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

What will this $5 billion credit union look like? We explore financial, operational, and member metrics.

 
 

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.

 

Addison
Avenue

First Tech All CUs
Over $1B
Member Metrics 
     
     12-month member growth
4.47%
5.54%
5.48%
     Members/potential members
57.90%
23.32%
9.72%
     Share accounts per member
2.22
2.12
1.98
     Average share balance
$13,529
$10,814
$10,535
     Loan accounts per member
0.61
0.59
0.58
     Average loan balance
$17,717
$11,699
$14,591
     Average member relationship
24,328
17,767
18,980
     YOY Change in Avg Member Rel.
-1.74%
2.21%
-1.22%
Member Participation      
     Share Draft Penetration
53.42%
69.63%
53.21%
     Auto Loan Penetration
16.00%
19.90%
18.03%
     Credit Card Penetration
22.74%
30.03%
18.97%
     First Mortgage Loan Penetration
2.86%
1.13%
2.24%

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
First Tech
All CUs
Over $1B
Interest Rate Comparisons
Savings Rates      
     Share Drafts
0.05%
0.25%
0.35%
     Regular Shares
0.10%
0.25%
0.51%
     Money Market Shares
0.35%
1.05%
0.95%
     Share certificates
1.35%
0.90%
1.65%
     IRA
2.25%
1.05%
1.74%
     Average Cost of Funds
1.89%
1.54%
2.10%
Loan Rates      
     Credit cards
7.25%
6.00%
8.92%
     Unsecured Lines of Credit
11.99%
8.54%
11.60%
     New Autos
4.99%
3.99%
5.44%
     Used Autos
5.49%
4.49%
6.00%
     1st Mortgages
5.25%
5.10%
5.20%
     Other Real Estate
4.00%
4.99%
5.40%
     Average Loan Yield
5.25%
5.69%
6.07%

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).

  Addison
Avenue
First Tech All CUs
Over $1B
Productivity
     Full time employees (FTEs)
385
389
484
     Members per FTE
402
421
413
     Assets per FTE
$6,427,870
$5,621,107
$5,190,132
     Loan and Share Accounts per FTE
1,137
1,145
1,058
     Loans Originated per FTE
$2,890,647
$2,073,232
$1,720,541
     Loan Income per FTE
$235,619
$170,394
$211,946
     (NIM + Non Interest Income)/FTE
$325,255
$232,452
$214,014
     Net Income per FTE
$11,165
$66,347
$35,597
     Capital per FTE
$639,104
$530,161
$536,939
     Average Salary and Benefits per FTE
$107,121
$67,912
$67,858
     $ Rev. / $ of Sal. & Ben. per FTE
$3.97
$4.50
$4.73
     YOY Chng in Avg Sal & Ben per FTE
7.71%
1.87%
5.04%

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.

  Addison
Avenue
First Tech All CUs
Over $1B
Efficiency
     Earning Assets/Total Assets
98.24%
96.72%
96.07%
     Operating Expense/Member
$540
$362
$311
     Efficiency Ratio
66.68%
65.61%
87.70%
     Operating Expense/Average Assets
3.60%
2.90%
2.83%
     Average Account Size
8,595
6,539
7,412
     YOY Change in Average Account Size
-1.68%
6.96%
4.08%
     Revenue/Operating Expense
196.02%
200.25%
241.29%
     Revenue per Member
$1,059
$725
$751
     Capital per Member
$1,592
$1,259
$1,300
     Net Income per Member
$28
$158
$86

 

 

 

 

March 15, 2010


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