Herald National Bank Raises $32 Million in Capital

Herald National Bank (NYSE AMEX: HNB), a New York-based full-service commercial bank, announced today the completion of a private placement of 10.7 million shares of its common stock and Series A preferred stock at $3.00 per share. The private placement was completed in two tranches, with the first tranche of $7.5 million closing December 30, 2009 and the second tranche of $24.5 million closing on March 31, 2010. The gross proceeds to Herald National Bank from the offering were approximately $32 million, prior to the deduction of placement fees and offering expenses. The offering was lead by Sandler O'Neill + Partners, LP with participation from Freeman & Co. Securities LLC.

Key highlights of the offering include:

Approximately $29 million in additional tier one capital, net of estimated offering related expenses
Chairman of the Board, Raymond A. Nielsen elected to the additional position of Chief Executive Officer

"The capital raise enhances Herald National Bank’s capital position and increases our pro-forma tier one capital ratio to a level considerably in excess of that required of de novo banks, which is significantly higher than the ratio required of older more established banks,” stated Herald National Bank President, David S. Bagatelle. “We are pleased to have the support of our institutional investors and look forward to working with them as we continue to build our relationship based franchise in the New York metropolitan area," he concluded.

"The investors in this offering have reaffirmed their confidence in our business plan and our ability to execute. Unlike many offerings in the financial services sector these days, our offering was not about balance sheet repair, rather the capital we raised strengthens our bank’s ability to work with and lend to many of the premier middle market businesses in our market area,” added Chairman of the Board and CEO, Raymond A. Nielsen.

New York-based, Clinton Group was the lead investor in the offering with a 24.9% investment in the Bank. In total five new institutional investors participated in the offering including: The Clinton Group, Blue Atlantic Capital, Triumph Investment Funds, and ALDA Capital, LLC. In addition to the new investors, four of Herald National Bank’s initial institutional investors and Raymond A. Nielsen also participated in the private placement.

“Our investment in Herald is based on our confidence in this management team and the capacity to capitalize on the many opportunities that exist for a locally managed, middle market bank in the New York metropolitan area,” stated George Hall, President and CEO, of The Clinton Group. “We were attracted to the clean balance sheet, core deposit growth, and recent measures taken to improve their operational efficiency,” he continued.

David Perez, of Palladium Equity Partners, an initial investor in the bank and participant in this offering commented, “Our team at Palladium contributed to the recapitalization of Herald National Bank because of a continued belief in the fundamentals of this business plan and its long-term potential in this marketplace and the ability of management to execute on that plan.”

Immediately following the offering, Herald National Bank also made several changes to its management and board structure designed to enhance the oversight and operations of the bank. First, the bank has separated the offices of Chief Executive Officer and President, with current Chairman of the Board Raymond A. Nielsen assuming the office of Chief Executive Officer, subject to regulatory non-objection. David S. Bagatelle has retained the office of President – a move that allows Bagatelle to focus on day-to-day management and direct support of the bank’s business development efforts. Second, the Board of Directors has reduced in size from 15 persons to 10 persons, resulting in resignations from five directors to accommodate the reduction in size. As a result of significant investments by The Clinton Group and ALDA Capital, LLC the Board of Directors expects to nominate representatives of each entity to serve on the Board of Directors, subject to regulatory non-objection, which will be expected to result in two additional director resignations.

About Herald National Bank

Herald National Bank is a relationship-based banking institution dedicated to serving the commercial and private banking needs of small to mid-size businesses, their owners, executives and senior managers, as well as high net worth individuals in the New York metropolitan area. Herald National Bank presently has three offices located in Manhattan (623 Fifth Avenue), Brooklyn (1333 60th Street), and Melville, Long Island (58 South Service Road). As of December 31, 2009 the bank had $443 million in assets of which $301 million were loans. Deposits at December 31, 2009 were $405 million, of which 93% were core deposits and 35% of which were checking accounts, largely the operating accounts of the businesses served by the bank.

For more information, visit www.heraldnb.com.

Forward Looking Statements Disclaimer

Certain matters in this press release constitute forward-looking statements that involve assumptions and potential risks and uncertainties, which are made in a manner consistent with the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance and achievements of Herald National Bank to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. These factors include: general economic, capital market and business conditions; risks arising from litigation or similar proceedings; interest rate fluctuations; levels of delinquent loans; employee turnover; government regulation; and those other factors discussed in the filings of Herald National Bank with the Office of the Comptroller of the Currency. Herald National Bank undertakes no obligation, and expressly disclaims any obligation, to update publicly or revise any forward looking statement, which speaks only as of the date it is made, whether as a result of new information, future events or otherwise.

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