Uncommon financial times

By Dan Mikes

Over the past few years much has been written about the impact of the economic downturn on houses of faith. Another recent article in The Wall Street Journal entitled “Churches Find End Is Nigh” reported that 200 churches have been foreclosed on by banks and indicated there is a potential for hundreds more. This is just one more story in a long line of such reports over these past few years. As a church lender for more than 20 years, I will be the first to agree these are, without question, unprecedented times for churches financially.

For decades the church lending market segment enjoyed a near spotless testimony within the banking community. That admittedly has changed. There is no question the level of reproach brought by these unfortunate events has caused several large banks to exit the church banking arena.

At times like these the tendency is to assume the news is mostly bad. This is simply not true. It is worthwhile to pause and be reminded that stories that sizzle will always sell more newspapers or commercial advertising space than reports of successful business as usual.

Financial success stories

Contrary to the seemingly endless stream of salacious headlines and quotations, there are numerous ministry financial success stories. There are also banks which continue to enjoy mutually beneficial relationships with their church partners. These banks have continued to aggressively seek new relationships with churches throughout the economic downturn.

The story of a bank with more than a billion dollars in church loans on its books, year-after-year of loan portfolio growth, a year-after-year zero-percent delinquency rate, and no church foreclosures, is simply a story that no major news outlet finds an economic benefit in telling.


The economic downturn provides a convenient excuse for many lenders. However, the fact that some church loan portfolios have not had significant up-ticks in delinquencies and losses is evidence the church foreclosure disaster was in fact avoidable.

Waters too deep

In the years preceding the downturn, some churches succumbed to the same over-leveraged mindset as did many home owners who bought too large a home or borrowed too much on their second mortgage. The continued acceleration of the popularity of the megachurch together with the willingness of some church lenders to lay aside wisdom in favor of even loftier loan production goals, created a wave which carried a number of exuberant visionary pastors out to waters which ultimately proved too deep.

The good news is that in spite of the worst economic down turn in decades the vast majority of churches continue to maintain a good testimony within their business communities.

This is not to say churches and their donors have been insulated from the economic upheaval. Many have certainly had to make tough decisions. As people of compassion and faith, it is especially hard to decide to reduce benefits, curtail outreach, or downsize staff. In many instances we have seen such decisions delayed until cash reserves have dwindled to levels well below budgeted targets. Nevertheless, most churches have managed through their declines in contributions without breaking covenant with their creditors and service providers. They place a high value on a good name.

Whether managing through tough times or planning a major physical plant expansion project, churches should remember there is safety in a multitude of counselors. As a lender we have seen instances where the hand is saying to the foot “I don’t need you”. God has placed various gifts and talents in his body for church leaders to draw upon. Many of the high profile church foreclosures are concentrated among churches with centralized leadership structures and limited board accountability. A classic example which comes to mind is a national cable news channel which aired a sound bite from an interview of a California-based board member of a church in Florida. In the interview the board member confesses he did not know the pastor had listed the church property for sale.

There are certainly lessons to be learned from the current financial tribulations which churches are facing. Lenders and church leaders should remember a wise man remains teachable.

Dan Mikes is executive vice president/manager of church banking division for Bank of the West, San Ramon, CA. [ bankofthewest.com ]


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