Fast-Growing REALTORS FCU Retools Model As CEO Departs

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ROCKVILLE, Md.-Although it has been one of the fastest-growing start-up credit unions in history, REALTORS FCU has been forced to retool some strategies and make cuts to operational expenses with mid-year numbers showing it remains in the red.

In addition, the credit union, built around a unique online-only service model, and its well-known CEO Tom Glatt, have also parted ways.

REALTORS, which has grown to $72-million in assets in less than two years after opening its virtual doors, reported $2 million in losses in its June call report. Although it has generated higher revenues during each business quarter, significant expenses have kept the institution mired in red.

According to its December 2009 call report, REALTORS spent $2.86 million on compensation last year, despite a staff of just 20 individuals. The CU also spent $1.4 million on professional and outside services, $332,000 on educational and promotion expenses, about $180,000 on travel and nearly $200,000 on office space. The credit union has no physical branch locations.

The $10-Million Launch

REALTORS FCU was launched with a $10-million capital infusion from its sponsor, the National Association of REALTORS. The NAR provided an additional $5 million in late 2009. The latter infusion, however, was not enough to keep the credit union from posting a $135,536 net loss in 2009 as expenses climbed above the $5 million mark.

REALTORS FCU was actually losing more than $64,000 after provisions for loan losses at the end of 2009, but that trend has been fully reversed in 2010 as the CU has pulled in $1.1 million in loan and investment interest income and another $113,640 in fee income.

The numbers from the first-half of 2010 are similar to the prior year. REALTORS FCU reported $1.26 million in compensation-related expenses, $818,599 on outside services, $96,523 on promotion and $37,605 on travel. Its expense for office occupancy increased $232,855, more than it spent for office space in all of 2009. Net worth has fallen precipitously as well, dropping from 24.7% in December 2009 to 13.9% in June, although it remains well-capitalized by regulatory standards.

Tom Glatt, who piloted REALTORS FCU as CEO from its launch until his departure in July, said strategic changes and reductions in operational expenses have REALTORS FCU is moving in the right direction. "I think they are in a great position," he said. "With the economy like it is though, Realtors are up against the wall. There was a conscious strategic decision to cut back on operations a bit, retrench and do more business with [local] associations."

Top-Level Employees Let Go

Glatt acknowledged the CU has let go several executive level employees, and that the overall workforce has been reduced to 16 employees from 23. He said REALTORS FCU is awaiting approval to begin underwriting member business loans with state and local Realtors associations. "I think they will turn it around very quickly," said Glatt. "The team that is left there is really good folks. I don't think the losses will continue to mount like they were. When the economy starts to show even small signs of a true recovery I think you'll see REALTORS FCU go straight up the page."

Though short of its initial goals, which Glatt said were impossible to reach in this economy, REALTORS has grown to 5,500 members. The National Association of Realtors has more 1.2 million members.

In July, Glatt issued a statement saying he was stepping down as CEO in order to be nearer to his wife, Diane Johnson-Glatt, in New Jersey, with whom he founded well-known CU consultancy Counter Intelligence Associates. Johnson-Glatt recently took a job in the Garden State.

Glatt joined REALTORS FCU in 2008 from Continental FCU, Tempe, Ariz., where as CEO he fought off the industry's first hostile takeover attempt, by Minnesota-based Wings Financial CU. During his two-and-a-half years at Continental, Glatt saw many of the same issues faced at REALTORS FCU.

Continental's net worth declined slightly to 14% from 16.9%, but just three months after he left CCU it reported a net worth of 8.77% in March 2009. Today, Continental is considered "significantly undercapitalized" and posted a net worth of 3.9% in its June 2010 call report. The erosion has been caused by a massive increase in loan losses; Continental's ALL skyrocketed from $2.8 million in 2008 to $11 million in 2009.

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