Title: Church financing by financial institutions in the United States, 1946-1952 ..
CITATION PDF VIEWER THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00098036/00001
 Material Information
Title: Church financing by financial institutions in the United States, 1946-1952 ..
Physical Description: 279 leaves : ; 28 cm.
Language: English
Creator: Millican, Charles Norman, 1916-
Publication Date: 1954
Copyright Date: 1954
 Subjects
Subject: Church finance   ( lcsh )
Business Administration thesis Ph. D
Dissertations, Academic -- Business Administration -- UF
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Thesis: Thesis (Ph. D.) - University of Florida, 1954.
Bibliography: Bibliography: leaves 273-278.
Additional Physical Form: Also available on World Wide Web
General Note: Manuscript copy.
General Note: Vita.
 Record Information
Bibliographic ID: UF00098036
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: alephbibnum - 000554462
oclc - 13405962
notis - ACX9304

Downloads

This item has the following downloads:

churchfinancingb00millrich ( PDF )


Full Text










CHURCH FINANCING BY

FINANCIAL INSTITUTIONS IN THE

UNITED STATES, 1946-1952











By
CHARLES NORMAN MILLICAN


A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY










UNIVERSITY OF FLORIDA
June, 1954


- -










ACKIGJLLDGEtIElTS


The author wishes to express his gratitude for the advise and

counsel given by the chairman of his supervisory committee, Dr. John

B. McFerrin, throughout the preparation of this study. He also appre-

ciates the suggestions made by the other members of his committee:

Prof. John W. Dietz, Dr. James S. Lanham, Dr. Leroy L. Quails, and

Dr. John N. Vebb. The genuine interest of all five of these men in

the completion of a worthwhile project is deeply appreciated.

Without the co-operation of 1r. Floyd M. Call, Executive Sec-

retary of the Florida Bankers' Association, this work could probably not

have been started. This debt can never be fully paid. Sincere thanks

are also due to Mr. Comer J. Kimball, Chairman of the Florida Bankers'

Association Credit Policy Committee; Mr. Ralph W. Sedgwick, Secretary-

Treasurer of the Florida Savings, Building and Loan League; and Ir.

Joe C. Jenkins, Executive Secretary of the First Federal Savings and

Loan Association of Gainesville for their assistance in making avail-

able transmittal letters to their respective associates in the lending

industry.

There is also the wish to express thanks to Mr. Carlis Taylor

of the University of Florida Statistical Laboratory and members of his

staff for the preparation of some of the tabular material, but most of

all for ideas of how to process and arrange this type of information.

The author is deeply grateful to his wife, Frances, for her

constant encouragement. This dissertation would probably not have been

written without her patience and understanding.











TABLE OF CONTENTS


Page
LIST OF TABLES . . . . . ...... . . . v

Chapter
I. THE DEVELOPMENT OF THE FINANCING OF CHURCH BUILDING
EXPANSION . . . . . . . . . . .

Introduction
European Development
American Development
Financing Church Building Expansion in
the United States, 1906-1940
Church Construction Activity and Income in
the United States, 1941-1952
.Stummary

II. BANK LOANS TO CHURCHES, 1946-1952. . . . . .3

Introduction
Number and Amount of Loans
Use of Loans
Contract Terms
Denominations
Geographical Distribution of Loans
Percentage of Total Construction Cost Required
of Churches
Defaults on Church Loans
Loans Declined
No-Loan Banks
Factors Influencing Bankers' Decisions to
Make Church Loans
Relationship Between Church Loans and Other Types of
Real-Estate Loans
Relationship Between Church Loans and Consumption
Loans
.Summary

III. LOANS TO CHURCHES BY LIFE INSURANCE COMPANIES,
1946-1952 . . . . . . . . .. . 10

Introduction
Number and Amount of Loans
Use of Loans
Contract Terms
Denominations


iii











TABLE OF CONTENTS (Continued)
Page

Geographical Distribution of Loans
Percentage of Total Construction Cost Required
of Churches
Defaults on Church Loans
Loans Declined
No-Loan Companies
Factors Influencing Decisions to lake Church Loans
Relationship Between Church loans and Other Types
of Real-Estate Loans
-Summary

IV. LuAIS TO ClibIRCHLS bY SAVIJbS AND LOAN ASSOCIATIONS,
19166-1952 ................... 3

Introduction
Number and Amount of Loans
Use of Loans
Contract Terms
Donoriiinations
Geographical Distribution of Loans
Percentage of Total Construction Cost Required
of Churches
Delaults on Church Loans
Loans Declined
No-Loan Associations
Factors influencing Decisions to Make Church Loans
Susmary

,V. SUARY AD CONCLUSIUS . . . . . . 181

APAqNDIX A TABLES ON BANK LOANS TO CHURCHES . . . . 198

APPENDIX B TABLES ON LOANS TO CHIURCHES BY LIFL INSURANCE
COMPANIF^S o . . . . . . . 225

APPENDIX C TABLES ON LOANS TO CHURCIILS BY SAVINGS AND LOAN
ASSOCIATIONS . . . . . . . ... 249


BIBLIOGRAPHY ......... . . . . . . .


273












LIST OF TABLES


Table
Chapter I

1. Total Church Debt and Total Property Value for All
Denominations in the United States, Clarsified by
Year . . . . . . . . . . . .


Page


2. Ratios of Number of Churches Reporting Debt to Number
of Churches Reporting Property Value for elected
Senoninations in the United States, Classified by
Year and Denomination . . . . . .... 22

3. Ratios of Total Debt to Total Property Value for
Selected Denominations in the United States,
Classified by Year and Lenomination . . . . 2

4. Total Gifts to 15 Protestant Religious Bodies in the
United States for Selected fears, 1926-1940. . . 29

5. Total New and Religious Construction Activity in the
United States, Classified by years, 1929-1950 . . 47


Chapter II

1. Response of 215 Banks in the United States to the
Church Loan Fx'erience Survey, Classified by Size of
Bank Assets, January 1, 1946-January 1, 1952 . .. 56

2. Distribution of Assets, Loans and Discounts and Amount
of Church Loans for A Sample of 215 Banks in the United
States, Classified by Size of Bank Deposits, January 1,
19616-January 1, 1952 . . . . ...... 58

3. -onse of 215 Banks in the United States to the
u..urch Loan Experience Survey, Classified by Size of
Bank Deposits, January 1, 1946-January 1, 1952 . 59

L. Average Size of Loans, Average Number and Amount of
Loans for A Sample of Church Loans Made by 105 Eanks
in the United states, Classified by Size of Bank
Deposits, January 1, 1966-January 1, 1952. . . .. 61











LIST OF TABLES (Continued)
Table Page

5. Ratios of expansion to Repair Loans for A Sample of
Church Loans Made by 105 Banks in the United States,
Classified by Size of Bank Deposits, January 1, 1946-
January 1, 1952 ..... . . .. . ... 62

6. Sample of Church Loans Made by 105 Banks in the United
States, Classified by Denomination, January 1, 1946-
January 1, 1952 . . . . ...... . . 78

7. Percentage Distribution of 105 Church-Loan Bankfs in the
United States, Classified by Bank Location and Bank
Deposits, January 1, 1946-January 1, 1952 . .... 81

8. Average Interest Rates for A Sample of Church Loans
Made by 105 Banks in the United States, Classified by
Bank Location and Amount of Loans, January 1, 1946-
January 1, 1952 . . . . . ... . . .. 81

9. Percentage Distribution of the Number and Amount of
Loans for A Sample of Church Loans Made by 105 Banks in
the United States, Classified by Bank Location, Use of
Loans and Contract Terms, January 1, 1946-January 1,
1952 . . . . . . . . 83

10. Percentage of Total Construction Cost Required to be on
Hand of Churches for A Sample of Church Loans Made by
105 Banks in the United States, Classified by Bank
Deposits, January 1, 1946-January 1, 1952. . . 85

11. Distribution of Factors Influencing Bankers' Decisions
to Make Church Loans for A Sample of Church Loans Made
by 105 Banks in the United States, Classified by Use of
Loans, January 1,1946-January 1, 1952 ..... 90


Chapter III

1. Number and Amount of Loans for A Sample of Church Loans
Made by 30 Insurance Companies in the United States,
Classified by Size of Company Assets, January 1, 1946-
January 1, 1952 . . . . . .. . . . 107









vii
LIST OF TABLES (Continued)
Table Page

2. Nuber of Loans Per Company for A Sample of Church
Loans Made by 30 Insurance Companies in the United
States, Classified by Size of Company Assets, January
1, 1946-January 1, 1952 . . . . .. . 109

3. Average Size of Loans, Average number and Amount of
Loans Per Company for A Sample of Church Loans Made by
28 Insurance Companies in the United States, Classified
by Size of Company Assets, January 1, 1946-January 1,
1952 . . . . . . . . . . . . 10

4. Number and Amount of Church Loans for A Sample of Church
Loans Made by 28 Insurance Companies in the United
States, Classified by Use of Loans and Size of Company
Assets, January 1, 1946-January 1, 1952 . . .. 114

5. Number and Amount of Church Loans Made by 28 Insurance
Companies in the United States, Classified by Denomina-
tion, January 1, 1916--January 1, 1952 . . . . 122

6. Total Number, Total Amount, Average Amount and Average
Size of Loans for A Sample of Church Loans Made by 28
Insurance Companies in the United States, Classified by
Company Location, January 1, 1946-January 1, 1952 . 124

7. Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified by Company Location
and Size of Company Assets, January 1, 3.916-January 1.
1952 . . . . . . . . . . . 125

8. Percentage of Total Construction Cost Required to be
on Hand of Churches for A Sample of Church Loans Made
by 28 Insurance Companies in the United States,
Classified by Company Assets, January 1, 1946-January 1,
192 . . . . . . .. . . . 128


Chapter IV

1. Number and Amount of Loans for A Sample of Church Loans
Made by 63 Savings and Loan Association in the United
States, Classified by Size of Association Assets,
January 1, 1946-January 1, 1952 .. . .. .. 148









viii
LIST OF TABLES (Continued)
Table Page

2. lumber of Loans Xbr Association for A Sample of
Church Loans Made by 63 Savings and Loan Associations
in the United States, Classified by Size of Associa-
tion Assets, January 1, 1946-January 1, 1952. . . 1L9

3. Number and Amount of Loans for A Sample of Church Loans
ade by 56 Savings and Loan Associations in the United
States, Classified by Use of Loans and Size of Associa-
tion Assets, January 1, 1946-January 1, 1952 . . a 1S5

4. Loan-to-Value Ratios for A Sample of Church Loans atde
by 56 Savings and Loan Associations in the United
States, Classified by Amount of Loans, January 1, 1946-
January 1, 1952 . . . . . . . . 159

5. hNumber and Amount of Loans for A Sample of Church Loans
hMde by 56 Savings and Loan Associations in the United
States, Classified by Denomination, January 1, 1946-
January 1, 1952 . . . . . . . .. . 162

6. Total Number, Total Amount, Average Amount and Average
Size of Loans for A Sample of Church Loans Made by 56
Savings and Loan Associations in the United States,
Classified by Association Location, January 1, 1946-
January 1, 1952 . . . . . . . . .165

7. Number of Loans Per Association for A Sample of Church
Loans Made by 56 Savings and Loan Associations in the
United States, Classified by Association Location,
January l, 1946-January 1, 1952 . . . . . 166

8. Sample of Church Loans Hade by 56 Savings and Loan
Associations in the United States, Classified by Asso-
ciation Location and Size of Association Assets,
January 1, 1946-January 1, 1952 . . ..... 166

9. Average Size of Loans and Average Interest Rates for A
Sample of Church Loans Made by 56 Associations in the
United States, Classified by Association Location and
Denomination, January 1, 19i6-January 1, 1952 . . 169

10* Sample of Church Loans Declined by 63 Savings and Loan
Associations in the United States, Classified by Size of
Association Assets, January 1, 1946-January 1, 1952. 172







LIST OF TABLES (Continued) ix
Table Page
Appendix A

1. Nuber and Amount of Loans for a Sample of Church
Loans Made by 113 Banks in the United States,
Classified by Size of Bank Deposits, January 1, 1946-
January 1, 1952 .................. 199

2. Number of Loans Per Bank for a Sample of Church Loans
Made by 105 Banks in the United States, Classified by
Size of Bank Deposits, January 1, 1946-January 1, 1952 200

3. Number and Amount of Loans for a Sample of Church
Loans Made by 105 Banks in the United States, Classified
by Use of Loans and Size of Bank Deposits, January 1,
1946-January 1, 1952 . . . . . . . . 201

I. Average Size and Range Amounts of Loans for a Sample
of Church Loans Made by 105 Banks in the United States,
Classified by Use of Loans and Size of Bank Deposits,
January J anuary, 1 january 1952. . . . . . 202

5. Ratios of Expansion to Repair Loans for a Sample of
Church Loans Made by 105 Banks in the United States,
January 1, 1946-January 1, 1952, Classified by Size of
Bank Deposits and Population Changes, 1940-1950 . 203

6. Ratios of Expansion to Operating Expense Loans for a
Sample of Church Loans Made by 105 Banks in the United
States, January 1, 1946-January 1, 1952, Classified by
Size of Bank Deposits and Population Changes, 1940-1950 204

7. Average Amounts of Loans Per Bank for a Sample of
Church Loans Made by 105 Banks in the United States,
January 1, 1946-January 1, 1952, Classified by Use of
Loans, Size of Bank Deposits, and Population Changes,
190O-1950 . . . . . . . . .. . 205

8. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 105 Banks in
the United States, Classified by Contract Terms and Use
of Loans, January 1, 1946-January 1, 1952 . . . 206

9. Average Interest Rates for a Sample of Church Loans
Made by 105 Banks in the United States, Classified by
Use of Loans and Contract Terms, January 1, 1946-January
1, 1952 . . . . . . . . . . 207











LIST OF TABLES (Continued)
Table Page

10. Average Interest Rates and Average Maturities for a
Sample of Church Loans Made by 105 Banks in the United
States, Classified by Use of Loans and Amount of Loans,
January 1, 1946-January 1952 . .. . 208

11. Average Maturities, Number and Amount of Loans for a
Sample of Church Loans Made by 105 Banks in the United
States, Classified by Use of Loans and Schedule of Re-
payments, January 1, 1946-January 1, 1952 . . 209

12. Average Interest Rates and Average Maturities for a
Sample of Church Loans Made by 105 Banks in the United
States, Classified by the Use of Loans and Form of
Security, January 1, 1946-January 1, 1952 . . . 210

13. Number and Amount of Loans for a Sample of Church Loans
Made by 105 Banks in the United States, Classified by
Use of Loans and Denominations, January 1, 1946-January
1, 1952 . . . . . . . . . . . 211

14. Sample of Church Operating Expense Loans Made by 105
Banks in the United States, Classified by Denominations,
January 1, 1946-January 1, 1952 . ... . 212

15. Contract Terms and Payment Record for a Sample of Church
Loans Made by 105 Banks in the United States, Classi-
fied by Use of Loan and Lenomination, January 1, 1946-
January 1, 1952 . . . . . . . . . 213

16. Average Amount of Loans and Average Interest Rates for
a Sample of Church Loans Made by 105 Banks in the
United States, Classified by Bank Location, January 1,
1946-January 1, 1952 . . . . . . . . 214

17. Sample of Church Loans Made by 105 Banks in the United
States, Classified by Dank Location and Number of Loans
Made Per Bank, January 1, 1946-January 1, 1952 . . 215

18. Sample of Church Loans Made by 105 Banks in the United
States, Classified by Bank Location, Use of Loans and
Schedule of Repayments, January 1, 19L6-January 1, 1952 216

19. Sample of Church Loans Made by 105 Banks in the United
States, Classified by Bank Location and Denomination,
January 1, 1916-January 1, 1952 .. . 217









LIST OF TABLES (Continued)


Table Page

20. Average Interest Rates and Average Size of Loans for
a Sample of Church Loans Made by 105 Banks in the
United States, Classified by Bank Location and Denomi-
nation, January 1, 1946-January 1, 1952 . . . .. 218

21. Distribution of Church-Loan Banks Which Declined Loans
to Churches for a Sample of Church Loans Made by 113
Banks in the United States, Classified by Size of Bank
Deposits, January 1, 196-January i, 1952 . . . 219

22. Sample of 102 No Church-Loan Banks in the United States,
January 196-Jary 96 ry 1, 1952, Classified by Bank
Deposits, and Percentage Increase in Population, 1940-
1950 . . . . . . . . . . . . 220

23. Percentage Distribution of 1,000 Questionnaires Sent to
Banks in the United States for the Church Loan Experi-
ence Survey, Classified by States, January 1, 1946-
January 1, 1952 . . . . . . . . 221


