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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, 2003

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

RADDING BANCORP


REDDING BANCORP


(Exact name of Registrant as specified in its charter)


|                                                                                                         |  |                                                
|-------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|California
(State or other jurisdiction of incorporation or organization)
1951 Churn Creek Road Redding, |  | 94-2823865
(I.R.S. Employer Identification No.)
|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 by a check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Exchange Act)
Yes [  ]   No [X]

Outstanding shares of Common Stock, no par value, as of March 31, 2003: 2,654,466

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TABLE OF CONTENTS



|                              |                                                                                               |                                                                |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | Consolidated Condensed Statements of Income                   
|                              |                                                                                               | Consolidated Condensed Statements of Cash Flows               
|                              |                                                                                               | Notes to Unaudited Consolidated Condensed Financial Statements
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                          
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|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                                                                            
|                              | Item 6B. Reports on Form 8-K                                                                 
|SIGNATURES                   
|Exhibit 99.1                 



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REDDING BANCORP & SUBSIDIARIES

Index to Form 10-Q

|                              |                                                                                               |  |       |    | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  | ----- | -- | 
|                              |                                                                                               |  | Page:
|PART I. FINANCIAL INFORMATION |                                                                                               |  |       |   
|                              | Item 1. Financial Statements                                                                  |  |       |    | 
|                              | Consolidated Condensed Balance Sheets
March 31, 2003, December 31, 2002 and March 31, 2002    |  |       | 3  | 
|                              | Consolidated Condensed Statements of Income
Three months ended March 31, 2003 and 2002        |  |       | 4  | 
|                              | Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 2003 and 2002    |  |       | 5  | 
|                              | Notes to Consolidated Condensed Financial Statements                                          |  |       | 6  | 
|                              | Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations |  |       | 9  | 
|                              | Item 3. Quantitative and Qualitative Disclosure about Market Risk                             |  |       | 22 | 
|                              | Item 4. Controls and Procedures                                                               |  |       | 22 | 
|PART II. OTHER INFORMATION    |                                                                                               |  |       |   
|                              | Item 1. Legal proceedings                                                                     |  |       | 24 | 
|                              | Item 2. Changes in Securities and use of proceeds                                             |  |       | 24 | 
|                              | Item 3. Defaults Upon Senior Securities                                                       |  |       | 24 | 
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                   |  |       | 24 | 
|                              | Item 5. Other Information                                                                     |  |       | 24 | 
|                              | Item 6. Exhibits and Report on Form 8-K                                                       |  |       | 24 | 
|SIGNATURES                    |                                                                                               |  | 24    |   
|CERTIFICATIONS                |                                                                                               |  |       |   

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements


REDDING BANCORP & SUBSIDIARIES
 Consolidated Condensed Balance Sheets
(Unaudited)


|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----------------- | ------------ | ------------ | ------- | -------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|Dollar amounts in thousands                                                                                                                                                          |                                            | March 31, 2003    |              | Dec 31, 2002 |         | March 31, 2002
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |        
|ASSETS                                                                                                                                                                               |                                            |                   |              |              |         |                |         |         |         |         |         |        
|Cash and due from banks                                                                                                                                                              |                                            | $                 | 19,499       |              |         | $              | 23,832  |         |         | $       | 17,881  |        
|Federal funds sold and securities purchased under agreements to
resell                                                                                                               |                                            |                   | 22,380       |              |         |                | 10,760  |         |         |         | 13,930  |        
|Securities available-for-sale                                                                                                                                                        |                                            |                   | 26,096       |              |         |                | 32,328  |         |         |         | 34,640  |        
|Securities held to maturity, at cost (estimated fair value of $2,277
at March 31, 2003, $2,561 at December 31, 2002
and $3,805 at March 31, 2002)                                    |                                            |                   | 2,138        |              |         |                | 2,405   |         |         |         | 3,707   |        
|Loans, net of the allowance for loan losses of $3,963 at March 31,
2003, $3,793 at December 31, 2002, $3,232
at March 31, 2002                                                       |                                            |                   | 284,445      |              |         |                | 280,087 |         |         |         | 230,892 |        
|Bank premises and equipment, net                                                                                                                                                     |                                            |                   | 5,331        |              |         |                | 5,366   |         |         |         | 5,391   |        
|Other assets                                                                                                                                                                         |                                            |                   | 10,385       |              |         |                | 12,656  |         |         |         | 10,899  |        
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|                                                                                                                                                                                     |                                            |                   | TOTAL ASSETS |              | $       | 370,274        |         |         | $       | 367,434 |         |         | $       | 317,340 | 
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                 |                                            |                   |              |              |         |                |         |         |         |         |         |        
|Demand - noninterest bearing                                                                                                                                                         |                                            | $                 | 55,694       |              |         | $              | 55,170  |         |         | $       | 44,830  |        
|Demand - interest bearing                                                                                                                                                            |                                            |                   | 89,945       |              |         |                | 88,251  |         |         |         | 73,409  |        
|Savings                                                                                                                                                                              |                                            |                   | 22,174       |              |         |                | 20,797  |         |         |         | 18,065  |        
|Certificates of deposits                                                                                                                                                             |                                            |                   | 147,697      |              |         |                | 150,229 |         |         |         | 138,081 |        
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|                                                                                                                                                                                     |                                            | Total Deposits    |              |              | 315,510 |                |         |         | 314,447 |         |         |         | 274,385 |        
|Securities sold under agreements to repurchase                                                                                                                                       |                                            |                   | 3,783        |              |         |                | 3,704   |         |         |         | 11,867  |        
|Federal Home Loan Bank borrowings                                                                                                                                                    |                                            |                   | 13,000       |              |         |                | 18,000  |         |         |         | 0       |        
|Other Liabilities                                                                                                                                                                    |                                            |                   | 4,283        |              |         |                | 3,616   |         |         |         | 3,293   |        
|Guaranteed Preferred Beneficial Interests in Companys
Junior Subordinated Debentures (Trust Preferred Securities)                                                                   |                                            |                   | 5,000        |              |         |                | 0       |         |         |         | 0       |        
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|                                                                                                                                                                                     |                                            | Total Liabilities |              |              | 341,576 |                |         |         | 339,767 |         |         |         | 289,545 |        
|Stockholders Equity:                                                                                                                                                                |                                            |                   |              |              |         |                |         |         |         |         |         |        
|Preferred stock, no par value, 2,000,000 authorized
no shares issued and outstanding in 2002 and 2001                                                                                |                                            |                   |              |              |         |                |         |         |         |         |         |        
|Common Stock , no par value, 10,000,000 shares
authorized; 2,654,466 shares issued and outstanding
at March 31, 2003, 2,641,536 at December 31, 2002
and 2,698,415 at March 31, 2002 |                                            |                   | 8,764        |              |         |                | 8,715   |         |         |         | 8,851   |        
|Retained Earnings                                                                                                                                                                    |                                            |                   | 19,805       |              |         |                | 18,814  |         |         |         | 19,042  |        
|Accumulated other comprehensive income gain (loss), net of tax                                                                                                                       |                                            |                   | 129          |              |         |                | 138     |         |         |         | (98     | )      
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|                                                                                                                                                                                     |                                            |                   | 28,698       |              |         |                | 27,667  |         |         |         | 27,795  |        
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        
|                                                                                                                                                                                     | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                   | $            | 370,274      |         |                | $       | 367,434 |         |         | $       | 317,340 |        
|                                                                                                                                                                                     |                                            |                   |              |              |         |                |         |         |         |         |         |        

