A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better prepared to withstand economic trouble. Losses, on the other hand, take away from a bank's ability to do those things.
Farmers and Merchants Bank received below-average marks on Bankrate's earnings test, achieving a score of 2 out of a possible 30.
One important measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Farmers and Merchants Bank's most recent annualized quarterly return on equity was 0.14 percent, below the national average of 8.10 percent.
The bank recorded net income of $1,000 on total equity of $719,000 for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.01 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.