Appendix B

1. Total Assets and Total Number of Insurance Companies
in the United States, Classified by Companies in the
United States, Companies Sent Questionnaires, Companies
Responding to Questionnaires, Companies makingg Church
Loans and Size of Company Assets, January 1, 19l6-
January 1, 1952 . . . . . . ....... 226

2. Distribution of the Number and Amount of Loans for a
Sample of Church Loans Mde by 28 Insurance Companies
in the United States, Classified by Amount of Loan and
Size of Company Assets, January i, 19h6-January 1, 1952 227

3. Average Size and Range Amounts of Loans For a Sample of
Church Loans Made by 28 Insurance Companies in the
United States, Classified by Use of Loans and Size of
Company Assets, January 1, 19S6-January 1, 1952 . 228

4. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 28 Insurance
Companies in the United States, Classified by Interest
Rates, Use of Loans and Size of Company Assets, January 1,
196-January 1952 . . . . . . . . 229









xii
LIST OF TABLES (Continued)
Tables Page

5. Average Size of Loans, Average Mahturities, and Average
Loan-To-Value Ratios for a Sample of Church Loans
Made by 28 Insurance Companies in the United States,
Classified by Use of Loans and Interest Rates, January
1, 1946-January 1, 1952 . ..... . .. 230

6. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 28 Insurance
Companies in the United States, Classified by Contract
Lengths, Use of Loans and Size of Company Assets,
January January 6-January 1, 1952 . . . . .. 231

7. Average Size of Loans and Average Interest Rates for a
Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified by Use of Loans and
Contract Lengths, January 1, 1946-Jnuary 1, 1952 . 232

8. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 28 Insurance
Companies in the United States, Classified by Form of
Security, Use of Loans and Size of Company Assets,
January 1, 1946-January 1952 ........ .. 233

9. Average Maturities and Average Interest Rates for a
Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified by Form of Security
and Use of Loans, January 1, 1946-January 1, 1952. 234

10. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 28
Insurance Companies in the United States, Classified
by Loan-To-Value P.atioe, Use of Loans and Size of
Company Assets, January 1, 19L6-January 1, 1952. . 235

11. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 28 Insurance
Companies in the United States, Classified by Schedule
of Repayments, Use of Loans and Size of Company Assets,
January 1, 1946-January i, 1952 . . . . ... 236

12. Number and Amount of Loans for a Sample of Church Loans
Made by 28 Life Insurance Companies in the United States,
Classified by Use of Loans and Denominations, January 1,
196-January 192 . . . . . . ... 237










LIST OF TABLES (Continued)


Table


13. Contract Terms and Payment Record for a Sample of
Church Loans Made by 28 Insurance Companies in the
United States, Classified by Use of Loan and Denomi-
nation, January 1, 1946-January 1, 1952 . . .

14. Distribution of the Number of Expansion Loans for a
Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified by Form of Security
and Denomination, January 1, 19L6-January 1, 1952

15. Distribution of the h',mber of Repair and. Operating
Expense Loans for a Sample of Church Loans Made by 28
Insurance Companies in the United States, Classified by
Form of Security and Denomination, January 1, 1946-
January 1, 1952 .* . . . . . . .

16. Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified b Company Location
and Number of Loans Made Per Company, January 1, l.9l6-
January 1, 1952 . . . . . . . . .


17. Number and
Made by 28
Classified
January 1,

18. Number and
Made by 28
Classified
January 1,

19. Humber and
Vade by 28
Classified
January 1,


Amount of Loans for a Sample of Church Loans
Insurance Companies in the United States,
by Amount of Loans and Company Location,
1946-January 1, 1952 . . . . ..

Amount of Loans for a Sample of Church Loans
Insurance Companies in the United States,
by Contract Terms and Company Location,
1946-January 1, 192 . . . . .

Amount of Loans for a Sample of Church Loans
Insurance Companies in the United States,
by Company Location and Denomination,
1946-January 1, 1952 . . . . .


242




243




244




245


20. Average Size of Loans and Average Interest Rates for a
Sample of Church Loans Made by 28 Insurance Companies
in the United States, Classified by Company Location
and Denomination, January 1, 19t6-January 1, 1952 .

21. Distribution of Church-Loan Companies which Declined
Loans to Churches for a Sample of Church Loans Made
by 30 Insurance Companies in the United States, Classi-
fied by Size of Company Assets, January 1, 1.96-
January 1, 1952 . . . . . . . . .


246


xiii


Page


238




239





240




21U









xiv
LIST OF TABLES (Continued)
Table Page

22. Distribution of 70 No Church-Loan Insurance Companies
in the United States, January 1, 19l6-January 1,
1952, Classified by Size cf Company Assets and Per-
centage increase in Population, 19O0-1950 . . . 27

23. Distribution of Factors Influencing Company Decisions
to Hake Church Loans for a Sample of Church Loans made
by 28 Insurance Companies in the United States, Classi-
fied by Company Assets, January 1, 19t6-January 1, 1952 2L8


Appendix C

1. Response of 223 Savings and Loan Association in the
United States to the Church Loan Survey, Classified by
Size of Association Assets, January 1, 1946-January 1,
1952 . . . . . . . . . . .. . 250

2. Distribution of the Ihnmber and Amount of Loans for a
Sample of Church Loans Yade by 56 Savings and Loan
Associations in the United States, Classified by Amount
of Loan and Size of Association Assets, January 1, 19E6-
January 1, 1952 . . . . . . .... . 251

3. Average Size and Range Amounts of Loans for a Sample of
Church Loans Made by 56 Savings and Loan Associations
in the United States, Classified by Use of Loans and
Size of Association Assets, January 1, 19.6-January 1,
1952 . . . . .. . 0 0 . 0 0 . . 252

h4 Ratios of Expansion to Repair Loans fcr a Sample of
Church Loans Made by 56 Savings and Loan Associations
in the United State- Classified by Population Changes,
19O0-1950, and Size of Association Assets, January 1,
1946-January 1, 1952 . . . . . . . . 253

5. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 56 Savincs
and Loan Associations in the United States, Classi-
fied by Interest Rates, Use of Loans and Size of
Association Assets, January 1, 1946-January 1, 1952 254

6. Distribution of the Number of Loans for a Sample of
Church Loans hade by 56 Savings and Loan Associations
in the United States, Classified by Interest Rates and
Contract Terms, January 1, 1946-January 1, 1.92 . 255










LIST OF TABLES (Continued)
Table Page

7. bPrcentage Distribution of the Iumber and Aount of
Loans for a Sample of Church Loans Made by 56 Savings
and Loan Associations in the United States, Classified
by Maturities, Use of Loans and Size of Association
Assets, January 1, 1946-January 1, 1952 . . . 256

8. Distribution of the Number of Loans for a Sample of
Church Loans Made by 56 Savings and Loan Associations in
the United States, Classified by MIturities and Contract
Terms, January 1, 1946-January 1, 952 . . . . 257

9. Percentage Distribution of the !umbcr and Amount of
Loans for a Sample of Church Lans Made by 56 Savings
and Loan Associations in the United States, Classified
by Loan-To-Value Ratios, Use of Loans and Size of
Association Assets, January 1, 19l6-January 1, 3952. 258

10. Percentage Distribution of the Number and Amount of
Loans for a Sample of Church Loans Made by 56 Savings
and Loan Associations in the United States, Classified
by Form of Security, Use of Loans and Size of Associa-
tion Assets, January 1, 1946-January 1, 1552 . . 259

11. Percentage Distribution of the LNumber and Amount of Loans
for a Sanple of Church Loans Made by 56 Savings and Loan
Associations in the United States, Classified by Schedule
of Repayments, Use of Loans and Size of Association Assets,
S194 6-J 1 january 1952 . . . . 260

12. Number and Amount of Loans for a Sample of Church Loans
Iade by 56 Savings and Loan Association in the United
States, Classified by Use of Loans and Denomination,
January 196-January 1, 1952 . . .. .. 261

13. Contract Terms and Payment Record for a Sample of
Church Loans Made by 56 Savings and Loan Association in
the United States, Classified by Use of Loans and
Denomination, January 1, 1946-January 1, 192 . . 262

14. Number and Amount of Loans for a Sample of Church Loans
Made by 56 Savings and Loan Associations in the United
States, Classified by Amount of Loans and Association
Location, January 1, 1946-January 1, 1952 . . . 263











LIST OF TABLES (Continued)
Table Page

15. Number and Amount of Loans for a Sample of Church
Loans Made by 56 Savings and Loan Associations in the
United States, Classified by Contract Terms and
Association Location, January 1, 1946-January 1, 1952 264

16. Number and Amount of Loans for a Sample of Church
Loans I'ade by 56 Savings and Loan Association in the
United States, Classified by Association Location and
Denomination, January 1, 1946-January 1, 1952. . . 265

17. Percentage of Total Construction Cost Required to be
on Hand of Churches for a Sample of Church Loans Made
by 56 Savings and Loan Associations in the United States,
Classified by Size of Association Assets, January 1,
1946-January 1, 1952 . . . . . . . . 266

18. Sample of 160 No Church-Loan Savings and Loan Associa-
tions in the United States, January 1, 1946-January 1,
1952, Classified by Size of Association Assets and
Percentage increase in Population, 190-190 . . 267

19. Distribution of Factors Influencing Association Deci-
sions to Make Church Loans for a Sample of Church
Loans Made by 63 Savings and Loan Associations in the
United States, Classified by Size of Association
Assets, January 1, 1946-January 1, 1952. . . . 268

20. Percentage Distribution of 600 Questionnaires Sent to
Associations in the United States for the Church Loan
Experience Survey, Classified by States, January 1,
196-January 1952 . . . . . . . . 269












CHAPTER I


THE DEVELOPMENT OF THE FINANCING OF CHURCH BUILDING EXPANSION


Introduction


Churches in the United States have made extensive use of

loans from lending institutions during the past thirty years to

help finance the construction of new or enlarged church buildings.

This type of financing has also been used in a minor way to assist

in the repair of church property. Such a practice is probably the

result of two conditions. First, speedier production methods make

it possible for even relatively large church buildings to be erected

within a period of months rather than years or decades. Second, the

desire of church members to have a new or larger church building and

to have it "now". Often, the time required to complete the construc-

tion of a church building is much shorter than that required by the

members to secure the funds to pay for it. But this presents no in-

surmountable problem because the secular financial community has

provided the means whereby many economic goods may be purchased now

and paid for later. In other walks of life, the congregation has

become accustomed to using goods while they pay for them. Thus, they

see no reason -why they need to wait until they have accumulated all

of the necessary funds for a new church building when they can borrow

a substantial part of the total construction costs from a lending










institution. Consequently, since 1920, hundreds of churches in the

United States have moved into new edifices which were not completely

paid for until later.

Many churches, which had borrowed money to pay for the ex-

pansion of buildings and equipment during the prosperous years of

the 1920's, found that they were unable to meet the debt service

on these obligations in the depression of the 1930's. Numbers of

churches ultimately defaulted on their debts. This resulted in

embarrassment for the churches and skepticism in financial circles

toward this type of loan.

The first half of the twentieth century is not the only

time that the expansion of church buildings has been affected by

the prevailing construction and financing methods of the times.

Naturally, churches through the ages have had no choice but to use

the available methods of construction. But the sentiment has not

always prevailed among church members that they must have a new or

larger building and have it "now'. Although churches, in general,

have not sought assistance from secular financial institutions to

help pay for their buildings, the past thirty years is not the only

period in which they have borrowed money to erect buildings, nor is

it the first time they have encountered financial difficulties as a

result of over-expansion. Congregations have paid for expansion

and repair programs in many ways. The development of church con-

struction and financing methods which follows Till present some of

the most common procedures which have been used since 970 B.C.











As an early example of the financing of church building

expansion, the construction of the Temple in Jerusalem may be cited.

This was the first permanent structure used for a house of worship

by the young nation of Israel. Its construction and financing are

vital to an understanding of the development of the financing of

church buildings throughout the ages, because persent-day Christian-

ity had its beginnings in the religion of the Jewish nation of

Israel.

The young Jewish nation used a tent (The Tabernacle) as a

place of worship for about 480 years before King Solomon began con-

struction of the Temple in Jerusalem in 977 B. C.1 King David,

Solomon's father, spent three years assembling money and materials

for the Temple but did none of the actual construction.2 During

this period in history, machines to aid in construction were few and

the process was long and arduous. Most of the work was done by

hand labor. Thus, it was not surprising that King Solomon took

another seven and one-half years and used at least 183,300 men for

the completion of the building.3

Estimates on the current market price of the materials used

in the construction of the Temple range upwards from two billion


11 Kings 6:1.

2Tilliam ';histon, The Life and Works of rlavius Josephus
(Philadelphia: The John C. Winston Company), p. 233.


31 Kings 6:1-37.









dollars.1 Money to pay for the cost of construction and to provide

furnishings for the Temple came from many sources. Voluntary con-

tributions of gold, silver and precious stones were made by people

throughout the Jewish nation.2 A substantial contribution (more

than four billion dollars in gold and silver) to the Temple building

fund was made from the kingdom treasury. Another large amount was

given by the king himself.

Although tremendous quantities of gold and silver had been

accumulated for the Temple building fund, King Solomon secured the

cedar and cypress needed for use in the edifice from neighboring

King Hiram in exchange for a yearly payment of 160,000 bushels of

wheat and 156,000 gallons of oil.3

During the early Christian Era, no financing of church build-

ings was required. The first Christians frequented the Temple at

Jerusalem so long as their relation to the Mosaic economy allowed,.

The first converts in many cities throughout the Roman world opened

their dwellings for worship. Meetings were also held in ships, sepul-

chres, caves, deserts, streets and market places. That these early

Christians erected special houses of worship is out of the question


1
Henry H. HaLley, Pocket Bible Handbook (19th ed.; Chicago:
Henry H. Halley, 1951), p. 202.
2
I Chron. 22:14; 29:2-8.
3
I Kings 5:11-12.

Philip Schaff, History of the Christian Church (New York:
Scribner, Armstrong & Co., 1858), p. 12?.










because of their persecution by Jews and Gentiles and their general

poverty.

As the number of Christians increased, larger rooms or edi-

fices were required for their meetings. For a time they probably

hired or erected plain rectangular buildings.1 When these were no

longer adequate, they constructed churches on the model of the

Roman basilicas. In the time of Diocletion, there existed some

stately church edifices. The record does not indicate the length

of time required for the construction of these buildings nor the

manner in which they were financed.

It is after Constantine's ascension that the era of church

building on a magnificent scale really began.2 Splendid basilicas

were built in Jerusalem, Bethlehem and Constantinople. These were

paid for by the Emperor himself. A few of the churches which he

built received revenues from the public funds, mhile to others were

given the treasures of the confiscated pagan temples. The emperors

endeavored to promote the interest of Christianity by their personal

influence and by giving to the Church and its clergy new legal rights.3

The Church was made the heir of all clergymen who died without leav-

ing wills. The right to receive legacies became a fruitful source of



George P. Fisher, History of the Christian Church (New York:
Charles Scribner's Sons, 1887), p. 63.
2Ibid.

Ibid., p. 100.










wealth. Ecclesiastical property rapidly accumulated.

As soon as Christianity became the religion of the rich

and powerful and as the desire to oppose the splendor of pagan

temples with the severe simplicity of Christian church buildings

was less felt, the primitive aversion to art in worship began to

fade away.1 Churches of more imposing proportions and more costly

furnishings began to be erected. The public buildings and pagan

temples which were sometimes obtained through the munificence of

the emperors were slightly remodelled for the uses of Christian

worship.


European Development


The financing of new and larger church buildings took a

turn in another direction in Europe. One is struck with the strong

constrasts that present themselves in every province of medieval life

and lend to it a picturesque character. In the vicinity of the mighty

cathedral whose spires rise above the tallest trees of the forest are

the humble dwelling of the mechanic and the peasant's miserable hovel.2

A multitude of abbeys, many of them so grand and spacious that their

chapels were like cathedrals, arose in every part of Christendom.3 In

the erection of these sanctuaries, churches lavished their treasures,



IIbid., pp. 116-117.

2Ibid., p. 227.

Ibid., p. 236.










nobles offered their costly gifts, and the people of all classes

combined in a common enthusiasm of sincere devotion. Everyone

gave or did what he could to carry upward the walls and towers

and to perfect with elaborate art the houses of worship.


France


The financing of the cathedrals of France also constitutes

another integral part of the development of the financing of church

buildings. In France, fifteen great cathedrals were built in and

around the city of Paris during the twelfth and thirteenth centuries.