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES




Consolidated Condensed Statements of Income (Unaudited)
Three months ended March 31, 2003 and 2002


|                                                |                                                                                    |                                                     |       |                    |       |   |       |       |       | 
|----------------------------------------------- | ---------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | ------------------ | ----- | - | ----- | ----- | ----- | 
|                                                |                                                                                    |                                                     |       | Three Months Ended
|Dollars in thousands, except for per share data |                                                                                    | March 31, 2003                                      |       | March 31, 2002    
|                                                |                                                                                    |                                                     |       |                   
|Interest income:                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                | Interest and fees on loans                                                         |                                                     | $     | 4,505              |       |   | $     | 3,707 |      
|                                                | Interest on tax exempt securities                                                  |                                                     |       | 13                 |       |   |       | 48    |      
|                                                | Interest on U.S. government securities                                             |                                                     |       | 215                |       |   |       | 377   |      
|                                                | Interest on federal funds sold and securities purchased
under agreements to resell |                                                     |       | 51                 |       |   |       | 63    |      
|                                                | Interest on other securities                                                       |                                                     |       | 23                 |       |   |       | 21    |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Total interest income                               |       |                    | 4,807 |   |       |       | 4,216 | 
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|Interest expense:                               |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                | Interest on demand deposits                                                        |                                                     |       | 110                |       |   |       | 118   |      
|                                                | Interest on savings deposits                                                       |                                                     |       | 36                 |       |   |       | 37    |      
|                                                | Interest on time deposits                                                          |                                                     |       | 1,082              |       |   |       | 1,435 |      
|                                                | Securities sold under agreements to repurchase                                     |                                                     |       | 73                 |       |   |       | 10    |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Total interest expense                              |       |                    | 1,301 |   |       |       | 1,600 | 
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Net interest income                                 |       |                    | 3,506 |   |       |       | 2,616 | 
|Provision for loan losses                       |                                                                                    |                                                     | 175   |                    |       |   | 65    |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Net interest income after provision for loan losses |       |                    | 3,331 |   |       |       | 2,551 | 
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|Non-interest income:                            |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                | Service charges on deposit accounts                                                |                                                     |       | 68                 |       |   |       | 72    |      
|                                                | Other income                                                                       |                                                     |       | 232                |       |   |       | 223   |      
|                                                | Net gain (loss) on sale of securities available-for-sale                           |                                                     |       | 23                 |       |   |       | (1    | )    
|                                                | Merchant credit card service income, net                                           |                                                     |       | 95                 |       |   |       | 107   |      
|                                                | Mortgage brokerage fee income, net                                                 |                                                     |       | 53                 |       |   |       | 42    |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    |                                                     | 471   |                    |       |   | 443   |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|Non-interest expense:                           |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                | Salaries and related benefits                                                      |                                                     |       | 1,299              |       |   |       | 1,022 |      
|                                                | Net occupancy and equipment expense                                                |                                                     |       | 372                |       |   |       | 353   |      
|                                                | FDIC insurance premium                                                             |                                                     |       | 12                 |       |   |       | 12    |      
|                                                | Data processing and professional services                                          |                                                     |       | 209                |       |   |       | 120   |      
|                                                | Directors Expense                                                                 |                                                     |       | 56                 |       |   |       | 60    |      
|                                                | Other expenses                                                                     |                                                     |       | 368                |       |   |       | 318   |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Total non-interest expense                          |       |                    | 2,316 |   |       |       | 1,885 | 
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|Income before income taxes                      |                                                                                    |                                                     | 1,486 |                    |       |   | 1,109 |      
|                                                | Provision for income taxes                                                         |                                                     |       | 560                |       |   |       | 368   |      
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|                                                |                                                                                    | Net Income                                          |       | $                  | 926   |   |       | $     | 741   | 
|                                                |                                                                                    |                                                     |       |                    |       |   |       |      
|Basic earnings per share                        |                                                                                    | $                                                   | 0.35  |                    |       | $ | 0.27  |      
|Weighted average shares - basic                 |                                                                                    |                                                     | 2,644 |                    |       |   | 2,703 |      
|Diluted earnings per share                      |                                                                                    | $                                                   | 0.33  |                    |       | $ | 0.26  |      
|Weighted average shares - diluted               |                                                                                    |                                                     | 2,777 |                    |       |   | 2,873 |      

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES




Consolidated Condensed Statements of Cash Flows (Unaudited)
Three months ended March 31, 2003 and 2002


|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |   |         |     |        |  
|--------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------------------------------- | ---------- | ----------------------------------------- | ------- | --- | ------ | - | ------- | --- | ------ | -
|Dollars in thousands                                                              |                                  | March 31, 2003                                                      |            | March 31, 2002                           
|                                                                                  |                                  |                                                                     |            |                                          
|Cash flows from operating activities:                                             |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  |                                                                     | Net Income |                                           | $       | 926 |        |   | $       | 741 |       
|Adjustments to reconcile net income to net
cash provided by operating activities: |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  | Provision for loan losses                                           |            |                                           | 175     |     |        |   | 65      |    
|                                                                                  |                                  | Provision for depreciation and amortization                         |            |                                           | 142     |     |        |   | 147     |    
|                                                                                  |                                  | Compensation expense associated with stock options                  |            |                                           | 6       |     |        |   | 17      |    
|                                                                                  |                                  | (Gain) Loss on sale of securities available-for-sale                |            |                                           | (23     | )   |        |   | 1       |    
|                                                                                  |                                  | Amortization of investment premiums and accretion of
discounts, net |            |                                           | 144     |     |        |   | (177    | )  
|                                                                                  |                                  | Gain on sale of loans                                               |            |                                           | (9      | )   |        |   | (42     | )  
|                                                                                  |                                  | Proceeds from sales of loans                                        |            |                                           | 605     |     |        |   | 3,368   |    
|                                                                                  |                                  | Loans originated for sale                                           |            |                                           | (596    | )   |        |   | (3,410  | )  
|                                                                                  |                                  | Effect of changes in:                                               |            |                                           |         |     |        |   |         |    
|                                                                                  |                                  |                                                                     |            | Other assets                              |         |     | 2,271  |   |         |     | (221   | )
|                                                                                  |                                  |                                                                     |            | Deferred loan fees                        |         |     | (12    | ) |         |     | 103    |  
|                                                                                  |                                  |                                                                     |            | Other liabilities                         |         |     | 666    |   |         |     | 63     |  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  |                                                                     |            | Net cash provided by operating activities |         |     | 4,295  |   |         |     | 655    |  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|Cash flows from investing activities:                                             |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  | Proceeds from maturities of available-for- sale securities          |            |                                           | 3,419   |     |        |   | 3,466   |    
|                                                                                  |                                  | Proceeds from sales of available-for-sale securities                |            |                                           | 4,181   |     |        |   | 6,839   |    
|                                                                                  |                                  | Proceeds from maturities of held-to-maturity securities             |            |                                           | 270     |     |        |   | 0       |    
|                                                                                  |                                  | Purchases of available-for- sale securities                         |            |                                           | (1,500  | )   |        |   | (3,550  | )  
|                                                                                  |                                  | Loan origination, net of principal repayments                       |            |                                           | (4,521  | )   |        |   | (14,280 | )  
|                                                                                  |                                  | Purchases of premises and equipment                                 |            |                                           | (107    | )   |        |   | (200    | )  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  |                                                                     |            | Net cash (used) by investing activities   |         |     | 1,742  |   |         |     | (7,725 | )
|Cash flows from financing activities:                                             |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  | Net increase (decrease) in deposits                                 |            |                                           | 1,063   |     |        |   | (7,050  | )  
|                                                                                  |                                  | Net increase in securities sold under agreement to repurchase       |            |                                           | 78      |     |        |   | 5,087   |    
|                                                                                  |                                  | Proceeds from Federal Home Loan Bank advances                       |            |                                           | 10,000  |     |        |   | 0       |    
|                                                                                  |                                  | Repayments of Federal Home Loan Bank advances                       |            |                                           | (15,000 | )   |        |   | 0       |    
|                                                                                  |                                  | Proceeds from Trust Preferred Securities                            |            |                                           | 5,000   |     |        |   | 0       |    
|                                                                                  |                                  | Common stock transactions, net                                      |            |                                           | 109     |     |        |   | (114    | )  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  |                                  |                                                                     |            | Net cash provided by financing activities |         |     | 1,250  |   |         |     | (2,077 | )
|Net increase in cash and cash equivalents                                         |                                  |                                                                     | 7,287      |                                           |         |     | (9,147 | )
|Cash and cash equivalents, beginning of period                                    |                                  |                                                                     | 34,592     |                                           |         |     | 40,958 |  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|Cash and cash equivalents, end of period                                          |                                  | $                                                                   | 41,879     |                                           |         | $   | 31,811 |  
|                                                                                  |                                  |                                                                     |            |                                           |         |     |        |  
|Supplemental disclosures:                                                         |                                  |                                                                     |            |                                           |         |     |        |  
|                                                                                  | Cash paid during the period for: |                                                                     |            |                                           |         |     |        |   |        
|                                                                                  |                                  |                                                                     |            | Income taxes                              |         | $   | 0      |   |         | $   | 0      |  
|                                                                                  |                                  |                                                                     |            | Interest                                  |         |     | 1,227  |   |         |     | 1,677  |  

