Worried about potential risks to its reputation, and to avoid being tainted by a so-called "bailout label," Boston’s First Trade Union Bank announced Thursday it will not accept $11 million in federal funds for which it was previously approved.

First Trade, which applied for and obtained approval to receive Capital Purchase Program (CPP) funds from the Treasury in February, had planned to utilize the capital to stimulate economic activity while expanding the institution’s lending capabilities. However, First Trade President and CEO Michael Butler said the bank will not use the government’s investment because it does not want to be tainted with a "bailout label."

"First Trade is a healthy, well-capitalized financial institution," Butler said in a statement. "We were approved for the investment by the government for precisely that reason. However, because there has been a broad misunderstanding of the Capital Purchase Program, our board of directors has opted to forego the opportunity to participate. The reputation risk is simply too high."

As a subset to the Troubled Asset Relief Program (TARP), the CPP was introduced last fall by the U.S. Treasury to stimulate the economy by providing government investment in healthy banks.

"While the CPP capital would have afforded us the opportunity to make more funds available in the marketplace, our growth plans are not dependent on the additional capital," Butler said. "Given the misperceptions surrounding the CPP, we believe it is a prudent business decision for First Trade to decline participation in the program."

In 2008, the bank reported a 17.2 percent increase in net income, a 25.7 percent increase in total loans and a 23.1 percent increase in deposit growth over 2007.