##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to __________

Commission file number 0-25135

REDDING BANCORP

(Exact name of Registrant as specified in its charter)


|                                                                          |  |                                                
|------------------------------------------------------------------------- |  | -----------------------------------------------
|California
(State or other jurisdiction of incorporation or organization) |  | 94-2823865
(I.R.S. Employer Identification No.)

|                                                                                   |  |                 
|---------------------------------------------------------------------------------- |  | ----------------
|1951 Churn Creek Road
Redding, California
(Address of principal executive offices) |  | 96002
(Zip code)

Registrants telephone number, including area code: (530) 224-3333

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [   ]

Indicate the number of shares outstanding of each of the issuers class of
common stock, as of the latest practicabledate. March 31, 2002: 2,698,415

1



---

TABLE OF CONTENTS



|                              |                                                                                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                                                                                 
|                              |                                                                                                                                                               | Consolidated Balance Sheets (Unaudited)             
|                              |                                                                                                                                                               | Consolidated Statements of Income (Unaudited)       
|                              |                                                                                                                                                               | Consolidated Statements of Cash Flows (Unaudited)   
|                              |                                                                                                                                                               | Notes to Unaudited Consolidated Financial Statements
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT.
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                                                                                          
|PART II. Other Information   
|                              | Item 1. Legal proceedings                                                                                                                                    
|                              | Item 2. Changes in securities and use of proceeds                                                                                                            
|                              | Item 3. Defaults upon Senior Securities                                                                                                                      
|                              | Item 4. Submission of Matters to a vote of Security Holders                                                                                                  
|                              | Item 5. Other Information                                                                                                                                    
|                              | Item 6A. Exhibits                                                                                                                                            
|SIGNATURES                   



---



##### Table of Contents



REDDING BANCORP & SUBSIDIARIES

Index to Form 10-Q

|                              |                                                                                               |    |      
|----------------------------- | --------------------------------------------------------------------------------------------- | -- | -----
|                              |                                                                                               |    | Page:
|PART I. Financial Information |                                                                                               |   
|                             
|                              | Item 1. Financial Statements                                                                  |    |      
|                             
|                              | Consolidated Balance Sheets
March 31, 2002 , December 31, 2001 and March 31, 2001             |    | 3    
|                             
|                              | Consolidated Statements of Income
Three months ended March 31, 2002 and 2001                  |    | 4    
|                             
|                              | Consolidated Statements of Cash Flows
Three months ended March 31, 2002 and 2001              |    | 5    
|                             
|                              | Notes to Consolidated Financial Statements                                                    |    | 6    
|                             
|                              | Item 2. Managements Discussion and Analysis
Of Financial Condition and Results of Operations |    | 8    
|                             
|                              | Item 3. Quantitative and Qualitative Disclosure about Market Risk                             |    | 17   
|                             
|PART II. Other Information    |                                                                                               |   
|                             
|                              | Item 1. Legal proceedings                                                                     |    | 19   
|                             
|                              | Item 2. Changes in Securities and use of proceeds                                             |    | 19   
|                             
|                              | Item 3. Defaults Upon Senior Securities                                                       |    | 19   
|                             
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                   |    | 19   
|                             
|                              | Item 5. Other Information                                                                     |    | 19   
|                             
|                              | Item 6. Exhibits and Report on Form 8-K                                                       |    | 20   
|                             
|SIGNATURES                    |                                                                                               | 20

2



---



##### Table of Contents












PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

REDDING BANCORP & SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Dollar amounts in thousands)

|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |         |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------- | ------------ | ------- | -------------- | ------- | ------------ | ------- | -------------- | ------- | ------- | ------- | ------- | ------- | 
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         | March 31, 2002 |         | Dec 31, 2001 |         | March 31, 2001
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |               
|ASSETS                                                                                                                                            |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|Cash and due from banks                                                                                                                           |                                                                                                                                                         | $                                          | 17,881            |              |         | $              | 15,528  |              |         | $              | 11,598  |        
|Federal funds sold and securities purchased under
agreements to resell                                                                            |                                                                                                                                                         |                                            | 13,930            |              |         |                | 25,430  |              |         |                | 24,270  |        
|Securities available-for-sale                                                                                                                     |                                                                                                                                                         |                                            | 34,640            |              |         |                | 40,898  |              |         |                | 24,570  |        
|Securities held to maturity, at cost (estimated fair value
of $3,805 on March 31, 2002, $4,193 on December 31, 2001
and $5,910 on March 31, 2001) |                                                                                                                                                         |                                            | 3,707             |              |         |                | 4,117   |              |         |                | 5,861   |        
|Loans, net of the allowance for loan losses of $3,232 on
March 31, 2002, $3,180 on December 31, 2001 and $2,645 on
March 31, 2001                 |                                                                                                                                                         |                                            | 230,892           |              |         |                | 216,696 |              |         |                | 194,328 |        
|Bank premises and equipment, net                                                                                                                  |                                                                                                                                                         |                                            | 5,391             |              |         |                | 5,339   |              |         |                | 5,187   |        
|Other assets                                                                                                                                      |                                                                                                                                                         |                                            | 10,899            |              |         |                | 10,678  |              |         |                | 7,417   |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   | Total Assets |         | $              | 317,340 |              |         | $              | 318,686 |         |         | $       | 273,231 | 
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                              |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  | Demand  noninterest bearing                                                                                                                            |                                            | $                 | 44,830       |         |                | $       | 44,525       |         |                | $       | 33,072  |        
|                                                                                                                                                  | Demand  interest bearing                                                                                                                               |                                            |                   | 73,409       |         |                |         | 69,892       |         |                |         | 53,921  |        
|                                                                                                                                                  | Savings                                                                                                                                                 |                                            |                   | 18,065       |         |                |         | 17,034       |         |                |         | 13,355  |        
|                                                                                                                                                  | Certificates of deposits                                                                                                                                |                                            |                   | 138,081      |         |                |         | 149,984      |         |                |         | 127,831 |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  |                                                                                                                                                         |                                            | Total Deposits    |              |         | 274,385        |         |              |         | 281,435        |         |         |         | 228,179 |        
|Securities sold under agreements to repurchase                                                                                                    |                                                                                                                                                         |                                            | 11,867            |              |         |                | 6,780   |              |         |                | 11,272  |        
|Other Liabilities                                                                                                                                 |                                                                                                                                                         |                                            | 3,293             |              |         |                | 3,231   |              |         |                | 3,902   |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  |                                                                                                                                                         |                                            | Total Liabilities |              |         | 289,545        |         |              |         | 291,446        |         |         |         | 243,353 |        
|Stockholders Equity:                                                                                                                             |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  | Preferred stock, no par value, 2,000,000 authorized
no shares issued and outstanding in 2001 and 2000                                                   |                                            |                   |              |         |                |         |              |         |                |         |         |        
|                                                                                                                                                  | Common Stock , no par value, 10,000,000 shares
authorized; 2,698,415 shares issued and outstanding
at March 31, 2002 and 2,703,457 at December 31, 2001 |                                            |                   | 8,851        |         |                |         | 8,851        |         |                |         | 9,359   |        
|                                                                                                                                                  | Retained Earnings                                                                                                                                       |                                            |                   | 19,042       |         |                |         | 18,397       |         |                |         | 20,330  |        
|                                                                                                                                                  | Accumulated other comprehensive income (loss), net of tax                                                                                               |                                            |                   | (98          | )       |                |         | (8           | )       |                |         | 189     |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  |                                                                                                                                                         |                                            | 27,795            |              |         |                | 27,240  |              |         |                | 29,878  |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        
|                                                                                                                                                  |                                                                                                                                                         | Total Liabilities and Stockholders Equity |                   | $            | 317,340 |                |         | $            | 318,686 |                |         | $       | 273,231 |        
|                                                                                                                                                  |                                                                                                                                                         |                                            |                   |              |         |                |         |              |         |                |         |        

See notes to consolidated financial statements.