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES




Notes to Unaudited Consolidated Condensed Financial Statements


1.      Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Redding Bancorp
(the Company), its subsidiaries Redding Bank of Commerce (RBC) and RBC
Mortgage Services and all operating divisions. All significant inter-company
balances and transactions have been eliminated. All such adjustments are of a
normal recurring nature. 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. The preparation of
financial statements in conformity with generally accepted accounting
principals requires management to make estimates and assumptions that affect
the reported amounts of certain assets and liabilities at the date of the
financial statements and the reported amounts of certain revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The accompanying unaudited consolidated financial statements should be read in
conjunction with the financial statements and related notes contained in
Redding Bancorps 2002 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 results of operations and cash flows for the 2003 interim
periods shown in this report are not necessarily indicative of the results for
any future interim period or the entire fiscal year.

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.

During the years 1999 through December 2002, merchant credit card services were
considered a segment of the Company. Credit card services are limited to those
revenues, net of related data processing costs, associated with the Banks
agreement to provide credit and debit card processing services for merchants
solicited by an independent sales organization (ISO) or the bank who accept
credit and debit cards as payments for goods and services. As previously
reported, the 2001 renewal of the contract with our ISO represented a
significant reduction to the earnings on this business segment. The Company is
no longer accepting new merchant activity from the ISO and the segment is no
longer managed separately from the banks local merchant activity. Due to these
changes the Company no longer considers merchant credit card activity to be a
segment.

During the quarter ended March 31, 2003, the Company, through its RBC Mortgage
Services subsidiary has entered into an affiliated business arrangement with
another entity to provide mortgage loans to customers of Redding Bank of
Commerce. RBC Mortgage Services and its affiliate provide mortgage brokerage
services, and split all earnings, net of operating costs equally.

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REDDING BANCORP & SUBSIDIARIES
Notes to Unaudited Consolidated Condensed Financial Statements

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, 2003 and
2002.

|                                              |                                                 |   |                              |       |      |   |       |       | 
|--------------------------------------------- | ----------------------------------------------- | - | ---------------------------- | ----- | ---- | - | ----- | ----- | 
|(Dollars in thousands, except per share data) |                                                 |   |                              |      
|                                              |                                                 |   | Three Months Ended March 31,
|                                              |                                                 |   |                             
|                                              |                                                 |   | 2003                         |       | 2002
|                                              |                                                 |   |                              |       |     
|Basic EPS Calculation:                        |                                                 |   |                              |       |      |   |       |      
|                                              | Numerator (net income)                          |   | $                            | 926   |      |   | $     | 741   | 
|                                              | Denominator (average common
shares outstanding) |   |                              | 2,644 |      |   |       | 2,703 | 
|Basic earnings per Share                      |                                                 | $ | 0.35                         |       |      | $ | 0.27  |      
|Diluted EPS Calculation:                      |                                                 |   |                              |       |      |   |       |      
|                                              | Numerator (net income)                          |   | $                            | 926   |      |   | $     | 741   | 
|                                              | Denominator:                                    |   |                              |       |      |   |       |       | 
|                                              | Average common shares outstanding               |   |                              | 2,644 |      |   |       | 2,703 | 
|                                              | Options                                         |   |                              | 133   |      |   |       | 170   | 
|                                              |                                                 |   |                              |       |      |   |       |      
|                                              |                                                 |   | 2,777                        |       |      |   | 2,873 |      
|Diluted earnings per Share                    |                                                 | $ | 0.33                         |       |      | $ | 0.26  |      

3.     Stock Option Plans

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company accounts for its stock option plan under the intrinsic value
method in accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense is recorded only
if the current market price of the underlying stock exceeds the exercise
price on the date of the grant. As required by the Statement of
Financial Accounting Standards, (SFAS) No. 123, Accounting for
Stock-Based Compensationas amended by SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosurethe Company
provides pro forma net income and pro forma earnings per share
disclosures for employee stock option grants. The following table
illustrates the effect on net income and earnings per share if the
Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation,to
stock-based employee compensation.

7



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##### Table of Contents



REDDING BANCORP & SUBSIDIARIES
Notes to Unaudited Consolidated Condensed Financial Statements

|                    |                       |                                                                                                                                     |   |                              |     |      |   |      |     |  
|------------------- | --------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------------- | --- | ---- | - | ---- | --- | -
|                    |                       |                                                                                                                                     |   | Three Months ended March 31,
|                    |                       |                                                                                                                                     |   | 2003                         |     | 2002
|                    |                       |                                                                                                                                     |   |                              |     |     
|Net income          |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | As reported           |                                                                                                                                     | $ | 926                          |     |      | $ | 741  |    
|Deduct:             |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    |                       | Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax
effects |   |                              | (19 | )    |   |      | (42 | )
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | Pro forma net income  |                                                                                                                                     | $ | 907                          |     |      | $ | 699  |    
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     
|Earnings per share: |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | Basic - as reported   |                                                                                                                                     | $ | 0.35                         |     |      | $ | 0.27 |    
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | Basic - pro forma     |                                                                                                                                     | $ | 0.34                         |     |      | $ | 0.26 |    
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | Diluted - as reported |                                                                                                                                     | $ | 0.33                         |     |      | $ | 0.26 |    
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     
|                    | Diluted - pro forma   |                                                                                                                                     | $ | 0.33                         |     |      | $ | 0.25 |    
|                    |                       |                                                                                                                                     |   |                              |     |      |   |     

4.     Comprehensive Income

The Companys total comprehensive earnings were as follows:

|                                         |                                                                 |   |                              |     |      |   |     |     |  
|---------------------------------------- | --------------------------------------------------------------- | - | ---------------------------- | --- | ---- | - | --- | --- | -
|                                         |                                                                 |   | Three Months Ended March 31,
|                                         |                                                                 |   |                             
|                                         |                                                                 |   | 2003                         |     | 2002
|                                         |                                                                 |   |                              |     |     
|Net Income as reported                   |                                                                 | $ | 926                          |     |      | $ | 741 |    
|Other comprehensive income
(net of tax): |                                                                 |   |                              |     |      |   |     |    
|                                         | Unrealized holding gain (loss) on
securities available-for-sale |   |                              | 5   |      |   |     | (91 | )
|                                         | Less reclassification adjustment                                |   |                              | (14 | )    |   |     | 1   |  
|                                         |                                                                 |   |                              |     |      |   |     |    
|Total other comprehensive income         |                                                                 |   | (9                           | )   |      |   | (90 | )  
|Total comprehensive income               |                                                                 | $ | 917                          |     |      | $ | 651 |    

5.     Junior Subordinated Debentures (Trust Preferred Securities)

In March 2003, Redding Bancorp formed a wholly owned Delaware statutory
business trust, Redding Bancorp Trust, which issued $5.0 million of guaranteed
preferred beneficial interests in Redding Bancorps junior subordinated
debentures (the Trust Preferred Securities). These debentures qualify as Tier
1 capital under Federal Reserve Board guidelines. The proceeds from the
issuance of the Trust Preferred Securities were transferred from the Holding
Company to the Bank as surplus capital. The Trust Preferred Securities accrue
and pay distributions on a quarterly basis at 3 month London Interbank Offered
Rate (LIBOR) plus 1.32% for an initial rate of 4.62%. The rate is capped at
2.75% annually and the lifetime cap is 12.5%. The final maturity on the Trust
Preferred Securities is March 18, 2033, and the debt is callable after five
years on the quarterly payment date. Payments based on $5.0 million at the
initial rate of 4.62% equal $57,750 quarterly, or $231,000 annually.

