A bank's earnings performance affects its safety and soundness. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. However, banks that are losing money are less able to do those things.
On Bankrate's test of earnings, Prime Meridian Bank scored 18 out of a possible 30, exceeding the national average of 15.12.
Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. Prime Meridian Bank's most recent annualized quarterly return on equity was 10.39 percent, above the national average of 8.10 percent.
The bank reported net income of $3.1 million on total equity of $32.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.94 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.