Bank of Boston Corp. does not plan to raise capital for its pending $247 million cash purchase of BankWorcester Corp.. said William Shea, chief financial officer.

In June the Federal Reserve Board forced the Boston bank to raise $170 million of capital for its purchase of Multibank Financial Corp.. Dedham, Mass.

Mr. Shea said he hopes the scenario will not be repeated.

"We certainly informed the regulators of what we intended to do [with Bank Worcester]," said Mr. Shea, who declined to predict their response.

Standard Met

"At this point we don't see any need to raise additional capital. We are still well above the well-capitalized criteria," said Mr. Shea.

He added, "We're hopeful that the regulators will approve the transaction in the normal course," he said.

The fed initially turned down Bank of Boston's proposed purchase of Multibank last spring, then reversed course and approved the acquisition in June. But the application caused a rift among Fed governors.

Four of the seven members approved the deal. Three abstained, objecting to last-minute bargaining over the amount of capital the bank needed to raise to secure approval.

Capital Cushion

To get a green light, Bank of Boston agreed to raise $70 million in preferred stock, which counts as Tier 1 capital, and $100 million of subordinated debt, which counts as Tier 2 capital. The added capital quelled concerns about the effect of Multibank's bad loans on Bank of Boston.

At the time the Multibank acquisition was announced last year. Bank of Boston's capital levels qualified it for the "well capitalized" category. Back then, it had 10.0% total capital and 6% Tier 1 capital. The regulatory minimums required to be well capitalized are 10% and 6%, respectively.

But the Boston bank, which has $32 billion in assets is in a better position today prevail with regulators. Bank of Boston's capital levels have improved since then from the capital raising and retained earnings, and its asset quality has improved.

Total Ratio Is 12%

At the end of the second quarter, Bank of Boston had a 12% total capital ration and a 7.1% Tier 1 capital ratio.

"The Bank Worcester transaction doesn't drop capital ratios more than 40 or 50 basis points," he noted. "In our view it is a very slight deterioration."

In addition, Mr. Shea said Bank Worcester's low level of non performing loans and strong reserve levels make the merger's impact on Bank of Boston's asset quality "almost a nonevent." Bank Worcester's nonperforming assets totaled $31 million at the end of the second quarter, and the bank had a $16.7 million loan-loss reserve.

A Different Story

In contrast, Multibank had $135 million of nonperforming assets and a $46 million loan-loss reserve at March 31, the last time it publicity reported its results before being bought.

Bank of Boston's nonaccrual loans and foreclosed real estate dropped 12% to $526 million at the end of June, from $597 million on March 31.

The purchase of the $2.4 billion-asset Multibank Financial and $1.4 billion asset Bank BankWorcester are part of the Bank of Boston's bid to build its consumer banking business and overall marker penetration in its backyard.

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