# LCMS Convention Workbook_St. Louis Missouri_2019_S127
# Machine transcription, uncorrected — CHI Digital Archive (demonstration)

OFFICER, BOARD, AND COMMISSION REPORTS

Investments
The laddered fixed income portfolio as of December 31,
2018, totaled $202.8 million with an interest yield of 2.88 percent compared to a yield of 2.73 percent a year ago. The longterm reserve portfolio (consisting of fixed income, equities, and
other non-correlated investments) totaled $68.7 million.
Net market value losses for the period ending December
31, 2018, totaled $4.5 million with laddered fixed income gains
of $1.6 million offset by long-term portfolio losses of $6.1 million. Inclusive of the investment income as of December 31,
2018, the total return for the laddered portfolio was 3.65 percent. Within the long-term portfolio, the equity and alternative
portfolios earned a total return loss of 9.26 percent and 7.49
percent, respectively, with the fixed-income portfolio earning a
total return gain of 2.82 percent. The total return on the longterm portfolio in total was a loss of 5.49 percent. LCEF remains
optimistic that the long-term portfolio is positioned well and
will perform with gains throughout 2019. Prior fiscal year-end
data:
FYE 2016

(in 000s)

FYE 2017

$358.7M

$317.2M

$281.7M

Net Gain/(Loss)

($1,542)

($4,783)

$2,901

••

Investor Payables—Loyal investors continued to
provide funds to enable LCMS ministries financial
resources that support their efforts to expand
God’s kingdom. A promotion to coincide with
LCEF’s 40th anniversary began October 1, 2018.
The promotion offered investors a 40-month fixed
rate note at 4 percent with a $40,000 cap per note.
The promotion closed on January 17 after reaching
its goal of $100 million. LCEF processed 4,600
accounts (1,727 new investors). Prior fiscal year-end
data:

Investor Payables

(a 19 percent increase over the same period last year)
FYTD. Year to date, LCEF has purchased 16 RCW
consolidation loans from LFCU, an increase of 220
percent over last year. Prior fiscal year-end data:
(in 000s)

FY 2016

FY 2017

FY 2018

Total Loans Closed

$381,077

$442,708

$381,325

••

FYE 2018

Total Investment
Portfolio

FY 2016

FY 2017

FY 2018

$1,592,675

$1,616,634

$1,599,497

Maturities of LCEF’s 35-month notes at 3.5 percent began in October and continued through December. LCEF offered investors with maturing notes the opportunity to re-invest
the 35-month note at 4 percent. Well over 90 percent of the
35-month note investors have re-invested at the 4 percent rate.

Loans Receivable—LCEF supported ministry expansion with closings totaling $166.4 million in district/
national loans; $17.2 million in Rostered Church
Worker (RCW) loans (LCEF purchased 45 RCW
loans totaling $3.9 million from the Lutheran Federal
Credit Union [LFCU]); and $36.3 million from loan
restructures as of December 31, 2018. National lending has seen some slight ebbing of new loan volume.
However, we are seeing complex loan requests that
take more time to process. There are significant
requests in the pipeline totaling approximately $87.3
million (in addition to $35 million in refinances).
RCW new mortgage activity includes 71 closed loans

Loan Delinquencies and Impairments—LCEF’s Loan
Resolution Group (LRG) continues to work diligently with ministries experiencing financial challenges.
Because of these efforts and God’s blessings, the level
of impaired loans has lowered from $93.7 million at
FYE 2018 to $84.6 million at Dec. 31, 2018. LRG is
tasked with monitoring and minimizing delinquency
rates. The delinquency rate over the past year has
generally been trending below 1.0 percent, and for the
end of Q2 2019 a rate of 0.8 percent was reported.
LCEF created an implementation team to formulate
plans for compliance with the new Current Expected
Credit Losses (CECL) standards being phased in
over the coming years. CECL has the potential for
significant impact on LCEF credit loss reserve balances. Implementation of CECL has been delayed
until July 1, 2021, but the team has an implementation goal of July 1, 2019, to allow for two years of
testing and refinement. Prior fiscal year-end data:

Impaired Loans
Delinquency Rate

FY 2016

FY 2017

FY 2018

$125,989

$103,818

$94,536

.41%

.74%

.91%

Regionalization
Since its last convention report, LCEF has been engaged
in efforts to decentralize operations into three regional offices: Central Region (Minneapolis, Minnesota), West Region
(Irvine, California), and East Region (Orlando, Florida). The
purpose of regionalization is to better deliver service and support through LCEF district vice presidents to districts, congregations, schools, organizations, workers, and members, so that
ministry extends in the church and world. We continue work
with other entities to leverage the regional structure.
••

Loans
••

127

Distribution of Operating Results—LCEF was
pleased to again share earnings distribution with
partner districts and Synod, Inc. totaling $2,019,000
in 2018. Prior fiscal year-end data:

FY 2016
$1,933,854
••

FY 2017
$2,019,000

FY 2018
$2,139,096

Kaleidoscope Fund—Since 2016, the Kaleidoscope
Fund has granted nearly $2.1 million to LCMS
ministries. In addition to the regular grants, in 2017,
a total of $250,000 was granted to LCMS Disaster
Response for those affected by Hurricane Harvey.
That same year, LCEF granted another $302,365 to
LCEF borrowers affected by Hurricanes Harvey and
Irma.
2019 Convention Workbook