They were built with infinite care for details and with exquisite

art. It should be remembered that while they were wrought without

our faster modern production processes and high tension financial

drives, only half of the cathedrals in this group took the alleged

three or four centuries to build.1 The rest, including the four

largest, took decades only; Amiens 68 years, Noyon 80, Laon 62,

Chartres 45, Rheims 95, Sens 50 and Notre Dame at Paris 74. The

cathedral in Beauvais was started in 1247 and never completely fin-

ished.

Whether the construction period for these cathedrals as

decades or centuries, the length of time was still considerably longer

than that generally used for the erection of church buildings during



Robert G. Anderson, Biography of a Cathedral (1st ed.; New
York: Longmans, Green and Company, 194), pp. 403-UOh.











the twentieth century in the United States. This longer construc-

tion period would naturally give the parishioners additional time

in which to acquire funds to pay for the new buildings.

Every cathedral was the result of a gigantic united move-

ment of clergy, nobles, paupers and guilds giving their all and

actually harnessing themselves to carts.1 Some of the wealthier

members laid on the altar deeds to quarries and privileges to cut

down forest for timber for the cathedral.2 Since endowments or

substantial gifts were beyond the means of a large number of people,

the custom slowly developed of parishioners, vhose daily life or

business brought them together, associating themselves into guilds

to make contributions to the building of places of worship. This

new sense of solidarity among the workers, the guilds, assisted a

great deal in these building operations.3 This was not the first

time a secular movement had helped advance the Church. In the

first centuries Rome, even while persecuting the Christians, had

organized a vast peace and a great system of communications and roads

in which Christianity developed.






1Ibid.
2
SIbid. p. 431.
31bid p. 413.











Italy


.overcicc for tho ancient chur l':n -' ol It-.l- w.as

supplanted in the rinds o roli '" leaders tho desire to rear

edifices that ni -.t rival th.- e One sue :'ii n-as t. tor's

a ..-ral in Rome. The actual co strrction extended t'ro:u t

tho century. Alt'o the conerstone mas laid in 1i0, tle ~-n

part tie edifice was not consecrated until 1626. '' total

cost this structure has bee 1:.c.1 at 'fD3,000,000.


There is much obscri'

financinc- of the -rst -,cial

possil he crction o no

to sect; services oa 1".

their est< es.3

t' e early of

ti-e f,-1....on for i%-, 1ni
the fo. Ye .o"w .. la1. doe

by tC creation o. enorn cents in1

to 'vc rom their smal '


5ITO -.'-



loes or ric'

Sfor t)e


,je 1

-s to c

lads

,; to


r;\

sta-'lish


and for tl

swell the


o construction and

0 -e -- ir

S 1 *ds : o desired

S1-- drellin -,?.


1 it~ i 1

iow, :onas;terios

1e lesser -,entry

I-iboes e


3

London: ut en


op. cit., e. 236.



lact, "L in&:cr~l e-1' (v'tU1 *;
r (,"_I Co.;


___ ~


__ __












monasteries already created.1 But such endowments were naturallJy

beyond the means of a large number of people. Thus, tho custom

grew in England, parallel to that in France, of parishioners

associating themselves into guilds for the purpose of building a

church, or for the maintenance of a priest to sqj mass for them.

They were able to provide in this manner what individually they

were unable to afford.2 For a hundred years after the Norman

Conquest the religious enthusiasm which found expression in this

practical manner was a rising tide. More than 500 new monasteries

had been founded in England by 1200 A.D. Before the end of the

century, however, the great era of monastic revival was past. Dur-

ing the reign of Henry III only 157 new houses of worship were estab-

lished. After 1300 A.D. only a few new foundations saw the light.3

With so much wealth and so many sources of income, there

would seem to be no excuse for the financial chaos in which so many

of the religious houses of England were sunk during the thirteenth

century. Almost everywhere we turn among monastic chronicles and

records we are brought up against a picture of insolvency and of

almost desperate remedies to get out of the toils of moneylenders.4



11. E. Lunt, History of England (New York: Harper & Brothers,
1928), p. 178.
2
H. F. Westlake, Parish Gilds of Mediaeval England (New York:
The Macmillan Company, 1919), p. 10.

Lunt, loc. cit.

4John R. H. Moorman, Church Life in England in the Thirteenth
Century (1st ed.; Cambridge: University Press, 1916), p. 302.










Jocelin's account is the most intimate and picturesque

which we possess, but the more prosaic records tell the same story.1

A large number of churches were in financial difficulty from 1231

to 1300. Debts ranged in amounts from 800 to 5,248 pounds. The

monks of Christ Church, Canterbury, in spite of substantial amounts

of property were over 2,500 pounds in debt in 1265, while at Rochester

the debts were described as "inestimable". Gloucester and Peter-

borough each had a debt of 2,000 pounds about the middle of the

century, Ihile St. Mary's Abbey at York in 1300 owed no less than

6,666 pounds to the Earl of Lincoln. Even the small priory of

Dover, a cell of Canterbury, ran up a debt of nearly 800 pounds.

The results of this appalling insolvency vwre sometimes

disastrous. The time cae when even the patience of the moneylenders

could last no longer and monks and canons were reduced to the posi-

tion of beggars, depending upon what charitable neighbors would give

them.2 The monks of Faversham were found to be practically starving

in 1275, because they had exhausted their stores.

The causes of all this poverty and debt were many and not

all of them were within the control of the monks themselves. Tax-

ation and forced loans, civil disturbances and Scottish raids,

floods and fires, bad harvests and murrain; all of these made great

inroads on the resources of the monasteries. On the other hand, much



Ibid., pp. 302-306.
2
Ibid.








12

of the financial distress from which these religious houses suffered

was due to the extravagance and incompetence of the monks themselves.

Most monasteries were busy with building operations during the thir-

teenth century. They saw nothing incongruous in spending vast sums

on erecting new and sumptuous buildings at a time when the state of

their finances demanded the most rigid economy. But the churches

were not the only ones in debt during this time. Such practices

were customary in all walks of life. Landowners, both ecclesiasti-

cal and lay, were burdened with enormous debts which they had neither

the power nor the intention of clearing and these they handed on to

their heirs or successors. Periods of mismanagement and incompe-

tence in a community, both ecclesiastical and lay, were often termin-

ated by the appearance of some really strong man who was able to

bring order out of chaos and to save his house from disaster.1

During the fourteenth and fifteenth centuries, the construc-

tion of new church buildings in England came almost to a standstill.2

Parishioners were primarily occupied with trying to keep existing

structures in repair. Some buildings required only minor repairs

while others were in such a run-down condition that complete rebuild-

ing was necessary. Funds to pay for this work came from the church

itself where the wealth and income of the church was sufficient, but

in many cases guilds were formed to take ever chantries whose rents



1Ibid., p. 313.
2festlake, op. cit., pp. 21-26.










and lands had disappeared or had so diminished in value as no

longer to provide the necessary money.

As the LMiddle Ages drew to a close, other changes took

place in the construction and financing of church buildings in

England. Attempts were made to beautify the parish churches by

the use of wall decorations and painted or stained-glass windows.1

Most of the windows were the result of individual gifts; however,

some of the less prosperous members joined themselves into groups

to make such an addition to their church.

In countries where the people embraced the Reformation, the

work of church building was checked. The prime motive which up

to that time had prompted the rebuilding or extension of so many

churches was gone and the existing buildings fully met the require-

ments of reformed worship. The doldrums in church construction in

England extended well into the sixteenth century.3 Repairs to needy

buildings were continued and paid for by a Voluntary Rate. This

was in the nature of a voluntary assessment levied upon each person

according to his possessions. Although not so universal, nor of

course possessing the binding force of a public a sent, were

Joint Voluntary Gifts for special purposes. If something in the

way of a decoration, a bell, a window, a vestment or a piece of

plate was wanted, the people drew themselves together to pay for it.


1Gasquet, op. cit., p. 59.
2"Church", Encyclopaedia Britannica, Vol. $.
3"London", Encyclopaedia Britannica, Vol. 14.










The Great Fire of London in 1666 destroyed many beautiful

and magnificent church buildings. Four years after the fire, Sir

Christopher Wren began the reconstruction of fifty-one churches

which were not completed when the century ended.1 St. Paul's, the

great cathedral of the Church of England, was one of the churches

completely destroyed by the great fire. It had been damaged three

times by fires and once by lightning before 1666. The first stone

of the new St. Paul's was laid in 1675, and the last stone was set

in 1710. The total cost of the structure was about 1,511,205 pounds,

equivalent to present-day costs of fully 2,000,000 pounds (1943).

The rebuilding, which was undertaken by the government of Charles

II, was paid for by a tax on incoming coal.2

The next period of extensive church construction in England

began immediately after the beginning of the ninteenth century.

Many new churches grew up in the large towns as a result of the zeal-

ous efforts of Evangelical groups.3 Vast sums of money were spent

on building new churches and repairing old ones. Within a fifty-

year period, 1800 to 1850, more than 3,000 new parishes were created.

Large grants were made by the government to help with the costs of

these new edifices.



1"London", Encyclopaedia Britannica, Vol. 14.
2
"Saint Paul's", New Standard Encyclopaedia, Vol., IX.

F. York Powell and T. F. Tout, History of England (London:
Longmans, Green and Company, 1910), pp. 880, 969.










American )De ,elopnent


Early Colonial history provides a heterogeneous pattern of

church construction and financing methods. Some 'muildin s were out-

right gifts from one individual. The Truton Parish Church of Williams-

burg, Virginia, Rhich was ori finally built in 168h was a -ift from

Colonel John Page.1 So increased was the attendance at the services

that in 1701 the little parish church became overcrowded and in the

course of the next ten years measures were taken to erect a new

structure. This time the financing was done differently. An agree-

ment was made between the vestry of the church and the house of

Burgesses of Vir"inia in which the State Government was to pay for

part of the cost of the new building. It was finished in 171.

The Church of the il -rinage, Plymouth, Massachusetts cane into

possession of its first house of worship as a gift.2 At the out-

set of its career, Trinity Church of New York City owned a large

tract of land to which was added a a -i"iccnt endowment from the

English Government. This endovecnt embodied all that tract of land

between "ose- Street on the South and rx 'istopher Street on the

Torth, and runninr from "roadwn- to the so. "i'r.3 A greater

part of this : '."n is still in possession .' 0o church' Tihich derives



1Fellie U. 'allin-ton, historic C urches of America ("-: York:
Duffield & Company, 1907), p. 67.
2
Ibid., p. 70.

Ibid., p. 146.










a large income from it.

Other church buildings were paid for by contributions from

the entire membership. Among the Virginians, tobacco served as an

equivalent of money, and when the English settlers of New Kent

County decided to build a house of worship at Whitehouse in 1703,

they paid for its construction by contributions of the fragrant

weed.1 Soon after the close of the Revolutionary War, the subject

of building a new house of worship was discussed by the members

of the First Presbyterian Church of Elizabeth, New Jersey. Although

the war had left many of them almost ruined financially, they were

determined to have a new church building. A sufficient amount of

money was contributed by the members to pay for the construction,

and the new building was dedicated in 1791.

The construction and financing methods on the frontier also

varied from one group to another. In frontier Pennsylvania around

the year 1740, the ground for early Presbyterian church buildings

came into possession of congregations by various ways. A congregation

was frequently guilty of squatting on land just as its individual

members sometimes obtained their land.2 However, the congregation

later became the lawful owner by a gift from some individual or by

purchase of the land with contributions made forthat purpose.


1
Ibid., p. 1L.
2
Guy S- Klett, Presbyterians in Colonial Pennsylvania
(Philadelphia: University of Pennsylvania Press, 1937, P. 9 1.











Once the land was acquired, there came the problem of the

building itself. In the less developed sections of frontier

Pennsylvania and in the early years of the existence of many churches,

the simply log meeting house was the rule.1 The resources of the

members permitted only the simplest structure. Some of these log

structures were erected in one day through the co-operative efforts

of the residents of the community, while others took several weeks to

complete if only a few persons did the work.2 Both the labor and the

materials were often donated to the church.

The first Baptist churches on the frontier of Indiana around

1800 were the rude cabins of the settlers. As a rule these dwellings

served for the first several years after a church was formed, because

the membership of these early churches was often very small.

In the more highly developed communities where circumstances

permitted, the Presbyterians erected large frame buildings, or even a

stone building, to take the place of the old log meeting house.4 By

a special enactment of the provincial Assebly of Pennsylvania, some

Presbyterian congregations were granted the right to raise money by


Ibid., p. 92.

2William W. Sweet, The Presbyterians, 1793-1840, Vol. II,
Religion on the American Frontier (New York: Harper & Brothers, 1936),
p. 61.

3William WV. Sweet, The Baptists, 1783-1830, Vol. I, Religion
on the American Frontier (new York: Henry Holt and Company, 1931, p. 53.

4Klett, op. cit., p. 92.









18

lotteries for the construction of meeting houses or parsonages and

to repair church buildings. Funds for these purposes were also

secured from voluntary contributions from the members.

Although details with reference to the financing are lacking,

the length of time required for the construction of two New York

cathedrals is pertinent to this discussion. The construction period

of both these cathedrals extended over a period of decades, and this

is a striking contrast to the length of time generally required to

complete present-day church edifices.1 St. Patrick's Cathedral in

New York City is one of the world's largest church edifices. The

cornerstone was laid in 1858 and the dedication ceremony took place

in 1879. The Cathedral of St. John the Divine is also in New York

City. The construction of this building was started in 1892, but it

is as yet unfinished. When completed this cathedral will be one of

the most imposing edifices in the world. Part of the structure was

consecrated and put to use in 1911.


Financing Church Building Expansion

in the United States, 196-194l

Church buildings erected in the United States from 1906 to

1940 were paid for in many ways. One of the methods frequently used

was to pay construction costs in full at the time of completion with

contributions voluntarily made by the members of the church. But, it

was also during this period that the prospects of having a new or


"Cathedral", New Standard Encyclopedia, Vol. II.











larger church building "immediately", to be paid for later, claimed

the attention of many church groups. Such an attitude toward financ-

ing church buildings was not surprising in view of the fact that this

same attitude was held with respect to the purchase of other types of

economic goods. Thus, another major method used by churches to finance

expansion of buildings and equipment was as follows: First, the

members of the church would raise a portion of the total construction

cost which was placed in a building fund. Second, they would then

borrow the balance of the funds needed from a lending institution.

The percentage of the total construction cost raised by the church

members before work actually started varied considerably from one group

to another.

Many churches borrowed money during the first thirty years of

the twentieth century to finance the construction of new or larger

church buildings. Numbers of these loans were made during relatively

prosperous times and in many cases churches assumed very heavy

financial obligations. Therefore, it was not astonishing that quite

a number of churches found themselves in financial difficulty during

the depression of the 1930's as a result of burdensome debts.

An attempt will be made below to answer the following questions:

(1) What was the trend of church property values and church debts

from 1906 to 1936? (2) Which denominations carried the largest share

of the debt? (3) How much did church income decline during the depres-

tion of the 1930's? (4) What was the extent of defaults on church

loans? (5) What attitudes did the churches adopt toward their debts?












(6) What effect did defaults on church loans have on the attitude

of lending institutions toward this type of lending?


Church Debts

During the decade from 1906 to 1916, there was an increase in

the total number of churches reporting property values, the total

value of property, the total number of churches reporting debts and

the total amount of church debt (Table 1, Page 21). The data also

show that the percentage increase in the total value of property was

greater than the percentage increase in the total number of churches

reporting such valuations. This shows that the value of property per

church grew faster than the number of churches. Still more important

is the fact that the percentage increase in the total amount of debt

was greater than the percentage increase in the total number of

churches reporting debt and the percentage increase in the total

value of church property.

These data are significant because they show that a growing

number of churches expanded their buildings with borrowed funds and

that churches were inclined to finance an increasing proportion of

building costs with funds from external rather than internal sources.

