A bank's profitability affects its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.
Bank of Modesto scored 2 out of a possible 30 on Bankrate's earnings test, less than the national average of 16.52.
One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Bank of Modesto's most recent annualized quarterly return on equity was 5.22 percent, below the national average of 9.28 percent.
For the twelve months ended June 30, 2017, the bank earned net income of $133,000 on total equity of $5.6 million. The bank had an annualized return on average assets, or ROA, of 0.55 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.