A bank's ability to earn money affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Conversely, losses diminish a bank's ability to do those things.
Preferred Bank received below-average marks on Bankrate's earnings test, achieving a score of 8 out of a possible 30.
Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one key measure of a bank's earnings. Preferred Bank's most recent annualized quarterly return on equity was 3.56 percent, below the national average of 8.10 percent.
For the twelve months ended December 31, 2017, the bank recorded net income of $194,000 on total equity of $5.4 million. The bank experienced an annualized return on average assets, or ROA, of 0.37 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.