Capital Bancorp earnings declined in the third quarter of 2026, even as the bank’s adjusted profit and net interest margin improved. The company reported on October 26 that GAAP net income fell to $13.1 million, or $0.80 per diluted share, from $15.1 million, or $0.89 per share, a year earlier, while preparations for its pending merger with Peoples Bancorp added costs.

Key Takeaways

  • Core diluted earnings rose to $0.89, compared with $0.72 a year earlier, diverging from the decline in GAAP earnings.
  • Net interest margin widened sequentially, but deposits declined amid title-business seasonality and a large customer withdrawal.
  • The all-stock Peoples acquisition remains subject to approvals, with closing expected in the first half of 2027.

Capital Bancorp earnings show a GAAP-core split

Third-quarter GAAP net income also declined from $14.3 million in the second quarter. By contrast, core net income reached $14.7 million, up from $14.3 million sequentially and $12.2 million a year earlier.

The distinction reflects adjustments rather than two measures of the same reported profit. Capital’s non-GAAP core results exclude merger-related expenses and certain other items. The current quarter included approximately $1.6 million of merger-related expenses, while the year-earlier quarter benefited from approximately $3.5 million of after-tax income from the call of brokered time deposits, which was excluded from core results.

Noninterest expenses increased $2.5 million from the second quarter. Capital attributed the increase to strategic growth initiatives and merger-related costs. Excluding merger expenses, core noninterest expenses rose $1.0 million.

ItemDetails
Nine-month GAAP net income$39.4 million in 2026, versus $42.1 million in 2025
Nine-month GAAP diluted EPS$2.40 in 2026, versus $2.50 in 2025
Tangible book value per share$23.98 at third-quarter 2026 end, versus $21.33 a year earlier; a non-GAAP measure

Margins improve while deposit balances retreat

Net interest margin, which measures net interest income relative to earning assets, increased 17 basis points from the second quarter to 5.81%. Capital attributed most of the improvement to its Commercial Bank loan portfolio, with a further contribution from higher OpenSky balances. Excluding the card business, margin rose 14 basis points to 4.18%.

That sequential improvement did not restore year-earlier margins: the comparable third-quarter 2025 figures were 6.36% including cards and 4.66% excluding cards.

Total deposits fell $52.0 million during the quarter to approximately $3.32 billion. Capital cited an $89.3 million decline in title-business demand deposits, consistent with regular seasonality, and a $45.2 million reduction tied to one customer relationship. Excluding those two categories, deposits increased $82.5 million.

Fee income grew at an annualized rate of 18.7% from the second quarter, led by government lending revenue, loan servicing rights income, credit card fees and USDA fees. Fees represented 22.1% of total revenue.

Peoples transaction remains pending

The companies’ joint merger announcement sets an exchange ratio of 1.11 Peoples shares for each Capital share. The September 30 announcement valued the all-stock transaction at approximately $728.1 million, or $43.75 per Capital share, using Peoples’ specified historical share-price average rather than a fixed cash payment.

The acquisition is expected to close in the first half of 2027, subject to regulatory approvals, approval by both companies’ shareholders and other customary conditions. Capital also has a pending agreement to sell its North Riverside, Illinois branch, which remains subject to regulatory approvals and other closing conditions.

Next milestone

The next confirmed shareholder date is November 9, 2026, the record date for Capital’s declared $0.14-per-share cash dividend. Payment is scheduled for November 25.

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