A bank's profitability has an effect on its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.
Bank 2 received below-average marks on Bankrate's earnings test, achieving a score of 14 out of a possible 30.
Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Bank 2 was 6.86 percent, below the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank earned net income of $1.2 million on total equity of $18.0 million. The bank had an annualized return on average assets, or ROA, of 0.89 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.