A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, potentially making the bank better prepared to withstand financial shocks. Banks that are losing money, however, are less able to do those things.
Security Federal Bank scored 8 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 15.12.
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. Security Federal Bank's most recent annualized quarterly return on equity was 3.90 percent, below the national average of 8.10 percent.
The bank earned net income of $403,000 on total equity of $10.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.64 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.