BROOKLYN, N.Y. - Polish and Slavic Federal Credit Union has profited by serving a group many banks consider untouchable - Eastern European immigrants.

The credit union was a single teller station when it was organized in 1977 by a handful of Polish immigrants. Now, with $360 million in assets, three branches, and 37,000 members, it's the largest Polish-American financial institution in the country.

"We serve people who have problems with regular financial institutions because they don't speak English or they don't speak it fluently enough," said Marcin Sar, the institution's general manager since 1987. "Most of the time, new immigrants don't have a credit history. Someone has to make that first step to trust them."

Up to 90% of the credit union's members are immigrants, officials said.

Almost since its founding, Polish and Slavic's primary line of business has been putting members in homes. This was crucial in the beginning because many institutions avoided lending to the Brooklyn's Greenpoint neighborhood, where the institution and most of its members are located, Mr. Sar said.

"Analysts thought this area would go under," he said. They predicted "it would become a very, very bad area. Lending to this neighborhood was considered an unnecessary risk."

The credit union saw things differently.

"People knew each other. It's a closely knit community," Mr. Sar said. "People knew who they could lend their money to."

Polish and Slavic bet right. Rather than sinking, real estate values skyrocketed during the 1980s, though they have fallen off in recent years.

"We saved this neighborhood," said Halina Podstawki, a senior loan officer for the credit union.

Polish and Slavic has the highest concentration of mortgage loans of any credit union, with 94.7% of its $136 million loan portfolio in real estate, according to Callahan & Associates, a Washington-based consulting firm. The solid, multifamily brick residences with ground-floor businesses that line Greenpoint's streets are collateral for many of the loans.

Banks have rediscovered the neighborhood, but Polish and Slavic stacks up as a stiff competitor on mortgages. It doesn't charge points, and its rates are below the competition's, Mr. Sar said.

Mortgage lending helped Polish and Slavic's assets mushroom. From 1977 to 1986, assets grew to $100 million; by 1989, they had doubled again to $200 million. Since then, assets have grown another 73%. According to Callahan, Polish and Slavic has grown nearly 40% faster than the industry on average since 1989.

The group's mortgage concentration led to a bitter fight in the early 1990s with the National Credit Union Administration. The agency considered much of the credit union's real estate lending to be commercial in nature, and, spooked by the thrift meltdown, it took a hard line.

During a six-week period in 1991, the NCUA forced the credit union to sell all its mortgages to the secondary market and investors, Mr. Sar said.

"One could imagine that bureaucratic wisdom would get rid of all traffic accidents by issuing a decree to prohibit all automobile traffic," Mr. Sar said of the agency's attitude in the credit union's 1990 annual report.

At one point, Polish and Slavic considered switching to a thrift charter to escape the NCUA. Such a step proved unnecessary when the agency relented and allowed the credit union to return to the mortgage business.

The credit union has a 1.5% delinquency ratio, with 26 foreclosures totaling $1.7 million. The average credit union delinquency is about 0.9%, but most credit unions stick to consumer loans, credit union officials said. Also, Polish and Slavic's 15% capital-to-assets ratio is higher than the industry's average of 9%.

High demand for housing in Greenpoint makes lending there relatively safe, Mr. Sar said.

Real estate has made Polish and Slavic one of the most profitable credit unions in the country, with a return on assets that is consistently one of the industry's highest. The institution's third-quarter ROA of 2.32% was the 37th best in the country, according to Callahan.

Low expenses contribute to the high return. Besides being highly automated, Polish and Slavic operates with a lean staff. It has about 90 employees, while most credit unions its size have 200.

"In our credit union there's no attitude like 'This isn't in my job description,' " he said.

Virtually all of the credit union's staff are immigrants, including Mr. Sar. He was a visiting professor at the University of Kansas in 1980. After martial law was declared in Poland, amid labor strife, Mr. Sar lost the teaching position he had with the University of Warsaw.

"I wasn't in line" with the Communist party, he said.

Demand for loans other than mortgages is relatively low because Polish and Slavic's members prefer to pay for goods in cash, Mr. Sar said.

"They aren't used to credit. They hate credit," Mr. Sar said. "If they buy a refrigerator or car, they want to pay in cash."

Nevertheless, the credit union is pushing credit cards and other types of loans. The credit union's non-real-estate-related portfolio stands at about $6.4 million.

About 6,000, or 16%, of the credit union's members carry a credit union credit card, and about a third of those use a secured card because they have either shaky credit ratings or none at all.

Polish and Slavic's members are as reluctant to use automated teller machines as they are to go into debt. Polish and Slavic's members are "like Americans in the late '70s" as far as ATMs are concerned, Mr. Sar said. Two ATMs, with Polish-language screens, stand in the credit union lobby.

Since 1988, the credit union has offered ATM cards with members' photographs on them, giving them an alternative photo ID to a passport.

Polish and Slavic's membership growth has matched its financial expansion. From 1988 through 1993, its membership rolls grew 65%, making it the 47th-fastest-growing credit union in the country, according to Callahan.

Poles, like other immigrants, are strong savers, and deposits at Polish and Slavic increased 65% from 1989 through 1994. The average account is $7,940, which places Polish and Slavic in the 87th percentile for highest balances, Callahan said.

To join, a person must be able to prove he is of Polish or Slavic descent. That definition might sound loose, but Mr. Sar said the credit union has turned away people who didn't qualify for membership.

"We have to be careful because of field-of-membership controversies," Mr. Sar said.

Polish and Slavic is well into negotiations to open a branch in Clifton, N.J., and there is demand for branches on Long Island and in Connecticut and Pennsylvania.

Beyond its role as a financial institution, the credit union also participates in the cultural life of New York's Polish community.

For instance, it sponsors a daily program devoted to Polish news and cooperates on projects with the Polish and Slavic Center, its parent organization. On a more personal scale, members without telephones can use two in the credit union to call Poland. One of the telephones has a video screen.

Polish and Slavic also is active in organizing and supporting credit unions in Poland. Polish religious and political leaders have visited the credit union.

The credit union also is a patron of Polish artists living in the United States, some of whom Mr. Sar knows personally. Their work can be found in the institution's annual reports, publications, and greeting cards. The calendars that the credit unions gives its members at Christmas also feature Polish art.

"Instead of the usual scenic views of Colorado, we can provide people with something of value," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.