How Is the Banking Industry Affecting Your Ministry?

(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)

There is no doubt, 2009 brought many changes to both banking and ministry. As we adjust to our new realities, what is on the horizon for the banking industry—and how does it affect ministries? At the recent 2009 Financial Forum for Ministries, presented by ECCU and CapinCrouse, LLP, Mark Johnson, ECCU executive vice president, provided these updates.

First, let’s take a look at the banking industry:

  • Deposits are secure. Have confidence in the safety of your deposits, knowing that deposits up to $250,000 (in a federally insured financial institution) are insured by the Federal Deposit Insurance Company (FDIC) and the National Credit Union Administration (NCUA). This deposit insurance increase to $250,000 was extended to 2013, and may end up sticking around permanently.

  • Lending remains tight. Financial institutions are maintaining greater liquidity by reducing the amount of financing available. This decline in lending—combined with even stricter underwriting standards—means that ministries seeking a loan need to be even more financially well-positioned for approval.

  • Keep it in perspective. Even as the economy struggles, the FDIC and NCUA feel the stability of financial institutions remains high. While over 100 banks and 11 credit unions have closed in 2009, failures are far less than those in the Savings and Loan crisis in the 1980s or the 9,000 bank failures in the 1930s.

What does this mean for your ministry?

  • Monitor your financial institution. Even if you have less than $250,000, you still need to be aware of your bank’s financial health. Should it fail, you would undoubtedly experience challenges in the sudden transition of your banking. If you have more than $250,000, it is that much more important to monitor the health of your financial institution.

  • Do your due diligence. Ask the tough questions of your bank or credit union. Key indicators of their health are: Profitability, capital, and asset quality. You can also do a self-check by accessing your financial institution’s information at www.fdic.gov for banks or www.ncua.gov for credit unions.

  • Budget conservatively. Build in contingencies and beef up your cash reserves. Make appropriate—and sometimes painful—budget cuts and focus your expenditures specifically around your mission. For added accountability, review your budget more frequently (not just once a year).

  • Be open and honest about your finances. Regardless of your financial situation, communicate effectively with your staff, donors, and stakeholders. Dismiss the idea that disclosing financial issues will cause stakeholders to jump ship. Research shows that dedicated donors value transparency and will remain committed to your ministry. In addition, talk with your board and finance committee about how your finances are managed. For helpful tools in assessing the strength of your finances, review these four financial priorities for ministries as suggested by ECCU: Ensure financial integrity, maintain adequate liquidity, maximize cash flow, and leverage assets.

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