How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Banks that are losing money, however, are less able to do those things.
Cottonwood Valley Bank underperformed the average on Bankrate's test of earnings, achieving a score of 6 out of a possible 30.
One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Cottonwood Valley Bank was 2.56 percent, below the national average of 8.10 percent.
The bank recorded net income of $119,000 on total equity of $4.4 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.36 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.