BankRI faces $4.2M loss from Schilling

BROOKLINE, Mass. (WPRI) - Bank Rhode Island may lose as much as $4.2 million on loans that were apparently given to 38 Studios in exchange for tax credits Curt Schilling's firm never received, its parent company announced Thursday.

Brookline Bancorp Inc. set aside $4.2 million for loan losses connected with the two short-term commercial loans in Rhode Island. They were contingent on tax credits which, "due to the unexpected and abrupt bankruptcy filing of an entity in Rhode Island related to the borrowers, were not issued," the bank said in its second-quarter earnings report.

Bank Rhode Island "has moved aggressively to resolve the problem credits and is evaluating all potential sources of recovery; however, further recovery attempts will be complicated and subject to additional discussions with the relevant parties, including the State of Rhode Island," the Brookline, Mass.-based bank said.

"We view the magnitude of this quarter's unexpected development as an unusual event which we are working aggressively to resolve," Brookline CEO Paul Perrault said, adding that the bank "remains well-capitalized even after the [loss] provision recorded this quarter." The statement did not mention 38 Studios by name.

Brookline Bancorp, the parent of Brookline Bank, completed its purchase of Bank Rhode Island in January. Michael Corso, a tax-credit broker connected to House Speaker Gordon Fox, secured the Bank Rhode Island loan for 38 Studios in exchange for motion-picture tax credits, which were never granted because the company was ineligible under state law.

Julie Gerschick, the bank's chief financial officer, disclosed in a call with investors that 38 Studios borrowed $9.6 million, but the bank recouped $2.5 million by liquidating collateral put up to back the loan and is trying to get back the remaining $7 million, The Boston Globe reported.

Providence-based Citizens Bank, which is owned by the Royal Bank of Scotland, is suing Schilling personally for $2.4 million that Citizens says it gave 38 Studios and the former Red Sox pitcher guaranteed.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi