Remember Heritage Bank? It got all kinds of hype (guilty) last December for being a new, well-capitalised bank startup, hoping to take advantage of the financial crisis and the weakness at major banks.
Well, it hasn’t been so rosey. First of all, they had to change their name from Heritage Bank to Herald National, after a dispute with a NJ bank. And it’s losing money.
Crain’s: Herald recorded a $7.7 million loss in the first quarter of this year, its first full quarter of operation. Its return on average assets was -27% for the quarter, according to research firm SNL Financial. A return of 2% or more is traditionally considered a sign of a well-managed bank.
More recently, Herald lost its highly regarded executive chairman of the board, shelved ambitious plans to expand into New Jersey, and axed nearly 25% of its staff, including nine bankers with the title of managing director, according to a regulatory filing.
Part of the problem, we think is that they’re a retail bank, and retail customers could not care less about a bank’s capital levels. As long as Citigroup has that FDIC guarantee, they’re as good as anyone else. Retail investors care about stuff like free checking and ATMs and a usable website. And what’s more, the government rescued the banks, meaning they could continue to take new deposite and lend without fear of getting too low on capital. So yeah, they kind of got screwed.