The tendency for a growing number of churches to borrow funds for

expansion purposes is confirmed by the information in Table 2 (page 22)

which shows that the ratio of the total number of churches reporting

debt to the total number of churches reporting property value

increased during this period from 17.4 to 21.1 per cent. Further









TABLE 1

TOTAL CHURCH DEBT AND TOTAL PROPERTY VALUE FOR ALL
DENOMINATIONS IN THE UNITED STATES, CLASSIFIED BY YEAR


Church Property Church Debt

Year Increase r Increase
uber Value or er or
of of Decrease of Amount Decrease
Churches Church over Churc of over
Re- Property Previous Re Debt Previous
porting Year porting Year

a1906 192,795 ~1,257,575,000 + 85.1% 33,617 108,050,0oo ....

b1916 203,432 1,676,600,000 + 33.3 42,990 164,865,o00o -52.6%

C1926 202,930 3,839,500,000 +135.0 WU,173 432,459,000 4162.4

d1936 173,754 3,411,875,000 4 11.1 45,376 509,627,000 + 17.8



&Although census figures showed the number of churches report-
ing (38,001) and the value of church property ($87,000,000) as early
as 1850, the amount of church debt was ascertained for the first time
in the 1906 census.
U. S. Bureau of the Census. Religious Bodies: 1906, Sumary
and General Tables, Part I (Washington: Government Printing Office,
1910), pp. 39, 48, 515, 565.
U. S. Bureau of the Census. Religious Bodies: 1916, Summary
and General Tables, Part I (Washington: Government printing Office,
1919), pp. 49-50.
c
U. S. Bureau of the Census. Religious Bodies: 1926, Summary
and Detailed Tables, Vol. I ('ashington: Government Printing Office,
1930), pp. 92-96.
du. S. Bureau of the Census. Religious Bodies: 1936, Summary
and Detailed Tables, Vol. I (Washington: Government Printing Office,
1941), pp. 98-103.









TABLE 2

RATIOS OF NUMBER OF CHURCHES REPORTING DEBT TO NUMBER OF
CHURCHES REPORTING FROFPRTY VALUE FOR SELECTED
DENOMINATIONS IN THE UNITED STATES,
CLASSIFIED BY YEAR AND DENOMINATION


Year
Denominatione
1906b 1916b 1926c 1936d

All 17.1% 21.1% 21.7% 26.1%

Roman Catholic 39.9 41.6 33.0 12.0
Lutheran Missouri (a) (a) 32.1 41.6
Jewish 60.1 69.5 69.8 l1.1
United Lutheran (a) (a) 29.2 37.9
Evangelical & Reformed (a) (a) (a) 36.8
Presbyterian, U.S.A. 20.0 24.5 28.3 34.5
Church of Christ Scientists 21.9 (a) 34.7 34.4
Northern Baptist 20.0 23.0 21.9 28.4
Congregational & Christian 22.5 26.2 25.6 25.9
Disciples of Christ 15.0 23.7 22.8 24.7
Methodist Episcopal 16.7 22.5 20.0 22.9
Negro Baptist 17.3 20.9 26.3 19.5
Protestant Episcopal 16.7 29.8 18.3 26.5
Methodist Episcopal, South 7.5 11.2 13.1 11.8
Southern Baptist 6.5 8.5 12.9 14.O


Figures were not available for these years.


U. S. Bureau of
and General Tables, Part
1919), pp. 49-50.
CU. S. Bureau of
and General Tables, Part
1930), pp. 92-96.


the Census. Religious Bodies: 1916, Summary
I (Washington: Government i-rinting Office,


the Census. Religious Bodies: 1926, Summary
I (Sashington: Government Printing Office,


U. S. Bureau of the Census. Religious Bodies: 1936, Summary
and Detailed Tables, Vol. I (Washington: Government Printing office,
1941), pp. 98-103.
eThese 15 denominations held 86.5 per cent of all debt
reported in 1936.











evidence of this tendency for churches to finance construction from

external rather than internal sources is shown by the increase in the

ratio of total debt to total property value from 8.6 to 9.8 per cent

(Table 3, page 24).

From 1916 to 1926, the increase in total church property

value was more than 100 per cent greater tnan that shown for the pre-

ceding ten years, while the total number of churches reporting prop-

erty values, reversing the previous trend, declined (Table 1, page 21).

This demonstrates that churches were more interested in the enlarge-

ment of existing buildings during this period than in the establish-

ment of additional churches. Thus, the emphasis appears to have been

on the construction of more magnificent buildings. The record of this

period also shows that the percentage increase in the total number of

churches reporting debts was considerably less than that shown for the

preceding ten years; however, this was still a growth in the number of

churches incurring debt, while the number of churches reporting prop-

erty values declined. On the other hand, the percentage increase in

the total amount of church debt from 1916 to 1926 was greater than

the percentage increase in the total number of churches reporting

debts. It is further shown that the debt increased only one and one-

half times during the ten years before that date. Thus, it is quite

clear that a larger proportion of church construction was financed

with borrowed money from 1916 to 1926 than from 1906 to 1916.








TABLE 3

RATIOS OF TOTAL DEBT TO TOTAL PROSPRTY VALUE FOR
SELECTED DENOMINATIONS IN THE UNITED STATES,
CLASSIFIED BY YEAR AND DENOMINATION


Year
Denomination*
Dninati1906b 1916b 1926c 1936d

All 8.6% 9.8% 21.0% 25.0%

Jewish 19.6 21.0 22.5 .24.8
Roman Catholic 16.9 18.3 15.5 24.0
Lutheran Missouri (a) (a) 13.1 19.3
United Lutheran (a) (a) 12.4 15.7
Church of Christ Scientists 4.4 (a) 13.1 15.4
Evangelical & Reformed (e) (a) (a) 14.9
Disciples of Christ 6.5 10.3 11.7 13.0
Methodist Episcopal 5.3 7.7 10.5 12.4
Southern Baptist 3.6 5.4 13.2 12.2
Northern Baptist 6.9 7.7 8.6 11.9
Negro Baptist 7.2 8.3 10.2 11.7
Presbyterian, U.S.A. 4.5 5.0 6.3 10.4
Methodist Episcopal, South 3.4 6.2 9.9 9.4
Congregational & Christian 4.3 4.9 12.3 7.3
Protestant Episcopal 3.9 3.9 3.8 6.0


aFigures were not available for these years.

bU. S. Bureau of the Census. Religious Bodies: 1916, Summary
and General Tables, Part I (Washington: Government Printing Office,
1919), PP. -50.

CU. S. Bureau of the Census. Religious Bodies: 1926, Summary
and Detailed Tables, Vol. I (Washington: Government Printing Office,
1930), pp. 92-96.
du. S. Bureau of the Census. Religious Bodies: 1936, Summary
and Detailed Tables, Vol. I (Washington: Government Printing Office,
I9Tl), pp. 98-103.
eThesc 15 denominations held 86.5 per cent of all debt
reported in 1936. They had the highest ratios of debt to property
value for that year.








25

It is significant that the value of church property increased

rapidly from 1906 to 1926, and that an increasing proportion of this

growth was financed by borrowing (Table 1, page 21). This suggests

that the burden of church debt was gradually increasing. Such a

tendency is further exhibited by the increase in the ratios of total

debt to total property value for each ten-year period (Table 3,

page 24). The ratio was 8.6 per cent in 1906, 9.8 per cent in 1916

and 21.0 per cent in 1926.

Although the ratios of total debt to total property value

were not very high for any one reporting year, they do indicate the

trend of the debt. It is also evident that the burden of debt for

many local churches was much heavier than these ratios would seem to

indicate. The ratio of total debt to total property value for all

reporting churches was only 21.0 per cent in 1926, but the fact that

only 21 per cent of the total number of churches carried any debt on

church edifices indicates higher ratios for many individual churches.1

The probability of higher ratios of debt to property value for

individual churches is further demonstrated by the fact that twelve

denominations accounted for about 79 per cent of all debt in 1926

with ratios for these denominations from 3.8 to 22.5 per cent. That


U. S. Bureau of the Census. Religious Bodies: 1926, Summary
and Detailed Tables, Vol. I (Washington: Government printing uifice,
1930), pp. 22-23.
While a few organizations with debts probably failed to report
them, the number was presumably small, and it can be assumed that
virtually all other churches that did not report debts had none,











the debt was still further concentrated is indicated by the fact

that the ratio of debt to property value for two denominations

declined from 1916 to 1926, while the ratio for nine other denomina-

tions increased (Table 3, page 24). The data for four denominations

vere incomplete and it could not be determined if the ratio for this

group increased or decreased. Additional weight is added to the

tendency for the debt to be concentrated by data which show that the

percentage of urban churches with debt in 1926 was about three times

that of rural churches, and the average size of the debt for urban

churches was about six times as large as that for rural churches.1

After 1926 both the number and the proportional valuation of

churches increased and debts mounted in an even larger proportion

according to the testimony of church officers.2 Specific estimates on

the growth of church debts for the years between 1926 and 1930 are

very meagre. One denomination showed a debt increase of $18,000,000

and two other reported increases in their indebtedness during this

period, but the specific amount of increases for the latter was not

given.3 Some indication of the total indebtedness on church prop-

erties in 1932 is given in the report of a canvass made by a


IIbid.

2E. G. Everett, "Church Debts and the Local Bank", American
Bankers Association Journal, Vol. 25 (August, 1932), 16.

3Herman C. Weber, "The Debts of Churchcs", Christian Century,
Vol. 48, No. 2 (September 2, 1931), 1090.







27
irotestant church or-c-rization coveri: this problem anong ten denomi-

nations in the ; -"ted .':es. T`: e -' i i-, of these denominations

vas about 10,0(~J,000 in 1932, and this Fror j of denomin actions held

about L &.r cent of tie total church property, based on figures

reported in the 1926 census.1 .ost of the churches of these ten

denominations were out of debt, but 11, 'j churches owed a total of

'135,200,OC, on irox-rty valued at about 6270,0 ),000.

A 1936 _dtlral Census shared that the amount of church debt

was greater in that year than that shown for 1',. but that the per-

centa e increase in the debt v s considerably less than that for the

previous ten years (.a'. : 1, page 21). T.;t. .L -ix per cent the

churches reported debt on church buildir. So .-ebts on urban churches

were a ,ai. far l -r than those on rural churches, and the .rc- La.-e

of urban churches with debts was about tree times as ,1- e s that of

rural churches.2 Filteen denorinaLions accounted for about p'r cent

of all debt.

Thus, the availa le data for the period from 1, to 1.

clearly evidence that a substantial nurnir of churches were in debt

duria this time. ,L ^e is also little question that quite a number of

churches entered the depression of the early t irties with a rather

i h ratio of debt to .. 0u Ly value. .;; e : atios further indi-

cate the probability of relatively i oavy fixed : .r.-es for these same

church s.


-1. Verett, Loc. .t.
? . bureau of the sus. l.ia .. 1 a aJ and
'VcLlc.7 les, Al. I ton: .e -rnment rr'.nt. : 'ice, 19h1),
p;1. 5 -103.











Church Income

The data in Table 4 (page 29) disclose that the total contri-

butions to 15 Protestant denominations in the United States declined

approximately h4 per cent from 1927 to 1934. Other sources indicate

that total contributions to all denominations in the United States

shrank from $850,000,000 in 1929 to $510,000,000 in 1932, or 40 per

cent.1 These figures show clearly that the incomes of churches

declined considerably from the late twenties to the early thirties.

This, of course, was the reason for the financial difficulties encoun-

tered by churches which had incurred large debts in the late twenties.

It was not surprising that churches were in financial distress when

they tried to meet large principal and interest payments with reduc-

tions in income of this magnitude.


Defaults on Church Loans

Evidence above has shown that a substantial number of churches

were in debt before, during and after the depression of the early

1930's. It is also quite clear that the income of churches in the

United States suffered a sharp decline from 1929 to 1934. It is

therefore not surprising that many churches encumbered with burden-

some debts got into financial difficulty.


Arnaud C. Martz, "Are the Churches Insolvent?" Christian
Century, Vol. 51, (February 21, 1934), 252.
"The Church and Hard Times," Literary Digest, Vol. 116,
(November 25, 1933), 18.










TABLE 4

TOTAL GIFTS TO 15 PROTESTATI RELIGIOUS BODIES IN

THE UNITED STATES FOR SELECTED YEARS, 1926-19110


Total Gifts
Year for all
Purposes

1926 t 368,529,000

1927 159,527,000

1928 429,947,000

1929 404,002,000

1930 4l1,452,000

1932 362,491,000

1934 256,803,000

1936 260,528,000

1938 292,554,000

1940 300,729,000


"Gifts to Protestant Religious Bodies", 19119 Edition:
Yearbook of American Churches (Lebanon: Sowers Publishing Company,
1949), p. 161.









30

In his discussion of church debts, Robert Cashman gives this

testimony front a leading certified public accountant who audited the

books of many churches which were in distress during this period:

In modern church finance, the last generation, probably more
than any other in church history, witnessed the burden of church
debts, many of them unwisely contracted for expansion of plants,
with the result that a double penalty was exacted; first, the
expenses of operation were permanently increased; second, the
burden of interest and depreciation was extended for a longer
period of time. This discouraging aftermath of ill-conceived pro-
motion, of course, was not out of line with the financing of many
business enterprises that failed, but the lesson is painfully
continuing to show that expansion should be from within and not
merely from without.1

Another writer cited the plight of churches with large debts

in two "typical" cities.2 The first city was in the Middle West and

had a population (1933) of 150,000. Five large church buildings were

erected in the city from 1926 to 1933. One congregation decided upon

an elaborate structure which was financed by a bond issue. Even

before the congregation entered the new building, it was being sued

for the fixtures. No interest had been paid on the bonds by the first

half of 1933. Up to that time, foreclosure had been avoided only

because the plant was so large and in such a location that it could not

well be used for anything but a church. Two other churches in the five

had likewise defaulted on their bonds. The fourth church by desperate


Robert Cashman, The Finances of a Church (New York: Harper &
Brothers, 1939), pp. 116-117.

2
Charles J. Dutton, "America's Bankrupt Churches", Current
History, Vol. 39 (October, 1933), 59.










31

efforts :as : l .. to exist, a o... oholdT s had been r. .ted



r le as c .... . .... i oii t r



cirt c about thb S3 size. There v:as built .. that it i. ,i





oly a _e .nts ur c .ion, tl.e church : :i

o i i V jr v I:th, and it. os .:.iaut,



~ii uusperaw ;ii of L M one au. lri.er i ...e.d ..: u

co, . _tiol.',, .ec:. boasts oi ai __'e i Lc c t in i,

tia .... LfC ffor the .y. ,. sur of > '. ... .- crs,



i h n ;L ates a1Id t c au. ded to e tirties a n ciurcld



b e nu cLU es t iave be: paid t. ue oi oediateyst
beautiful churches on te outside that I have ever seen is the *...
I wit' tile e xs o.t a block I'i on t- 1'in st7rt.lt
but that church almost failed financially because the / ., .s that
ihicd ben nade, when thie i;.. of the tLivr'tles cic, could not
be paid immediately.2


Charles 'd ee Adams, "Credit Ratinis Ith the Lord", .rth
Americanr i w ,.. ', .*. 1 ( vie ', .

2Let er from Harry ers, ecreary, ..td Stewardship
Co il o *e s i. 1 e -.e t..s ., d to
or, April 1, 1. j.










An analysis of 900 churches made by the author in 1950

revealed that some of then were in financial distress during the

depression.1 One church lost 80 per cent of property valued at about

$750,000 when it became unable to meet mortgage payments. Another

church lost all of its property valued at >500,000. A third church was

unable to meet payments on its loan and secured a reduction in princi-

pal and interest payments.

Although the report of the canvass made of ten Protestant

denominations in 1932 revealed that most of the churches in these

denominations were not in debt,2 it further indicated that 11,655 of

these churches owed a136,200,000.3 Slightly more than 3,000 of them

were in default on payments of principal and interest amounting to

approximately $6,500,000 and involving mortgage values of over

$50,000,000. These defaulted obligations ranged in amounts from $2,000

to $27,000 with the major portion of payments from one to two years

behind. Most of these loans had been made by banks. There were 292

of the above mentioned churches in such a financial condition that they

had been refused aid for refinancing during the preceding twelve

months. They required an immediate $5,485,000 for refinancing to keep


1Charles N. Millican, "The Financial Policies of Churches",
The Journal of Finance, Vol. VI, No. 4 (December, 1951), 120.

See page 27for other information pertaining to the report of
this canvass.

3Everett, loc. cit.











their loans from being foreclosed. There had been numerous fore-

closures and the number was rapidly increasing. The author of the

above report also made the following; comments:

Lest the picture thus outlined be considered too discouraging
in its influence, it may be well to note here than in spite of
the increase in delinquencies and foreclosures the church real
estate situation is better than that of any other major line of
real estate financing. Delinquencies in farm loans, loans on city
property and upon residences are far larger both in actual amount
and in proportion to the total loans outstanding.1

The quotation given above was paralleled by the following

comments from another who wrote about church debts and defaults during

this period:

A study made of the relative survival of churches and secular
institutions during the depression up to January 1, 1933, shows
that the churches were far sounder financially. Up to that time,
one of six banks of the nation had gone into bankruptcy, one of
22 businesses had gone into bankruptcy, one of 50 taxing units had
defaulted on its bonds, one dollar of each eighteen dollars worth
of municipal bonds was in default, but only one in 2,304 churches
had gone into bankruptcy.2

The fact that the Everett article was published in the American Bankers

Association Journal and the Iartz article was published in the

Christian Century is some basis for saying that perhaps both financial

and religious institutions have been represented in these viewpoints.

