Jul 042017

43 Years of Service and Still Going Strong!

Posted on July 04, 2017 Uncategorized



The picture of Northern California was much different in the late sixties from what it is today. Sunnyvale, Walnut Creek and Milpitas were still rather small rural towns with orchards dominating the landscape and none of the technology parks and glamorous office buildings so prominent now.

Similarly, the Polish community in the area was much smaller and thinly spread over a huge territory except for a few pockets in San Francisco, Oakland, Monterey and Sacramento, and with the Polish Hall in San Francisco being the main center of activity.

The Polish American Congress of California was the leading organization, split in late sixties into two separate Divisions. The newly created Northern California Division’s leadership was searching for acceptance by members and establish its identity within the National Center in Chicago. The President of the new Division, Zdzislaw (Richard) Zakrzewski, first elected to the office in 1972 adopted a long term plan for community development as the main task for Congress. It focused on the creation of strong institutions capable of providing tangible services to the Polish community, and so the idea of a Polish bank was born.

In February came letter of approval from the National Credit Union Administration dated January 7, 1974 with a charter No. 21502. Polam FCU thus became an operational organization with assets insured by the Federal Treasury through the NCUA, and so the brainchild of Richard and his wife Zofia came into existence. But starting a financial institution is no easy feat, it means asking people to put their faith and hard-earned money into a bank with no prior history of performance or stability.  This was particularly visible at the beginning, when the idea of a Polish Bank looked quite suspicious and chances of success seemed remote. Hardly anybody approached would directly refuse participation, however, many would simply find no time to fill out the membership card or bring in their deposit. The most common way to avoid any risk of losing money, was to open an account with a nominal amount just to be spared further “reminders” to join Polam. And then things changed.

During a picnic of the Polish Social Club of Sacramento in 1974, Richard and his wife Zofia introduced Polam to the people and asked everyone to join the new Polish Credit Union.  There was no actual rush of candidates to open an account until the then Club President Jerry Adams broke the awkward atmosphere. He pulled out of his pocket a few crumpled bills and offered “This is all I have on me, give me the forms and I will open an account” It was some two or three hundred dollars, a sizable amount at the time, but what’s more important three or four more accounts were open at that memorable picnic, and more followed thereafter on a regular basis. The trust in Polam grew as did the need for a Polish financial institution.

Another milestone in trust and growth occurred a couple of days before the end of the year 1976. At that time the total assets of Polam were just under $500,000.  It was a goal to reach the half-million dollar mark by year end but this magic figure seemed elusive. An appeal was sounded over the Polish radio program by Polam President just before Christmas to bring deposits, but when the holiday passed and we were still about $30,000 below the target, all hope seemed lost. Then on the evening of December 29, a knock on the door of the President’s private residence was heard and three of Polam’s members’ people entered.  One of them pulled out a roll of bills and offered “here, you wanted to close the year with $500,000 in assets, put this in our account and that should do it. Polam closed year 1976 with $503,269 in total assets. This was indeed a joyous holiday as it proved the faith and belief in Polam by the community.

Polam’s first offices were located in a tiny room also serving as library on the top of steep flight of stairs in the Polish Hall in San Francisco, and was offered rent free until earnings would allow for a formal lease agreement.  The location posed many challenges and was not centrally located to serve the growing membership.  After exploring several alternate locations, the office was moved to the home of Richard and Zofia which was conveniently located at the mid-peninsula. Daily operations were conducted by Zofia and in 1976 she was elected to the Board and became a Treasurer.

By now it was obvious, that Polam will soon need a formal office and a paid staff, otherwise its development and future would be in jeopardy; that of course required reaching certain size to provide adequate earning power, therefore all efforts were directed growth. All local activities such as organizational meetings, church functions, shows, dances, festivals, picnics etc. were turned into an opportunity to approach, inform and sign up new Polam members and the results were soon visible as shown by the early financial statements exhibited in the Appendix the assets doubled and tripled in the first few years of existence with comparable growth in earnings.

Much later it was discovered that this method of recruiting and serving members had to be used in spite of opening a formal office; geographical dispersion would require unsustainable number of offices if adequate access was to be provided to all interested in Polam services. The idea of Polam representatives taking our services to members at various, unrelated activities remained for a long time the best available tactic to assure membership growth and satisfaction.

In February of 1977 a first, single room office was rented on the first floor of former Crocker Bank building on 2nd Avenue in San Mateo. The Treasurer turned into a one person office staff until Alicia Purcell joined in five months later. After the first six months of working just for the mileage expenses, the Treasurer now turned into Manager has received a fixed salary of $100 / month for the unlimited number of working hours and full responsibility for the operation.

