“We Preach Christ Crucified” Organization Mission Statement To support The Lutheran Church–Missouri Synod by ensuring that financial resources and related services are available now and in the future. Our vision of growing ministry opportunities lives through our core values: be faithful; pursue excellence and innovation; inspire belief through partnerships; endure balancing resources and risk; and learn continually. Despite the pandemic and economic challenges, Lutheran Church Extension Fund (LCEF) remains in a strong financial position and has joyfully fulfilled its commitment to provide the financial resources necessary to support the church in her work. Below is an overview. More details can be found in the Offering Circular and Ministry and Business Plan, published annually.
Financial Trends Total assets as of Dec. 31, 2022, amounted to $2.014 billion, a decrease of $54.5 million from June 30, 2022. The decrease was due primarily to seasonal withdrawals on institutional Steward Account products.
LCEF continues its commitment to a strong capital and liquidity position. Liquidity on Dec. 31, 2022, amounted to 31.8 percent of notes and support dollars payable. Notes and support dollars totaled $1.765 billion and have decreased $71.4 million since June 30.
LCEF achieved operating income totaling $2.1 million for the period ending Dec. 31, 2022, a decrease from $3.5 million the prior year. The decline is the result of a contraction in net interest income as loans lag re pricing to the increase in cost of funds. Net interest income will improve going forward as annually adjustable loans re price to the increase in the cost of funds. The operating income goal for the end of the year is $5.4 million. Net loss for the period ended Dec. 31, 2022, totaled $8.7 million compared to net income of $7.5 million the prior year. The decline is the result of unrealized losses on the investment portfolio. The net income goal for the end of the year is $9.5 million. LCEF’s capital ratio as of Dec. 31, 2022, was 10.51 percent compared to 12.62 percent a year ago. The capital-to asset goal for the end of the year is 10.91 percent.
The remedies included the following: • A total of 258 loans with an outstanding principal balance of $400.3 million were approved for some form of relief
- A total of $8.5 million in foregone principal and/or principal and interest payments (P&I) due from the borrowers
- 30 COVID-19 lines of credit totaling $3.5 million
- 11 COVID-19 term loans totaling $695,000
As of June 30, 2021, all loans that requested and received partial or total payment defer ral have reached the expiration of the initial period for which the relief was granted. The total outstanding balance of those loans was $400.3 million, with the following results: • A total of 186 loans totaling $244.3 million in outstanding balances agreed to return to regular P&I payments.
- A total of 72 loans totaling $156 million in outstanding balances requested extended relief for an additional 90 days.
Of the loans approved for extended relief beyond the initial 90day period, 47 loans totaling $91.5 million in outstanding balances agreed to return to regular P&I payments, and 25 loans totaling $64.5 million were unable to return to regular payments of P&I.
Loans LCEF supported ministry expansion by closing over $1.4 billion of loans over the past four years. LCEF continues to track loans in three categories: congregation lending, national lending (institutions, agencies, and RSOs), and roster ed church worker lending. It should be noted that congregation lending, which is still strong, continues to decline as an overall percentage of the portfolio. For fiscal 2022, congregation lending totaled $896.1 million, or 64 percent, of the total loan portfolio. Ten years ago, congregation lending accounted for 76 percent of the total loan portfolio. During the same period, national lending went from 14 percent of the portfolio to over 25 percent, with over $352 million in total loans at the end of 2022. Likewise, roster ed church worker lending has continued to balloon from 4 percent of the portfolio a decade ago to now over 12 percent of the portfolio and over $174 million in total loans. After enjoying years of loan growth (2017–20), the pandemic brought tightening and a slowdown of lending for fiscal years 2021–22, as repayments significantly outpaced new lending. LCEF is happy to report that that trend is quickly reversing as the church is getting back to work expanding its footprint around the globe.
COVID Response and Support Lessons learned following the 2008–09 financial crisis compelled LCEF to respond to the economic threats of the pandemic quickly and pro actively. The initial remedies made available to LCEF borrowers included modification of existing loans to provide partial or total defer ral of monthly payments, freeing up cash resources for the borrower’s use to meet other obligations. In other cases, LCEF made lines of credit or term notes available with expedited underwriting.
