HNB Herald National Bank Common Stock

Herald National Bank (NYSE AMEX: HNB), a full-service commercial bank, today reported results for the quarter and year ended December 31, 2010. The period represents the second consecutive quarter of profitability for the Bank.

“The fourth quarter was our second consecutive quarter of profitability, coming in just our second full year of operation. This rewarding result corroborates our focus on relationship banking for small and mid-market companies whose financial needs are not being met by larger institutions,” said Chairman and Chief Executive Officer Raymond A. Nielsen.

Key highlights for the three and 12-month periods include:

• Net income for the quarter was $126,000 or $0.01 per share, the second consecutive quarter of profitability for the bank following net income of $321,000 in the prior period, which included a $288,000 gain on the sale of securities. There was no similar gain in the current quarter. The fourth quarter profit compares to a net loss of $3.7 million or $0.59 per share, in the same quarter a year ago. A net loss of $5.4 million ($0.50 per share) was recorded for 2010, an improvement over a net loss of $23.9 million ($3.86 per share) in 2009.
• Net income prior to the provision for loan losses was $449,000 for the quarter, compared to $326,000 in the third quarter. The fourth quarter result compares to a net loss of $2.1 million in the same period a year ago.
• Total assets increased 13.9% year over year to $505 million from $443 million at December 31, 2009.
• Deposits increased 6.4% to $431 million from $405 million at December 31, 2009, of which 91.9% are core deposits and 19.7% are checking accounts.
• Loans increased 10.5% to $333 million from $301 million at December 31, 2009.
• Tier 1 leverage ratio stood at 10.97% at December 31, 2010, vs. 10.98% the previous quarter and 8.52% at year-end 2009. This exceeds the minimum regulatory capital ratios applicable to the bank.
• Net interest margin was unchanged from the prior quarter at 4.10%, and improved from 3.22% reported at quarter-end December 31, 2009.
• Non-performing loans were $0.4 million at December 31, 2010 as compared to $0.5 million at the end of the prior quarter.

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 Twelve months ended December 31, December 31,

Statement of Operations

2010

2009

2010

2009

Interest income $ 5,642 $ 4,416 $ 22,390 $ 9,264 Interest expense   948     1,377     4,421     3,355   Net interest income 4,694 3,039 17,969 5,909 Provision for loan losses 323 1,582 4,357 4,022 Noninterest income 160 150 861 319 Noninterest expense   4,380     5,244     19,748     26,059   Pretax income (loss) 151 (3,637 ) (5,275 ) (23,853 ) Tax expense   25     23     102     57   Net income (loss) $ 126   $ (3,660 ) $ (5,377 ) $ (23,910 )   Basic earnings (loss) per share $ 0.01 $ (0.59 ) $ (0.50 ) $ (3.86 ) Weighted average shares - basic 12,207 6,204 10,819 6,202   Selected Financial Highlights

Data at End of Period

  12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009   Total loans $ 332,909 $ 349,555 $ 343,162 $ 344,467 $ 301,177 Allowance for loan losses 6,404 5,554 6,837 4,584 4,127 Securities available for sale 132,076 59,334 69,080 50,128 71,779 Securities held to maturity 16,657 10,215 23,449 34,533 41,515 Total assets 504,690 439,265 464,104 452,537 443,194 Total deposits 430,569 375,672 407,950 392,227 404,628 Stockholders' equity 50,679 52,300 52,288 55,569 35,226 Net income (loss) before provision for loan losses 449 326 (373 ) (1,211 ) (2,079 ) Net interest margin 4.10 % 4.10 % 4.10 % 3.85 % 3.22 % Cost of funds 1.14 % 1.26 % 1.49 % 1.62 % 1.86 %  

Capital Ratios

Equity to Assets 10.04 % 11.91 % 11.27 % 12.28 % 7.95 % Tier 1 Leverage Ratio 10.97 % 10.98 % 10.73 % 11.94 % 8.52 % Tier 1 Risk-based Capital Ratio 15.10 % 14.96 % 14.25 % 15.20 % 10.63 % Total Risk-based Capital Ratio 16.36 % 16.21 % 15.51 % 16.45 % 11.88 %