Management Shake-Up at Bank of New England

Walter J. Connolly Jr., chairman and chief executive of the Bank of New England Corp., will resign his CEO position when a replacement is found, the troubled bank said in a statement Tuesday.

Asked if this meant Connolly will stay on as chairman, Marcia Ryan, a bank spokeswoman, said only “the word of the release is as it stands.” She acknowledged “there is an ambiguity” about the wording regarding Connolly’s future position with the bank.

Bank of New England also announced Tuesday that it had designated the executive committee of its board and three special board committees to examine key structural aspects of its business and operations.

Since the bank’s troubles began, federal banking regulators have increased scrutiny of its operations. Financial analysts had speculated that a major reshuffling of the bank’s top management was forthcoming.

“It’s certainly been rumored around Hartford and Boston that he (Connolly) might step aside,” said Tracey Stangle, an analyst with First Albany Corp., who works out of Hartford, Conn. “I guess for that reason it didn’t come as a surprise.”

The announcement came after the stock market closed Tuesday. Bank of New England was the most active issue on the New York Stock Exchange, with more than 2.2 million shares changing hands. The shares fell 12.5 cents to close at $7.375.

Stangle said Connolly has been a driving force at the bank. “He’s a very strong-willed guy that has run the institution for the past 10 years or so,” he said, adding it was unclear who would take his place as chief executive.

The bank’s board appointed a committee to begin a search for candidates to succeed Connolly, who said he would resign his post as chief executive when a replacement is found, the company said in a statement.

The statement said Connolly will continue working with another board committee on further expense reductions, financial matters and other improvements in operations.

In another sign of its financial difficulties, the bank on Friday rescinded its common stock dividend of 34 cents a share for the fourth quarter. Earlier this month, the bank said it would boost its loan reserves above $1 billion and that it expected a “substantial” loss for the year.

The new special committees are “designed to assure that the problems faced by the organization as a result of the unprecedented developments in the real estate market are addressed in a timely and comprehensive manner,” the statement said.

Gordon I. Ulmer, the company’s president, was named to begin an effort to address all aspects of the real estate loan portfolio of Bank of New England’s banking units in Massachusetts. He was charged to report to the executive committee of the company’s board, assisted by the board’s special adviser, Washington-based Secura Group.

Industry analysts said the move reflected the serious trouble Bank of New England faces due to a real estate slump that affected a number of other banks in the region.

Bank of New England also said Tuesday that it is continuing to work with the investment firm Lazard Freres & Co. to explore possible asset sales or mergers. A special board committee has been named to oversee this effort, the company said.