How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital buffer, or use them to address problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, diminish a bank's ability to do those things.
On Bankrate's earnings test, Farmers and Merchants State Bank scored 22 out of a possible 30, exceeding the national average of 15.12.
Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one widely used measure of a bank's earnings. Farmers and Merchants State Bank's most recent annualized quarterly return on equity was 13.36 percent, above the national average of 8.10 percent.
The bank reported net income of $1.7 million on total equity of $13.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.75 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.