The Loan Deposit Program (LDP) is an important part of the financial stewardship of the Catholic Church in southeast Michigan. It is a cooperative savings, investment, and lending program consisting of deposit and loan accounts managed by the Archdiocese for the benefit of parishes, schools, and other Catholic organizations, each of whom earns interest on their deposits. These funds make it possible for the Archdiocese to provide loans to these depositors. This deposit program is not a federally or state-regulated bank and there are no federal bank-insured (FDIC) deposits.
Many U.S. dioceses have financial mechanisms like the LDP through which the monetary resources of the diocese, parishes, schools and other Catholic entities are internally deposited, enabling these institutions to obtain loans at lower interest rates and with better terms than available from commercial sources.
According to the audited fiscal year June 30, 2018 report, the archdiocese’s LDP has about $236 million in deposits, the majority of which are from parishes and schools. The LDP has approximately $49 million in loans to parishes, independent Catholic schools and other Catholic organizations. The LDP also has loans to internal archdiocesan funds in the amount of $25 million which are not reported on the financial statements since generally acceptable accounting practices (GAAP) require the loans to be eliminated in consolidated financial statements.
For nearly 80 years, the LDP has been a source of financial strength and stability for the archdiocese, our parishes, schools and other Catholic organizations. Similar to other areas of archdiocesan finances, the LDP has strict guidelines and is independently audited annually. Reforms to lending practices and interest rate adjustments are among several new policies, procedures and oversight measures that have helped stabilize the LDP over the last several years.
Because the financial resources of our archdiocese come as gifts from generous and faithful parishioners, it is important that we are accountable as faithful stewards of the community’s resources.
Frequently Asked Questions
What is the Loan Deposit Program’s primary income source? How does it work?
LDP assets in excess of the loans it makes are primarily invested in commercial financial markets. Interest earnings from loans to parishes, schools and Catholic entities was $1.6 million in the fiscal year ending June 30, 2018. Interest and dividend income from the investment portfolio was $2.8 million in the fiscal year ending June 30, 2018.
Effective October 1, 2018, Archbishop Vigneron accepted the recommendation from the Loan Deposit Program Committee and Archdiocesan Finance Council to increase the deposit savings annual interest rate .125 percent from .50 percent to a new rate of .625 percent. The last change to the interest rate was in 2012. The increase signals that the archdiocese and its parishes, schools and ministries have reduced the LDP deficit over the last decade, which is contributing to the overall health of parishes in the archdiocese.
In the fiscal year ending June 30, 2018, $1.8 million was paid in interest on LDP savings deposits. The interest rate charged on new LDP loans is currently 5.5 percent per annum.
Who started the Loan Deposit Program? Why and when?
Cardinal Edward Mooney, Detroit's first Archbishop, started the LDP during the Great Depression. After becoming Archbishop in 1937, Cardinal Mooney became increasingly concerned about parishes borrowing from commercial lenders and falling behind or defaulting on their loans. Motivated to prevent banks from foreclosing on and owning sacred worship space, Cardinal Mooney envisioned the LDP as a way to enhance and stabilize the financial assets of the Archdiocese, parishes and schools, managing and investing the funds for the common good, rather than having Catholic entities individually borrow from banks with limited recourse if they were unable to pay. Funds in the LDP are invested on behalf of its depositors, with each entity retaining a separate account with separate ownership and access to its funds.
Is the LDP unique to the Archdiocese of Detroit?
No. Many dioceses in the United States rely on internal, benevolent depository programs like the LDP in which depositors, including parishes, schools, and other Catholic entities, earn interest on their savings, while having access to capital through loans from the same source. These diocesan programs enable better diocesan financial management and limit the exposure of individual parishes and schools to commercial lenders.
How much is in the LDP?
The assets of the LDP are its loan receivables from borrowers as well as its cash and invested assets. As of its most recent audited financial report for the fiscal year ending June 30, 2018, the LDP has $232 million in total net assets, consisting of $38 million in net collectible loan receivables, $147 million held by investment managers, and a $41 million cash balance.
What are the sources of LDP deposits?
The LDP has $245 million in deposits. Of that total, parishes and schools have $189 million on deposit. Catholic cemeteries have $25 million in deposits, and other Catholic enterprises in southeast Michigan have deposited $22 million. These deposits are considered liabilities because they can be withdrawn.
What other Catholic organizations have LDP accounts?
Sacred Heart Major Seminary, various religious orders, and Catholic youth organizations in southeast Michigan are examples of other Catholic entities maintaining LDP accounts.
Who has loans from the LDP? What is the status of those loans?
There are approximately 49 LDP loans to parishes, parishes with affiliated schools, independent Catholic schools, Catholic organizations and internal archdiocese accounts. Outstanding loans to all Catholic institutions noted above total approximately $74 million.
