A Massachusetts community bank is another casualty of Curt Schilling's failed video game company in Providence.
Brookline Bancorp, Inc., parent of Brookline Bank, said Thursday in its quarterly earnings report that it set aside $4.2 million to cover potential losses from two business loans made by its subsidiary, Bank Rhode Island, shortly after Brookline Bank bought the Providence bank in January.
The bank said the loans — originally totaling $9.6 million — were based partly on expected tax credits for a company in Rhode Island that unexpectedly and abruptly went bankrupt, a reference to Schilling’s company, 38 Studios. The firm, which was seeking millions of dollars in tax credits from the state, filed for bankruptcy last month.
Public records show companies affiliated with Rhode Island film tax credit broker, Michael Corso, used tax credits that 38 Studios was seeking to secure loans from Bank Rhode Island in January. Records also show the retired Red Sox pitcher used several million dollars in 1-ounce gold coins as collateral for a loan from the bank.
Under Rhode Island’s film tax credit program, video game companies are eligible for $1 in tax credits for every $4 they spend. Companies typically sell the credits through brokers like Corso to other companies or wealthy individuals looking to reduce tax bills.
But Rhode Island ultimately refused to grant the tax credits to 38 Studios, citing the company’s default on a $75 million loan backed by the state.
In a conference call with analysts, bank chief financial officer Julie A. Gerschick said the total value of the loans was $9.6 million, but the bank has recouped $2.5 million by liquidating collateral for the loan. The bank is trying to recoup the additional $7 million it is still owed, Gerschick said.
Despite the expense, bank executives said the company is profitable and considered well capitalized.
The company reported a profit of $7.5 million for the second quarter, up from $7 million a year ago.
Some other banks have also felt the impact of 38 Studios’s collapse. For instance, RBS Citizens, the legal name for Citizens Bank, sued Schilling personally last month for $2.4 million for loans to 38 Studios that Schilling guaranteed. Schilling also personally guaranteed a $1.5 million line of credit from Middlesex Savings Bank of Natick.Todd Wallack can be reached at email@example.com. Follow him on Twitter @twallack.