A bank's earnings performance has an effect on its long-term survivability. 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. Losses, on the other hand, reduce a bank's ability to do those things.
Farmers and Merchants State Bank of Alpha did below-average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.
One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Farmers and Merchants State Bank of Alpha's most recent annualized quarterly return on equity was 6.10 percent, below the national average of 8.10 percent.
The bank reported net income of $257,000 on total equity of $4.3 million for the twelve months ended December 31, 2017. The bank had 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.