UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q
                  Quarterly Report Pursuant Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For Quarterly Period Ended September 30,2008      Commission file number 0-10661
---------------------------------------------     ------------------------------

                                TRICO BANCSHARES
             (Exact name of registrant as specified in its charter)

           California                                          94-2792841
------------------------------                            -------------------
 (State or other jurisdiction                              (I.R.S. Employer
 incorporation or organization)                           Identification No.)

                 63 Constitution Drive, Chico, California 95973
               (Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code:  (530) 898-0300


--------------------------------------------------------------------------------
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

     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 check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Act (check one).

            Large accelerated filer      Accelerated filer  X
                                   ----                   ----
            Non-accelerated filer        Small reporting company
                                   ----                          ----
     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).

                             Yes           No  X
                                -----        -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:

Title of Class:  Common stock, no par value

Outstanding shares as of October 31, 2008:  15,744,881,



<PAGE>

                                TABLE OF CONTENTS

                                                                           Page

Forward Looking Statements                                                    1

PART I - FINANCIAL INFORMATION                                                2

   Item 1 - Financial Statements                                              2

            Notes to Unaudited Condensed Consolidated Financial Statements    6

            Financial Summary                                                17

   Item 2 - Management's Discussion and Analysis of Financial                18
            Condition and Results of Operations

   Item 3 - Quantitative and Qualitative Disclosures about Market Risk       28

   Item 4 - Controls and Procedures                                          29

PART II - OTHER INFORMATION                                                  30

   Item 1 - Legal Proceedings                                                30

   Item 1A - Risk Factors                                                    30

   Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds      31

   Item 6 - Exhibits                                                         31

   Signatures                                                                31

   Exhibits                                                                  32


<PAGE>

                           FORWARD-LOOKING STATEMENTS

This  report  on Form  10-Q  contains  forward-looking  statements  about  TriCo
Bancshares (the "Company") for which it claims the protection of the safe harbor
provisions  contained in the Private  Securities  Litigation Reform Act of 1995.
These forward-looking statements are based on Management's current knowledge and
belief and include  information  concerning  the  Company's  possible or assumed
future  financial  condition and results of operations.  When you see any of the
words "believes", "expects", "anticipates", "estimates", or similar expressions,
it may mean the  Company  is  making  forward-looking  statements.  A number  of
factors,  some of which are beyond the Company's  ability to predict or control,
could cause future results to differ  materially  from those  contemplated.  The
reader is  directed  to the  Company's  annual  report on Form 10-K for the year
ended  December  31,  2007,  and Part II,  Item 1A of this  report  for  further
discussion of factors which could affect the Company's business and cause actual
results  to  differ  materially  from  those  suggested  by any  forward-looking
statement made in this report.  Such Form 10-K and this report should be read to
put any  forward-looking  statements  in  context  and to  gain a more  complete
understanding of the risks and uncertainties involved in the Company's business.
Any forward-looking statement may turn out to be wrong and cannot be guaranteed.
The Company does not intend to update any  forward-looking  statement  after the
date of this report.


                                       1
<PAGE>
<TABLE>
<CAPTION>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
                                TRICO BANCSHARES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data; unaudited)

                                                          At September 30,        At December 31,
                                                        2008           2007            2007
                                                   --------------------------    ---------------
     <S>                                                  <C>            <C>              <C>
Assets:
 Cash and due from banks                              $67,300        $70,791          $88,798
 Federal funds sold                                         -            488                -
                                                   --------------------------     --------------
     Cash and cash equivalents                         67,300         71,279           88,798
 Securities available-for-sale                        241,900        239,242          232,427
 Federal Home Loan Bank stock, at cost                  9,147          8,652            8,766
 Loans, net of allowance for loan losses
     of $24,588, $17,139 and $17,331                1,538,648      1,517,937        1,534,635
 Foreclosed assets, net of allowance for
     losses of $214, $180 and $180                      1,178            187              187
 Premises and equipment, net                           19,094         20,804           20,492
 Cash value of life insurance                          46,061         44,751           44,981
 Accrued interest receivable                            7,874          8,865            8,554
 Goodwill                                              15,519         15,519           15,519
 Other intangible assets, net                             786          1,298            1,176
 Other assets                                          28,960         24,989           25,086
                                                   --------------------------     ------------
      Total Assets                                 $1,976,467     $1,953,523       $1,980,621
                                                   ==========================     ============
Liabilities:
 Deposits:
     Noninterest-bearing demand                      $334,015       $345,467         $378,680
     Interest-bearing                               1,229,826      1,186,675        1,166,543
                                                   --------------------------     ------------
     Total deposits                                 1,563,841      1,532,142        1,545,223
 Federal funds purchased                               67,000         66,000           56,000
 Accrued interest payable                               5,217          6,899            7,871
 Reserve for unfunded commitments                       3,365          2,040            2,090
 Other liabilities                                     24,831         22,483           23,195
 Other borrowings                                      79,873         99,996          116,126
 Junior subordinated debt                              41,238         41,238           41,238
                                                   --------------------------     ------------
      Total Liabilities                             1,785,365      1,770,798        1,791,743
                                                   --------------------------     ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value: 50,000,000 shares
     authorized; issued and outstanding:
     15,744,881 at September 30, 2008                  78,008
     15,891,300 at September 30, 2007                                 78,331
     15,911,550 at December 31, 2007                                                   78,775
Retained earnings                                     115,549        108,022          111,655
Accumulated other comprehensive loss, net              (2,455)        (3,628)          (1,552)
                                                   --------------------------     ------------
     Total Shareholders' Equity                       191,102        182,725          188,878
                                                   --------------------------     ------------
     Total Liabilities and Shareholders' Equity    $1,976,467     $1,953,523       $1,980,621
                                                   ==========================     =============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                TRICO BANCSHARES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (In thousands, except share data; unaudited)

                                                             Three months ended       Nine months ended
                                                               September 30,             September 30,
                                                             2008         2007        2008           2007
                                                      ---------------------------------------------------------
<S>                                                        <C>            <C>           <C>            <C>
Interest and dividend income:
Loans, including fees                                    $26,790       $30,099        $81,531        $88,404
Debt securities:
Taxable                                                    2,756         1,874          8,607          5,216
Tax exempt                                                   287           354            910          1,123
Dividends                                                    138           109            382            332
Federal funds sold                                             -             6              3             14
                                                      ---------------------------------------------------------
Total interest income                                     29,971        32,442         91,433         95,089
                                                      ---------------------------------------------------------
Interest expense:
Deposits                                                   5,776        8,078          18,603         23,016
Federal funds purchased                                      430          922           1,953          2,458
Other borrowings                                             473          768           2,060          1,764
Junior subordinated debt                                     573          834           1,872          2,475
                                                      --------------------------------------------------------
Total interest expense                                     7,252       10,602          24,488         29,713
                                                      ---------------------------------------------------------
Net interest income                                       22,719       21,840          66,945         65,376
                                                      ---------------------------------------------------------
Provision for loan losses                                  2,600          700          15,500          1,682
                                                      ---------------------------------------------------------
Net interest income after provision for loan losses       20,119       21,140          51,445         63,694
                                                      ---------------------------------------------------------
Noninterest income:
Service charges and fees                                   5,224        5,218          16,178         15,654
Gain on sale of loans                                        341          211             915            756
Commissions on sale of non-deposit investment products       594          583           1,539          1,633
Increase in cash value of life insurance                     360          405           1,080          1,215
Other                                                        273          430           1,210          1,218
                                                      ---------------------------------------------------------
Total noninterest income                                   6,792        6,847          20,922         20,476
                                                      ---------------------------------------------------------
Noninterest expense:
Salaries and related benefits                              9,431        8,975          28,556         28,336
Other                                                      7,158        7,777          23,450         22,819
                                                      ---------------------------------------------------------
Total noninterest expense                                 16,589       16,752          52,006         51,155
                                                      ---------------------------------------------------------
Income before income taxes                                10,322       11,235          20,361         33,015
Provision for income taxes                                 4,087        4,442           7,804         13,023
                                                      ---------------------------------------------------------
Net income                                                $6,235       $6,793         $12,557        $19,992
                                                      =========================================================

Average shares outstanding                            15,744,881   15,889,061      15,777,282     15,894,768
Diluted average shares outstanding                    15,951,668   16,310,631      16,021,886     16,396,615
Per share data:
Basic earnings                                             $0.40        $0.43           $0.80          $1.26
Diluted earnings                                           $0.39        $0.42           $0.78          $1.22
Dividends paid                                             $0.13        $0.13           $0.39          $0.39
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                TRICO BANCSHARES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
           (In thousands, except share and per share data; unaudited)

                                                                               Accumulated
                                           Shares of                               Other
                                           Common       Common     Retained    Comprehensive
                                           Stock        Stock      Earnings         Loss       Total
                                       ---------------------------------------------------------------
<S>                                          <C>           <C>         <C>          <C>          <C>
Balance at December 31, 2006              15,857,207     $73,739   $100,218      ($4,521)     $169,436
                                                                                              --------
Comprehensive income:
Net income                                                           19,992                     19,992
Change in net unrealized gain on
  securities available for sale, net                                                 893           893
                                                                                               -------
Total comprehensive income                                                                      20,885
Stock option vesting                                         579                                   579
Stock options exercised                      362,100       3,863                                 3,863
Tax benefit of stock options exercised                     1,707                                 1,707
Repurchase of common stock                  (328,007)     (1,557)    (5,987)                    (7,544)
Dividends paid ($0.39 per share)                                     (6,201)                    (6,201)
                                        ---------------------------------------------------------------
Balance at September 30, 2007             15,891,300     $78,331    $108,022     ($3,628)     $182,725
                                        ===============================================================

Balance at December 31, 2007              15,911,550     $78,775    $111,655     ($1,552)     $188,878
Comprehensive income:
Net income                                                            12,557                    12,557
Change in net unrealized gain on
  securities available for sale, net                                                (903)         (903)
                                                                                              ---------
Total comprehensive income                                                                      11,654
Cumulative effect of change in
  accounting principle, net of tax                                      (522)                     (522)
Stock option vesting                                         502                                   502
Reversal of tax benefit from
  exercise of stock options                                 (444)                                 (444)
Repurchase of common stock                  (166,669)       (825)     (1,996)                   (2,821)
Dividends paid ($0.39 per share)                                      (6,145)                   (6,145)
                                        ---------------------------------------------------------------
Balance at September 30, 2008             15,744,881     $78,008    $115,549     ($2,455)     $191,102
                                        ===============================================================
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>

                                TRICO BANCSHARES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands; unaudited)

                                                       For the nine months ended
                                                              September 30,
                                                                2008      2007
                                                       -------------------------
Operating activities:
Net income                                                    $12,557   $19,992
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Depreciation of property and equipment, and amortization    2,586     2,829
    Amortization of intangible assets                             389       367
    Provision for loan losses                                  15,500     1,682
    Amortization of investment securities premium, net            250       528
    Originations of loans for resale                          (61,109)  (48,628)
    Proceeds from sale of loans originated for resale          61,403    48,878
    Gain on sale of loans                                        (915)     (756)
    Change in value of mortgage servicing rights                  743       226
    Provision for losses on other real estate owned                34         -
    Loss on disposal of fixed assets                                2         5
    Increase in cash value of life insurance                   (1,080)   (1,215)
    Stock option vesting expense                                  502       579
    Stock option tax benefits                                     444    (1,707)
    Change in:
      Reserve for unfunded commitments                          1,275       191
      Interest receivable                                         680      (138)
      Interest payable                                         (2,654)     (649)
      Other assets and liabilities, net                        (2,677)    1,334
                                                        ------------------------
    Net cash provided by operating activities                  27,930    23,518
                                                        ------------------------
Investing activities:
Proceeds from maturities of securities available-for-sale      38,938    38,954
Proceeds from sales of securities available-for-sale                -         -
Purchases of securities available-for-sale                    (50,219)  (78,822)
Purchases of Federal Home Loan Bank stock                        (381)     (332)
Loan originations and principal collections, net              (20,538)  (26,841)
Proceeds from sale of premises and equipment                        2        11
Purchases of premises and equipment                            (1,185)   (2,610)
                                                        ------------------------
  Net cash used by investing activities                       (33,383)  (69,640)
                                                        ------------------------
Net (decrease) increase in deposits                            18,618   (67,007)
Net increase in Federal funds purchased                        11,000    28,000
Payments of principal on long-term other borrowings               (58)      (51)
Proceeds from issuance of long-term other borrowings                -    50,000
Net change in short-term other borrowings                     (36,195)   10,136
(Reversal of) stock option tax benefit                           (444)    1,707
Repurchase of common stock                                     (2,821)   (2,685)
Dividends paid                                                 (6,145)   (6,201)
Exercise of stock options                                           -       488
                                                       -------------------------
  Net cash (used by) provided by financing activities         (16,045)   14,387
                                                       -------------------------
Net change in cash and cash equivalents                       (21,498)  (31,735)
                                                       -------------------------
Cash and cash equivalents and beginning of period            88,798    103,014
                                                       -------------------------
Cash and cash equivalents at end of period                  $67,300    $71,279
                                                       =========================
Supplemental disclosure of noncash activities:
Loans transferred to other real estate owned                   $1,025       187
Unrealized gain on securities available for sale              ($1,558)   $1,541
Income tax benefit from stock option exercises                  ($444)   $1,707
Value of common stock tendered, in lieu of cash,
  to pay for exercise of stock options                              -    $4,859
Supplemental disclosure of cash flow activity:
Cash paid for interest expense                                $27,142   $30,362
Cash paid for income taxes                                    $10,350   $12,300

See accompanying notes to unaudited condensed consolidated financial statements

                                       5
<PAGE>

Note 1: General Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and  pursuant  to  the  rules  and  regulations  of  the
Securities and Exchange  Commission.  The results of operations  reflect interim
adjustments,  all of which are of a normal  recurring  nature and which,  in the
opinion of management,  are necessary for a fair presentation of the results for
the  interim  periods  presented.   The  interim  results  are  not  necessarily
indicative of the results expected for the full year. These unaudited  condensed
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements  and  accompanying  notes  as well as  other
information  included in the  Company's  Annual Report on Form 10-K for the year
ended December 31, 2007.

Principles of Consolidation
The consolidated  financial  statements include the accounts of the Company, and
its  wholly-owned  subsidiary,  Tri Counties Bank (the "Bank").  All significant
intercompany accounts and transactions have been eliminated in consolidation.

Nature of Operations
The Company  operates 32 branch  offices and 25 in-store  branch  offices in the
California  counties of Butte,  Contra Costa, Del Norte,  Fresno,  Glenn,  Kern,
Lake, Lassen,  Madera,  Mendocino,  Merced,  Napa, Nevada,  Placer,  Sacramento,
Shasta,  Siskiyou,  Stanislaus,  Sutter,  Tehama,  Tulare,  Yolo and  Yuba.  The
Company's  operating  policy since its inception has emphasized  retail banking.
Most of the Company's  customers are retail  customers and small to medium sized
businesses.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  Management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  On an on-going basis,  the Company  evaluates its
estimates,  including  those  related to the adequacy of the  allowance for loan
losses,  investments,  intangible assets,  income taxes and  contingencies.  The
Company  bases its  estimates  on  historical  experience  and on various  other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions. The allowance for loan losses, goodwill and other intangible assets,
income  taxes,  and  the  valuation  of  mortgage   servicing  rights,  are  the
significant   accounting   estimates  that   materially   affect  the  Company's
consolidated financial statements.

Reclassifications
Certain amounts previously  reported in the 2007 financial  statements have been
reclassified to conform to the 2008 presentation.  These  reclassifications  did
not affect previously reported net income or total shareholders' equity.

Significant Group Concentration of Credit Risk
The Company grants agribusiness,  commercial, consumer, and residential loans to
customers  located  throughout the northern San Joaquin  Valley,  the Sacramento
Valley  and  northern  mountain  regions  of  California.   The  Company  has  a
diversified  loan  portfolio  within  the  business  segments  located  in  this
geographical area.

Cash and Cash Equivalents
For  purposes  of the  consolidated  statements  of cash  flows,  cash  and cash
equivalents include cash on hand, amounts due from banks and federal funds sold.

                                       6
<PAGE>

Investment Securities
The Company  classifies its debt and marketable  equity  securities  into one of
three  categories:  trading,  available-for-sale  or  held-to-maturity.  Trading
securities  are bought and held  principally  for the  purpose of selling in the
near term.  Held-to-maturity  securities are those  securities which the Company
has the  ability and intent to hold until  maturity.  All other  securities  not
included in trading or  held-to-maturity  are classified as  available-for-sale.
During the nine months  ended  September  30, 2008,  and  throughout  2007,  the
Company did not have any  securities  classified as either  held-to-maturity  or
trading.

Available-for-sale  securities are recorded at fair value.  Unrealized gains and
losses,  net of the related tax effect,  on  available-for-sale  securities  are
reported  as a separate  component  of other  accumulated  comprehensive  income
(loss) in shareholders' equity until realized.

Premiums and  discounts  are  amortized or accreted over the life of the related
investment  security  as an  adjustment  to yield using the  effective  interest
method.  Dividend and interest income are recognized when earned. Realized gains
and losses for  securities  are included in earnings  and are derived  using the
specific  identification  method for  determining  the cost of securities  sold.
Unrealized  losses  due to  fluctuations  in fair  value of  securities  held to
maturity  or  available  for sale are  recognized  through  earnings  when it is
determined that an other than temporary decline in value has occurred.

Federal Home Loan Bank Stock
The Bank is a member of the Federal  Home Loan Bank of San  Francisco  ("FHLB"),
and as a condition of membership,  it is required to purchase stock.  The amount
of FHLB  stock  required  to be  purchased  is based on the  borrowing  capacity
desired by the Bank. While technically  these are considered equity  securities,
there is no market for the FHLB stock.  Therefore,  the shares are considered as
restricted investment securities. Such investment is carried at cost.

Loans Held for Sale
Loans  originated  and intended for sale in the secondary  market are carried at
the  lower  of  aggregate  cost  or  fair  value,  as  determined  by  aggregate
outstanding  commitments from investors of current investor yield  requirements.
Net unrealized losses are recognized through a valuation allowance by charges to
income.  At September  30, 2008 and 2007,  and December 31, 2007,  the Company's
balance of loans held for sale was immaterial.

Mortgage  loans held for sale are  generally  sold with the  mortgage  servicing
rights  retained by the Company.  The carrying  value of mortgage  loans sold is
reduced by the fair value allocated to the associated mortgage servicing rights.
Gains  or  losses  on  sales  of  mortgage  loans  are  recognized  based on the
difference  between  the  selling  price and the  carrying  value of the related
mortgage loans sold.

Loans
Loans are reported at the principal amount  outstanding,  net of unearned income
and the allowance for loan losses.  Loan  origination  and  commitment  fees and
certain  direct  loan  origination  costs are  deferred,  and the net  amount is
amortized as an adjustment of the related  loan's yield over the estimated  life
of the loan.  Loans on which the accrual of interest has been  discontinued  are
designated  as  nonaccrual  loans.  Accrual of  interest  on loans is  generally
discontinued  either  when  reasonable  doubt  exists  as to  the  full,  timely
collection  of interest or principal or when a loan becomes  contractually  past
due by 90 days or more with respect to interest or principal.  When loans are 90
days past due, but in Management's  judgment are well secured and in the process
of  collection,  they may be  classified  as  accrual.  When a loan is placed on
nonaccrual  status,  all  interest  previously  accrued  but  not  collected  is
reversed.  Income on such loans is then  recognized only to the extent that cash
is received and where the future  collection of principal is probable.  Interest
accruals are resumed on such loans only when they are brought fully current with
respect to interest and principal and when, in the judgment of  Management,  the
loans are estimated to be fully  collectible  as to both principal and interest.
All impaired loans are classified as nonaccrual loans.

                                       7
<PAGE>

 Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans and deposit related overdrafts are charged against the
allowance for loan losses when Management  believes that the  collectibility  of
the  principal  is unlikely  or, with  respect to  consumer  installment  loans,
according to an  established  delinquency  schedule.  The allowance is an amount
that Management  believes will be adequate to absorb probable losses inherent in
existing  loans  and  leases,   based  on  evaluations  of  the  collectibility,
impairment and prior loss experience of loans and leases.  The evaluations  take
into  consideration  such  factors  as  changes  in the  nature  and size of the
portfolio,  overall portfolio  quality,  loan  concentrations,  specific problem
loans, and current economic conditions that may affect the borrower's ability to
pay. The Company defines a loan as impaired when it is probable the Company will
be unable to collect all amounts due according to the  contractual  terms of the
loan  agreement.  Impaired  loans are  measured  based on the  present  value of
expected future cash flows discounted at the loan's original  effective interest
rate. As a practical  expedient,  impairment may be measured based on the loan's
observable  market  price or the fair  value  of the  collateral  if the loan is
collateral  dependent.  When the measure of the  impaired  loan is less than the
recorded  investment in the loan, the impairment is recorded through a valuation
allowance.

Credit  risk is inherent in the  business of lending.  As a result,  the Company
maintains  an  allowance  for loan  losses  to  absorb  losses  inherent  in the
Company's  loan  portfolio.  This is  maintained  through  periodic  charges  to
earnings.  These  charges are shown in the  Consolidated  Income  Statements  as
provision for loan losses. All specifically identifiable and quantifiable losses
are  immediately  charged off against the allowance.  However,  for a variety of
reasons,  not all losses are immediately known to the Company and, of those that
are known,  the full extent of the loss may not be quantifiable at that point in
time.  The balance of the Company's  allowance for loan losses is meant to be an
estimate of these unknown but probable  losses  inherent in the  portfolio.  For
purposes of this discussion, "loans" shall include all loans and lease contracts
that are part of the Company's portfolio.

The Company  formally  assesses  the  adequacy of the  allowance  on a quarterly
basis.  Determination  of the  adequacy is based on ongoing  assessments  of the
probable  risk in the  outstanding  loan  portfolio,  and to a lesser extent the
Company's loan commitments. These assessments include the periodic re-grading of
credits based on changes in their individual  credit  characteristics  including
delinquency,  seasoning,  recent financial performance of the borrower, economic
factors, changes in the interest rate environment,  growth of the portfolio as a
whole or by segment, and other factors as warranted.  Loans are initially graded
when  originated.  They are  re-graded as they are renewed,  when there is a new
loan to the same borrower,  when identified facts demonstrate heightened risk of
nonpayment,  or if they become  delinquent.  Re-grading of larger  problem loans
occur at least quarterly.  Confirmation of the quality of the grading process is
obtained by  independent  credit reviews  conducted by consultants  specifically
hired for this purpose and by various bank regulatory agencies.

The Company's method for assessing the appropriateness of the allowance for loan
losses and the reserve for unfunded commitments includes specific allowances for
identified  problem  loans and leases,  formula  allowance  factors for pools of
credits,  and allowances  for changing  environmental  factors  (e.g.,  interest
rates, growth, economic conditions,  etc.). Allowance factors for loan pools are
based on the  previous 5 years  historical  loss  experience  by  product  type.
Allowances  for  specific  loans are based on  analysis of  individual  credits.
Allowances for changing  environmental factors are Management's best estimate of
the  probable  impact these  changes have had on the loan  portfolio as a whole.
This  process  is  explained  in detail in the  notes to the  Company's  audited
consolidated financial statements in its Annual Report on Form 10-K for the year
ended December 31, 2007.

Based on the current conditions of the loan portfolio,  Management believes that
the  allowance for loan losses and the reserve for unfunded  commitments,  which
collectively  stand at $27,953,000 at September 30, 2008, are adequate to absorb
probable losses  inherent in the Company's loan  portfolio.  No assurance can be
given, however, that adverse economic conditions or other circumstances will not
result in increased losses in the portfolio.

                                       8
<PAGE>

The  following  tables  summarize the activity in the allowance for loan losses,
reserve for unfunded  commitments,  and allowance for losses (which is comprised
of the allowance for loan losses and the reserve for unfunded  commitments)  for
the periods indicated (dollars in thousands):

                                       Three months ended,    Nine months ended
                                           September 30,         September 30,
                                      ------------------------------------------
  Allowance for loan losses:             2008        2007      2008       2007
                                      ------------------------------------------
  Balance at beginning of period      $24,281    $16,999    $17,331   $16,914
  Provision for loan losses             2,600        700     15,500     1,682
  Loans charged off:
    Real estate mortgage:
      Residential                        (140)         -        (361)       -
      Commercial                            -          -         (19)       -
    Consumer:
      Home equity lines                (1,004)         -      (1,952)     (242)
      Home equity loans                    (8)         -        (258)        -
      Auto indirect                    (1,014)      (464)     (2,186)   (1,047)
      Other consumer                     (239)      (256)       (818)     (727)
    Commercial                           (142)      (123)       (531)     (317)
    Construction:
      Residential                         (31)         -      (3,014)        -
      Commercial                            -          -           -         -
                                       ----------------------------------------
  Total loans charged off              (2,578)      (843)     (9,139)   (2,333)
  Recoveries of previously
    charged-off loans:
    Real estate mortgage:
      Residential                           -          -           -         -
      Commercial                           15         13          43        43
    Consumer:
      Home equity lines                    12          -          12         1
      Home equity loans                     -          -           -         5
      Auto indirect                       104         94         295       246
      Other consumer                      146        143         520       445
    Commercial                              8         33          26       136
    Construction:
      Residential                           -          -           -         -
      Commercial                            -          -           -         -
                                      -----------------------------------------
  Total recoveries of
    previously charged off loans          285        283         896       876
                                      -----------------------------------------
      Net charge-offs                  (2,293)      (560)     (8,243)   (1,457)
                                      -----------------------------------------
  Balance at end of period            $24,588    $17,139     $24,588   $17,139
                                      =========================================
  Reserve for unfunded commitments:
  Balance at beginning of period       $3,465     $2,040      $2,090    $1,849
  Provision for losses -
    unfunded commitments                 (100)         -       1,275       191
                                      -----------------------------------------
  Balance at end of period             $3,365     $2,040      $3,365    $2,040
                                      =========================================
  Balance at end of period:
  Allowance for loan losses                                  $24,588   $17,139
  Reserve for unfunded commitments                             3,365     2,040
                                                             -----------------
  Allowance for losses                                       $27,953   $19,179
                                                             =================
  As a percentage of total loans:
     Allowance for loan losses                                 1.57%     1.12%
     Reserve for unfunded commitments                          0.22%     0.13%
                                                             -----------------
     Allowance for losses                                      1.79%     1.25%
                                                             =================

                                       9
<PAGE>

Loans  classified  as  nonaccrual,  net of  guarantees  of the U.S.  government,
including  its  agencies  and its  government-sponsored  agencies,  amounted  to
approximately  $16,667,000 and $7,511,000 at September 30, 2008 and December 31,
2007,  respectively.  These nonaccrual loans were classified as impaired and are
included in the recorded balance of impaired loans. As of September 30, 2008 and
December 31, 2007 the Company's  recorded  investment in impaired loans,  net of
guarantees of the U.S.  government,  and the related valuation allowance were as
follows (in thousands):

                                              At September 30,   At December 31,
                                                      2008             2007
                                             -----------------------------------
Impaired loans with no allocated allowance,          $12,526         $4,299
    net of guarantees
Impaired loans with allocated allowance,               4,141          3,212
    net of guarantees                        -----------------------------------
Total impaired loans                                 $16,667         $7,511
                                             ===================================
Allowance for loan losses allocated                   $1,738        $1,395
   to impaired loans                         ===================================

Reserve for Unfunded Commitments
The reserve for unfunded  commitments  is  established  through a provision  for
losses on unfunded  commitments charged to noninterest  expense. The reserve for
unfunded  commitments is an amount that Management  believes will be adequate to
absorb  probable  losses  inherent in  existing  commitments,  including  unused
portions of  revolving  lines of credits  and other  loans,  standby  letters of
credits,  and unused  deposit  account  overdraft  privilege.  The  reserve  for
unfunded  commitments is based on evaluations of the  collectibility,  and prior
loss experience of unfunded commitments. The evaluations take into consideration
such  factors as changes in the nature and size of the loan  portfolio,  overall
loan portfolio quality, loan concentrations,  specific problem loans and related
unfunded  commitments,  and  current  economic  conditions  that may  affect the
borrower's or depositor's ability to pay.

