attractive synergies to both entities, he said. Seeman said he's evaluating his options and doesn't yet know whether he'll remain with the company.

Parish said Wings has no plans to shut any City-County branches in the near term.

Wings, which has 300 employees, expects to keep about two-thirds of City-County's 145 employees. Some trims will likely come from duplicate back-office operations, Parish said.

Two mergers

Wings announced at the end of June that it was merging with St. Paul-based Highgrove Credit Union, another troubled institution with 8,600 members and about $37 million in assets. The two mergers give Wings a footprint across much of the Twin Cities.

"Our members will benefit from stronger networks of branches and fee-free ATM locations across the Twin Cities and by expanded growth opportunities that will allow us to continue offering the great rates, low fees and great service our members have come to expect," Parish said in a prepared statement.

The merger has preliminary approval from both the NCUA and Minnesota's Department of Commerce, which supervises state-chartered credit unions. It will be finalized later this summer.