Executive Management's Letter To Our Shareholders, Clients and Friends,

The year 2012 was a year of challenge and achievement for NCAL Bancorp and our subsidiary, National Bank of California.

We entered the year with three primary objectives: strengthen our financial condition and asset quality; achieve compliance with regulatory expectations; and improve our profitability and operating results. We are pleased to report that substantial progress has been made on all three areas:

  • Our financial condition improved due to our vigorous collection efforts. Classified loans were reduced by 60%, while foreclosed assets declined by 36%. Our improving asset quality enabled us to dramatically reduce our provision for loan losses, which was $8.5 million less than the prior year provision, a reduction of 86.3%.
  • We made steady progress in complying with the terms of National Bank of California‚Äôs Consent Order and our other regulatory understandings. Compliance has been achieved in almost all areas, and we are continuing our efforts to address the few regulatory issues that remain.
  • Profitability improved significantly in 2012 compared to the prior year. We benefited from reduced loan loss provisions and tighter controls on expenses. In January 2012, we completed the sale of our Westlake Village Regional Office, and late in the year we entered into a sale agreement for the Glendale Regional Office which was completed in the first quarter of 2013. These transactions generated meaningful gains while reducing overhead expenses now and in the future. We will continue our program of expense control while intensifying our efforts to achieve controlled, profitable growth and the increased revenues that result.

We have restructured our organization and loan portfolio, addressed regulatory requirements, and maintained an active role with our clients in the communities we serve. The restructuring accomplished in 2012 has positioned our Company with a firm new foundation for the future.

As previously disclosed, NCAL Bancorp and Grandpoint Capital Corporation decided not to proceed with the merger transaction that was announced in June 2012. This mutual decision does not change NCAL Bancorp's focus on executing its business plan. We will also continue our efforts to address our capital requirements while maximizing shareholder value.

While much hard work remains, our positive momentum is building. We remain dedicated to our valued shareholders, clients, and employees, and thank you for your continued and loyal support.

Sincerely,

Henry Homsher,
President and Chief Executive Officer

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