Mortgage Servicing Rights
Mortgage  servicing  rights (MSRs)  represent  the  Company's  right to a future
stream of cash flows based upon the  contractual  servicing fee associated  with
servicing mortgage loans. Our MSRs arise from residential mortgage loans that we
originate  and sell,  but retain the right to  service  the loans.  For sales of
residential  mortgage  loans, a portion of the cost of  originating  the loan is
allocated  to the  servicing  right  based  on fair  values  of the loan and the
servicing  right.  The net gain from the  retention  of the  servicing  right is
included in gain on sale of loans in  noninterest  income when the loan is sold.
Fair  value  is  based  on  market  prices  for  comparable  mortgage  servicing
contracts, when available, or alternatively,  is based on a valuation model that
calculates  the present  value of estimated  future net  servicing  income.  The
valuation model incorporates  assumptions that market  participants would use in
estimating  future  net  servicing  income,  such as the  cost to  service,  the
discount rate, the custodial earnings rate, an inflation rate, ancillary income,
prepayment  speeds and  default  rates and  losses.  MSRs are  included in other
assets.  Servicing fees are recorded in noninterest income when earned. MSRs are
carried at fair value, with changes in fair value reported in noninterest income
in the period in which the change occurs.

The determination of fair value of our MSRs requires management judgment because
they are not actively traded.  The determination of fair value for MSRs requires
valuation  processes  which combine the use of  discounted  cash flow models and
extensive  analysis  of current  market  data to arrive at an  estimate  of fair
value. The cash flow and prepayment assumptions used in our discounted cash flow
model are based on empirical data drawn from the  historical  performance of our
MSRs,   which  we  believe  are  consistent  with  assumptions  used  by  market
participants  valuing similar MSRs, and from data obtained on the performance of
similar MSRs. The key assumptions used in the valuation of MSRs include mortgage
prepayment  speeds and the discount  rate.  These  variables  can, and generally
will, change from quarter to quarter as market conditions and projected interest
rates change.  The key risks inherent with MSRs are prepayment speed and changes
in discount rates.

                                       10
<PAGE>

The following tables summarize the activity in, and the main assumptions we used
to  determine  the fair  value of  mortgage  servicing  rights  for the  periods
indicated (dollars in thousands):

                                        Nine months ended September 30,
                                        -------------------------------
                                               2008         2007
Mortgage servicing rights:              -------------------------------
Balance at beginning of period               $4,088        $3,912
Additions                                       621           506
Change in fair value                           (743)         (226)
                                        -------------------------------
Balance at end of period                     $3,966        $4,192
                                        ===============================
Servicing fees received                        $767          $737
Balance of loans serviced at:
     Beginning of period                   $406,743      $389,636
     End of period                         $425,783      $402,806
Weighted-average prepayment speed (CPR)        11.2%         11.6%
Discount rate                                  13.0%         10.0%

Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business,  the Company has entered into commitments to
extend credit, including commitments under credit card arrangements,  commercial
letters of credit, and standby letters of credit. Such financial instruments are
recorded when they are funded.

Premises and Equipment
Land is carried at cost. Buildings and equipment, including those acquired under
capital  lease,   are  stated  at  cost  less   accumulated   depreciation   and
amortization.  Depreciation  and  amortization  expenses are computed  using the
straight-line  method over the estimated  useful lives of the related  assets or
lease terms.  Asset lives range from 3-10 years for  furniture and equipment and
15-40 years for land improvements and buildings.

Foreclosed Assets
Assets acquired  through,  or in lieu of, loan foreclosure are held for sale and
are initially recorded at fair value at the date of foreclosure,  establishing a
new cost basis.  Subsequent to  foreclosure,  management  periodically  performs
valuations  and the assets are carried at the lower of  carrying  amount or fair
value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in other noninterest expense.

Goodwill and Other Intangible Assets
Goodwill  represents the excess of costs over fair value of assets of businesses
acquired.  Goodwill and other intangible  assets acquired in a purchase business
combination and determined to have an indefinite  useful life are not amortized,
but instead  tested for  impairment at least  annually.  Intangible  assets with
estimable  useful lives are amortized  over their  respective  estimated  useful
lives to their  estimated  residual  values,  and reviewed for  impairment.  The
Company tested its goodwill  intangible and determined it was not impaired as of
September 30, 2008 and December 31, 2007.

The following table summarizes the Company's goodwill intangible as of September
30, 2008 and December 31, 2007.

                               December 31,                        September 30,
                                  2007      Additions   Reductions     2008
 (Dollar in Thousands)        --------------------------------------------------
 Goodwill                      $15,519         -              -        $15,519
                              ==================================================

The  Company has  identifiable  intangible  assets  consisting  of core  deposit
premiums and minimum  pension  liability.  Core deposit  premiums are  amortized
using an  accelerated  method  over a period  of ten  years.  Intangible  assets
related to minimum pension  liability are adjusted annually based upon actuarial
estimates.

                                       11
<PAGE>

The following  table  summarizes  the Company's  core deposit  intangibles as of
September 30, 2008 and December 31, 2007.

                                December 31,                       September 30,
                                  2007        Additions   Reductions      2008
(Dollar in Thousands)          -------------------------------------------------
 Core deposit intangibles       $3,365          -              -        $3,365
 Accumulated amortization       (2,189)         -            (390)      (2,579)
                               -------------------------------------------------
 Core deposit intangibles, net  $1,176          -           ($390)        $786
                               =================================================

Core deposit  intangibles are amortized over their expected  useful lives.  Such
lives are  periodically  reassessed  to  determine  if any  amortization  period
adjustments  are  indicated.   The  following  table  summarizes  the  Company's
estimated core deposit  intangible  amortization for each of the five succeeding
years:
                                       Estimated Core Deposit
                                       Intangible  Amortization
                Years Ended              (Dollar in thousands
                -----------            -------------------------
                   2008                         $523
                   2009                         $328
                   2010                         $260
                   2011                          $65
                Thereafter                         -

Impairment of Long-Lived Assets and Goodwill
Long-lived  assets,  such as premises and equipment,  and purchased  intangibles
subject to amortization,  are reviewed for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying amount of an asset to estimated  undiscounted  future
cash flows expected to be generated by the asset.  If the carrying  amount of an
asset  exceeds  its  estimated  future  cash  flows,  an  impairment  charge  is
recognized  by the amount by which the carrying  amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately  presented
in the balance  sheet and reported at the lower of the  carrying  amount or fair
value  less  costs  to sell,  and are no  longer  depreciated.  The  assets  and
liabilities of a disposed  group  classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance sheet.

On December 31 of each year,  goodwill is tested for  impairment,  and is tested
for impairment  more  frequently if events and  circumstances  indicate that the
asset might be impaired. An impairment loss is recognized to the extent that the
carrying amount exceeds the asset's fair value.  This  determination  is made at
the  reporting  unit  level  and  consists  of two  steps.  First,  the  Company
determines  the fair value of a reporting  unit and  compares it to its carrying
amount.  Second,  if the  carrying  amount of a reporting  unit exceeds its fair
value, an impairment loss is recognized for any excess of the carrying amount of
the reporting unit's goodwill over the implied fair value of that goodwill.  The
implied fair value of goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price allocation.  The residual
fair value after this allocation is the implied fair value of the reporting unit
goodwill.

Income Taxes
The  Company's  accounting  for income taxes is based on an asset and  liability
approach.  The Company  recognizes the amount of taxes payable or refundable for
the current  year,  and deferred tax assets and  liabilities  for the future tax
consequences  that have  been  recognized  in its  financial  statements  or tax
returns.  The  measurement  of  tax  assets  and  liabilities  is  based  on the
provisions of enacted tax laws.

                                       12
<PAGE>

Stock-Based Compensation
The following table shows the number, weighted-average exercise price, intrinsic
value,  weighted average remaining  contractual life,  average remaining vesting
period,  and remaining  compensation  cost to be  recognized  over the remaining
vesting period of options  exercisable,  options not yet exercisable,  and total
options  outstanding  as of September  30, 2008:

<TABLE>
<CAPTION>
                                                      Currently     Currently Not     Total
(dollars in thousands except exercise price)         Exercisable     Exercisable   Outstanding
<S>                                                      <C>             <C>           <C>
Number of options                                    1,168,911         265,570      1,434,481
Weighted average exercise price                         $13.44          $20.48         $14.74
Intrinsic value                                         $9,768            $498        $10,266
Weighted average remaining contractual term (yrs.)        2.32            8.77           3.51
</TABLE>

The  options  for  265,570  shares  that  are not  currently  exercisable  as of
September 30, 2008 are expected to vest, on a  weighted-average  basis, over the
next 3.14  years,  and the  Company  is  expected  to  recognize  $1,672,000  of
compensation costs related to these options as they vest.

Earnings Per Share
Basic  earnings per share  represents  income  available to common  shareholders
divided by the  weighted-average  number of common shares outstanding during the
period.  Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive  potential  common shares had been issued,  as
well as any  adjustments  to income  that would  result from  assumed  issuance.
Potential  common  shares that may be issued by the Company  relate  solely from
outstanding stock options, and are determined using the treasury stock method.

Earnings per share have been computed based on the following:
<TABLE>
<CAPTION>

                                                    Three months ended       Nine months ended
                                                     September 30,            September 30,
                                                 ----------------------------------------------
                                                     2008         2007       2008        2007
(in thousands)                                   -----------------------    -------------------
<S>                                                   <C>          <C>        <C>         <C>
Net income                                          $6,235       $6,793      $12,557    $19,992

Average number of common shares outstanding         15,745       15,889       15,777     15,895
Effect of dilutive stock options                       206          422          245        502
                                                 -----------------------    --------------------
Average number of common shares outstanding
   used to calculate diluted earnings per share     15,951       16,311       16,022     16,397
                                                 =======================    ====================
</TABLE>

There were 595,143 and 302,050 options  excluded from the computation of diluted
earnings per share for the nine month periods ended September 30, 2008 and 2007,
respectively, because the effect of these options was antidilutive.

Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be  included in net income.  Although  certain  changes in assets and
liabilities,   such  as  unrealized  gains  and  losses  on   available-for-sale
securities,  are reported as a separate  component of the equity  section of the
balance  sheet,   such  items,   along  with  net  income,   are  components  of
comprehensive income.

The components of other comprehensive  income (loss) and related tax effects are
as follows:
<TABLE>
<CAPTION>
                                                  Three months ended      Nine months ended
                                                    September 30,          September 30,
                                                  ------------------------------------------
                                                    2008         2007     2008        2007
(in thousands)                                    ---------------------   ------------------
<S>                                                  <C>          <C>      <C>         <C>
Unrealized holding gains (losses) on
   available-for-sale securities                    $906        $1,987    ($1,558)    $1,541
Tax effect                                          (381)         (836)       655       (648)
                                                 ----------------------   -------------------
Unrealized holding gains (losses) on
   available-for-sale securities, net of tax        $525        $1,151      ($903)     $893
                                                 ======================   ===================
</TABLE>

                                       13
<PAGE>

The   components  of  accumulated   other   comprehensive   loss,   included  in
shareholders' equity, are as follows:

                                                  September 30,  December 31,
                                                      2008           2007
(in thousands)                                    --------------------------
Net unrealized (losses) gains on available-
  for-sale securities                               ($266)         $1,292
Tax effect                                            112            (543)
  Unrealized holding (losses) gains on            -------------------------
  available-for-sale securities, net of tax         ($154)            749
                                                  -------------------------
Minimum pension liability                          (3,970)         (3,970)
Tax effect                                          1,669           1,669
                                                  -------------------------
  Minimum pension liability, net of tax            (2,301)         (2,301)
                                                  -------------------------
Accumulated other comprehensive loss              ($2,455)        ($1,552)
                                                  =========================
Retirement Plans
The Company has  supplemental  retirement plans for current and former directors
and key executives.  These plans are non-qualified defined benefit plans and are
unsecured and unfunded.  The Company has purchased insurance on the lives of the
participants  and  intends to use the cash  values of these  policies to pay the
retirement obligations.

The following table sets forth the net periodic benefit cost recognized for the
plans:
<TABLE>
<CAPTION>
                                                             Three Months Ended   Nine Months Ended
                                                                September 30,        September 30,
                                                             ------------------   -----------------
(in thousands)                                                2008       2007       2008     2007
                                                              ----       ----       ----     ----
<S>                                                            <C>        <C>        <C>      <C>
Net pension cost included the following components:
Service cost-benefits earned during the period                $138       $150       $416     $450
Interest cost on projected benefit obligation                  166        146        498      438
Amortization of net obligation at transition                     1          1          1        1
Amortization of prior service cost                              45         45        135      135
Recognized net actuarial loss                                   37         28        111       84
                                                             ------------------------------------
Net periodic pension cost                                     $387       $370     $1,161   $1,108
                                                             =====================================
</TABLE>

During  the  nine  months  ended  September  30,  2008  and  2007,  the  Company
contributed  and paid out as benefits  $453,000 and $405,000,  respectively,  to
participants under the plans. For the year ending December 31, 2008, the Company
expects to contribute and pay out as benefits $593,000 to participants under the
plans.

Fair Value Measurement
The Company utilizes fair value measurements to record fair value adjustments to
certain  assets  and  liabilities  and  to  determine  fair  value  disclosures.
Securities available-for-sale and mortgage servicing rights are recorded at fair
value on a recurring basis. Additionally,  from time to time, the Company may be
required to record at fair value other assets on a nonrecurring  basis,  such as
loans held for sale,  loans held for investment and certain other assets.  These
nonrecurring  fair value adjustments  typically involve  application of lower of
cost or market accounting or impairment write-downs of individual assets.

The Company groups assets and  liabilities at fair value in three levels,  based
on the  markets  in  which  the  assets  and  liabilities  are  traded  and  the
reliability of the assumptions used to determine fair value. These levels are:

Level 1  - Valuation  is based  upon  quoted  prices for  identical  instruments
          traded in active markets
Level 2   - Valuation  is based upon quoted  prices for similar  instruments  in
          active markets,  quoted prices for identical or similar instruments in
          markets that are not active, and model-based  valuation techniques for
          which all significant assumptions are observable in the market.
Level 3   - Valuation is generated from model-based techniques that use at least
          one  significant  assumption  not  observable  in  the  market.  These
          unobservable  assumptions reflect estimates of assumptions that market
          participants  would use in pricing the asset or  liability.  Valuation
          techniques include use of option pricing models,  discounted cash flow
          models and similar techniques.

                                       14
<PAGE>

Securities  available-for-sale  are recorded at fair value on a recurring basis.
Fair value  measurement  is based upon quoted  prices,  if available.  If quoted
prices are not  available,  fair values are measured using  independent  pricing
models or other  model-based  valuation  techniques such as the present value of
future  cash  flows,  adjusted  for the  security's  credit  rating,  prepayment
assumptions  and  other  factors  such  as  credit  loss  assumptions.  Level  1
securities  include  those  traded on an active  exchange,  such as the New York
Stock Exchange,  U.S. Treasury  securities that are traded by dealers or brokers
in active  over-the-counter  markets and money market funds.  Level 2 securities
include  mortgage-backed  securities  issued by government  sponsored  entities,
municipal bonds and corporate debt securities.  Securities classified as Level 3
include asset-backed securities in less liquid markets.

The Company does not record loans at fair value on a recurring  basis.  However,
from time to time,  a loan is  considered  impaired  and an  allowance  for loan
losses is  established.  Loans for which it is probable that payment of interest
and principal will not be made in accordance with the  contractual  terms of the
loan  agreement  are  considered   impaired.   Once  a  loan  is  identified  as
individually  impaired,  management  measures impairment in accordance with SFAS
114, Accounting by Creditors for Impairment of a Loan (SFAS 114). The fair value
of  impaired  loans  is  estimated  using  one  of  several  methods,  including
collateral value,  market value of similar debt,  enterprise value,  liquidation
value and discounted cash flows. Those impaired loans not requiring an allowance
represent  loans  for  which  the  fair  value  of the  expected  repayments  or
collateral exceed the recorded investments in such loans. At September 30, 2008,
substantially  all of the total impaired loans were evaluated  based on the fair
value of the collateral.  In accordance  with SFAS 157,  impaired loans where an
allowance  is  established  based  on  the  fair  value  of  collateral  require
classification  in  the  fair  value  hierarchy.  When  the  fair  value  of the
collateral is based on an observable  market price or a current  appraised value
which uses substantially  observable data, the Company records the impaired loan
as nonrecurring  Level 2. When an appraised value is not available or management
determines  the fair  value of the  collateral  is  further  impaired  below the
appraised value, or the appraised value contains a significant  assumption,  and
there is no observable  market price,  the Company  records the impaired loan as
nonrecurring Level 3.

Mortgage  servicing rights are carried at fair value. A valuation  model,  which
utilizes a discounted  cash flow analysis  using a discount rate and  prepayment
speed assumptions is used in the completion of the fair value measurement. While
the prepayment speed assumption is currently quoted for comparable  instruments,
the  discount  rate  assumption  currently  requires  a  significant  degree  of
management  judgment.  As such, the Company classifies mortgage servicing rights
subjected to recurring fair value adjustments as Level 3.

Goodwill and identified  intangible assets are subject to impairment  testing. A
projected  cash flow  valuation  method is used in the  completion of impairment
testing.  This  valuation  method  requires a  significant  degree of management
judgment as there are  unobservable  inputs for these  assets.  In the event the
projected  undiscounted  net  operating  cash  flows are less than the  carrying
value, the asset is recorded at fair value as determined by the valuation model.
As such, the Company  classifies  goodwill and other intangible assets subjected
to nonrecurring fair value adjustments as Level 3.

The table below presents the recorded amount of assets and liabilities  measured
at fair value on a recurring basis:

Fair value at September 30, 2008          Total    Level 1     Level 2   Level 3
Securities available-for-sale           $241,900      -       $241,900        -
Mortgage servicing rights                  3,966      -              -    3,966
                                        ----------------------------------------
Total assets measured at fair value     $245,866      -       $241,900    3,966
                                        ========================================
T
he table below presents the recorded amount of assets and liabilities measured
at fair value on a nonrecurring basis:

Fair value at September 30, 2008          Total    Level 1     Level 2  Level 3
Impaired loans                           $20,244      -          -      $20,244
                                        ----------------------------------------
Total assets measured at fair value      $20,244      -          -      $20,244
                                        ========================================

                                       15
<PAGE>

Recent Accounting Pronouncements
In  September  2006,  the FASB issued FASB  Statement  of  Financial  Accounting
Standards No. 157,  Fair Value  Measurements  (SFAS 157).  SFAS 157 defines fair
value,  establishes a framework for measuring  fair value in generally  accepted
accounting  principles,  and expands  disclosures about fair value measurements.
SFAS 157 was  effective  for the  Company  on January 1, 2008 and did not have a
significant impact on the Company's consolidated financial statements.

In  September  2006,  the FASB issued FASB  Statement  of  Financial  Accounting
Standards No. 158,  Employers'  Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88 106, and 132(R)
(SFAS  158).  SFAS 158  requires  an employer to  recognize  the  overfunded  or
underfunded  status of  defined  benefit  postretirement  plans as an asset or a
liability in its statement of financial position.  The funded status is measured
as the difference  between plan assets at fair value and the benefit  obligation
(the projected benefit  obligation for pension plans or the accumulated  benefit
obligation for other postretirement benefit plans). An employer is also required
to measure the funded status of a plan as of the date of its year-end  statement
of financial  position  with  changes in the funded  status  recognized  through
comprehensive  income. SFAS 158 also requires certain disclosures  regarding the
effects on net  periodic  benefit  cost for the next fiscal year that arise from
delayed recognition of gains or losses,  prior service costs or credits, and the
transition asset or obligation. The Company was required to recognize the funded
status of its defined benefit  post-retirement benefit plans in its consolidated
financial  statements  for the year ended  December  31,  2006.  The Company had
previously   recognized   the  funded  status  of  its  Executive  and  Director
Supplemental  Retirement plans in prior consolidated  financial statements.  The
Company  has  no  other  defined  benefit  post-retirement  benefit  plans.  The
requirement to measure plan assets and benefit obligations as of the date of the
year-end  statement  of  financial  position  is  effective  for  the  Company's
consolidated  financial  statements  beginning  with the fiscal year ended after
December 15, 2008.  The Company  currently  uses December 31 as the  measurement
date for its defined benefit post-retirement benefit plans.

In February  2007,  the FASB  issued  FASB  Statement  of  Financial  Accounting
Standards  No. 159, The Fair Value  Option for  Financial  Assets and  Financial
Liabilities - Including an amendment to FASB Statement No. 115 (SFAS 159).  SFAS
159 permits entities to choose to measure many financial instruments and certain
other items at fair value.  The objective is to improve  financial  reporting by
providing  entities  with the  opportunity  to mitigate  volatility  in reported
earnings caused by measuring related assets and liabilities  differently without
having to apply complex hedge accounting provisions.  SFAS 159 was effective for
the  Company  on January  1, 2008 and did not have a  significant  impact on the
Company's consolidated financial statements.

FASB  Emerging  Issues  Task Force  ("EITF")  Issue No.  06-4,  "Accounting  for
Deferred  Compensation and  Postretirement  Benefit Aspects of Endorsement Split
Dollar Life  Insurance  Arrangements."  EITF 06-4 requires the  recognition of a
liability  and  related  compensation  expense  for bank  owned  life  insurance
policies with joint beneficiary agreements that provide a benefit to an employee
that  extends  to  post-retirement  periods.  Under EITF  06-4,  life  insurance
policies purchased for the purpose of providing such benefits do not effectively
settle an entity's  obligation  to the  employee.  Accordingly,  the entity must
recognize a liability and related  compensation  expense  during the  employee's
active  service  period  based on the future  cost of  insurance  to be incurred
during the  employee's  retirement.  If the  entity  has  agreed to provide  the
employee with a death  benefit,  then the liability for the future death benefit
should  be  recognized  by  following  the  guidance  in SFAS  106,  "Employer's
Accounting for Postretirement Benefits Other Than Pensions." The Company adopted
EITF 06-4  effective as of January 1, 2008 as a change in  accounting  principle
through a  cumulative-effect  adjustment to retained earnings of $522,000 net of
tax.

In November 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan
Commitments  Recorded at Fair Value through Earnings (SAB 109). SAB 109 provides
guidance on the accounting for written loan  commitments  recorded at fair value
under generally accepted  accounting  principles (GAAP).  Specifically,  the SAB
revises  the  Staff's  views on  incorporating  expected  net future  cash flows
related to loan servicing  activities in the fair value measurement of a written
loan commitment.  SAB 109, which  supersedes SAB 105,  Application of Accounting
Principles  to Loan  Commitments,  requires  the  expected net future cash flows
related to the associated  servicing of the loan be included in the  measurement
of all written loan  commitments  that are  accounted  for at fair value through
earnings. SAB 109 was effective on January 1, 2008 for the Company.  Adoption of
SAB 109 did not a material impact on the Company's financial statements.

