Marty Fridson is a leading dividend specialist and the editor of Fridson/Forbes Income Securities Investor; here, he looks to a pair of preferred stocks issued by regional banks.
Midland States Bancorp (MSBI) is a small, community-based, financial services-banking company with $7.58 billion in total assets as of 09/30/22. MSBI is based in central Illinois, serving retail customers, small businesses, and corporate clients throughout communities in Illinois.
The company offers a full range of financial services that include retail and commercial banking, equipment financing, and real estate construction lending, as well as wealth and treasury management.
The Midland States Perpetual Preferred Series A (MSBIP) is a fixed rate-reset preferred with a 7.750% dividend until the initial 09/30/27 call date. This issue may be redeemed in whole or part on 09/30/27 or any dividend payment date thereafter. If preferred shares are not redeemed in their entirety, the dividend then resets to the five-year U.S. Treasury rate plus 4.713%, resetting every five years.
MSBI reported 2Q 2022 net income of $23.5 million or $1.04 per share, beating analysts’ $1.01 estimates. Bottom-line results climbed 20.3% from a year ago on strong loan growth and higher net interest income. Revenue of $79.8 million also topped estimates.
Dividends on this preferred are qualified and taxed at the 15%-20% rate. This investment is suitable for medium- to high-risk taxable portfolios. Buy at $27.25 or lower for a 7.11% current yield and a 5.60% yield to call.
PacWest Bancorp (PACW) is a regional bank holding company, headquartered in Los Angeles, with $41.5 billion in total assets PACW is focused on relationship-based banking with small and middle-market customers, as well as venture-backed businesses nationwide.
The banking company offers a broad range of loan, lease, and deposit products through full-service branches located throughout California, Denver, Colorado and Durham, North Carolina.
PACW’s lending products include asset-based, equipment, and real estate lending to middle-market companies on a national basis. The company also provides venture banking products and services geared for entrepreneurial venture-backed businesses
The dividend on the Pacwest Bancorp Fixed Rate Preferred (PACWP) is 7.750% up until the initial 09/01/27 redemption date. If the preferred shares are not redeemed in their entirety, then the preferred issue will reset at the five-year Treasury rate, plus 4.82%, resetting every five years thereafter.
PACW reported 3Q 2022 net income of $122.2 million or $1.02 per share, missing analysts’ $1.08 estimates. Revenues of $373.8 million fell a bit short of expectations, as external events and related capital markets volatility negatively affected revenue momentum.
This preferred investment is suitable for medium- to high-risk taxable portfolios. Dividends are qualified and taxed at the 15%-20% rate. Buy at $26.60 or lower for a $7.28% current yield and a 6.18% yield to call.
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