3



---



##### Table of Contents






REDDING BANCORP & SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except share data)
Three months ended March 31, 2002 and 2001

|                                                    |                                                                                    |                            |       |                |       |                |       |       |       | 
|--------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------------- | ----- | -------------- | ----- | -------------- | ----- | ----- | ----- | 
|                                                    |                                                                                    |                            |       | March 31, 2002 |       | March 31, 2001
|                                                    |                                                                                    |                            |       |                |       |               
|Interest income:                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    | Interest and fees on loans                                                         |                            | $     | 3,707          |       |                | $     | 4,552 |      
|                                                    | Interest on tax exempt securities                                                  |                            |       | 48             |       |                |       | 25    |      
|                                                    | Interest on US government securities                                               |                            |       | 377            |       |                |       | 376   |      
|                                                    | Interest on federal funds sold and securities
purchased under agreements to resell |                            |       | 63             |       |                |       | 228   |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    |                                                                                    | Total interest income      |       |                | 4,216 |                |       |       | 5,206 | 
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Interest expense:                                   |                                                                                    |                            |       |                |       |                |       |      
|                                                    | Interest on demand deposits                                                        |                            |       | 118            |       |                |       | 303   |      
|                                                    | Interest on savings deposits                                                       |                            |       | 37             |       |                |       | 95    |      
|                                                    | Interest on time deposits                                                          |                            |       | 1,435          |       |                |       | 1,872 |      
|                                                    | Securities sold under agreements to repurchase                                     |                            |       | 10             |       |                |       | 80    |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    |                                                                                    | Total interest expense     |       |                | 1,600 |                |       |       | 2,350 | 
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Net interest income                                 |                                                                                    |                            | 2,616 |                |       |                | 2,856 |      
|Provision for loan losses                           |                                                                                    |                            | 65    |                |       |                | 158   |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Net interest income after provision for loan losses |                                                                                    |                            | 2,551 |                |       |                | 2,698 |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Non-interest income:                                |                                                                                    |                            |       |                |       |                |       |      
|                                                    | Service charges on deposit accounts                                                |                            |       | 72             |       |                |       | 51    |      
|                                                    | Other income                                                                       |                            |       | 265            |       |                |       | 207   |      
|                                                    | Net loss sale of securities available-for-sale                                     |                            |       | (1             | )     |                |       | 0     |      
|                                                    | Credit card service income, net                                                    |                            |       | 107            |       |                |       | 474   |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    |                                                                                    | Total non-interest Income: |       |                | 443   |                |       |       | 732   | 
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Non-interest expense:                               |                                                                                    |                            |       |                |       |                |       |      
|                                                    | Salaries and related benefits                                                      |                            |       | 1,022          |       |                |       | 969   |      
|                                                    | Net occupancy and equipment expense                                                |                            |       | 353            |       |                |       | 225   |      
|                                                    | FDIC Insurance premium                                                             |                            |       | 12             |       |                |       | 10    |      
|                                                    | Data processing and professional services                                          |                            |       | 120            |       |                |       | 105   |      
|                                                    | Directors expenses                                                                |                            |       | 60             |       |                |       | 46    |      
|                                                    | Other expense                                                                      |                            |       | 318            |       |                |       | 305   |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    |                                                                                    | Total non-interest expense |       |                | 1,885 |                |       |       | 1,660 | 
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Income before income taxes                          |                                                                                    |                            | 1,109 |                |       |                | 1,770 |      
|                                                    | Provision for income taxes                                                         |                            |       | 368            |       |                |       | 639   |      
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|                                                    |                                                                                    | Net Income                 |       | $              | 741   |                |       | $     | 1,131 | 
|                                                    |                                                                                    |                            |       |                |       |                |       |      
|Basic earnings per share                            |                                                                                    | $                          | 0.27  |                |       | $              | 0.39  |      
|Weighted average shares  basic                     |                                                                                    |                            | 2,703 |                |       |                | 2,876 |      
|Diluted earnings per share                          |                                                                                    | $                          | 0.26  |                |       | $              | 0.38  |      
|Weighted average shares  diluted                   |                                                                                    |                            | 2,873 |                |       |                | 3,008 |      

See notes to consolidated financial statements.

4



---



##### Table of Contents






REDDING BANCORP & SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Three months ended March 31, 2002 and 2001

|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |                |         |   |        |  
|--------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | ------ | ------------------------------------------------ | ------- | -------------- | ------ | -------------- | ------- | - | ------ | -
|                                                                                  |                                  |                                                                     |        |                                                  |         | March 31, 2002 |        | March
31, 2001
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Cash flows from operating activities:                                             |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  | Net Income                                                          |        | $                                                | 741     |                |        | $              | 1,131   |  
|Adjustments to reconcile net income to net cash provided by
operating activities: |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  | Provision for loan losses                                           |        |                                                  | 65      |                |        |                | 158     |  
|                                                                                  |                                  | Provision for depreciation                                          |        |                                                  | 147     |                |        |                | 118     |  
|                                                                                  |                                  | Compensation expense associated with exercise of stock
options      |        |                                                  | 17      |                |        |                | 17      |  
|                                                                                  |                                  | Loss on sale of securities available-for-sale                       |        |                                                  | 1       |                |        |                | 0       |  
|                                                                                  |                                  | Amortization of investment premiums and accretion of
discounts, net |        |                                                  | (177    | )              |        |                | 130     |  
|                                                                                  |                                  | Gain on sale of loans                                               |        |                                                  | (42     | )              |        |                | (14     | )
|                                                                                  |                                  | Proceeds from sales of loans                                        |        |                                                  | 3,368   |                |        |                | 742     |  
|                                                                                  |                                  | Loans originated for sale                                           |        |                                                  | (3,410  | )              |        |                | (728    | )
|                                                                                  |                                  | Effect of changes in:                                               |        |                                                  |         |                |        |                |         |  
|                                                                                  |                                  |                                                                     |        | Other assets                                     |         |                | (221   | )              |         |   | (536   | )
|                                                                                  |                                  |                                                                     |        | Deferred loan fees                               |         |                | 103    |                |         |   | (38    | )
|                                                                                  |                                  |                                                                     |        | Other liabilities                                |         |                | 63     |                |         |   | 853    |  
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  |                                                                     |        | Net cash provided by operating activities        |         |                | 655    |                |         |   | 1,833  |  
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Cash flows from investing activities:                                             |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  | Proceeds from maturities of available-for-sale securities           |        |                                                  | 3,466   |                |        |                | 7,970   |  
|                                                                                  |                                  | Proceeds from sale of available-for-sale securities                 |        |                                                  | 6,839   |                |        |                | 0       |  
|                                                                                  |                                  | Purchases of available-for-sale securities                          |        |                                                  | (3,550  | )              |        |                | (12,425 | )
|                                                                                  |                                  | Loan origination, net of principal repayments                       |        |                                                  | (14,280 | )              |        |                | (3,126  | )
|                                                                                  |                                  | Purchases of premises and equipment                                 |        |                                                  | (200    | )              |        |                | (18     | )
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  |                                                                     |        | Net cash (used) provided by investing activities |         |                | (7,725 | )              |         |   | (7,599 | )
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Cash flows from financing activities:                                             |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  | Net increase (decrease) in demand deposits and savings              |        |                                                  | 4,852   |                |        |                | 3,066   |  
|                                                                                  |                                  | Net increase in certificates of deposit                             |        |                                                  | (11,903 | )              |        |                | 7,077   |  
|                                                                                  |                                  | Net increase from other borrowings                                  |        |                                                  | 5,087   |                |        |                | 6,004   |  
|                                                                                  |                                  | Common stock repurchase transactions                                |        |                                                  | (113    | )              |        |                | (126    | )
|                                                                                  |                                  | Common stock options exercised                                      |        |                                                  | 0       |                |        |                | 0       |  
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  |                                  |                                                                     |        | Net cash provided by financing activities        |         |                | (2,077 | )              |         |   | 16,021 |  
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Net increase in cash and cash equivalents                                         |                                  |                                                                     | (9,147 | )                                                |         |                | 10,255 |               
|Cash and cash equivalents, beginning of period                                    |                                  |                                                                     | 40,958 |                                                  |         |                | 25,613 |               
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Cash and cash equivalents, end of period                                          |                                  | $                                                                   | 31,811 |                                                  |         | $              | 35,868 |               
|                                                                                  |                                  |                                                                     |        |                                                  |         |                |        |               
|Supplemental disclosures:                                                         |                                  |                                                                     |        |                                                  |         |                |        |               
|                                                                                  | Cash paid during the period for: |                                                                     |        |                                                  |         |                |        |                |        
|                                                                                  |                                  |                                                                     |        | Income taxes                                     |         |                | 0      |                |         |   | 60     |  
|                                                                                  |                                  |                                                                     |        | Interest                                         |         |                | 1,677  |                |         |   | 2,417  |  

See notes to consolidated financial statements.