The comments made in these two articles show that, in general, churches

seem to have fared somewhat better during the depression years than


libid.

2Arnaud C. 'artz, "Are the Churches Insolvent?", Christian
Century, Vol. 51 (February 21, 1931), 252.











other types of organizations.

There is still further evidence that the majority of church

loan contracts were faithfully carried out during the depression of the

1930's. An investment company which h had placed more than 100,000,000

of church mortgages stated:

We are gratified that by and large, this type of security stood
up very well. The great majority of loans carried through in
strict accordance with promises to pay. On the other hand, we
faced problems with respect to some church loans that reflected
unfavorably upon the organizations involved.1

Thus far, the analysis seems to suggest that the rnjority of

churches met their principal and interest payments in full compliance

with loan contract agreements. However, a number of churches did

cxpericnce financial difficulty during the depression of the 1930's and

some of this number were in serious financial distress.


Attitudes of Churches Toward Their Debts

Another important feature of the financial difficulties of

churches during this period was the attitude which was taken toward

church debts by church officials and other members.

One phase of this problem was concerned with whether the church

income should be used for missions or for mortgage payments. Some

persons were of the opinion that payments to mission projects should be

made before payments were made on the church mortgage, while others

took the opposite viewpoint. This particular problem has many


1Cashman, op. cit., p. 120.











tangents, but the discussion in this paper will be kept to what appears

to be the main argument. One writer expressed the following opinion

on this subject:

A large city church has a mortgage of several hundred thousand
dollars on its property, which mortgage is held by one of the great
insurance companies. In order to adjust the payments to its
ability to pay, the church asked for a reduction of the interest
rate and postponement of payments on the principal. The president
of the insurance company replied that nothing could be done if the
church was giving anything to missions. It was not that the presi-
dent or his company had anything against missions. The idea was
merely that the church ought to devote all the money it could
raise, above bare living expenses, to meeting its mortgage obliga-
tions. ...
Readjustments in interest rates and moratoriums on amortization
payments are standard practice and should not be conditioned on
ruinous economic policies on the part of the debtor. ... The insti-
tution or individual who lends money to a church ought to know in
advance that it may take a mortgage on its property but that it can-
not get a lieonon its soul.1

A slightly different approach was rdde to this same question by

one who stated:

There must be a great many churches which are confronted by
the financial dilemma and the moral problem of dealing fairly with
their creditors on the one hand and with the causes and individuals
represented in their missionary budgets on the other. ...but this
principle is basic: participation in the wider enterprises of the
whole church is essential to the vitality of the congregation.2

Whether payments to missions should have taken precedence over pay-

ments on a church mortgage is at best a perplexing question. It is a

question that this study does not purport to answer. The attempt here

is simply to point out the problem.


l"Mortgages and Missions", Clhistian Century, Vol. 50, (Decem-
ber 20, 1933), 1597.

2"Mortgages and Missions", Christian Century, Vol. 51, (Jan-
uary 31, 1934), l3.












Another attitude of church groups toward their debts is

revealed by those who expressed the view that churches were justified

in seeking a reduction in principal and interest payments due to the

depressed economic conditions existing at the time. The following

quotation seems to present a middle-of-the-road point of views

Most churches do pay their debts. ... But some cannot pay
them. And some too easily allow themselves to be persuaded that
they cannot; or that in a period of deflation and devaluation, it
is not important that they should; and so they do not. ...debtor
churches like debtor farmers and industrial corporations found
themselves seriously embarrassed in meeting the fixed charges they
had assumed when everyone thought affluence would last forever.
The churches are no more to be blamed for not knowing more about
the financial future than the President of the United States, the
Secretary of the Treasury and the most eminent experts in economics,
and they are as much entitled as any to avail themselves of any
refunding or reduction of their indebtedness that their creditors
will agree to if and when the load of debt in its present form
cannot be carried.
That last condition is of the utmost importance. Churches.are
justified in seeking a writing down of their bonds or other obliga-
tions, or can be excused for defaulting on them, when but only
when the load of debt in its present form cannot be carried. The
thing that makes it worth while to comment on the matter is the
fact that some churches and church-supported institutions are stand-
ing from under their financial responsibilities when there is no
convincing evidence that the burden is beyond their powers. Such a
situation imperils both the honor and reputation of the church. In
financial integrity, the church ought to be like Caesar's wife
"above suspicion"; not "all things to all men". The church should
pay its debts.1

The next quotation presents an extreme view of the responsi-

bility which a church has towards its debts. Certainly this was not

the position taken by the majority of churches during the depression


"Should Churches Pay Their Debts?", Christian Century, Vol. 51,
(December 12, 1934), 1584.











of the 1930's. Archibald G. Adams commented:

Qf course the churches should pay their debts, ... But is it
fair for the banks to insist on a continuation of 5 per cent and
even higher rates of interest during these hard times when they
themselves give 2 per cent or only 1 per cent on savings accounts?
When the money was borrowed by our church at 5 per cent interest it
was a fair rate considering the market ten years ago. But now that
5 per cent is equivalent to 10 per cent or more in the greater
purchasing power of the dollar, it is unjust, unfair usury to
charge 5 per cent in these times. One church of our community
insists that unless the banks reduce the interest rate to 3 per
cent they will not put on a campaign to raise the money for the
interest payments, more than a year over due. In view of the fact
that churches are not money-making institutions and are so necessary
these days in keeping up the morale of the community the banks
ought to reduce their interest rates; in fact, they ought not to
charge anything l

In the following example, church officials no longer felt that

the church was under obligation for the full amount of the debt in

view of the depressed economic conditions. The loan was made to the

church in July, 1925, for an original amount of $250,000, and secured

by a first mortgage on the new church and the old church property plus

some membership pledges.2 The church subsequently defaulted on its

loan payments and in 1929 a Bondholders Protective Committee was

formed. Foreclosure of both the old and new church properties was con-

sumated in the early part of 1931, the Committee retaining ownership

of the old church property and conveying the new church property back

to the church trustees. The Committee received new first mortgage


Archibald G. Adams, "Churches and Their Debts", Christian
Century, Vol. 52, (January 15, 1936), 85.

Letter from J. R. Iarkey, President, Bankers Securities
Company, Inc., to John W. Diets, August 28, 1952.









38

bonds from said church in the principal amount of $125,000 along with

$22,000 separate Trustee's notes not secured by the mortgage and

approximately $1,000 cash.1 Some payments were made on these new obli-

gations but the entire issue again went into default in 1932. Two

other plans were attempted from 1935 to 1938 but neither worked out

satisfactorily. According to further information, the amount due at

the time of the foreclosure eventually worked out at around 30 cents on

the dollar. J. R. Harkey further commented:

I realize of course that this loan got into trouble at a time
when conditions were very bad and that there were a great many
defaults. However, I was very much disappointed in the attitude
this church's membership took toward payment of the debt. Some of
the trustees, and especially the minister, took the position that
the membership had taken their losses and saw no reason why the
bondholders should not do likewise. Up to the time this loan got
into trouble, I considered loans of this type largely a moral obli-
gation, realizing that regardless of the cost or value of physical
property a very small percentage could be realized under the fore-
closure.2

In still another situation, the reaction of church officials

to defaulted payments on church debts was entirely different from that

shown in the case just discussed. A church college sold bonds amount-

ing to $1,000,000 in February,1928,for the construction of new build-

ings. The loan was secured by a first and closed mortgage on both the

new and old properties valued at $2,328,413.3 A notice from the


ILetter from the Ex-Secretary to the New Secretary of the Bond-
holders Protective Committee for First Mortgage 8% Bonds issued by the
.....Church, January 29, 1942.
2Harkey, loc. cit.

3prospectus, $1,000,000 .....College, First and Closed Mortgage
5$1, Serial Gold Bonds, Citizens and Southern Company, Investment
Securities, February, 1928.









39
Trustees under the mortgage notified holders of the bonds in October,

193h, that principal and interest payments totaling -155,000 were in

default on a total amount outstanding of $998,000.1 The Trustees

transmitted further information to the effect that the college had con-

ducted a campaign for a period of four months with the best expert

assistance they could command in an attempt to raise funds with which

to eet the defaulted payments. A great deal of earnest interest was

manifested by a great many people in the purpose of the campaign but

everywhere the solicitors for funds were met with the statement that

the people, however willing, did not have the money to give. The

results of the drive for funds were very disappointing and sufficient

cash funds were not even raised to pay the expenses of the drive. How-

ever, the college officials stated that they would continue their

efforts to secure funds. Foreclosure proceedings were not instituted

at that time, but the properties were sold to the Bondholders Protec-

tive Committee at foreclosure on March 1, 1938.2 Of the bonds outstand-

ing, $845,000 were deposited with the Committee and the undeposited

bonds were to be paid off in cash at the rate of (222.16 per $1,000

bond. The properties were then leased back to the college. The prop-

erties were repurchased for the college by certain unnamed individuals


Letter from the Trustees under the Mortgage to holders of the
bonds, October 15, 1934.

Letter from .....Bondholders Protective Conmittee to Holders
of the .....College Certificates of Deposit, June 27, 1938.









ho

in December, 1940. At that time, the Bondholders Protective Committee

made its final distribution to the holders of Certificates of Deposit

which brought the total amount received by holders of the Certificates

to $530 per $1,000 bond.1 It is worth mentioning that in the years

which followed members of the denomination who were interested in the

college instituted a campaign to raise sufficient funds to clear the

moral obligation of the college. They were successful in the effort

and by May, 1950, had made additional payments totaling $h70 on each

$1,000 bond to original purchasers of the bonds. This did not include

any funds to cover the loss of interest, but the payment of an addi-

tional $470 per bond meant that the original purchasers had received

total payments of $1,000 for each bond held.2

In another case in which the church group did not attempt to

withdraw from its financial responsibilities, the original indebtedness

in 1930 was for more than $1,000,000.3 The major portion of this debt

was in the form of bonds, although some of it was in the form of

promissory notes. A creditors' protective committee was appointed in


Letter from ....Bondholders Protective Committee to Holders
of .....College Certificates of Deposit, May 8, 1939.
Letter from .....Bondholders Protective Committee to Holders
of .....College Certificates of Deposit, December 14, 19L0.

2Letter from James F. Brown, Jr., Brown and Groover to J. R.
Harkey, President, Bankers Securities Company, September 25, 1952.

C. E. Bryant, ".....Pays Honor Debts", The .....Program,
January, 1953, 19.











1931 after numerous payments had been defaulted. The church group

decided in 1936, after consultation with creditors, to sek a final

settlement and to submit to litigation through the federal court. The

petition, which was for a settlement on the basis of 35 cents on the

dollar, was granted and the decree was issued in December, 1937. A

drive to raise the necessary cash funds for the settlement was success-

ful and the 2350,000 was turned over to the creditors. Nothing was

done toward the payment of the 3650,000 until 194h. In that year, the

members of the denomination voted to pay off the old indebtedness by

annual installments. Although the court decree of 1937 had freed them

from all further legal responsibility for the debt, opinions were

expressed to the effect that the church group was unwilling for cred-

itors to sustain the 65 per cent loss on their investment. Although

this action did not make any provisions for defaulted interest payments,

the full amount of the principal had been paid by November, 1952.

From the above cCom-nts, it is evident that church officials

and other members had various attitudes toward church debts. The posi-

tive attitude was shown by those who felt that the church had not ful-

fill.d its obligation until at least the principal amount originally

borrowed had been repaid in full. The negative attitude was portrayed

by those who expressed the belief that the church was no longer under

obligation due to the depressed economic conditions.


Attitudes of Financial Institutions Toward Church Debts

The current attitudes of financial institutions toward church










h2

loans have undoubtedly been shaped by the experiences which they had

with this type of lending from 1920 to 1940. Some churches met their

loan payments in a satisfactory manner while others did not. Such

results would lead one to expect a mixed reaction toward loans to

church organizations.

A favorable attitude was created toward loans to certain

denominations and to particular churches within other denominations

because they fulfilled their loan obligations during the depression of

the thirties. That a substantial proportion of church loans were

carried through in accordance with loan contract agreements has been

demonstrated above. More than one lending institution official stated

that, in general, some denominations maintained a better credit standing

in the financial community during The Great Depression than others.1

It may further be stated that certain churches within many denominations

gave a better performance on loan contracts than others.

On the other hand, a certain amount of skepticism arose in

financial circles toward church loans as a result of several different

kinds of unfavorable experiences encountered during this period. One

reason for the skepticism can be traced to the fact that the percentage

of defaults on church loans was apparently higher in some denominations

than others.2 Therefore, it was not astonishing that some loan


Letter from J. R. Earkey, President, Bankers Securities
Company, Inc., to John W. Dietz, October 2, 1952,

2Ibid.











officers expressed a more favorable attitude toward loans to churches

of one denomination than another. ore than one loan officer felt that

the organizational structure of the denomination itself seemed to have

had some influence on the gravity of financial problems of churches

during the depression of the thirties. The following comments probably

present this feature more clearly than others

It is significant that while the comparative indebtedness of
several of the larger denominations does not vary greatly in pro-
portion to membership, the comparative credit standing of the
churches as indicated by the proportion of defaults usually varies
with the strength of their national organization. The stronger the
national organization, the smaller is the proportion of defaults.
This is merely the logical result of the old axian that "in union
there is strength", but it has a practical application in the
present situation. Since church construction financing has almost
become big business, it should follow that it ought to be conducted
on big business principles, which has certainly not been the case
with most of the church organizations.1

Another reason for the skeptical attitude of lending institu-

tions toward church loans was the lack of a sense of moral responsi-

bility for the debt by some church members. The churches had gener-

ally been granted a loan primarily on a moral and not a financial or

a legal basis. The following quotation is illustrative of others:

I will try to give you my impression of my experience in connec-
tion with religious institutional financing, although it is rather
hard to give anything concrete since there was so much variation
in the outcome of the various loans of this type that I was identi-
fied with.
Prior to the troubles that we had with some of this type of
loan, I had a somewhat better opinion of religious institutional


1
Everett, loc. cit.












obligations, believing that organizations of this kind placed
their moral obligation on a higher plane that at least some of
them did.
Of course, some of these loans matured at times when condi-
tions were very bad, and in some instances members of these organi-
zations had suffered financially to the extent that it was perhaps
impossible for them to meet their pledges. However, it did seem to
me that an extension of time and reasonable terms of extensions
would be appreciated by the membership and an effort made to
eventually liquidate the loan. However, in some instances I know
it to be a fact that they took the attitude that since they had
suffered financially they saw no reason why the bondholders should
not take their losses too. It is gratifying to know that in some
cases this attitude on the part of the borrower did eventually
work out satisfactorily to the bondholder, but ft usually took
more time and patience than the bondholder had.

WRhen a church did not fulfill this moral obligation, the lend-

ing institution was left in most cases without any course of action to

recover its loss. A mortgage on the property actually offered little

protection for the lender because church property can generally be

used only by a church. The problem is aptly presented in the follow-

ing statements:

I realized at the time we were making this type of loan that
physical security did not mean very much in the way of realization
under foreclosure proceedings, and was merely window-dressin- or
an indication of the size and character of the denomination.t

What can a creditor, especially a bank, do with a church
building acquired under foreclosure? It is seldom that a bank can
use such a building. It is sometimes possible to rent it, and
often the building is rented for the time being to the former
owners. Sales are difficult because, while sites may be valuable,
the necessity of clearing them for rebuilding often takes much


Letter from J. R. Harkey, President, Bankers Securities
Company, Inc., to John W. Diets, October 2, 1953.
2bid
Ibid.









from their value. Remodeling is often possible but this involves
expenses which creditors usually are not willing to make in these
times, and in the case of a bank it involves legal problems not
easily solved.
The situation presents a distinctly embarrassing problem for
many banks, especially for those in medium-sized or smaller cities.
There is perhaps not a bank in the country which is not disposed to
take some risk in financing the churches of its community. As a
means of moral uplift and in developing a reliable background, a
church is of definite value aside from any other consideration. A
community without a church would offer little promise for the
future of any bank, and a community willing to be without a church
would be a poor banking risk. However, churches are eleemosynary
institutions; banks are not. Admitting sound business as well as
the moral obligation on the part of a bank to aid its community in
the construction of churches, the fact remains that the bank must
consider a church loan as a business transaction to be conducted
upon business principles.1

Although it was not the view generally expressed by responding

loan officers and is not the opinion of the author of this disserta-

tion, the following statement is an illustration of an extremely nega-

tive attitude toward church loans. One loan officer said: "... Our

experience is that all churches get into financial difficulties sooner

or later. ...2

The record from 1926 to 1940 shows that a substantial number of

churches were in debt for new buildings and equipment. It seems that,

by and large, churches met their loan payments in strict accordance

with the agreements which had been made with lenders. However, many

congregations defaulted on their financial obligations when they tried


1Everett, loc. cit.