                                       16
<PAGE>
<TABLE>
<CAPTION>
                                TRICO BANCSHARES
                                Financial Summary
               (In thousands, except per share amounts; unaudited)

                                                Three months ended        Nine months ended
                                                   September 30,              September 30,
                                          ---------------------------------------------------
                                               2008           2007        2008         2007
                                          ---------------------------------------------------
<S>                                              <C>           <C>         <C>         <C>
Net Interest Income (FTE)                    $22,889       $22,031     $67,464      $66,005
Provision for loan losses                      2,600           700      15,500        1,682
Noninterest income                             6,792         6,847      20,922       20,476
Noninterest expense                           16,589        16,752      52,006       51,155
Provision for income taxes (FTE)               4,257         4,633       8,323       13,652
                                          --------------------------------------------------
     Net income                               $6,235        $6,793     $12,557      $19,992
                                          ==================================================
Earnings per share:
     Basic                                     $0.40         $0.43       $0.80        $1.26
     Diluted                                   $0.39         $0.42       $0.78        $1.22
Per share:
     Dividends paid                            $0.13         $0.13       $0.39        $0.39
     Book value at period end                 $12.14        $11.50
     Tangible book value at period end        $11.10        $10.44

Average common shares outstanding             15,745        15,889      15,777       15,895
Average diluted shares outstanding            15,952        16,311      16,022       16,397
Shares outstanding at period end              15,745        15,891
At period end:
     Loans, net                           $1,538,648    $1,517,937
     Total assets                          1,976,467     1,953,523
     Total deposits                        1,563,841     1,532,142
     Other borrowings                         79,873        99,996
     Junior subordinated debt                 41,238        41,238
     Shareholders' equity                   $191,102      $182,725
Financial Ratios:
During the period (annualized):
     Return on assets                          1.26%         1.44%       0.84%        1.42%
     Return on equity                         13.04%        14.92%       8.71%       14.94%
     Net interest margin(1)                    5.07%         5.12%       4.96%        5.16%
     Net loan charge-offs to average loans     0.59%         0.15%       0.71%        0.13%
     Efficiency ratio(1)                      55.89%        58.01%      58.84%       59.15%
At Period End:
     Equity to assets                          9.67%         9.35%
     Total capital to risk assets             12.38%        11.66%
     Allowance for losses to loans(2)          1.79%         1.25%

(1)  Fully taxable equivalent (FTE)
(2)  Allowance  for losses  includes  allowance  for loan losses and reserve for
     unfunded commitments.
</TABLE>

                                       17
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

As TriCo  Bancshares (the  "Company") has not commenced any business  operations
independent of Tri Counties Bank (the "Bank"), the following discussion pertains
primarily  to the  Bank.  Average  balances,  including  such  balances  used in
calculating  certain financial ratios, are generally  comprised of average daily
balances  for the  Company.  Within  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations,  interest income and net interest
income are  generally  presented  on a fully  tax-equivalent  (FTE)  basis.  The
presentation  of  interest  income and net  interest  income on a FTE basis is a
common  practice within the banking  industry.  Interest income and net interest
income  are  shown on a  non-FTE  basis in the  Part I -  Financial  Information
section  of  this  Form  10-Q,  and a  reconciliation  of the  FTE  and  non-FTE
presentations is provided below in the discussion of net interest income.

Critical Accounting Policies and Estimates
The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The preparation of these financial statements requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  on-going  basis,  the  Company  evaluates  its
estimates,  including  those  related to the adequacy of the  allowance for loan
losses, intangible assets, and contingencies. The Company bases its estimates on
historical  experience and on various other  assumptions that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions. (See caption "Allowance for
Loan Losses" for a more detailed discussion).

Results of Operations
The  following   discussion  and  analysis  is  designed  to  provide  a  better
understanding  of the significant  changes and trends related to the Company and
the  Bank's  financial  condition,   operating  results,   asset  and  liability
management,  liquidity and capital  resources and should be read in  conjunction
with the  Condensed  Consolidated  Financial  Statements  of the Company and the
Notes thereto located at Item 1 of this report.

Following is a summary of the components of fully taxable equivalent ("FTE") net
income for the periods indicated (dollars in thousands):

                                   Three months ended         Nine months ended
                                       September 30,             September 30,
                                 -----------------------------------------------
                                   2008          2007         2008         2007
                                 -----------------------------------------------
Net Interest Income (FTE)         22,889       $22,031      $67,464     $66,005
Provision for loan losses          2,600           700       15,500       1,682
Noninterest income                 6,792         6,847       20,922      20,476
Noninterest expense               16,589        16,752       52,006      51,155
Provision for income taxes (FTE)   4,257         4,633        8,323      13,652
                                 -----------------------------------------------
Net income                        $6,235        $6,793      $12,557     $19,992
                                 ===============================================

The Company had  quarterly  earnings of  $6,235,000  for the three  months ended
September 30, 2008.  This represents a decrease of $558,000 (8.2%) when compared
with earnings of $6,793,000  for the quarter ended  September 30, 2007.  Diluted
earnings per share for the quarter ended  September 30, 2008  decreased  7.1% to
$0.39  compared to $0.42 for the quarter ended  September 30, 2007. The decrease
in  earnings  from the prior year  quarter  was  primarily  due to a  $1,900,000
increase in provision for loans losses.

The Company reported earnings of $12,557,000 for the nine months ended September
30, 2008. These results represent a decrease of $7,435,000 (37.2%) when compared
with  earnings of  $19,992,000  for the nine months  ended  September  30, 2007.
Diluted  earnings  per  share  for the nine  months  ended  September  30,  2008
decreased  36.1% to $0.78 compared to $1.22 for the nine months ended  September
30, 2007.  The decrease in earnings  from the nine month period ended  September
30, 2007 was  primarily  due to a  $13,818,000  increase in  provision  for loan
losses.

                                    18
<PAGE>

Net Interest Income
The  Company's  primary  source  of  revenue  is  net  interest  income,  or the
difference  between  interest  income on  interest-earning  assets and  interest
expense  on  interest-bearing  liabilities.   Following  is  a  summary  of  the
components  of net  interest  income  for  the  periods  indicated  (dollars  in
thousands):

                                  Three months ended          Nine months ended
                                     September 30,               September 30,
                                 ----------------------------------------------
                                      2008         2007         2008       2007
                                 -----------------------------------------------
 Interest income                     $29,971     $32,442     $91,433    $95,089
 Interest expense                     (7,252)    (10,602)    (24,488)   (29,713)
 FTE adjustment                          170         191         519        629
                                 -----------------------------------------------
    Net interest income (FTE)        $22,889     $22,031     $67,464    $66,005
                                 ===============================================
 Average interest-earning assets  $1,806,010  $1,721,547  $1,814,103  $1,704,342

 Net interest margin (FTE)             5.07%       5.12%       4.96%       5.16%

The  Company's  primary  source  of  revenue  is  net  interest  income,  or the
difference  between  interest  income on  interest-earning  assets and  interest
expense in interest-bearing liabilities.

Net interest  income (FTE) during the third quarter of 2008  increased  $858,000
(3.9 %) from  the  same  period  in 2007 to  $22,889,000.  The  increase  in net
interest  income  (FTE) was due to an  $84,463,000  (4.9%)  increase  in average
balances of  interest-earning  assets to  $1,806,010,000  that was substantially
offset by a 0.05% decrease in net interest margin (FTE) to 5.07%.

Net  interest  income  (FTE)  during  the first  nine  months of 2008  increased
$1,459,000  (2.2%) from the same period in 2007 to $67,464,000.  The increase in
net interest  income (FTE) was due to a $109,761,000  (6.4%) increase in average
balances of interest-earning  assets to $1,814,103,000 that was partially offset
by a 0.20% decrease in net interest margin (FTE) to 4.96%.

Interest and Fee Income
Interest and fee income (FTE) for the third quarter of 2008 decreased $2,492,000
(7.6%) from the third quarter of 2007.  The decrease was due to a 0.90% decrease
in the yield on  average  interest-earning  assets to 6.68%  that was  partially
offset by an $84,463,000 (4.9%) increase in average  interest-earning  assets to
$1,806,010,000.  The growth in interest-earning  assets was due to a $31,590,000
(21%)  increase in average loan  balances to  $1,549,009,000  and an increase of
$53,253,000  (26.1%) in average  balances of  investments to  $256,926,000.  The
decrease  in the yield on  average  interest-earning  assets was mainly due to a
1.01% decrease in yield on loans to 6.92%.  The decrease in loan yields from the
third  quarter of 2007 was mainly due to a 3.25%  decrease in the prime  lending
rate from 8.25% at June 30, 2007 to 5.00% at September 30, 2008.

Interest  and fee income  (FTE) for the nine  months  ended  September  30, 2008
decreased  $3,766,000  (3.9%) from the same period of 2007. The decrease was due
to a 0.73%  decrease  in the yield on average  interest-earning  assets to 6.76%
that  was  partially  offset  by  a  $109,761,000  (6.4%)  increase  in  average
interest-earning assets to $1,814,103,000. The growth in interest-earning assets
was  due  to  a  $38,706,000   (2.6%)  increase  in  average  loan  balances  to
$1,543,571,000  and an increase of  $71,240,000  (35.8%) in average  balances of
investments   to   $270,339,000.   The   decrease   in  the  yield  on   average
interest-earning  assets was mainly due to a 0.79% decrease in yield on loans to
7.04%. The decrease in loan yields from the nine months ended September 30, 2007
was mainly due to a 3.25%  decrease in the prime lending rate from 8.25% at June
30, 2007 to 5.00% at September 30, 2008.

                                       19
<PAGE>

Interest Expense
Interest expense decreased $3,350,000 (31.6%) to $7,252,000 in the third quarter
of  2008  compared  to the  third  quarter  of  2007.  The  average  balance  of
interest-bearing  liabilities  increased $74,375,000 (5.6%) to $1,408,323,000 in
the third quarter of 2008 compared to the third quarter of 2007. The increase in
the  average  balance  of  interest-bearing  liabilities  was due  primarily  to
increases of $49,536,000 (9.0%) in the average balance of time deposits from the
third quarter of 2007. The average rate paid on interest-bearing  liabilities in
the quarter ended  September 30, 2008  decreased  1.12% to 2.06% compared to the
quarter  ended  September  30, 2007 as a result of lower market rates for almost
all types of interest-bearing liabilities.

Interest expense decreased $5,225,000 (17.6%) to $24,488,000 for the nine months
ended  September  30, 2008  compared to  $29,713,000  for the nine months  ended
September  30,  2007.  The  average  balance  of  interest-bearing   liabilities
increased  $97,066,000  (7.4%)  to  $1,410,614,000  for the  nine  months  ended
September  30, 2008 compared to the nine months ended  September  30, 2007.  The
increase  in  the  average  balance  of  interest-bearing  liabilities  was  due
primarily to increases of  $43,994,000  (70.8%) and  $40,544,000  (81.7%) in the
average balances of Federal funds purchased and other borrowings,  respectively,
from the nine  months  ended  September  30,  2007.  The  average  rate  paid on
interest-bearing  liabilities in the nine month period ended  September 30, 2008
decreased 0.71% to 2.31% compared to the nine months ended September 30, 2007 as
a result  of  lower  market  rates  for  almost  all  types of  interest-bearing
liabilities.

Net Interest Margin (FTE)
The  following  table  summarizes  the  components of the Company's net interest
margin for the periods indicated:

                                    Three months ended         Nine months ended
                                      September 30,              September 30,
                                   ---------------------------------------------
                                    2008         2007          2008       2007
                                   ---------------------------------------------
Yield on interest-earning assets    6.68%        7.58%         6.76%      7.49%
Rate paid on interest-bearing
     Liabilities                    2.06%        3.18%         2.31%      3.02%
                                   ---------------------------------------------
     Net interest spread            4.62%        4.40%         4.45%      4.47%
Impact of all other net
     noninterest-bearing funds      0.45%        0.72%         0.51%      0.69%
                                   ---------------------------------------------
        Net interest margin         5.07%        5.12%         4.96%      5.16%
                                   =============================================

Net  interest  margin for the three months ended  September  30, 2008  decreased
0.05%  compared to the three months ended  September 30, 2007.  This decrease in
net  interest  margin was mainly due to an 0.27%  decrease  in the impact of net
noninterest-bearing  funds  to  0.45%  from  0.72%  in the  three  months  ended
September 30, 2007 that was partially offset by a 0.22% increase in net interest
spread as the average yield on interest-earning assets decreased 0.90% while the
average rate paid on interest-bearing liabilities decreased 1.12% from the three
months ended September 30, 2007.

Net interest margin for the nine months ended September 30, 2008 decreased 0.20%
compared to the nine months  ended  September  30,  2007.  This  decrease in net
interest   margin   was  due  to  a  0.18%   decrease   in  the  impact  of  net
noninterest-bearing funds to 0.51% from 0.69% in the nine months ended September
30, 2007,  and a 0.02%  decrease in net interest  spread as the average yield on
interest-earning   assets  decreased  0.73%  while  the  average  rate  paid  on
interest-bearing   liabilities  decreased  0.71%  from  the  nine  months  ended
September 30, 2007.

                                       20
<PAGE>

Summary of Average Balances, Yields/Rates and Interest Differential
The following table presents,  for the periods indicated,  information regarding
the Company's consolidated average assets, liabilities and shareholders' equity,
the  amounts  of  interest  income  from  average  interest-earning  assets  and
resulting  yields,  and the amount of interest expense paid on  interest-bearing
liabilities.  Average loan balances include nonperforming loans. Interest income
includes  proceeds  from  loans on  nonaccrual  loans  only to the  extent  cash
payments have been received and applied to interest income. Yields on securities
and  certain  loans have been  adjusted  upward to reflect  the effect of income
thereon  exempt from federal income  taxation at the current  statutory tax rate
(dollars in thousands).

 <TABLE>
<CAPTION>

                                                             For the three months ended
                                            ---------------------------------------------------------------
                                                    September 30, 2008               September 30, 2007
                                            -----------------------------     -----------------------------
                                                        Interest   Rates                Interest    Rates
                                             Average    Income/    Earned    Average    Income/     Earned
                                             Balance    Expense    Paid      Balance    Expense     Paid
                                           -----------------------------    ------------------------------
<S>                                             <C>        <C>       <C>        <C>        <C>        <C>
Assets:
Loans                                       $1,549,009  $26,790    6.92%     $1,517,419  $30,009     7.93%
Investment securities - taxable                232,419    2,894    4.98%        174,472    1,983     4.55%
Investment securities - nontaxable              24,507      457    7.46%         29,201      545     7.47%
Federal funds sold                                  75        -    1.19%            455        6     5.27%
                                            -----------------------------    -----------------------------
Total interest-earning assets                1,806,010   30,141    6.68%      1,721,547   32,633     7.58%
                                                        -------                           ------
Other assets                                   168,382                          170,445
                                            ----------                       ----------
Total assets                                $1,974,392                       $1,891,992
                                            ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits              $226,843      239    0.42%        220,582      114     0.21%
Savings deposits                               376,594    1,041    1.11%        388,315    1,761     1.81%
Time deposits                                  597,765    4,496    3.01%        548,229    6,203     4.53%
Federal funds purchased                         84,851      430    2.03%         70,602      922     5.22%
Other borrowings                                81,032      473    2.33%         64,982      768     4.73%
Junior subordinated debt                        41,238      573    5.56%         41,238      834     8.09%
                                            ----------------------------      ----------------------------
Total interest-bearing liabilities           1,408,323    7,252    2.06%      1,333,948   10,602     3.18%
                                                         ------                           ------
Noninterest-bearing deposits                   344,233                          342,667
Other liabilities                               30,625                           33,297
Shareholders' equity                           191,211                          182,080
                                            ----------                       ----------
Total liabilities and shareholders' equity  $1,974,392                       $1,891,992
                                            ==========                       ==========
Net interest spread(1)                                    4.62%                            4.40%
Net interest income and interest margin(2)     $22,889    5.07%                 $22,031    5.12%
                                           ====================              ===================
</TABLE>
(1)  Net interest spread represents the average yield earned on interest-earning
     assets minus the average rate paid on interest-bearing liabilities.
(2)  Net  interest  margin is computed by  calculating  the  difference  between
     interest   income  and   expense,   divided  by  the  average   balance  of
     interest-earning assets.

                                       21
<PAGE>

<TABLE>
<CAPTION>

                                                             For the nine months ended
                                           ---------------------------------------------------------------
                                                  September 30, 2008               Septembere 30, 2007
                                           -----------------------------    ------------------------------
                                                       Interest   Rates                Interest    Rates
                                            Average    Income/    Earned    Average    Income/     Earned
                                            Balance    Expense    Paid      Balance    Expense     Paid
                                           -----------------------------    ------------------------------
<S>                                            <C>        <C>       <C>        <C>        <C>        <C>
Assets:
Loans                                      $1,543,571  $81,531    7.04%     $1,504,865 $88,404     7.83%
Investment securities - taxable               244,833    8,989    4.90%        168,363   5,548     4.39%
Investment securities - nontaxable             25,506    1,429    7.47%         30,736   1,752     7.60%
Federal funds sold                                193        3    2.07%            378      14     4.94%
                                           -----------------------------    -----------------------------
Total interest-earning assets               1,814,103   91,952    6.76%      1,704,342  95,718     7.49%
                                                       -------                          ------
Other assets                                  169,092                          171,978
                                           ----------                       ----------
Total assets                               $1,983,195                       $1,876,320
                                           ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits             $220,366      460    0.28%       $225,402     343     0.20%
Savings deposits                              385,624    3,715    1.28%        384,366   4,418     1.53%
Time deposits                                 567,089   14,428    3.39%        550,783  18,255     4.42%
Federal funds purchased                       106,109    1,953    2.45%         62,115   2,458     5.28%
Other borrowings                               90,188    2,060    3.05%         49,644   1,764     4.74%
Junior subordinated debt                       41,238    1,872    6.05%         41,238   2,475     8.00%
                                           ------------------------------   -----------------------------
Total interest-bearing liabilities          1,410,614   24,488    2.31%      1,313,548  29,713     3.02%
                                                        ------                          ------
Noninterest-bearing deposits                  348,483                          351,050
Other liabilities                              31,882                           33,309
Shareholders' equity                          192,216                          178,413
                                           ----------                       ----------
Total liabilities and shareholders' equity $1,983,195                       $1,876,320
                                           ==========                       ==========
Net interest spread(1)                                            4.45%                            4.47%
Net interest income and interest margin(2)             $67,464    4.96%                 $66,005    5.16%
                                                       ================                 =================
</TABLE>

(1)  Net interest spread represents the average yield earned on interest-earning
     assets minus the average rate paid on interest-bearing liabilities.
(2)  Net  interest  margin is computed by  calculating  the  difference  between
     interest   income  and   expense,   divided  by  the  average   balance  of
     interest-earning assets.

                                       22
<PAGE>

Summary of  Changes in  Interest  Income and  Expense  due to Changes in Average
Asset and Liability Balances and Yields Earned and Rates Paid

The following tables set forth a summary of the changes in interest income (FTE)
and  interest  expense  from  changes in average  asset and  liability  balances
(volume)  and  changes  in average  interest  rates for the  periods  indicated.
Changes  not  solely  attributable  to volume or rates  have been  allocated  in
proportion to the respective volume and rate components (dollars in thousands).

                                           Three months ended September 30, 2008
                                                 compared with three months
                                                  ended September 30, 2007
                                           -------------------------------------
                                              Volume         Rate         Total
                                           -------------------------------------
Increase (decrease) in interest income:
Loans                                           $626       ($3,935)    ($3,309)
Investment securities                            571           252         823
Federal funds sold                                (5)           (1)         (6)
                                           -------------------------------------
   Total interest-earning assets               1,192        (3,684)     (2,492)
                                           -------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                   3           122         125
Savings deposits                                 (53)         (667)       (720)
Time deposits                                    561        (2,268)     (1,707)
Federal funds purchased                          186          (678)       (492)
Other borrowings                                 190          (485)       (295)
Junior subordinated debt                           -          (261)       (261)
                                           -------------------------------------
   Total interest-bearing liabilities            887        (4,237)     (3,350)
                                           -------------------------------------
Increase in Net Interest Income                 $305          $553        $858
                                           =====================================

                                            Nine months ended September 30, 2008
                                               compared with nine months ended
                                                     September 30, 2007
                                           -------------------------------------
                                              Volume           Rate      Total
                                           -------------------------------------
Increase (decrease) in interest income:
Loans                                         $2,273      ($9,146)     ($6,873)
Investment securities                          2,220          898        3,118
Federal funds sold                                (7)          (4)         (11)
                                           -------------------------------------
   Total interest-earning assets               4,486       (8,252)      (3,766)
                                           -------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                  (8)         125          117
Savings deposits                                  14         (717)        (703)
Time deposits                                    541       (4,368)      (3,827)
Federal funds purchased                        1,742       (2,247)        (505)
Other borrowings                               1,441       (1,145)         296
Junior subordinated debt                           -         (603)        (603)
                                           -------------------------------------
   Total interest-bearing liabilities          3,730       (8,955)      (5,225
                                           -------------------------------------
Increase in Net Interest Income                 $756         $703       $1,459
                                           =====================================

Provision for Loan Losses
The Company  provided  $2,600,000  for loan losses in the third  quarter of 2008
versus  $700,000 in the third quarter of 2007. In the third quarter of 2008, the
Company recorded  $2,293,000 of net loan charge-offs versus $560,000 of net loan
charge-offs  in the third  quarter of 2007.  In  addition,  net  charge-offs  of
$1,000,000  on home equity lines and loans and $910,000 on auto  indirect  loans
were taken during the third quarter of 2008.

The Company  provided  $15,500,000  for loan losses during the nine months ended
September 30, 2008 versus  $1,682,000 during the nine months ended September 30,
2007.  In the nine  months  ended  September  30,  2008,  the  Company  recorded
$8,243,000 of net loan charge-offs  versus $1,457,000 of net loan charge-offs in
the nine months ended September 30, 2007. During the second quarter of 2008, the
Company re-appraised all of its larger residential  development  projects.  As a
result of this effort, the Company charged-off $1,007,000 on a twenty-eight unit
residential  condominium  project and $640,000 on a twenty-seven lot residential
construction  project.  In addition to the re-appraisal effort during the second
quarter of 2008  which  resulted  in  charge-offs  of  $1,647,000,  the  Company
charged-off  $1,078,000 on a thirty-two  lot  residential  construction  project
during the first quarter of 2008. In addition,  net charge-offs of $2,198,000 on
home equity lines and loans and  $1,891,000  on auto  indirect  loans were taken
during the nine months ended September 30, 2008.

                                       23
<PAGE>

Noninterest Income
The following  table  summarizes the  components of  noninterest  income for the
periods indicated (dollars in thousands).

<TABLE>
<CAPTION>
                                               Three months ended          Nine months ended
                                                 September 30,               September 30,
                                             -------------------------------------------------
                                               2008          2007         2008         2007
                                             -------------------------------------------------
   <S>                                         <C>           <C>           <C>          <C>
  Service charges on deposit accounts         $4,080        $3,819       $11,881     $11,236
  ATM fees and interchange revenue             1,164         1,016         3,411       3,011
  Other service fees                             551           523         1,629       1,633
  Change in value of mortgage servicing rights  (571)      (141)         (743)       (226)
  Gain on sale of loans                          341           211           915         756
  Commissions on sale of
    nondeposit investment products               594           583         1,539       1,633
  Increase in cash value of life insurance       360           405         1,080       1,215
  Gain from VISA IPO                               -             -           396           -
  Other noninterest income                       273           431           814       1,218
                                             -------------------------------------------------
  Total noninterest income                    $6,792        $6,847       $20,922     $20,476
                                             =================================================
</TABLE>

Noninterest  income for the third quarter of 2008 decreased  $55,000 (0.8%) from
the third  quarter of 2007,  mainly due to a $430,000  decrease  in the value of
mortgage servicing rights to a negative $571,000 from a negative $141,000 in the
third  quarter of 2007.  The  negative  impact of the  decrease  in the value of
mortgage  servicing rights was partially offset by a $261,000 (6.8%) increase in
service  charges on  deposit  accounts  to  $4,080,000,  and a $148,000  (14.6%)
increase in ATM fees and  interchange  to  $1,164,000.  The increases in service
charges on deposit accounts and ATM fees and interchange  revenue were primarily
due to increased numbers of customers.

Noninterest  income for the nine  months  ended  September  30,  2008  increased
$446,000  (2.2%) to  $20,922,000  from the same period in 2007.  The increase in
noninterest  income from the nine months ended September 30, 2007 was mainly due
to a  $396,000  gain from the  Company's  membership  in VISA,  Inc.  and VISA's
initial  public  offering  (IPO) in March 2008,  a $645,000  (5.7%)  increase in
service  charges on deposit  accounts  to  $11,881,000,  and a $400,000  (13.3%)
increase in ATM fees and  interchange  to  $3,411,000.  The increases in service
charges on deposit accounts and ATM fees and interchange  revenue were primarily
due to increased numbers of customers.

Noninterest Expense
The following  table  summarizes the  components of noninterest  expense for the
periods indicated (dollars in thousands).

<TABLE>
<CAPTION>
                                            Three months ended          Nine months ended
                                              September 30,                  September 30,
                                           ----------------------------------------------------
                                              2008          2007         2008         2007
                                           ----------------------------------------------------
   <S>                                        <C>           <C>           <C>            <C>
  Base salaries, net of
     deferred loan origination costs        $6,331        $6,143         $18,980       $18,077
  Incentive compensation                       675           451           2,065         2,936
  Benefits and other compensation costs      2,425         2,381           7,511         7,323
                                           ----------------------------------------------------
     Total salaries and related benefits     9,431         8,975          28,556        28,336
                                           ----------------------------------------------------
  Occupancy                                  1,289         1,178           3,705         3,526
  Equipment                                  1,017         1,052           2,997         3,222
  Data processing and software                 600           564           1,811         1,482
  ATM network charges                          506           463           1,529         1,389
  Advertising and marketing                    451           620           1,204         1,624
  Telecommunications                           402           412           1,629         1,240
  Professional fees                            300           408           1,302         1,217
  Courier service                              258           285             796           867
  Postage                                      185           178             683           602
  Intangible amortization                      133           122             389           367
  Assessments                                  118            82             283           247
  Operational losses                            81           128             286           313
  Provisions for losses-unfunded commitments  (100)            0           1,275           191
  Other                                      1,918         2,285           5,561         6,532
                                           ----------------------------------------------------
  Total other noninterest expense            7,158         7,777          23,450        22,819
                                           ----------------------------------------------------
  Total noninterest expense                $16,589       $16,752         $52,006       $51,155
                                           ====================================================
  Average full time equivalent staff           668           646             638           636
  Noninterest expense to revenue (FTE)       55.89%        58.01%          58.84%        59.12%
</TABLE>

                                       24
<PAGE>

Noninterest  expense for the third  quarter of 2008  decreased  $163,000  (1.0%)
compared to the third quarter of 2007.  Salaries and benefits expense  increased
$456,000 (5.1%) to $9,431,000 due to increases in all areas including  salaries,
commissions and incentives,  and benefits.  Other noninterest  expense decreased
$619,000 (8.0%) due to decreases over a broad range of other expense categories.

Noninterest  expense  for the nine months  ended  September  30, 2008  increased
$851,000 (1.7%)  compared to the nine months ended September 30, 2007.  Salaries
and benefits expense  increased  $220,000 (0.8%) to $28,556,000  mainly due to a
$903,000  (5.0%)  increase in base  salaries and a $188,000  (2.6%)  increase in
benefits  expense that were  partially  offset by an $871,000  (29.7%)  decrease
incentive  compensation.  Other noninterest  expense  increased  $631,000 (2.8%)
primarily  due to a  $1,084,000  increase  in  provision  for losses on unfunded
commitments.

