When JPMorgan Chase reported its
So did Matt Selke, CEO of the $88 million-asset Pinnacle Credit Union in Atlanta.
Earnings season is a one-way firehose of information, according to Selke. Publicly traded companies, including banks, are required by the Securities and Exchange Commission to file earnings reports at the end of each quarter detailing the company’s performance. But not-for-profit organizations such as credit unions are under no such obligation. They are required to file call reports with their regulators, but credit unions don't host public calls for the investor and analyst community.
Selke follows some of the largest banks in the country to see how they are doing and what strategies they are using. He also simply finds the calls entertaining.
“I follow the big ones like Chase, and Citibank is always fun to hear about as they are — for lack of a better word — a clown show and still recovering from their troubles from way back,” he said. “Well Fargo is always fun to see what shenanigans they are trying to fix or how they’re trying to come back from the fraudulent accounts sales thing from a few years ago.”
Although banks and credit unions typically
Greg Kidwell, president of Pathways Financial Credit Union, a $600 million-asset lender in Columbus, Ohio, said he pays “casual” attention to bank earnings trends, and when he does it is typically the largest national banks, such as JPMorgan Chase or Bank of America.
“But I have never listened in on a bank earnings call,” Kidwell said. “What we really do pay attention to on a quarterly basis are the call reports of other credit unions in our peer group, so that we can get a sense of how our performance stacks up and to highlight areas that we might want to target in terms of performance improvement on our end.”
Many credit unions have sought expansion by purchasing banks, and those banks' earnings calls are valuable sources of data on potential acquisition targets.
“I really don’t watch bank earnings or financials very much — usually only in the event it’s a bank we might be interested in purchasing,” said Steve Swofford, president and CEO of the $1.4 billion-asset Alabama Credit Union in Tuscaloosa.
Swofford said he is only a casual observer of bank earnings, but he kept a close eye on
Large banks are worth watching because their bird's-eye view of national trends could uncover a risk that smaller banks and credit unions have yet to see in their local markets, according to Selke.
“For example, I just read that Chase earnings were lower than expected because they beefed up their loan loss reserves, which is interesting because delinquency has been so low,” he said. “But they must be seeing a different trend or preparing for a bad year next year, which is good to know. Maybe we will up our loan loss reserves to be conservative.”
Earnings calls can also be a chance for banks to get a read on the trends that matter most to investors and analysts. The calls are also a regular source of free press that credit unions don't get.
“I believe the credit union industry is hurt as a whole by not getting the mainstream press like the big banks, yet we also don't get the negative headlines ethier when there are bad years,” Selke said. “But who would the press cover? Navy Federal? State Employees in North Carolina? PenFed?”
Selke also pointed out that credit union earnings are public knowledge, and call report information is easily accessible on the National Credit Union Administration’s
“So it's not like people can't find earnings of their local bank or credit union. A lot of people just don't know where to look,” he said.
Many credit unions also stopped publishing quarterly newsletters that typically included updated financials because “nobody was reading them,” Selke said.
Kidwell from Pathways said he and CEO Mike Shafer spend a lot of time on the credit union’s financial performance from a board reporting and discussion standpoint. Additionally, he provides a monthly financial summary for the staff so that they understand their employer's financial performance.
“But the idea of having a quarterly earnings discussion for members definitely has me thinking,” Kidwell said.
Swofford said Alabama Credit Union’s annual meeting is its chance to converse with members on financials, new services and other issues, and that’s enough for him.
“I do visit with members regularly and my calls aren’t screened and hundreds of members have my cell number,” Swofford said. “It’s all part of being member owned. But the bottom line is I don’t really see the need for more disclosure.”