2This statement was taken from one of the questionnaires
returned to the author of the dissertation by one of the savings and
loan associations.












to meet large and burdensome loan payments with greatly reduced

incomes. Some of those groups which defaulted felt that the church

had not fulfilled its obligation until at least the principal amount

originally borrowed had been repaid in full. Others expressed the

belief that the church was no longer under any obligation due to the

depressed economic conditions. It is further evident that both favor-

able and unfavorable attitudes were engendered in financial circles

toward church loans, depending upon the experience of the lending insti-

tution with this type of loan during the 1930's. The skepticism which

arose appears to be levelled primarily at the individual churches which

defaulted on their financial obligations and at the denominations which,

in general, failed to maintain a good credit rating. The skepticism

was particularly keen toward those church groups which felt no sense of

moral obligation for their debts. The lack of protection afforded the

lender in a church mortgage further intensified this unfavorable

attitude.


Church Construction Activity and Income

in the United States, 1941-1952

During World War II, there was almost a drought in church

construction activity (Table 5, page 47). The expansion of church

property which had risen from $21,000,000 in 1934 to $62,000,000 in

1941, declined to only $6,000,000 in 1943. But since the end of the

war in 1945, there has been a tremendous increase in the number of

church buildings being erected. The percentage increase in the total











TABLE 5

TOTAL 1NE AND RELIGIOUS CONSTRUCTION ACTIVITY III THE
UNITED STATES, CLASSIFIED BY YEARS, 1929-1950*
(millions of dollars)


Total New Religious
Year Construction Construction
Activity Activity

1929 $ 10,793 $ 147
1930 8,741 135
1931 6,427 87
1932 3,538 45
1933 2,879 22
1931 3,720 21
1935 14,232 22
1936 6,497 34
1937 6,999 1A
1938 6,980 51
1939 8,198 48
1940 8,682 59
1911 11,957 62
1942 14,075 31
1943 8,301 6
1944 5,259 11
1945 5,633 26
1946 12,000 76
1947 16,627 126
198 21,572 251
19L9 22,584 360
1950 27,902 409


*. S. Department of Comerce, National Income and Product of
the United States, 1929-1950 (Washington: Government Printing Office,
1951), pp. 198-199.









48

amount of religious construction activity has been even greater than

the percentage increase in the total amount of all construction activity.

According to the F. W. Dodge Corporation, about 1,480 churches were

built in 37 states (excluding the Far West) during 1946.1 The total

value of these new buildings was placed at 656,750,000. A survey of

church construction plans of eight denominations (Catholic and Pro-

testant) showed that investment programs for these denominations from

1945 to 1954 extended from a few million dollars to as much as ten

billion dollars. During 1952, the nation's churches were reported to

be engaged in the erection of more new buildings than at any other time

in their history.2 According to Albert M. Conover, Director of the

Bureau of Church Building and Architecture of the National Council of

Churches of Christ in the United States, there was over $1,000,000,000

worth of work on Protestant church buildings alone in architects'

offices in March, 1952.

The income of churches in the United States has also increased

substantially during this period. The total income of the 15 largest

Protestant religious bodies was Aq59,000,000 in 1945 and $971,000,000

in 1949.3 During 1950 and 1951, the total income of all denominations


"Churches: Spending Billions to Keep Up With The Times," Busi-
ness Week, (April 11, 1953), pp. 100-101.

2The Wall Street Journal, May 24, 1952, p. 1.

3"Gifts to Protestant Religious Bodies", 1949 Edition: Yearbook
of American Churches, (Lebanon: Sowers Publishing Company, 1949), p. 161.











was running about $1,200,000,000 annually.1

Attempts to secure comprehensive financial information on the

current indebtedness of churches on a nation-wide basis have been

unsuccessful due to the lack of any central record of such data since

the Federal Census of 1936.2 National figures are especially hard to

find for the multitude of self-governing Protestant churches. Denomi-

nations keep records with varying degrees of completeness; some national

offices know little about the fiscal affairs of the local congregations.

Yet some figures are obtainable, and they indicate that churches have

borrowed funds to help finance their current construction programs.

One church official stated that the ratio of the total debt to the

total property value for churches in his denomination was 6 per cent,

while for a second denomination information indicated a ratio of 10 per

cent.3 In April, 1950, an official of the Southern Baptists estimated

that churches in his denomination probably owed $50,000,000 for recent

construction An examination of the 1952 annual report of the

Methodist Church disclosed that a substantial number of the churches


1The Wall Street Journal, May 24, 1952, p. 1.

2Letter from J. J. Collins, Vice-President, Central Hanover Bank
& Trust Company, to the author, June 29, 1950.
Letter from T. W. Englert, Business Information Division, Dun &
Bradstreet, Inc., to the author, July 5, 1950.

3Cashman, op. cit.

4Statement by William A. Harrell, Secretary, Department of Church
Architecture, Sunday School Board of the Southern Baptist Convention,
personal interview.









50

of this denomination were in debt. Although the above information on

church debts was only fragmentary, it was sufficient to demonstrate

that churches in the United States were not financing all of their

current construction activity from internal sources.


Summary

The development of the financing of church building expansion

presented above clearly shows that such programs have been paid for in

many ways. The primary method appears to have been for the members, or

those interested in the church, to make gifts or contributions to the

church which were to be used to pay for the construction costs. These

gifts or contributions came in many forms and were made by many

different persons. Several times during the history of the church,

substantial assistance in defraying church building costs was received

from the reigning monarch or the government. It seems that there have

been only two times in the history of the Christian church when exten-

sive use was made of borrowed money to erect new or larger buildings.

Once was in England during the thirteenth century and the other time

was in the United States during the early part of the twentieth century.

In both instances, churches which had over-extended themselves found

themselves in financial difficulty when they tried to meet large debt

payments with reduced incomes.

Statements given above clearly reveal that the churches of

America have spent hundreds of millions of dollars for the expansion of

buildings and equipment since 19h5. It is further evident that once









51

again a considerable amount of this expansion has been paid for with

borrowed funds. Where did they borrow the money? Have the lending

institutions in the United States continued to make church loans in

spite of the difficulties experienced by some of them with this type of

lending during the 1930's?

A survey was made of banks, life insurance companies and savings

and loan associations in the United States during the early half of

1952 in order to find the answers to these questions. These firms were

asked to indicate if they had made any loans to churches from January 1,

1946, to January 1, 1952. An attempt was also made in this survey to

answer the following questions: (1) How many loans to churches had been

approved during this period and how many loan applications had been

declined? (2) If the lending institution had made any loans of this

type, what were the primary factors influencing their decisions to

make such loans? (3) In view of the inadequacy of a mortgage on church

property to provide the lender with protection for his loan, what steps

have they taken to correct this deficiency? (4) Are the characteristics

of church loan contracts similar to those on conventional loans, or do

church loans possess certain unique characteristics? (5) Have these

lending institutions been selective in approving this type of loan

application? (6) Have they made loans only to churches of certain

denominations? (7) Have there been any defaults on loan payments during

this period? (8) What percentage of the total construction cost have












they required the church to have on hand before approving the loan

application? The answers to these and related questions will be

discussed in the chapters which follow.













CHAPTER II


BANK LOANS TO CHUiRCHLS, 1946-19S21


Introduction

Churches, along with other organizations, accumulated excessive

debts during the 1920's in order to finance the expansion of buildings

and equipment. As a result of these excessive debts, financial diffi-

culties were encountered by numbers of churches during the 1930's when

they tried to meet high fixed charges with reduced incomes. Many of the

loans on which payments were defaulted had been obtained from banks. In

spite of the fact that many churches fulfilled their financial obliga-

tions faithfully during the depression of the 1930's, still a certain

amount of skepticism arose among bankers toward loans to church groups

due to the embarrassing situations which arose,

In view of this earlier experience, the question of just what

policy banks could reasonably be expected to adopt in the handling of

applications for church loans to final ce the postwar expansion has doubt-

less been a matter of some concern to every bank board in the land at

one time or another, and, with many, it has been a constantly recurring


Unless otherwise indicated, all data used in this chapter have
been taken from the questionnaires returned by the 215 banks which
responded to the church loan survey.
See Appendix A (p. 223) for a complete discussion of the
sampling procedure employed in this survey.








5h

one. Particularly is this true of those banks in which public relations

factors are fully weighed in the formulation of policies generally af-

fecting their relations with groups organized along religious or similar

lines.

Granted that no amount of public or group pressure should be

permitted to influence a bank's mnnce-erent to engage in unsound lending

practices, there remains a question as to just which course, in given

instances, holds the greater probability of loss. For a banker to take

a completely negative attitude toward church loans is avoiding the

question. Sconer or later such an attitude could create some avoidable

ill will which could conceivably prove quite costly. On the other hand,

it is difficult to imagine a more difficult situation, and one loaded

with greater possibilities for ill will than a church loan gone sour.

Therefore, one purpose of this survey of banks was to determine

whether or not banks have continued to make loans to churches in view

of the skepticism which has existed since the early thirties. The re-

suits of this survey indicate that the answer to this question is defi-

nitely an affirmative one.

Another purpose of the survey was to secure information to an-

swer the following questions: (1) How many banks made church loans,

and how many bcnks did not make church loans? (2) 1.hlat was the total

number and total amount of these loans? (3) iWhat use was made of the

loans by the churches which received them? (4) .hat were the contract

terms of these loans? (5) Did the banks make loans only to certain de-

nominations? (6) 1.ere the loans to churches confined to any particular

geographical region in the United States? (7) ;'hat percentage of the









total construction cost did banks require the churches to have on hand

in the form of cash before considering the loan application? (8) Have

there been any defaults on church loans since January 1, 1946? (9)

How many church loan applications have been declined by banks, if any?

(10) What factors influenced bankers' decisions as to whether or not

to make loans? And (11) What seems to be the prevailing attitude of

bankers throughout the United States toward church loans? These and

related questions will be answered in the following pages.

The sample survey of bank loans to churches was started during

the early half of 1952. Banks were requested to report on all loans

made to churches from January 1, 1946 to January 1, 1952. One thousand

banks with total assets on June 30, 1950 of $60,201,000,000, or 31 per

cent of the total assets of all U.S. banks, were selected on a random

srnmple basis as described in Appendix A, page 223. Table 1 (page56)

shows that 215 banks responded to the questionnaire, or 21.5 per cent

of those sampled, and they held approximately 23.5 per cent of the

total assets of all barks. As an indication of the adequacy of the

sample in the church loan survey, it may be comp red with the survey

of urban mortgage financing by Carl F. Eehrens which was published by

the Nat onal Bureau of Econonic Research. Behrens obtained responses

from 170 banks from a sample of 496, or 314 per cent of those sampled,

and they held approximately 34 per cent of all urban mortgage loans

of commercial banks. While the recent survey of bank loans to churches



Carl F. Behrens, Commercinl Rnnk activities in Urban "ortnrge
Financing (New York: National bureau of economic Kcsenrch, 19.2), p. 37.
It should be noted that financial support for the Behrens' study









did not obtain quite as high a percentage of returns as the survey of

bank activities in urban mortgage financing, a larger sample was used

and a larger absolute number of responses was received.


TABLE 1

RESPONSE OF 215 BANKS IN THE UNITED STATES TO THE CHURCH LOAN
EXPERIENCE SURVEY, CLASSIFIED BY SIZE OF BANK ASSETS,
JANUARY 1, 19h6-JANUARY 1, 1952a


Asset Size ($ millions) All Sizes
Item
Less than More than Number Assets
2.6 2.6

No. of banks in U.S.b 7,377 7,577 14,754 $193,6h7,000,000
No. of banks in sam-
ple .............. 500 500 1,000 60,201,000,000
No. of banks respond-
ing .............. 103 112 215 46,576,000,000
Response ratios .... 20.o 22.4% 21.5 75.7-'
No. of loans reported 123 145 568 .


Data are for assets as of December 30, 1950.


bRand Mclally
pany, 1951), p. 530.


Bankers Directory (Chicago: Rand McNally and Com-


ORepresents the number of responding banks as a percentage of
the number of banks sampled.


The sample data in this chapter will not be used as a basis for



was received from the Association of Reserve City Bankers, the Life In-
surance Investment Research Committee, and the Rockefeller Foundation.
Technical assistance was given by the American Bankers Association, the
Board of Governors of the Federal Reserve System while the research it-
self was done co-operatively by the National Bureau of Economic Research
and the Federal Deposit Insurance Corporation.
This study was financed entirely by the author of the disserta-
tion. The only outside assistance received on the church loan survey
was in the form of a transmittal letter from the Florida Bankers Associ-
ation.










esti o'- .

are prosio

duri the


r 0 ,r.n or-nution for on ann lsis of the outst.


of church loans by these 21

sented in sulsequent o s.

Table 2 ( .. ~) shows t

total Pssets of all res c.-'i b


the 3

s ,

nade

the c

which

ty-fo

were

oral1

bank

re- or
v: e re


1i baks wh

us that a

loans to ch

'sta in Tabl

lade lonrs

ur u the 1

in this sam

.y decr- sec

: incrc


re

.e t


orO,

f the t

for tie c

,hite fifre


ich sta ted thet

hi her perc( f

urches than the

.e 3 (e -e 59).

to churches had

Sres ba

ie size clossi

both in nu bar
ro

sed. 11 b

loans to ''

r -riod.

2( $858 is

total :..ourt of

;otal loeu s r)d d

h urcio lonns is a

Sfor the loans


but t"'cr

banks

.tainod


5 ba ks ra those eo




hat : l tely

banks is represented

they had made loans t

.. the l',r r,-s .

sm4ll bnks. '" is

3' AL our of the 113

de osits of ,2, 00,0

rks which did not m'a

stion. "n~o church

nd in r :,rtion as

nks (12 r cent v

1 ,171 had been

otiir si- icant *" '

tit indicates that

churc loans as onla1

iscurts. it is rece

tot l of loans over

rd discounts is n tot


Sal


-rio

for


or, tho c arisor is us to ie onl


e-cral indictoio


church loa:es an not i ;


the characteristics of all church loans by ha ks,

ced only as indicttinr the -'eces of these 1

r'od inrica- r "rt'onnares con


as an exact


characteristics

turs will be re-




per cent o the

the assets of

.o churches. IS

'i baeks had

substantiated

res i ba ks

') and over. -

e loans to churches

h-losn" banks 'on-

the si-e o the

those res )

i adc to churches

tu the or-

1in size class-

n ver scall r-

Aized th.t


rt


c t:'v rel ti ve










percentage. It should be kept in mind that the public relations factor


TABLE 2

DISTRIBUTION OF ASSETS, LuANS AND DISCOUNTS AND ATUJNT OF CHURCH
LOANS FOR A SA'.iLE uF 215 BAIKS IN THE UNITED STATES CLASSIFIED
BY SIZE OF BAN. DEPOSITS, JANUARY 1, 194o-JANUARY 1, 1952


Bank Deposits (0 millions)*
Item All
Less 5.0 25.0 100.0 Banks
Than to to end
5.0 25.0 100.0 Over

(All figures in thousands of dollars)


Total assets
215 banks
responding ... $278,531 $416,132 $1,258,17 $44,623,10 t46,575,950
Total assets
113 banks
making church
loans ........ 139,306 245,113 611,299 42,337,362 43,333,080
Totpl loans and
discounts 113
banks making
church loans 42,828 64,028 162,898 16,125,464 16,396,218
Total amount of
church loans 582 1,005 1,008 15,956 18,552


Size classification of banks is based on those used in Eighty-
Ninth Annual Report of the Comptroller of the Currency 1951, (Washing-
ton: Government Printing Office, 1952), p. 116.



in this type of loan makes church loans far more important in bank op-

erations than the above amounts would seem to indicate. One church us-

ually involves far more persons directly than the ordinary single com-


mercial bank loan.









TABLE 3

RESPONSE OF 215 p^LKS IN TIE UNITED STATES TO THE CHURCH
LOAN EXPERIENCE SURVEY, CLASSIFIED bY SIZE OF BAIg(
DE USITS, JANUARY i, 1946-JANjUARY 1, 1952


Bank Deposits Number of Banks
($ millions)
S oTotal Making Church Not Making Church
Responding Loans Loans


Less than 2.0 80 40 10
2.0 2.599 23 9 L4
2.6 5.000 33 14 19
5.0 25.000 34 21 13
25.0 100.030 20 11 9
100.0 and over 25 18 7

Totals .... 215 113 102




Number and Amount of Loans

Responding church-loan banks are divided into four different

size groups on the basis of their total deposits as indicated in Table

4 (page 61). These size groups will be retained throughout the chapter

and the groups of banks will at times be referred to by the group num-

bers.

