A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.
On Bankrate's test of earnings, Bank 2 scored 14 out of a possible 30, falling short of the national average of 16.52.
Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Bank 2's most recent annualized quarterly return on equity was 6.15 percent, below the national average of 9.28 percent.
The bank earned net income of $531,000 on total equity of $17.5 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.78 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.