In an effort to muster the financial muscle needed to support nationwide expansion, church organizations are starting to look more than a bit like banks.

Some national church organizations, with member churches numbering in the thousands, have developed bank-like offshoots, called "extension funds," formed primarily to provide loans for church-site construction and renovation. The more sophisticated funds offer their congregants a wide variety of deposit products and investment options.

Although their investments are never FDIC-insured, extension-fund customers enjoy an added benefit that real banks cannot provide--the comfort of knowing that their money's working for God.

"The church extension fund is really a win-win for all concerned," says Vic Bryant, executive vice president of the Lutheran Church Extension Fund. "With contributions, you give and it's gone, but with the church-extension program you can make an investment and know the money's being used to build schools and churches and carry out the Great Commission."

The LCEF, which has over $1 billion in assets and about 2,500 outstanding loans, is one of the largest of about 35 extension funds nationwide. It lends money and offers its products to members of the Missouri Synod, a nationwide network of 6,000 Lutheran congregations in the United States.

Besides investment products, the LCEF offers its members' congregants savings accounts, CDs and IRAs. Introduced earlier this year, the LCEF's StewardAccount--a deposit-account--can be opened with as little as $100 and pays tiered interest based on current money-market rates. Unlike the LCEF's other deposit products, the StewardAccount comes with a checking option with a $250 maximum per check. Account holders may also opt for a Visa Check Card.

Bryant says that while banks have become more willing to lend to churches, extension funds traditionally have been the lenders to congregations that can't secure a loan from a bank. "Banks were very reluctant to lend to congregations," he says. "I think it was the fear of bad press if they had to foreclose on a church, but more recently banks have recognized making loans to congregations is not the risk that they once thought."

The Anaheim, CA-based Church Development Fund--with $155 million in assets and 250 active loans--uses underwriting criteria suited for members of the Christian Church/Church of Christ. "One of the advantages here is that we do have an ordained staff with an intimate knowledge [of the churches]," says Tom McGlinchey, the fund's chief financial officer. Its products include savings accounts, CDs and "retirement agreements."

Likewise, the Evangelical Lutheran Church in America's extension fund--called the Mission Investment Fund--offers CDs, IRAs, money-market accounts and limited check-writing options. The fund has about $340 million in assets, 16,000 accounts and 650 open loans.

As bank-like as they may seem, Frank Torres, vice president and controller for the fund, says banks need not worry about extension funds edging onto their turf. Most, if not all, of his customers are simply looking for a way to support the church rather than get high returns, he says. And he says banks still have the upper hand in technology and size.

But the technology gap is narrowed by banking software for processing and accounting. The Mission Investment Fund and the CDF recently switched to a banking system by Orlando, FL-based Phoenix International Ltd. The LCEF has been using software by Malvern, PA-based Sanchez Computer Associates and has plans to go online by the beginning of next year.

Any "deposits" in the funds technically are investments, which come under the aegis of state securities laws. Introducing a new product requires the approval of all 50 states and the modification of offering circulars. "Organizations like us are not really interested in that stuff. It's not really a part of our mission," Torres says. "We'll leave it to the banks. You know, they're in it for the money."

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