HERNDON - Dealt a final regulatory blow as a result of the Great Recession, Herndon National Bank (HNB), a rare independent in a merged financial world, is in its final weeks of operation.
As of Monday, Aug. 8, the institution, which traces its roots to 1901, will become part of Gratz National Bank, which in 2008 opened a branch location along Route 147 a few miles south of Herndon. In addition to its namesake location in northern Dauphin County, Gratz National also has a branch office in Valley View.
All eight full-time employees at HNB will get jobs at Gratz National, a stipulation made as part of the sale, said Steve Tressler, chief executive officer at Herndon.
He said there is excitement about the move, but also sadness in the fact that HNB, a prominent structure - physically and financially - along Route 147 in the center of the small borough, will no longer exist.
Also, it marks the end of an era in which four generations of Tressler's family - including three great-grandfathers - were involved in HNB and its predecessor, First National Bank of Herndon.
"Sure there is (sadness)," said Tressler, noting his family's long involvement. "We kept it open for as long as we possibly could."
Similar philosophy
Tressler, who will become a vice president at Gratz, working with assistant vice president Jack Snyder at the Herndon branch, said HNB didn't experience a lot of interest from larger banks through the years, but it finally responded to interest from Gratz National.
"It's a small banking operation with a similar philosophy, which is why we chose to go with them," he said. "And they have an interest in the area."
There will be some benefits for customers, he said, including online banking and a debit card.
Ted Bonwit, president at Gratz National, said his firm had been "courting" Herndon National for more than five years. He considers the transaction a "merger of equals."
Recession's impact
Tressler said increasingly cumbersome and time-consuming regulatory issues have been an issue for some time for banks, but it got worse with the recession.
As is the case for other businesses, expenses, including health care, continued to climb while investment returns declined, Tressler said.
Among the final factors was the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama last summer, which Tressler described as "one of the most sweeping regulatory changes since the Great Depression." It has resulted in even small banks needing almost a full-time person to deal with regulatory compliance.
"It's another strain on the bottom line," Tressler said.
He doesn't blame the federal government, however.
"Unfortunately, the big boys (in banking) were left to their own devices," and this lack of regulatory control, once abused, prompted the government to step in with a heavy hand.
Bonwit said the merger will allow Gratz National to better deal with the regulatory demands. While Tressler and two others HNB employees work at the Herndon branch, the other five will work at the main office in Gratz, where they'll have administrative jobs that largely deal with compliance.
"I think Steve knew he had to do something," Bonwit said. "That's how our conversations materialized."
The acquisition by Gratz National needed regulatory approval from three agencies, a process that was completed in June. The federal Office of the Comptroller of the Currency takes the first look, and subsequent approvals by the Federal Reserve and the Pennsylvania Department of Banking are essentially foregone conclusions, Tressler said.
Family connection
Tressler, 57, said three of his great-grandfathers - two on the Tressler side, the other on the Krebs side - were involved with the First National Bank of Herndon. The bank building is now the Herndon Post Office.
In a correlation to today's financial trouble in the United States, First National was forced to reorganize and even build a more secure facility under regulations passed in 1934 as a result of the Great Depression. That's when the named changed to Herndon National and the current bank building was constructed next door.
Tressler's grandfather, Lloyd, a local businessman involved in a store, telephone service and lumber company, and later his father, Isaac, an attorney, would be involved in HNB. Isaac, who died in August 2008 at age 90, was on the board of directors and did much of the bank's legal work.
This personal connection made the decision to sell all the more difficult, Steve Tressler said.
"It took me a year to decide to go in this direction," he said, "but the writing was on the wall."
Bonwit said his banking mentor, former Gratz National board chairman John Pfeiffer, who died several years ago, and Isaac Tressler were good friends.
"We have an awful lot of respect for the Tressler name," Bonwit said.
In fact, Bonwit said, "John had always envisioned us and Herndon teaming up."
Bonwit said Gratz National has directed the HNB board to donate its building to a nonprofit organization in respect of the Tressler name. That process is continuing, he said.