5



---



##### Table of Contents






REDDING BANCORP & SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements should be read in
conjunction with the financial statements and related notes contained in
Redding Bancorps 2001 Annual Report to Shareholders. The accounting and
reporting policies of the Company conform with accounting principles generally
accepted in the United States of America and general practices within the
banking industry. The statements include the accounts of Redding Bancorp (the
Company), and its wholly owned subsidiaries, Redding Bank of Commerce (RBC),
Roseville Bank of Commerce, a division of Redding Bank of Commerce and Redding
Service Corporation. All significant inter-company balances and transactions
have been eliminated. The financial information contained in this report
reflects all adjustments that in the opinion of management are necessary for a
fair presentation of the results of the interim periods. All such adjustments
are of a normal recurring nature. The results of operations and cash flows for
the three months ended March 31, 2002 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2002.

For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, federal funds sold and repurchase agreements.
Federal funds sold and repurchase agreements are generally for one day periods.

2. Earnings per Share

Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. The following table displays the
computation of earnings per share for the three months ended March 31, 2002 and
2001.

(Dollars in thousands, except per share data)

|                           |                                                 |   |                              |       |      |   |       |       | 
|-------------------------- | ----------------------------------------------- | - | ---------------------------- | ----- | ---- | - | ----- | ----- | 
|                           |                                                 |   | Three Months Ended March 31,
|                           |                                                 |   |                             
|                           |                                                 |   | 2002                         |       | 2001
|                           |                                                 |   |                              |       |     
|Basic EPS Calculation:     |                                                 |   |                              |       |      |   |       |      
|                           | Numerator (net income)                          |   | $                            | 741   |      |   | $     | 1,131 | 
|                           | Denominator (average common
shares outstanding) |   |                              | 2,703 |      |   |       | 2,876 | 
|Basic earnings per Share   |                                                 | $ | 0.27                         |       |      | $ | 0.39  |      
|Diluted EPS Calculation:   |                                                 |   |                              |       |      |   |       |      
|                           | Numerator (net income)                          |   | $                            | 741   |      |   | $     | 1,131 | 
|                           | Denominator:                                    |   |                              |       |      |   |       |       | 
|                           | Average common shares outstanding               |   |                              | 2,703 |      |   |       | 2,876 | 
|                           | Options                                         |   |                              | 170   |      |   |       | 132   | 
|                           |                                                 |   |                              |       |      |   |       |      
|                           |                                                 |   | 2,873                        |       |      |   | 3,008 |      
|Diluted earnings per Share |                                                 | $ | 0.26                         |       |      | $ | 0.38  |      
|                           |                                                 |   |                              |       |      |   |       |      

6



---



##### Table of Contents



3. Comprehensive Income

The Companys total comprehensive earnings were as follows:

|                                                                |  |                              |     |      |  |   |       | 
|--------------------------------------------------------------- |  | ---------------------------- | --- | ---- |  | - | ----- | 
|                                                                |  | Three Months Ended March 31,
|                                                                |  |                             
|                                                                |  | 2002                         |     | 2001
|                                                                |  |                              |     |     
|Net Income as reported                                          |  | $                            | 741 |      |  | $ | 1,131 | 
|Other comprehensive income (net of tax):                        |  |                              |     |      |  |   |       | 
|Unrealized holding
gain (loss) on securities available-for-sale |  |                              | (91 | )    |  |   | 192   | 
|Reclassification adjustment for losses included in net income   |  |                              | 1   |      |  |   | 0     | 
|                                                                |  |                              |     |      |  |   |       | 
|Total other comprehensive income                                |  |                              | (90 | )    |  |   | 192   | 
|Total comprehensive income                                      |  | $                            | 651 |      |  | $ | 1,323 | 
|                                                                |  |                              |     |      |  |   |       | 

4. Segment Reporting

The Company has two reportable segments: commercial banking and credit card
services. The Company conducts a general commercial banking business in the
counties of El Dorado, Placer, Shasta, and Sacramento, California. The
principal commercial banking activities include a full-array of deposit
accounts and related services and commercial lending for businesses and their
interests. Credit card services are limited to those revenues and data
processing costs associated with its agreement with an Independent Sales
Organization (ISO), pursuant to which the Bank provides credit and debit card
processing services for merchants solicited by the ISO or the Bank who accept
credit and debit cards as payments for goods and services.

The following table presents financial information about the Companys
reportable segments:

|                                      |  |                              |       |      |  |   |       | 
|------------------------------------- |  | ---------------------------- | ----- | ---- |  | - | ----- | 
|                                      |  | Three Months Ended March 31,
|                                      |  |                             
|Net income before taxes allocated to: |  | 2002                         |       | 2001
|                                      |  |                              |       |     
|Commercial Banking                    |  | $                            | 1,002 |      |  | $ | 1,296 | 
|Credit card services                  |  |                              | 107   |      |  |   | 474   | 
|                                      |  |                              |       |      |  |   |       | 
|                                      |  | $                            | 1,109 |      |  | $ | 1,770 | 
|                                      |  |                              |       |      |  |   |       | 

5. New Accounting Pronouncements

Business Combinations and Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinationswhich addresses
the elimination of pooling accounting treatment in business combinations and
the financial accounting and reporting for acquired goodwill and other
intangible assets at acquisition and SFAS No. 142, Goodwill and Other
Intangible Assetswhich addresses financial accounting and reporting for
acquired goodwill and other intangible assets at acquisition in transactions
other than business combinations covered by SFAS No. 141, and the accounting
treatment of goodwill and other intangible assets after acquisition and initial
recognition in the financial statements. The adoption of these statements did
not have any impact on the Companys consolidated financial position, results
of operations, or cash flows, as the Company had no goodwill as of January 1,
2002 and all of the Companys intangible assets, comprised of core deposit
intangibles, have finite lives and are continuing to be amortized.

7



---



##### Table of Contents



Impairment or Disposal of Long-Lived Assets

Effective
January 1, 2002, the Company adopted SFAS No. 144, Accounting
For The Impairment Or Disposal Of Long-Lived Assets.SFAS No. 144 supersedes
SFAS No. 121, Accounting For The Impairment Of Long-Lived Assets And For
Long-Lived Assets To Be Disposed Ofand the accounting and reporting
provisions of Accounting Principles Board (APB) Opinion No. 30, Reporting
The Results Of Operations  Reporting The Effects Of Disposal Of A Segment Of A
Business, And Extraordinary, Unusual and Infrequently Occurring Events And
Transactions. SFAS No. 144 unifies the accounting treatment for various types
of long-lived assets to be disposed of, and resolves implementation issues
related to SFAS No. 121. The adoption of SFAS No. 144 did not have any effect
on the Companys financial position, results of operations, or cash flows, as
the Company had no long-lived assets that were considered impaired or that were
to be disposed of as of January 1, 2002.

8



---



##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT.

