In an effort to raise badly needed capital, struggling Mainstreet Bank of Forest Lake has agreed to sell one of its nine branches.
Mainstreet sells branch bank in move to raise capital
Mainstreet Bank sells one of its nine branches to generate badly needed cash.
March 26, 2009 at 4:10AM
The community bank announced Wednesday that it will sell its branch office in Cottage Grove, as well as its $16 million in deposits, to a larger rival, Merchants Financial Group Inc. of Winona, Minn. A spokeswoman for the bank declined to disclose the value of the deal.
The branch sale comes as Mainstreet Bank faces increased scrutiny from federal regulators for its lending practices.
The 105-year-old bank, an aggressive lender to housing developers and builders during the real estate boom, has seen an unusually high percentage of its loans go sour. Last month, the Federal Deposit Insurance Corp. (FDIC) issued a cease-and-desist order against Mainstreet, alleging the bank operated with an excessive level of delinquent loans and did not keep an adequate allowance for losses. The FDIC ordered the bank to raise more capital.
"It's one of many things we're doing to restore our capital," said Karen Greisinger, a spokeswoman for Mainstreet. She said the bank does not plan to sell any more branches.
Mainstreet Bank has branches in Center City, Centerville, Forest Lake, Minneapolis, Newport, South St. Paul, Woodbury and in Hudson, Wis.
The transaction is expected to close during the second quarter.
CHRIS SERRES
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