diff --git a/spring-cloud-context/src/main/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializer.java b/spring-cloud-context/src/main/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializer.java
index c851f38d..4842b504 100644
--- a/spring-cloud-context/src/main/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializer.java
+++ b/spring-cloud-context/src/main/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializer.java
@@ -212,15 +212,15 @@ public class EnvironmentDecryptApplicationInitializer implements
 						}
 						catch (Exception e) {
 							String message = "Cannot decrypt: key=" + key;
-							if (this.failOnError) {
-								throw new IllegalStateException(message, e);
-							}
 							if (logger.isDebugEnabled()) {
 								logger.warn(message, e);
 							}
 							else {
 								logger.warn(message);
 							}
+							if (this.failOnError) {
+								throw new IllegalStateException(message, e);
+							}
 							// Set value to empty to avoid making a password out of the
 							// cipher text
 							value = "";
diff --git a/spring-cloud-context/src/test/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializerTests.java b/spring-cloud-context/src/test/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializerTests.java
index 8e1decee..3fc28c5f 100644
--- a/spring-cloud-context/src/test/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializerTests.java
+++ b/spring-cloud-context/src/test/java/org/springframework/cloud/bootstrap/encrypt/EnvironmentDecryptApplicationInitializerTests.java
@@ -19,8 +19,10 @@ package org.springframework.cloud.bootstrap.encrypt;
 import java.util.Collections;
 import java.util.Map;
 
+import org.junit.Rule;
 import org.junit.Test;
 
+import org.springframework.boot.test.rule.OutputCapture;
 import org.springframework.boot.test.util.TestPropertyValues;
 import org.springframework.boot.test.util.TestPropertyValues.Type;
 import org.springframework.context.ApplicationContext;
@@ -49,6 +51,9 @@ public class EnvironmentDecryptApplicationInitializerTests {
 	private EnvironmentDecryptApplicationInitializer listener = new EnvironmentDecryptApplicationInitializer(
 			Encryptors.noOpText());
 
+	@Rule
+	public OutputCapture outputCapture = new OutputCapture();
+
 	@Test
 	public void decryptCipherKey() {
 		ConfigurableApplicationContext context = new AnnotationConfigApplicationContext();
@@ -77,14 +82,22 @@ public class EnvironmentDecryptApplicationInitializerTests {
 		then(context.getEnvironment().getProperty("foo")).isEqualTo("spam");
 	}
 
-	@Test(expected = IllegalStateException.class)
+	@Test
 	public void errorOnDecrypt() {
 		this.listener = new EnvironmentDecryptApplicationInitializer(
 				Encryptors.text("deadbeef", "AFFE37"));
 		ConfigurableApplicationContext context = new AnnotationConfigApplicationContext();
 		TestPropertyValues.of("foo: {cipher}bar").applyTo(context);
-		this.listener.initialize(context);
-		then(context.getEnvironment().getProperty("foo")).isEqualTo("bar");
+		// catch IllegalStateException and verify
+		try {
+			this.listener.initialize(context);
+		}
+		catch (Exception e) {
+			then(e).isInstanceOf(IllegalStateException.class);
+		}
+		// Assert logs contain warning even when exception thrown
+		String sysOutput = this.outputCapture.toString();
+		then(sysOutput).contains("Cannot decrypt: key=foo");
 	}
 
 	@Test
@@ -95,6 +108,9 @@ public class EnvironmentDecryptApplicationInitializerTests {
 		ConfigurableApplicationContext context = new AnnotationConfigApplicationContext();
 		TestPropertyValues.of("foo: {cipher}bar").applyTo(context);
 		this.listener.initialize(context);
+		// Assert logs contain warning
+		String sysOutput = this.outputCapture.toString();
+		then(sysOutput).contains("Cannot decrypt: key=foo");
 		// Empty is safest fallback for undecryptable cipher
 		then(context.getEnvironment().getProperty("foo")).isEqualTo("");
 	}