With the steady growth and increase in earnings. Polam kept expanding its facilities, services and personnel accordingly. In 1978 a first branch was opened in the Sacramento area, to better serve members of the Polish Social Club of Sacramento. Betty Paprocki became the Manager and the only employee of this office, with her husband Walter, at the time member of the Board of Directors, as a volunteer helper. This arrangement lasted till 1983 when an office was rented in a bank building on Sunset Blvd., in Citrus Heights and a regular employee was hired to staff it. When the Polish Social Club in Sacramento purchased a property in Roseville, Polam’s local office was moved to that building.

At the same time, Mr. John Smelski Polam representative for the Oakland / East Bay area, could be seen at all Polish functions such as Sunday masses, meetings and dances carrying a briefcase with signature cards, loan applications and other forms for members as needed to save them a trip to the office in San Mateo.

Almost immediately after moving to the rented office, in late 1977 a computer service from Crocker National Bank was retained; the service would process all daily activities on a batch basis. This streamlined operation and allowed to run Polam with minimal personnel thus more than offsetting the reasonable cost of the service.

However, in 1980 when assets were approaching $3,000,000 and number of members 1,000, it became evident, that the batch system would be inadequate for the volume of transactions and it was replaced by the “on line” system. This was done in view of the perceived need to further expand services by introducing “share drafts” which were another term for checking accounts, which could not be operated without the capability. Since the checking requires access to the national banking network Polam has signed a contract with the Security Pacific National Bank to perform clearing functions for Polam. Providing checking accounts was not just a new valuable service to members; it also opened to our members’ access to several hundred of local, Security Pacific branches to use as deposit and withdrawal points, thus facilitating access to their accounts.

It may be difficult to realize, but Polam is in a very unique position in that regard. Most credit unions are based on common employer and that means that most of the members are every day in well-defined places for work; an office opened on the premises provides an easy, daily access to all desired services offered by the credit union; the employer usually cooperates in providing automatic payroll deductions for savings and / or loan payments. Banks with branches at every street corner find it difficult to compete with such a combination of services.

Credit unions based on territory, mean that potential members all live within the same geographical area, hence a centrally located office provides a reasonable access for most them. Even unions based on an organization, have members living fairly close, or meeting regularly and often at a fixed location; they are usually church congregations, home owners’ associations, etc.; by their nature they imply close proximity to a central point of activity, which makes location of a credit union office natural and convenient to most, if not all, members.

By comparison, there are very few credit unions in existence similar to Polam, with members dispersed over hundreds of miles between Santa Barbara and the Oregon border and with no major centers in between to economically support a branch office. Thus finding a method to free members from the need to travel many miles to reach a service point, was and still is a paramount problem for Polam management as a very condition of credit union growth. For this reason, the powers granted to credit unions to offer checking and the existence of Security Pacific service, became a major license on Polam’s life; this simple contract was equivalent to opening hundreds of branch offices in Northern California to serve Polam members, a goal otherwise utterly unattainable.

Since the first office was rented, the constant growth forced continuous adjustments. After absorbing adjacent rooms on each side of our first rental, we have reached the limit of expansion at that address and in 1981 Polam moved to larger facility, at corner of El Camino Real and Bovette in San Mateo. In two years we started expanding again and it became obvious, that sooner or later we will exhaust the space available for expansion and will have to move again. Each move became a hardship not only on the personnel, but also on members; they had to adjust to new location, different routing, parking, etc. and the management realized, that to avoid repeated changes of address we have to start thinking about own building.

In 1982 Polam introduced residential mortgage loans; they became instantly very popular since a lot of our members would have hard time to qualify for a bank loan due to lack of a credit history and language issues. It does not mean that they were a poor credit risk they just did not fit the standard applicant profile.  In the 1980’s banks were unfamiliar with a notion that a person may not have a steady employment record, shows below average earnings and no credit history simply because they are recent immigrants, starting life from scratch in a foreign land, without knowledge of the language, or a backup in family and friends. This reaction was also echoed by many Federal Examiners, who for years were telling Polam’s Directors to tighten up on loan policies to avoid “risk loans”, which to them were loans made to the new immigrants. We stood our ground and continued to lend.

Thousands of Polish people arrived in the United States and many found their way to Polam. Recognizing their special needs and inability to obtain credit, Polam Directors instituted special policies to accommodate them.  During the first 12-months from the arrival date in America, a new member was entitled to special loans at lower than normal interest rates as soon as they could provide proof of employment. This loan program consisted of funds for apartment rental and for purchase of a used car. For many years we had to fight every Federal examiner who spotted this policy and protested, that this is a “reckless activity”, because we give those loans to people without proof of steady employment and credit history; they would not consider that these people were only a few months in the country and cannot wait for three or more years without access to credit. Finally examiners were assured by the fact, that our policies were sound and had the lowest rate of loan losses as compared to all other Credit Unions in the entire country.