Table 3 (page 59) has shown that 113 banks made loans to churches

during the survey period; however, only 105 of these 113 banks included

sufficient information on the returned questionnaires for an analysis of

detailed characteristics of the loans mado by this group of firms.

Therefore, Table h and subsequent tables in this chapter will contain an

analysis of the characteristics of the loans made by 105 banks.

While there were slightly more than one-half of all "church-loan"







60

banks in Group 1 (deposits of less than $5,000,000), this group of firms

made only 32 per cent of the number of loans and 3 per cent of the

amount of loans, Table 1, Appendix A. On the other hand, banks in Group

4 (deposits of $100,000,000 and over) constituting one-sixth of all
"church-loan" banks reported 36 per cent of the number of loans and 86

per cent of the amount of loans. Banks in Group 4 had the largest aver-

age number of loans per bank, while barks in Groups 1 and 2 had the

smallest average number of loans. This is confirmed by the data in

Table 4 (page 61) which show that the average number of loans per bank

was the same (3) for the banks in Group 1 as it was for the banks in

Group 3, whereas, the banks in Groups 2 and 4 had an average number of

loans per bank of 7 and 15, respectively. It is significant that the

average number of loans was considerably larger for banks in Group 4

than it was for any other group. In Group 2, one bank alone accounted

for 65 of the 146 loans reported by the firms. This bank with deposits

of %5,261,000 was located in a city of 5,500 population. Undoubtedly

this is a unique situation but no explanation for it could be determined

from the information on the questionnaire.

The somewhat different approach to the number of loans nade per

bank presented in Table 2, Appendix A, shows that Group 4 had a much

smaller percentage of its firms making 5 loans or less than any of the

other groups of banks. It was not surprising to learn that Group 2 had

the next smallest percentage of firms within this classification and

that Groups 1 and 3 had the largest percentage of firms so classified.

The total amount of loans reported by banks in Groups 2 and 3

was approximately the same, and this amount was about twice that reported








61

by banks in Group 1 and about one-sixth of that reported by banks in

Group 4, Table 1, Appendix A. Although the number of loans made per

bank did not generally increase with an increase in the group size of

banks, the information in Table 4 (page 61) shows that both the average

amount of loans made per bank and the average size of loans did in-

crease with an increase in the group size of banks. This shows a gen-

eral tendency for the small banks to make the small loans and the large

banks to make the large loans. The frequency distribution of the num-

ber of loans in each loan size classification gives further evidence of

this tendency. The percentage of the total number of loans under

l0,001 to the total number of loans made by each group of banks was as

follows: 96 per cent for Group 1, 76 per cent for Group 2, 51 per cent

for Group 3, and 25 per cent for Group 4.


TABLE 4

AVERAGE SIZE OF LOANS, AVERAGE NUMBER AND AMOUNT OF LOANS FOR A
SALE OF CHURCH LOANS IADE BY 105 BANKS IN THE UNITED STATES,
CLASSIFIED BY SIZE OF BANK DEPOSITS,
JANUARY 1946-JANUARY 1, 1952


Bank Deposits ($ millions)
All
Item Less 5.0 25.0 100.0 Banks
Than to to and
5.0 25.0 100.0 Over
(Group 1) (Group 2) (Group 3) (Group 4)

Avg. no. of
loans per bank 3.0 7.3 3.0 15.4 5.4
Avg. amt. of
loans made per
bank ......... 9,546 $50,277 $91,650 $1,227,957 $186,685
Avg. size of
loans ........ $3,Ut6 $11,971 $32,521 $ 117,325 $ 41,171









TABLE 5

RATIOS OF EXPY4SIOIl TO REPAIR LOANS FOR A SMiPLE OF CHURCH LOANS
.iADE BY 105 BANKS IN THE UNITED STAT',S, CLASSIFIED BY SIZE OF
BANK DEPOSITS, JANUARY 1, 1946-JANUARYI 1, 1952


Ratios: Expansion to Ratios: Expansion to Opcr-
Bank Deposits Repair Loans eating Expense Loans
($ millions)

No. of Amt. of No. of Amt. of
Loans Loans Loans Loans

Less than 5.0 1.2 3.6 5.2 39.8
5.0 25.0 1.1 7.6 4.0 91.2
25.0 100.0 2.0 6.7 18.1 171.0
100.0 and over 3.9 13.3 5.2 6.6



Several reasons would account for the facts revealed in the pre-

ceding paragraphs. First, the demand for church loans has not been as

great in the smaller cities end towns as it has in the larger cities and

metropolitan areas. The median population figures (1950) of places in

which the banks are located were as follows: 5,050 for Group 1, 12l,808

for Group 2, 968,020 for Group 3 and 1,287,624 for Group 4.1 This sug-

gests that the large-deposit banks are mainly in metropolitan areas

where church buildings of higher value are concentrated, while the small-

deposit banks are mainly in small cities and towns where church build-

ings of lower value arc located. Thus, the demand for larger loans by

churches would generally be found in the larger cities and metropolitan

areas. Furthermore, one of the primary factors affecting the expansion



1U.S. Bureau of the Census, Census of Population: 1950, Vol. I,
Number of Inhabitants (wiashington: Government Printing Office, 1952),
pp. 2-7 to 50-10.










of church facilities is a growing population which gives the churches

greater opportunities for increases in membership. There has been a

definite trend of population toward the larger cities and their subur-

ban areas since 1?10.1 Thus, assuming increases in church memberships

in these larger cities and metropolitan areas, there would be a Greater

demand in these localities for loans to churches than in smaller cities

and towns as the churches in the former centers attempted to provide

additional facilities for their constituents. Even if a small city had

the same percentage increase in population as a larger one, the demand

for additional church facilities would probably not be as great in the

former as in the latter. For example, a 10 per cent population increase

in a town of 2,000 residents would result in an absolute increase of

only 200, while a similar 10 per cent population increase in a city of

1,000,000 residents would result in an absolute increase of 100,000.

The difference in the potentialities for increases in church memberships

is obvious.

Perhaps closely allied with the first reason are the additional

opportunities afforded the larger banks due to the generally wider areas

which they serve. A third important factor affecting the volume of

church lending by banks of different sizes is the inability of the

smaller banks to handle the larger loans. Even if a small bank were

given the opportunity of making a very large church loan, it would be

forced to turn it down due to insufficient lending capacity. For ex-

ample, 63 of the "church-loan" banks had total deposits of less than



1Ibid.







64

$5,000,000 and 1i had less than t1,000,000. All 63 "church-loan" banks

in Group 1 (deposits of less than 35,000,000) had loans and discounts

of less than '3,00,000 and 25 had less than $500,000. Thus, even the

total lending capacity of any one of these small banks would have been

insufficient to handle the total amount of church loans made by a few

of the large banks. And no astute banker is going to place any sub-

stantial part of his loans in one type of single purpose property, par-

ticularly church loans. It would have been most difficult in sone in-

stances for some of the small banks to have handled a few of the single

loans made by the large banks. As a banker in Group 1 stated: "We

wouldn't be interested in any church loan of a sizeable amount." An-

other banker whose firm held approximately $1,000,000 in loans and dis-

counts commented: "`We participated 20 per cent in a .200,000 ... Church

construction loan, ..." Still another with loans and discounts of

$553,000 indicated that the church loan requested was a little larger

than it cared to handle. They replied: "We handled this loan in co-

operation with two national banks in an adjoining city. Yle retained

$114,000 for ourselves and the balance of $21,000 was taken by the

others."

A fourth reason is to be found in the legal limitations placed

upon the real estate mortgage lending activities of both national and

state chartered banks. Section 24 of the Federal Reserve Act places an

upper limit on the amount that may be loaned by national banks against

a property of given appraised value. This is termed the maximum loan-

to-value ratio. The amended section of the Federal Reserve Act reads

as follows:










Any national banking associnton may y md:e real estate loans
secured by first liens upon improved real estate, including
farm land end improved business and residential properties ...
The amount of any such loan hereafter made shall not exceed 50
per centum of the appraised value of the real estate offered
as security and no such loan shall be made for a longer term
than five years; except that (1) any such loan may be made in
an amount not to exceed 60 per centum of the appraised value
of the real estate offered as security and for a term not longer
than ten years if the lean is secured by an amortized mortgage,
deed of trust, or other such instrument under the terms of which
the installment payments are sufficient to amortize 40 per cent-
um or more of the principal of the loan within a period of not
more than ten years, ...

On the other hand, Section 5200 of the National Bank Act which places

a limit on the total amount of any single lean, reads as follows:

The total obligations to any national banking association
of any person, copartnership, association, or corporation shall
at no time exceed 10 per centum of the amount of the capital
stock of such association actually paid in and unimpaired and
10 per centum of its unimpaired surplus fund.2

State chartered commercial banks make mortgage loans under a wide vari-

ety of laws. A recent digest of these laws indicates that limits are

placed on the term of years for which ordinary real estate loans may be

written in twenty states, and limits on the maximum loan-to-value ratio

of such loans in twenty-three states.3 One indication of the type of

restriction placed upon state-chartered banks is the regulations in the

State of Florida which state that it is unlawful to make an unsecured

loan for more than 10 per cent of the capital and unimpaired surplus of



'U.S. Statutes at Lsroe, Vol. LXIII, Part I, p. 906 (1949).

'U.S. Revised Statutes, Sec. 5200, (1375).

3Legal Maximum for Loan-Value Ratio and for Term of Real Estate
Loans by 6tate banks Cenernlly fnd to G.I.'s (New York: American bank-
ers Association, 194o).








66

any bank to any person, firm or corporation until approved by the board

of directors or a duly authorized committee therefrom.1 The Florida

law further states that secured loans to any person, firm or corporation

are limited to 25 per cent of the bank's capital and unimpaired surplus.2

Thus, legal limitations definitely restrict the amount of loans by banks

to any one church organization even if banks were inclined to disregard

general rules of good banking.


Use of Loans

What use was made of the bank loans received by churches? The

105 banks reported sufficient information on 420 loans for an analysis

of the uses made of them. Forty-seven per cent of the number and 28

per cent of the amount of loans were for expansion, Table 3, Appendix A.

Loans used for expansion included the following: (1) $6,009,872 for new

buildings and/or the enlargement of present buildings and (2) $2,889,100

for construction loans. A rather large percentage of the amount of

loans contained no specific information as to the use made of the funds.

A relatively small proportion of the total lonns was made for repairs,

operating expenses and "other uses." "Other uses" included such items

as: new organs, insurance loans, moving a building and wrecking an old

tower.

On the basis of information pertaining to the number and amount

of loans made by banks in each group size, it was to be expected that



1Florida Statutes, 1951, chap. 653, Sec. 13, (2).

2Ibid., (3).











the total amount of loans made to churches for all three primary uses

expansionn, repairs and operating expenses) would generally increase

with an increase in the size of the group. This is confirmed by the

data in Table 3, Appendix A. The average size of loans and the range

amounts of loans also increased with an increase in the size of the

group, Table 4, Appendix A.

It is also worth mentioning that the ratio of expansion to re-

pair loans was greater for the largest banks then for the smallest

banks (Table 5, page 62). These ratios did not increase with an in-

crease in the size of the group. However, the data in this table sug-

gest that churches in the smaller areas were more inclined to borrow

money from banks to make repairs to buildings than to build new ones,

whereas, the churches in the larger areas were more inclined to do just

the opposite. There was no discernable relationship between the ratios

of expansion to operating expense loans and the group size of banks.

It is pertinent to examine the possible relationship between

the use of loans, the size of banks and the changes in population of

the cities in which the banks were located. The period from 1940 to

1950 was used in determining the change in population. Population of

the cities in which the banks were located was used rather than the

population of the cities in which the recipient churches were located.

However, inasmuch as bank lending is generally local in character, it

is felt that unwarranted liberty has not been taken in this approach

to the problem. For example, the comment on one of the questionnaires

indicates the general local nature of bank lending:

We have had no direct construction loans presented to us










for some time. Churches in our city are rather old, have been
built for many years and loans asked for have been more for
operating expenses, re-organization or for reairs to building
and/or heating plant or furniture and fixtures.

Median population figures (page 62) have already indicated a

direct relationship between the increase in the group size of banks and

an increase in the median population of places in which the banks were

located. Therefore, the group size classification of banks was retained

with one exception. Group 1 (deposits of less than $5,000,000) was giv-

en two sub-classifications because a substantial number of the banks in

this group were in places with less then 2,500 population as well as

places with more than 2,500 persons. All other banks were in places

with more than 2,500 population.

The data in Table 5, Appendix A, indicate that there was defi-

nitely a larger ratio of expansion to repair loans in all groups of

banks where the population increase was over 10 per cent than where the

population increase was less than 10 per cent. As a matter of fact,

the increases in the ratios (from the small group sizes to the large

group sizes) were proportionately greater for those banks where the

population increase was over 10 per cent than whore the population in-

crease was less than 10 per cent.

The fact that all ratios for expansion to repair loans were

greater in all group sizes of banks in cities where the population in-

crease was over 10 per cent than where the population increase was less

than 10 per cent suggests two things: (1) That banks in cities with

more than a 10 per cent population increase were lending a larger pro-

portion of funds to churches for expansion than were the banks in cities











with less than a 10 per cent population increase. Thus, churches in

cities with more than a 10 per cent population increase were securing a

larger percentage of borrowed funds for new buildings and enlargements

than were churches in cities with less than a 10 per cent population

increase. (2) Thnt churches in cities with less than a 10 per cent pop-

ulation increase had found it expedient to secure a larger proportion

of borrowed funds for repairs to existing properties than for erecting

new buildings or for enlarging old ones.

The pattern was not so clearly defined for the relationship be-

tween expansion and operating expense loans. The ratios for expansion

to operating expense loans were with one exception greater in all group

sizes of banks in cities where the population increase was more than 10

per cent than for those banks in cities with less than a 10 per cent

population increase, Table 6, Appendix A. This indicates that four

groups of banks in cities with the smaller proportionate population in-

creases were lending a larger percentage of funds to pay for current

operating expenses than were the banks in cities with the larger pro-

portionate population increases. The reverse was evidenced by the data

for banks with deposits from $5,000,000 to $25,000,000. On the other

hand, there were two groups of banks in cities where the population in-

crease was more than 10 per cent which did not report a single operating

expense loan. Thirteen banks in these two groups made 26 loans totaling

$616,000.

The preceding statements are based on ratios and they should

not be interpreted to mean that the total number or amount of loans

for each group size of banks was greater for banks in cities where the










population increase was less than 10 per cent. Such was not the case.

In fact, this was true for only 3 out of the 5 groups of banks.

The foregoing statements are confirmed by the data in Table 7,

Appendix A, which show the average amount of loans made per bank,

classified by size of bank deposits, use of loans and relative popu-

lation increases.


Contract Terms

In succeeding pages, an attempt will be made to answer the fol-

lowing questions pertaining to contract terms on church loans: (1)

What maturities were placed on the loans made to churches? (2) 'What

interest rates were charged on church loans? (5) Tihat were the loan-

to-value ratios? (h) Were churches required to make periodic payments

on their loans? (5) What types of security did the banks require of

the churches?


Contract Lencth

The responding banks have generally restricted their church

lending activities to either short-term or intormediate-term for expan-

sion and repair loans, Table 8, Appendix A. Operating expense loans

were primarily on a short-term basis. In fact there was only one op-

erating expense loan for more than 1 year and this was for 3$- years.

Information on the questionnaire indicated that this loan would prob-

ably be used by more than one church as it was made to a district or-

ranization.

Intermediate-tern loans are in line with the present-day con-

cept of the type of loans proper for banks which the Financial handbook











explains as follows:

It was once thought economically unsound and socially un-
wise to use bank credit for other than a fairly narrow range
of purposes identified with production or distribution. Loans,
it was held, had to be short-term and self-liquidating to be
sound. Maturities of more than 90 days were questioned, ex-
cept for agricultural papor, and a maturity of more than one
year was considered an improper use of bank credit. In con-
trast, banks lend nowadays for practically any purpose so long
as ultimate payment is reasonably sure. They make capital
loans on a term basis, that is, payable in installments with
maturities as long as 10 years.1

Short-term loans as used in this study will refer to those ma-

turities of one year or less, intermediate-term loans (term loans)

will refer to those maturities from two to ten years and long-term

loans will indicate those maturities for more than 10 years.2

Some of the loans which banks made to churches were only for

interim financing. Three banks stated that they had made loans to

churches for a short period of time until the loans could be transferred

to insurance companies. One other bank indicated that it was carrying

its loan which was secured by bonds as an accomodation until the bonds

could be sold. This was a portion of building bonds remaining unsold

at the time the church had to make final settlement with the contractor.

