A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in times of trouble. Obviously, banks that are losing money are less able to do those things.
The Farmers State Bank scored 18 out of a possible 30 on Bankrate's earnings test, beating the national average of 15.12.
One important way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The Farmers State Bank's most recent annualized quarterly return on equity was 8.70 percent, above the national average of 8.10 percent.
The bank earned net income of $653,000 on total equity of $7.9 million for the twelve months ended December 31, 2017. The bank reported 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.