How profitable a bank is 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 better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.
On Bankrate's earnings test, Farmers and Merchants State Bank scored 26 out of a possible 30, above the national average of 15.12.
One key measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Farmers and Merchants State Bank's most recent annualized quarterly return on equity was 18.17 percent, above the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank reported net income of $2.0 million on total equity of $11.2 million. The bank had an annualized return on average assets, or ROA, of 1.91 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.