Provision for Income Tax
The effective  tax rate for the three months ended  September 30, 2008 was 39.6%
and reflects no change from 39.6% for the three months ended September 30, 2007.
The  effective  tax rate for the nine months ended  September 30, 2008 was 38.3%
and reflects a decrease from 39.5% for the nine months ended September 30, 2007.
The  provision  for  income  taxes  for  all  periods   presented  is  primarily
attributable to the respective  level of earnings and the incidence of allowable
deductions,  particularly  from  increase  in  cash  value  of  life  insurance,
tax-exempt loans and state and municipal securities.

Classified Assets
The  Company  closely  monitors  the  markets in which it  conducts  its lending
operations  and  continues  its strategy to control  exposure to loans with high
credit risk.  Asset reviews are performed  using grading  standards and criteria
similar to those employed by bank regulatory  agencies.  Assets receiving lesser
grades  fall  under  the  "classified  assets"  category,   which  includes  all
nonperforming  assets and potential problem loans, and receive an elevated level
of attention regarding collection.

The following is a summary of classified assets on the dates indicated (dollars
in thousands):

                              At September 30, 2008      At December 31, 2007
                             ----------------------    -------------------------
                              Gross  Guaranteed  Net    Gross Guaranteed   Net
                             ---------------------------------------------------
Classified loans             $61,529  $5,545  $55,984   $18,570  $5,948  $12,622
Other classified assets        1,178       -    1,178       187       -      187
                             ---------------------------------------------------
Total classified assets      $62,707  $5,545  $57,162   $18,757  $5,948  $12,809
                             ===================================================

Allowance for loan losses/classified loans     43.9%                      137.3%

Classified  assets,  net of  guarantees  of the U.S.  Government,  including its
agencies and its government-sponsored  agencies, increased $44,353,000 (346%) to
$57,162,000 at September 30, 2008 from $12,809,000 at December 31, 2007.

Nonperforming Loans
Loans are reviewed on an  individual  basis for  reclassification  to nonaccrual
status when any one of the following  occurs:  the loan becomes 90 days past due
as to  interest  or  principal,  the full and timely  collection  of  additional
interest or principal becomes  uncertain,  the loan is classified as doubtful by
internal credit review or bank regulatory  agencies,  a portion of the principal
balance has been charged off, or the Company takes possession of the collateral.
Loans that are placed on nonaccrual even though the borrowers  continue to repay
the  loans as  scheduled  are  classified  as  "performing  nonaccrual"  and are
included  in  total  nonperforming  loans.  The  reclassification  of  loans  as
nonaccrual does not necessarily reflect Management's judgment as to whether they
are collectible.

Interest income is not accrued on loans where Management has determined that the
borrowers  will  be  unable  to  meet  contractual   principal  and/or  interest
obligations,  unless the loan is well secured and in the process of  collection.
When a loan is placed on nonaccrual,  any previously accrued but unpaid interest
is  reversed.  Income on such loans is then  recognized  only to the extent that
cash is received  and where the future  collection  of  principal  is  probable.
Interest  accruals  are resumed on such loans only when they are  brought  fully
current  with  respect to interest and  principal  and when,  in the judgment of
Management, the loans are estimated to be fully collectible as to both principal
and interest.

                                       25
<PAGE>

Interest income on nonaccrual loans, which would have been recognized during the
nine months  ended  September  30,  2008,  if all such loans had been current in
accordance  with their  original  terms,  totaled  $1,759,000.  Interest  income
actually  recognized  on these loans during the nine months ended  September 30,
2008 was $882,000.

The  Company's  policy is to place loans 90 days or more past due on  nonaccrual
status.  In some instances  when a loan is 90 days past due Management  does not
place  it on  nonaccrual  status  because  the loan is well  secured  and in the
process of  collection.  A loan is considered to be in the process of collection
if, based on a probable  specific  event,  it is expected  that the loan will be
repaid or brought current. Generally, this collection period would not exceed 30
days. Loans where the collateral has been repossessed are classified as OREO or,
if the collateral is personal  property,  the loan is classified as other assets
on the Company's financial statements.

Management considers both the adequacy of the collateral and the other resources
of the  borrower  in  determining  the steps to be taken to  collect  nonaccrual
loans.   Alternatives  that  are  considered  are  foreclosure,   collecting  on
guarantees, restructuring the loan or collection lawsuits.

As shown in the following table, total nonperforming assets net of guarantees of
the  U.S.  Government,  including  its  agencies  and  its  government-sponsored
agencies,  increased  $10,521,000  (136.7%) to $18,219,000 during the first nine
months of 2008.  Nonperforming  assets net of  guarantees  represented  0.92% of
total assets at September 30, 2008.  All  nonaccrual  loans are considered to be
impaired  when  determining  the need for a specific  valuation  allowance.  The
Company  continues  to make a concerted  effort to work  problem  and  potential
problem loans to reduce risk of loss.

<TABLE>
<CAPTION>
                                                  At September 30, 2008       At December 31, 2007
                                              -------------------------    -------------------------
                                                Gross  Guaranteed  Net      Gross  Guaranteed   Net
                                              ------------------------------------------------------
<S>                                             <C>       <C>      <C>        <C>     <C>     <C>
(dollars in thousands)
Performing nonaccrual loans                   $14,534   $5,419   $9,115     $9,098  $5,814   $3,284
Nonperforming, nonaccrual loans                 7,552        -    7,552      4,227       -    4,227
                                              ------------------------------------------------------
   Total nonaccrual loans                      22,086    5,419   16,667     13,325   5,814    7,511
Loans 90 days past due and still accruing         374        -      374          -       -        -
                                              ------------------------------------------------------
Total nonperforming loans                      22,460    5,419   17,041     13,325   5,814    7,511
Other real estate owned                         1,178        -    1,178        187       -      187
                                              ------------------------------------------------------
Total nonperforming assets                    $23,638   $5,419  $18,219    $13,512  $5,814   $7,698
                                              ======================================================
Nonperforming loans to total loans                                1.09%                       0.48%
Nonperforming assets to total assets                              0.92%                       0.39%
Allowance for loan losses/nonperforming loans                      144%                        231%
</TABLE>


Assets
During the first nine months of 2008, total assets decreased  $4,154,000  (0.2%)
to  $1,967,467,000  from  $1,980,621,000  at December 31, 2007. This decrease in
assets primarily reflects a decrease in cash and cash equivalents of $21,498,000
and a  $7,257,000  increase in  allowance  for loan  losses that were  partially
offset  by a  $9,473,000  increase  in  securities  available  for  sale  and an
$11,270,000  increase in loans.  The  decrease in cash and cash  equivalents  is
reflective of a seasonal  effect  whereby the Company  experiences a spike up in
deposits during the year-end holiday season.  Historically,  this year-end spike
up in  deposits  lasts  only a week or two,  can be as high as  several  tens of
millions of dollars,  and appears to be the result of holiday  seasons  shopping
and  increases in deposit  balances of the  Company's  business  customers.  The
following  table shows the Company's loan balances,  including net deferred loan
costs:
                                             September 30,  December 31,
                                                 2008           2007
(dollars in thousands)                      ----------------------------
Commercial, financial and agricultural         $189,837        $164,815
Consumer installment                            513,132         535,819
Real estate mortgage                            770,553         716,013
Real estate construction                         89,714         135,319
                                            ----------------------------
    Total loans                              $1,563,236      $1,551,966
                                            ============================

                                       26
<PAGE>

Liabilities
During the first nine months of 2008,  total  liabilities  decreased  $6,378,000
(0.4%) to $1,785,365,000 from $1,791,743,000 at December 31, 2007. This decrease
in liabilities  primarily reflects a decrease in other borrowings of $36,253,000
that  was  partially  offset  by an  $18,618,000  increase  in  deposits  and an
$11,000,000  increase  in  Federal  funds  purchased.   The  decrease  in  other
borrowings  is due  to  the  maturity  and  repayment  of  $20,000,000  of  term
borrowings  from the FHLB in April 2008,  and  $16,253,000  of net reductions in
other overnight collateralized borrowings. The increase in deposits is primarily
due to a  $40,000,000  increase in  certificate  of  deposits  from the State of
California  to  $80,000,000  during March of 2008 that was  partially  offset by
seasonal  fluctuations in deposits,  including the year-end fluctuation noted in
the  description of Assets above.  The Bank  participates  in a deposit  program
offered by the State of  California  whereby the State may make  deposits at the
Bank's request  subject to collateral  and credit  worthiness  constraints.  The
negotiated rates on these State deposits are generally more favorable than other
wholesale funding sources available to the Bank.

Capital Resources
The  current  and  projected  capital  position of the Company and the impact of
capital plans and long-term strategies are reviewed regularly by Management.

The Company adopted and announced a stock repurchase plan on August 21, 2007 for
the repurchase of up to 500,000  shares of the Company's  common stock from time
to time as market conditions allow. The 500,000 shares authorized for repurchase
under this plan represented  approximately  3.2% of the Company's  approximately
15,815,000  common shares  outstanding  as of August 21, 2007.  This plan has no
stated  expiration  date for the  repurchases.  As of September  30,  2008,  the
Company had  repurchased  166,600  shares  under this plan,  which left  333,400
shares available for repurchase under the plan.

The  Company's  primary  capital  resource is  shareholders'  equity,  which was
$191,102,000  at  September  30,  2008.  This  amount  represents  a increase of
$2,224,000  from December 31, 2007, the net result of  comprehensive  income for
the period of  $11,654,000  and the effect of stock  option  vesting of $502,000
partially  offset by the  repurchase  of common stock with value of  $2,821,000,
dividends  paid of $6,145,000,  the cumulative  effect of a change in accounting
principle,  net of tax, of $522,000, and a $444,000 reversal of tax benefit from
the exercise of stock options. The Company's ratio of equity to total assets was
9.67%,  9.35%,  and 9.54% as of September  30,  2008,  September  30, 2007,  and
December 31, 2007, respectively.

The following  summarizes the ratios of capital to risk-adjusted  assets for the
periods indicated:

                   At September 30,      At         Minimum     Well Capitalized
                   ----------------    December 31, Regulatory   by Regulatory
                   2008       2007       2007       Requirement  Definition
                   ------------------------------------------------------------
 Tier I Capital    11.13%     10.68%     10.90%       4.00%         6.00%
 Total Capital     12.38%     11.66%     11.90%       8.00%        10.00%
 Leverage ratio    11.08%     11.28%     11.16%       4.00%         5.00%

Liquidity
The discussion of "Liquidity" under Item 3 of this report is incorporated herein
by reference.

Off-Balance Sheet Items
The Bank has certain ongoing  commitments under operating and capital leases. As
of September 30, 2008  commitments to extend credit and  commitments  related to
the Bank's deposit  overdraft  privilege  product were the Bank's only financial
instruments  with  off-balance  sheet risk.  The Bank has not  entered  into any
contracts for financial derivative instruments such as futures,  swaps, options,
etc.  Commitments  to  extend  credit  were  $653,764,000  and  $690,633,000  at
September 30, 2008 and December 31, 2007, respectively,  and represent 41.8% and
44.5% of the total loans  outstanding  at  September  30, 2008 and  December 31,
2007,  respectively.   Commitments  related  to  the  Bank's  deposit  overdraft
privilege product totaled  $37,997,000 and $33,517,000 at September 30, 2008 and
December 31, 2007, respectively.

                                       27
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Asset and Liability  Management The goal for managing the assets and liabilities
of the Company is to maximize shareholder value and earnings while maintaining a
high quality  balance sheet without  exposing the Company to undue interest rate
risk.  The Board of  Directors  has  overall  responsibility  for the  Company's
interest rate risk management  policies.  The Company has an Asset and Liability
Management Committee (ALCO) which establishes and monitors guidelines to control
the sensitivity of earnings to changes in interest rates.

Activities involved in asset/liability management include but are not limited to
lending,  accepting and placing  deposits,  investing in securities  and issuing
debt.   Interest  rate  risk  is  the  primary  market  risk   associated   with
asset/liability  management.  Sensitivity  of earnings to interest  rate changes
arises when yields on assets change in a different time period or in a different
amount from that of interest  costs on  liabilities.  To mitigate  interest rate
risk, the structure of the balance sheet is managed with the goal that movements
of interest  rates on assets and  liabilities  are  correlated and contribute to
earnings  even in  periods  of  volatile  interest  rates.  The  asset/liability
management  policy  sets  limits on the  acceptable  amount of  variance  in net
interest margin,  net income and market value of equity under changing  interest
environments.  Market value of equity is the net present value of estimated cash
flows from the Company's  assets,  liabilities and off-balance  sheet items. The
Company uses simulation  models to forecast net interest margin,  net income and
market value of equity.

Simulation of net interest  margin,  net income and market value of equity under
various  interest  rate  scenarios is the primary tool used to measure  interest
rate risk. Using computer-modeling  techniques,  the Company is able to estimate
the potential  impact of changing  interest  rates on net interest  margin,  net
income and market value of equity.  A balance sheet  forecast is prepared  using
inputs  of  actual  loan,   securities  and  interest-bearing   liability  (i.e.
deposits/borrowings) positions as the beginning base.

In the simulation of net interest  margin and net income under various  interest
rate scenarios,  the forecast balance sheet is processed  against seven interest
rate  scenarios.  These  seven  interest  rate  scenarios  include  a flat  rate
scenario,  which assumes  interest  rates are  unchanged in the future,  and six
additional rate ramp scenarios ranging from +300 to -300 basis points around the
flat scenario in 100 basis point  increments.  These ramp scenarios  assume that
interest  rates  increase  or  decrease  evenly  (in a  "ramp"  fashion)  over a
twelve-month period and remain at the new levels beyond twelve months.

In the  simulation  of  market  value of  equity  under  various  interest  rate
scenarios,  the forecast balance sheet is processed  against seven interest rate
scenarios.  These seven interest rate  scenarios  include the flat rate scenario
described  above,  and six additional rate shock scenarios  ranging from +300 to
-300 basis points around the flat scenario in 100 basis point increments.  These
rate shock scenarios assume that interest rates increase or decrease immediately
(in a "shock" fashion) and remain at the new level in the future.

At September 30, 2008, the results of the simulations  noted above indicate that
given a "flat"  balance  sheet  scenario,  and if deposit  rates  track  general
interest  rate changes by  approximately  50%, the  Company's  balance  sheet is
slightly  liability  sensitive.  "Liability  sensitive"  implies  that  earnings
decrease when interest rates rise,  and increase when interest  rates  decrease.
The  magnitude of all the  simulation  results  noted above is within the Bank's
policy guidelines. The asset liability management policy limits aggregate market
risk, as measured in this fashion,  to an acceptable level within the context of
risk-return trade-offs.

The simulation results noted above do not incorporate any management actions,
which might moderate the negative consequences of interest rate deviations.
Therefore, they do not reflect likely actual results, but serve as conservative
estimates of interest rate risk.

At September 30, 2008 and 2007, the Company had no material derivative financial
instruments.

                                       28
<PAGE>

Liquidity
The  Company's  principal  source of asset  liquidity is federal  funds sold and
marketable  investment  securities  available  for sale.  At September 30, 2008,
federal  funds  sold  and  investment  securities  available  for  sale  totaled
$241,900,000,  representing  an increase of $9,473,000  (4.1%) from December 31,
2007, and an increase of $2,170,000 (0.9%) from September 30, 2007. In addition,
the Company generates  additional liquidity from its operating  activities.  The
Company's  profitability  during the first nine  months of 2008  generated  cash
flows from  operations of $27,930,000  compared to $23,518,000  during the first
nine  months  of 2007.  Additional  cash  flows  may be  provided  by  financing
activities,  primarily  the  acceptance of deposits and  borrowings  from banks.
Sales  and  maturities  of  investment   securities  produced  cash  inflows  of
$38,938,000  during  the nine  months  ended  September  30,  2008  compared  to
$38,954,000 for the nine months ended September 30, 2007. During the nine months
ended  September 30, 2008, the Company  invested  $50,219,000 and $20,538,000 in
securities  and  net  loan  principal  increases,   respectively,   compared  to
$78,822,000  and  $26,841,000 in securities  and net loan  principal  increases,
respectively,  during the first nine months of 2007. These changes in investment
and loan  balances  contributed  to net cash  used by  investing  activities  of
$33,383,000  during the nine months ended  September  30, 2008,  compared to net
cash used by investing  activities of  $69,640,000  during the nine months ended
September 30, 2007. Financing activities used net cash of $16,045,000 during the
nine months ended September 30, 2008, compared to net cash provided by financing
activities  of  $14,387,000  during the nine months  ended  September  30, 2007.
Deposit  balance  increases  accounted for  $18,618,000 of financing  sources of
funds during the nine months ended  September 30, 2008,  compared to $67,007,000
of funds used by  decreases in deposits  during the nine months ended  September
30,  2007.  A  net  decrease  in  short-term  other  borrowings   accounted  for
$36,195,000  of financing  uses of funds during the nine months ended  September
30, 2008, compared to $10,136,000 of funds provided by an increase in short-term
other borrowings during the nine months ended September 30, 2007. Dividends paid
used  $6,145,000 and  $6,201,000 of cash during the nine months ended  September
30, 2008 and 2007, respectively. An increase in Federal funds purchased provided
$11,000,000  and  $28,000,000 of cash during the nine months ended September 30,
2008 and 2007,  respectively.  Also,  the  Company's  liquidity  is dependent on
dividends received from the Bank. Dividends from the Bank are subject to certain
regulatory restrictions.

Item 4.  Controls and Procedures
The Chief Executive  Officer,  Richard Smith,  and the Chief Financial  Officer,
Thomas Reddish, evaluated the effectiveness of the Company's disclosure controls
and  procedures  as of September  30, 2008  ("Evaluation  Date").  Based on that
evaluation,  they each concluded  that as of the  Evaluation  Date the Company's
disclosure  controls and procedures are effective to ensure that the information
required to be  disclosed by the Company in this  Quarterly  Report on Form 10-Q
was  recorded,  processed,  summarized  and  reported  within  the time  periods
specified in the SEC's rules and forms for Form 10-Q.

No changes in the Company's  internal control over financial  reporting occurred
during  the first  nine  months of 2008 that have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                       29
<PAGE>

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Due to the nature of the banking business, the Bank is at times party to various
legal actions;  all such actions are of a routine nature and arise in the normal
course of business of the Bank.

Item 1A - Risk Factors

There have been no material changes to the risk factors previously  disclosed in
Item 1A to Part I of our Annual Report on Form 10-K for the year ended  December
31, 2007 other than as follows:

The  Corporation  may be adversely  affected by the soundness of other financial
institutions.

Financial  services  institutions  are  interrelated  as a result  of  clearing,
counterparty,  or other  relationships.  The  Corporation  has  exposure to many
different  industries and  counterparties,  and routinely executes  transactions
with  counterparties in the financial  services industry,  including  commercial
banks,  brokers and  dealers,  and other  institutional  clients.  Many of these
transactions  expose the Corporation to credit risk in the event of a default by
a counterparty  or client.  In addition,  the  Corporation's  credit risk may be
exacerbated when the collateral held by the Corporation  cannot be realized upon
or is  liquidated  at prices not  sufficient  to recover  the full amount of the
credit or derivative exposure due to the Corporation. Any such losses could have
a material adverse affect on the Corporation's  financial  condition and results
of operations.

Current levels of market volatility are unprecedented.

The capital and credit  markets have been  experiencing  extreme  volatility and
disruption  for more  than 12  months.  In  recent  weeks,  the  volatility  and
disruption have reached  unprecedented  levels.  In some cases, the markets have
exerted downward  pressure on stock prices,  security prices and credit capacity
for  certain  issuers  without  regard to those  issuers'  underlying  financial
strength.  If the current levels of market disruption and volatility continue or
worsen,  there can be no assurance that we will not experience  adverse effects,
which may be  material,  on our ability to access  capital and on our results of
operations.

The Corporation and the Bank could be aversely affected by new regulations.

Federal and state  governments and regulators  could pass  legislation and adopt
policies  responsive  to current  credit  conditions  that would have an adverse
affect on the Company and its financial  performance.  For example,  the Company
could experience higher credit losses because of federal or state legislation or
regulatory  action that limits the Bank's  ability to  foreclose  on property or
other collateral or makes foreclosure less economically feasible.

The Federal Deposit  Insurance  Corporation  ("FDIC")  insures  deposits at FDIC
insured  financial  institutions up to certain limits.  The FDIC charges insured
financial  institutions  premiums to maintain the Deposit Insurance Fund. Due to
recent bank  failures,  the FDIC  insurance  fund reserve ratio has fallen below
statutory minimums. The FDIC has developed a proposed restoration plan that will
uniformly increase insurance assessments by 7 basis points (annualized) and also
proposes changes to the deposit  insurance  assessment  system requiring riskier
institutions  to pay a larger share.  If the FDIC adopts this or a similar plan,
the Bank could be required to pay higher premiums for deposit insurance.

The  Emergency  Economic  Stabilization  Act of 2008 included a provision for an
increase in the amount of deposits  insured by the FDIC to $250,000.  On October
14, 2008, the FDIC announced a new program -- the Temporary  Liquidity Guarantee
Program   that   provides    unlimited    deposit    insurance   on   funds   in
noninterest-bearing  transaction  deposit accounts not otherwise  covered by the
existing deposit insurance limit of $250,000.  All eligible institutions will be
covered  under the program for the first 30 days  without  incurring  any costs.
After the initial period, participating institutions will be assessed a 10 basis
point surcharge on the additional insured deposits.

There  are no other  material  changes  to the  risk  factors  disclosed  in the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2007.

                                       30
<PAGE>

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows information concerning the common stock repurchased by
the Company  during the second  quarter of 2008 pursuant to the Company's  stock
repurchase  plan adopted on August 21,  2007,  which is discussed in more detail
under  "Capital  Resources"  in  this  report  and  is  incorporated  herein  by
reference:

<TABLE>
<CAPTION>

Period        (a) Total number      (b) Average price  (c) Total number of   (d) Maximum number
              of shares purchased   paid per share     shares purchased as   of shares that may yet
                                                       part of publicly      be purchased under the
                                                       announced plans or    plans or programs
                                                       programs
---------------------------------------------------------------------------------------------------
   <S>                  <C>             <C>                 <C>                     <C>
---------------------------------------------------------------------------------------------------
July 1-31, 2008          -               -                    -                  333,400
Aug. 1-31, 2008          -               -                    -                  333,400
Sep. 1-30, 2008          -               -                    -                  333,400
---------------------------------------------------------------------------------------------------
Total                    -               -                    -                  333,400
</TABLE>


Item 6 - Exhibits

    31.2     Rule 13a-14(a)/15d-14(a) Certification of CEO
    31.2     Rule 13a-14(a)/15d-14(a) Certification of CFO
    32.1     Section 1350 Certification of CEO
    32.2     Section 1350 Certification of CFO


SIGNATURES
Pursuant  to 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 hereunto duly authorized.

                                TRICO BANCSHARES
                                  (Registrant)

Date:  November 7, 2008     /s/Thomas J. Reddish
                            --------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer
                            (Principal financial officer)



                                       31
<PAGE>

EXHIBITS

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of CEO

I, Richard P. Smith, certify that;

   1.     I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  TriCo
          Bancshares;
   2.     Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;
   3.     Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;
   4.     The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and we have:
          a.   Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including its consolidated subsidiary, is made known
               to us by others within those  entities,  particularly  during the
               period in which this quarterly report is being prepared;
          b.   Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  to provide reasonable  assurance
               regarding  the   reliability  of  financial   reporting  and  the
               preparation  of financial  statements  for  external  purposes in
               accordance with generally accepted accounting principles;
          c.   Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and procedures  and presented in this  quarterly  report
               our  conclusions   about  the  effectiveness  of  the  disclosure
               controls and  procedures,  as of the end of the period covered by
               this quarterly report based on such evaluation; and
          d.   Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's  most  recent  fiscal  quarter  that has  materially
               affected,  or is  reasonably  likely to  materially  affect,  the
               registrant's internal control over financial reporting; and
   5.     The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors:
          a.   All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability to record, process,  summarize and report financial data;
               and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.



Date: November 7, 2008        /s/Richard P. Smith
                              --------------------
                              Richard P. Smith
                              President and Chief Executive Officer


                                       32

<PAGE>

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of CFO

I, Thomas J. Reddish, certify that;

   1.     I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  TriCo
          Bancshares;
   2.     Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;
   3.     Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;
   4.     The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and we have:
          a.   Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including its consolidated subsidiary, is made known
               to us by others within those  entities,  particularly  during the
               period in which this quarterly report is being prepared;
          b.   Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  to provide reasonable  assurance
               regarding  the   reliability  of  financial   reporting  and  the
               preparation  of financial  statements  for  external  purposes in
               accordance with generally accepted accounting principles;
          c.   Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and procedures  and presented in this  quarterly  report
               our  conclusions   about  the  effectiveness  of  the  disclosure
               controls and  procedures,  as of the end of the period covered by
               this quarterly report based on such evaluation; and
          d.   Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's  most  recent  fiscal  quarter  that has  materially
               affected,  or is  reasonably  likely to  materially  affect,  the
               registrant's internal control over financial reporting; and
    5.    The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors:
          a.   All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability to record, process,  summarize and report financial data;
               and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.


Date: November 7, 2008         /s/Thomas J. Reddish
                              ---------------------
                              Thomas J. Reddish
                              Executive Vice President and
                              Chief Financial Officer


                                       33
<PAGE>

Exhibit 32.1

Section 1350 Certification of CEO

In connection with the Quarterly  Report of TriCo  Bancshares (the "Company") on
Form 10-Q for the period ended  September 30, 2008 as filed with the  Securities
and Exchange Commission on the date hereof (the "Report"),  I, Richard P. Smith,
President and Chief Executive  Officer of the Company,  certify,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:

    (1)   The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and
    (2)   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

     /s/Richard P. Smith
     --------------------
     Richard P. Smith
     President and Chief Executive Officer

A signed  original of this  written  statement  required by Section 906 has been
provided  to TriCo  Bancshares  and will be  retained  by TriCo  Bancshares  and
furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Section 1350 Certification of CFO

In connection with the Quarterly  Report of TriCo  Bancshares (the "Company") on
Form 10-Q for the period ended  September 30, 2008 as filed with the  Securities
and Exchange Commission on the date hereof (the "Report"), I, Thomas J. Reddish,
Executive Vice President and Chief  Financial  Officer of the Company,  certify,
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

    (1)   The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and
    (2)   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

    /s/Thomas J. Reddish
    --------------------
    Thomas J. Reddish
    Executive Vice President and Chief Financial Officer

A signed  original of this  written  statement  required by Section 906 has been
provided  to TriCo  Bancshares  and will be  retained  by TriCo  Bancshares  and
furnished to the Securities and Exchange Commission or its staff upon request.


