MetroCity's Tax Credit Lifts Third-Quarter Earnings
Net income rose to $24.3 million, or $0.84 a share, as a $4.0 million tax credit cut the effective rate to 13.1% even as noninterest income and net interest income receded.
MetroCity Bankshares, Inc. (MCBS), the Atlanta-based holding company for Metro City Bank, reported net income of $24.3 million, or $0.84 a diluted share, for the third quarter of 2026, up from $22.1 million, or $0.76 a share, in the second quarter.
The $2.2 million, or 9.8%, increase primarily reflected a $4.8 million decrease in income tax expense, including a $4.0 million tax credit benefit that cut the effective tax rate to 13.1% from 27.7%. That tax swing more than offset a $1.4 million drop in noninterest income, a $720,000 smaller recovery for credit losses, a $483,000 reduction in net interest income, and an $87,000 rise in noninterest expense.
Net interest income declined on a $56.2 million drop in average gross loans. Interest income fell $678,000, or 1.0%, to $69.7 million. Interest expense declined $195,000, or 0.7%, to $26.2 million on a $27.9 million decrease in average interest-bearing deposits and a $34.8 million decrease in average borrowings.
The net interest margin compressed 4 basis points to 4.07% from 4.11%. The yield on average interest-earning assets fell 5 basis points to 6.52% while the cost of average interest-bearing liabilities held at 3.36%. Average interest-earning assets declined $54.1 million.
Gross loans held for investment were essentially unchanged at $3.98 billion, down $3.8 million, or 0.1%, from June 30, 2026. Residential real estate loans fell $28.7 million and commercial and industrial loans $3.3 million, offset by a $16.0 million increase in commercial real estate and a $12.3 million increase in construction and development loans.
Deposits rose $72.7 million, or 2.1%, to $3.56 billion, led by a $45.3 million increase in noninterest-bearing deposits, $18.6 million in money market, $6.6 million in time, and $2.8 million in interest-bearing demand, offset by a $566,000 decline in savings. Noninterest-bearing deposits were $828.3 million, or 23.3% of total deposits, versus 22.4% at June 30, 2026.
Noninterest income fell $1.4 million, or 23.8%, to $4.4 million, primarily on lower gain on sale of SBA loans—sales of $9.7 million versus $27.1 million in the prior quarter—and a $743,000 unrealized loss on equity securities, offset by higher SBA servicing income and service charges. Mortgage originations rose to $85.1 million from $75.4 million; there were no mortgage sales in either quarter.
Noninterest expense was $20.0 million, up $87,000, or 0.4%, on higher salaries and employee benefits, advertising, occupancy and equipment, and data processing, partially offset by a decrease in merger-related expenses. The efficiency ratio rose to 41.81% from 40.08%.
The recovery for credit losses narrowed to $72,000 from $792,000 in the second quarter, with annualized net recoveries to average loans of 0.00% versus 0.01%. Nonperforming assets fell $3.2 million to $20.6 million, or 0.45% of total assets, on a $6.4 million decline in nonperforming loans, offset by a $3.2 million increase in other real estate owned. The allowance for credit losses remained 0.65% of loans.
Total assets were $4.60 billion at September 30, 2026, up $77.9 million, or 1.7%, from $4.52 billion at June 30, 2026, primarily on a $50.3 million increase in cash and cash equivalents and a $36.4 million increase in other assets related to income taxes receivable from the tax-credit utilization.
Annualized return on average assets was 2.12% and return on average equity was 16.97%.
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