Third Federal, the biggest federally chartered thrift, bolsters Slavic Village

Third Federal Savings and Loan is Greater Cleveland’s biggest home mortgagor and the nation’s biggest federally chartered thrift. But it’s also a neighborhood bank, headquartered in Slavic Village, helping homeowners and nonprofits there and elsewhere.

Trailside Homes.jpg

Slavic Village has hosted a wide range of activists.

Take Walter Szylwian, a 96-year-old altar boy at St. Casimir Catholic Church in 2009. When Bishop Richard Lennon led a ceremony to close the church, Szylwian unplugged the prelate’s microphone. Worshippers promptly rose, jeered Lennon, and sang the Polish national anthem. Three years later, forced to reopen St. Casimir, Lennon gave communion there, and the first recipient was Szylwian.

Or take Inez Killingsworth, a school janitor who protested redlining and predatory loans in Slavic Village, Union Miles, and other eastside neighborhoods by marching with tombstones, wrapping banks in crepe, tossing plastic sharks onto bankers’ desks, and posting their cell numbers at decrepit buildings. She went on to form Empowering and Strengthening Ohio’s People (ESOP), which fought foreclosures statewide.

Meanwhile, quieter activists have given this edge neighborhood a velodrome, a four-acre nature preserve, art shows, and more. 

Then there’s Marc Stefanski. At first glance, the affable, suit-jacketed former preppie, who has led Third Federal Savings & Loan Association for 34 of his 67 years, might not seem like an activist. But he once hugged Killingsworth and recently put a former ESOP president, Barbara Anderson, on his board. Until the pandemic, he sang and played keyboard in a band that rocked at fundraising parties. And he has enriched Cleveland through commerce, charity, and fresh ideas, from raising homes on cleared industrial rubble to giving wigs to cancer patients.

“This neighborhood has been good to Third Federal, the Stefanski family,” he said recently. “We’re doing what we can to try to help.”

Finance, philanthropy, and fun 

Third Federal is the leading Cleveland home mortgagor and the biggest federally chartered thrift. It has $9.2 billion in deposits, $14.6 billion in total assets, and more than $3 billion in loans per year at last report. 

The bank has 37 branches and seven loan offices in Ohio and Florida. It issued mortgages last year in 23 other states, plus D.C. Yet it remains led by the Stefanski family and is headquartered here. 

Third Federal helps to make and remake local homes, often with breaks on interest rates and down payments and with seminars and coaching sessions for borrowers. Because of the pandemic, it has delayed all foreclosures until June.

The bank and its Third Federal Foundation also donated some $7 million a year to schools, housing programs, and other causes, especially in Slavic Village.

The bank’s website touts “a value system of love, trust, respect, a commitment to excellence and fun.” It may sound hokey, but local leaders validate much of it.

Earl Pike of the neighborhood’s University Settlement said of Third Federal, “They’re an economic giant that acts like a mom-and-pop bank, in an incredibly community-oriented way.”

Ward 12 Councilman Tony Brancatelli said of Third Federal, “They put their money where their mouth is.” 

Trustee Anderson, who leads Slavic Village’s Another Chance of Ohio, said Third Federal has helped the nonprofit group make emergency repairs to its truck and its roof. 

She also said the bank accepts borrowers rejected elsewhere. “I’ve referred people to Third Federal who’ve been helped, and not easy people to help, people who have been in trouble and may not hit every marker to get help. Third Federal has worked with them.”

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“Best” and “Needs to improve”

Among other honors over the years, Third Federal has been named the nation’s best-run bank by the Federal Deposit Insurance Corp. and one of its best workplaces by Fortune Magazine. It has won five stars every quarter in the 37 years of the BauerFinancial ratings.

Yet the federal Office of the Comptroller of the Currency’s last two evaluations have given Third Federal “needs to improve” ratings. The office said that the bank made relatively few of its Greater Cleveland loans in census tracts with low to moderate incomes. For instance, from 2017 through 2019, 1.5 percent of Third Federal area loans were in low-income tracts, while other banks averaged 3.0 percent there.

The office also said Third Federal and its foundation need to invest more in community development than the 1.53 percent of the bank’s relevant capital so invested from 2015 through 2019. According to the most recent evaluation, “None of the investments demonstrated innovation or complexity.”

A spokesperson for Third Federal declined to comment. Consultant Frank Ford of the Western Reserve Land Conservancy said the ratings surprised him, given the bank’s good reputation. He said Third Federal may need to reach out more in poor neighborhoods. But the evaluations also punish Third Federal for success in more prosperous tracts.

Once homeowners find Third Federal, they tend to get loans, according to a recent report by Ford. In 2019, Third Federal accepted a higher share of home loan applicants than did any of the next 14 biggest lenders in Cuyahoga County – 84 percent to the field’s 78 percent. Third Federal specifically ranked third in loans to people with low to moderate incomes and first in the acceptance rate of such applicants, 84 percent versus an average of 75 percent.

During the predatory loan crisis, many banks accepted too many borrowers on onerous terms. Sticking to its usual terms and standards, Third Federal lost more than half its local market share then, but bounced back afterwards. 

Last year, the pandemic rattled customers at first, but it hasn’t shaken a bank born in the Great Depression. Stefanski said, “Our strong capital levels and consistent growth keep us well-positioned. Refinances are continuing at an active pace, and the purchase market is strong.”

A long history

Slavic Village’s Stefanskis are no known relation to the Browns’ coach, Kevin Stefanski. They’ve been more like the neighborhood’s coaches.

