Synovus Financial Preferred Attractive After Rate Reset

Company Overview - Synovus Financial Corp. is the holding company for Synovus Bank, ranking as the 38th largest commercial bank in the U.S. with $59 billion in assets and 246 branches [3] - The company has issued a preferred stock, the Fixed-Rate Reset Non-Cumulative Preferred E, which was initially fixed and reset to an adjustable rate on July 1, 2023 [3][4] Preferred Stock Details - The E preferred stock has a yield of 8.507% based on a reference price of $25, combining a five-year Treasury rate of 4.38% and a spread of 4.127% [3] - The forward yield is approximately 8.3%, with the first payment at this rate scheduled for October 1, 2023, and an ex-dividend date of September 13, 2023 [3] - The E preferred became callable in July 2023, but the next call date and dividend reset will not occur until July 2029 [3] Comparative Analysis - Synovus' E preferreds yield 67 basis points lower than its D series, which floats based on SOFR and is expected to decline with Fed rate changes [4] - Other regional banks generally offer higher rates to attract investors, with Synovus' preferreds compared to those from Fifth Third Bancorp, Zions Bancorporation, Regions Financial, First Horizon, Banc of California, and KeyCorp [4] - The E preferred stock is expected to maintain a higher yield compared to floating rate securities if the Fed cuts rates significantly [4] Financial Metrics - Synovus maintains a Tier 1 capital ratio of 11.74%, which is above the regulatory minimum of 8.5% [6][7] - The net interest margin for Synovus in the second quarter was 3.20%, higher than the median for comparison banks [7] - The preferred stock is rated BB-, which is lower than some of its peers [6][7] Conclusion - The yield of over 8% on the E preferred stock appears attractive relative to the associated risks, suggesting a potential investment opportunity [8]