Lending to Churches & Other Religious Institutions
Non-Profit Organizations (“NPO”) generally comprise a smaller percentage of outstanding loans on the books of community banks however, they represent a risk that are quite unique. Bankers are not required to become an expert in this type of lending because the number of opportunities are few however, when you are approached with a request, you must know how to underwrite them. Most of these loans are extended to Religious Organizations (Churches). The skills required to understand and underwrite the credit risks involved in this type of lending is quite different from lending to For Profit Organizations (“FPO”). Unlike conventional loans, church loans have a higher risk level because they are typically un-guaranteed; the collateral is considered “Special Purpose” with limited resell value; the primary source of repayment is dependent upon contributions from parishioners whose behavior is often volatile if a difference of opinion on the church’s direction exists; the quality of financial statements may not be in compliance with Generally Accepted Accounting Procedures, among other risks This course will cover the major church lending risks and discusses how a bank can prudently manage these risks by exposing participants to the appropriate methods of analyzing and lending to Religious Organizations.
This course will also review Statement of Financial Accounting Standards 117 (Required Financial Statements Presentation for NPOs). This Standard replaces Fund Accounting, which was used previously by NPOs for many years.