HNB Herald National Bank Common Stock

Herald National Bank (NYSE AMEX: HNB), a New York-based full-service commercial bank, reported profitable results for the quarter ended September 30, 2010 – its first profitable quarter since it began operations less than two years ago in November 2008.

“These results represent the most significant and positive milestone in our brief operational history,” said Chairman and Chief Executive Officer Raymond A. Nielsen. “This represents a continuation of the consistent, positive trend of steadily improving results in most key measures and categories since the inception of our reorganization efforts. This impressive achievement is a testament to the hard work of our talented and dedicated staff, and a validation of our proposition to bring the highest levels of service to small and mid-size business clients in the greater New York City area,” he added.

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

• Net income for the quarter was $321,000 or $0.03 per share vs. a loss of $3.9 million or $0.32 per share the previous quarter and a loss of $5.5 million or $0.89 per share for the same period last year.
• Net interest margin was steady at 4.10%, the same as for the quarter ending June 30, 2010 vs. 2.58% at September 30, 2009.
• Net income prior to the provision for loan losses and one-time items was $326,000 vs. a loss of $373,000 for the previous quarter and a loss of $4.0 million for the comparable quarter in 2009.
• 93% of the $375.7 million total deposits are considered by the bank to be “core,” contributing to a low and decreased cost of funds of 1.26% at September 30, 2010 vs. 1.49% at June 30, 2010 and 1.95% at the same point a year earlier.
• Tier 1 leverage ratio is 10.98% vs. 10.73% for the quarter ending June 30, 2010 and 10.36% at the same point in 2009, and the bank is “well capitalized,” the highest regulatory capital classification by the OCC.
• Nonperforming assets are $0.5 million and 0.14% at September 30, 2010 vs. $2.2 million or 0.63% of loans during the quarter ending June 30, 2010.

“For a bank that opened its doors less than two years ago, in the middle of the one of the worst financial crises in our nation’s history, to be able to post our first quarterly profit so quickly is an especially gratifying achievement,” said Herald’s President and Chief Operating Officer Michael S. Carleton. “We’re treating this accomplishment as only the first step in the next phase of our lifecycle, and focusing even more diligently on our core strategy of maintaining a strong credit quality, managing expenses diligently and prioritizing the welfare of our customers, shareholders and employees in everything we do.”

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; legislation affecting the banking industry, 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

Nine months ended September 30, September 30,

Statement of Operations

  2010       2009     2010       2009   Interest income $ 5,576 $ 2,773 $ 16,748 $ 4,848 Interest expense   1,019     1,026     3,473     1,978   Net interest income 4,557 1,747 13,275 2,870 Provision for loan losses 293 1,454 4,034 2,441 Noninterest income 478 77 701 169

Noninterest expense, net

  4,395     5,844     15,369     20,814   Pretax loss 347 (5,474 ) (5,427 ) (20,216 ) Tax expense   26     26     77     34   Net income (loss) $ 321   $ (5,500 ) $ (5,504 ) $ (20,250 )   Basic earnings per share $ 0.03 $ (0.89 ) $ (0.53 ) $ (3.27 ) Weighted average shares - basic 12,201 6,201 10,352 6,201   Selected Financial Highlights

Data at End of Period

  9/30/2010     6/30/2010     3/31/2010     12/31/2009     9/30/2009   Total loans $ 349,555 $ 343,162 $ 344,467 $ 301,177 $ 225,418 Allowance for loan losses 5,554 6,837 4,584 4,127 2,546 Securities available for sale 59,334 69,080 50,128 71,779 78,693 Securities held to maturity 10,215 23,449 34,533 41,515 32,635 Total assets 439,265 464,104 452,537 443,194 366,095 Total deposits 375,672 407,950 392,227 404,628 326,278 Stockholders' equity 52,300 52,288 55,569 35,226 31,317 Net income (loss) before provision for loan losses 326 (373 ) (1,211 ) (2,079 ) (4,045 ) Net interest margin 4.10 % 4.10 % 3.85 % 3.22 % 2.58 % Cost of funds 1.26 % 1.49 % 1.62 % 1.86 % 1.95 %  

Capital Ratios

Equity to Assets 11.91 % 11.27 % 12.28 % 7.95 % 8.55 % Tier 1 Leverage Ratio 10.98 % 10.73 % 11.94 % 8.52 % 10.36 % Tier 1 Risk-based Capital Ratio 14.96 % 14.25 % 15.20 % 10.63 % 12.06 % Total Risk-based Capital Ratio 16.21 % 15.51 % 16.45 % 11.88 % 13.05 %