Mega Merger Creates Synergies…and Concerns

Both credit unions cater to high-tech workers. First Tech Credit Union serves Oregon and Washington, and Addison Avenue Federal Credit Union primarily covers California.

If completed, the merger would be the largest of its kind within the credit union industry in many years. The combined credit union would have assets of $4.6 billion, 38 branches, and 320,000 members nationwide, making it the 15th largest in the United States. The combined credit union would be called First Tech Federal Credit Union, and would maintain three corporate offices: in Beaverton, Oregon; Palo Alto, California; and Rocklin, California.

The two credit unions hope to have the merger completed by the end of summer.

“For over a year, our Board of Directors has been searching for a replacement. Benson Porter, Addison Avenue’s current President and CEO seemed like a great match, but there was one problem, he was pretty committed to Addison Avenue. When the Board looked a little deeper, they realized that it wasn’t just Benson that was a good fit; it was the entire credit union itself.” — Merger announcement on First Tech CU’s blog

Unusual merger motivations

It’s not often you hear a company say, “Our CEO is retiring so that’s why we’re merging.” Normally, organizations announce they are merging while talking about all the synergies, cost savings, alignment of cultures and improved services people will enjoy… and then say which CEO will retire. First Tech’s spin is certainly honest and transparent, but it has also triggered some tough questions.

Chuck Bruen, CEO of First Entertainment Credit Union, wonders why the merger didn’t happen sooner if it is such a great idea. “I find it very interesting that the merger is happening now that Tom Sargeant (First Tech’s CEO) is retiring. If the merger makes really good business sense, then why didn’t it happen earlier?”

“I hate to think my credit union is missing out on good opportunities just because I haven’t hit the bricks yet,” Bruen said, reflecting on his own impending retirement.

Members, too, are skeptical.

“The fact that First Tech was in a desperate search for a replacement CEO does not mean this is the right time to merge,” a member from Addison Avenue commented.

“So because First Tech didn’t want to search for another CEO fit, they decided on a merger?” asked a First Tech member on the credit union’s blog.

“The best First Tech Board members could do was find a person who is employed at a place he doesn’t want to leave?” asked Dean T.

Compounding concerns, some First Tech members aren’t thrilled about the idea of replacing their CEO, a 25-year credit union veteran, with Addison Avenue’s CEO, Benson Porter, a former executive with KeyBank and WaMu.

Merger of equals

It’s unlikely you’ll ever see a merger between two organizations that are more similar in size and makeup. The synergies and balances are obvious. The fact that both credit unions share the same core data processing system would help grease the skids as the two credit unions integrate operations.

Charter Federal State
Assets $2.5 billion $2.2 billion
Members 155,000 165,000
Branches 21 17
Primary Area California Oregon, Washington
Cap Ratio 8.77% 8.56%
Core Data Processor Open Solutions Open Solutions
Savings APY 0.10% 0.25%
12 Month CD 1.35% 1.35%
30 Year Fixed 5.00% 5.25% Rating 2 stars 3 stars

Tip: If you are going to merge two financial institutions, it’s a good idea to bring each other’s rates into alignment months before making the announcement. Give people one less thing to obsess about.

Member myths and realities

Invariably, when a merger like this is announced, people’s reactions reflect a range of emotions — fear, anger, excitement, anticipation. While there are many members of both credit unions who support the merger, it seems the loudest people are also (unfortunately) the most fearful, the most resistant to change, and quite often the dimmest.

Initial comments from the general public on stories about the merger found around the web include a number of misconceptions and falsehoods.

Reaction Reality
“Addison Avenue has many times the number of members of First Tech. It sounds to me like Addison Avenue will be swallowing us up and running everything!” First Tech has 10,000 more members than Addison Avenue.
“Addison Avenue’s rates are worse. I hope this isn’t a sign of things to come.” The rates offered by both credit unions are comparable.
“I certainly hope that this isn’t yet another bank type merger that trashed our economy.” Mergers didn’t trash the economy. Subprime loans and credit default swaps did.
“Big fish gobble up the little ones.” It’s a merger of equally-sized organizations.
“First Tech members will lose local Board representation.” The Board will be equally balanced between the two organizations and members will still vote for their own representatives.
“This benefits the Board only, not the members.” Credit union Board members are unpaid volunteers. They gain nothing personally by merging. In fact, some Board members at both credit unions will probably lose their seats.
“I want to be a member of a credit union, not a customer of a huge bank.” The merged institution will still be a credit union run by its members.
“If Addison Avenue is so great, why is their CEO applying for a job at First Tech?” Addison Avenue’s CEO did no such thing.

Some members raise some good, fair questions: What will happen to some of the unique products and services each credit union has? And will the merged entity participate in shared branching, because one of the credit unions doesn’t currently participate today? But based on the kinds of facts and rumors people sling around, you’d swear no one had ever heard of Google.

“We respect all of our members’ feedback,” said Deborah Colby, VP/Marketing & Business Development at First Tech.

On First Tech’s blog, Colby herself confessed some initial hesitations about the merger. “I’ll admit, when I first heard the news, I was a little apprehensive,” she wrote.

Within a day or so after the announcement, First Tech had a new blog post up acknowledging people’s concerns. In the post, titled “Mixed Feelings,” Colby tries to assuage fears while answering questions and providing clarity. This touched off a new and equally interesting set of responses from members.

Reality Check: There is no such thing as “too much” reassurance and hand-holding with mergers.

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Ron Shevlin, Senior Analyst with Aite, says its only natural for members to worry about a merger’s impact on service, staff and branches. But he wonders about the level of transparency First Tech has taken in its communications strategy.

“I would have suggested the CMO not admit ‘when I heard about the merger, I was apprehensive,’” Shevlin said. “First off, it makes it sound like she was out of the loop in the decision-making process. Second, if she’s apprehensive, then what’s the membership base to think?”

Awkward changes

The merger requires First Tech members to approve a reversion back to a federal charter. Back in 1997 when First Tech shortened their name down from “First Technology,” they successfully had members vote in favor of a switch from a federal- to state charter.

“First Tech changed from Federal to State for a reason,” a First Tech member named TJ pointed out on the First Tech blog. “Why are we going back?” It’s another tough question.

Addison Avenue changed its name from “Hewlett Packard Credit Union” a few years ago. The current name pays homage to the credit union’s original sponsor, HP, which William Hewlett and Dave Packard started in a garage on Addison Avenue in Menlo, California.

Key Questions: Will First Tech members feel like switching charters again? Will Addison Avenue members feel like switching names again?


The combination of two equally-matched, tech-savvy credit unions that are running the same core systems and serve technology workers in three adjacent states is a merger that makes a lot of sense. It should be “sellable” to both credit unions’ members. One big hitch is that First Tech’s members in Oregon may feel like they are being “taken over” or “selling out” to a California-based financial institution, despite the fact that the merged credit union would preserve the “First Tech” name, First Tech Board members and Oregon operations.

Human beings are instinctually hard-wired to fear what they stand to lose more than they see what they can gain. This merger’s success or failure hinges on how well the Addison Avenue and First Tech address their members’ innate survival reflex — their emotions, not their intellect. As The Financial Brand wrote in “The Good Reason vs. The Real Reason,” logical arguments aren’t always effective and “running the math” doesn’t always work. This works both ways — for those who support and oppose the merger. The side that plays to people’s emotions most effectively will prevail.

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