Merger is saving Highgrove Community credit union

Highgrove Community Credit Union in St. Paul is about to take wing.

Wings Financial, the largest credit union in Minnesota with $2.6 billion in assets and 126,000 members, announced Wednesday that it will absorb the one-branch Highgrove, which has 8,600 members and about $37 million in assets.

Highgrove got its start in 1947 serving workers at the city's Ford plant. It expanded over time to cover the entire city of St. Paul but got into trouble as the economy faltered and its customers dealt with foreclosures, unemployment and tighter purse strings.

Highgrove President Pat Johnson said the credit union's board voted last fall to begin looking for a merger partner to stabilize the business and protect its members.

"Whether or not things could have changed and we could have rebounded, we don't know," Johnson said.

Highgrove's two-year-old branch office at the juncture of West 7th Street, Montreal Avenue and Lexington Parkway will remain open under the Wings nameplate. Johnson said the building was an attractive asset that may have saved the credit union from closure.

Wings found the merger attractive because Highgrove's membership is "solid" and because about 4,000 Wings members live within a short radius of the Highgrove office, an area where Wings didn't have any branches, said John Wagner, marketing vice president.

Most of Highgrove's 17 employees will be offered jobs with Wings, but an unknown number of back office jobs likely will be cut, Wagner said.

Johnson said she doesn't know yet whether she'll have a job with Wings but won't remain as manager of the St. Paul branch.

The National Credit Union Administration and Minnesota Department of Commerce have approved the merger, which will take place over the next few months.

Wings, headquartered in Apple Valley, got off the ground 72 years ago in St. Paul as the credit union for Northwest Airlines employees. It now has 18 branch offices in the United States, including seven that serve the 13-county Twin Cities area.

More mergers foreseen

He said some struggling credit unions will merge into larger, healthier institutions, like the merger of Highgrove into Wings. And mergers of relatively healthy equals also are expected as credit unions look for ways to leverage more services for their members.

Marvin Umholz, a credit union consultant in Olympia, Wash., agreed. Because of the economy, though, he said regulator-driven mergers are dominating now. That appears to be the case with Highgrove, he said, citing financial figures on its first-quarter report that would ordinarily trigger regulatory intervention.

As of the end of March, Highgrove's ratio of net worth-to-total assets scraped bottom when compared with its peers, landing it in the lowest percentile of credit unions with assets between $10 million and $50 million.

Its return on average assets, a measurement of earnings, looked relatively healthy at the end of the first quarter, Umholz said. But that wasn't the case last year, when Highgrove had big losses that depleted its net worth.

"A combination of high loan delinquencies and charge-offs could cause this," Umholz said. "I think a merger -- at least based on what I read on the credit union trade press this morning -- that's a good thing. It takes a potentially bad situation and turns it into a positive situation."