This quarterly report on Form 10-Q includes forward-looking information, which
is subject to the safe harbor created by the Securities Act of 1933, and
Securities Act of 1934. These forward-looking statements (which involve the
Companys plans, beliefs and goals, refer to estimates or use similar terms)
involve certain risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. Such risks and
uncertainties include, but are not limited to, the following factors:



| |  | Competitive pressure in the banking industry and changes in the regulatory environment.                                                                                                
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Changes in the interest rate environment and volatility of rate sensitive deposits.                                                                                                    
| 
| |  | The health of the economy declines nationally or regionally which could reduce the demand
for loans or reduce the value of real estate collateral securing most of the
Companys loans.
| 
| |  | Credit quality deteriorates which could cause an increase in the provision for loan
losses.                                                                                            
| 
| |  | Losses in the Companys merchant credit card processing business.                                                                                                                      
| 
| |  | Asset/Liability matching risks and liquidity risks.                                                                                                                                    
| 
| |  | Changes in the securities markets.                                                                                                                                                     

For additional information concerning risks and uncertainties related to
the Company and its operations please refer to the Companys Annual Report on
Form 10-K for the year ended December 31, 2001 under the heading Risk factors
that may affect results. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to revise or publicly release the results of
any revision to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

The following sections discuss significant changes and trends in financial
condition, capital resources and liquidity of the Company from December 31,
2001 to March 31, 2002. Also discussed are significant trends and changes in
the Companys results of operations for the three months ended March 31, 2002,
compared to the same period in 2001. The consolidated financial statements and
related notes appearing elsewhere in this report are condensed and unaudited.

General

Redding Bancorp (the Company) is a financial service holding company
(FHC) with its principal offices in Redding, California. A financial service
holding company may engage in a commercial banking, insurance and securities
business and offer other financial products to consumers. The Company currently
engages in a general commercial banking business in Redding and Roseville and
the counties of El Dorado, Placer, Shasta, and Sacramento, California.

The Company considers Upstate California to be its major market area. The
Company conducts its business through Redding Bank of Commerce (The Bank),
its principal subsidiary, and Roseville Bank of Commerce, a division of the
Bank. The services offered by the Company include those traditionally offered
by commercial banks of similar size and character in California, such as
checking, interest-bearing checking (NOW) and savings accounts, money market
deposit accounts, commercial, construction, real estate, personal, home
improvement, automobile and other installment and term loans, travelers checks,
safe deposit boxes, lock box collection services, telephone and Internet
banking.

The primary focus of the Company is to provide services to the business
and professional community of its major market area including Small Business
Administration (SBA) loans, commercial building financing, credit card
services, payroll and accounting packages and lock box collection programs.
The Company does not offer trust services or international banking services and
does not plan to do so in the immediate future.

9



---



##### Table of Contents



The Company derives its income from two principal sources: (i) net
interest income, which is the difference between the interest income it
receives on interest-earning assets and the interest expense it pays on
interest-bearing liabilities, and (ii) fee income, which includes fees earned
on deposit services, income from SBA lending, electronic-based cash management
services and merchant credit card processing services. Management considers the
business of the Company to be divided into two segments: (i) commercial banking
and (ii) credit card services. Credit card services are limited to those
revenues, net of related data processing costs, associated with the Merchant
Services Agreement and the Banks agreement to provide credit and debit card
processing services for merchants solicited by the Bank who accept credit and
debit cards as payments for goods and services.

Critical Accounting Policies

The Companys financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP). The Companys significant accounting policies are presented in Note
2 to the Consolidated Financial Statements contained in the Companys 2001
Annual Report on Form 10-K. The Company follows accounting policies typical to
the community commercial banking industry and in compliance with various
regulations and guidelines as established by the Financial Accounting Standards
Board (FASB) and the Banks primary federal regulator, the FDIC.

The Companys most significant management accounting estimate is the
appropriate level for the allowance for loan losses. The Company follows a
methodology for calculating the appropriate level for the allowance for loan
losses. However, various factors, many of which are beyond the control of the
Company, could lead to significant revisions in the amount of allowance for
loan losses in future periods, with a corresponding impact upon the results of
operations. In addition, the calculation of the allowance for loan losses is
by nature inexact, as the allowance represents Managements best estimate of
the loan losses inherent in the Companys credit portfolios at the reporting
date. These loan losses will occur in the future, and as such cannot be
determined with absolute certainty at the reporting date.

Other estimates that the Company utilizes in its accounting include the
expected useful lives of depreciable assets, such as buildings, building
improvements, equipment, and furniture. The useful lives of various technology
related hardware and software could be subject to change due to advances in
technology and the general adoption of new standards for technology or
interfaces among computer or telecommunication systems.

The Company applies Accounting Principles Board (APB) Opinion No. 25 and
related interpretations in accounting for stock options. Under APB No. 25,
compensation cost for stock options is measured as the excess, if any, of the
fair market value of the Companys stock at the date of grant over the amount
the employee or director must pay to acquire the stock. Because the Companys
stock option Plans provide for the issuance of options at a price of no less
than the fair market value at the date of grant, no compensation cost is
required to be recognized for the stock option Plans.

Had compensation costs for the stock option Plans been determined based
upon the fair value at the date of grant consistent with SFAS No. 123,
Accounting For Stock Based Compensation, the Companys net income and
earnings per share would have been reduced. The amount of the reduction for
the fiscal years 1999 through 2001 is disclosed in Note 11 to the Consolidated
Financial Statements contained in the 2001 Annual Report on Form 10-K, based
upon the assumptions listed therein.

GAAP itself may change over time, impacting the reporting of the Companys
financial activity. Although the economic substance of the Companys
transactions would not change, alterations in GAAP could affect the timing or
manner of accounting or reporting.

10



---



##### Table of Contents



Results of Operations

The Company reported earnings of $741,000 ($0.26 per diluted share) for
the quarter ended March 31, 2002. The quarterly earnings represent a 34.5%
decrease over the $1,131,000 ($0.38 per diluted share) reported for the same
period of 2001. The decrease in earnings is related to the net interest margin
and attributable to the 475 basis point decrease in prime-lending rates over
the prior year, as well as the decrease in merchant services income
attributable to the new merchant services agreement. The Federal Reserve has
cut rates to 40-year lows in an effort to fend off a recession. The Companys
internal financial models indicate that in periods of falling interest rates
the net interest margin is expected to decrease while in periods of rising
interest rates its margin is expected to increase. The decrease of net interest
margin is magnified by the fact that the Companys assets reprice at a more
rapid rate than liabilities.

Diluted earnings per share for the first quarter of 2001 were $0.26,
compared to $0.38 for the same period of 2001.

Additional factors contributing to the decrease in net earnings include a
77.4% reduction in merchant credit card servicing income pursuant to new
contract pricing, the purchase of fixed assets and lease expenses to move the
Roseville Bank of Commerce, a division of Redding Bank of Commerce to its
permanent facility coupled with expanding staffing expenses for the new office
and to support the volume of loan growth during the period.

Net Interest Income

Net interest income is the primary source of income for the Bank. Net
interest income represents the excess of interest and fees earned on
interest-earning assets (loans, investments and Federal Funds sold) over the
interest paid on deposits and borrowed funds. Net interest margin is net
interest income expressed as a percentage of average earning assets.

For the three months ended March 31, 2002, interest income decreased
$990,000 (19.0%) over the same period in 2001. Interest expense on deposit
accounts and borrowings decreased $750,000 (31.9%) over the same three-month
period in 2001.

The combined effect of the increase in volume of earning assets and
decrease in yield on earning assets, resulted in a decrease of $240,000 (8.4%)
in net interest income for the three month period ended March 31, 2002 from the
same period in 2001. Net interest margin decreased 103 basis points to 3.72%
from 4.75% for the same period a year ago. Yields on earning assets dropped to
5.99% compared with 8.66% a year ago. Funding costs dropped to 2.69% compared
with 4.83% a year ago. The increased volume of earning assets has mitigated
some of the effect of the rate reductions. The Companys internal financial
models indicate that in periods of falling interest rates the net interest
margin is expected to decrease while in periods of rising interest rates its
margin is expected to increase. The decrease of net interest margin is
magnified by the fact that the Companys assets reprice at a more rapid rate
than liabilities. At the current low rates, any additional rate reductions
will cause an additional reduction in interest margins. During the quarter $4.7
million of brokered deposits yielding 7.01% were repaid reducing overall
interest expense.

