TCF Financial (TCB) is unwinding a strategy that goes back more than a decade — a series of investments in community banks.

The $18 billion-asset TCF on Jan. 31 sold its 8.7% stake in MainStreet BankShares (MREE), a $169 million-asset company in Martinsville, Va. TCF had been MainStreet's largest shareholder for several years, and it first took a stake in the company in 2002, says Jason Korstange, TCF's director of investor relations.

TCF still has "five or six" community banks in its portfolio, although Korstange declined to name them. TCF had originally invested in about 15 banks for the purpose of seeking a return.

"It was a tactic we used back in the late 1990s, early 2000s," Korstange says. "We're trying to get rid of them [now]."

TCF's timing seemed to be fortuitous. Its stake would have been valued at about $1.2 million, based on MainStreet's closing stock price on Jan. 31. MainStreet's shares had climbed 28% in the 12-month period ending Jan. 31.

TCF, in Wayzata, Minn., sold its stake to Spence Limited, an investment fund in Nashville, Tenn., headed by longtime bank investor John W. Spence.

Brenda Smith, president and chief executive of MainStreet, did not return calls seeking comment. A representative from Spence Limited declined to comment.

In an unrelated event, MainStreet lost a director in February. Coincidentally, the director shares the same name as TCF's chairman and CEO.

William L. Cooper III resigned as a MainStreet director on Feb. 5, according to a regulatory filing. MainStreet says it "believes" that the Rocky Mount, Va., businessman resigned because of his outstanding loans with MainStreet's operating unit, Franklin Commmunity Bank.

[There is no relation between TCF's William A. Cooper, its chairman and CEO, and the former MainStreet director named Cooper, Korstange says.]

MainStreet and William L. Cooper III could not reach an agreement on the loans to "avoid the loans becoming criticized assets requiring significant additional amounts to be allocated to the allowance for loan losses," MainStreet said in the filing.

After his resignation, MainStreet categorized about $640,000 in loans assigned to Cooper as troubled debt restructurings. MainStreet also charged off about $454,000 in loans to Cooper.

Cooper, who runs a furnishings business in Rocky Mount, Va., gives a different account. "I made all the payments [on my loans] and everything was current and they decided to take a different approach toward the collateral ratios," Cooper said Friday. "I disagreed with that approach and thought it would be appropriate for me to step down. The bank lost nothing on me, because I paid everything that I thought I was supposed to pay."

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