Rising inflation, hawkish comments from Federal Reserve officials and uncertainty around the next move on interest rates are reshaping how investors think about banks and insurers. Some stocks could benefit if higher rates support lending margins or investment income, while others may face pressure from funding costs and credit risks. This article focuses on three stocks from our Financial Sector screener that appear closely tied to these rate and policy trends. You will see how each stock is exposed to the current news backdrop so you can judge whether it fits your own risk and return expectations.

Metropolitan Bank Holding (MCB)

Overview: Metropolitan Bank Holding is a New York based commercial bank that serves small businesses, middle market firms, public entities, and individuals with a full suite of deposit accounts, real estate and commercial loans, and payment services, including cash management and card programs. The bank also supports specialized financing needs such as construction, multi family, and acquisition and renovation loans, alongside online and mobile banking.

Operations: Metropolitan Bank Holding generates all of its approximately US$312 million in revenue from banking activities in the United States.

Market Cap: US$1.15b

Metropolitan Bank Holding sits at the center of the rising rate story, with a loan book and deposit base that are highly sensitive to interest rate moves and a net interest margin that management expects to trend higher without assuming Fed cuts. The company is investing heavily in new technology and real time payment platforms, which could shift more of its income toward higher margin fees if execution stays on track. At the same time, investors need to weigh concentration in commercial real estate, a relatively low allowance for bad loans, recent insider selling, and ongoing regulatory and funding pressures. The combination of strong recent net interest income trends, dividend growth and a buyback program makes the risk reward profile worth a closer look.

Metropolitan Bank Holding’s rising net interest income, dividend growth and buyback program could be masking a very different story beneath the surface. Get the full context in the 3 key rewards and 3 important warning signs

Simmons First National (SFNC)

Overview: Simmons First National is a Pine Bluff based regional bank holding company that, through Simmons Bank, provides everyday banking services, a wide range of consumer and commercial loans, and wealth and insurance solutions to individuals and businesses across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas.

Operations: Simmons First National generates all of its approximately US$110.3 million in reported revenue from customers in the United States.

Market Cap: US$3.45b

Rising rate expectations put Simmons First National firmly on the radar for investors seeking direct exposure to higher net interest margins, with roughly half the loan book tied to variable rates and management actively using hedges and deposit pricing to manage swings in funding costs. At the same time, the bank is spending heavily on technology and talent and is still working through a period of weak profitability, so the 3.6% dividend yield and recent buybacks sit alongside questions about expense control, credit risk in commercial real estate, and the pace at which earnings may align with growth forecasts. How these factors fit together will depend on your risk appetite and investment time horizon.

Simmons First National’s combination of variable rate loans, hedging strategies and a 3.6% yield hints at a story investors may be only half seeing. Get the full picture in the 2 key rewards and 1 important warning sign

First Merchants (FRME)

Overview: First Merchants is a community focused financial holding company that provides everyday banking, mortgages, business lending, agricultural finance, and wealth management services to individuals and businesses across Indiana, Ohio, and Michigan through branches, online platforms, and mobile apps.

Operations: First Merchants generates about US$642.2 million in revenue entirely from community banking activities in the United States.

Market Cap: US$2.74b

First Merchants stands out as an Indiana based community bank whose loan book and deposit base tend to be very sensitive to interest rate moves, which can matter a lot when the Fed is talking tough on inflation. Analysts expect strong earnings and revenue growth, yet the stock trades meaningfully below one fair value estimate and on a lower P/E than many broader market peers, while still offering a 3.39% dividend yield and several years of dividend increases. At the same time, investors need to weigh a recent drop in profitability, rising non accrual loans after a couple of problem credits, and heavy insider selling in recent months. The recent First Savings acquisition and ongoing buybacks add another layer that close followers of First Merchants will want to unpack further.

First Merchants looks like a classic small bank story where the share price, earnings expectations and recent acquisition may not be telling the same story. Get the missing context in the analyst forecasts for First Merchants

The three banks covered here are a starting point, not the full story. The Financial Sector screener surfaces 13 more companies with equally compelling interest rate and credit narratives inside the Financial Sector (Banks and Insurers) screener. Use Simply Wall St to identify and analyze the exact catalysts, risk profiles and financial traits that matter most to you so you can focus on the highest conviction ideas in this group.

Take Control of Your Investment Journey

If Metropolitan Bank Holding or any of these companies sound like a great opportunity, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value the ideal entry point. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Seeking Fresh Alternatives Beyond Banks?

Some stocks are already building breakout momentum while others are still under the radar for now. Before the crowd catches up and ideal entry points start dropping, consider exploring alternative ideas.

• Explore resilient income streams by checking out 7 dividend fortresses which is built to highlight companies where yield and balance sheet strength move together.
• Look for early tech momentum by scanning 55 AI infrastructure stocks which focuses on businesses positioned around the backbone of AI growth.
• Review under followed growth stories inside 18 high quality undiscovered gems curated to surface financially solid companies still flying below most investors' radars.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.