11



---



##### Table of Contents



The following table sets forth the Companys daily average balance sheet,
related interest income or expense and yield or rate paid for the periods
indicated. Tax-exempt investment yields have not been adjusted to a
tax-equivalent yield basis.

Average Balances, Interest Income/Expense and Yields/Rates Paid
(Unaudited, Dollars in thousands)

|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|------------------------------------------- |  | ------------------ | ------- | -------------- |  | ---- | ----- | ------- |  | -------- | ----- | ------- |  | - | ------- | - |  | ------ | ----- |  |  |  | ---- | -
|                                            |  | Three Months Ended
|                                            |  |                   
|                                            |  | March 31, 2002     |         | March 31, 2001
|                                            |  |                    |         |               
|                                            |  |                    |         |                |  |      |       |         |  | Yield/   |       | Average |  |   |         |   |  | Yield/
|                                            |  | Average Balance    |         | Interest       |  | Rate |       | Balance |  | Interest |       | Rate   
|                                            |  |                    |         |                |  |      |       |         |  |          |       |        
|Earning Assets                              |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Portfolio Loans                             |  | $                  | 222,576 |                |  | $    | 3,707 |         |  |          | 6.66  | %       |  | $ | 195,008 |   |  | $      | 4,552 |  |  |  | 9.34 | %
|Tax Exempt Securities                       |  |                    | 4,281   |                |  |      | 48    |         |  |          | 4.48  | %       |  |   | 2,257   |   |  |        | 25    |  |  |  | 4.43 | %
|US Government                               |  |                    | 38,625  |                |  |      | 377   |         |  |          | 3.90  | %       |  |   | 24,781  |   |  |        | 376   |  |  |  | 6.07 | %
|Federal Funds Sold                          |  |                    | 15,224  |                |  |      | 63    |         |  |          | 1.66  | %       |  |   | 16,945  |   |  |        | 228   |  |  |  | 5.38 | %
|Other Securities                            |  |                    | 780     |                |  |      | 21    |         |  |          | 10.77 | %       |  |   | 1,437   |   |  |        | 25    |  |  |  | 6.96 | %
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Average Earning Assets                      |  | $                  | 281,486 |                |  | $    | 4,216 |         |  |          | 5.99  | %       |  | $ | 240,428 |   |  | $      | 5,206 |  |  |  | 8.66 | %
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Cash & Due From Banks                       |  | $                  | 18,307  |                |  |      |       |         |  |          |       |         |  | $ | 10,431  |   |  |        |       |  |  |  |      |  
|Bank Premises                               |  |                    | 5,358   |                |  |      |       |         |  |          |       |         |  |   | 5,196   |   |  |        |       |  |  |  |      |  
|Allowance for Loan Losses                   |  |                    | (3,192  | )              |  |      |       |         |  |          |       |         |  |   | (2,882  | ) |  |        |       |  |  |  |      |  
|Other Assets                                |  |                    | 8,780   |                |  |      |       |         |  |          |       |         |  |   | 5,234   |   |  |        |       |  |  |  |      |  
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Average Total Assets                        |  | $                  | 310,739 |                |  |      |       |         |  |          |       |         |  | $ | 258,407 |   |  |        |       |  |  |  |      |  
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Interest Bearing Liabilities                |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Demand Interest Bearing                     |  | $                  | 70,555  |                |  | $    | 118   |         |  |          | 0.67  | %       |  | $ | 50,087  |   |  | $      | 303   |  |  |  | 2.42 | %
|Savings Deposits                            |  |                    | 17,493  |                |  |      | 37    |         |  |          | 0.85  | %       |  |   | 12,984  |   |  |        | 95    |  |  |  | 2.93 | %
|Certificates of Deposit                     |  |                    | 144,623 |                |  |      | 1,435 |         |  |          | 3.97  | %       |  |   | 125,559 |   |  |        | 1,872 |  |  |  | 5.96 | %
|Borrowings                                  |  |                    | 5,331   |                |  |      | 10    |         |  |          | 0.75  | %       |  |   | 6,079   |   |  |        | 80    |  |  |  | 5.26 | %
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|                                            |  |                    | 238,002 |                |  | $    | 1,600 |         |  |          | 2.69  | %       |  |   | 194,709 |   |  | $      | 2,350 |  |  |  | 4.83 | %
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Non interest Demand                         |  |                    | 43,758  |                |  |      |       |         |  |          |       |         |  |   | 32,877  |   |  |        |       |  |  |  |      |  
|Other Liabilities                           |  |                    | 2,542   |                |  |      |       |         |  |          |       |         |  |   | 3,210   |   |  |        |       |  |  |  |      |  
|Shareholder Equity                          |  |                    | 26,437  |                |  |      |       |         |  |          |       |         |  |   | 27,611  |   |  |        |       |  |  |  |      |  
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Average Liabilities and
Shareholders Equity |  | $                  | 310,739 |                |  |      |       |         |  |          |       |         |  | $ | 258,407 |   |  |        |       |  |  |  |      |  
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  
|Net Interest Income and Net
Interest Margin |  |                    |         |                |  | $    | 2,616 |         |  |          | 3.72  | %       |  |   |         |   |  | $      | 2,856 |  |  |  | 4.75 | %
|                                            |  |                    |         |                |  |      |       |         |  |          |       |         |  |   |         |   |  |        |       |  |  |  |      |  

12



---



##### Table of Contents



The following tables set forth changes in interest income and expense for
each major category of earning assets and interest-bearing liabilities, and the
amount of change attributable to volume and rate changes for the periods
indicated. Changes attributable to rate/volume have been allocated to volume
changes.

Analysis of Changes in Net Interest Income
(Dollars in thousands)

|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |      |      |   | 
|----------------------------------------------- | ------------------------ | -------------- | --- | ---- | ---------------------------------- | ----- | ---- | ------ | ------ | - | ---- | ---- | ---- | - | 
|                                                |                          |                |     |      | March 31, 2002 over March 31, 2001
|                                                |                          |                |     |      |                                   
|Increase (Decrease) InInterest Income           |                          | Volume         |     | Rate |                                    | Total
|                                                |                          |                |     |      |                                    |      
|                                                | Portfolio loans          |                | $   | 459  |                                    |       | $    | (1,304 | )      |   | $    | (845 | )   
|                                                | Tax exempt securities    |                |     | 23   |                                    |       |      | 0      |        |   |      | 23   |     
|                                                | US Government securities |                |     | 135  |                                    |       |      | (134   | )      |   |      | 1    |     
|                                                | Federal Funds Sold       |                |     | (7   | )                                  |       |      | (158   | )      |   |      | (165 | )   
|                                                | Other Securities         |                |     | (18  | )                                  |       |      | 14     |        |   |      | (4   | )   
|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |     
|                                                |                          | Total Increase |     | $    | 592                                |       |      | $      | (1,582 | ) |      | $    | (990 | )
|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |     
|Increase (Decrease) In
        Interest Expense |                          |                |     |      |                                    |       |      |        |        |   |      |     
|                                               
|                                                | Interest Bearing Demand  |                | $   | 34   |                                    |       | $    | (219   | )      |   | $    | (185 | )   
|                                                | Savings Deposits         |                |     | 10   |                                    |       |      | (68    | )      |   |      | (58  | )   
|                                                | Certificates of Deposit  |                |     | 189  |                                    |       |      | (626   | )      |   |      | (437 | )   
|                                                | Borrowings               |                |     | (1   | )                                  |       |      | (69    | )      |   |      | (70  | )   
|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |     
|                                                |                          | Total Increase |     | $    | 232                                |       |      | $      | (982   | ) |      | $    | (750 | )
|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |     
|Net Increase                                    |                          | $              | 360 |      |                                    | $     | (600 | )      |        | $ | (240 | )   
|                                                |                          |                |     |      |                                    |       |      |        |        |   |      |     

