New England Bank (BNE) is the first interstate regional bank in America, created in 1985 by the merger of Connecticut Bank and Trust Corporation (CBT) and another holding company bank. BNE owns nine banks (with 470 branches) and provides various financial services, primarily consumer and wholesale banking, as well as operational services such as processing data, mutual funds, payroll, and other services for different companies.
In 1831, the Bank Merchants London, the earliest predecessor of England’s New Bank of Trust and Bank Connecticut, was granted a charter in Massachusetts, a charter state. The Trust Company and New Bank of England both originated as state banks in the early days of America’s efforts to create a workable banking system. The CBT, which was incorporated as the New Union of London, is the older of the two.
The Merchants National Bank of Boston, which succeeded Merchants Bank, was established in 1864 as one of the first privately owned national banks under the National Banking Act. The money supply constantly varied due to the lack of a central organization and the circulation of unlimited (and often counterfeit) types of currency. Banking in America was unstable and unsophisticated, as the First Bank of the United States in 1781 and the Second Bank of the United States in 1816 failed to streamline the nation’s financial activities. Congress passed the National Banking Act in 1863, providing a framework for a consistent currency and a system of privately owned national banks.
The series of panics and chaos that hit over the next 50 years, the National Merchants Bank of Boston, together with the predecessors of the Trust Company and the Connecticut Bank, conducted their traditional banking businesses quietly and busily. Although the path is unclear, the Safe Deposit and Trust Company of New London and the Trust Company of Hartford were founded in 1868 and 1871 respectively, as successors to Union Bank of London.
In 1919, Company Trust and Safe Deposit and Company Trust Hartford merged to form Company Trust Connecticut and Company Trust Hartford-Connecticut, which still provides traditional banking services such as trust and safe deposit. Between 1921 and 1934, the company had a few stock offerings, demonstrating its history during the Great Depression. During this period, Company Trust Hartford-Connecticut had a total of 142 employees, which grew to 166 in 1928, providing services such as tax and foreign-credit transfer. In 1927, the company underwent splits and acquisitions. Despite these changes, the company remains largely unchanged since its chartering in 1864 as the National Merchants Bank of Boston. In 1954, it was able to make a major move by merging with the state bank Phoenix, becoming Company Trust Bank and Company Trust Connecticut.
The inspection was successful for both Boston’s National Merchants Bank and Trust Company in Hartford, Connecticut. The newly elected President Franklin D. Roosevelt immediately declared a mandatory bank holiday until every bank in the country could be examined. This was in response to the international financial crisis that began in 1931, which led to the failure of several important European banks. Between 1929 and 1932, approximately 11,000 American banks failed, resulting in the disappearance of around $2 billion in deposits.
The government could have a greater amount of funds accessible if the banks collaborated in decreasing unnecessary private lending. The Federal Reserve put a hold on interest rates at levels similar to the Great Depression in the fall of 1941, where they stayed until 1947. There was a notable decrease in unemployment after the United States joined the war in 1941. Ultimately, World War II provided economic respite.
The second-largest bank in the state was Connecticut Bank and Trust, made possible by a merger with Wallingford Bank and Trust Company in 1962, which nearly didn’t occur due to the elimination of one of the few banks in a small town. Between 1958 and 1963, the Connecticut Bank and Trust Company combined with five banks. New England Merchants National Bank became the fourth-largest bank in the Boston area after merging on December 31, 1960 into New England National Bank of Boston, which was originally established in 1869 as New England Trust Company and transformed in 1960 to its national bank status. The Merchants National Bank of Boston started to expand in the mid-1950s, merging with one bank in 1956 and acquiring another in 1958.
During that period, CBT Corporation included seven banks in its portfolio as well. The Bank of New England Corporation altered its name in 1982 to BNE, or Bank of New England, and continued to expand by combining with or acquiring seven banks and financial firms. New England Merchants Company, Inc., Which was not officially incorporated until 1971, approved the establishment of holding companies to obtain its assets, along with Connecticut Bank and Trust Company. By 1970, Massachusetts and Connecticut already had mutual agreements with each other, as well as with Maine, New Hampshire, Rhode Island, and Vermont. The 1966 Douglas Amendment to the Bank Holding Act, which had permitted the establishment of bank holding companies in 1956, prohibited interstate banking unless it was authorized by the specific states involved.
The merger was effectively in limbo as the matter was being reviewed by the Federal Appeals Court. The two holding companies took the position that the Amendment to the Bank Holding Act, which allowed states to make their own interstate banking laws, violated the Constitution. The largest banking conglomerate in the nation, Citicorp, contested the merger on the premise that it represented an illegal compact between states. Although the merger had obtained approval from federal agencies in 1984, it was generally acknowledged that it obtained approval based on the contested premise. One reason for this fear was that the merger would result in California and Chicago, major banking centers, absorbing New York’s regional identity. It was also acknowledged that similar statutes existed in other states, such as New York, and that Connecticut only allowed its banks to acquire banks from reciprocal states. The merger between these two large bank holding companies was historic, as it had to wrestle with the conflict between federal and state powers before it could be completed in 1985.
