HNB Herald National Bank Common Stock

Herald National Bank (NYSE AMEX: HNB), a New York-based full-service commercial bank, today announced financial results for the quarter ended June 30, 2010.

“We’ve continued to experience improvements in our financial performance, and our results this quarter are no exception, especially absent one-time charges,” said Chairman and Chief Executive Officer Raymond A. Nielsen. “We are ‘well capitalized’ under the OCC’s regulatory capital guidelines, financially stable and continue to focus on relationship banking, while delivering the highest levels of attentive, personalized service to our growing roster of clients.”

Key highlights for the quarter ended June 30, 2010 include:

• Net loss for the quarter was $3.9 million or $0.32 per share vs. a loss of $5.8 million or $0.62 per share for the same period in 2009, a decline of 32%.
• Net interest margin increased to 4.10% at June 30, 2010 vs. 3.85% at March 31, 2010.
• Net loss prior to the provision for loan losses and one-time charges was $373,000 for the quarter, an improvement of 69% over the comparable prior quarter amount of $1.2 million.
• 91% of the $407.9 million total deposits are considered by the bank to be “core,” contributing to a low and decreased cost of funds, 1.49% at June 30, 2010 vs. 1.62% at March 31, 2010.
• Tier 1 leverage ratio is 10.73% at June 30, 2010, and the bank is “well capitalized,” the highest regulatory capital classification by the OCC.
• Nonperforming assets increased to $2.2 million or 0.63% of loans during the quarter as compared to $1.2 million or 0.35% at the end of the previous quarter. Despite the increase, the Bank’s nonperforming assets level continues to be significantly below the industry average.

Herald also announced that David S. Bagatelle has resigned as both President and a director of the bank. Herald’s Chief Operating Officer Michael S. Carleton has been appointed President pending the review and non-objection of the OCC, the bank’s primary regulator, of him assuming that role permanently. Carleton has been with the bank since its inception and will retain his Chief Operating Officer duties and rejoin the board of directors. Detailed information on these management changes is contained in a form 8-K filed today by the bank.

"David was a lead founder of the bank, and played an essential leadership role from Herald's earliest days, helping to navigate us through the pre-launch and initial capital raising phases," said Nielsen. "His contributions to our development and growth have left us poised for long-term strength and stability, and we believe that the assumption of these responsibilities by Michael will ensure a smooth and effective transition." These changes follow a recent capital raise occurring at the end of the first quarter and a restructuring of the bank's board of directors.

The end of the quarter also marks the implementation of a series of operational and pricing improvements stemming from a comprehensive internal evaluation. The resulting changes occurred primarily in three areas – reducing non-interest expenses, lowering the cost of funds and enhancing fee income through relationship pricing improvements. The bank also announced the appointment of Mark Foley, who has more than 20 years of risk management experience, to serve as its Senior Vice President and Chief Risk Officer.

“These initiatives, combined with our recent capital infusion and the adoption of more conservative growth objectives have enabled the bank to significantly reduce our operating loss and leave us poised to turn the corner and accelerate our progress toward sustained profitability,” said Carleton. “I’m very enthused to be assuming these additional responsibilities at such a significant and positive point in Herald National Bank’s development and will continue working to ensure that we are serving the needs of our clients and optimizing shareholder value.”

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.

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.

Herald National Bank

Financial Highlights

(unaudited)

(dollars in thousands, except per share data)

    Three months ended   Six months ended   June 30, June 30,

Statement of Operations

2010   2009 2010   2009 Interest income $ 5,708 $ 1,505 $ 11,172 $ 2,074 Interest expense   1,166     672     2,454     952   Net interest income 4,542 833 8,718 1,122 Provision for loan losses 3,053 633 3,740 987 Noninterest income 116 71 223 92 Noninterest expense, net   5,504     7,278     10,974     14,969   Pretax loss (3,899 ) (7,007 ) (5,773 ) (14,742 ) Tax expense   27     4     51     8   Net loss $ (3,926 ) $ (7,011 ) $ (5,824 ) $ (14,750 )   Basic earnings per share $ (0.32 ) $ (1.13 ) $ (0.62 ) $ (2.38 ) Weighted average shares - basic 12,185 6,201 9,412 6,201   Selected Financial Highlights

Data at End of Period

6/30/2010 3/31/2010 12/31/2009 9/30/2009 6/30/2009 Total loans $ 343,162 $ 344,467 $ 301,177 $ 225,418 $ 98,876 Allowance for loan losses 6,837 4,584 4,127 2,546 1,092 Securities available for sale 69,080 50,128 71,779 78,693 90,042 Securities held to maturity 23,449 34,533 41,515 32,635 30,713 Total assets 464,104 452,537 443,194 366,095 261,475 Total deposits 407,950 392,227 404,628 326,278 216,147 Stockholders' equity 52,288 55,569 35,226 31,317 36,176 Net loss before provision for loan losses (873 ) (1,211 ) (2,079 ) (4,045 ) (6,379 ) Net interest margin 4.10 % 3.85 % 3.22 % 2.58 % 1.82 % Cost of funds 1.49 % 1.62 % 1.86 % 1.95 % 1.90 %  

Capital Ratios

Equity to Assets 11.27 % 12.28 % 7.95 % 8.55 % 13.84 % Tier 1 Leverage Ratio 10.73 % 11.94 % 8.52 % 10.36 % 16.90 % Tier 1 Risk-based Capital Ratio 14.25 % 15.20 % 10.63 % 12.06 % 24.34 % Total Risk-based Capital Ratio 15.51 % 16.45 % 11.88 % 13.05 % 25.07 %