A bank's profitability affects its long-term survivability. A bank can retain its earnings, expanding its capital buffer, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.
Merchants Bank of Alabama beat the national average on Bankrate's test of earnings, achieving a score of 16 out of a possible 30.
Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Merchants Bank of Alabama was 7.04 percent, below the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank earned net income of $1.8 million on total equity of $25.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.66 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.