                                       34
[{"type": "10-Q", "sequence": "1", "filename": "tcb10q3q08.txt", "secsgml_size_bytes": 158592}]
{"company-data": {"conformed-name": "TRICO BANCSHARES /", "cik": "0000356171", "assigned-sic": "6022", "irs-number": "942792841", "state-of-incorporation": "CA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-10661", "film-number": "081172883"}, "business-address": {"street1": "TRICO BANCSHARES", "street2": "63 CONSTITUTION DRIVE", "city": "CHICO", "state": "CA", "zip": "95973", "phone": "5308980300"}, "mail-address": {"street1": "TRICO BANCSHARES", "street2": "63 CONSTITUTION DRIVE", "city": "CHICO", "state": "CA", "zip": "95973"}}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q
                  Quarterly Report Pursuant Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For Quarterly Period Ended September 30,2008      Commission file number 0-10661
---------------------------------------------     ------------------------------

                                TRICO BANCSHARES
             (Exact name of registrant as specified in its charter)

           California                                          94-2792841
------------------------------                            -------------------
 (State or other jurisdiction                              (I.R.S. Employer
 incorporation or organization)                           Identification No.)

                 63 Constitution Drive, Chico, California 95973
               (Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code:  (530) 898-0300

--------------------------------------------------------------------------------
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

     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 check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Act (check one).

            Large accelerated filer      Accelerated filer  X
                                   ----                   ----
            Non-accelerated filer        Small reporting company
                                   ----                          ----
     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).

                             Yes           No  X
                                -----        -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:

Title of Class:  Common stock, no par value

Outstanding shares as of October 31, 2008:  15,744,881,
TABLE OF CONTENTS

                                                                           Page

Forward Looking Statements                                                    1

PART I - FINANCIAL INFORMATION                                                2

   Item 1 - Financial Statements                                              2

            Notes to Unaudited Condensed Consolidated Financial Statements    6

            Financial Summary                                                17

   Item 2 - Management's Discussion and Analysis of Financial                18
            Condition and Results of Operations

   Item 3 - Quantitative and Qualitative Disclosures about Market Risk       28

   Item 4 - Controls and Procedures                                          29

PART II - OTHER INFORMATION                                                  30

   Item 1 - Legal Proceedings                                                30

   Item 1A - Risk Factors                                                    30

   Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds      31

   Item 6 - Exhibits                                                         31

   Signatures                                                                31

   Exhibits                                                                  32
FORWARD-LOOKING STATEMENTS

This  report  on Form  10-Q  contains  forward-looking  statements  about  TriCo
Bancshares (the "Company") for which it claims the protection of the safe harbor
provisions  contained in the Private  Securities  Litigation Reform Act of 1995.
These forward-looking statements are based on Management's current knowledge and
belief and include  information  concerning  the  Company's  possible or assumed
future  financial  condition and results of operations.  When you see any of the
words "believes", "expects", "anticipates", "estimates", or similar expressions,
it may mean the  Company  is  making  forward-looking  statements.  A number  of
factors,  some of which are beyond the Company's  ability to predict or control,
could cause future results to differ  materially  from those  contemplated.  The
reader is  directed  to the  Company's  annual  report on Form 10-K for the year
ended  December  31,  2007,  and Part II,  Item 1A of this  report  for  further
discussion of factors which could affect the Company's business and cause actual
results  to  differ  materially  from  those  suggested  by any  forward-looking
statement made in this report.  Such Form 10-K and this report should be read to
put any  forward-looking  statements  in  context  and to  gain a more  complete
understanding of the risks and uncertainties involved in the Company's business.
Any forward-looking statement may turn out to be wrong and cannot be guaranteed.
The Company does not intend to update any  forward-looking  statement  after the
date of this report.

                                       1
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
                                TRICO BANCSHARES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data; unaudited)

                                                          At September 30,        At December 31,
                                                        2008           2007            2007
                                                   --------------------------    ---------------
Assets:
 Cash and due from banks                              $67,300        $70,791          $88,798
 Federal funds sold                                         -            488                -
                                                   --------------------------     --------------
     Cash and cash equivalents                         67,300         71,279           88,798
 Securities available-for-sale                        241,900        239,242          232,427
 Federal Home Loan Bank stock, at cost                  9,147          8,652            8,766
 Loans, net of allowance for loan losses
     of $24,588, $17,139 and $17,331                1,538,648      1,517,937        1,534,635
 Foreclosed assets, net of allowance for
     losses of $214, $180 and $180                      1,178            187              187
 Premises and equipment, net                           19,094         20,804           20,492
 Cash value of life insurance                          46,061         44,751           44,981
 Accrued interest receivable                            7,874          8,865            8,554
 Goodwill                                              15,519         15,519           15,519
 Other intangible assets, net                             786          1,298            1,176
 Other assets                                          28,960         24,989           25,086
                                                   --------------------------     ------------
      Total Assets                                 $1,976,467     $1,953,523       $1,980,621
                                                   ==========================     ============
Liabilities:
 Deposits:
     Noninterest-bearing demand                      $334,015       $345,467         $378,680
     Interest-bearing                               1,229,826      1,186,675        1,166,543
                                                   --------------------------     ------------
     Total deposits                                 1,563,841      1,532,142        1,545,223
 Federal funds purchased                               67,000         66,000           56,000
 Accrued interest payable                               5,217          6,899            7,871
 Reserve for unfunded commitments                       3,365          2,040            2,090
 Other liabilities                                     24,831         22,483           23,195
 Other borrowings                                      79,873         99,996          116,126
 Junior subordinated debt                              41,238         41,238           41,238
                                                   --------------------------     ------------
      Total Liabilities                             1,785,365      1,770,798        1,791,743
                                                   --------------------------     ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value: 50,000,000 shares
     authorized; issued and outstanding:
     15,744,881 at September 30, 2008                  78,008
     15,891,300 at September 30, 2007                                 78,331
     15,911,550 at December 31, 2007                                                   78,775
Retained earnings                                     115,549        108,022          111,655
Accumulated other comprehensive loss, net              (2,455)        (3,628)          (1,552)
                                                   --------------------------     ------------
     Total Shareholders' Equity                       191,102        182,725          188,878
                                                   --------------------------     ------------
     Total Liabilities and Shareholders' Equity    $1,976,467     $1,953,523       $1,980,621
                                                   ==========================     =============
See accompanying notes to unaudited condensed consolidated financial statements.

                                       2
TRICO BANCSHARES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (In thousands, except share data; unaudited)

                                                             Three months ended       Nine months ended
                                                               September 30,             September 30,
                                                             2008         2007        2008           2007
                                                      ---------------------------------------------------------
Interest and dividend income:
Loans, including fees                                    $26,790       $30,099        $81,531        $88,404
Debt securities:
Taxable                                                    2,756         1,874          8,607          5,216
Tax exempt                                                   287           354            910          1,123
Dividends                                                    138           109            382            332
Federal funds sold                                             -             6              3             14
                                                      ---------------------------------------------------------
Total interest income                                     29,971        32,442         91,433         95,089
                                                      ---------------------------------------------------------
Interest expense:
Deposits                                                   5,776        8,078          18,603         23,016
Federal funds purchased                                      430          922           1,953          2,458
Other borrowings                                             473          768           2,060          1,764
Junior subordinated debt                                     573          834           1,872          2,475
                                                      --------------------------------------------------------
Total interest expense                                     7,252       10,602          24,488         29,713
                                                      ---------------------------------------------------------
Net interest income                                       22,719       21,840          66,945         65,376
                                                      ---------------------------------------------------------
Provision for loan losses                                  2,600          700          15,500          1,682
                                                      ---------------------------------------------------------
Net interest income after provision for loan losses       20,119       21,140          51,445         63,694
                                                      ---------------------------------------------------------
Noninterest income:
Service charges and fees                                   5,224        5,218          16,178         15,654
Gain on sale of loans                                        341          211             915            756
Commissions on sale of non-deposit investment products       594          583           1,539          1,633
Increase in cash value of life insurance                     360          405           1,080          1,215
Other                                                        273          430           1,210          1,218
                                                      ---------------------------------------------------------
Total noninterest income                                   6,792        6,847          20,922         20,476
                                                      ---------------------------------------------------------
Noninterest expense:
Salaries and related benefits                              9,431        8,975          28,556         28,336
Other                                                      7,158        7,777          23,450         22,819
                                                      ---------------------------------------------------------
Total noninterest expense                                 16,589       16,752          52,006         51,155
                                                      ---------------------------------------------------------
Income before income taxes                                10,322       11,235          20,361         33,015
Provision for income taxes                                 4,087        4,442           7,804         13,023
                                                      ---------------------------------------------------------
Net income                                                $6,235       $6,793         $12,557        $19,992
                                                      =========================================================

Average shares outstanding                            15,744,881   15,889,061      15,777,282     15,894,768
Diluted average shares outstanding                    15,951,668   16,310,631      16,021,886     16,396,615
Per share data:
Basic earnings                                             $0.40        $0.43           $0.80          $1.26
Diluted earnings                                           $0.39        $0.42           $0.78          $1.22
Dividends paid                                             $0.13        $0.13           $0.39          $0.39
See accompanying notes to unaudited condensed consolidated financial statements.

                                       3
TRICO BANCSHARES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
           (In thousands, except share and per share data; unaudited)

                                                                               Accumulated
                                           Shares of                               Other
                                           Common       Common     Retained    Comprehensive
                                           Stock        Stock      Earnings         Loss       Total
                                       ---------------------------------------------------------------
Balance at December 31, 2006              15,857,207     $73,739   $100,218      ($4,521)     $169,436
                                                                                              --------
Comprehensive income:
Net income                                                           19,992                     19,992
Change in net unrealized gain on
  securities available for sale, net                                                 893           893
                                                                                               -------
Total comprehensive income                                                                      20,885
Stock option vesting                                         579                                   579
Stock options exercised                      362,100       3,863                                 3,863
Tax benefit of stock options exercised                     1,707                                 1,707
Repurchase of common stock                  (328,007)     (1,557)    (5,987)                    (7,544)
Dividends paid ($0.39 per share)                                     (6,201)                    (6,201)
                                        ---------------------------------------------------------------
Balance at September 30, 2007             15,891,300     $78,331    $108,022     ($3,628)     $182,725
                                        ===============================================================

Balance at December 31, 2007              15,911,550     $78,775    $111,655     ($1,552)     $188,878
Comprehensive income:
Net income                                                            12,557                    12,557
Change in net unrealized gain on
  securities available for sale, net                                                (903)         (903)
                                                                                              ---------
Total comprehensive income                                                                      11,654
Cumulative effect of change in
  accounting principle, net of tax                                      (522)                     (522)
Stock option vesting                                         502                                   502
Reversal of tax benefit from
  exercise of stock options                                 (444)                                 (444)
Repurchase of common stock                  (166,669)       (825)     (1,996)                   (2,821)
Dividends paid ($0.39 per share)                                      (6,145)                   (6,145)
                                        ---------------------------------------------------------------
Balance at September 30, 2008             15,744,881     $78,008    $115,549     ($2,455)     $191,102
                                        ===============================================================
See accompanying notes to unaudited condensed consolidated financial statements.

                                       4
TRICO BANCSHARES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands; unaudited)

                                                       For the nine months ended
                                                              September 30,
                                                                2008      2007
                                                       -------------------------
Operating activities:
Net income                                                    $12,557   $19,992
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Depreciation of property and equipment, and amortization    2,586     2,829
    Amortization of intangible assets                             389       367
    Provision for loan losses                                  15,500     1,682
    Amortization of investment securities premium, net            250       528
    Originations of loans for resale                          (61,109)  (48,628)
    Proceeds from sale of loans originated for resale          61,403    48,878
    Gain on sale of loans                                        (915)     (756)
    Change in value of mortgage servicing rights                  743       226
    Provision for losses on other real estate owned                34         -
    Loss on disposal of fixed assets                                2         5
    Increase in cash value of life insurance                   (1,080)   (1,215)
    Stock option vesting expense                                  502       579
    Stock option tax benefits                                     444    (1,707)
    Change in:
      Reserve for unfunded commitments                          1,275       191
      Interest receivable                                         680      (138)
      Interest payable                                         (2,654)     (649)
      Other assets and liabilities, net                        (2,677)    1,334
                                                        ------------------------
    Net cash provided by operating activities                  27,930    23,518
                                                        ------------------------
Investing activities:
Proceeds from maturities of securities available-for-sale      38,938    38,954
Proceeds from sales of securities available-for-sale                -         -
Purchases of securities available-for-sale                    (50,219)  (78,822)
Purchases of Federal Home Loan Bank stock                        (381)     (332)
Loan originations and principal collections, net              (20,538)  (26,841)
Proceeds from sale of premises and equipment                        2        11
Purchases of premises and equipment                            (1,185)   (2,610)
                                                        ------------------------
  Net cash used by investing activities                       (33,383)  (69,640)
                                                        ------------------------
Net (decrease) increase in deposits                            18,618   (67,007)
Net increase in Federal funds purchased                        11,000    28,000
Payments of principal on long-term other borrowings               (58)      (51)
Proceeds from issuance of long-term other borrowings                -    50,000
Net change in short-term other borrowings                     (36,195)   10,136
(Reversal of) stock option tax benefit                           (444)    1,707
Repurchase of common stock                                     (2,821)   (2,685)
Dividends paid                                                 (6,145)   (6,201)
Exercise of stock options                                           -       488
                                                       -------------------------
  Net cash (used by) provided by financing activities         (16,045)   14,387
                                                       -------------------------
Net change in cash and cash equivalents                       (21,498)  (31,735)
                                                       -------------------------
Cash and cash equivalents and beginning of period            88,798    103,014
                                                       -------------------------
Cash and cash equivalents at end of period                  $67,300    $71,279
                                                       =========================
Supplemental disclosure of noncash activities:
Loans transferred to other real estate owned                   $1,025       187
Unrealized gain on securities available for sale              ($1,558)   $1,541
Income tax benefit from stock option exercises                  ($444)   $1,707
Value of common stock tendered, in lieu of cash,
  to pay for exercise of stock options                              -    $4,859
Supplemental disclosure of cash flow activity:
Cash paid for interest expense                                $27,142   $30,362
Cash paid for income taxes                                    $10,350   $12,300

See accompanying notes to unaudited condensed consolidated financial statements

                                       5
Note 1: General Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and  pursuant  to  the  rules  and  regulations  of  the
Securities and Exchange  Commission.  The results of operations  reflect interim
adjustments,  all of which are of a normal  recurring  nature and which,  in the
opinion of management,  are necessary for a fair presentation of the results for
the  interim  periods  presented.   The  interim  results  are  not  necessarily
indicative of the results expected for the full year. These unaudited  condensed
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements  and  accompanying  notes  as well as  other
information  included in the  Company's  Annual Report on Form 10-K for the year
ended December 31, 2007.

Principles of Consolidation
The consolidated  financial  statements include the accounts of the Company, and
its  wholly-owned  subsidiary,  Tri Counties Bank (the "Bank").  All significant
intercompany accounts and transactions have been eliminated in consolidation.

Nature of Operations
The Company  operates 32 branch  offices and 25 in-store  branch  offices in the
California  counties of Butte,  Contra Costa, Del Norte,  Fresno,  Glenn,  Kern,
Lake, Lassen,  Madera,  Mendocino,  Merced,  Napa, Nevada,  Placer,  Sacramento,
Shasta,  Siskiyou,  Stanislaus,  Sutter,  Tehama,  Tulare,  Yolo and  Yuba.  The
Company's  operating  policy since its inception has emphasized  retail banking.
Most of the Company's  customers are retail  customers and small to medium sized
businesses.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  Management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  On an on-going basis,  the Company  evaluates its
estimates,  including  those  related to the adequacy of the  allowance for loan
losses,  investments,  intangible assets,  income taxes and  contingencies.  The
Company  bases its  estimates  on  historical  experience  and on various  other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions. The allowance for loan losses, goodwill and other intangible assets,
income  taxes,  and  the  valuation  of  mortgage   servicing  rights,  are  the
significant   accounting   estimates  that   materially   affect  the  Company's
consolidated financial statements.

Reclassifications
Certain amounts previously  reported in the 2007 financial  statements have been
reclassified to conform to the 2008 presentation.  These  reclassifications  did
not affect previously reported net income or total shareholders' equity.

Significant Group Concentration of Credit Risk
The Company grants agribusiness,  commercial, consumer, and residential loans to
customers  located  throughout the northern San Joaquin  Valley,  the Sacramento
Valley  and  northern  mountain  regions  of  California.   The  Company  has  a
diversified  loan  portfolio  within  the  business  segments  located  in  this
geographical area.

Cash and Cash Equivalents
For  purposes  of the  consolidated  statements  of cash  flows,  cash  and cash
equivalents include cash on hand, amounts due from banks and federal funds sold.

                                       6
Investment Securities
The Company  classifies its debt and marketable  equity  securities  into one of
three  categories:  trading,  available-for-sale  or  held-to-maturity.  Trading
securities  are bought and held  principally  for the  purpose of selling in the
near term.  Held-to-maturity  securities are those  securities which the Company
has the  ability and intent to hold until  maturity.  All other  securities  not
included in trading or  held-to-maturity  are classified as  available-for-sale.
During the nine months  ended  September  30, 2008,  and  throughout  2007,  the
Company did not have any  securities  classified as either  held-to-maturity  or
trading.

Available-for-sale  securities are recorded at fair value.  Unrealized gains and
losses,  net of the related tax effect,  on  available-for-sale  securities  are
reported  as a separate  component  of other  accumulated  comprehensive  income
(loss) in shareholders' equity until realized.

Premiums and  discounts  are  amortized or accreted over the life of the related
investment  security  as an  adjustment  to yield using the  effective  interest
method.  Dividend and interest income are recognized when earned. Realized gains
and losses for  securities  are included in earnings  and are derived  using the
specific  identification  method for  determining  the cost of securities  sold.
Unrealized  losses  due to  fluctuations  in fair  value of  securities  held to
maturity  or  available  for sale are  recognized  through  earnings  when it is
determined that an other than temporary decline in value has occurred.

Federal Home Loan Bank Stock
The Bank is a member of the Federal  Home Loan Bank of San  Francisco  ("FHLB"),
and as a condition of membership,  it is required to purchase stock.  The amount
of FHLB  stock  required  to be  purchased  is based on the  borrowing  capacity
desired by the Bank. While technically  these are considered equity  securities,
there is no market for the FHLB stock.  Therefore,  the shares are considered as
restricted investment securities. Such investment is carried at cost.

Loans Held for Sale
Loans  originated  and intended for sale in the secondary  market are carried at
the  lower  of  aggregate  cost  or  fair  value,  as  determined  by  aggregate
outstanding  commitments from investors of current investor yield  requirements.
Net unrealized losses are recognized through a valuation allowance by charges to
income.  At September  30, 2008 and 2007,  and December 31, 2007,  the Company's
balance of loans held for sale was immaterial.

Mortgage  loans held for sale are  generally  sold with the  mortgage  servicing
rights  retained by the Company.  The carrying  value of mortgage  loans sold is
reduced by the fair value allocated to the associated mortgage servicing rights.
Gains  or  losses  on  sales  of  mortgage  loans  are  recognized  based on the
difference  between  the  selling  price and the  carrying  value of the related
mortgage loans sold.

Loans
Loans are reported at the principal amount  outstanding,  net of unearned income
and the allowance for loan losses.  Loan  origination  and  commitment  fees and
certain  direct  loan  origination  costs are  deferred,  and the net  amount is
amortized as an adjustment of the related  loan's yield over the estimated  life
of the loan.  Loans on which the accrual of interest has been  discontinued  are
designated  as  nonaccrual  loans.  Accrual of  interest  on loans is  generally
discontinued  either  when  reasonable  doubt  exists  as to  the  full,  timely
collection  of interest or principal or when a loan becomes  contractually  past
due by 90 days or more with respect to interest or principal.  When loans are 90
days past due, but in Management's  judgment are well secured and in the process
of  collection,  they may be  classified  as  accrual.  When a loan is placed on
nonaccrual  status,  all  interest  previously  accrued  but  not  collected  is
reversed.  Income on such loans is then  recognized only to the extent that cash
is received and where the future  collection of principal is probable.  Interest
accruals are resumed on such loans only when they are brought fully current with
respect to interest and principal and when, in the judgment of  Management,  the
loans are estimated to be fully  collectible  as to both principal and interest.
All impaired loans are classified as nonaccrual loans.

                                       7
Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans and deposit related overdrafts are charged against the
allowance for loan losses when Management  believes that the  collectibility  of
the  principal  is unlikely  or, with  respect to  consumer  installment  loans,
according to an  established  delinquency  schedule.  The allowance is an amount
that Management  believes will be adequate to absorb probable losses inherent in
existing  loans  and  leases,   based  on  evaluations  of  the  collectibility,
impairment and prior loss experience of loans and leases.  The evaluations  take
into  consideration  such  factors  as  changes  in the  nature  and size of the
portfolio,  overall portfolio  quality,  loan  concentrations,  specific problem
loans, and current economic conditions that may affect the borrower's ability to
pay. The Company defines a loan as impaired when it is probable the Company will
be unable to collect all amounts due according to the  contractual  terms of the
loan  agreement.  Impaired  loans are  measured  based on the  present  value of
expected future cash flows discounted at the loan's original  effective interest
rate. As a practical  expedient,  impairment may be measured based on the loan's
observable  market  price or the fair  value  of the  collateral  if the loan is
collateral  dependent.  When the measure of the  impaired  loan is less than the
recorded  investment in the loan, the impairment is recorded through a valuation
allowance.

Credit  risk is inherent in the  business of lending.  As a result,  the Company
maintains  an  allowance  for loan  losses  to  absorb  losses  inherent  in the
Company's  loan  portfolio.  This is  maintained  through  periodic  charges  to
earnings.  These  charges are shown in the  Consolidated  Income  Statements  as
provision for loan losses. All specifically identifiable and quantifiable losses
are  immediately  charged off against the allowance.  However,  for a variety of
reasons,  not all losses are immediately known to the Company and, of those that
are known,  the full extent of the loss may not be quantifiable at that point in
time.  The balance of the Company's  allowance for loan losses is meant to be an
estimate of these unknown but probable  losses  inherent in the  portfolio.  For
purposes of this discussion, "loans" shall include all loans and lease contracts
that are part of the Company's portfolio.

The Company  formally  assesses  the  adequacy of the  allowance  on a quarterly
basis.  Determination  of the  adequacy is based on ongoing  assessments  of the
probable  risk in the  outstanding  loan  portfolio,  and to a lesser extent the
Company's loan commitments. These assessments include the periodic re-grading of
credits based on changes in their individual  credit  characteristics  including
delinquency,  seasoning,  recent financial performance of the borrower, economic
factors, changes in the interest rate environment,  growth of the portfolio as a
whole or by segment, and other factors as warranted.  Loans are initially graded
when  originated.  They are  re-graded as they are renewed,  when there is a new
loan to the same borrower,  when identified facts demonstrate heightened risk of
nonpayment,  or if they become  delinquent.  Re-grading of larger  problem loans
occur at least quarterly.  Confirmation of the quality of the grading process is
obtained by  independent  credit reviews  conducted by consultants  specifically
hired for this purpose and by various bank regulatory agencies.

The Company's method for assessing the appropriateness of the allowance for loan
losses and the reserve for unfunded commitments includes specific allowances for
identified  problem  loans and leases,  formula  allowance  factors for pools of
credits,  and allowances  for changing  environmental  factors  (e.g.,  interest
rates, growth, economic conditions,  etc.). Allowance factors for loan pools are
based on the  previous 5 years  historical  loss  experience  by  product  type.
Allowances  for  specific  loans are based on  analysis of  individual  credits.
Allowances for changing  environmental factors are Management's best estimate of
the  probable  impact these  changes have had on the loan  portfolio as a whole.
This  process  is  explained  in detail in the  notes to the  Company's  audited
consolidated financial statements in its Annual Report on Form 10-K for the year
ended December 31, 2007.

Based on the current conditions of the loan portfolio,  Management believes that
the  allowance for loan losses and the reserve for unfunded  commitments,  which
collectively  stand at $27,953,000 at September 30, 2008, are adequate to absorb
probable losses  inherent in the Company's loan  portfolio.  No assurance can be
given, however, that adverse economic conditions or other circumstances will not
result in increased losses in the portfolio.