Noninterest Income

The Companys noninterest income consists of processing fees for merchants
who accept credit card payments for goods and services, service charges on
deposit accounts, and other service fees. In April 1993, the Bank entered into
an agreement (the Merchant Services Agreement) with Cardservice
International, Inc. (CSI), an independent sales organization (ISO) and
nonbank merchant credit card processor, pursuant to which the Bank has agreed
to provide credit and debit card processing services for merchants solicited by
CSI who accept credit and debit cards as payment for goods and services.
Pursuant to the Merchant Services Agreement, the Bank acts as a clearing bank
for CSI and processes credit or debit card transactions into the Visa® or
MasterCard® system for presentment to the card issuer. As a result of the
Merchant Services Agreement, the Bank has acquired electronic credit and debit
card processing relationships with merchants in various industries on a
nationwide basis. The Merchant Services Agreement with CSI was renewed on
March 28, 2001 for a period of four years, which expires on April 1, 2005, and
will automatically renew for additional four-year periods unless terminated in
advance of the renewal period by CSI upon 90 days written notice or by the Bank
upon 30 days prior written notice. The terms of the renewal represent a
reduction in earnings on volume from .135% to .002% effective May 1, 2001.
During the first quarter of 2002, CSI was acquired by FDMS a division of First
Data resources. The acquisition provides significant financial strength to CSI
further reducing financial risk to the Company. Management does not expect any
changes in the contract through this term.

For the three months, ended March 31, 2002 noninterest income decreased
$289,000 or 39.5% over the same period in 2001. Merchant credit card income
dropped 77.4%, or $367,000 over the prior period. This reduction in income is
the result of pricing drops from .135% to .002% of the volumes processed. The
new pricing is indicative of the financial strength of CSI and the mitigated
risk associated with processing volumes, and was anticipated by the Company.
Strategies to reduce the dependence of merchant services fee income include
substantial growth in the loan portfolio with a focus to volume increases in
the Roseville market.

13



---



##### Table of Contents



Historically the Companys service charges on deposit accounts have lagged
peer levels for similar services. This is consistent with the Companys
philosophy of allowing customers to pay for services with compensating balances
and the emphasis on certificates of deposit as a significant funding source.
Service charges increased 41.2% or $21,000 over the prior period reflective of
volume increases in the deposit portfolio.

The following table sets forth a summary of noninterest income for the
periods indicated.

|                         |                                               |      |                              |      |   |   |     |     | 
|------------------------ | --------------------------------------------- | ---- | ---------------------------- | ---- | - | - | --- | --- | 
|                         |                                               |      | Three Months Ended March 31,
|(Dollars in Thousands)   |                                               |     
|Noninterest Income       |                                               | 2002 |                              | 2001
|                         |                                               |      |                              |     
|                         | Service Charges                               |      | $                            | 72   |   |   | $   | 51  | 
|                         | Credit Card Income, net                       |      |                              | 107  |   |   |     | 474 | 
|                         | Other Income                                  |      |                              | 265  |   |   |     | 207 | 
|                         | Loss on sale of securities available-for-sale |      |                              | (1   | ) |   |     | 0   | 
|                         |                                               |      |                              |      |   |   |     |    
|Total noninterest income |                                               | $    | 443                          |      |   | $ | 732 |    
|                         |                                               |      |                              |      |   |   |     |    

Noninterest Expense

Noninterest expenses consist of salaries and related employee benefits,
occupancy and equipment expenses, data processing fees, professional fees,
directors fees and other operating expenses.

For the three months ended March 31, 2002, noninterest expense increased
$225,000 over the same period in 2001. Salaries and benefits increased $53,000
or 5.5% representing the acquisition of the Sunrise office coupled with the
expansion of the Roseville Bank of Commerce. Occupancy and equipment expense
increased $128,000 or 56.9% over the prior year and represents the investment
in the Roseville Bank of Commerce facility and fixtures.

The following table sets forth a summary of noninterest expense for the
periods indicated.

|                          |                       |      |                              |       |  |   |       |     | 
|------------------------- | --------------------- | ---- | ---------------------------- | ----- |  | - | ----- | --- | 
|                          |                       |      | Three Months Ended March 31,
|(Dollars in Thousands)    |                       |     
|Noninterest Expense       |                       | 2002 |                              | 2001 
|                          |                       |      |                              |      
|                          | Salaries and Benefits |      | $                            | 1,022 |  |   | $     | 969 | 
|                          | Occupancy & Equipment |      |                              | 353   |  |   |       | 225 | 
|                          | Data Processing Fees  |      |                              | 28    |  |   |       | 23  | 
|                          | Professional Fees     |      |                              | 84    |  |   |       | 82  | 
|                          | Directors Expenses    |      |                              | 60    |  |   |       | 47  | 
|                          | Other Expenses        |      |                              | 338   |  |   |       | 314 | 
|                          |                       |      |                              |       |  |   |       |    
|Total Noninterest expense |                       | $    | 1,885                        |       |  | $ | 1,660 |    
|                          |                       |      |                              |       |  |   |       |    

Income Taxes

The Companys provision for income taxes includes both federal and state
income taxes and reflects the application of federal and state statutory rates
to the Companys net income before taxes. The principal difference between
statutory tax rates and the Companys effective tax rate is the benefit derived
from investing in tax-exempt securities. Increases and decreases in the
provision for taxes reflect changes in the Companys net income before tax.

The following table reflects the Companys tax provision and the related
effective tax rate for the periods indicated.

|                       |  |                              |      |      |  |   |      |  
|---------------------- |  | ---------------------------- | ---- | ---- |  | - | ---- | -
|                       |  | Three Months Ended March 31,
|(Dollars in thousands) |  |                             
|Income Taxes           |  | 2002                         |      | 2001
|                       |  |                              |      |     
|Tax provision          |  | $                            | 368  |      |  | $ | 639  |  
|Effective tax rate     |  |                              | 33.2 | %    |  |   | 36.1 | %
|                       |  |                              |      |      |  |   |      |  

The Companys effective tax rate varies with changes in the relative
amounts of its non-taxable income and non-deductible expenses. The decrease in
the Companys tax provision is attributable to a decrease in taxable income.

14



---



##### Table of Contents



Asset Quality

The Company concentrates its lending activities primarily within in El
Dorado, Placer, Sacramento and Shasta Counties, California, and the locations
of the Banks four full service branches.

The Company manages its credit risk through diversification of its loan
portfolio and the application of underwriting policies and procedures and
credit monitoring practices. Although the Company has a diversified loan
portfolio, a significant portion of its borrowers ability to repay the loans
is dependent upon the professional services and residential real estate
development industry sectors. Generally, the loans are secured by real estate
or other assets and are expected to be repaid from the cash flows of the
borrower or proceeds from the sale of collateral.

The following table sets forth the amounts of loans outstanding by
category as of the dates indicated:

|                         |                              |                |         |                   |   |   |         |        |  
|------------------------ | ---------------------------- | -------------- | ------- | ----------------- | - | - | ------- | ------ | -
|(Dollars in thousands)   |                              |                |         |                   |   |   |         |       
|Portfolio Loans          |                              | March 31, 2002 |         | December 31, 2001
|                         |                              |                |         |                  
|Commercial & Financial   |                              | $              | 85,834  |                   |   | $ | 76,913  |       
|Real Estate-Construction |                              |                | 43,214  |                   |   |   | 45,331  |       
|Real Estate-Commercial   |                              |                | 104,127 |                   |   |   | 96,617  |       
|Installment              |                              |                | 443     |                   |   |   | 440     |       
|Other Loans              |                              |                | 744     |                   |   |   | 709     |       
|Less:                    |                              |                |         |                   |   |   |         |       
|                         | Deferred Loan Fees and Costs |                |         | (238              | ) |   |         | (134   | )
|                         | Allowance for Loan Losses    |                |         | (3,232            | ) |   |         | (3,180 | )
|                         |                              |                |         |                   |   |   |         |       
|Total Net Loans          |                              | $              | 230,892 |                   |   | $ | 216,696 |       
|                         |                              |                |         |                   |   |   |         |       

The Companys practice is to place an asset on nonaccrual status when one
of the following events occurs: (i) any installment of principal or interest is
90 days or more past due (unless in managements opinion the loan is well
secured and in the process of collection). (ii) Management determines the
ultimate collection of principal or interest to be unlikely or (iii) the terms
of the loan have been renegotiated due to a serious weakening of the borrowers
financial condition. Nonperforming loans are loans that are on nonaccrual, are
90 days past due and still accruing or have been restructured.

