Deloitte Offers Booklet to Help Execs Field Questions at the Annual

Every spring, many top corporate executives start to feel uneasy about the approach of the annual meeting. It's the one time of year when they face a possible grilling by investors over the company's performance.

For mortgage banking executives, the anxiety could be particularly severe this year because their earnings probably fell sharply in 1994.

Deloitte & Touche, the accounting firm, has prepared a booklet to help top managers in all industries anticipate the questions they may face, and has included a section on mortgage banking.

One of the likely questions, the booklet says, is about the impact of revisions in the accounting rule that covers the valuation of servicing rights. The rule was changed by the Financial Accounting Standards Board last month and could have a significant impact on reported earnings for some companies.

A question on FAS 65 posed by Deloitte: "Will such a revision impact the economics of the company's business or modify its strategic plan?"

The booklet also notes that last year's sharp rise in interest rates has reduced the profitability of marketing. Questions: "Does the company provide for losses related to the committed, or rate-locked, pipeline due to changes in interest rates? If so, how are the provisions reported?"

Some other questions posed by Deloitte:

*"How does the company evaluate its purchased servicing rights for impairment?"

*"Does the company sell loans with retained recourse risk?"

*"What is the company's foreclosure loss experience and how does it compare with that of the . . . industry?"

Investor relations counselors generally agree that the risk of embarrassing questions is relatively small at most meetings and that most questions will be about practical matters such as dividends and earnings. The risk, they say, is probably greater that a lot of preparation will go to waste because few if any questions will be asked.

Michael Seeley, president of Investor Access Corp., a New York investor relations agency, says: "The whole process, driven by fear, of anticipating what an antagonistic person might ask, could be turned into a constructive exercise."

Some counselors recommend that companies make sure questions are asked that will enable management to recite its accomplishments rather than simply providing attendees with a free lunch. This can be done, for example, by having questions asked by employee-shareholders.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER