Medallion Bank's Preferred Stock Shift: A Strategic Capital Overhaul for Growth and Stability

Medallion Bank (NASDAQ: MBNK) has embarked on a significant capital structure overhaul, redeeming its Series F Preferred Stock (MBNKP) and issuing a new Series G Preferred Stock (MBNKO) in one of its most decisive moves to date. This dual-action strategy not only repositions the bank's balance sheet but also signals a forward-looking approach to cost management and capital efficiency. For investors, the implications are profound, offering both near-term clarity and long-term opportunities.

The Redemption of Series F: A Clean Slate for Capital Management

Effective July 1, 2025, Medallion will redeem its Series F Preferred Stock at par value ($25 per share), eliminating a perpetual dividend obligation that had required quarterly payments of 5.875% since its issuance in 2018. This move is a strategic pruning of legacy costs, freeing up approximately $9.7 million annually in dividend savings (based on the $168 million outstanding principal of Series F). The redemption, which follows FDIC approval, underscores the bank's focus on optimizing its capital stack to prioritize growth over historical commitments.

While the Series F was a fixed-to-floating rate instrument, its reset to a floating rate in 2028 could have exposed the bank to rising interest costs—a risk now entirely mitigated. Instead of waiting, Medallion has chosen to retire this obligation early, leveraging proceeds from the newly issued Series G.

The Series G Offering: A Decade of Predictability and Flexibility

The $77.5 million raised via the Series G Preferred Stock issuance offers more than just redemption funds. With a fixed 9% dividend rate until 2030—a period covering potential Federal Reserve rate hikes—the bank secures a decade of stable financing costs. Post-2030, the floating rate (5-year U.S. Treasury + 4.94%) provides flexibility, aligning Medallion's funding costs with broader market conditions.

This dual-phase structure is a masterstroke. The fixed-rate period shields the bank from near-term rate volatility, while the floating component avoids locking in high rates indefinitely. For investors, Series G's Nasdaq listing (MBNKO) and quarterly dividend payments starting October 2025 make it an attractive yield instrument, especially in a low-yield environment.

Implications for Investors: A Stronger Balance Sheet, New Growth Horizons

The capital restructuring achieves three critical goals:
1. Cost Efficiency: Eliminating the Series F's variable-rate exposure reduces interest expense uncertainty.
2. Liquidity Boost: Proceeds from Series G, combined with the redeemed Series F capital, strengthen Medallion's equity base, enabling greater risk-taking in its core businesses—RV, boat, and home improvement loans—as well as fintech partnerships.
3. Regulatory Resilience: A healthier capital ratio (Series G qualifies as Tier 1 capital) enhances the bank's FDIC-insured stability, a key consideration for depositors and institutional investors.

While the redemption at par avoids immediate financial strain, the real win lies in the future: Medallion can now reinvest savings into high-return consumer lending segments, where its niche expertise in non-traditional financing positions it to outperform peers.

Risks and Considerations

No move is without risk. The Series G's post-2030 floating rate could pressure earnings if Treasury yields rise sharply. Additionally, Medallion's reliance on preferred stock issuance may signal a preference for equity-like funding over debt, which could be a double-edged sword if market access tightens. However, the bank's conservative loan loss provisions and 96% DTC-held Series G shares suggest strong investor confidence.

Why Act Now?

For income-oriented investors, Series G offers a compelling 9% yield in a market starved for dividends. For equity holders, the capital structure shift reduces financial leverage and positions Medallion to capitalize on its $77.5 million war chest for strategic acquisitions or tech-driven growth. The bank's focus on underserved consumer lending markets—RV loans, for instance, are projected to grow at 4% annually through 2030—adds a secular tailwind.

The clock is ticking. With Series F's redemption imminent and Series G's dividends kicking in this fall, investors who act now can secure a stake in a bank primed to thrive in both stable and rising-rate environments. Medallion's move isn't just about cutting costs—it's about building a fortress balance sheet for the next decade.

Investment Call to Action:
- Preferred Stock Investors: Consider adding MBNKO to capture the fixed-rate yield through 2030.
- Equity Investors: Monitor MBNK for potential share price appreciation as capital strength improves.
- Holdings Review: If you own MBNKP, ensure your broker facilitates the July 1 redemption.

Medallion Bank's capital overhaul isn't just a technical maneuver—it's a blueprint for sustainable growth. In an era where financial resilience is paramount, this move places Medallion at the forefront of its industry. The question for investors is clear: Will you be part of this transformation, or left behind?

Disclaimer: This analysis is for informational purposes only. Always consult a financial advisor before making investment decisions.