                                       8
The  following  tables  summarize the activity in the allowance for loan losses,
reserve for unfunded  commitments,  and allowance for losses (which is comprised
of the allowance for loan losses and the reserve for unfunded  commitments)  for
the periods indicated (dollars in thousands):

                                       Three months ended,    Nine months ended
                                           September 30,         September 30,
                                      ------------------------------------------
  Allowance for loan losses:             2008        2007      2008       2007
                                      ------------------------------------------
  Balance at beginning of period      $24,281    $16,999    $17,331   $16,914
  Provision for loan losses             2,600        700     15,500     1,682
  Loans charged off:
    Real estate mortgage:
      Residential                        (140)         -        (361)       -
      Commercial                            -          -         (19)       -
    Consumer:
      Home equity lines                (1,004)         -      (1,952)     (242)
      Home equity loans                    (8)         -        (258)        -
      Auto indirect                    (1,014)      (464)     (2,186)   (1,047)
      Other consumer                     (239)      (256)       (818)     (727)
    Commercial                           (142)      (123)       (531)     (317)
    Construction:
      Residential                         (31)         -      (3,014)        -
      Commercial                            -          -           -         -
                                       ----------------------------------------
  Total loans charged off              (2,578)      (843)     (9,139)   (2,333)
  Recoveries of previously
    charged-off loans:
    Real estate mortgage:
      Residential                           -          -           -         -
      Commercial                           15         13          43        43
    Consumer:
      Home equity lines                    12          -          12         1
      Home equity loans                     -          -           -         5
      Auto indirect                       104         94         295       246
      Other consumer                      146        143         520       445
    Commercial                              8         33          26       136
    Construction:
      Residential                           -          -           -         -
      Commercial                            -          -           -         -
                                      -----------------------------------------
  Total recoveries of
    previously charged off loans          285        283         896       876
                                      -----------------------------------------
      Net charge-offs                  (2,293)      (560)     (8,243)   (1,457)
                                      -----------------------------------------
  Balance at end of period            $24,588    $17,139     $24,588   $17,139
                                      =========================================
  Reserve for unfunded commitments:
  Balance at beginning of period       $3,465     $2,040      $2,090    $1,849
  Provision for losses -
    unfunded commitments                 (100)         -       1,275       191
                                      -----------------------------------------
  Balance at end of period             $3,365     $2,040      $3,365    $2,040
                                      =========================================
  Balance at end of period:
  Allowance for loan losses                                  $24,588   $17,139
  Reserve for unfunded commitments                             3,365     2,040
                                                             -----------------
  Allowance for losses                                       $27,953   $19,179
                                                             =================
  As a percentage of total loans:
     Allowance for loan losses                                 1.57%     1.12%
     Reserve for unfunded commitments                          0.22%     0.13%
                                                             -----------------
     Allowance for losses                                      1.79%     1.25%
                                                             =================

                                       9
Loans  classified  as  nonaccrual,  net of  guarantees  of the U.S.  government,
including  its  agencies  and its  government-sponsored  agencies,  amounted  to
approximately  $16,667,000 and $7,511,000 at September 30, 2008 and December 31,
2007,  respectively.  These nonaccrual loans were classified as impaired and are
included in the recorded balance of impaired loans. As of September 30, 2008 and
December 31, 2007 the Company's  recorded  investment in impaired loans,  net of
guarantees of the U.S.  government,  and the related valuation allowance were as
follows (in thousands):

                                              At September 30,   At December 31,
                                                      2008             2007
                                             -----------------------------------
Impaired loans with no allocated allowance,          $12,526         $4,299
    net of guarantees
Impaired loans with allocated allowance,               4,141          3,212
    net of guarantees                        -----------------------------------
Total impaired loans                                 $16,667         $7,511
                                             ===================================
Allowance for loan losses allocated                   $1,738        $1,395
   to impaired loans                         ===================================

Reserve for Unfunded Commitments
The reserve for unfunded  commitments  is  established  through a provision  for
losses on unfunded  commitments charged to noninterest  expense. The reserve for
unfunded  commitments is an amount that Management  believes will be adequate to
absorb  probable  losses  inherent in  existing  commitments,  including  unused
portions of  revolving  lines of credits  and other  loans,  standby  letters of
credits,  and unused  deposit  account  overdraft  privilege.  The  reserve  for
unfunded  commitments is based on evaluations of the  collectibility,  and prior
loss experience of unfunded commitments. The evaluations take into consideration
such  factors as changes in the nature and size of the loan  portfolio,  overall
loan portfolio quality, loan concentrations,  specific problem loans and related
unfunded  commitments,  and  current  economic  conditions  that may  affect the
borrower's or depositor's ability to pay.

Mortgage Servicing Rights
Mortgage  servicing  rights (MSRs)  represent  the  Company's  right to a future
stream of cash flows based upon the  contractual  servicing fee associated  with
servicing mortgage loans. Our MSRs arise from residential mortgage loans that we
originate  and sell,  but retain the right to  service  the loans.  For sales of
residential  mortgage  loans, a portion of the cost of  originating  the loan is
allocated  to the  servicing  right  based  on fair  values  of the loan and the
servicing  right.  The net gain from the  retention  of the  servicing  right is
included in gain on sale of loans in  noninterest  income when the loan is sold.
Fair  value  is  based  on  market  prices  for  comparable  mortgage  servicing
contracts, when available, or alternatively,  is based on a valuation model that
calculates  the present  value of estimated  future net  servicing  income.  The
valuation model incorporates  assumptions that market  participants would use in
estimating  future  net  servicing  income,  such as the  cost to  service,  the
discount rate, the custodial earnings rate, an inflation rate, ancillary income,
prepayment  speeds and  default  rates and  losses.  MSRs are  included in other
assets.  Servicing fees are recorded in noninterest income when earned. MSRs are
carried at fair value, with changes in fair value reported in noninterest income
in the period in which the change occurs.

The determination of fair value of our MSRs requires management judgment because
they are not actively traded.  The determination of fair value for MSRs requires
valuation  processes  which combine the use of  discounted  cash flow models and
extensive  analysis  of current  market  data to arrive at an  estimate  of fair
value. The cash flow and prepayment assumptions used in our discounted cash flow
model are based on empirical data drawn from the  historical  performance of our
MSRs,   which  we  believe  are  consistent  with  assumptions  used  by  market
participants  valuing similar MSRs, and from data obtained on the performance of
similar MSRs. The key assumptions used in the valuation of MSRs include mortgage
prepayment  speeds and the discount  rate.  These  variables  can, and generally
will, change from quarter to quarter as market conditions and projected interest
rates change.  The key risks inherent with MSRs are prepayment speed and changes
in discount rates.

                                       10
The following tables summarize the activity in, and the main assumptions we used
to  determine  the fair  value of  mortgage  servicing  rights  for the  periods
indicated (dollars in thousands):

                                        Nine months ended September 30,
                                        -------------------------------
                                               2008         2007
Mortgage servicing rights:              -------------------------------
Balance at beginning of period               $4,088        $3,912
Additions                                       621           506
Change in fair value                           (743)         (226)
                                        -------------------------------
Balance at end of period                     $3,966        $4,192
                                        ===============================
Servicing fees received                        $767          $737
Balance of loans serviced at:
     Beginning of period                   $406,743      $389,636
     End of period                         $425,783      $402,806
Weighted-average prepayment speed (CPR)        11.2%         11.6%
Discount rate                                  13.0%         10.0%

Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business,  the Company has entered into commitments to
extend credit, including commitments under credit card arrangements,  commercial
letters of credit, and standby letters of credit. Such financial instruments are
recorded when they are funded.

Premises and Equipment
Land is carried at cost. Buildings and equipment, including those acquired under
capital  lease,   are  stated  at  cost  less   accumulated   depreciation   and
amortization.  Depreciation  and  amortization  expenses are computed  using the
straight-line  method over the estimated  useful lives of the related  assets or
lease terms.  Asset lives range from 3-10 years for  furniture and equipment and
15-40 years for land improvements and buildings.

Foreclosed Assets
Assets acquired  through,  or in lieu of, loan foreclosure are held for sale and
are initially recorded at fair value at the date of foreclosure,  establishing a
new cost basis.  Subsequent to  foreclosure,  management  periodically  performs
valuations  and the assets are carried at the lower of  carrying  amount or fair
value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in other noninterest expense.

Goodwill and Other Intangible Assets
Goodwill  represents the excess of costs over fair value of assets of businesses
acquired.  Goodwill and other intangible  assets acquired in a purchase business
combination and determined to have an indefinite  useful life are not amortized,
but instead  tested for  impairment at least  annually.  Intangible  assets with
estimable  useful lives are amortized  over their  respective  estimated  useful
lives to their  estimated  residual  values,  and reviewed for  impairment.  The
Company tested its goodwill  intangible and determined it was not impaired as of
September 30, 2008 and December 31, 2007.

The following table summarizes the Company's goodwill intangible as of September
30, 2008 and December 31, 2007.

                               December 31,                        September 30,
                                  2007      Additions   Reductions     2008
 (Dollar in Thousands)        --------------------------------------------------
 Goodwill                      $15,519         -              -        $15,519
                              ==================================================

The  Company has  identifiable  intangible  assets  consisting  of core  deposit
premiums and minimum  pension  liability.  Core deposit  premiums are  amortized
using an  accelerated  method  over a period  of ten  years.  Intangible  assets
related to minimum pension  liability are adjusted annually based upon actuarial
estimates.

                                       11
The following  table  summarizes  the Company's  core deposit  intangibles as of
September 30, 2008 and December 31, 2007.

                                December 31,                       September 30,
                                  2007        Additions   Reductions      2008
(Dollar in Thousands)          -------------------------------------------------
 Core deposit intangibles       $3,365          -              -        $3,365
 Accumulated amortization       (2,189)         -            (390)      (2,579)
                               -------------------------------------------------
 Core deposit intangibles, net  $1,176          -           ($390)        $786
                               =================================================

Core deposit  intangibles are amortized over their expected  useful lives.  Such
lives are  periodically  reassessed  to  determine  if any  amortization  period
adjustments  are  indicated.   The  following  table  summarizes  the  Company's
estimated core deposit  intangible  amortization for each of the five succeeding
years:
                                       Estimated Core Deposit
                                       Intangible  Amortization
                Years Ended              (Dollar in thousands
                -----------            -------------------------
                   2008                         $523
                   2009                         $328
                   2010                         $260
                   2011                          $65
                Thereafter                         -

Impairment of Long-Lived Assets and Goodwill
Long-lived  assets,  such as premises and equipment,  and purchased  intangibles
subject to amortization,  are reviewed for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying amount of an asset to estimated  undiscounted  future
cash flows expected to be generated by the asset.  If the carrying  amount of an
asset  exceeds  its  estimated  future  cash  flows,  an  impairment  charge  is
recognized  by the amount by which the carrying  amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately  presented
in the balance  sheet and reported at the lower of the  carrying  amount or fair
value  less  costs  to sell,  and are no  longer  depreciated.  The  assets  and
liabilities of a disposed  group  classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance sheet.

On December 31 of each year,  goodwill is tested for  impairment,  and is tested
for impairment  more  frequently if events and  circumstances  indicate that the
asset might be impaired. An impairment loss is recognized to the extent that the
carrying amount exceeds the asset's fair value.  This  determination  is made at
the  reporting  unit  level  and  consists  of two  steps.  First,  the  Company
determines  the fair value of a reporting  unit and  compares it to its carrying
amount.  Second,  if the  carrying  amount of a reporting  unit exceeds its fair
value, an impairment loss is recognized for any excess of the carrying amount of
the reporting unit's goodwill over the implied fair value of that goodwill.  The
implied fair value of goodwill is determined by allocating the fair value of the
reporting unit in a manner similar to a purchase price allocation.  The residual
fair value after this allocation is the implied fair value of the reporting unit
goodwill.

Income Taxes
The  Company's  accounting  for income taxes is based on an asset and  liability
approach.  The Company  recognizes the amount of taxes payable or refundable for
the current  year,  and deferred tax assets and  liabilities  for the future tax
consequences  that have  been  recognized  in its  financial  statements  or tax
returns.  The  measurement  of  tax  assets  and  liabilities  is  based  on the
provisions of enacted tax laws.

                                       12
Stock-Based Compensation
The following table shows the number, weighted-average exercise price, intrinsic
value,  weighted average remaining  contractual life,  average remaining vesting
period,  and remaining  compensation  cost to be  recognized  over the remaining
vesting period of options  exercisable,  options not yet exercisable,  and total
options  outstanding  as of September  30, 2008:
Currently     Currently Not     Total
(dollars in thousands except exercise price)         Exercisable     Exercisable   Outstanding
Number of options                                    1,168,911         265,570      1,434,481
Weighted average exercise price                         $13.44          $20.48         $14.74
Intrinsic value                                         $9,768            $498        $10,266
Weighted average remaining contractual term (yrs.)        2.32            8.77           3.51
The  options  for  265,570  shares  that  are not  currently  exercisable  as of
September 30, 2008 are expected to vest, on a  weighted-average  basis, over the
next 3.14  years,  and the  Company  is  expected  to  recognize  $1,672,000  of
compensation costs related to these options as they vest.

Earnings Per Share
Basic  earnings per share  represents  income  available to common  shareholders
divided by the  weighted-average  number of common shares outstanding during the
period.  Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive  potential  common shares had been issued,  as
well as any  adjustments  to income  that would  result from  assumed  issuance.
Potential  common  shares that may be issued by the Company  relate  solely from
outstanding stock options, and are determined using the treasury stock method.

Earnings per share have been computed based on the following:
Three months ended       Nine months ended
                                                     September 30,            September 30,
                                                 ----------------------------------------------
                                                     2008         2007       2008        2007
(in thousands)                                   -----------------------    -------------------
Net income                                          $6,235       $6,793      $12,557    $19,992

Average number of common shares outstanding         15,745       15,889       15,777     15,895
Effect of dilutive stock options                       206          422          245        502
                                                 -----------------------    --------------------
Average number of common shares outstanding
   used to calculate diluted earnings per share     15,951       16,311       16,022     16,397
                                                 =======================    ====================
There were 595,143 and 302,050 options  excluded from the computation of diluted
earnings per share for the nine month periods ended September 30, 2008 and 2007,
respectively, because the effect of these options was antidilutive.

Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be  included in net income.  Although  certain  changes in assets and
liabilities,   such  as  unrealized  gains  and  losses  on   available-for-sale
securities,  are reported as a separate  component of the equity  section of the
balance  sheet,   such  items,   along  with  net  income,   are  components  of
comprehensive income.

The components of other comprehensive  income (loss) and related tax effects are
as follows:
Three months ended      Nine months ended
                                                    September 30,          September 30,
                                                  ------------------------------------------
                                                    2008         2007     2008        2007
(in thousands)                                    ---------------------   ------------------
Unrealized holding gains (losses) on
   available-for-sale securities                    $906        $1,987    ($1,558)    $1,541
Tax effect                                          (381)         (836)       655       (648)
                                                 ----------------------   -------------------
Unrealized holding gains (losses) on
   available-for-sale securities, net of tax        $525        $1,151      ($903)     $893
                                                 ======================   ===================
13
The   components  of  accumulated   other   comprehensive   loss,   included  in
shareholders' equity, are as follows:

                                                  September 30,  December 31,
                                                      2008           2007
(in thousands)                                    --------------------------
Net unrealized (losses) gains on available-
  for-sale securities                               ($266)         $1,292
Tax effect                                            112            (543)
  Unrealized holding (losses) gains on            -------------------------
  available-for-sale securities, net of tax         ($154)            749
                                                  -------------------------
Minimum pension liability                          (3,970)         (3,970)
Tax effect                                          1,669           1,669
                                                  -------------------------
  Minimum pension liability, net of tax            (2,301)         (2,301)
                                                  -------------------------
Accumulated other comprehensive loss              ($2,455)        ($1,552)
                                                  =========================
Retirement Plans
The Company has  supplemental  retirement plans for current and former directors
and key executives.  These plans are non-qualified defined benefit plans and are
unsecured and unfunded.  The Company has purchased insurance on the lives of the
participants  and  intends to use the cash  values of these  policies to pay the
retirement obligations.

The following table sets forth the net periodic benefit cost recognized for the
plans:
Three Months Ended   Nine Months Ended
                                                                September 30,        September 30,
                                                             ------------------   -----------------
(in thousands)                                                2008       2007       2008     2007
                                                              ----       ----       ----     ----
Net pension cost included the following components:
Service cost-benefits earned during the period                $138       $150       $416     $450
Interest cost on projected benefit obligation                  166        146        498      438
Amortization of net obligation at transition                     1          1          1        1
Amortization of prior service cost                              45         45        135      135
Recognized net actuarial loss                                   37         28        111       84
                                                             ------------------------------------
Net periodic pension cost                                     $387       $370     $1,161   $1,108
                                                             =====================================
During  the  nine  months  ended  September  30,  2008  and  2007,  the  Company
contributed  and paid out as benefits  $453,000 and $405,000,  respectively,  to
participants under the plans. For the year ending December 31, 2008, the Company
expects to contribute and pay out as benefits $593,000 to participants under the
plans.

Fair Value Measurement
The Company utilizes fair value measurements to record fair value adjustments to
certain  assets  and  liabilities  and  to  determine  fair  value  disclosures.
Securities available-for-sale and mortgage servicing rights are recorded at fair
value on a recurring basis. Additionally,  from time to time, the Company may be
required to record at fair value other assets on a nonrecurring  basis,  such as
loans held for sale,  loans held for investment and certain other assets.  These
nonrecurring  fair value adjustments  typically involve  application of lower of
cost or market accounting or impairment write-downs of individual assets.

The Company groups assets and  liabilities at fair value in three levels,  based
on the  markets  in  which  the  assets  and  liabilities  are  traded  and  the
reliability of the assumptions used to determine fair value. These levels are:

Level 1  - Valuation  is based  upon  quoted  prices for  identical  instruments
          traded in active markets
Level 2   - Valuation  is based upon quoted  prices for similar  instruments  in
          active markets,  quoted prices for identical or similar instruments in
          markets that are not active, and model-based  valuation techniques for
          which all significant assumptions are observable in the market.
Level 3   - Valuation is generated from model-based techniques that use at least
          one  significant  assumption  not  observable  in  the  market.  These
          unobservable  assumptions reflect estimates of assumptions that market
          participants  would use in pricing the asset or  liability.  Valuation
          techniques include use of option pricing models,  discounted cash flow
          models and similar techniques.

                                       14
Securities  available-for-sale  are recorded at fair value on a recurring basis.
Fair value  measurement  is based upon quoted  prices,  if available.  If quoted
prices are not  available,  fair values are measured using  independent  pricing
models or other  model-based  valuation  techniques such as the present value of
future  cash  flows,  adjusted  for the  security's  credit  rating,  prepayment
assumptions  and  other  factors  such  as  credit  loss  assumptions.  Level  1
securities  include  those  traded on an active  exchange,  such as the New York
Stock Exchange,  U.S. Treasury  securities that are traded by dealers or brokers
in active  over-the-counter  markets and money market funds.  Level 2 securities
include  mortgage-backed  securities  issued by government  sponsored  entities,
municipal bonds and corporate debt securities.  Securities classified as Level 3
include asset-backed securities in less liquid markets.

The Company does not record loans at fair value on a recurring  basis.  However,
from time to time,  a loan is  considered  impaired  and an  allowance  for loan
losses is  established.  Loans for which it is probable that payment of interest
and principal will not be made in accordance with the  contractual  terms of the
loan  agreement  are  considered   impaired.   Once  a  loan  is  identified  as
individually  impaired,  management  measures impairment in accordance with SFAS
114, Accounting by Creditors for Impairment of a Loan (SFAS 114). The fair value
of  impaired  loans  is  estimated  using  one  of  several  methods,  including
collateral value,  market value of similar debt,  enterprise value,  liquidation
value and discounted cash flows. Those impaired loans not requiring an allowance
represent  loans  for  which  the  fair  value  of the  expected  repayments  or
collateral exceed the recorded investments in such loans. At September 30, 2008,
substantially  all of the total impaired loans were evaluated  based on the fair
value of the collateral.  In accordance  with SFAS 157,  impaired loans where an
allowance  is  established  based  on  the  fair  value  of  collateral  require
classification  in  the  fair  value  hierarchy.  When  the  fair  value  of the
collateral is based on an observable  market price or a current  appraised value
which uses substantially  observable data, the Company records the impaired loan
as nonrecurring  Level 2. When an appraised value is not available or management
determines  the fair  value of the  collateral  is  further  impaired  below the
appraised value, or the appraised value contains a significant  assumption,  and
there is no observable  market price,  the Company  records the impaired loan as
nonrecurring Level 3.

Mortgage  servicing rights are carried at fair value. A valuation  model,  which
utilizes a discounted  cash flow analysis  using a discount rate and  prepayment
speed assumptions is used in the completion of the fair value measurement. While
the prepayment speed assumption is currently quoted for comparable  instruments,
the  discount  rate  assumption  currently  requires  a  significant  degree  of
management  judgment.  As such, the Company classifies mortgage servicing rights
subjected to recurring fair value adjustments as Level 3.

Goodwill and identified  intangible assets are subject to impairment  testing. A
projected  cash flow  valuation  method is used in the  completion of impairment
testing.  This  valuation  method  requires a  significant  degree of management
judgment as there are  unobservable  inputs for these  assets.  In the event the
projected  undiscounted  net  operating  cash  flows are less than the  carrying
value, the asset is recorded at fair value as determined by the valuation model.
As such, the Company  classifies  goodwill and other intangible assets subjected
to nonrecurring fair value adjustments as Level 3.

The table below presents the recorded amount of assets and liabilities  measured
at fair value on a recurring basis:

Fair value at September 30, 2008          Total    Level 1     Level 2   Level 3
Securities available-for-sale           $241,900      -       $241,900        -
Mortgage servicing rights                  3,966      -              -    3,966
                                        ----------------------------------------
Total assets measured at fair value     $245,866      -       $241,900    3,966
                                        ========================================
T
he table below presents the recorded amount of assets and liabilities measured
at fair value on a nonrecurring basis:

Fair value at September 30, 2008          Total    Level 1     Level 2  Level 3
Impaired loans                           $20,244      -          -      $20,244
                                        ----------------------------------------
Total assets measured at fair value      $20,244      -          -      $20,244
                                        ========================================

                                       15
Recent Accounting Pronouncements
In  September  2006,  the FASB issued FASB  Statement  of  Financial  Accounting
Standards No. 157,  Fair Value  Measurements  (SFAS 157).  SFAS 157 defines fair
value,  establishes a framework for measuring  fair value in generally  accepted
accounting  principles,  and expands  disclosures about fair value measurements.
SFAS 157 was  effective  for the  Company  on January 1, 2008 and did not have a
significant impact on the Company's consolidated financial statements.

In  September  2006,  the FASB issued FASB  Statement  of  Financial  Accounting
Standards No. 158,  Employers'  Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88 106, and 132(R)
(SFAS  158).  SFAS 158  requires  an employer to  recognize  the  overfunded  or
underfunded  status of  defined  benefit  postretirement  plans as an asset or a
liability in its statement of financial position.  The funded status is measured
as the difference  between plan assets at fair value and the benefit  obligation
(the projected benefit  obligation for pension plans or the accumulated  benefit
obligation for other postretirement benefit plans). An employer is also required
to measure the funded status of a plan as of the date of its year-end  statement
of financial  position  with  changes in the funded  status  recognized  through
comprehensive  income. SFAS 158 also requires certain disclosures  regarding the
effects on net  periodic  benefit  cost for the next fiscal year that arise from
delayed recognition of gains or losses,  prior service costs or credits, and the
transition asset or obligation. The Company was required to recognize the funded
status of its defined benefit  post-retirement benefit plans in its consolidated
financial  statements  for the year ended  December  31,  2006.  The Company had
previously   recognized   the  funded  status  of  its  Executive  and  Director
Supplemental  Retirement plans in prior consolidated  financial statements.  The
Company  has  no  other  defined  benefit  post-retirement  benefit  plans.  The
requirement to measure plan assets and benefit obligations as of the date of the
year-end  statement  of  financial  position  is  effective  for  the  Company's
consolidated  financial  statements  beginning  with the fiscal year ended after
December 15, 2008.  The Company  currently  uses December 31 as the  measurement
date for its defined benefit post-retirement benefit plans.

In February  2007,  the FASB  issued  FASB  Statement  of  Financial  Accounting
Standards  No. 159, The Fair Value  Option for  Financial  Assets and  Financial
Liabilities - Including an amendment to FASB Statement No. 115 (SFAS 159).  SFAS
159 permits entities to choose to measure many financial instruments and certain
other items at fair value.  The objective is to improve  financial  reporting by
providing  entities  with the  opportunity  to mitigate  volatility  in reported
earnings caused by measuring related assets and liabilities  differently without
having to apply complex hedge accounting provisions.  SFAS 159 was effective for
the  Company  on January  1, 2008 and did not have a  significant  impact on the
Company's consolidated financial statements.

FASB  Emerging  Issues  Task Force  ("EITF")  Issue No.  06-4,  "Accounting  for
Deferred  Compensation and  Postretirement  Benefit Aspects of Endorsement Split
Dollar Life  Insurance  Arrangements."  EITF 06-4 requires the  recognition of a
liability  and  related  compensation  expense  for bank  owned  life  insurance
policies with joint beneficiary agreements that provide a benefit to an employee
that  extends  to  post-retirement  periods.  Under EITF  06-4,  life  insurance
policies purchased for the purpose of providing such benefits do not effectively
settle an entity's  obligation  to the  employee.  Accordingly,  the entity must
recognize a liability and related  compensation  expense  during the  employee's
active  service  period  based on the future  cost of  insurance  to be incurred
during the  employee's  retirement.  If the  entity  has  agreed to provide  the
employee with a death  benefit,  then the liability for the future death benefit
should  be  recognized  by  following  the  guidance  in SFAS  106,  "Employer's
Accounting for Postretirement Benefits Other Than Pensions." The Company adopted
EITF 06-4  effective as of January 1, 2008 as a change in  accounting  principle
through a  cumulative-effect  adjustment to retained earnings of $522,000 net of
tax.

In November 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan
Commitments  Recorded at Fair Value through Earnings (SAB 109). SAB 109 provides
guidance on the accounting for written loan  commitments  recorded at fair value
under generally accepted  accounting  principles (GAAP).  Specifically,  the SAB
revises  the  Staff's  views on  incorporating  expected  net future  cash flows
related to loan servicing  activities in the fair value measurement of a written
loan commitment.  SAB 109, which  supersedes SAB 105,  Application of Accounting
Principles  to Loan  Commitments,  requires  the  expected net future cash flows
related to the associated  servicing of the loan be included in the  measurement
of all written loan  commitments  that are  accounted  for at fair value through
earnings. SAB 109 was effective on January 1, 2008 for the Company.  Adoption of
SAB 109 did not a material impact on the Company's financial statements.

