Metropolitan earnings rose sharply in the third quarter of 2026 as loan growth, lower funding costs and a wider interest margin lifted net income to $32.4 million, or $2.58 per diluted share. Results released on October 20, followed by an October 21 earnings call, also showed strong deposit growth. Management nevertheless expects a lower fourth-quarter margin as some benefits from loan payoffs fade.
Key Takeaways
- Net interest income increased 26.3% year over year to $97.6 million.
- Deposits grew faster than loans during the quarter, supporting balance-sheet expansion.
- Management expects a fourth-quarter margin of 4.15%–4.20%, below the reported third-quarter level.
Table of Contents
- Metropolitan earnings benefit from funding costs and loan fees
- Deposit growth outpaces lending, but the pace may ease
- Lower expenses support profit as credit measures diverge
- Dividend rises while buyback capacity remains
- Conclusion
Metropolitan earnings benefit from funding costs and loan fees
Metropolitan Bank Holding Corp.’s third-quarter 2026 results announcement showed net income rising from $19.2 million in the second quarter and $7.1 million a year earlier. Diluted earnings per share increased from $1.54 and $0.67, respectively.
Net interest income rose 7.9% sequentially, while net interest margin widened 28 basis points to 4.36%. The company attributed the improvement to higher yields on loans and securities, lower funding costs, and elevated prepayment penalties and deferred-fee recognition associated with loan payoffs.
Those payoff-related benefits make the reported margin a higher benchmark than management’s underlying estimate. On the earnings call, management put normalized margin at approximately 4.20%–4.25% and guided to 4.15%–4.20% for the fourth quarter. It still forecast full-year net interest income growth above 20%.
| Item | Details |
|---|---|
| Annualized return on average equity | 13.1% in Q3 2026, versus 8.0% in Q2 |
| Effective tax rate | 29.5%, versus 31.1% in Q2; an investment tax credit purchase program contributed to the decline |
| Company total risk-based capital ratio | 13.9% at September 30, 2026 |
| Allowance for credit losses | $64.2 million, up $2.2 million from June 30 |
Deposit growth outpaces lending, but the pace may ease
Loans reached $7.5 billion at September 30, up $205 million from June and $723.6 million, or 10.6%, from year-end 2025. Nearly $1 billion of third-quarter originations was substantially offset by about $800 million of payoffs, paydowns and prepayments. Management maintained its expectation for approximately $1 billion of full-year loan growth.
Deposits increased $589.1 million during the quarter to $8.3 billion, bringing year-to-date growth to 12.8%. Chief Financial Officer Daniel Dougherty said the EB-5 business accounted for 75% of the quarterly increase. Noninterest-bearing deposits rose about $200 million, helping reduce total deposit costs by eight basis points to 2.49%.
Management cautioned that the unusually strong noninterest-bearing deposit increase would be difficult to repeat. Dougherty nevertheless expects seasonal municipal deposits to return in the fourth quarter and said the bank could allow $400 million of short-term investments to run off to fund growth.
Lower expenses support profit as credit measures diverge
Noninterest expense fell $2.3 million from the second quarter to $49.5 million, reflecting lower other operating expenses, professional fees and technology costs, partly offset by higher deposit-related program fees. Expenses remained $3.7 million above the year-earlier quarter. Management expects deposit-related fees to rise approximately 25% in the fourth quarter.
Nonperforming loans were 0.95% of total loans, up from 0.91% in June but below 1.20% a year earlier. The sequential increase primarily reflected one commercial real estate loan entering nonaccrual status. Annualized charge-offs were 18 basis points.
Dougherty said legacy problem credits were progressing through restructuring or legal processes and that he expected recoveries in the fourth quarter. Those recoveries remain management expectations rather than completed outcomes.
Dividend rises while buyback capacity remains
The board declared a quarterly dividend of $0.40 per share on October 19, a 14% increase. The company also repurchased approximately $10 million of shares during the quarter and had $40 million of authorization remaining.
Management said it intended to continue repurchases. The remaining authorization provides capacity, however, rather than a commitment to buy a fixed amount within a specified period.
Conclusion
The fourth quarter will test whether continued loan growth and deposit gathering can sustain earnings as payoff-related margin benefits moderate and deposit-related fees rise. Management’s 4.15%–4.20% margin guidance and approximately $1 billion full-year loan-growth target provide the next benchmarks.
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