Parts of Slavic Village used to be called Little Warsaw and Karlin, the latter named for a section of Prague. Beetling over the industrial valley, Slavic Village flanks Broadway and East 55th Street about a 3.5-mile drive from Public Square. Before today’s highways, the place bustled with commuters, the Broadway Auto Miles, butcher shops, churches, and a population peaking at about 70,000.

Stefanski’s immigrant grandfather led crews that built basements beneath slab homes here. “My family was literally responsible for the foundations of the area,” Stefanski likes to say.

His father, Ben, and mother, Gerome, conceived the bank at a kitchen table here and applied for a charter in D.C. on their way to a honeymoon cruise. They opened the bank at a bar in 1938 with $50,000 in neighborhood money. 

The bank grew fast. The family repaid the town by supporting many causes, such as Catholic high schools. Ben’s nickname became Benefactor. 

Marc, the youngest of five children, was raised in Shaker Heights, but often rode to the Broadway area to visit the bank, a dental office, and the family’s favorite butcher shops. He got his diploma at Gilmour Academy, bachelor’s degree at Heidelberg College, and master’s in business at Baldwin-Wallace. He trained at Third Federal and Ameritrust before taking over the former in 1987 as president and chief executive officer.

Meanwhile, Slavic Village was losing many residents and businesses, the car dealers under pressure from carmakers to flee to Bedford and beyond. Buildings emptied and rotted. 

In the 1990s, Stefanski moved to Hunting Valley but rebuilt the bank’s headquarters at 7007 Broadway. The complex includes a branch office and a community room often borrowed by local groups, keeping corporate types close to locals. 

In 2001, he built Broadway Place across from his campus with 42 suites for seniors. In 2003, he helped consolidate Cleveland Central Catholic High School here. Seven years later, he gave the school a stadium named for his late brother, Ben II, who’d directed utilities for Mayor Carl Stokes.

Then came the bust. During the second quarter of 2007, Slavic Village’s zip code led the nation in foreclosures. By the 2010 census, the neighborhood’s population had plummeted to 22,432.

During the crash, Stefanski issued a minority stock offering that bolstered the bank with nearly $1 billion. Then he started the Third Federal Foundation with $55 million. Since then, he has continued to boost the neighborhood and beyond. 

Helping out

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For a few examples, he cleared industrial wasteland behind his campus and started a complex of Trailside Homes for about $165,000 apiece. Twenty have been built so far, and 55 more are expected. Altogether, he has helped raise nearly 200 homes in Slavic Village in recent years.

He also started the Slavic Village P-16. This partnership of local agencies provides many services for students and families, from tutoring to yoga, to boost progress from preschool through college.

He gave more than $2.5 million for Broadway Rising, a complex under construction with a new home for University Settlement and 88 units of affordable housing. He helped to narrow and landscape Broadway.

He has given heavily to health care. The $5 million Stefanski Center for Community Health Education, part of the Health Education Campus of the Cleveland Clinic and Case Western Reserve University, seeks to boost health and healthcare in needy neighborhoods. A $1 million program called Rhonda’s Kiss memorializes Stefanski’s first wife by helping patients and families at the Clinic and two California hospitals with rent, utilities, wigs, massages, rides to treatments, and more.

Through gifts of money and computers, Third Federal has worked with PCs for People to connect nearly 2,000 local families to the internet.

During the pandemic, the bank gave $100,000 to ESOP for interest-free loans up to $1,000 and financial coaching for needy seniors in Cuyahoga County. This month, it’s hosting COVID vaccinations. 

Business too

For all its charity, Third Federal does more for the community as a business. It’s old-fashioned in some ways. It shares an ATM network instead of having its own. It sells its loans but still services them. 

It boasts easy terms for all borrowers and especially low ones for borrowers of modest means. Its HomeReady program offers them low interest, down payments as low as 3 percent, and grants up to $3,000.

Stefanski once went to his Euclid branch to meet a 103-year-old customer at her request. Another time, a woman recognized him at Cleveland Hopkins International Airport and thanked him. She said her mother survived the Holocaust, emigrated to Cleveland and could get a mortgage only at Third Federal.

A business also matters as a workplace. The bank offers its 1,000 workers fitness programs, flex time, bonuses, and more. During the pandemic, it gave out an extra round of bonuses. It has no sales quotas and has never laid anyone off. The average tenure has risen to 13.8 years, and turnover is less than 3 percent per year.

Stefanski encourages workers to give back to Slavic Village. They built a Habitat for Humanity home on company time. They also participate in the neighborhood’s Pierogi Dash and other events.

Thanks in part to the bank’s efforts, Slavic Village is showing signs of bouncing back. Its population rose by 2019 to an estimated 26,756, according to Despite white flight, the neighborhood remained more integrated than some, with 49.1 percent African-American, 32.4 white and 7.4 Latino. Median household income was $31,511, almost equal to the citywide median of $32,053.

Stefanski’s son and two nephews work at Third Federal, and his daughter serves on the board. He said he has no plans to sell the bank, buy others, or retire.

“We’re here to stay in the neighborhood,” he says. “We’ve seen a lot of changes here, some good, some not so good. We’re confident that we’ll still make a difference in somebody’s life and a neighborhood’s life.

Third Federal Foundation is a financial supporter of The Land.

Grant Segall is a national-prizewinning reporter who spent 34 years with The Plain Dealer. He has also published freelance articles, fiction, and “John D. Rockefeller: Anointed With Oil” (Oxford University Press).

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