                                       16
TRICO BANCSHARES
                                Financial Summary
               (In thousands, except per share amounts; unaudited)

                                                Three months ended        Nine months ended
                                                   September 30,              September 30,
                                          ---------------------------------------------------
                                               2008           2007        2008         2007
                                          ---------------------------------------------------
Net Interest Income (FTE)                    $22,889       $22,031     $67,464      $66,005
Provision for loan losses                      2,600           700      15,500        1,682
Noninterest income                             6,792         6,847      20,922       20,476
Noninterest expense                           16,589        16,752      52,006       51,155
Provision for income taxes (FTE)               4,257         4,633       8,323       13,652
                                          --------------------------------------------------
     Net income                               $6,235        $6,793     $12,557      $19,992
                                          ==================================================
Earnings per share:
     Basic                                     $0.40         $0.43       $0.80        $1.26
     Diluted                                   $0.39         $0.42       $0.78        $1.22
Per share:
     Dividends paid                            $0.13         $0.13       $0.39        $0.39
     Book value at period end                 $12.14        $11.50
     Tangible book value at period end        $11.10        $10.44

Average common shares outstanding             15,745        15,889      15,777       15,895
Average diluted shares outstanding            15,952        16,311      16,022       16,397
Shares outstanding at period end              15,745        15,891
At period end:
     Loans, net                           $1,538,648    $1,517,937
     Total assets                          1,976,467     1,953,523
     Total deposits                        1,563,841     1,532,142
     Other borrowings                         79,873        99,996
     Junior subordinated debt                 41,238        41,238
     Shareholders' equity                   $191,102      $182,725
Financial Ratios:
During the period (annualized):
     Return on assets                          1.26%         1.44%       0.84%        1.42%
     Return on equity                         13.04%        14.92%       8.71%       14.94%
     Net interest margin(1)                    5.07%         5.12%       4.96%        5.16%
     Net loan charge-offs to average loans     0.59%         0.15%       0.71%        0.13%
     Efficiency ratio(1)                      55.89%        58.01%      58.84%       59.15%
At Period End:
     Equity to assets                          9.67%         9.35%
     Total capital to risk assets             12.38%        11.66%
     Allowance for losses to loans(2)          1.79%         1.25%

(1)  Fully taxable equivalent (FTE)
(2)  Allowance  for losses  includes  allowance  for loan losses and reserve for
     unfunded commitments.
17
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

As TriCo  Bancshares (the  "Company") has not commenced any business  operations
independent of Tri Counties Bank (the "Bank"), the following discussion pertains
primarily  to the  Bank.  Average  balances,  including  such  balances  used in
calculating  certain financial ratios, are generally  comprised of average daily
balances  for the  Company.  Within  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations,  interest income and net interest
income are  generally  presented  on a fully  tax-equivalent  (FTE)  basis.  The
presentation  of  interest  income and net  interest  income on a FTE basis is a
common  practice within the banking  industry.  Interest income and net interest
income  are  shown on a  non-FTE  basis in the  Part I -  Financial  Information
section  of  this  Form  10-Q,  and a  reconciliation  of the  FTE  and  non-FTE
presentations is provided below in the discussion of net interest income.

Critical Accounting Policies and Estimates
The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The preparation of these financial statements requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  on-going  basis,  the  Company  evaluates  its
estimates,  including  those  related to the adequacy of the  allowance for loan
losses, intangible assets, and contingencies. The Company bases its estimates on
historical  experience and on various other  assumptions that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions. (See caption "Allowance for
Loan Losses" for a more detailed discussion).

Results of Operations
The  following   discussion  and  analysis  is  designed  to  provide  a  better
understanding  of the significant  changes and trends related to the Company and
the  Bank's  financial  condition,   operating  results,   asset  and  liability
management,  liquidity and capital  resources and should be read in  conjunction
with the  Condensed  Consolidated  Financial  Statements  of the Company and the
Notes thereto located at Item 1 of this report.

Following is a summary of the components of fully taxable equivalent ("FTE") net
income for the periods indicated (dollars in thousands):

                                   Three months ended         Nine months ended
                                       September 30,             September 30,
                                 -----------------------------------------------
                                   2008          2007         2008         2007
                                 -----------------------------------------------
Net Interest Income (FTE)         22,889       $22,031      $67,464     $66,005
Provision for loan losses          2,600           700       15,500       1,682
Noninterest income                 6,792         6,847       20,922      20,476
Noninterest expense               16,589        16,752       52,006      51,155
Provision for income taxes (FTE)   4,257         4,633        8,323      13,652
                                 -----------------------------------------------
Net income                        $6,235        $6,793      $12,557     $19,992
                                 ===============================================

The Company had  quarterly  earnings of  $6,235,000  for the three  months ended
September 30, 2008.  This represents a decrease of $558,000 (8.2%) when compared
with earnings of $6,793,000  for the quarter ended  September 30, 2007.  Diluted
earnings per share for the quarter ended  September 30, 2008  decreased  7.1% to
$0.39  compared to $0.42 for the quarter ended  September 30, 2007. The decrease
in  earnings  from the prior year  quarter  was  primarily  due to a  $1,900,000
increase in provision for loans losses.

The Company reported earnings of $12,557,000 for the nine months ended September
30, 2008. These results represent a decrease of $7,435,000 (37.2%) when compared
with  earnings of  $19,992,000  for the nine months  ended  September  30, 2007.
Diluted  earnings  per  share  for the nine  months  ended  September  30,  2008
decreased  36.1% to $0.78 compared to $1.22 for the nine months ended  September
30, 2007.  The decrease in earnings  from the nine month period ended  September
30, 2007 was  primarily  due to a  $13,818,000  increase in  provision  for loan
losses.

                                    18
Net Interest Income
The  Company's  primary  source  of  revenue  is  net  interest  income,  or the
difference  between  interest  income on  interest-earning  assets and  interest
expense  on  interest-bearing  liabilities.   Following  is  a  summary  of  the
components  of net  interest  income  for  the  periods  indicated  (dollars  in
thousands):

                                  Three months ended          Nine months ended
                                     September 30,               September 30,
                                 ----------------------------------------------
                                      2008         2007         2008       2007
                                 -----------------------------------------------
 Interest income                     $29,971     $32,442     $91,433    $95,089
 Interest expense                     (7,252)    (10,602)    (24,488)   (29,713)
 FTE adjustment                          170         191         519        629
                                 -----------------------------------------------
    Net interest income (FTE)        $22,889     $22,031     $67,464    $66,005
                                 ===============================================
 Average interest-earning assets  $1,806,010  $1,721,547  $1,814,103  $1,704,342

 Net interest margin (FTE)             5.07%       5.12%       4.96%       5.16%

The  Company's  primary  source  of  revenue  is  net  interest  income,  or the
difference  between  interest  income on  interest-earning  assets and  interest
expense in interest-bearing liabilities.

Net interest  income (FTE) during the third quarter of 2008  increased  $858,000
(3.9 %) from  the  same  period  in 2007 to  $22,889,000.  The  increase  in net
interest  income  (FTE) was due to an  $84,463,000  (4.9%)  increase  in average
balances of  interest-earning  assets to  $1,806,010,000  that was substantially
offset by a 0.05% decrease in net interest margin (FTE) to 5.07%.

Net  interest  income  (FTE)  during  the first  nine  months of 2008  increased
$1,459,000  (2.2%) from the same period in 2007 to $67,464,000.  The increase in
net interest  income (FTE) was due to a $109,761,000  (6.4%) increase in average
balances of interest-earning  assets to $1,814,103,000 that was partially offset
by a 0.20% decrease in net interest margin (FTE) to 4.96%.

Interest and Fee Income
Interest and fee income (FTE) for the third quarter of 2008 decreased $2,492,000
(7.6%) from the third quarter of 2007.  The decrease was due to a 0.90% decrease
in the yield on  average  interest-earning  assets to 6.68%  that was  partially
offset by an $84,463,000 (4.9%) increase in average  interest-earning  assets to
$1,806,010,000.  The growth in interest-earning  assets was due to a $31,590,000
(21%)  increase in average loan  balances to  $1,549,009,000  and an increase of
$53,253,000  (26.1%) in average  balances of  investments to  $256,926,000.  The
decrease  in the yield on  average  interest-earning  assets was mainly due to a
1.01% decrease in yield on loans to 6.92%.  The decrease in loan yields from the
third  quarter of 2007 was mainly due to a 3.25%  decrease in the prime  lending
rate from 8.25% at June 30, 2007 to 5.00% at September 30, 2008.

Interest  and fee income  (FTE) for the nine  months  ended  September  30, 2008
decreased  $3,766,000  (3.9%) from the same period of 2007. The decrease was due
to a 0.73%  decrease  in the yield on average  interest-earning  assets to 6.76%
that  was  partially  offset  by  a  $109,761,000  (6.4%)  increase  in  average
interest-earning assets to $1,814,103,000. The growth in interest-earning assets
was  due  to  a  $38,706,000   (2.6%)  increase  in  average  loan  balances  to
$1,543,571,000  and an increase of  $71,240,000  (35.8%) in average  balances of
investments   to   $270,339,000.   The   decrease   in  the  yield  on   average
interest-earning  assets was mainly due to a 0.79% decrease in yield on loans to
7.04%. The decrease in loan yields from the nine months ended September 30, 2007
was mainly due to a 3.25%  decrease in the prime lending rate from 8.25% at June
30, 2007 to 5.00% at September 30, 2008.

                                       19
Interest Expense
Interest expense decreased $3,350,000 (31.6%) to $7,252,000 in the third quarter
of  2008  compared  to the  third  quarter  of  2007.  The  average  balance  of
interest-bearing  liabilities  increased $74,375,000 (5.6%) to $1,408,323,000 in
the third quarter of 2008 compared to the third quarter of 2007. The increase in
the  average  balance  of  interest-bearing  liabilities  was due  primarily  to
increases of $49,536,000 (9.0%) in the average balance of time deposits from the
third quarter of 2007. The average rate paid on interest-bearing  liabilities in
the quarter ended  September 30, 2008  decreased  1.12% to 2.06% compared to the
quarter  ended  September  30, 2007 as a result of lower market rates for almost
all types of interest-bearing liabilities.

Interest expense decreased $5,225,000 (17.6%) to $24,488,000 for the nine months
ended  September  30, 2008  compared to  $29,713,000  for the nine months  ended
September  30,  2007.  The  average  balance  of  interest-bearing   liabilities
increased  $97,066,000  (7.4%)  to  $1,410,614,000  for the  nine  months  ended
September  30, 2008 compared to the nine months ended  September  30, 2007.  The
increase  in  the  average  balance  of  interest-bearing  liabilities  was  due
primarily to increases of  $43,994,000  (70.8%) and  $40,544,000  (81.7%) in the
average balances of Federal funds purchased and other borrowings,  respectively,
from the nine  months  ended  September  30,  2007.  The  average  rate  paid on
interest-bearing  liabilities in the nine month period ended  September 30, 2008
decreased 0.71% to 2.31% compared to the nine months ended September 30, 2007 as
a result  of  lower  market  rates  for  almost  all  types of  interest-bearing
liabilities.

Net Interest Margin (FTE)
The  following  table  summarizes  the  components of the Company's net interest
margin for the periods indicated:

                                    Three months ended         Nine months ended
                                      September 30,              September 30,
                                   ---------------------------------------------
                                    2008         2007          2008       2007
                                   ---------------------------------------------
Yield on interest-earning assets    6.68%        7.58%         6.76%      7.49%
Rate paid on interest-bearing
     Liabilities                    2.06%        3.18%         2.31%      3.02%
                                   ---------------------------------------------
     Net interest spread            4.62%        4.40%         4.45%      4.47%
Impact of all other net
     noninterest-bearing funds      0.45%        0.72%         0.51%      0.69%
                                   ---------------------------------------------
        Net interest margin         5.07%        5.12%         4.96%      5.16%
                                   =============================================

Net  interest  margin for the three months ended  September  30, 2008  decreased
0.05%  compared to the three months ended  September 30, 2007.  This decrease in
net  interest  margin was mainly due to an 0.27%  decrease  in the impact of net
noninterest-bearing  funds  to  0.45%  from  0.72%  in the  three  months  ended
September 30, 2007 that was partially offset by a 0.22% increase in net interest
spread as the average yield on interest-earning assets decreased 0.90% while the
average rate paid on interest-bearing liabilities decreased 1.12% from the three
months ended September 30, 2007.

Net interest margin for the nine months ended September 30, 2008 decreased 0.20%
compared to the nine months  ended  September  30,  2007.  This  decrease in net
interest   margin   was  due  to  a  0.18%   decrease   in  the  impact  of  net
noninterest-bearing funds to 0.51% from 0.69% in the nine months ended September
30, 2007,  and a 0.02%  decrease in net interest  spread as the average yield on
interest-earning   assets  decreased  0.73%  while  the  average  rate  paid  on
interest-bearing   liabilities  decreased  0.71%  from  the  nine  months  ended
September 30, 2007.

                                       20
Summary of Average Balances, Yields/Rates and Interest Differential
The following table presents,  for the periods indicated,  information regarding
the Company's consolidated average assets, liabilities and shareholders' equity,
the  amounts  of  interest  income  from  average  interest-earning  assets  and
resulting  yields,  and the amount of interest expense paid on  interest-bearing
liabilities.  Average loan balances include nonperforming loans. Interest income
includes  proceeds  from  loans on  nonaccrual  loans  only to the  extent  cash
payments have been received and applied to interest income. Yields on securities
and  certain  loans have been  adjusted  upward to reflect  the effect of income
thereon  exempt from federal income  taxation at the current  statutory tax rate
(dollars in thousands).
For the three months ended
                                            ---------------------------------------------------------------
                                                    September 30, 2008               September 30, 2007
                                            -----------------------------     -----------------------------
                                                        Interest   Rates                Interest    Rates
                                             Average    Income/    Earned    Average    Income/     Earned
                                             Balance    Expense    Paid      Balance    Expense     Paid
                                           -----------------------------    ------------------------------
Assets:
Loans                                       $1,549,009  $26,790    6.92%     $1,517,419  $30,009     7.93%
Investment securities - taxable                232,419    2,894    4.98%        174,472    1,983     4.55%
Investment securities - nontaxable              24,507      457    7.46%         29,201      545     7.47%
Federal funds sold                                  75        -    1.19%            455        6     5.27%
                                            -----------------------------    -----------------------------
Total interest-earning assets                1,806,010   30,141    6.68%      1,721,547   32,633     7.58%
                                                        -------                           ------
Other assets                                   168,382                          170,445
                                            ----------                       ----------
Total assets                                $1,974,392                       $1,891,992
                                            ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits              $226,843      239    0.42%        220,582      114     0.21%
Savings deposits                               376,594    1,041    1.11%        388,315    1,761     1.81%
Time deposits                                  597,765    4,496    3.01%        548,229    6,203     4.53%
Federal funds purchased                         84,851      430    2.03%         70,602      922     5.22%
Other borrowings                                81,032      473    2.33%         64,982      768     4.73%
Junior subordinated debt                        41,238      573    5.56%         41,238      834     8.09%
                                            ----------------------------      ----------------------------
Total interest-bearing liabilities           1,408,323    7,252    2.06%      1,333,948   10,602     3.18%
                                                         ------                           ------
Noninterest-bearing deposits                   344,233                          342,667
Other liabilities                               30,625                           33,297
Shareholders' equity                           191,211                          182,080
                                            ----------                       ----------
Total liabilities and shareholders' equity  $1,974,392                       $1,891,992
                                            ==========                       ==========
Net interest spread(1)                                    4.62%                            4.40%
Net interest income and interest margin(2)     $22,889    5.07%                 $22,031    5.12%
                                           ====================              ===================
(1)  Net interest spread represents the average yield earned on interest-earning
     assets minus the average rate paid on interest-bearing liabilities.
(2)  Net  interest  margin is computed by  calculating  the  difference  between
     interest   income  and   expense,   divided  by  the  average   balance  of
     interest-earning assets.

                                       21
For the nine months ended
                                           ---------------------------------------------------------------
                                                  September 30, 2008               Septembere 30, 2007
                                           -----------------------------    ------------------------------
                                                       Interest   Rates                Interest    Rates
                                            Average    Income/    Earned    Average    Income/     Earned
                                            Balance    Expense    Paid      Balance    Expense     Paid
                                           -----------------------------    ------------------------------
Assets:
Loans                                      $1,543,571  $81,531    7.04%     $1,504,865 $88,404     7.83%
Investment securities - taxable               244,833    8,989    4.90%        168,363   5,548     4.39%
Investment securities - nontaxable             25,506    1,429    7.47%         30,736   1,752     7.60%
Federal funds sold                                193        3    2.07%            378      14     4.94%
                                           -----------------------------    -----------------------------
Total interest-earning assets               1,814,103   91,952    6.76%      1,704,342  95,718     7.49%
                                                       -------                          ------
Other assets                                  169,092                          171,978
                                           ----------                       ----------
Total assets                               $1,983,195                       $1,876,320
                                           ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits             $220,366      460    0.28%       $225,402     343     0.20%
Savings deposits                              385,624    3,715    1.28%        384,366   4,418     1.53%
Time deposits                                 567,089   14,428    3.39%        550,783  18,255     4.42%
Federal funds purchased                       106,109    1,953    2.45%         62,115   2,458     5.28%
Other borrowings                               90,188    2,060    3.05%         49,644   1,764     4.74%
Junior subordinated debt                       41,238    1,872    6.05%         41,238   2,475     8.00%
                                           ------------------------------   -----------------------------
Total interest-bearing liabilities          1,410,614   24,488    2.31%      1,313,548  29,713     3.02%
                                                        ------                          ------
Noninterest-bearing deposits                  348,483                          351,050
Other liabilities                              31,882                           33,309
Shareholders' equity                          192,216                          178,413
                                           ----------                       ----------
Total liabilities and shareholders' equity $1,983,195                       $1,876,320
                                           ==========                       ==========
Net interest spread(1)                                            4.45%                            4.47%
Net interest income and interest margin(2)             $67,464    4.96%                 $66,005    5.16%
                                                       ================                 =================
(1)  Net interest spread represents the average yield earned on interest-earning
     assets minus the average rate paid on interest-bearing liabilities.
(2)  Net  interest  margin is computed by  calculating  the  difference  between
     interest   income  and   expense,   divided  by  the  average   balance  of
     interest-earning assets.

                                       22
Summary of  Changes in  Interest  Income and  Expense  due to Changes in Average
Asset and Liability Balances and Yields Earned and Rates Paid

The following tables set forth a summary of the changes in interest income (FTE)
and  interest  expense  from  changes in average  asset and  liability  balances
(volume)  and  changes  in average  interest  rates for the  periods  indicated.
Changes  not  solely  attributable  to volume or rates  have been  allocated  in
proportion to the respective volume and rate components (dollars in thousands).

                                           Three months ended September 30, 2008
                                                 compared with three months
                                                  ended September 30, 2007
                                           -------------------------------------
                                              Volume         Rate         Total
                                           -------------------------------------
Increase (decrease) in interest income:
Loans                                           $626       ($3,935)    ($3,309)
Investment securities                            571           252         823
Federal funds sold                                (5)           (1)         (6)
                                           -------------------------------------
   Total interest-earning assets               1,192        (3,684)     (2,492)
                                           -------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                   3           122         125
Savings deposits                                 (53)         (667)       (720)
Time deposits                                    561        (2,268)     (1,707)
Federal funds purchased                          186          (678)       (492)
Other borrowings                                 190          (485)       (295)
Junior subordinated debt                           -          (261)       (261)
                                           -------------------------------------
   Total interest-bearing liabilities            887        (4,237)     (3,350)
                                           -------------------------------------
Increase in Net Interest Income                 $305          $553        $858
                                           =====================================

                                            Nine months ended September 30, 2008
                                               compared with nine months ended
                                                     September 30, 2007
                                           -------------------------------------
                                              Volume           Rate      Total
                                           -------------------------------------
Increase (decrease) in interest income:
Loans                                         $2,273      ($9,146)     ($6,873)
Investment securities                          2,220          898        3,118
Federal funds sold                                (7)          (4)         (11)
                                           -------------------------------------
   Total interest-earning assets               4,486       (8,252)      (3,766)
                                           -------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                  (8)         125          117
Savings deposits                                  14         (717)        (703)
Time deposits                                    541       (4,368)      (3,827)
Federal funds purchased                        1,742       (2,247)        (505)
Other borrowings                               1,441       (1,145)         296
Junior subordinated debt                           -         (603)        (603)
                                           -------------------------------------
   Total interest-bearing liabilities          3,730       (8,955)      (5,225
                                           -------------------------------------
Increase in Net Interest Income                 $756         $703       $1,459
                                           =====================================

Provision for Loan Losses
The Company  provided  $2,600,000  for loan losses in the third  quarter of 2008
versus  $700,000 in the third quarter of 2007. In the third quarter of 2008, the
Company recorded  $2,293,000 of net loan charge-offs versus $560,000 of net loan
charge-offs  in the third  quarter of 2007.  In  addition,  net  charge-offs  of
$1,000,000  on home equity lines and loans and $910,000 on auto  indirect  loans
were taken during the third quarter of 2008.

The Company  provided  $15,500,000  for loan losses during the nine months ended
September 30, 2008 versus  $1,682,000 during the nine months ended September 30,
2007.  In the nine  months  ended  September  30,  2008,  the  Company  recorded
$8,243,000 of net loan charge-offs  versus $1,457,000 of net loan charge-offs in
the nine months ended September 30, 2007. During the second quarter of 2008, the
Company re-appraised all of its larger residential  development  projects.  As a
result of this effort, the Company charged-off $1,007,000 on a twenty-eight unit
residential  condominium  project and $640,000 on a twenty-seven lot residential
construction  project.  In addition to the re-appraisal effort during the second
quarter of 2008  which  resulted  in  charge-offs  of  $1,647,000,  the  Company
charged-off  $1,078,000 on a thirty-two  lot  residential  construction  project
during the first quarter of 2008. In addition,  net charge-offs of $2,198,000 on
home equity lines and loans and  $1,891,000  on auto  indirect  loans were taken
during the nine months ended September 30, 2008.

                                       23
Noninterest Income
The following  table  summarizes the  components of  noninterest  income for the
periods indicated (dollars in thousands).
Three months ended          Nine months ended
                                                 September 30,               September 30,
                                             -------------------------------------------------
                                               2008          2007         2008         2007
                                             -------------------------------------------------
Service charges on deposit accounts         $4,080        $3,819       $11,881     $11,236
  ATM fees and interchange revenue             1,164         1,016         3,411       3,011
  Other service fees                             551           523         1,629       1,633
  Change in value of mortgage servicing rights  (571)      (141)         (743)       (226)
  Gain on sale of loans                          341           211           915         756
  Commissions on sale of
    nondeposit investment products               594           583         1,539       1,633
  Increase in cash value of life insurance       360           405         1,080       1,215
  Gain from VISA IPO                               -             -           396           -
  Other noninterest income                       273           431           814       1,218
                                             -------------------------------------------------
  Total noninterest income                    $6,792        $6,847       $20,922     $20,476
                                             =================================================
Noninterest  income for the third quarter of 2008 decreased  $55,000 (0.8%) from
the third  quarter of 2007,  mainly due to a $430,000  decrease  in the value of
mortgage servicing rights to a negative $571,000 from a negative $141,000 in the
third  quarter of 2007.  The  negative  impact of the  decrease  in the value of
mortgage  servicing rights was partially offset by a $261,000 (6.8%) increase in
service  charges on  deposit  accounts  to  $4,080,000,  and a $148,000  (14.6%)
increase in ATM fees and  interchange  to  $1,164,000.  The increases in service
charges on deposit accounts and ATM fees and interchange  revenue were primarily
due to increased numbers of customers.

Noninterest  income for the nine  months  ended  September  30,  2008  increased
$446,000  (2.2%) to  $20,922,000  from the same period in 2007.  The increase in
noninterest  income from the nine months ended September 30, 2007 was mainly due
to a  $396,000  gain from the  Company's  membership  in VISA,  Inc.  and VISA's
initial  public  offering  (IPO) in March 2008,  a $645,000  (5.7%)  increase in
service  charges on deposit  accounts  to  $11,881,000,  and a $400,000  (13.3%)
increase in ATM fees and  interchange  to  $3,411,000.  The increases in service
charges on deposit accounts and ATM fees and interchange  revenue were primarily
due to increased numbers of customers.

Noninterest Expense
The following  table  summarizes the  components of noninterest  expense for the
periods indicated (dollars in thousands).
Three months ended          Nine months ended
                                              September 30,                  September 30,
                                           ----------------------------------------------------
                                              2008          2007         2008         2007
                                           ----------------------------------------------------
Base salaries, net of
     deferred loan origination costs        $6,331        $6,143         $18,980       $18,077
  Incentive compensation                       675           451           2,065         2,936
  Benefits and other compensation costs      2,425         2,381           7,511         7,323
                                           ----------------------------------------------------
     Total salaries and related benefits     9,431         8,975          28,556        28,336
                                           ----------------------------------------------------
  Occupancy                                  1,289         1,178           3,705         3,526
  Equipment                                  1,017         1,052           2,997         3,222
  Data processing and software                 600           564           1,811         1,482
  ATM network charges                          506           463           1,529         1,389
  Advertising and marketing                    451           620           1,204         1,624
  Telecommunications                           402           412           1,629         1,240
  Professional fees                            300           408           1,302         1,217
  Courier service                              258           285             796           867
  Postage                                      185           178             683           602
  Intangible amortization                      133           122             389           367
  Assessments                                  118            82             283           247
  Operational losses                            81           128             286           313
  Provisions for losses-unfunded commitments  (100)            0           1,275           191
  Other                                      1,918         2,285           5,561         6,532
                                           ----------------------------------------------------
  Total other noninterest expense            7,158         7,777          23,450        22,819
                                           ----------------------------------------------------
  Total noninterest expense                $16,589       $16,752         $52,006       $51,155
                                           ====================================================
  Average full time equivalent staff           668           646             638           636
  Noninterest expense to revenue (FTE)       55.89%        58.01%          58.84%        59.12%
24
Noninterest  expense for the third  quarter of 2008  decreased  $163,000  (1.0%)
compared to the third quarter of 2007.  Salaries and benefits expense  increased
$456,000 (5.1%) to $9,431,000 due to increases in all areas including  salaries,
commissions and incentives,  and benefits.  Other noninterest  expense decreased
$619,000 (8.0%) due to decreases over a broad range of other expense categories.

Noninterest  expense  for the nine months  ended  September  30, 2008  increased
$851,000 (1.7%)  compared to the nine months ended September 30, 2007.  Salaries
and benefits expense  increased  $220,000 (0.8%) to $28,556,000  mainly due to a
$903,000  (5.0%)  increase in base  salaries and a $188,000  (2.6%)  increase in
benefits  expense that were  partially  offset by an $871,000  (29.7%)  decrease
incentive  compensation.  Other noninterest  expense  increased  $631,000 (2.8%)
primarily  due to a  $1,084,000  increase  in  provision  for losses on unfunded
commitments.

