Quarterly Report – 2018 4th Quarter & President’s Message

We’ve closed the books on a great year at Partners Bank of California! I’m very pleased to report the bank finished the year on a strong note, continuing a streak of strong growth. We are also very excited that the strength of our performance last year has propelled us into 2019 with fantastic momentum. The following highlights some of the bank’s key financial achievements in 2018.

During 2018, Partners Bank continued with its strategic growth plan by increasing assets, loans, and core deposits, while maintaining a favorable capital position. Our total loans increased substantially by $58.4 million, or 37.5% over the previous year. Total assets increased by $59.7 million, which was a 30.1% growth over 2017. Noninterest-bearing deposits were $102.2 million, representing 52% of total deposits, and up 17.3% from $87.1 million a year earlier. Despite the significant growth achieved in 2018, the bank’s tier 1 leverage ratio increased during the year to 12.1% from 11.0% at yearend 2017 due to a $4.5 million increase in equity as a result of a $2.75 million mid-year capital raise coupled with earnings retention.

Our balance sheet growth led to an increase in net interest income of $1.92 million, or 26% when comparing net interest income of $9.28 million for the year ended December 31, 2018 to $7.36 million recorded in the year ended December 31, 2017. This net interest income growth was substantially offset by an intentional increase in operating costs associated with increased staffing levels in 2018, which have already provided us expanded capabilities to do more for more clients.

Net income of $1.43 million for 2018 significantly exceeded the $700,000 recorded a year earlier. The increase was driven primarily by the previously mentioned loan growth and the normalization of income tax accruals in 2018. Federal tax law changes enacted in late 2017 had the effect of significantly increasing the bank’s tax expense in 2017 (due to the write down of deferred tax assets) while reducing income tax expense in 2018 that resulted from a significant reduction in corporate income tax rates. These factors helped increase the bank’s return on average assets from 0.36% in 2017 to 0.67% in 2018.

In March 2019, Partners Bank of California will open our first banking branch office outside of Orange County. Our Beverly Hills office will provide full-service business and private banking as well as provide a full array of commercial lending solutions to clients in the greater Los Angeles area. This extension of the Partners Bank branch footprint and presence in Los Angeles county will further enhance our bank’s growth and service capabilities, making it easier and more convenient for our LA clients to access relationship managers and for the bank to provide our unique relationship based banking services. We’re very excited about this expansion, the importance to our bank and most importantly the positive impact to our clients.

Our Beverly Hills office will be led by Tom Calahan, Los Angeles Regional Manager. Tom has been an integral member of our business development team at Partners since 2016 and has already established a firm presence for us in the LA market. If you’re in the greater Los Angeles area, and seeking unique commercial banking and lending solutions with outstanding service, give Tom a call. Tom Calahan can be reached directly at (949) 421-8768 or by email at tcalahan@pbofca.com.

As always, my thanks goes to our outstanding team of banking professionals here at Partners who work tirelessly every day to ensure that we’re operating prudently and serving our clients efficiently and with the utmost care and service. Additionally, where would we be without our loyal and steadfast clients and shareholders? As we say every chance we get…your success is our success. At Partners Bank we’re passionate about your success. Thank you for choosing Partners Bank of California!

As always, my thanks goes to our outstanding team of banking professionals here at Partners who work tirelessly every day to ensure that we’re operating prudently and serving our clients efficiently and with the utmost care and service. Additionally, where would we be without our loyal and steadfast clients and shareholders? As we say every chance we get…your success is our success. At Partners Bank we’re passionate about your success. Thank you for choosing Partners Bank of California!

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Chris Walsh

President / CEO

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