Strongtower Financial

The Associated Press has written a new article dealing with the impact of the recession on churches, and it has been published by a number of newspapers and other media outlets around the country. The AP story is another in what is becoming a series of articles focused on the fact that this recession, unlike previous recessions, is having a more significant financial impact on churches. While technically accurate, the article makes some generalizations which, whether intended or unintended, can potentially create misimpressions—especially when terms like "late, delinquent, default and foreclosure" are used in the industry almost interchangeably. How does the average person sort through the confusion and get a more accurate picture of the current health of churches in general, or their church investments in particular?

First of all, it is no secret that churches are having more trouble in today’s economy than they have in past downturns. A front page Wall Street Journal article in December called attention to the fact that for the first time in recent memory, America’s churches have begun to feel significant pressure from an economic recession. The Journal article correctly observed that, "Churches were long considered good credit risks…weekly collections tend to be steady, even during recessions, and churches feel a moral tug to pay debts." In fact, studies have shown that giving to churches actually goes up as often as down during recessions, and even when they have a bad year, the average drop in giving has been under 1%, the worst single year drop was under 2%, and the largest multi-year drop was 2.5 % over three years, followed by a 5.5% gain in the following three years.

But as both articles point out, this year is different. A recent Barna Research study reports that 20% of American households have reduced their giving to churches, which has hurt church finances in a way not experienced in the past. As a result, some churches are struggling and church lenders are reporting more problems this year than they have experienced over the past several decades.

Having said that, we also need to acknowledge that while churches have not escaped the pressures that have brought down some of the largest corporate institutions in the country, it would be misleading to associate them with the foreclosure crisis in America. We have to be particularly careful when using specific churches as examples, especially when, of the three churches named in this article, the trustee confirms that not a single one is late in payments to either bondholders or lenders, much less in foreclosure.

We also have to be careful when using terms that may have different meanings to different people, or in different contexts. A case in point is the article’s reference to the California Baptist Foundation’s 2008 loan fund prospectus, which refers to "10% of its $119 million in outstanding loans being in default." To the average person, being in "default" (as opposed to merely "late") is often thought of as having very negative connotations, and many believe it is just one step away from foreclosure. In prospectus language, however, the term "default" can refer to any payments that may be as little as 30 days late. In times of financial stress, churches—and families—may be late with payments from time to time. It may be temporary, and often is, or it may be more serious. In the article’s loan fund example, it was a temporary condition—all of the churches comprising the 10% "in default" are now current in their payments, which is not likely the impression readers are left with. The fact is, churches—and families—that may be struggling in hard times will find themselves on and off of lists like this from time to time, without any danger of them being near foreclosure.

In summary, both the Wall Street Journal and AP articles are correct in observing that families are under more financial stress in this recession than we have seen in the past and that as a result, many churches are feeling more financial stress as well. Let's also note that these same churches have been redoubling their efforts to help their communities during these troubled times. Let’s also applaud how they are struggling—sometimes heroically—to help those who have become financially destitute through no fault of their own, working to keep families together, helping make sense of what’s happening around us, and providing encouragement and genuine hope for the future.

Let’s also appreciate how Christian institutions like the California Baptist Foundation, Strongtower Financial, and ECCU are engaged in every possible way to help our churches through this. 

Strongtower recently issued a white paper entitled Churches During Economic Turbulence.  If you would like to read this white paper,  follow this link and complete the form.