Of the $74 million in total gross outstanding LDP loans, about $36 million is being reserved for these accounts, which are unlikely to be collected in full. The Archdiocese made this accounting allowance (a non-cash charge) of $36 million to address the possibility that some LDP loans may not be paid in full. Interest charges are not accruing on nonperforming loans.
As of June 30, 2018, the $36 million in reserved funds resulted in the LDP having a net deficit in assets totaling about $20 million due the large amount of uncollectable loans.
The $36 million accounting allowance for uncollectible loans was determined through a review of outstanding LDP loan balances and the financial condition of the related parishes and other organizations. The $36 million total is considered adequate to cover all possible uncollectible LDP loans as of June 30, 2018.
How have LDP funds been used?
LDP loans to parishes and schools have typically financed renovation and construction projects to upgrade or build parish life centers, gymnasiums, multipurpose additions, and faith formation offices. LDP loans also have facilitated repairs to roofs, parking lots, boilers, and other property needs. From the mid-1990s, LDP loans were made to stand-alone Catholic schools and parishes with struggling schools.
Is the LDP making loans?
Yes, the LDP is currently making loans to parishes, schools, and cemeteries, primarily for capital improvement projects. The LDP is no longer making loans to cover operating deficits.
What has the Archdiocese done over the last several years to stabilize the LDP?
In November 2010, Archbishop Vigneron established new LDP policies and procedures, and established a LDP Committee to provide financial oversight of the LDP:
- All loans were reviewed to determine their repayment status.
- Best practices and lending criteria were established for all new loans.
- LDP interest rates are reviewed quarterly and adjusted periodically.
The LDP Committee is comprised of members of the archdiocesan Finance Council and the College of Consultors. The committee meets regularly and recommends interest rate changes, new loan requests, and loan modifications to the Finance Council. The Finance Council is a nine-member committee comprised of lay financial experts and clergy who provide advice to Archbishop Vigneron and oversight on financial matters pertaining to the Archdiocese. The College of Consultors is the priest council of advisors to the Archbishop on administrative and financial issues.
Since the implementation of the new policies and procedures no new sub-standard loans have been made.
Because of the implementation of the new policies and procedures, as noted above, along with good returns on invested funds, the Net Asset Deficit has been reduced from a negative $64 million as of June 2010 to a negative $20 million as of June 30, 2018, an improvement of $44 million.
Have any parishes or schools been restricted from accessing their LDP deposits? Can they make withdrawals for things like roof and parking lot repairs or school year startup expenses?
LDP depositors continue to have access to their funds for appropriate purposes. The LDP has had adequate liquidity to satisfy all depositor withdrawal requests.
Do parishes and schools have deposits and debts outside the LDP?
Very few parishes have outside debts or loans with commercial banking institutions. Those who do were approved by the College of Consultors. Parishes are required to deposit into the LDP all parish funds in excess of 60 days of parish operating expenses.
Parishes and schools can continue to make investment deposits into the Archdiocese of Detroit Endowment fund in which 77 parishes, schools, and organizations have 90 accounts in the fund totaling $66 million. These funds are invested in the market with the goal of getting a better rate of return but can experience loss of principle in a down market.
Some parishes and schools collectively owe the Lansing-based Michigan Catholic Conference (MCC) more than $4.7 million in overdue healthcare benefit payments for priests as well as pension and healthcare benefits for lay people in parish service, and for property and liability insurance coverage. The MCC operates the retirement and benefit plans covering all lay church employees in the state. The MCC also facilitates property and liability insurance for parishes and schools.
The Archdiocese is addressing these and other debts outside of the LDP in the financial planning it is facilitating with parishes.
Who manages LDP assets and investments?
The LDP is part of the archdiocesan general investment fund and is managed by the archdiocesan Finance Council's investment committee. The Finance Council manages LDP investments, assisted by CapTrust, an investment consulting firm.
Where are LDP deposits invested?
LDP deposits are invested in a diverse portfolio of domestic equity, international equity, fixed income, and alternative asset funds. Because the LDP is a cooperative depository and lending program operated for mutual benefit, deposits into the LDP make it possible to extend loans to depositors. In this regard, LDP deposits are invested in loans made to parishes, schools, the Archdiocese, and other LDP borrowers.
Who is the Loan Deposit Program auditor?
Plante & Moran, PLLC annually audits the financial statements of certain Archdiocesan funds including its central operations, designated funds, properties, the Loan Deposit Program and archdiocesan collections. The Archdiocese has consistently received unqualified (also known as clean) audit opinions from Plante & Moran. The most recent annual report, in its entirety, can be found here on our website.