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##### Table of Contents






ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION
AND RESULTS OF OPERATIONS

Forward looking statements and risk factors

This discussion and information in the accompanying financial statements
contain certain forward-looking statements, which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks and uncertainties that could cause actual
results to differ materially from those stated These risks and uncertainties
include the Companys ability to maintain or expand its market share and net
interest margins, or to implement its marketing and growth strategies. Further,
actual results may be affected by the Companys ability to compete on price and
other factors with other financial institutions; customer acceptance of new
products and services; and general trends in the banking and the regulatory
environment, as they relate to the Companys cost of funds and return on
assets. The reader is advised that this list of risks is not exhaustive and
should not be construed as any prediction by the Company as to which risks
would cause actual results to differ materially from those indicated by the
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements.

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, 2002 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,
2002 to March 31, 2003. Also discussed are significant trends and changes in
the Companys results of operations for the three months ended March 31, 2003,
compared to the same period in 2002. The consolidated financial statements and
related notes appearing elsewhere in this report are condensed and unaudited.
The following discussion and analysis is intended to provide greater detail of
the Companys financial condition and results.

General

Redding Bancorp (the Company) is a financial service holding company (FHC)
registered under the Bank Holding Company Act of 1956, as amended, and was
incorporated in California on January 21, 1982, for the purpose of organizing,
as a wholly owned subsidiary, Redding Bank of Commerce (the Bank). The
Company elected to change to a FHC in 2000. As a financial service holding
company, the Company is subject to the Financial Holding Company Act and to
supervision by the Board of Governors of the Federal Reserve System (FRB).
The Companys principal business is to serve as a holding company for the Bank
and RBC Mortgage Services, a California corporation (formerly Redding Service
Corporation) and for other banking or banking-related subsidiaries that the
Company may establish or acquire.

On January 2, 2003, Redding Service Corporation changed its name to RBC
Mortgage Services, an affiliate of Redding Bank of Commerce. The principal
business of the subsidiary is mortgage brokerage services. The new subsidiary
has an affiliated business arrangement with the Bank of Walnut Creek (BWC
Mortgage Services). Under the terms of the agreement, BWC Mortgage Services
underwrites or brokers mortgage products and manages the outside sales staff,
supporting staff and broker relationships with various secondary market
lenders. RBC Mortgage Services in turn provides office space, equipment and
marketing support for the mortgage brokerage services. RBC Mortgage Services,
through this agreement, offers a full array of single-family and multi-family
residential real estate mortgages including equity lines. Earnings from the
mortgage brokerage services, net of operating costs, are split 50% RBC Mortgage
Services, 50% BWC Mortgage Services.

Prior to the formation of the subsidiary, mortgage banking services were performed as a department of the Bank.

9



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

The Companys principal source of income is dividends from its subsidiaries.
The Company conducts its corporate business operations at the administrative
office of the Bank located at 1951 Churn Creek Road, Redding, California 96002.
The Company conducts its business operations in two geographic market areas,
Redding and Roseville, California. The Company considers Upstate California to
be the major market area of the Bank. The Internet addresses of the Company
are reddingbankofcommerce.com, rosevillebankofcommerce.com, and
rbcmortgageservices.com.

The Bank was incorporated as a California banking corporation on November 25,
1981, and received its certificate of authority to begin banking operations on
October 22, 1982. The Bank operates three full service branches and one
focused-service deposit facility. The Company established its first full
service branch at 1177 Placer Street, Redding, California, and opened for
business on October 22, 1982. On November 1, 1988, the Bank received a
certificate of authority to establish and maintain a loan production office in
Citrus Heights, California. On September 1, 1998, the Company relocated the
loan production office to 2400 Professional Drive in Roseville, California.

On March 1, 1994, the Bank received a certificate of authority to open a second
full-service branch at 1951 Churn Creek Road in Redding, California. On June
30, 2000, the Bank received a certificate of authority to convert the loan
production office in Roseville to a full service banking facility under the
name Roseville Bank of Commerce, a division of Redding Banking of Commerce. On
June 15, 2001 the Bank acquired the deposit liabilities of FirstPlus Bank at
Citrus Heights, California and has renamed the facility Roseville Bank of
Commerce at Sunrise, a division of Redding Bank of Commerce. On February 22,
2002, the Roseville Bank of Commerce at Eureka Road, a division of Redding Bank
of Commerce office relocated to its permanent location at 1504 Eureka Road,
Suite 100, Roseville, California.

The Bank is principally supervised and regulated by the California
Department of Financial Institutions (DFI) and the Federal Deposit Insurance
Corporation (FDIC), and conducts a general commercial banking business in the
counties of El Dorado, Placer, Shasta, and Sacramento, California.

The services offered by the Bank 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, real estate, construction, and term loans; travelers
checks, safe deposit boxes, collection services and electronic banking
activities. The primary focus of the Bank is to provide services to the
business and professional community of its major market area, including Small
Business Administration loans, payroll and accounting packages, benefit
administration and billing services. The Bank does not offer trust services or
international banking services and does not plan to do so in the near future.

Most of the Banks customers are small to medium sized businesses,
professionals and other individuals with medium to high net worth, and most of
the Banks deposits are obtained from such customers. The Bank emphasizes
servicing the needs of local businesses and professionals and individuals
requiring specialized services. The primary business strategy of the Bank is
to focus on its lending activities. The Banks principal lines of lending are
(i) commercial, (ii) real estate construction and (iii) commercial and
residential real estate. The majority of the loans of the Bank are direct
loans made to individuals and small businesses in the major market area of the
Bank and are secured by real estate. See -Risk Factors That May Affect
Results-Dependence on Real Estate. A relatively small portion of the loan
portfolio of the Bank consists of loans to individuals for personal, family or
household purposes. The Bank accepts real estate, listed and unlisted
securities, savings and time deposits, automobiles, machinery and equipment and
other general business assets such as accounts receivable and inventory as
collateral for loans.

The Companys goal is to be a premier provider of financial 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, lockbox and billing programs.
The Company measures premier by monitoring key operating ratios to high
performing peer information on a national level, and models strategies to meet
or exceed such goals.

10



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

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,
mortgage brokerage fee income and merchant credit card processing services.

Critical Accounting Policies

The preparation of these financial statements requires management to make
estimates and judgements that affect the reported amount of assets,
liabilities, revenues and expenses. On an ongoing basis, management evaluates
the estimates used. Estimates are based upon historical experience, current
economic conditions and other factors that management considers reasonable
under the circumstances. These estimates result in judgements regarding the
carrying values of assets and liabilities when these values are not readily
available from other sources, as well as assessing and identifying the
accounting treatments of contingencies and commitments. Actual results may
differ from these estimates under different assumptions or conditions.

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 2002 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 Securities and Exchange Commission (SEC) recently issued disclosure
guidance for critical accounting policies. The SEC defines critical
accounting policies as those that require application of managements most
difficult, subjective or complex judgements, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and
may change in future periods. Not all of significant accounting policies
presented in Note 2 to the Consolidated Financial Statements contained in the
Companys 2002 Annual Report on Form 10-K require management to make difficult,
subjective or complex judgements or estimates. However, management believes
that the following policies could be considered critical within the SEC
definition.

