To Our Shareholders, Clients and Friends,

NCAL Bancorp and its subsidiary, National Bank of California, made good progress in 2013 in the face of continued challenges.

A key objective has been to address our capital requirements. On September 16, 2013, NCAL Bancorp enteredinto a definitive agreement with a California-based investor to recapitalize the Company with $25 million of additional capital. When completed, this important accomplishment will provide a solid capital base which will not only meet regulatory requirements, but will enable the Bank to grow and better serve our clients and our communities.

Management continued its diligent and aggressive efforts to meet all regulatory and compliance expectations in 2013. In particular, we focused on strengthening our loan portfolio, addressing problems and working with borrowers to implement solutions. As a result of these efforts, credit quality improved significantly. This improvement led to a substantial reduction in our provision for loan losses in 2013, which declined to just $183,000 for the year from $1,167,000 in 2012. The reduction in problem loans also resulted in sharply lower legal expenses, which decreased by $1,000,000 in 2013 compared to the prior year.

But while much progress was made, challenges remain. The recent economic recession and the lackluster recovery which followed continue to adversely impact our borrowers and their ability to service their loans. The continuation of the historically-low interest rates which currently prevail significantly depresses our operating margins and profitability. Although much remains to be done to restore our performance to acceptable levels, we believe that significant strides have been made. We will remain steadfast in our focus on improving profitability to meet our ambitious goals.

Our progress in 2013 would not have been possible without our resilient team of banking professionals. These individuals remain dedicated to extending the exceptional level of personal service and added value to customers and prospects which has long been a hallmark of National Bank of California.

We're proud to say that we're on the right course. On behalf of the Board of Directors, we deeply appreciate the continued support of our shareholders, clients, and staff members.


Henry Homsher,
President and Chief Executive Officer

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