Earnings season is upon us and the one sector that will take the spotlight more than any other this time around is financials. Not surprising. After 3 banks collapsed last month, the market has started to question the stability of the banking system. Reports will be complex this earnings season, and when I say complex, I mean there will be some nuances to keep in mind. Just looking at sales and earnings per share results can and will be deceiving, so here’s a guide to help.

Provision for loan losses will be the highlight of any financial institution and can drastically impact reported profits. This item is cash held by a financial institution in case borrowers are unable to repay existing loans. Each financial institution may call it differently. For example, Citigroup refers to this provision as Allowance for Credit Losses (ACL). Although these “losses” are, in a sense, unrealized, accounting rules require that they be expensed on the income statement, which could dramatically skew earnings per share downward. That doesn’t necessarily mean the financial institution is underperforming, but when adjusted earnings per share are reported, it usually causes a short-term shock to investors. The other side of this is also true. When the financial institution runs out of cash to cover potential credit losses, these are added back to the income statement, again causing a skewed result in terms of profits. Here are some financial institutions reporting on Friday and what to look out for.

1Q Estimates (Earnings Whisper)

JPMorgan Chase (JPM)

Estimated revenue: $36.04 billion

Adjusted EPS estimate: $3.44

JPMorgan could benefit from the flight of deposits away from community and regional banks. The bank’s business units are well diversified, which some investors see as an advantage, but it also allows them to expand into other areas of the…