Bank of New England

Bank of New England Corporation

File:Bank of New England logo.jpg Non-color logo from 1988
Company type	Subsidiary
Industry	Banking
Predecessor	Bank of New England Corporation and CBT Corporation
Founded	Template:Sda
Defunct	1991 (1991)
Fate	Bankruptcy liquidation
Successor	Recoll Management Corporation
Headquarters	Boston, Massachusetts, United States
Number of locations	470+ branches at peak
Area served	Northeastern United States
Key people	Lawrence Fish, Walter Connolly
Net income	-$450,000,000 (1990Q4)
Total assets	$21,900,000,000 (1990)
Parent	Bank of New England Corporation
Subsidiaries	Connecticut Bank & Trust Company; Maine National Bank; Bank of New England Trust Company

The Bank of New England Corporation was a regional banking entity headquartered in Boston, Massachusetts, which was taken over by the Federal Deposit Insurance Corporation (FDIC) in 1991 following significant loan defaults and subsequently placed into Chapter 7 bankruptcy liquidation. At that time, it ranked as the 33rd largest bank in the United States, with its federal rescue representing the second-largest bailout ever recorded. During its height, it held the 18th position nationally and operated more than 470 branches. The entity responsible for managing the liquidation process, Recoll Management Corporation, remains active in handling outstanding claims. By 2016, most assets formerly owned by the Bank of New England had been absorbed into Bank of America.

Since 2007, an unrelated private bank operating in New Hampshire has used the name Bank of New England but bears no connection to the original Boston-based institution.

Formation and interstate growth

Established in 1985 as the nation’s first regional bank to operate across state lines, the Bank of New England Corporation emerged from a merger between the original Bank of New England Corporation and CBT Corporation. CBT held ownership of Connecticut Bank and Trust Company, whose origins trace back to 1792, while the original Bank of New England was a successor to Merchants Bank founded in 1831.

The Bank Holding Company Act of 1956 initially prohibited interstate bank holding companies except for those grandfathered before enactment. The Douglas Amendment of 1966 permitted such companies only if authorized by participating states. Both Connecticut and Massachusetts enacted reciprocal legislation early on. In 1984, under this regulatory framework, New England Merchants National Bank and CBT Corporation pursued a merger. Despite legal opposition from Citicorp, which alleged an unlawful interstate agreement, the Supreme Court ruled in Northeast Bancorp, Inc. v. Governors, FRS (1985) in favor of the merger, thereby paving the way for this and future regional banking consolidations.

In 1987, Bank of New England expanded through acquisition of the Conifer Group—a collection of community banks—and subsequently went public on the New York Stock Exchange under the ticker NEB in 1988. Nevertheless, earnings plummeted dramatically from a $74 million profit in 1989 to a staggering $1.2 billion loss in 1990. This decline was largely attributed to poor real estate investments during the broader context of the savings and loan crisis. CEO Walter Connolly's aggressive growth tactics contributed to these risky financial exposures; he resigned near the end of 1989 and was replaced by Lawrence Fish. Simultaneously, regulatory authorities issued a cease and desist order limiting lending activities that threatened the bank’s financial stability.

Crisis and decline

Despite attempts to improve its financial condition, which included divesting its credit card division to Citigroup and reducing its workforce by 5,600 employees, the bank continued to suffer heavy losses. The Boston branch of the Federal Reserve extended $478 million in short-term funding; however, nearly $6 billion in losses linked to real estate ultimately compromised the bank's stability. Additional complications arose from significant inter-company loans within the holding group that obscured the true financial state, as well as an embezzlement case involving a bank vice-president uncovered during this period.

In January 1991, the FDIC took control of Bank of New England’s three subsidiary banks—Bank of New England Trust Company, Connecticut Bank and Trust, and Maine National Bank—placing them into Chapter 7 bankruptcy liquidation. To avert a widespread bank run, the FDIC guaranteed all deposits, including those exceeding the standard $100,000 insurance threshold, with the overall bailout estimated at $2.3 billion. The FDIC cautioned that instability at Bank of New England threatened broader financial system stability. Despite these reassurances, more than $1.5 billion was withdrawn in the days leading up to the seizure after a prolonged period of instability and depositor withdrawals.

These cash withdrawals happened amid widely publicized scenes of long queues reminiscent of those seen during the Great Depression. Notably, the Bank of New England Trust Company located in West Palm Beach, Florida—a subsidiary—was not seized but instead sold during the liquidation process.

Liquidation

To oversee the assets of Bank of New England, Connecticut Bank & Trust Company, and Maine National Bank, three bridge banks were created. These entities were later transferred to Fleet/Norstar Financial Group and Kohlberg Kravis Roberts. Managed initially by Fleet and subsequently by Bank of America under Recoll Management Corporation, their role focused on recovering loans from the failed institutions. Significant disbursements included a $140 million payment made in 1998 to claimants; secured creditors recovered their full amounts, while unsecured creditors received approximately 34 cents per dollar owed. Nonetheless, as late as 2009, disagreements remained regarding the distribution of the final $101 million held by the bankruptcy trustee.

Southern New Hampshire Bank & Trust

In 2007, Southern New Hampshire Bank & Trust based in Salem, New Hampshire adopted the name Bank of New England; however, it bears no relation to the former bank.

See also

• List of largest U.S. bank failures