The Companys most significant management accounting estimate is the
appropriate level for the allowance for loan losses. The allowance for loan
losses is established to absorb known and inherent losses attributable to loans
outstanding and related off-balance sheet commitments. The adequacy of the
reserve is monitored on an on-going basis and is based on managements
evaluation of numerous factors. These factors include the quality of the
current loan portfolio, the trend in the loan portfolios risk ratings, current
economic conditions, loan concentrations, loan growth rates, past-due and
non-performing trends, evaluation of specific loss estimates for all
significant problem loans, historical charge-off and recovery experience and
other pertinent information.

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.

The Companys primary sources of revenue are interest income. Interest income
is recorded on an accrual basis. Note 2 to the Consolidated Financial
Statements contained in the Companys 2002 Annual Report on Form 10-K offers an
explanation of the process for determining when the accrual of interest income
is discontinued on an impaired loan.

Other estimates that the Company uses in its accounting include the expected
useful lives of depreciable assets, such as buildings, building improvements,
equipment, and furniture. The useful lives of various technological 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.

11



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

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 provides 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 reduction in the Companys net income had
compensation costs been determined in accordance with FAS No. 123 would have
been $19,000 and $42,000 in the first quarter 2003 and 2002, respectively.
There would have been no change in diluted earnings per share in 2003 and $0.01
per share decrease in 2002.

The amount of the reduction for the fiscal years 2000 through 2002 is disclosed
in Note 12 to the Consolidated Financial Statements contained in the 2002
Annual Report on Form 10-K, based upon the assumptions listed therein.
Accounting principles generally accepted in the United States of America
(GAAP), itself may change over time, having impact over 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.

The Company is party to various legal proceedings as a matter of business.
These matters have a high degree of uncertainty associated with them. There can
be no assurances that all matters that may be brought against the Company are
known to us at any point of time.

Financial Highlights - Results of Operations

The following table summarizes income, income per share and key financial
ratios for the periods indicated using two measurements:

|                                 |         |      |                              |      |  |   |       |      | 
|-------------------------------- | ------- | ---- | ---------------------------- | ---- |  | - | ----- | ---- | 
|                                 |         |      | Three Months Ended March 31, |      |  |   |      
|                                 |         |      |                              |      |  |   |      
|(Dollars in thousands,except per |         |      |                              |      |  |   |       |     
|share amounts)                   |         | 2003 |                              | 2002
|                                 |         |      |                              |     
|Net Income                       |         | $    | 926                          |      |  | $ | 741   |     
|Net Income per share:            |         |      |                              |      |  |   |       |     
|                                 | Basic   |      | $                            | 0.35 |  |   | $     | 0.27 | 
|                                 | Diluted |      | $                            | 0.33 |  |   | $     | 0.26 | 
|Return on average assets         |         |      | 1.01                         | %    |  |   | 0.95  | %   
|Return on average equity         |         |      | 13.41                        | %    |  |   | 11.21 | %   

Net Income

The Company reported earnings of $926,000, for the quarter ended March 31, 2003
up 25.0% from the $741,000 reported for the same quarterly period of 2002.
Diluted earnings per share for the first quarter of 2003 were $0.33, compared
to $0.26 for the same period of 2002. The increase in earnings is primarily
related to the volume of loan activity over the prior year coupled with a
significant reduction in the cost of funds.

12



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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Net Interest Income and Net Interest Margin

Net interest income is the primary source of the Companys revenue. 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. Net
interest income was $3.5 million for the quarter ended March 31, 2003 compared
with $2.6 million for the same period in 2002. (See tables on page 16)

Average earning assets increased $57.1 million or 20.3% compared with the same
period in the prior year. Loans, the largest component of earning assets,
increased $64.3 million or 28.9% on average compared with the prior year
period. Offsetting this increase was a slight decrease in average investments.
Overall, the yield on earning assets decreased to 5.68% for the quarter
compared to 5.99% for the same period in the prior year.
The decline was due to variable loan repricing as well as new loan production
at lower rates in the first quarter 2003 compared with the first quarter 2002.

Average interest-bearing liabilities increased $43.2 million or 18.2% compared
with the prior year period. Of this increase, $23.4 million was in core deposit
growth (interest-bearing demand and savings accounts), generally the least
expensive deposit categories. Federal Home Loan Bank borrowings increased $15.0
million compared with the prior year period. The Company is using the lower
cost wholesale borrowings to facilitate loan growth. The overall cost of
interest-bearing liabilities for the first quarter 2003 was 1.85% compared with
2.69% for the first quarter 2002, a 31.2% decrease. The decrease was primarily
a result of decreases in rates paid on time deposits. As time deposits matured
during the period, the Company was able to roll them over at lower rates.

The net effect of the changes discussed above resulted in an increase of
$890,000 or 34.0% in net interest income for the three month period ended March
31, 2003 from the same period in 2002. Net interest margin increased 42 basis
points to 4.14% from 3.72% for the same period a year ago.

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. The volume of earning assets helps to
mitigate some of the drop in yield. At the current low rates, any additional
rate reductions will cause an additional reduction in interest margin.

Capital Resources

Total shareholder equity increased from December 31, 2002 by $1,031,000 to
$28.7 million at March 31, 2003. The increase was a result of earnings of
$926,000, $114,420 from exercises of stock options and a reduction in
accumulated other comprehensive income of approximately $9,000. At March 31,
2003, the Companys Tier 1 and total risk-based capital ratios were
approximately 10.96% and 12.21% respectively. The Federal Reserves Boards
minimum risk-based capital ratio guidelines for Tier 1 and total capital are 4%
and 8% respectively.

During the first quarter 2003, the Company formed and funded the Redding
Bancorp Trust, a Delaware Statutory Trust. The purpose of the trust was to act
as a conduit for the issuance of the Companys junior subordinated debentures,
a borrowing that may be counted as a form of Tier 1 capital. Redding Bancorp
trust provides flexibility in raising cost effective capital to support future
growth of the Company.

The Company participated in a Trust Preferred Security offering raising $5.0
million in guaranteed preferred beneficial interests in the Companys junior
subordinated debentures. The price of this borrowing is London Interbank
Offering Rate (LIBOR) plus 330 basis points, floating with a 2.75% annual cap
and
a lifetime cap of 12.5%. The initial rate is 5.62%. The debt is callable in
five years with a final maturity of thirty years. Up to twenty-five percent of
the Companys capital may include Trust Preferred securities.

13



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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

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

|                                                  |  |           |       |              |  |                |       |         |  |                  |       |   |  |  |       |   |  |  |         |  
|------------------------------------------------- |  | --------- | ----- | ------------ |  | -------------- | ----- | ------- |  | ---------------- | ----- | - |  |  | ----- | - |  |  | ------- | -
|                                                  |  | March 31, |       | December 31, |  |                |       |        
|                                                  |  | 2003      |       | 2002         |  |                |       |        
|                                                  |  |           |       |              |  | For Bank to be
|Capital Ratios                                   |  | Bank      |       | Company      |  | Bank           |       | Company |  | well capitalized
|                                                  |  |           |       |              |  |                |       |         |  |                 
|Total Risk-Based Capital                          |  |           | 11.82 | %            |  |                | 12.21 | %       |  |                  | 10.19 | % |  |  | 10.57 | % |  |  | > 10.00 | %
|Tier 1 Capital to Risk-Based Assets               |  |           | 10.76 | %            |  |                | 10.96 | %       |  |                  | 9.14  | % |  |  | 9.32  | % |  |  | > 6.00  | %
|Tier 1 Capital to Average Assets (Leverage ratio) |  |           | 8.94  | %            |  |                | 9.07  | %       |  |                  | 7.97  | % |  |  | 8.05  | % |  |  | > 5.00  | %

Liquidity

Liquidity enables the Company to meet the borrowing needs of its customers and
withdrawals of its depositors. The Company meets its liquidity needs through
the maintenance of cash resources, lines of credit with the Federal Home Loan
Bank and other financial institutions, maturities and sales of investment
securities and a stable base of core deposits. The Companys consolidated
liquidity position remains adequate to meet future contingencies. At March 31,
2003, the Company had overnight investments of $22.4 million and available
lines of credit of approximately $46.0 million.