The 25 loans needing support beyond the second round of relief over the following months all returned to regular payments of P&I. LCEF, its borrowers, and the church survived the pandemic with little harm to ministry programs and finances. An initiative-taking approach on the part of LCEF in reaching out to its borrowing base coupled with efforts of the federal government to support payrolls and the conservative nature of most LCMS ministries allowed the church to move forward from the pandemic poised for continued ministry in the future.
Strategic Plan Prior to the pandemic, the LCEF Board of Directors was undertaking strategic conversations with the goal of moving LCEF beyond the successes of the past. The board members believe they, and the organization, have a role and responsibility to help grow the church. The board believes that is accomplished through the objectives and duties of the church extension fund within the Synod. Yet those “financial resources and related services” must never become static and stagnant. LCEF must be dynamic and responsive to the needs and opportunities before the church as it engages the world with the Gospel. The strategic plan establishes a three-year vision: Be the trusted partner in providing solutions that inspire ministry, innovation, and growth. The primary focus of the strategic plan is five three-year objectives and 24 initiatives that prioritize and establish the future work and direction of LCEF. To ensure the future success of growth initiatives that move LCEF beyond where we are today, we must strengthen our core and prepare the organization for the innovation and change required to successfully implement growth initiatives that provide improved solutions, moving LCEF beyond our current model to a place where we help grow the church through expanded and improved “financial resources and related services.” That work is underway. The three-year objectives set the overall direction for the work outlined in this plan. These five objectives receive prior it iz ation of resources and efforts as they enable us to achieve our strategic and growth initiatives well beyond the duration of this plan. Each objective is broad in scope and includes operational objectives necessary for success. The three-year objectives are: • Continuous Improvement
- Increase Investment in Core Technology
- Transform Identity and Position
- Develop Key Partnerships
- Access to Greater Financial Resources
The plan also includes financial growth drivers that focus on increasing the total loan portfolio to $1.85 billion by the end of fiscal 2025. This would be supported by $2.5 billion of total assets. Growth will come through the expansion of products that better serve congregations, schools, organizations, and workers of the church. LCEF is focused on people, processes, and technology as we endeavor to provide products and services that expand the work of the church. Updating our core banking system, providing digital account creation, streamlining underwriting and loan processing, and improving the customer experience for both investors and borrowers remains our top priority.
Supporting the Work of the Synod Over the triennium, LCEF has given special consideration to Resolution 8-03, “To Ensure Timely and Transparent Financial Report to the Synod,” and Resolution 9-06, “To Add to Clarify Access by the Board of Directors to Information of Synod Agencies,” both of which were passed at the 2019 Synod Convention. LCEF makes an annual disclosure of its financial position through an audit, the Offering Circular, and the annual report shared with its members and available via its website. LCEF has satisfied all requests for information from the LCMS Board of Directors, assuring their oversight responsibilities are carried out with the requested information, per the bylaw. LCEF continues to find ways to support the mission priorities of the Synod and the work of the national, international, and pastoral education offices. Noteworthy endeavors of the past triennium include providing grant dollars to support “Set Apart to Serve” resources, a property purchase in Uruguay, expansion of a children’s home in Tanzania, and, most significantly, a $1 million grant to support the Soldiers of the Cross–Amplified program during the pandemic. New international loan opportunities are being considered in collaboration with Synod. LCEF continues to provide Mission In Site resources that give meaningful demographic insights into future ministry expansion. LCEF is working with the church planting initiative to evaluate and identify sites while creating financial models that better support new starts. Likewise, as the Synod considers ways to launch new Lutheran schools, LCEF is committed to providing financial and other resources to assure success. LCEF is working to support church workers through special loan and investment products as well as integrating worker wellness resources into its processes. The launch of a new investment product to establish a loan pool offering below-markets rates to support church workers is an important way LCEF will address home ownership and debt challenges some workers face. Leadership development remains critical to the future success of LCEF as church workers and laity consider creative ways to extend the mission of serving the church and the world. Supporting the development of leaders continues to be explored through partnerships
with Synod entities and universities. The impact of LCEF’s work and the breadth of its partnerships are highlighted in the publication Interest Time. Detailed information about LCEF products and activities are available at lcef.org. Bart Day, President and CEO