LCMS Convention Workbook St. Louis, Missouri — 2013, Page 123

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SYNOD REPORTS
avenue provides its own set of opportunities for identifying individuals who have a passion for Christ-centered stewardship and helping
them create lifetime gift plans.
The Foundation’s annual Ministry Report with supplemental
information, updated financials, and distributions appears on the
Foundation’s Web site at www.lcmsfoundation.org. The Foundation’s
audited financial statements are available on request.
As it enters the next triennium, the Foundation rejoices in the enormous blessings of the past and looks forward confidently by God’s
grace to the future.
Wayne Price, Interim President
R6-05

Lutheran Church Extension Fund
Organization Mission Statement
To support the Church in fulfilling its mission of sharing the Gospel
of Jesus Christ by being a Christ-centered servant partner of the LCMS,
ensuring that funds and services are available now and in the future.

The Lutheran Church Extension Fund (LCEF) is honored to serve
and support LCMS ministries in building the kingdom of Christ.
The country continues to be impacted by the global recession of
2008 and 2009 and the slow economic recovery. Yet the Lord has
blessed LCEF with many opportunities to walk alongside ministries
that are adjusting to economic and cultural challenges. We are confident He will provide the resources and solutions needed to effectively
fulfill His mission of sharing the Gospel.
As unemployment increased and remained elevated, contributions to a number of congregations and other ministries decreased
and school enrollment declined, presenting a significant challenge to
all. As a result, the level of LCEF’s loan delinquencies and impairments increased. LCEF expended considerable time and resources to
work with these challenged ministries. We are pleased to report that
these efforts resulted in a return to prerecession delinquency levels,
and loans that have been restructured are returning to current status.
Key financial and ministry highlights as of Dec. 31, 2012, are
listed below. For more current information, visit lcef.org or call
800-843-5233.
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Total Assets. As a result of the recession, ministries have delayed
building projects, and the demand for loans has decreased significantly.
To maintain the appropriate balance of loans and investor payables,
LCEF limited growth in investor payables area. Total assets were $1.82
billion, a level comparable to the previous three fiscal years.
Loans Receivable. Loan demand was such that new loans were funded
from the principal repayments on existing loans. Accordingly, the loan
portfolio decreased to $1.423 billion from a high of $1.526 billion as
of June 30, 2010.
Loan Delinquencies. Providing ministries time to address the issues
causing delinquencies and restructuring the terms of the loans, the percentage of loan delinquencies returned to a historically normal level
of between 2% and 3%. Since our last report to the Synod, LCEF put
aside considerable funds to ensure the loan-loss reserve is adequately
capitalized.
Capital to Asset/Liquidity Ratios. LCEF is focused on ensuring it
has a strong capital position and adequate liquidity. LCEF improved
its capital position to 9.79% (exclusive of its loan loss reserve) from
8.85% at June 30, 2010, an increase of 0.94%. Inclusive of the loan
loss reserve, the capital ratio improved to 11.80% from 10.17% as of
June 30, 2010. It should be noted that the FDIC considers a strong
capital ratio for financial institutions better than 8%. LCEF’s level of
cash and investments as a percentage of its outstanding investor payables totaled 23.7%, an increase from 15.7% as of June 30, 2010. A
liquidity ratio of 20% is considered a strong ratio within the financial
industry.

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Low Interest Rates. The Federal Reserve lowered interest rates several times in an effort to stimulate the economy. Since LCEF’s sets
rates on a combination of the cost of funds and prevailing market interest rates, ministries have had an opportunity to borrow at historically
low levels.
• Investor Payables. Loyal investors continued to provide funds to provide LMCS ministries financial resources that support their efforts to
expand God’s kingdom. While the investor payable portfolio of $1.6
billion is slightly lower than the previous three years, LCEF is blessed
by more than 51,000 primary investor relationships. Investors in the
easy-access StewardAccount®, introduced in 2000, have invested in
excess of $500 million.
Distribution of Operating Results. In fiscal years 2011 and 2012, LCEF
was able to return excess earnings to the Synod and partner districts. In
2011, more than $701,400 was distributed; in 2012, more than $1.65
million was shared.
Reorganization and Branding. To better address the changing needs
of the Synod’s ministries and support the ministries impacted by the
economic downturn, LCEF restructured its national-office operations,
experiencing an increase in efficiencies and a reinvigorated mission
and brand. The updated logo and purpose statement (shown below) is
an opportunity to generate more excitement, reach new partners, and
more effectively serve the LCMS.

Operational Summary
2009–2010

Total assets as of June 30, 2010, the end of LCEF’s fiscal year,
reached $1.81 billion, with $1.57 billion in investor payables and
$160 million in net assets. Strong investment returns and operating
efficiencies resulted in net income of $10.6 million.
Although requests for loans slowed during the 2010 fiscal year,
LCEF funded loans requested by LCMS congregations, schools,
missions, and other organizations totaling $165.9 million, with $30
million for rostered church-worker loans. The total loan portfolio was
valued at $1.53 billion.
Like many financial institutions, LCEF experienced an increase
in delinquent and impaired loans (defined as a loan placed on nonaccrual status or with restructured terms). In response, LCEF added
$13.5 million to LCEF’s loan-loss reserve to provide for potential
loan losses. At fiscal 2010 year-end, delinquencies totaled 7.2% of
the loan portfolio, up from 6.4% in fiscal 2009 and 2.7% in 2008.
The economic recession impacted funds LCEF holds in investments that are set aside to meet loan disbursements and to provide
operational funds for redeemed notes as needed. To assist management, in April 2010, the LCEF Board of Directors established a Board
Investment Committee. LCEF worked with outside professional
financial advisors to construct and maintain a diversified, conservative, and prudent investment portfolio.
In May 2011, LCEF responded to several natural disasters that
impacted many LCMS members and congregations. Through LCEF’s
Natural Disaster Loan Program, ministries and rostered church workers in areas declared a natural disaster area by a local, state, or national
entity were eligible to receive 0% interest-rate loans that required no
payment during the first 12 months of the term. In addition, LCEF
waived the administrative fees for Laborers For Christ projects
and Architectural Advisory Committee Site and Facility Analyses.
Through this program, LCEF assisted, among others, Immanuel
Lutheran Church and Martin Luther School in Joplin, Missouri, and
St. John Lutheran Church, Hillsboro, North Dakota.
LCEF’s Rostered Church Worker Loan program adapted to
changes in the home-lending industry as a result of regulations implemented after the credit crisis. The SAFE Act eliminated organizational
exemptions available to LCEF, which resulted in increased licensing
fees, and subjected all loan originators to state-specific testing and
2013 Convention Workbook