Asset liquidity sources consist of the repayments and maturities of loans,
selling of loans, short-term money market investments, maturities and sales of
investments from the available for sale portfolio. Cash generated by
investments totaled approximately $1,727,000 in the first quarter 2003.
Increased loan balances were responsible for the major use of liquidity.

Liquidity is generated from liabilities through deposit growth and short-term
borrowings. Internal deposit growth provided approximately $1,063,000 and
borrowings provided approximately $79,000 of liquidity. The Bank also has
available correspondent banking lines of credit totaling approximately $10
million and available secured borrowing lines of approximately $46.0 million
with the Federal Home Loan Bank of San Francisco. While these sources are
expected to continue to provide significant amounts of liquidity in the future,
their mix, as well as the possible use of other sources, will depend on future
economic and market conditions. Liquidity is also provided or used through the
results of the Banks operations.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have a fixed expiration date or other termination clause any may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

To accommodate future growth and business needs, the Bank develops an annual
capital expenditure budget during strategic planning sessions. Capital
expenditures for 2003 are expected to be about $700,000 for additional software
and routine replacement of furniture and equipment. The Company expects that
the earnings of the Bank, acquisition of core deposits and wholesale borrowing
arrangements are sufficient to support liquidity needs in 2003.

14



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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONAND RESULTS
OF OPERATIONS (Continued)

Short term borrowings

The Bank actively uses Federal Home Loan Bank (FHLB) advances as a
source of wholesale funding to support growth strategies as well as to provide
liquidity. At March 31, 2003, all of the banks FHLB advances were fixed rate,
fixed term borrowings without call or put option features.

During the first quarter 2003 the Bank repaid $15 million in borrowings
due and borrowed $10 million for one year. At March 31, 2003, the Bank had $13
million in FHLB advances outstanding compared to $0 at March 31, 2002.

Provision for loan losses

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. Provision for loan losses of $175,000 were provided for the three
months ended March 31, 2003 compared with $65,000 for the same period of 2002.
Redding Bancorps allowance for loan losses was 1.37% of total loans at March
31, 2003 and 1.38% at March 31, 2002, while its ratio of non-performing assets
to total assets was 2.12% at March 31, 2003, compared to 0.11% at March 31,
2002. Year-to-date net charge-offs of $7,639 compare favorably to net
charge-offs of $13,000 in the same period last year.

15



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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF
OPERATIONS (Continued)

The following table presents the Companys daily average balance sheet
information together with interest income and yields earned on average
interest-bearing assets and interest expense and rates paid on average
interest-bearing liabilities. Average balances are average daily balances.

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

|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|------------------------------------------- |  | ------- | ------- | -------- |  | ---- | ----- | ------- |  | ---------------------------- | ---- | ---- |  | - | ------- | ------ |  | - | ----- |  |  |  | ----- | -
|                                            |  |         |         |          |  |      |       |         |  | Three Months Ended March 31, |      |      |  |   |         |        |  |  
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |  
|                                            |  | 2003    |         | 2002    
|                                            |  |         |         |         
|                                            |  | Average |         |          |  |      |       | Yield/  |  | Average                      |      |      |  |   |         | Yield/
|                                            |  | Balance |         | Interest |  | Rate |       | Balance |  | Interest                     |      | Rate
|Earning Assets                              |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Portfolio Loans                             |  | $       | 286,869 |          |  | $    | 4,505 |         |  |                              | 6.28 | %    |  | $ | 222,576 |        |  | $ | 3,707 |  |  |  | 6.66  | %
|Tax-exempt Securities                       |  |         | 1,191   |          |  |      | 13    |         |  |                              | 4.37 | %    |  |   | 4,281   |        |  |   | 48    |  |  |  | 4.48  | %
|US Government                               |  |         | 31,862  |          |  |      | 215   |         |  |                              | 2.70 | %    |  |   | 38,625  |        |  |   | 377   |  |  |  | 3.90  | %
|Federal Funds Sold                          |  |         | 17,412  |          |  |      | 51    |         |  |                              | 1.17 | %    |  |   | 15,224  |        |  |   | 63    |  |  |  | 1.66  | %
|Other Securities                            |  |         | 1,237   |          |  |      | 23    |         |  |                              | 7.44 | %    |  |   | 780     |        |  |   | 21    |  |  |  | 10.77 | %
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Average Earning Assets                      |  | $       | 338,571 |          |  | $    | 4,807 |         |  |                              | 5.68 | %    |  | $ | 281,486 |        |  | $ | 4,216 |  |  |  | 5.99  | %
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Cash & Due From Banks                       |  | $       | 19,546  |          |  |      |       |         |  |                              |      |      |  | $ | 18,307  |        |  |   |       |  |  |  |       |  
|Bank Premises                               |  |         | 5,328   |          |  |      |       |         |  |                              |      |      |  |   | 5,358   |        |  |   |       |  |  |  |       |  
|Allowance for Loan Losses                   |  |         | ( 3,881 | )        |  |      |       |         |  |                              |      |      |  |   | ( 3,192 | )      |  |   |       |  |  |  |       |  
|Other Assets                                |  |         | 8,792   |          |  |      |       |         |  |                              |      |      |  |   | 8,780   |        |  |   |       |  |  |  |       |  
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Average Total Assets                        |  | $       | 368,356 |          |  |      |       |         |  |                              |      |      |  | $ | 310,739 |        |  |   |       |  |  |  |       |  
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Interest Bearing Liabilities                |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Demand Interest Bearing                     |  | $       | 89,954  |          |  | $    | 110   |         |  |                              | 0.49 | %    |  | $ | 70,555  |        |  | $ | 118   |  |  |  | 0.67  | %
|Savings Deposits                            |  |         | 21,504  |          |  |      | 36    |         |  |                              | 0.67 | %    |  |   | 17,493  |        |  |   | 37    |  |  |  | 0.85  | %
|Certificates of Deposit                     |  |         | 149,404 |          |  |      | 1,082 |         |  |                              | 2.90 | %    |  |   | 144,623 |        |  |   | 1,435 |  |  |  | 3.97  | %
|Borrowings                                  |  |         | 20,336  |          |  |      | 73    |         |  |                              | 1.44 | %    |  |   | 5,331   |        |  |   | 10    |  |  |  | 0.75  | %
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|                                            |  |         | 281,198 |          |  | $    | 1,301 |         |  |                              | 1.85 | %    |  |   | 238,002 |        |  | $ | 1,600 |  |  |  | 2.69  | %
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Non interest Demand                         |  |         | 54,991  |          |  |      |       |         |  |                              |      |      |  |   | 43,758  |        |  |   |       |  |  |  |       |  
|Other Liabilities                           |  |         | 4,550   |          |  |      |       |         |  |                              |      |      |  |   | 2,542   |        |  |   |       |  |  |  |       |  
|Shareholder Equity                          |  |         | 27,617  |          |  |      |       |         |  |                              |      |      |  |   | 26,437  |        |  |   |       |  |  |  |       |  
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Average Liabilities and
Shareholders Equity |  | $       | 368,356 |          |  |      |       |         |  |                              |      |      |  | $ | 310,739 |        |  |   |       |  |  |  |       |  
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  
|Net Interest Income and Net Interest Margin |  |         |         |          |  | $    | 3,506 |         |  |                              | 4.14 | %    |  |   |         |        |  | $ | 2,616 |  |  |  | 3.72  | %
|                                            |  |         |         |          |  |      |       |         |  |                              |      |      |  |   |         |        |  |   |       |  |  |  |       |  

