Medallion Bank's Capital Overhaul: A Strategic Shift in Preferred Equity and Its Implications

Medallion Bank's recent decision to redeem its Series F Preferred Stock on July 1, 2025, and simultaneously issue $77.5 million of Series G Preferred Stock marks a pivotal moment in its capital management strategy. This move underscores a deliberate pivot toward cost optimization, regulatory alignment, and growth-oriented financing—key themes for investors in preferred equity. Let's dissect the implications and opportunities.

The Redemption of Series F: A Strategic Exit from Floating Rates

The Series F Preferred Stock (ticker: MBNKP) was originally structured as a fixed-to-floating rate instrument. For years, it offered investors an 8% fixed dividend, but starting April 2025, its rate reset to a floating benchmark (three-month Term SOFR + 6.46%), pushing its dividend to 10.7576% by April 2025. While this offered upside in a rising rate environment, Medallion Bank chose to redeem Series F at par ($25/share) on July 1, 2025, effectively terminating its obligation to pay the escalating floating rate.

This decision is strategically sound for two reasons:
1. Cost Control: By retiring Series F, the bank avoids future interest payments that could spike further as rates remain elevated. The Series G issuance, with its fixed 9% dividend until 2030, locks in lower costs compared to the 10.75% Series F was paying in April .
2. Capital Flexibility: The redemption reduces regulatory capital requirements tied to perpetual preferred stock, freeing up resources for growth.

However, this move is a double-edged sword for Series F holders:
- They receive $25 per share at redemption but lose the chance to benefit from any future dividend hikes.
- Investors seeking floating-rate exposure must now pivot to alternatives, such as adjustable-rate preferreds or Treasury inflation-protected securities (TIPS).

The Series G Issuance: Stability in a Volatile Rate Environment

The new Series G Preferred Stock (ticker: MBNKO) offers investors a fixed dividend of 9% annually until June 30, 2030, after which it resets to a rate tied to the five-year U.S. Treasury yield + 4.94%. This structure provides predictable income for the next eight years, appealing to conservative investors.

Why Issue Series G Now?
- Funding Growth: Proceeds will bolster capital levels and support Medallion's expanding loan portfolio, which grew to $2.2 billion as of Q1 2025.
- Regulatory Prudence: By replacing floating-rate preferred stock with fixed-rate debt, the bank reduces exposure to interest rate volatility, a priority as the Federal Reserve's stance remains uncertain.

Risks and Opportunities for Investors

Risks to Consider:
- Series F Holders' Loss of Upside: Those retaining Series F past July 1 will miss the final dividend and see their shares vanish, leaving no residual value post-redemption.
- Series G's 2030 Reset Risk: After 2030, the dividend could rise if Treasury yields climb, but the 4.94% spread may lag inflation expectations.

Opportunities:
- Immediate Yield Capture: Investors can buy Series G at issuance for a 9% yield, higher than many bank preferreds.
- Fintech-Backed Stability: Medallion's partnerships with fintech firms (e.g., loan origination platforms) position it to weather economic cycles, boosting confidence in its ability to sustain dividends.

Actionable Insights for Preferred Equity Investors

1. Exit Series F Before July 1: Holders should liquidate MBNKP by the June 16 record date to avoid losing the final dividend ($0.67982/share) and ensure proceeds from redemption are realized.
2. Invest in Series G for Steady Income: The 9% fixed rate until 2030 offers a compelling hedge against rate volatility, especially if Treasury yields decline.
3. Monitor Fintech Synergies: Medallion's tech-driven loan growth (up 15% YTD 2025) signals a sustainable revenue stream, underpinning its capacity to service debt.

Conclusion: A Bold Move with Long-Term Payoffs

Medallion Bank's capital restructuring is a masterclass in balancing cost discipline with growth ambitions. By retiring high-rate Series F and issuing Series G, it secures lower borrowing costs and regulatory breathing room. For investors, the path is clear: exit legacy preferred stock and embrace the stability of Series G—before the window closes.

The clock is ticking. With Series F's redemption date looming, now is the time to act.

Final Note: Always consult a financial advisor before making investment decisions.