MOUNTAIN VIEW, Calif. — At $6.8 billion in assets, First Technology FCU is the 10th largest credit union in the nation — and it enjoys the unique perspective of serving members in two of the hottest markets: Silicon Valley in Northern California and Lane County, Oregon.
CEO Greg Mitchell said First Tech serves more than 1,000 technology companies, including all of the larger ones, plus Nike.
In addition to Oregon state government agencies, its 1,100-plus SEGs include some of the world's most well-known companies, such as Agilent Technologies, Cisco, Google, Hewlett-Packard, Intel, Microsoft, Netflix, Nokia and Sun Microsystems.
First Tech is the product of the largest natural-person credit union merger ever: the union of Palo Alto, Calif.-based Addison Avenue FCU and First Tech CU, Beaverton, Ore., that become First Tech FCU on Jan. 1, 2011.
"We are a SEG-based credit union, but we see the Bay Area as a very dynamic market," said Mitchell. "We are a significant consumer lender, including auto, Visa, signature loans and stock-secured loans."
'Irrational Pricing'
First Tech's principal competitors in auto lending are credit unions, and Mitchell said he sees some "irrational" pricing in that space.
"Credit unions tend to underprice auto loans, sometimes to their detriment," he declared. "First Tech tends to compensate for irrational behavior in one area by increasing volume in the other markets we serve."
Despite the competition over auto loans, Mitchell said cooperation among Bay Area CUs is "pretty good" because they understand each other's issues.
"We collaborate on strategy and understanding market trends," he said. "We are talking with other credit unions about investing in loans we are purchasing from large financial institutions. It will be a CUSO that offers a solid alternative to investments."
One way CUs here get along — according to several people contacted for this Special Report — is many of them have their own niche. Mitchell said this is remarkable considering most compete in the community space, other than Stanford FCU and First Tech.
'Vibrant' Housing Market
First Tech is the fifth-largest mortgage player in the credit union community in the United States, and 10th-largest overall. Mitchell characterized the Bay Area housing market as "vibrant," particularly San Francisco metro, the peninsula that includes Santa Clara County and the south bay.
"It has created challenges for entry-level home owners, particularly in Palo Alto and surrounding communities," he said.
First Tech does not see itself competing against other credit unions, but against all other mortgage providers, Mitchell continued. He said the CU's primary products are 3-, 5- and 7-year hybrid jumbo loans, that are fixed for a period and then floating thereafter. It has a 30-year jumbo product that it sells on a servicing-released basis.
"Those loans are sold to market participants outside the credit union movement," he explained.
To meet the needs of members in a feverish mortgage market, First Tech does up to 90% loan-to-value on jumbo loans, with private mortgage insurance on balances above 80% loan-to-value.
Another helper: the CU is working with an organization to provide members with obtaining assistance on their down payments.
"We originated $1.7 billion in mortgages last year and expect to do $1.6 billion this year," Mitchell noted. "A lot of that is through corporate relocation programs through our SEGs. We assist individuals with financing, which tends to give us some unique advantages."
Jeremy Walker, First Tech CU's SVP and mortgage executive, oversees sales, operations and servicing of mortgages, or "soup to nuts." Mortgage operations are headquartered in Beaverton, Ore., but the CU has sales people in the Northern California market.
Much of First Tech's mortgage volume comes from activity in the Bay Area, followed by Oregon and Washington.
"In the Bay Area, supply and demand is contributing to the price appreciation we are seeing," Walker said. "It is probably one of the top five markets we have seen in recent years, in terms of recovery. The affordability comes into play as rapidly increasing home prices are squeezing some folks out of different price ranges."
Both Mitchell and Walker said one aspect of Bay Area real estate that makes it particularly difficult in which to compete is the extraordinary amount of cash sales — up to 60% of transactions in some areas.
"This makes for a challenge," said Mitchell. "We offer members approval and funding in 28 days or less, which is a cash-equivalent transaction. We have to be able to compete with cash transactions, and we can provide that certainty. In some cases we can close in 15 days if the motivated members get us their financial information immediately, and appraisals and title companies also are motivated."
Walker noted being a portfolio lender gives First Tech a leg up.
"We have a focus on the tech sector, and we use lending as an opportunity to help people. We can be very aggressive in pricing hybrid ARMs in the jumbo space. The strength of the technology sector, which is right in our wheelhouse, helps us. We do a lot of business with our SEG partners. Because we can portfolio we can make decisions that can help our members compete in a highly competitive market."
