How profitable a bank is has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.
ABC Bank scored 14 out of a possible 30 on Bankrate's test of earnings, lower than the national average of 15.12.
Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for ABC Bank was 6.23 percent, below the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank earned net income of $2.5 million on total equity of $40.7 million. The bank had an annualized return on average assets, or ROA, of 0.72 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.