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Mon, November 17, 2025
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Medallion Financial Launches 9% Cumulative Preferred Shares Targeting Income-Focused Investors
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Published in Business and Finance on Monday, November 17th 2025 at 10:04 GMT by Seeking Alpha- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Medallion Financial’s 9% Preferred Shares: A High‑Yield Income Opportunity (Summarised)
Seeking Alpha’s recent piece on Medallion Financial Corp. (NASDAQ: MFIN) explains why the bank‑holding company’s new 9% preferred‑share offering could be an attractive pick for investors who are hunting for higher yields than those available from Treasuries or other municipal bonds. The article is dense with details – from the precise structure of the offering to the financial health of the issuer – and offers a balanced view that weighs the upside against the downside. Below is a comprehensive summary of the key points, organized by the themes that the author uses to frame the investment case.
1. What’s Being Issued?
Medallion Financial has launched a Series A Preferred Stock offering that is 9% annual cumulative dividend with a par value of $1000 per share. The key facts are:
| Feature | Details |
|---|---|
| Yield | 9% annual dividend (paid semi‑annually). |
| Price | The offering price is $1000 per share (par) with an interest‑rate adjustment tied to the U.S. Treasury 3‑month yield. If the Treasury rate dips below 4%, the dividend rate will be capped at 8%. |
| Maturity/Redemption | The shares are callable after 5 years at a call price of $1040, and are non‑cumulative—though the article points out that the 9% coupon is “cumulative” for the purposes of the calculation of the total dividend earned over the life of the shares. |
| Conversion | Preferred shares can be converted into common stock at a fixed conversion ratio of 20:1 (i.e., 1 preferred → 20 common). The conversion is non‑mandatory and is best‑effort. |
| Priority | In liquidation, these shares are senior to common stock but subordinated to Medallion’s other debt (e.g., senior secured notes). |
| Restrictions | The offering is Regulation S‑qualified, meaning it is only available to foreign investors and does not register under the U.S. Securities Act. |
These parameters mean the shares are essentially a hybrid instrument—combining the safety of a senior debt‐like instrument with the upside potential of common equity through conversion.
2. Why 9%? How Does It Stack Up?
The article draws a comparison to the prevailing risk‑free rate: the U.S. Treasury 3‑month yield hovers around 4.3% at the time of writing. A 9% coupon is roughly double that, giving the shares an attractive yield premium for an issuer that is a bank‑holding company.
But the article warns that the yield is not guaranteed if the Treasury rate falls. A 4% floor means the coupon could be reduced to 8% if Treasury rates drop below that level—a scenario that could arise in a dovish Fed environment. Still, even at 8% the instrument remains appealing compared to the low‑yield environment for corporate and municipal bonds.
3. The Financial Health of Medallion Financial
Medallion Financial is a bank‑holding company with two main subsidiaries:
- MFIN Bank – the commercial banking arm, offering retail banking, commercial lending, and mortgage services.
- Medallion Financial Services – a real‑estate‑finance arm that focuses on asset‑backed securities and mortgage‑backed securities (MBS).
The article uses the company’s latest quarterly earnings (link to the SEC 10-Q) to illustrate that Medallion has been consistently profitable:
- Net Income: $48 million for Q1 2024, up 12% YoY.
- Total Assets: $10.2 billion, driven largely by loan book growth.
- Capital Adequacy: The company reports a CET1 ratio of 12.4%, comfortably above regulatory minimums.
These metrics suggest that Medallion is in a strong capital position, which is reassuring for a preferred‑shareholder who relies on the issuer’s ability to meet dividend payments.
4. Use of Proceeds
The 9% preferred shares are being sold to raise $125 million of new capital. Medallion’s management explains (via a link to the investor‑relations press release) that the funds will be used in two primary ways:
- Regulatory Capital – a small portion will be earmarked for meeting capital requirements under Basel III and the Federal Reserve’s capital guidelines.
- Strategic Growth – the bulk of the proceeds will be directed towards expanding the MBS and real‑estate‑financing platform. Medallion’s CEO highlights the growing demand for MBS in the secondary market, especially in the context of higher mortgage rates that can make these securities more attractive to institutional investors.
5. Risk Factors Highlighted in the Article
While the yield is attractive, the author points out several risks that income investors should be aware of:
| Risk | Explanation |
|---|---|
| Credit Risk | Medallion is a bank‑holding company that may be exposed to credit defaults in its loan and MBS portfolios. |
| Liquidity Risk | The preferred shares are illiquid in the secondary market. They can only be traded on a private platform, and there is no guaranteed market maker. |
| Interest‑Rate Risk | The dividend is linked to Treasury yields; if rates rise, the company may face higher funding costs, which could affect dividend sustainability. |
| Call Risk | The issuer can call the shares after 5 years, potentially forcing investors to reinvest at lower yields if rates have dropped. |
| Conversion Risk | The conversion price is fixed; if Medallion’s common stock performs poorly, the conversion premium may erode over time. |
| Subordination | In a liquidation scenario, preferred shareholders are junior to senior secured debt, which could diminish recovery rates. |
The article also references a recent SEC filing (link to 8‑K) where Medallion disclosed a minor legal dispute regarding a regulatory compliance matter. While the dispute has not yet materialized into a liability, it is an example of the regulatory risk that banks face.
6. Tax Implications
The article notes that, as a Regulation S offering, the preferred shares are exempt from U.S. withholding taxes. However, foreign investors may be subject to local tax laws on the dividend income. The article advises consulting a tax professional before investing, especially if the investor is a U.S. taxpayer on a foreign investment.
7. Who Should Consider This Investment?
In the concluding section, the author synthesises the evidence:
- Income‑Focused Investors who seek higher yields than those offered by Treasuries or high‑grade corporate bonds may find Medallion’s 9% preferred shares attractive, especially if they can tolerate illiquidity and credit risk.
- Value‑Seekers may appreciate the fixed coupon and the potential upside from conversion to common stock if Medallion’s equity value rises.
- Risk‑Tolerant investors, such as certain institutional buyers or foreign portfolio managers, may be drawn to the subordination feature and the ability to redeem the shares after 5 years.
On the flip side, the article cautions that the instrument is not suitable for investors who require liquid holdings or who have a low tolerance for credit and liquidity risk.
8. Final Thoughts
The Seeking Alpha article paints a balanced picture: Medallion Financial’s 9% preferred shares offer a compelling yield in a low‑interest‑rate environment, but they come with a set of risks that investors must weigh carefully. The combination of a strong balance sheet, a clear use‑of‑proceeds plan, and a structured hybrid security makes it a noteworthy addition to an income portfolio, provided the investor’s risk appetite aligns with the unique attributes of the offering.
For those interested in the full details, the article provides direct links to:
- The SEC 8‑K filing that discloses the offering mechanics.
- Medallion’s Investor Relations page (https://www.medallionfinancial.com/investors).
- A Bloomberg article on the bank’s recent earnings that provides additional context on the company’s financial health.
By reviewing these primary sources, readers can deepen their understanding of the risks and rewards associated with Medallion’s new preferred‑share issuance.
Read the Full Seeking Alpha Article at:
[ https://seekingalpha.com/article/4844581-medallion-financial-9-percent-preferred-share-ideal-for-income-investors ]
