A bank's earnings performance has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.
The Farmers and Merchants Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating out the national average of 15.12.
One widely used way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. The Farmers and Merchants Bank's most recent annualized quarterly return on equity was 8.43 percent, above the national average of 8.10 percent.
The bank earned net income of $1.2 million on total equity of $14.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.11 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.