Polam kept a steady expansion of services and introduced VISA cards in 1984 through a service contract with Bell Savings Bank and later through a card program operated by the California Credit Union League.

In 1985 first Automatic Teller Machine (ATM) cards were introduced to further facilitate members’ access to funds.

By 1986 it was apparent, that Polam’s growth required a dedicated server.  It took Polam only about five years to outgrow that system and in 1991 it was enhanced to double processing the capacity. It was not so much the number of accounts but rather the variety of services offered to members that caused Polam to outgrow the computer capacity.  To this day, Polam is unique among many Credit Unions in that it offers every possible type of service like online banking, bill payer, banking via Smartphones and much more, and yet only charges $10/year for all these services.

As the years rolled by Polam’s Directors realized that the time had come to acquire its own building as a permanent location. In 1989 Polam became an owner of a building in Redwood City with 5,000 square feet of space and secured a long term tenant to lease the other half of the building. This would become the model as Polam expanded into new locations.  A part of the building would be leased out to offset operating cost and pay for services and products four our members which in credit unions are our shareholders.

In 1992 we partnered with Bank of the West to secure access to their ATM network which totaled over 760 ATMs.  And in 1993 the Russian American Credit Union in San Francisco a proposal of merger which further expanded Polam’s footprint.  As a result, Polam assets increased by 25% and the membership doubled.  This merger also allowed Polam to expand our Field of Membership and welcome members of the Russian and Slavic community.

In 1995 Polam once again outgrew its building on Jefferson Street in Redwood City and purchased a new building on the corner of Marshall and Main Street which was a few short blocks away.  This building offered a perfect location for future expansion and to this day is the headquarters of Polam.

In 2005 Polam expanded services into New Britain Connecticut.  The population of New Britain is approximately 70,000 with nearly half being Polish.  While walking the streets of downtown New Britain, all street signs are in Polish, the language on the street is Polish and almost all the businesses are Polish owned and yet there was no “Polish” bank to serve the community.  Initially Polam leased a small office on the main street of the city and after two years purchased three adjacent lots and combined them to build a permanent location at 55 Broad Street.

About the same time, the Federal regulators expressed a concern to the Directors of Polam that a succession plan for the CEO needed to be considered since Zofia was approaching retirement.  This posed a significant challenge due to the fact that Polam had a unique set of needs to be filled by the next CEO.  Polam needed someone that was bi-lingual, was well versed in all aspects of banking operations including lending, accounting, audit and compliance, and possessed exceptional knowledge of banking technology and marketing, but was also known and trusted by the members of Polam. They needed someone that had a clear vision of what Polam had to do to remain not only a strong institution but also one that would continue to grow and expand into new opportunities.  After an exhaustive search, Mark Chrzanowski was approached to consider the opportunity.  Mark fit the bill perfectly with having over 25-years of experience in retail and private banking at Crocker National Bank, Bell Savings and Loan, SJNB Financial Corp., and several other boutique banks. He also managed new and emerging technology development for financial industries at NCR, AT&T-GIS, StorageTek, Hitachi Data Systems and was instrumental in rolling out the new patient billing system at Kaiser Permanente.  He also managed large scale technology projects at Bank of America, Wells Fargo Bank, Northern Trust of Chicago, Bank of Hawaii and First Hawaiian Bank.  He was also the 17th member of Polam and well known by the Polish community which was an added benefit. After many months of negotiating, Mark made a 20-year commitment to the Directors and members of Polam.

2008 was the “Trial by Fire” for Mark and Polam as the banking industry was collapsing due to the real estate and tech bubble.  Since Polam is primarily focused on real estate lending and at that time had over 95% of its loan portfolio in real state, the federal regulators expressed great concern and implemented stringent management procedures.  Since Polam was and still is deeply rooted in conservative beliefs about credit and relationships rather than transactions, losses were minimal and foreclosures numbered roughly 20 properties.  The management of Polam knew that given a reasonable amount of time the market would rebound and any losses would convert back to significant recoveries.  Rather than sitting idle, Polam rehabilitated the foreclosed properties which were almost always significantly damaged, and leased them until the market values returned.  Many of these properties were leased for more than the original loan payments were bringing in.  But due to accounting rules, this excess income was not considered as Operational Income and Polam by GAP standards didn’t look good even though income continued to be healthy.  As the market recovered, Polam liquidated the entire foreclosed portfolio at very significant gains and managed to build up its net capital to over 12% which is the highest level in Polam’s history.  By comparison credit unions need to have 7% to be considered “well capitalized”.

In the fall of 2012, Polam decided to completely gut and remodel the main offices in Redwood City since little was done since the building was purchased in 1995.  The remodeling was a complete design change to the interior of the building creating a modern open configuration and created 3,750 leasable square feet of space on the second floor.