A bank's ability to earn money has an effect on its safety and soundness. Earnings may be retained by the bank, increasing its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand economic shocks. However, banks that are losing money are less able to do those things.
Farmers State Bank fell behind the national average on Bankrate's earnings test, achieving a score of 6 out of a possible 30.
One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Farmers State Bank's most recent annualized quarterly return on equity was 2.68 percent, below the national average of 8.10 percent.
The bank earned net income of $105,000 on total equity of $3.9 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.32 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.