Bank of New England
A former Boston-based regional banking group that became one of the largest U.S. bank failures of its era after collapsing under heavy real-estate and loan-portfolio losses in 1991.
Last updated August 26, 2026
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Overview
Bank of New England was the brand and principal banking group of a Boston-based regional bank holding company that expanded rapidly across New England during the 1980s and failed in January 1991. The institution was formed in 1985 through the merger of the former Bank of New England Corporation with CBT Corporation, the parent of Connecticut Bank and Trust Company. The transaction was historically significant because it created what was described as the first interstate regional bank holding company in the United States after Massachusetts and Connecticut adopted reciprocal interstate-banking legislation. The organization combined older banking franchises with roots extending into the nineteenth century and, in CBT's case, to institutions founded in the late eighteenth and early nineteenth centuries. Its expansion was supported by a wave of acquisitions and an aggressive lending strategy. In 1987, the group acquired the Conifer Group of community banks, and it reached a peak of more than 470 branches. The company became a New York Stock Exchange-listed public corporation in 1988 under the symbol NEB and was, at its height, reported to be the eighteenth-largest bank in the United States. Growth was heavily exposed to commercial real estate and other property-related lending. As the New England property market weakened and the broader savings-and-loan and banking crisis intensified, losses mounted rapidly. The company moved from a reported profit of $74 million in 1989 to a reported loss of approximately $1.2 billion in 1990. The board forced chief executive Walter Connolly to resign in 1989 and appointed Lawrence Fish as his successor. Federal regulators also issued a cease-and-desist order aimed at restricting lending practices regarded as threatening the institution's solvency. Management attempted to stabilize the group through cost reductions, workforce cuts, and the sale of its credit-card business to Citigroup. The Federal Reserve Bank of Boston supplied temporary financing of $478 million, but these measures could not offset continuing property-related losses. The crisis was also complicated by large intercompany loans within the holding group that obscured the financial condition of individual entities and by the discovery of embezzlement by a bank vice-president. By the end of 1990, reported real-estate losses for the year approached $6 billion, overwhelming the group's capital position. In January 1991, the Federal Deposit Insurance Corporation seized three principal subsidiary banks: Bank of New England Trust Company, Connecticut Bank and Trust, and Maine National Bank. They were placed into Chapter 7 liquidation. To prevent a broader panic, the FDIC guaranteed all deposit accounts, including balances above the normal $100,000 insurance limit. The bailout cost was estimated at approximately $2.3 billion, and the institution's failure was then the second-largest federal bank-seizure bailout on record. The bank was the thirty-third-largest U.S. bank at the time of seizure. More than $1.5 billion was withdrawn in the days immediately before the takeover, following a year of public financial distress and widely reported depositor queues. Bridge banks were created to manage the failed institutions' assets and were subsequently transferred to Fleet/Norstar Financial Group and Kohlberg Kravis Roberts. Recoll Management Corporation continued collecting loans and administering the bankruptcy estate, later under Fleet and then Bank of America-related ownership. Secured creditors ultimately received full recovery, while unsecured creditors received approximately 34 cents per dollar according to the referenced account. By 2016, most of the former institution's operations and assets had become part of Bank of America. A separate New Hampshire bank adopted the Bank of New England name in 2007, but it has no historical connection to the failed Boston institution.
History
The Bank of New England name is associated primarily with a former Boston-based regional banking organization, although an unrelated New Hampshire institution later adopted the same name. The historical banking group drew on much older local franchises. Its Boston predecessor traced its lineage to Merchants Bank, founded in 1831, and operated at different times as New England Merchants National Bank and New England National Bank of Boston. CBT Corporation, the other principal constituent of the 1985 combination, controlled Connecticut Bank and Trust Company and related institutions whose histories reached back to the Union Bank of New London, founded in 1792, and Phoenix State Bank and Trust Company, founded in 1814. The group's modern structure emerged from the relaxation of restrictions on interstate banking. The Bank Holding Company Act of 1956 generally barred interstate bank holding companies, while the Douglas Amendment of 1966 allowed interstate combinations where state law permitted them. Massachusetts and Connecticut adopted reciprocal legislation, and the proposed combination involving New England Merchants National Bank and CBT became a test of whether such arrangements were constitutional. Citicorp challenged the arrangement as an impermissible interstate compact. The Supreme Court's 1985 decision in Northeast Bancorp, Inc. v. Board of Governors upheld the arrangement, removing an important legal obstacle. The merger created the Bank of New England Corporation in 1985 and made it an early model of regional interstate banking. The group pursued rapid expansion, acquiring the Conifer Group of community banks in 1987 and building a network of more than 470 branches. It was listed on the New York Stock Exchange in 1988 as NEB. The strategy made the company one of the most prominent banking groups in New England and, at its peak, the eighteenth-largest bank in the United States. The same expansion left the company vulnerable to the collapse of New England commercial real estate. Aggressive lending and property investments generated large losses as property values and borrowers' ability to repay declined. Walter Connolly was removed as chief executive in 1989 and replaced by Lawrence Fish. Regulators issued a cease-and-desist order restricting lending, while management attempted to reduce expenses, dismissing 5,600 employees and selling the credit-card operation to Citigroup. The Federal Reserve Bank of Boston provided $478 million in temporary financing, but the group's balance sheet continued to deteriorate. The crisis involved more than ordinary credit losses. Large loans between entities within the holding group made the financial condition of the organization harder to assess, and an embezzlement by a vice-president was uncovered during the crisis. Real-estate-related losses for 1990 were reported at nearly $6 billion. The company therefore could not restore solvency through asset sales and cost reductions. In January 1991, the FDIC seized the three main subsidiary banks and placed them into Chapter 7 liquidation. The institution was then the thirty-third-largest bank in the country, and the federal intervention was described as the second-largest bank bailout of its kind at the time. The FDIC guaranteed all deposits, including uninsured balances, because officials believed a disorderly failure could trigger broader systemic stress. Nevertheless, more than $1.5 billion was withdrawn shortly before the seizure, producing long lines at branches and intensifying the public perception of a bank run. Three bridge banks were established to administer the failed institutions' assets. These arrangements were transferred to Fleet/Norstar Financial Group and Kohlberg Kravis Roberts, with Fleet operating the loan-collection and liquidation activities through Recoll Management Corporation. Later, much of the remaining business and assets became associated with Bank of America. The bankruptcy estate continued to address creditor claims for years. Secured creditors ultimately recovered in full, while unsecured creditors received a substantially smaller distribution. A separate New Hampshire bank adopted the name in 2007, but the surviving namesake has no corporate continuity with the failed Boston organization.