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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONAND RESULTS
OF OPERATIONS (Continued)

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, 2003 | over           | March 31, 2002
|                                           |                          | Volume         |                | Rate           |     | Total
|                                           |                          |                |                |                |     |       |    |      |     
|Increase(Decrease) In Interest
Income      |                          |                |                |                |     |       |    |      |      |      |     |     
|                                           | Portfolio loans          |                | $              | 1,010          |     |       | $  | (212 | )    |      | $   | 798  |     
|                                           | Tax exempt securities    |                |                | (34            | )   |       |    | (1   | )    |      |     | (35  | )   
|                                           | US Government securities |                |                | (46            | )   |       |    | (116 | )    |      |     | (162 | )   
|                                           | Federal Funds Sold       |                |                | 6              |     |       |    | (18  | )    |      |     | (12  | )   
|                                           | Other Securities         |                |                | 8              |     |       |    | (6   | )    |      |     | 2    |     
|                                           |                          |                |                |                |     |       |    |      |      |      |     |      |     
|                                           |                          |                | Total Increase |                | $   | 944   |    |      | $    | (353 | )   |      | $    | 591 | 
|                                           |                          |                |                |                |     |       |    |      |      |      |     |      |     
|Increase(Decrease) In
Interest Expense     |                          |                |                |                |     |       |    |      |      |      |     |     
|                                           | Interest Bearing Demand  |                | $              | 24             |     |       | $  | (32  | )    |      | $   | (8   | )   
|                                           | Savings Deposits         |                |                | 7              |     |       |    | (8   | )    |      |     | (1   | )   
|                                           | Certificates of Deposit  |                |                | 35             |     |       |    | (388 | )    |      |     | (353 | )   
|                                           | Borrowings               |                |                | 54             |     |       |    | 9    |      |      |     | 63   |     
|                                           |                          |                |                |                |     |       |    |      |      |      |     |      |     
|                                           |                          | Total Increase |                | $              | 120 |       |    | $    | (419 | )    |     | $    | (299 | )  
|                                           |                          |                |                |                |     |       |    |      |      |      |     |      |     
|Net Increase                               |                          | $              | 824            |                |     | $     | 66 |      |      | $    | 890 |     
|                                           |                          |                |                |                |     |       |    |      |      |      |     |      |     

Non-interest Income

The Companys non-interest income consists of service charges on deposit
accounts, other fee income, processing fees for credit card payments and gains
or losses on security sales.

Non-interest income increased $28,000 or 6.3% for the quarter ended March 31,
2003 over March 31, 2002. Other income increased by $10,000 or 4.5%. In
September 2002, the Company began to offer Image data capturing services for
other financial service companies. One contract is in place and has added
$18,000 to other fee income for the period. Merchant credit card income
quarterly earnings were $95,000 for the period ended March 31, 2003 compared
with $107,000 for the quarter ended March 31, 2002 representing at 11.2%
decrease.

Mortgage brokerage revenue, net was $53,000 for the first quarter 2003 compared
to $42,000 for the same period a year ago, representing a 26.2% increase.
Mortgage brokerage expenses include legal, depreciation and marketing expenses
totaling approximately $10,000 and $130 for the first quarter 2003 and 2002
respectively.

Approximately $4.0 million in available-for-sale securities were sold during
the period posting a gain of $23,000. The sale occurred to balance prepayment
risk in the U.S. Government portfolio.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF
OPERATIONS (Continued)

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

|                          |                                                          |      |                              |      |  |   |     |     |  
|------------------------- | -------------------------------------------------------- | ---- | ---------------------------- | ---- |  | - | --- | --- | -
|                          |                                                          |      | Three Months Ended March 31,
|                          |                                                          |      |                             
|Non-interest Income       |                                                          | 2003 |                              | 2002
|                          |                                                          |      |                              |     
|                          | Service charges on deposit accounts                      |      | $                            | 68   |  |   | $   | 72  |  
|                          | Other Income                                             |      |                              | 232  |  |   |     | 223 |  
|                          | Merchant credit card service income, net                 |      |                              | 95   |  |   |     | 107 |  
|                          | Net gain (Loss) on sale of securities
available-for-sale |      |                              | 23   |  |   |     | (1  | )
|                          | Mortgage Service fee income                              |      |                              | 53   |  |   |     | 42  |  
|                          |                                                          |      |                              |      |  |   |     |     |  
|Total Non-interest income |                                                          | $    | 471                          |      |  | $ | 443 |    

Non-interest Expense

Non-interest expense for the quarter ended March 31, 2003 was $2.3 million, an
increase of $429,000 or 22.8% over the same period a year ago. Salaries and
employee benefits increased $277,000 or 27.1% over the same period a year ago.
Increases to benefits include a 40.9% increase in group health coverage and a
99.4% increase workers compensation insurance expense. Group health and
California workers compensation insurance increases are reflective of the
current economic market for insurance coverage.

Professional service expense increased $89,000 or 74.2% for the quarter ended
March 31, 2003 over the quarter ended March 31, 2002. Professional service
expense consists of audit expenses, legal expenses and other outside services.
Audit expenses increased $49,000 or 143.0% for the quarter ended March 31, 2003
over the prior quarter ended March 31, 2002 as a result of overall increasing
costs for such services. Other outside services increased $43,000 or 289.6% for
the quarter ended March 31, 2003 over the quarter ended March 31, 2002 as a
result of new consulting contracts intended to provide insight into the
Companys efficiency and technology uses.

Other expenses increased $50,000 or 15.7% for the quarter ended March 31, 2003
over the quarter ended March 31, 2002. Included in other expenses,
correspondent service charges increased $22,000. The increase is directly
related to volume increases in check and automated clearinghouse processing
fees. All other expenses show modest increases over prior periods reflective of
growth.

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

|                           |                                     |      |                              |       |  |   |       |       | 
|-------------------------- | ----------------------------------- | ---- | ---------------------------- | ----- |  | - | ----- | ----- | 
|(Dollars in Thousands)     |                                     |      |                              |       |  |   |       |      
|                           |                                     |      | Three Months Ended March 31,
|                           |                                     |      |                             
|Non-interest Expense       |                                     | 2003 |                              | 2002 
|                           |                                     |      |                              |      
|                           | Salaries and related benefits       |      | $                            | 1,299 |  |   | $     | 1,022 | 
|                           | Net occupancy and equipment expense |      |                              | 372   |  |   |       | 353   | 
|                           | FDIC insurance premium              |      |                              | 12    |  |   |       | 12    | 
|                           | Data Processing fees                |      |                              | 32    |  |   |       | 28    | 
|                           | Professional service fees           |      |                              | 177   |  |   |       | 92    | 
|                           | Directors expense                  |      |                              | 56    |  |   |       | 60    | 
|                           | Other expense                       |      |                              | 368   |  |   |       | 318   | 
|                           |                                     |      |                              |       |  |   |       |       | 
|Total Non-interest expense |                                     | $    | 2,316                        |       |  | $ | 1,885 |      

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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITIONAND RESULTS
OF OPERATIONS (Continued)

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 and enterprise zone qualifying loans.
Increases and decreases in the provision for taxes reflect changes in the
Companys net income before tax.

Income tax expense through the first quarter 2003 was $560,000 as
compared to $368,000 for the first quarter period in 2002. The increase
in tax expense is attributed to increased revenues and a reduction in
tax-exempt income on available-for-sale securities.

