Article by Mark Mensheha. Synopsis by Creative Investment Research. Copyright, 1995.
Several developments prompted us to develop a new form of bank equity tied to lending. The article reviewed an instrument we invented, a preferred stock instrument with a dividend rate tied to HMDA (Home Mortgage Disclosure Act) lending data or to CRA (Community Reinvestment Act) rating performance. To invest in minority-owned financial institutions, we developed and suggested the use this new type of equity instrument, briefy described below.
(The mechanics of this investment instrument are proprietary and confidential. If you have an interest, e-mail us.) The equity issue is straightforward. A small minority or woman-owned bank or thrift seeking capital offers preferred equity to investors. The equity offering is identical to standard preferred equity offerings, with the one exception: dividends paid to investors vary with the number(or dollar amount) of a specific type of loan made, say, minority business loans or home mortgage loans.