The merger planned by Citicorp was appealed to the Supreme Court, and another stay was enacted. However, the Federal Appeals Court affirmed the interstate banking laws in Massachusetts and Connecticut, thereby giving the green light to the merger. This decision particularly affected the Southeast, where several holding company actions were pending. New England was the first zone to receive legal attention in the BNE case, as it would impact the formation of other regional interstate banking zones. Meanwhile, the Senate Banking Committee approved the proposed federal legislation for creating regional interstate banking zones.
The formation of new banking regions happened rapidly, and as a result, mergers between interstate banks became a routine. The first holding bank to form as a result of the merger was the “new” Bank of England Corporation, which merged with the New England Bank Corporation and the CBT Corporation on June 14. It is a widely favored historical fact that the banking control has traditionally been dispersed widely in our country. The Supreme Court unanimously upheld this decision on June 11, 1985.
NEB was listed on the New York Stock Exchange as BNE Corporation in April, 1988. By the end of 1987, BNE Corporation’s assets had increased to $30 billion, from $23 billion in 1986. Connecticut Bank and Trust added two banks during this period, while BNE added nine banks to its ranks. In 1987, BNE Corporation obtained the Conifer Group, a group of six community banks in Massachusetts, laying the foundation for its expansion. Throughout New England, BNE Corporation acquired ten additional banks, savings and loans, and other financial-service companies in just two years, thanks to the Federal Reserve board permitting bank holding companies to purchase savings banks.
In 1985, he was appointed as the chairman of the recently established Bank of New England Corporation. An influential figure in the consolidation of BNE and CBT, Connolly assumed the role of president at the Connecticut Bank and Trust in 1970, later becoming its CEO in 1977. In 1980, he ascended to the positions of chairman for both CBT Corporation and the Connecticut Bank and Trust, showcasing his progression within the company. The formation and growth of BNE Corporation were significantly influenced by three individuals who were lifelong residents of New England: Walter J. Connolly Jr., Gordon I. Ulmer, and Peter H. McCormick.
In 1980, Ulmer assumed the presidency of Trust and Bank Connecticut, while also becoming the CEO and chairman of Corporation BNE. Additionally, Ulmer took on the role of vice chairman of Corporation BNE and president of Corporation CBT when Connolly moved to Trust and Bank Connecticut.
In 1988, when Ulmer took over as president of BNE Corporation, McCormick stepped down. During the period of transition, McCormick held onto the position of president at BNE Corporation until his retirement in 1988. He was also appointed as president of BNE Corporation in 1978. Furthermore, he assumed the role of chairman in 1985, CEO in 1981, and president of BNE in 1978.
In October 1985, three employees of the Bank of England were indicted on 43 counts and convicted on 31 counts related to an alleged money laundering scheme. In February 1986, BNE, which was one of several large banks involved in the investigation, was charged with failure to file reports on large cash transactions as required by the Bank Secrecy Act. The business of the bank was not noticeably affected by this decision, and the management of BNE did not make much sense of it. The customer and all three employees were acquitted and fined accordingly, despite the fact that they were involved in the investigation.
In 1988, the focal point of BNE’s shifted as the banking industry in England slowed down and faced increased competition. As a result of acquisitions, the company had gained employees and its goal was to retain virtually all of them. While maintaining an acceptable level of profit, the bank saw an increase in both its customer and employee base due to mergers, expansions, and improved customer service. This meant that instead of reducing staff, the bank focused on using its employees more efficiently. This was particularly important during a time of high regional unemployment in the New England banking industry.
In the fourth quarter of 1989, the company’s profits began to plummet, down from a previous year’s profit of $74 million to estimated losses of $1.2 billion. This decline in profits was attributed to unwise acquisitions and uncontrolled growth that had obliterated BNE’s profits. It became clear by late 1989 that BNE could not afford the luxury of dedicating itself to customer service.
Poor record keeping and a cumbersome management approach worsened these issues. Numerous loans were authorized without sufficient collateral as Connolly also urged subsidiaries and branches to expand their loan portfolios at a pace that proved to be overwhelming. BNE acquired an excessive number of banks that took advantage of the thriving real estate market in the late 1980s, driven by their eagerness to expand.
BNE’s future will depend on the ability of its new managers to streamline and restructure the giant regional lumbering. A successor could be found as soon as Connolly agrees to resign, following a stormy board meeting in January 1990. BNE entered the 1990s with about $2.3 billion in nonperforming real estate loans, losing disenchanted customers in most of its 448 branches throughout New England.