America’s First ‘Christian’ Bank Goes out of Business

In the face of a recent recession and increased competition among financial institutions, a bank needs more than good intentions to survive. In Portland, Oregon, a bank organized to reflect Christian principles has learned that lesson the hard way.

The Stewardship Bank of Oregon was closed by state regulators in June—three years and three months after it opened as the first “Christian” bank in the United States. Its problems—poor management and a faulty loan policy—were similar to those encountered by the nearly 40 other American banks that have failed this year.

“They were too generous on credits and didn’t analyze them carefully,” said Oregon bank superintendent John Olin. The bank’s directors were alerted to loan problems early in 1982. The following May, the Federal Deposit Insurance Corporation (FDIC) examined the bank’s books, and subsequently directed it to charge off some $700,000 in loans. That action led to a loss of $765,000 for the year.

The death blow came last May when the FDIC directed the bank to charge off an additional $762,000 in loans. The action exhausted the bank’s $359,000 in capital and forced it out of business. When last-ditch efforts to raise more capital failed, the state declared the bank insolvent and named the FDIC as receiver.

Stockholders lost their investments, some in excess of $100,000. However, most of the $5.7 million on deposit with the bank was covered by FDIC insurance. Officials said about one-third of the bank’s business involved Christian people or organizations. A number of groups outside the state had funds on deposit there.

The Stewardship Bank opened in March 1981 with $1.6 million in capital. Prospective I investors were required to profess a belief in Christian principles before they could buy stock in the bank. They agreed to donate 10 percent of any profits to worthy causes, and even to donate one-tenth of their dividends. The tithing principle was not implemented widely because, except for a few months, the bank failed to make a profit.

Robert Laughlin, a Christian businessman who spearheaded the drive to organize the Stewardship Bank, said bank regulators advised the organizers to “hire the best president, let him run the bank, and directors shouldn’t interfere.” They hired a banking veteran of 35 years. Directors, who were businessmen with little banking experience, kept hands off.

That approach was a mistake, said Lynn Wallace, who became bank chairman in March when four directors resigned. “The board was sort of naïve,” he said. “It trusted management too much. No matter what kind of credentials a person has, don’t give him a free rein. A good director is a watchdog who is not afraid to ask questions. If you have a president who doesn’t want questions asked, then you’d better fire him.”

The failure of directors to keep a close watch on loans was a critical flaw. One director, who is being investigated by the state for alleged violation of securities laws, was a principal in firms that borrowed from the bank. At least one of those loans—amounting to $125,000—was defaulted, according to court records. The recession also played a role in some of the bank’s loans going bad.

Despite the failure, Laughlin and others haven’t given up on the concept of a “Christian” bank. Laughlin has sent a summary of the bank’s mistakes to organizers of similar institutions in New Jersey and Georgia to help them avoid the same errors.

DONALD J. SORENSENin Portland

Two Lutheran Bodies In Canada Vote To Unite

Two of Canada’s three main Lutheran denominations have voted to merge. The new Evangelical Lutheran Church in Canada will be the fifth-largest denomination in the country (behind Roman Catholics, the United Church of Canada, Anglicans, and Presbyterians). The merger brings together the Lutheran Church in America-Canada Section (125,000 members) and the Evangelical Lutheran Church of Canada (85,000).

Merger discussions, initiated in 1973, originally included three groups. But in 1978, the Lutheran Church-Canada (Canadian wing of the Lutheran Church-Missouri Synod) pulled out of the talks. That decision was based on a disagreement over the ordination of women and misgivings about a perceived drift on the issue of scriptural authority. Since then, the Lutheran Church-Canada has withdrawn from a joint Lutheran seminary in Saskatoon. This fall it plans to open its own seminary in Edmonton.

The new Lutheran alignment, to take effect in 1986, will make the Canadian church independent of any American Lutheran body. However, it will cooperate closely with the Lutheran Church in America and the American Lutheran Church, both scheduled to form a new body with the Association of Evangelical Lutheran Churches by 1988.

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