A Glimpse at the Future First Tech & Addison Avenue Credit Union

On March 12th, First Tech Credit Union ($2.2 billion, Beaverton, OR) and Addison Avenue Federal Credit Union ($2.5 billion, Palo Alto, CA) announced their intent to merge. For regulatory purposes, First Tech will merge into Addison Avenue to retain its federal charter; however, the First Tech name will survive. From the institutions' press release the credit unions are moving forward with the merger due to, "an opportunity to build a proactive partnership between two independently strong, well-capitalized credit unions who want to build an even stronger foundation for the future." Their financial, operational and member data currently available indicate that the new credit union, First Tech Federal Credit Union, will be a formidable credit union. Below are four areas, excerpted straight from the CUSP Scorecard, for comparisons. A full financial comparison, including the balance sheet and income statement at year-end for the two institutions combined can be downloaded here.

Addison Avenue had slower annual member growth, but they have significant membership penetration, nearly 58%. By contrast, First Tech has reached 23% of their potential members. The asset-based peer group has an average membership penetration level of 9.7%. Members at both institutions are using the credit union's products. First Tech has a significantly higher share draft penetration than Addison Avenue and the peer group, but less than half the first mortgage penetration.

In terms of dividends and rates, the credit unions have some differences. First Tech pays higher dividends on shorter-term products, including checking, savings, and money market funds. Addison Avenue pays higher rates on longer-term deposits. Addison Avenue has an industry-recognized member investment services program, and the higher rates on these types of deposits may be related to that program. As noted above, First Tech has higher than average penetration rates in Auto and Credit Card loans; the rates on those products are lower than the peer group's average rate.

Addison Avenue has a much higher average salary per employee, however, they have a greater level of productivity. Loan originations per employee are 40% higher at Addison Avenue. A factor for both of these figures may include the cost of living in the San Francisco Bay Area (for employees and member home purchases).

While salaries may be higher at Addison Avenue, the two credit unions are remarkably similar in the proportion of expenses to income. The Efficiency Ratio (a measure of expenses relative to interest and non-interest income), varies by one percentage point. Additionally, Revenue/Operating Expenses are within the same range. While Addison Avenue has a lower net income per member, it also had a $37 million Provision for Loan Loss expense. First Tech only reported an $11 million PLL expense in 2009.