Net portfolio loans increased $14.2 million or 6.6% at March 31, 2002
compared with $216.7 million at December 31, 2001. The portfolio mix remains
stable with the mix at December 31, 2001, with commercial and financial loans
of approximately 37%, real estate construction of 18% and commercial real
estate at 45%.

Impaired loans are loans for which it is probable that the Bank will not
be able to collect all amounts due. The Bank had outstanding balances of $0 and
$349,139 in impaired loans that had impairment allowances of $0 and $13,603 as
of March 31, 2002 and December 31, 2001, respectively. The reduction in
impaired loans during the first quarter 2002 was attributed to a foreclosure
action that resulted in taking the property into OREO. A reserve of $18,000 has
been established towards reducing the OREO property exposure.

The following table sets forth a summary of the Companys nonperforming
assets as of the dates indicated:

|                                         |  |                |     |                   |  |   |     | 
|---------------------------------------- |  | -------------- | --- | ----------------- |  | - | --- | 
|(Dollars in thousands)                   |  |                |     |                   |  |   |     | 
|Non performing assets                    |  | March 31, 2002 |     | December 31, 2001
|                                         |  |                |     |                  
|Nonaccrual loans                         |  | $              | 0   |                   |  | $ | 59  | 
|90 days past and still accruing interest |  |                | 0   |                   |  |   | 290 | 
|                                         |  |                | 0   |                   |  |   | 349 | 
|Other Real Estate Owned                  |  |                | 338 |                   |  |   | 0   | 
|                                         |  |                |     |                   |  |   |     | 
|Total non performing assets              |  | $              | 338 |                   |  | $ | 349 | 
|                                         |  |                |     |                   |  |   |     | 

15



---



##### Table of Contents



Allowance for Loan and Lease Losses (ALLL)

The Company makes provisions to the ALLL on a regular basis through
charges to operations that are reflected in the Companys statements of income
as a provision for loan losses. When a loan is deemed uncollectible, it is
charged against the allowance. Any recoveries of previously charged-off loans
are credited back to the allowance. There is no precise method of predicting
specific losses or amounts that ultimately may be charged-off on particular
categories of the loan portfolio.

Similarly, the adequacy of the ALLL and the level of the related provision
for possible loan losses is determined on a judgment basis by management based
on consideration of (i) economic conditions, (ii) borrowers financial
condition, (iii) loan impairment, (iv) evaluation of industry trends, (v)
industry and other concentrations, (vi) loans which are contractually current
as to payment terms but demonstrate a higher degree of risk as identified by
management, (vii) continuing evaluation of the performing loan portfolio,
(viii) monthly review and evaluation of problem loans identified as having loss
potential, (ix) quarterly review by the Board of Directors, (x) off balance
sheet risks and (xi) assessments by regulators and other third parties.
Management and the Board of Directors evaluate the allowance and determine its
desired level considering objective and subjective measures, such as knowledge
of the borrowers business, valuation of collateral, the determination of
impaired loans and exposure to potential losses.

The ALLL is a general reserve available against the total loan portfolio
and off balance sheet credit exposure. It is maintained without any
interallocation to the categories of the loan portfolio, and the entire
allowance is available to cover loan losses. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Banks ALLL. Such agencies may require the Bank to
provide additions to the allowance based on their judgment of information
available to them at the time of their examination. There is uncertainty
concerning future economic trends. Accordingly, it is not possible to predict
the effect future economic trends may have on the level of the provision for
possible loan losses in future periods.

The ALLL should not be interpreted as an indication that charge-offs in
future periods will occur in the stated amounts or proportions.

The adequacy of the ALLL is calculated upon three components. First is the
dollar weighted risk rating of the loan portfolio, including all outstanding
loans and leases, off balance sheet items, and commitments to lend. Every
extension of credit has assigned a risk rating based upon a comprehensive
definition intended to measure the inherent risk of lending money. Each rating
has an assigned a risk factor expressed as a reserve percentage. Central to
this assigned risk (reserve) factor is the five-year historical loss record of
the bank.

Secondly, established specific reserves are available for individual loans
currently on management watch and high-grade loan lists. These are the
estimated potential losses associated with specific borrowers based upon the
collateral and event(s) causing the risk rating.

The third component is unallocated. This reserve is for qualitative
factors that may effect the portfolio as a whole, such as those factors
described above.

Management believes the assigned risk grades and our methods for managing
changes are satisfactory. Management believes the loan portfolio performance
has improved as reflected by the stable and low delinquency ratio. Watch list
and high-grade loans have increased somewhat over the past year, primarily due
to a greater tendency to move more susceptible, although performing, accounts
to attention. This minimal increase does not suggest a trend.

16



---



##### Table of Contents



The following table summarizes the activity in the ALLL reserves for the
periods indicated.

|                                  |  |                              |       |      |  |   |       |   
|--------------------------------- |  | ---------------------------- | ----- | ---- |  | - | ----- | --
|                                  |  | Three Months Ended March 31,
|(Dollars in thousands)            |  |                             
|Allowance for Loan & Lease Losses |  | 2002                         |       | 2001
|                                  |  |                              |       |     
|Beginning balance for Loan Losses |  | $                            | 3,180 |      |  | $ | 2,974 |   
|Provision for Loan Losses         |  |                              | 65    |      |  |   | 158   |   
|Charge offs:                      |  |                              |       |      |  |   |       |   
|Commercial                        |  |                              | (18   | )    |  |   | (488  | ) 
|Other                             |  |                              | (0    | )    |  |   | (0    | ) 
|                                  |  |                              |       |      |  |   |       |   
|Total Charge offs                 |  |                              | (18   | )    |  |   | (488  | ) 
|Recoveries:                       |  |                              |       |      |  |   |       |   
|Commercial                        |  |                              | 5     |      |  |   | 1     |   
|Real Estate                       |  |                              | 0     |      |  |   | 0     |   
|                                  |  |                              |       |      |  |   |       |   
|Total Recoveries                  |  |                              | 5     |      |  |   | 1     |   
|Ending Balance                    |  | $                            | 3,232 |      |  | $ | 2,645 |   
|ALLL to total loans               |  |                              | 1.38  | %    |  |   | 1.34  | % 
|Net Charge offs to average loans  |  |                              | (0.02 | %)   |  |   | (0.25 | %)
|                                  |  |                              |       |      |  |   |       |   

Investment Portfolio

Total available-for-sale securities decreased $6,258,000 in the first
three months of 2002 or 15.3%. The decrease represents sales and maturities in
the portfolio used to fund loan growth during the period.

Liquidity

With respect to assets, liquidity is provided by cash and money market
investments such as interest-bearing time deposits, federal-funds sold,
securities available-for-sale and principal and interest payments on loans.
With respect to liabilities, the Companys core deposits, shareholders equity
and the ability of the Bank to borrow funds and to generate deposits, provide
asset funding.

Because estimates of the liquidity need of the Bank may vary from actual
needs, the Bank maintains a substantial amount of liquid assets to absorb short
term increases in loans or reductions in deposits.

The Companys liquid assets (cash and due from banks, federal funds sold
and available-for-sale securities) totaled $66,451,000 or 20.9% of total
assets, at March 31, 2002 compared to $81,856,000 or 25.7% of total assets at
December 31, 2001. The 2002 plan calls for reduction in the investment
portfolio and increases in the loan portfolio.