Twelve expansion and repair loans with maturities of more than

10 years were made either by state-chartered banks or trust companies.

Only one national bank made a church loan for more than 10 years. This

was a :100,000 loan with a contract length of 15 years.



IJules I. Bogen (ed.), financial Handbook (3d ed., New York:
The Ronald Press Company, 19.9), p. 598.

Ibid., p. 604.










Interest Rates

The majority of loans of all types carried interest rates below

5.0 per cent, Table 8, Appendix A. Loans for operating expenses gener-

ally had a lower rate of interest than either expansion or repair loans,

perhaps reflecting the generally shorter maturities for this type of

loan.

The Financial Handbook states that "term loans usually carry a

moderately higher interest rate than a short-term credit." This was

the case with bank loans to churches. There was a general tendency for

the interest rate to increase with an increase in the length of the con-

tract through ten years on both expansion and repair loans, Table 9,

Appendix A. Interest rates on term expansion and repair loans were over

5 per cent while on short-term loans they were less than 41 per cent.

The data on operating expense loans were insufficient for comparison.

Interest rates on long-term expansion and repair loans were generally

lower than either of the other maturities. One possible explanation

for this is that the average size of long-term loans was generally

greater than that of both short-tern and intermediate-term loans.


Loan-to-Value Ratios2

Data on loan-to-value ratios were somewhat incomplete for a lar-



Ibid.
2
Loan-to-value ratio means the ratio of the amount of the loan
to the value of the property. No definite interpretation can be made
of the term "value" as used in this and subsequent chapters. Respond-
ing firms (banks, insurance companies and savings and loan associations)
offered no explanation of how they arrived at the property values which









73
ge percentage of the responding barks, Table 8, Appendix A. With such

inadequate data, it wo'ld be rather hazardous to attempt any firm con-

clusions with respect to the relationship between these ratios and other

contract terms. About all that can be said is that the majority of the

loan-to-value ratios reported were less than 40 per cent.


Size of Loans and Contract Terma

Table 10, Appendix A, shows that there was a general tendency

for the average rate of interest to decrease with an increase in the

size of expansion loans. It also indicates that the average contract

length tended to increase with an increase in the size of loans. There

was a tendency for the average rate of interest to decrease with an in-

crease in the size of repair loans up to $40,000. Beyond this size the

number of loans was inadequate in places and the pattern was indefinite.

There seemed to be no definite positive or negative relationship between

the size of repair loans and maturities.

Twenty-six of the 35 operating expense loans were for $5,000 or

less. The average interest rate decreased with an increase in the size

of loans up to $20,000. Beyond this size the number of loans was inad-

equate for an analysis.



were shown on their returned questionnaires.
Various statutes have indicated that valuations are based upon
a given appraised value. From this interpretation, it may be supposed
that reference is made to the price at which the property would sell on
the current market. However, church property has little value from
this standpoint, except as the land might be sold for its site value.
Therefore, there are only two alternatives left for evaluating church
property; they are: original cost and reproduction cost. The respond-
ing financial institutions gave no evidence as to which method has been
used.








74

The data in this table further indicate that all three types of

loans had almost the same average interest rate for loans of $10,000 or

less. The preceding statements suggest a possible general relationship

between the size of loans and the average interest rates rather than

the use of loans and the interest rates. Some variations from this gen-

eral tendency are to be found, but they may be explained by such fac-

tors as: differences in degrees of risk among the different loans, the

probability of a regional pattern of interest rates on churches loans

as well as other kinds of loans, and the possibility of differences in

the year in which the loans were made.


Schedule of Repayments

Practically all church loan contracts required at least one pay-

ment per year, Table 11, Appendix A. In fact, 1, per cent of the amount

of expansion loans and 43 per cent of the amount of repair loans called

for payments at least once each month. The data also indicate that

about one-half of the number of operating expense loan contracts made

provision for quarterly payments.

The information also showed that expansion and repair loans with

repayment schedules calling for monthly payments had longer average ma-

turities than contracts with any other periodic repayment provisions.

This suggests the possibility that banks were inclined to ask for shorter

check-up periods on the long-term loans than on the short-term loans.

There was a sizeable number of loans for which the data were in-

complete, but such figures as were available were retained in all tables

to show the size of the unknown element in each classification which











might change the picture considerably for both expansion and repair

loans.


Form of Security

An "unsecured" loan as used in this study means a loan for which

the borrower has not pledged any specific collateral, but it is one in

which the lender is protected only by the general ability and willing-

ness of the borrower to repay. Table 12, Appendix A, includes two

classifications of "unsecured" loans: (1) loans which are protected

only by a promissory note signed by an officer of the church, and (2)

loans made by banks which included provisions for the personal endorse-

ment of the note by responsible members of the church. A "secured"

loan means one in which the lender is protected by the general ability

and willingness of the borrower to repay and by the pledge of some as-

set which may be sold in case of default on the loan.1

The data in Table 12, Appendix A, reveal that the majority of

expansion and repair loan contracts included provisions for either a

mortgage on the church property, or both a mortgage and personal en-

dorsement of the note by responsible members cf the church. They also

show that slightly more than one-third of the number of expansion loans

and about one-half of the number of repair loans were made to churches

on an unsecured basis. Quite a number of loans of this use were made

simply on promissory notes.

About one-third of the number of operating expense loans did



Charles L. Rather, Money and Banking (Chicago: Richard D.
Irwin, Inc., 1959), p. 182.








76

not show any indication of the type of security. Twenty of the 35 op-

erating expense loans were made to churches on an unsecured basis. Only

one such loan required as security a real estate mortgage.

Lending on an unsecured basis generally requires rather intimate

and up-to-date knowledge of the organization making the application for

a loan; therefore, the fact that banks have made a rather substantial

number of church loans on this basis indicates, in general, that they

have been rather close to the situations involved. Such lending prac-

tices on church loans are also probably due to two other important fac-

tors: (1) church loans may be classified as loans on singlc-purpose

property, and (2) church loans which are secured by mortgages on the

property include possible public relations problems if the banks should

find it necessary to foreclose. Several banks have stated that they

would find it difficult to foreclose a mortgage on church property, and

if they did there would be the question of what to do with the property

once they had it. They have also stated that such action would un-

doubtedly carry with it sufficient bad public relations as to be of ul-

timate doubtful value to the bank.

The information in Table 12, Appendix A, also indicates that

expansion and repair loans which were unsecured had much shorter matur-

ities than those which were secured. The only operating expense loan

which was secured carried a longer maturity than the 20 unsecured loans.

Banks further reported that six loans were made to churches

which were secured by bonds. Two expansion loans were made in this man-

ner. One was a construction loan for $26,000 and was made by a bank as

an accommodation to the church until the bonds could be sold. This loan








77

was further protected by a demand promissory note and personal endorse-

ments. Information on the three repair loans secured by bonds was in-

sufficient to determine just why these had been made. The only signif-

icant features discernable were that all of them were made on a short-

term basis and all were very small in amount. Information was also

rather meagre on the $15,000 operating expense loan secured by bonds.

Loans were also protected in other ways. The $1,015,000 ex-

pansion loan was guarant-d by the Board of American Missions of the

United Lutheran Church. A '403 repair loan was secured by the pledge

of securities as collateral, while two operating expense loans totaling

$420 were secured by the pledge of insurance policies.


Denominations

Bank loans to churches were definitely representative of the

majority of the largest denominations in the United States, and many

of the smaller ones as well. Thirty-nine different denominations were

represented in the loan sample from the banks, and it is possible that

several more were represented in the 95 loans for which no denomination

was indicated (Table 6, page 78). No attempt was made in the survey to

determine the division of loans on the basis of race. However, some

banks did indicate that loans had been extended to both Negro and white

congregations. The 95 loans for which no denomination was indicated

constituted about one-fifth of the total number of loans and slightly

more than two-fifths of the total amount of loans made to churches by

banks. Therefore, the following statements will be made with the pre-

ceding comment in mind.










TABLE 6

SAMPLE OF CHURCH LOANS MADE BY 105 BA.KS IN THE UNITED STATES, CLASSI-
FIED BY DENOMINATION, JANUARY 1, 1946-JANUARY 1, 1952


Denomination* No. of Percentage Amt. of Loans Percentage
Loans of total of total
number amount

Baptist ....... 75 17.1% $1,965,056 10.8%
Methodist ..... 50 11.9 674,631 3.9
Catholic ...... 31 7.4 3,613,480 19.8
Lutheran ...... 2L 5.7 1,669,070 9.2
Presbyterian .. 21 5.0 617,062 3.6
Episcopal ..... 17 4.1 224,921 1.5
Congregational 16 3.8 76,180 0.6
Jewish ........ 6 1.4 245,500 1.5
Christian ..... 6 1.4 214,800 1.5
Other Protestant 81 19.3 679,003 3.8
Not indicated 95 22.6 8,542,468 43.8

Totals .... 420 100.0 18,552,171 100.0

*
Only those denominations were listed separately which had made
five or more loans. The others were all grouped under the classifica-
tion of other protestant churches.

Among the loans for which denominations were indicated, the

largest total number of loans was made to churches of the Baptist denom-

ination while the largest total amount of loans was made to churches of

the Catholic denomination. Table 13, Appendix A, shows that Catholic

churches received the largest amount of expansion loans while the lar-

gest number of expansion loans was made to Baptist churches. Although

churches of the Methodist denomination received the largest number of

repair loans, churches of the Christian denomination received the lar-

gest amount of repair loans. Methodist churches also received a larger

number of operating expense loans than any other single denomination,

but the total amount of these loans was very small, Table l., Appendix A.









79
On the other hand, Catholic churches with only a very saall percentage

of the total number of operating expense loans received 80 per cent of

the total amount of such loans.

The analysis in Table 15, Appendix A, indicates no clearly de-

fined relationship between the average size of loans, the average inter-

est rates and the average contract lengths when the loans were classi-

fied according to the recipient denomination. The largest average size

of expansion loans ($132,612) was made to churches of the Catholic de-

nomination, while the second largest average siae ($110,100) went to

churches of the Lutheran denomination. Loans to Lutheran churches were

about twice the average size of loans made to churches of any other

Protestant denomination. Factors other than the size of loans and

contract lengths probably exerted some influence on the interest rates

charged on church loans. One factor which undoubtedly exercised some

influence on interest rates was the time the loans were made within this

five-year period. At least two responding banks indicated that the in-

terest rate charged on church loans was whatever the current lending

rate was at the time the loan was made. Still another factor with sme

weight in this matter was the ability of some denominations to advance

additional protection for loans through the pledging of the assets and

income of several churches rather than the assets and income of only

one church. In fact, one banker stated that this additional protection

places a very great deal of worth behind such a loan.

An attempt was made to analyse the possible relationship between

the interest rates paid on repair and operating expense loans and other

contract terms; however, the number of such loans made to some denomina-









tions was rather small and no definite patterns could be established.


Geographical Distribution of Loans

Number and Amount of Loans

Information contained in Table 16, Appendix A, indicates that

the responding banks were rather widely distributed geographically. A

larger number of questionnaires was sent to banks in the North than to

banks in either of the other two regions, thus, it was not surprising

that banks in this region made a larger total number and amount of loans

to churches than banks in the other regions. However, it is significant

that banks in the South made the largest average number of loans while

banks in the West made the smallest average number of loans. The number

of banks making 5 loans or less increased from the West to the North to

the South, Table 17, Appendix A. In fact, there were 7 banks in the

South, o in the North and only 1 in the West that made 10 loans or more.

Another significant feature of the geographical distribution of

bank loans to churches was the higher average size of loans and average

amount of loans per bank in the South than in either of the other two

regions, Table 16, Appendix A. These two items were lower in the West

than in the North. Earlier in this chapter it has been indicated that

the small banks made the small loans while the large banks made the

large loans; therefore, it was not surprising to find that there was a

larger percentage of Southern banks in the sample with deposits of

$100,000,000 and over than in either of the other two regions (Table 7,

Page 81). It is also interesting to note that firms in this region had

a larger percentage of loans $100,001 and over than firms in either of

the other two regions (Table 8, Page 81).










TABLE 7

PFRC iTAGE DISTRIBUTION OF 105 C1iURCH-LOAf BANKS IN THE UNITED
STATES, CLASSIFIED BY BA21K LOCATION AIND BANK DEPOSITS,
JAIrUARY 1, 194-S-JAITUAY 1, 1952


Bank Deposits Geographical Location
($ millions) All
North South West Regions


Less than .O .. 56o 663 59. 58%
5.0 to 25.0 .... 15 13 38 19
25.0 to 100.0 .. 15 4 2 10
100.0 and over 14 17 1 13

Totals ..... 100 100 100 100



TABLE 8

AVERAGE INTEREST RATES FOR A SAMPLE OF CHURCH LOANS MADE BY 105
BAN!S IN THE UNITED STATES, CLASSIFIED BY BANK LOCATION
AND > OUINT OF LOANS, JANUARY 1, 1946-JANUARY 1, 1952


Geographical Location

Amount North South West
of
Loans No. of Average No. of Average No. of Average
Loans Interest Loans Interest Loans Interest
Rate Rate Rate

$ 5,000 or less .. 117 4.6% 56 6.0% h8 5.414
5,001 10,000 26 4.0 7 4.7 13 5.1
10,001 20,000 20 3.7 10 4.5 3 5.0
20,001 40,000 14 3.7 19 4.8 2 3.5
40,001 60,000 11 3.6 6 4.3 1 5.0
60,001 80,000 3 4.5 8 5.0
80,001 100,000 6 3.5 6 5.0 1 4.5
100,001 200,000 5 3.3 33 4.6 .
200,001 and over 5 3.3 .*. .* ...

Totals ........ 207 ... 145 ... 68 .










Contract Terms

It was also found that the average interest rate was generally

lower in the North for loans of all uses than in either of the other two

regions (Table 8, page 81). As a matter of fact, there seems to have

been a general tendency for interest rates to increase from one Federal

Reserve District to another as one moves either southward or westward

from the Boston Federal Reserve District, Table 16, Appendix A. This

suggests the possibility of a regional pattern of interest rates on church

loans. Investigation of other contract terms revealed that banks in

the North made a larger percentage of both the number and amount of ex-

pansion and repair loans for an interest rate of less than 5.0 per cent

than did banks in either the South or West (Table 9, page 83). At the

same time, contract lengths were also generally shorter on loans made

by barks in the North than those made by barks from the other two re-

gions. However, loan-to-value ratios on loans made by the former group

of firms were not as low as the ratios on those loans made by the lat-

ter group of firms. This indicates a possible direct relationship be-

tween the interest rate paid on loans and the length of maturities, but

no such relationship between the interest rate and the loan-to-value

ratios. Such variations as did exist in this general pattern are pos-

sibly due to such things as: differences in denominations to which the

loans were made, differences in the time the loans were made, and dif-

ferences in the amounts of loans. This particular analysis could not

be expanded to include operating expense loans because the number of

loans in each classification was too few for any definite conclusions.










TABLE 9

FERCFINTGE; DISTRIBUTION OF THE NUMBER AND AMOUNT OF LOANS FOR A
SAMPLE OF CHURCH LOANS .:AD3 BY 105 BANKS IN THE UNITED STATES,
CLASSIFIED DY BMiK LOCATION, USE OF LOANS AND CONTRACT TERMS,
JANUARY 1, 1946-JANUARY 1, 1952


Contract
Terms


Geographical Location

North South West

No. of Amt. of No. of Amt. of No. of Amt. of
Loans Loans Loans Loans Loans Loans

Expansion Loans


Interest rate 4.9%
or less ......... 68% 92 1% 2 5% 56%
Contract length
1 yr. or less ... 53 55 56 17 46 18
Loan-to-value
ratios, 39% or
less ............ 30 23 57 77 44 42


Repair Lomns


Interest rate 4.9;,
or less ......... 56% 85% 11% 78% 15% 18%
Contract length 1
yr. or less ..... 71 53 36 16 23 25
Loan-to-value
ratios, 39% or
less ............ 28 L2 11 17 53 70



Schedule of Repayments

Bank requirements for regular periodic payments on church loans

were about the same for all regions and for all three principal types of

loans. If the "not indicated" classification is omitted from consider-

ations, it will be noted from the data in Table 18, Appendix A, that

principal emphasis was placed upon payments either every month or every




University of Florida Home Page
© 2004 - 2010 University of Florida George A. Smathers Libraries.
All rights reserved.

Acceptable Use, Copyright, and Disclaimer Statement
Last updated October 10, 2010 - - mvs