Boston Private OK'd to get $153m in US rescue funds

Boston Private Financial Holdings Inc. won preliminary approval to receive about $153 million under the government's financial rescue plan, the company's chief financial officer said yesterday, which would make it just the second Massachusetts financial company to be partially owned by US taxpayers.

Previously State Street Corp., the Boston financial services giant, received $2 billion in exchange for selling shares to the Treasury as part of the $700 billion financial rescue package passed by Congress last month.

Boston Private chief financial officer David Kaye said the financial company sought the funds to increase its lending and to use as a cushion in case the government prompts it to buy weaker banks. Although its capital ratio remains strong, "we want to be conservative," he said.

The parent of Boston Private Bank & Trust Co. and various private wealth management firms, Boston Private last month took charges of $227 million for the third quarter, mainly for the decreased value of banks it operates in Florida and the Northwest hard hit by the housing downturn. The charges helped wipe out its profit for that quarter.

Kaye said the application for public funds wasn't sparked by the charges, however, and said the bank already was well capitalized following the $173 million it raised from public and private investors in July.

Set up last month by Treasury Secretary Henry Paulson, the capital investment program is intended to bolster financial companies and spur lending during the economic downturn. So far the government has doled out $125 billion to nine of the nation's largest financial institutions, including State Street, plus another $33.6 billion to 21 smaller banks around the country, according to an analysis by Keefe, Bruyette & Woods.

Banks that accept the funds agree to pay the government a dividend and accept restrictions on executive pay.

Last week Paulson indicated he might expand the program to provide capital for companies that lend directly to consumers such as for student and auto loans. Moreover, a number of insurance companies, including Hartford Financial Service Group of Hartford, are buying small savings banks to qualify for the government capital.

Elsewhere in New England, Bancorp Rhode Island, parent of Bank Rhode Island of Providence, said it has applied for the capital and could receive up to $30 million. The money would allow the bank to "further strengthen our lending capabilities for customers," chief executive Merrill W. Sherman said in a statement.

The bank reported its total risk-weighed capital ratio was 12.7 percent, above the 10 percent regulators call "well-capitalized." But Sherman said the bank has decided it would be best to develop what she called a "super-capitalized balance sheet" that would support further loans.

Webster Financial of Connecticut, which operates Webster Bank branches in Massachusetts, said it has received preliminary approval from the government for $400 million.

Other banks say they don't need the funds including Danversbank of Danvers. Yesterday the company's chief executive Kevin T. Bottomley said it didn't apply for the funds because "quite frankly, we didn't need to." The bank's total risk-based capital ratio stood at 22.98 percent as of Sept. 30, the bank said in a statement.

The deadline for public companies to apply for the funds was Friday. The government is soon expected to describe terms of the capital offering for privately held institutions, such as mutually owned banks. One such mutual, Eastern Bank, said it is waiting to see those terms before deciding whether to apply.

Ross Kerber can be reached at kerber@globe.com.