Capital Adequacy

Overall capital adequacy is monitored on a day-to-day basis by the
Companys management and reported to the Companys Board of Directors on a
monthly basis. The Banks regulators measure capital adequacy by using a
risk-based capital framework and by monitoring compliance with minimum leverage
ratio guidelines. Under the risk-based capital standard, assets reported on the
Companys balance sheet and certain off-balance sheet items are assigned to
risk categories, each of which is assigned a risk weight.

This standard characterizes an institutions capital as being Tier 1 capital
(defined as principally comprising shareholders equity) and Tier 2 capital
(defined as principally comprising the qualifying portion of the ALLL).

The minimum ratio of total risk-based capital to risk-adjusted assets,
including certain off-balance sheet items, is 8%. At least one-half (4%) of the
total risk-based capital (Tier 1) is to be comprised of common equity; the
balance may consist of debt securities and a limited portion of the ALLL.

17



---



##### Table of Contents



The following table sets forth the Companys capital ratio as of the dates
indicated.

|                                    |  |                |       |                   |  |      |       |         |  |             |       |   |  |  |       |   |  |                     |         |  
|----------------------------------- |  | -------------- | ----- | ----------------- |  | ---- | ----- | ------- |  | ----------- | ----- | - |  |  | ----- | - |  | ------------------- | ------- | -
|                                    |  | March 31, 2002 |       | December 31, 2001 |  |      |       |        
|                                    |  |                |       |                   |  |      |       |        
|                                    |  |                |       |                   |  |      |       |         |  |             |       |   |  |  |       |   |  | For Bank to be well
|Capital Ratio's                     |  | Bank           |       | Company           |  | Bank |       | Company |  | capitalized
|                                    |  |                |       |                   |  |      |       |         |  |            
|Total Risk-Based Capital            |  |                | 11.17 | %                 |  |      | 12.04 | %       |  |             | 12.18 | % |  |  | 12.33 | % |  |                     | > 10.00 | %
|Tier 1 Capital to
Risk-Based Assets |  |                | 9.92  | %                 |  |      | 10.79 | %       |  |             | 10.93 | % |  |  | 11.08 | % |  |                     | > 6.00  | %
|Tier 1 Capital to
Average Assets    |  |                | 8.26  | %                 |  |      | 8.88  | %       |  |             | 9.38  | % |  |  | 9.38  | % |  |                     | > 5.00  | %
|(Leverage ratio)                    |  |                |       |                   |  |      |       |         |  |             |       |   |  |  |       |   |  |                     |         |  
|                                    |  |                |       |                   |  |      |       |         |  |             |       |   |  |  |       |   |  |                     |         |  




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Companys primary component of market risk is interest rate
volatility. Fluctuation in interest rates will ultimately impact both the
level of interest income and interest expense recorded on a large portion of
the Companys assets and liabilities, and the fair market value of interest
earning assets and interest-bearing liabilities, other than those which possess
a short term to maturity. Because the Companys interest-bearing liabilities
and interest-earning assets are with the Bank, the Companys interest rate risk
exposure is in connection with the operations of the Bank. Consequently, all
significant interest rate risk management procedures are performed at the Bank
level.

Based upon the nature of its operations, the Bank is not subject to
foreign currency exchange or commodity price risk. The fundamental objective of
the Companys management of its assets and liabilities is to enhance the
economic value of the Company while maintaining adequate liquidity and an
exposure to interest rate risk deemed acceptable by the Companys management.

The Company manages its exposure to interest rate risk through adherence
to maturity, pricing and asset mix policies and procedures designed to mitigate
the impact of changes in market interest rates. The Banks profitability is
dependent to a large extent upon its net interest income, which is the
difference between its interest income on interest-earning assets, such as
loans and securities, and its interest expense on interest-bearing liabilities,
such as deposits and borrowings.

The formal policies and practices adopted by the Bank to monitor and
manage interest rate risk exposure measure risk in two ways: (i) repricing
opportunities for earning assets and interest-bearing liabilities and (ii)
changes in net interest income for declining interest rate shocks of 100 and
200 basis points.

Because of the Banks capital position and noninterest-bearing demand
deposit accounts, the Bank is asset sensitive. As a result, management
anticipates that, in a declining interest rate environment, the Companys net
interest income and margin would be expected to decline, and, in an increasing
interest rate environment, the Companys net interest income and margin would
be expected to increase. However, no assurance can be given that under such
circumstances the Company would experience the described relationships to
declining or increasing interest rates.

Because the Bank is asset sensitive, the Company is adversely affected by
declining rates rather than rising rates. This effect is partially offset in
the short-term by the fact that the Company is liability sensitive through the
cumulative GAP period of one year or less. During a period of declining rates,
such liabilities may be repriced to provide a short-term advantage to the
Company; however, this benefit may not be sustainable over the long-term.

To estimate the effect of interest rate shocks on the Companys net
interest income, management uses a model to prepare an analysis of interest
rate risk. Such analysis calculates the change in net interest income given a
change in the federal funds rate of 100 basis points up or down. All changes
are measured in dollars and are compared to projected net interest income. At
March 31, 2002, the estimated annualized reduction in net interest income
attributable to a 100 and 200 basis point decline in the federal funds rate was
$545,000 and $1,090,000, respectively.

18



---



##### Table of Contents



A similar and opposite result attributable to a 100 basis point increase
in the federal funds rate. At December 31, 2001, the estimated annualized
reduction in net interest income attributable to a 100 and 200 basis point
decline in the federal funds rate was $837,000 and $1,673,000, respectively,
with a similar and opposite result attributable to a 100 basis point increase
in the federal funds rate. Management does not believe that the change from in
the first quarter is significant or represents a known trend toward more
interest rate risk sensitivity in the Companys financial position.

The model utilized by management to create the analysis described in the
preceding paragraph uses balance sheet simulation to estimate the impact of
changing rates on the annual net interest income of the Bank. The model
considers a number of factors, including (i) change in customer and management
behavior in response to the assumed rate shock, (ii) the ratio of the amount of
rate change for each interest-bearing asset or liability to assumed changes in
the federal funds rate based on local market conditions for loans and core
deposits and national market conditions for other assets and liabilities and
(iii) timing factors related to the lag between the rate shock and its effect
on other interest-bearing assets and liabilities. Actual results will differ
when actual customer and management behavior and ratios differ from the
assumptions utilized by management in its model. In addition, the model has
limited usefulness for the measurement of the effect on annual net interest
income resulting from rate changes other than 100 basis points. Management
believes that the short duration of its rate-sensitive assets and liabilities
contributes to its ability to reprice a significant amount of its
rate-sensitive assets and liabilities and mitigates the impact of rate changes
more than 100 basis points. The models primary benefit to management is its
assistance in evaluating the impact that future strategies with respect to the
Banks mix and level of rate-sensitive assets and liabilities will have on the
Companys net interest income.

19



---



##### Table of Contents






PART II. Other Information




Item 1. Legal proceedings

The Company and its subsidiaries are involved in various legal actions arising
in the ordinary course of business. The Company believes that the ultimate
disposition of all currently pending matters will not have a material adverse
effect on the Companys financial condition or results of operations.




Item 2. Changes in securities and use of proceeds

On March 8, 2002, the Board of Directors authorized a stock repurchase program
of approximately 3.45% or 90,000 shares. As of March 31, 2002 5,042 shares had
been repurchased at an average price of $22.38.




Item 3. Defaults upon Senior Securities

N/A.




Item 4. Submission of Matters to a vote of Security Holders

N/A.




Item 5. Other Information




Item 6A. Exhibits

None.

Item 6B. Reports on Form 8-K

Form 8-K dated February 25, 2002 announcing 2001 earnings.

Form 8-K dated March 8, 2002 announcing a treasury repurchase program.




SIGNATURES

Following the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

REDDING BANCORP
(Registrant)

|                   |  |                                                                  
|------------------ |  | -----------------------------------------------------------------
|Date: May 13, 2002 |  | /s/ Linda J. Miles                                               
|                   |  | Linda J. Miles
Executive Vice President &
Chief Financial Officer

20