Reporting Coop Success In the Glare of Live Market Updates

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August is the season for reporting quarterly earnings by all public companies. Even credit unions must file their 5300 financial updates with the regulator which are then open to the public.

These many forms of quarterly financial reports are required by law and regulation. For stock companies, shareholders, traders, investment funds, and market analysts, the daily news is dominated by the ups, or downs, in company performance. Here is one example of this reporting frenzy from 2023:

Earnings season marches on

This week brings another busy slate of quarterly earnings reports, from tech giants to restaurant stocks. Apple and Amazon are the biggest names due up, along with Starbucks and CVS Health. Earnings this season have so far defied expectations and have been somewhat stronger than expected. Here are the big names on deck . . .

None of those big names would be credit unions. Credit unions are required in their bylaws to post a monthly financial report in a conspicuous place in the credit union and file the quarterly 5300, but few will provide a public description of these results.

Credit unions have shareholders, as do all public companies. The members’ interest in the performance of their firm is the same as the owners of a bank or any other firm. How is my ownership benefitting me versus other options?

For stock companies, the market readily evaluates this performance as documented by changes in the daily stock price. Analysts evaluate the current results and make their “calls” about whether a stock is a buy, hold, or sell. Explaining a firm’s quarterly performance to all market participants is an important skill for CFOs and CEOs of all companies, even the smallest.

Credit unions generally provide no such reports or future forecasts (guidance). There is no stock price to provide market feedback. But is the interest of the member-owners any less deserving than those of public companies? Is the responsibility to coop shareholders by the credit union’s professional staff any less than to a publicly traded or even a private firm?

When credit unions did speak up

In the March-April 2023 closures of three banks led by Silicon Valley’s failure, credit unions launched major PR campaigns to assure their members that they were sound. CEOs stated there were no parallel circumstances in the coop industry. Some credit unions devoted a major part of the Annual Meeting to this public concern. Some of these updates highlighted the credit union’s percentage of insured shares, capital levels, or liquidity. The message was to assure members the credit unions were able and willing to continue meeting their needs.

I believe each quarter’s financial filing is another opportunity for credit unions to tell their special story.

What do the numbers mean for me?

Numbers matter and presenting the credit union’s financial position and key trends is a beginning. The most important message, just like a public company, is to tell what the numbers mean to the individual owner.

How has the credit union enhanced the value it brings to members? What investments has the credit union made and what was the member benefit? As the interest rate environment remains high, what changes has the credit union made to its rates?

Members will assume their credit union is safe and sound, or they will have left. Credit unions will often announce events, such as branch openings, sponsorship with a local sports team or venue, and even the comings and goings of senior management. These PR events and community engagements matter but are not the same as the quarterly status report. At this time everyone presents their financial results—so how did our members specifically benefit?

The radical cooperative model

Since the 2008-2009 financial crisis, there has been a singular focus within financial systems on stability. Financial outcomes are all that matter. The more capital the better. The only equity that matters is net worth, not social responsibility.

Financial performance is evaluated by the money made, not by the people served. The relevance of a coop is its size, its growth, and its superior numbers. A credit union that focuses on what it helped members accomplish becomes a radical act.

Transparency is the key to member-owner confidence and trust. And competitive advantage. It is as important for coop leaders as it is for those whose performance is judged daily by the fluctuation of share price in the market.

However, credit union’s quarterly numbers are not merely about financial outcomes but for how the performance aligns with the aspirations of members. Coops should be presenting the values and partnerships that demonstrate their role in communities beyond conventional financial success measures.

We should be holding up a model that is better for individuals, especially those often unaware of better opportunities. The quarterly updates should show how a credit union’s purpose is more than making money. It is a report on the difference made for the members.

A renewed commitment to using numbers to say who we are

As all three major U.S. stock indices closed higher for July, the S&P 500 and the Nasdaq mark their fifth consecutive months of gains, and the Dow is riding a 14-day winning streak, its longest since 1987; however, cooperatives have a different benchmark to report.

Our momentum is not market-driven but member-focused. Instead of live market updates, we should be offering our reports of improved member lives and opportunities. That is the difference coops should make.

Author

  • Chip Filson

    A nationally recognized leader in the credit union industry, Filson is an astute author, frequent speaker, and consultant for the credit union movement. He has more than 40 years of experience in government, financial institutions, and business. Chip co-founded Callahan and Associates. Filson has held concurrent positions at the NCUA as president of the Central Liquidity Facility and Director of the Office of Programs, which includes the NCUSIF and the examination process. He holds a magna cum laude undergraduate degree in government from Harvard University. After being awarded a Rhodes Scholarship, he earned a master’s degree in politics, philosophy, and economics from Oxford University in England. He also holds an MBA in management from Northwestern University’s Kellogg School in Chicago.

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