A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.
Farmers and Merchants State Bank of Neola, Iowa scored 12 out of a possible 30 on Bankrate's earnings test, lower than the national average of 15.12.
Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Farmers and Merchants State Bank of Neola, Iowa was 5.96 percent, below the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank recorded net income of $375,000 on total equity of $6.4 million. The bank had an annualized return on average assets, or ROA, of 0.61 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.