LCMS Convention Workbook St. Louis, Missouri — 2016, Page 89

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OFFICER, BOARD, AND COMMISSION REPORTS

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intentional reduction of the dollar balance of investor notes from a
total of $1.59 billion as of June 30, 2013, to $1.48 billion as of June
30, 2015, as over $400 million of five-year notes matured during the
period. LCEF met its goal of retaining 80 percent of these maturities.
In the fall of 2015, LCEF conducted a special promotion, which raised
an additional $87 million in investor notes to support increasing loan
demand experienced during the first two quarters of fiscal 2016. The
balance of investor payables at December 31, 2015, was $1.55 billion.
Reversing the Decline in Investor Relationships—Throughout this
period, LCEF focused on increasing investor relationships, offering
products designed to attract new investors without raising significant
dollars. LCEF successfully reversed the decline in the number of investors, increasing relationships from a low of 50,709 at June 30, 2013, to
a high of 56,115 at December 31, 2015—an increase of 10.7 percent.

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Loans
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Loans Receivable—LCEF supported ministry expansion during the
fiscal years 2013–15, with loan approvals totaling $470 million and
loan disbursements totaling $508 million, approximating the level of
loan repayments. As indicated, loan approvals for the first two quarters of the fiscal year ending June 30, 2016, have increased over those
of the past three years. To more effectively serve LCMS ministries,
LCEF reorganized its lending department to provide greater emphasis
on serving Recognized Service Organizations, the Concordia universities, and partner church bodies.
Pastoral Education Loan Program—The Pastoral Education Loan
Program was launched in the spring of 2013 to provide assistance to
active LCMS pastors with education debt. The program offers loans
for the consolidation of government-guaranteed and privately held student loans.
Low Interest Rates—Market interest rates have remained low. As a
result, ministries have had an opportunity to borrow at historically low
levels since LCEF set rates on a combination of the cost of funds and
prevailing market interest rates.
Shared Blessings rebate program—During the triennium, LCEF
increased the promotion of the Shared Blessings rebate program,
which is based on the number of congregation members investing
with LCEF. It is anticipated that the level of rebates remitted to congregations borrowing from LCEF will reach $850,000 during the fiscal
year ending June 30, 2016.
Loan Delinquencies and Impairments—LCEF’s Loan Resolution
Group continues to work diligently with ministries experiencing challenges. As a result of these efforts and God’s blessings, the level of
impaired loans has decreased from $170 million on June 30, 2013,
to $149 million on June 30, 2015. The 90-day delinquency rate has
reached a historic low of 1.3 percent as of December 31, 2015. LCEF
remains committed to working with ministries as they seek solutions
to the challenges they face.

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Ministry Support—Ministry Support offers a variety of services for
LCMS ministries such as Capital Funding, Stewardship, Architectural
Advisory Services, Demographic Studies, and Laborers For Christ.
During the fiscal year ending June 30, 2014, the Ministry Support
department reorganized to intentionally be more responsive to the
needs of the LCMS, its districts, and related ministries. During the
fiscal year that ended June 30, 2014, VisionPath was fully launched,
offering a catalytic planning experience to help ministries arrive at
clarity regarding their vision. During December 2015, Laborers For
Christ entered into an agreement with Bethesda to perform deferred
maintenance for Bethesda’s homes throughout the United States.
During the three-year period, Ministry Support served 723 ministries and conducted capital campaigns that raised $86.1 million in
support of ministry. Over the course of its 23-year history, Capital
Funding Services has conducted capital campaigns with commitments
of $516.4 million.
Distribution of Operating Results—LCEF made more than $7 million of earnings available to the Synod and partner districts. In 2013,

$1.6 million was made available, and in 2014 a double distribution of
$3.3 million was available with one half utilized to fund a newly established granting program entitled the Kaleidoscope Fund. In 2015, $2.1
million was made available.
Kaleidoscope Fund—During the fiscal year that ended June 30, 2014,
LCEF established a granting program available to certain LCMS
ministries based on LCEF policies with an initial allocation of $1.7
million. Additional funding for this program will be made available
in the future from earnings, distributions, and portions of unrestricted
gifts to the LCEF. Guidelines for this program are being finalized, and
it is expected that the initial grants will be made during the fiscal year
ending June 30, 2016.
Gift Planning—During the fiscal year ending June 30, 2014, LCEF
added a vice-president of gift planning to oversee planned giving
efforts, enhance relationships with existing donors and investors, and
build new ones with those who have a passion for LCEF’s ministry.
LCEF works closely with the LCMS Foundation in fulfilling these
efforts.
Sponsorship of Lutheran Federal Credit Union (LFCU)—During
the triennium, the LCEF Board of Directors and LCEF leadership
thoroughly researched the concept of a federal credit union to serve
the members and ministries of the LCMS. After prayerful deliberation
and close coordination with the LCMS Board of Directors, the Board
approved a sponsorship to support this start-up and allocated $5 million in capital. The credit union received its charter during December
2014 and began its operations during the following year. Based on its
Federal Charter, LFCU will be able to offer residential and debt-consolidation loans to rostered church workers in all 50 states. In the past,
LCEF has offered these loans within a selected number of states. LCEF
has arrangements with LFCU to purchase loans it makes to rostered
church workers. LCEF remains a separate entity from the LFCU.
California-Nevada-Hawaii (CNH) Entry—After prayerful deliberation and diligent research and analysis, the CNH District and its
Church Extension Fund elected to become the 29th participating district of LCEF, effective January 1, 2016.
Student Marketing Campaign—During the triennium, LCEF continued to offer LCMS universities the opportunity to participate in
LCEF’s student marketing campaign. The students, under the direction of a university faculty member, prepare a marketing campaign
based on the objectives defined by LCEF. The teams present their
campaigns before a panel of third-party judges at the Synod’s headquarters in St. Louis. The judges evaluate each team’s preparedness
and performance. LCEF has benefitted and has incorporated several
of the students’ ideas into LCEF’s marketing plan. We are pleased to
share that there has been strong participation since inception.

Financial Trends
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Ministry Support
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Total Assets—Based on projected loan demand, LCEF intentionally
managed a reduction in its investor payables, resulting in a decrease
of total assets from $1.78 billion on June 30, 2013, to $1.7 billion on
June 30, 2015. With the special promotion highlighted above, total
assets as of December 31, 2015, increased to $1.76 billion. LCEF is
well positioned to support loan demand in the foreseeable future.
Capital to Asset/Liquidity Ratios—LCEF continues its commitment
to a strong capital and liquidity position. LCEF improved its capital
position from 9.89 percent as of June 30, 2013, to 11.07 percent as of
December 31, 2015, an increase of 1.18 percent. The FDIC considers
8 percent a strong capital ratio for financial institutions. LCEF’s level
of cash and investments as a percentage of its outstanding investor
payables on December 31, 2015, totaled 20.9 percent, a level consistent with the liquidity position the prior three fiscal years. A 20 percent
liquidity ratio is considered very strong within the financial industry.
Strong Income—LCEF continues to achieve strong operating income,
earning $12 million during the fiscal year that ended June 30, 2013,
$9.5 million during fiscal 2014, and $12.5 million during fiscal 2015.
Net income totaled $6 million, $18.8 million, and $4.1 million, respectively. The major fluctuations impacting net income were changes in
the value of LCEF’s investment portfolio, reflecting a loss of $6.6

2016 Convention Workbook