A bank's profitability affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to address problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses diminish a bank's ability to do those things.
Farmers and Merchants Bank beat the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.
One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The most recent annualized quarterly return on equity for Farmers and Merchants Bank was 7.70 percent, below the national average of 8.10 percent.
The bank reported net income of $3.3 million on total equity of $42.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 1.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.