- 2016
Former operations largely associated with Bank of America
[1]Most of what had once been the Boston-based Bank of New England was reported as part of Bank of America.
- 2007
Unrelated New Hampshire institution adopts the name
[1]Southern New Hampshire Bank & Trust renamed itself Bank of New England without historical affiliation to the failed Boston institution.
- 1998
Major creditor distributions
[1]The liquidation estate made reported payments of approximately $140 million in claims.
- 1991
FDIC seizure and liquidation
[1]Three major subsidiaries were seized, placed into Chapter 7, and supported by an FDIC guarantee covering all deposit accounts.
- 1990
Losses overwhelm the group
[1]The company reported an approximately $1.2 billion annual loss, while real-estate-related losses approached $6 billion.
- 1989
Leadership and regulatory intervention
[1]Walter Connolly left as chief executive, Lawrence Fish succeeded him, and regulators issued a cease-and-desist order concerning lending.
- 1988
New York Stock Exchange listing
[1]Bank of New England Corporation began trading publicly under the symbol NEB.
- 1987
Conifer Group acquired
[1]The group expanded its community-bank presence by acquiring the Conifer Group.
- 1985
Bank of New England Corporation formed
[1]The former Bank of New England Corporation merged with CBT Corporation, creating an early interstate regional bank holding company.
- 1831
Merchants Bank founded
[1]The Boston predecessor that later operated under several New England banking names was founded.
Products and positioning
Large interstate regional bank serving New England businesses, households, and property markets
Consumer banking
Retail banking
The bank operated a broad New England branch network serving households with deposit accounts and routine banking services. Its more than 470 branches at peak reflected the institution's strategy of combining legacy local banks into a regional platform. Retail deposits were also central to the liquidity pressure that emerged before the 1991 seizure, when large withdrawals accelerated the bank's collapse.
Business banking
Commercial banking
Commercial banking was a core activity of the holding company and its subsidiary banks. The group served businesses across New England through lending, deposits, and related banking services. Its rapid growth depended heavily on expanding the loan portfolio, but concentration in vulnerable commercial and property-related borrowers made the business particularly exposed when the regional real-estate market weakened.
Mortgage and commercial property finance
Real-estate lending
Property finance became the defining risk of the institution's later years. Bank of New England made substantial commercial real-estate and related loans during its expansion, and poor investments in the property market generated losses that ultimately exceeded the group's ability to absorb them. Loan collection and administration continued through successor bridge banks and Recoll Management Corporation after the failure.
Payment and revolving credit services
Credit-card business
The group operated a credit-card unit during its final restructuring period. In an effort to raise liquidity and simplify the business, management sold the unit to Citigroup before the 1991 seizure. The sale did not resolve the much larger losses associated with real-estate lending.
Trust and fiduciary banking
Trust and deposit services
Trust and deposit activities were conducted through subsidiary institutions including Bank of New England Trust Company. The Florida-based Bank of New England Trust Company was not taken over in the same manner as the principal subsidiaries and was instead sold during the liquidation process.
Controversies
Brand decisions
1991
FDIC seizure and Chapter 7 liquidationOtherBackground
The bank's loan portfolio and real-estate investments had produced losses that overwhelmed its capital, while depositor withdrawals intensified liquidity pressure.
Action taken
The FDIC seized three subsidiary banks, established bridge banks, and guaranteed all deposits, including balances above the ordinary insurance limit.
Aftermath
The estimated federal bailout cost was approximately $2.3 billion. Assets were transferred for administration and loan collection, and the bankruptcy estate continued distributing claims for years.
Estimated bailout cost. $2.3 billion (1991 seizure and resolution)
1989
Attempt to stabilize the balance sheetStrategyBackground
Property-related losses and regulatory concerns threatened the group's solvency.
Action taken
Management sold the credit-card unit to Citigroup and eliminated 5,600 jobs while seeking temporary Federal Reserve financing.
Aftermath
The measures did not offset continuing real-estate losses, and the group was seized and liquidated in January 1991.
Temporary financing from the Federal Reserve Bank of Boston. $478 million (During the 1990 financial crisis)
1987
Acquire the Conifer GroupM&ABackground
The company was pursuing rapid regional expansion through the acquisition of community-bank franchises.
Action taken
Bank of New England acquired the Conifer Group.
Aftermath
The transaction expanded the branch and customer footprint but increased the scale and complexity of the group's balance sheet.
1985
Combine Bank of New England Corporation and CBT CorporationM&ABackground
Massachusetts and Connecticut had adopted reciprocal interstate-banking rules, but the proposed combination faced a constitutional challenge from Citicorp.
Action taken
The two banking groups merged after the Supreme Court upheld the legality of the interstate arrangement.
Aftermath
The transaction created an early interstate regional bank holding company and encouraged further consolidation across New England.
Sources2 sources
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