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

|                       |  |                              |      |      |  |   |      |  
|---------------------- |  | ---------------------------- | ---- | ---- |  | - | ---- | -
|(Dollars in thousands) |  |                              |      |     
|                       |  | Three Months Ended March 31,
|                       |  |                             
|Income Taxes           |  | 2003                         |      | 2002
|                       |  |                              |      |     
|Tax provision          |  | $                            | 560  |      |  | $ | 368  |  
|Effective tax rate     |  |                              | 37.7 | %    |  |   | 33.2 | %

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

Asset Quality

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

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 commercial 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, 2003 | December 31, 2002
|                         |                              |                |                  
|Commercial & Financial   |                              | $              | 106,243           |        |   | $ | 99,084  |       
|Real Estate-Construction |                              |                | 51,402            |        |   |   | 40,662  |       
|Real Estate-Commercial   |                              |                | 129,749           |        |   |   | 143,336 |       
|Installment              |                              |                | 637               |        |   |   | 720     |       
|Other Loans              |                              |                | 949               |        |   |   | 662     |       
|Less:                    |                              |                |                   |        |   |   |         |       
|                         | Deferred Loan Fees and Costs |                |                   | (572   | ) |   |         | (584   | )
|                         | Allowance for Loan Losses    |                |                   | (3,963 | ) |   |         | (3,793 | )
|                         |                              |                |                   |        |   |   |         |       
|Total Net Loans          |                              | $              | 284,445           |        |   | $ | 280,087 |       

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##### Table of Contents



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

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 $4,358,000 or 1.6% at March 31, 2003 over
$280,087,000 at December 31, 2002. The portfolio mix reflects a decrease in
commercial real estate reflective of participation lending. The balance of the
portfolio remains consistent with the mix at December 31, 2002, 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 and payable.
The Bank had outstanding balances of $0 and $6,818 in impaired loans that had
impairment allowances of $0 and $1,023 as of March 31, 2003 and December 31,
2002, respectively.

During the first quarter 2003, one loan relationship has become 90 days past
due for interest payments. Management is evaluating the credit relationship for
a possible term extension or full payoff. Interest payments are expected to be
brought current within a few weeks of the quarter end. The credit in question
totals $3.9 million, and is fully collateralized and is not considered impaired
as of March 31, 2003, as the Bank expects to collect all principal and interest
due. The Bank has seven other loans to this borrower totaling approximately
$1.9 million. These loans are performing in accordance with their original
terms, are fully collateralized and the Bank expects to collect all principal
and interest due. However, in accordance with its policy, the Bank has
classified all eight loans to this borrower and its affiliates.

Other real estate owned totaled $0 for the quarter. One other real estate owned
property sold during the period. No gains or losses on the sale were booked.

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, 2003 |       | December 31, 2002
|                                             |  |                |       |                  
|Nonaccrual loans                             |  | $              | 0     |                   |  | $ | 0   | 
|90 days past due and still
accruing interest |  |                | 3,934 |                   |  |   | 7   | 
|                                             |  |                |       |                   |  |   |     | 
|                                             |  |                |       |                   |  |   | 7   | 
|Other Real Estate Owned                      |  |                | 0     |                   |  |   | 338 | 
|                                             |  |                |       |                   |  |   |     | 
|Total non performing assets                  |  | $              | 3,934 |                   |  | $ | 345 | 

Allowance for Loan Losses (ALL)

The Company makes provisions to the ALL 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 ALL 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) monthly 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

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##### Table of Contents



business, valuation of collateral, the determination of impaired loans and exposure to potential losses.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

The ALL 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
ALL. 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. 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 ALL 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 ALL is calculated upon three components. First is the
dollar weighted risk rating of the loan portfolio, including all outstanding
loans and leases 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, the
current portfolio mix, growth rates, and loan concentrations.

Secondly, established specific reserves are available for individual loans
currently on management watch, special mention, and substandard 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 an assessment of current economic conditions in our
market areas. 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
loan categories 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.

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

|                                  |  |                              |       |      |  |   |       |   
|--------------------------------- |  | ---------------------------- | ----- | ---- |  | - | ----- | --
|(Dollars in thousands)            |  | Three Months Ended March 31,
|                                  |  |                             
|Allowance for Loan Losses         |  | 2003                         |       | 2002
|                                  |  |                              |       |     
|Beginning balance for Loan Losses |  | $                            | 3,793 |      |  | $ | 3,180 |   
|Provision for Loan Losses         |  |                              | 175   |      |  |   | 65    |   
|Charge offs:                      |  |                              |       |      |  |   |       |   
|Commercial                        |  |                              | (7    | )    |  |   | (18   | ) 
|Real Estate                       |  |                              | (0    | )    |  |   | (0    | ) 
|Other                             |  |                              | (0    | )    |  |   | (0    | ) 
|                                  |  |                              |       |      |  |   |       |   
|Total Charge offs                 |  |                              | (7    | )    |  |   | (18   | ) 
|Recoveries:                       |  |                              |       |      |  |   |       |   
|Commercial                        |  |                              | 2     |      |  |   | 5     |   
|Real Estate                       |  |                              | 0     |      |  |   | 0     |   
|                                  |  |                              |       |      |  |   |       |   
|Total Recoveries                  |  |                              | 2     |      |  |   | 5     |   
|Ending Balance                    |  | $                            | 3,963 |      |  | $ | 3,232 |   
|ALL to total loans                |  |                              | 1.37  | %    |  |   | 1.38  | % 
|Net Charge offs to average loans  |  |                              | (0.01 | %)   |  |   | (0.02 | %)

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MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)

Securities Portfolio

Total available-for-sale securities decreased $8.3 million or 24.1% for the
first quarter of 2003 compared with the same quarter a year ago. The decrease
is reflective of security maturities being deployed into current loans
outstanding.

Approximately $4.0 million in available-for-sale securities were sold during
the period posting a gain of $23,000. The sale occurred to balance prepayment
risk in the U.S. Government portfolio.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company considers interest rate, credit and operations risks as the most
significant risks impacting the Company. Other types of market risk, such as
foreign exchange risk and commodity price risk, do not impact the Company in
the normal course of operations.

The Company relies on prudent underwriting standards, loan reviews and an
adequate allowance for loan losses to mitigate credit risk. Internal controls
and periodic internal audits of business operations mitigate operations risk.

Fluctuation in interest rates will ultimately impact both the level of interest
income and interest expense recorded as revenues. 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.

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, 2003, the estimated annualized reduction in net interest income
attributable to a 50 and 100 basis point decline in the federal funds rate was
$542,000 and $1,082,000, respectively. A similar and opposite result
attributable to a 100 basis point increase in the federal funds rate. At
December 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
$769,000 and $1,538,000, respectively, with a similar and opposite result
attributable to a 100 basis point increase in the federal funds rate.




ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this Form 10-Q, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys President and Chief Executive Officer and
with the Companys Chief Financial Officer, of the effectiveness of the design
and operation of the Companys disclosure controls and procedures, pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Companys President
and Chief Executive Officer along with the Companys Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in this Form
10-Q.

There have been no significant changes in the Companys internal controls, or
in other factors, which would

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significantly affect internal controls subsequent
to the date the Company carried out its evaluation.

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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

N/A




Item 3. Defaults upon Senior Securities

N/A.




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

No meetings of security holders held during the quarter.




Item 5. Other Information

N/A




Item 6A. Exhibits

(99.1) Certifications of Chief Executive Officer and Chief Financial Officer
pursuant to the Sarbanes-Oxley Act of 2002.




Item 6B. Reports on Form 8-K

Form 8-K dated February 21,2003 Exhibit: Affiliated business arrangement agreement
Form 8-K dated February 25, 2003 Exhibit :Code of Ethics.
Form 8-K dated March 12, 2003 Additional proxy materials.
Form 8-K dated March 20, 2003 announcing Trust Preferred transaction.
Form 8-K dated April 24, 2003 announcing 1st Quarter earnings.




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: April 30, 2003

| |                                                                                     
| | ------------------------------------------------------------------------------------
| | /s/ Linda J. Miles
Linda J. Miles
Executive Vice President &
Chief Financial Officer

24