Provision for Income Tax
The effective  tax rate for the three months ended  September 30, 2008 was 39.6%
and reflects no change from 39.6% for the three months ended September 30, 2007.
The  effective  tax rate for the nine months ended  September 30, 2008 was 38.3%
and reflects a decrease from 39.5% for the nine months ended September 30, 2007.
The  provision  for  income  taxes  for  all  periods   presented  is  primarily
attributable to the respective  level of earnings and the incidence of allowable
deductions,  particularly  from  increase  in  cash  value  of  life  insurance,
tax-exempt loans and state and municipal securities.

Classified Assets
The  Company  closely  monitors  the  markets in which it  conducts  its lending
operations  and  continues  its strategy to control  exposure to loans with high
credit risk.  Asset reviews are performed  using grading  standards and criteria
similar to those employed by bank regulatory  agencies.  Assets receiving lesser
grades  fall  under  the  "classified  assets"  category,   which  includes  all
nonperforming  assets and potential problem loans, and receive an elevated level
of attention regarding collection.

The following is a summary of classified assets on the dates indicated (dollars
in thousands):

                              At September 30, 2008      At December 31, 2007
                             ----------------------    -------------------------
                              Gross  Guaranteed  Net    Gross Guaranteed   Net
                             ---------------------------------------------------
Classified loans             $61,529  $5,545  $55,984   $18,570  $5,948  $12,622
Other classified assets        1,178       -    1,178       187       -      187
                             ---------------------------------------------------
Total classified assets      $62,707  $5,545  $57,162   $18,757  $5,948  $12,809
                             ===================================================

Allowance for loan losses/classified loans     43.9%                      137.3%

Classified  assets,  net of  guarantees  of the U.S.  Government,  including its
agencies and its government-sponsored  agencies, increased $44,353,000 (346%) to
$57,162,000 at September 30, 2008 from $12,809,000 at December 31, 2007.

Nonperforming Loans
Loans are reviewed on an  individual  basis for  reclassification  to nonaccrual
status when any one of the following  occurs:  the loan becomes 90 days past due
as to  interest  or  principal,  the full and timely  collection  of  additional
interest or principal becomes  uncertain,  the loan is classified as doubtful by
internal credit review or bank regulatory  agencies,  a portion of the principal
balance has been charged off, or the Company takes possession of the collateral.
Loans that are placed on nonaccrual even though the borrowers  continue to repay
the  loans as  scheduled  are  classified  as  "performing  nonaccrual"  and are
included  in  total  nonperforming  loans.  The  reclassification  of  loans  as
nonaccrual does not necessarily reflect Management's judgment as to whether they
are collectible.

Interest income is not accrued on loans where Management has determined that the
borrowers  will  be  unable  to  meet  contractual   principal  and/or  interest
obligations,  unless the loan is well secured and in the process of  collection.
When a loan is placed on nonaccrual,  any previously accrued but unpaid interest
is  reversed.  Income on such loans is then  recognized  only to the extent that
cash is received  and where the future  collection  of  principal  is  probable.
Interest  accruals  are resumed on such loans only when they are  brought  fully
current  with  respect to interest and  principal  and when,  in the judgment of
Management, the loans are estimated to be fully collectible as to both principal
and interest.

                                       25
Interest income on nonaccrual loans, which would have been recognized during the
nine months  ended  September  30,  2008,  if all such loans had been current in
accordance  with their  original  terms,  totaled  $1,759,000.  Interest  income
actually  recognized  on these loans during the nine months ended  September 30,
2008 was $882,000.

The  Company's  policy is to place loans 90 days or more past due on  nonaccrual
status.  In some instances  when a loan is 90 days past due Management  does not
place  it on  nonaccrual  status  because  the loan is well  secured  and in the
process of  collection.  A loan is considered to be in the process of collection
if, based on a probable  specific  event,  it is expected  that the loan will be
repaid or brought current. Generally, this collection period would not exceed 30
days. Loans where the collateral has been repossessed are classified as OREO or,
if the collateral is personal  property,  the loan is classified as other assets
on the Company's financial statements.

Management considers both the adequacy of the collateral and the other resources
of the  borrower  in  determining  the steps to be taken to  collect  nonaccrual
loans.   Alternatives  that  are  considered  are  foreclosure,   collecting  on
guarantees, restructuring the loan or collection lawsuits.

As shown in the following table, total nonperforming assets net of guarantees of
the  U.S.  Government,  including  its  agencies  and  its  government-sponsored
agencies,  increased  $10,521,000  (136.7%) to $18,219,000 during the first nine
months of 2008.  Nonperforming  assets net of  guarantees  represented  0.92% of
total assets at September 30, 2008.  All  nonaccrual  loans are considered to be
impaired  when  determining  the need for a specific  valuation  allowance.  The
Company  continues  to make a concerted  effort to work  problem  and  potential
problem loans to reduce risk of loss.
At September 30, 2008       At December 31, 2007
                                              -------------------------    -------------------------
                                                Gross  Guaranteed  Net      Gross  Guaranteed   Net
                                              ------------------------------------------------------
(dollars in thousands)
Performing nonaccrual loans                   $14,534   $5,419   $9,115     $9,098  $5,814   $3,284
Nonperforming, nonaccrual loans                 7,552        -    7,552      4,227       -    4,227
                                              ------------------------------------------------------
   Total nonaccrual loans                      22,086    5,419   16,667     13,325   5,814    7,511
Loans 90 days past due and still accruing         374        -      374          -       -        -
                                              ------------------------------------------------------
Total nonperforming loans                      22,460    5,419   17,041     13,325   5,814    7,511
Other real estate owned                         1,178        -    1,178        187       -      187
                                              ------------------------------------------------------
Total nonperforming assets                    $23,638   $5,419  $18,219    $13,512  $5,814   $7,698
                                              ======================================================
Nonperforming loans to total loans                                1.09%                       0.48%
Nonperforming assets to total assets                              0.92%                       0.39%
Allowance for loan losses/nonperforming loans                      144%                        231%
Assets
During the first nine months of 2008, total assets decreased  $4,154,000  (0.2%)
to  $1,967,467,000  from  $1,980,621,000  at December 31, 2007. This decrease in
assets primarily reflects a decrease in cash and cash equivalents of $21,498,000
and a  $7,257,000  increase in  allowance  for loan  losses that were  partially
offset  by a  $9,473,000  increase  in  securities  available  for  sale  and an
$11,270,000  increase in loans.  The  decrease in cash and cash  equivalents  is
reflective of a seasonal  effect  whereby the Company  experiences a spike up in
deposits during the year-end holiday season.  Historically,  this year-end spike
up in  deposits  lasts  only a week or two,  can be as high as  several  tens of
millions of dollars,  and appears to be the result of holiday  seasons  shopping
and  increases in deposit  balances of the  Company's  business  customers.  The
following  table shows the Company's loan balances,  including net deferred loan
costs:
                                             September 30,  December 31,
                                                 2008           2007
(dollars in thousands)                      ----------------------------
Commercial, financial and agricultural         $189,837        $164,815
Consumer installment                            513,132         535,819
Real estate mortgage                            770,553         716,013
Real estate construction                         89,714         135,319
                                            ----------------------------
    Total loans                              $1,563,236      $1,551,966
                                            ============================

                                       26
Liabilities
During the first nine months of 2008,  total  liabilities  decreased  $6,378,000
(0.4%) to $1,785,365,000 from $1,791,743,000 at December 31, 2007. This decrease
in liabilities  primarily reflects a decrease in other borrowings of $36,253,000
that  was  partially  offset  by an  $18,618,000  increase  in  deposits  and an
$11,000,000  increase  in  Federal  funds  purchased.   The  decrease  in  other
borrowings  is due  to  the  maturity  and  repayment  of  $20,000,000  of  term
borrowings  from the FHLB in April 2008,  and  $16,253,000  of net reductions in
other overnight collateralized borrowings. The increase in deposits is primarily
due to a  $40,000,000  increase in  certificate  of  deposits  from the State of
California  to  $80,000,000  during March of 2008 that was  partially  offset by
seasonal  fluctuations in deposits,  including the year-end fluctuation noted in
the  description of Assets above.  The Bank  participates  in a deposit  program
offered by the State of  California  whereby the State may make  deposits at the
Bank's request  subject to collateral  and credit  worthiness  constraints.  The
negotiated rates on these State deposits are generally more favorable than other
wholesale funding sources available to the Bank.

Capital Resources
The  current  and  projected  capital  position of the Company and the impact of
capital plans and long-term strategies are reviewed regularly by Management.

The Company adopted and announced a stock repurchase plan on August 21, 2007 for
the repurchase of up to 500,000  shares of the Company's  common stock from time
to time as market conditions allow. The 500,000 shares authorized for repurchase
under this plan represented  approximately  3.2% of the Company's  approximately
15,815,000  common shares  outstanding  as of August 21, 2007.  This plan has no
stated  expiration  date for the  repurchases.  As of September  30,  2008,  the
Company had  repurchased  166,600  shares  under this plan,  which left  333,400
shares available for repurchase under the plan.

The  Company's  primary  capital  resource is  shareholders'  equity,  which was
$191,102,000  at  September  30,  2008.  This  amount  represents  a increase of
$2,224,000  from December 31, 2007, the net result of  comprehensive  income for
the period of  $11,654,000  and the effect of stock  option  vesting of $502,000
partially  offset by the  repurchase  of common stock with value of  $2,821,000,
dividends  paid of $6,145,000,  the cumulative  effect of a change in accounting
principle,  net of tax, of $522,000, and a $444,000 reversal of tax benefit from
the exercise of stock options. The Company's ratio of equity to total assets was
9.67%,  9.35%,  and 9.54% as of September  30,  2008,  September  30, 2007,  and
December 31, 2007, respectively.

The following  summarizes the ratios of capital to risk-adjusted  assets for the
periods indicated:

                   At September 30,      At         Minimum     Well Capitalized
                   ----------------    December 31, Regulatory   by Regulatory
                   2008       2007       2007       Requirement  Definition
                   ------------------------------------------------------------
 Tier I Capital    11.13%     10.68%     10.90%       4.00%         6.00%
 Total Capital     12.38%     11.66%     11.90%       8.00%        10.00%
 Leverage ratio    11.08%     11.28%     11.16%       4.00%         5.00%

Liquidity
The discussion of "Liquidity" under Item 3 of this report is incorporated herein
by reference.

Off-Balance Sheet Items
The Bank has certain ongoing  commitments under operating and capital leases. As
of September 30, 2008  commitments to extend credit and  commitments  related to
the Bank's deposit  overdraft  privilege  product were the Bank's only financial
instruments  with  off-balance  sheet risk.  The Bank has not  entered  into any
contracts for financial derivative instruments such as futures,  swaps, options,
etc.  Commitments  to  extend  credit  were  $653,764,000  and  $690,633,000  at
September 30, 2008 and December 31, 2007, respectively,  and represent 41.8% and
44.5% of the total loans  outstanding  at  September  30, 2008 and  December 31,
2007,  respectively.   Commitments  related  to  the  Bank's  deposit  overdraft
privilege product totaled  $37,997,000 and $33,517,000 at September 30, 2008 and
December 31, 2007, respectively.

                                       27
Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Asset and Liability  Management The goal for managing the assets and liabilities
of the Company is to maximize shareholder value and earnings while maintaining a
high quality  balance sheet without  exposing the Company to undue interest rate
risk.  The Board of  Directors  has  overall  responsibility  for the  Company's
interest rate risk management  policies.  The Company has an Asset and Liability
Management Committee (ALCO) which establishes and monitors guidelines to control
the sensitivity of earnings to changes in interest rates.

Activities involved in asset/liability management include but are not limited to
lending,  accepting and placing  deposits,  investing in securities  and issuing
debt.   Interest  rate  risk  is  the  primary  market  risk   associated   with
asset/liability  management.  Sensitivity  of earnings to interest  rate changes
arises when yields on assets change in a different time period or in a different
amount from that of interest  costs on  liabilities.  To mitigate  interest rate
risk, the structure of the balance sheet is managed with the goal that movements
of interest  rates on assets and  liabilities  are  correlated and contribute to
earnings  even in  periods  of  volatile  interest  rates.  The  asset/liability
management  policy  sets  limits on the  acceptable  amount of  variance  in net
interest margin,  net income and market value of equity under changing  interest
environments.  Market value of equity is the net present value of estimated cash
flows from the Company's  assets,  liabilities and off-balance  sheet items. The
Company uses simulation  models to forecast net interest margin,  net income and
market value of equity.

Simulation of net interest  margin,  net income and market value of equity under
various  interest  rate  scenarios is the primary tool used to measure  interest
rate risk. Using computer-modeling  techniques,  the Company is able to estimate
the potential  impact of changing  interest  rates on net interest  margin,  net
income and market value of equity.  A balance sheet  forecast is prepared  using
inputs  of  actual  loan,   securities  and  interest-bearing   liability  (i.e.
deposits/borrowings) positions as the beginning base.

In the simulation of net interest  margin and net income under various  interest
rate scenarios,  the forecast balance sheet is processed  against seven interest
rate  scenarios.  These  seven  interest  rate  scenarios  include  a flat  rate
scenario,  which assumes  interest  rates are  unchanged in the future,  and six
additional rate ramp scenarios ranging from +300 to -300 basis points around the
flat scenario in 100 basis point  increments.  These ramp scenarios  assume that
interest  rates  increase  or  decrease  evenly  (in a  "ramp"  fashion)  over a
twelve-month period and remain at the new levels beyond twelve months.

In the  simulation  of  market  value of  equity  under  various  interest  rate
scenarios,  the forecast balance sheet is processed  against seven interest rate
scenarios.  These seven interest rate  scenarios  include the flat rate scenario
described  above,  and six additional rate shock scenarios  ranging from +300 to
-300 basis points around the flat scenario in 100 basis point increments.  These
rate shock scenarios assume that interest rates increase or decrease immediately
(in a "shock" fashion) and remain at the new level in the future.

At September 30, 2008, the results of the simulations  noted above indicate that
given a "flat"  balance  sheet  scenario,  and if deposit  rates  track  general
interest  rate changes by  approximately  50%, the  Company's  balance  sheet is
slightly  liability  sensitive.  "Liability  sensitive"  implies  that  earnings
decrease when interest rates rise,  and increase when interest  rates  decrease.
The  magnitude of all the  simulation  results  noted above is within the Bank's
policy guidelines. The asset liability management policy limits aggregate market
risk, as measured in this fashion,  to an acceptable level within the context of
risk-return trade-offs.

The simulation results noted above do not incorporate any management actions,
which might moderate the negative consequences of interest rate deviations.
Therefore, they do not reflect likely actual results, but serve as conservative
estimates of interest rate risk.

At September 30, 2008 and 2007, the Company had no material derivative financial
instruments.

                                       28
Liquidity
The  Company's  principal  source of asset  liquidity is federal  funds sold and
marketable  investment  securities  available  for sale.  At September 30, 2008,
federal  funds  sold  and  investment  securities  available  for  sale  totaled
$241,900,000,  representing  an increase of $9,473,000  (4.1%) from December 31,
2007, and an increase of $2,170,000 (0.9%) from September 30, 2007. In addition,
the Company generates  additional liquidity from its operating  activities.  The
Company's  profitability  during the first nine  months of 2008  generated  cash
flows from  operations of $27,930,000  compared to $23,518,000  during the first
nine  months  of 2007.  Additional  cash  flows  may be  provided  by  financing
activities,  primarily  the  acceptance of deposits and  borrowings  from banks.
Sales  and  maturities  of  investment   securities  produced  cash  inflows  of
$38,938,000  during  the nine  months  ended  September  30,  2008  compared  to
$38,954,000 for the nine months ended September 30, 2007. During the nine months
ended  September 30, 2008, the Company  invested  $50,219,000 and $20,538,000 in
securities  and  net  loan  principal  increases,   respectively,   compared  to
$78,822,000  and  $26,841,000 in securities  and net loan  principal  increases,
respectively,  during the first nine months of 2007. These changes in investment
and loan  balances  contributed  to net cash  used by  investing  activities  of
$33,383,000  during the nine months ended  September  30, 2008,  compared to net
cash used by investing  activities of  $69,640,000  during the nine months ended
September 30, 2007. Financing activities used net cash of $16,045,000 during the
nine months ended September 30, 2008, compared to net cash provided by financing
activities  of  $14,387,000  during the nine months  ended  September  30, 2007.
Deposit  balance  increases  accounted for  $18,618,000 of financing  sources of
funds during the nine months ended  September 30, 2008,  compared to $67,007,000
of funds used by  decreases in deposits  during the nine months ended  September
30,  2007.  A  net  decrease  in  short-term  other  borrowings   accounted  for
$36,195,000  of financing  uses of funds during the nine months ended  September
30, 2008, compared to $10,136,000 of funds provided by an increase in short-term
other borrowings during the nine months ended September 30, 2007. Dividends paid
used  $6,145,000 and  $6,201,000 of cash during the nine months ended  September
30, 2008 and 2007, respectively. An increase in Federal funds purchased provided
$11,000,000  and  $28,000,000 of cash during the nine months ended September 30,
2008 and 2007,  respectively.  Also,  the  Company's  liquidity  is dependent on
dividends received from the Bank. Dividends from the Bank are subject to certain
regulatory restrictions.

Item 4.  Controls and Procedures
The Chief Executive  Officer,  Richard Smith,  and the Chief Financial  Officer,
Thomas Reddish, evaluated the effectiveness of the Company's disclosure controls
and  procedures  as of September  30, 2008  ("Evaluation  Date").  Based on that
evaluation,  they each concluded  that as of the  Evaluation  Date the Company's
disclosure  controls and procedures are effective to ensure that the information
required to be  disclosed by the Company in this  Quarterly  Report on Form 10-Q
was  recorded,  processed,  summarized  and  reported  within  the time  periods
specified in the SEC's rules and forms for Form 10-Q.

No changes in the Company's  internal control over financial  reporting occurred
during  the first  nine  months of 2008 that have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                       29
PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Due to the nature of the banking business, the Bank is at times party to various
legal actions;  all such actions are of a routine nature and arise in the normal
course of business of the Bank.

Item 1A - Risk Factors

There have been no material changes to the risk factors previously  disclosed in
Item 1A to Part I of our Annual Report on Form 10-K for the year ended  December
31, 2007 other than as follows:

The  Corporation  may be adversely  affected by the soundness of other financial
institutions.

Financial  services  institutions  are  interrelated  as a result  of  clearing,
counterparty,  or other  relationships.  The  Corporation  has  exposure to many
different  industries and  counterparties,  and routinely executes  transactions
with  counterparties in the financial  services industry,  including  commercial
banks,  brokers and  dealers,  and other  institutional  clients.  Many of these
transactions  expose the Corporation to credit risk in the event of a default by
a counterparty  or client.  In addition,  the  Corporation's  credit risk may be
exacerbated when the collateral held by the Corporation  cannot be realized upon
or is  liquidated  at prices not  sufficient  to recover  the full amount of the
credit or derivative exposure due to the Corporation. Any such losses could have
a material adverse affect on the Corporation's  financial  condition and results
of operations.

Current levels of market volatility are unprecedented.

The capital and credit  markets have been  experiencing  extreme  volatility and
disruption  for more  than 12  months.  In  recent  weeks,  the  volatility  and
disruption have reached  unprecedented  levels.  In some cases, the markets have
exerted downward  pressure on stock prices,  security prices and credit capacity
for  certain  issuers  without  regard to those  issuers'  underlying  financial
strength.  If the current levels of market disruption and volatility continue or
worsen,  there can be no assurance that we will not experience  adverse effects,
which may be  material,  on our ability to access  capital and on our results of
operations.

The Corporation and the Bank could be aversely affected by new regulations.

Federal and state  governments and regulators  could pass  legislation and adopt
policies  responsive  to current  credit  conditions  that would have an adverse
affect on the Company and its financial  performance.  For example,  the Company
could experience higher credit losses because of federal or state legislation or
regulatory  action that limits the Bank's  ability to  foreclose  on property or
other collateral or makes foreclosure less economically feasible.

The Federal Deposit  Insurance  Corporation  ("FDIC")  insures  deposits at FDIC
insured  financial  institutions up to certain limits.  The FDIC charges insured
financial  institutions  premiums to maintain the Deposit Insurance Fund. Due to
recent bank  failures,  the FDIC  insurance  fund reserve ratio has fallen below
statutory minimums. The FDIC has developed a proposed restoration plan that will
uniformly increase insurance assessments by 7 basis points (annualized) and also
proposes changes to the deposit  insurance  assessment  system requiring riskier
institutions  to pay a larger share.  If the FDIC adopts this or a similar plan,
the Bank could be required to pay higher premiums for deposit insurance.

The  Emergency  Economic  Stabilization  Act of 2008 included a provision for an
increase in the amount of deposits  insured by the FDIC to $250,000.  On October
14, 2008, the FDIC announced a new program -- the Temporary  Liquidity Guarantee
Program   that   provides    unlimited    deposit    insurance   on   funds   in
noninterest-bearing  transaction  deposit accounts not otherwise  covered by the
existing deposit insurance limit of $250,000.  All eligible institutions will be
covered  under the program for the first 30 days  without  incurring  any costs.
After the initial period, participating institutions will be assessed a 10 basis
point surcharge on the additional insured deposits.

There  are no other  material  changes  to the  risk  factors  disclosed  in the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2007.

                                       30
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows information concerning the common stock repurchased by
the Company  during the second  quarter of 2008 pursuant to the Company's  stock
repurchase  plan adopted on August 21,  2007,  which is discussed in more detail
under  "Capital  Resources"  in  this  report  and  is  incorporated  herein  by
reference:
Period        (a) Total number      (b) Average price  (c) Total number of   (d) Maximum number
              of shares purchased   paid per share     shares purchased as   of shares that may yet
                                                       part of publicly      be purchased under the
                                                       announced plans or    plans or programs
                                                       programs
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
July 1-31, 2008          -               -                    -                  333,400
Aug. 1-31, 2008          -               -                    -                  333,400
Sep. 1-30, 2008          -               -                    -                  333,400
---------------------------------------------------------------------------------------------------
Total                    -               -                    -                  333,400
Item 6 - Exhibits

    31.2     Rule 13a-14(a)/15d-14(a) Certification of CEO
    31.2     Rule 13a-14(a)/15d-14(a) Certification of CFO
    32.1     Section 1350 Certification of CEO
    32.2     Section 1350 Certification of CFO

SIGNATURES
Pursuant  to 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 hereunto duly authorized.

                                TRICO BANCSHARES
                                  (Registrant)

Date:  November 7, 2008     /s/Thomas J. Reddish
                            --------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer
                            (Principal financial officer)

                                       31
EXHIBITS

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of CEO

I, Richard P. Smith, certify that;

   1.     I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  TriCo
          Bancshares;
   2.     Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;
   3.     Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;
   4.     The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and we have:
          a.   Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including its consolidated subsidiary, is made known
               to us by others within those  entities,  particularly  during the
               period in which this quarterly report is being prepared;
          b.   Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  to provide reasonable  assurance
               regarding  the   reliability  of  financial   reporting  and  the
               preparation  of financial  statements  for  external  purposes in
               accordance with generally accepted accounting principles;
          c.   Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and procedures  and presented in this  quarterly  report
               our  conclusions   about  the  effectiveness  of  the  disclosure
               controls and  procedures,  as of the end of the period covered by
               this quarterly report based on such evaluation; and
          d.   Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's  most  recent  fiscal  quarter  that has  materially
               affected,  or is  reasonably  likely to  materially  affect,  the
               registrant's internal control over financial reporting; and
   5.     The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors:
          a.   All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability to record, process,  summarize and report financial data;
               and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.

Date: November 7, 2008        /s/Richard P. Smith
                              --------------------
                              Richard P. Smith
                              President and Chief Executive Officer

                                       32
Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of CFO

I, Thomas J. Reddish, certify that;

   1.     I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  TriCo
          Bancshares;
   2.     Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;
   3.     Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;
   4.     The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and we have:
          a.   Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including its consolidated subsidiary, is made known
               to us by others within those  entities,  particularly  during the
               period in which this quarterly report is being prepared;
          b.   Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  to provide reasonable  assurance
               regarding  the   reliability  of  financial   reporting  and  the
               preparation  of financial  statements  for  external  purposes in
               accordance with generally accepted accounting principles;
          c.   Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and procedures  and presented in this  quarterly  report
               our  conclusions   about  the  effectiveness  of  the  disclosure
               controls and  procedures,  as of the end of the period covered by
               this quarterly report based on such evaluation; and
          d.   Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's  most  recent  fiscal  quarter  that has  materially
               affected,  or is  reasonably  likely to  materially  affect,  the
               registrant's internal control over financial reporting; and
    5.    The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors:
          a.   All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability to record, process,  summarize and report financial data;
               and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.

Date: November 7, 2008         /s/Thomas J. Reddish
                              ---------------------
                              Thomas J. Reddish
                              Executive Vice President and
                              Chief Financial Officer

                                       33
Exhibit 32.1

Section 1350 Certification of CEO

In connection with the Quarterly  Report of TriCo  Bancshares (the "Company") on
Form 10-Q for the period ended  September 30, 2008 as filed with the  Securities
and Exchange Commission on the date hereof (the "Report"),  I, Richard P. Smith,
President and Chief Executive  Officer of the Company,  certify,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that:

    (1)   The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and
    (2)   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

     /s/Richard P. Smith
     --------------------
     Richard P. Smith
     President and Chief Executive Officer

A signed  original of this  written  statement  required by Section 906 has been
provided  to TriCo  Bancshares  and will be  retained  by TriCo  Bancshares  and
furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Section 1350 Certification of CFO

In connection with the Quarterly  Report of TriCo  Bancshares (the "Company") on
Form 10-Q for the period ended  September 30, 2008 as filed with the  Securities
and Exchange Commission on the date hereof (the "Report"), I, Thomas J. Reddish,
Executive Vice President and Chief  Financial  Officer of the Company,  certify,
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

    (1)   The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and
    (2)   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

    /s/Thomas J. Reddish
    --------------------
    Thomas J. Reddish
    Executive Vice President and Chief Financial Officer

A signed  original of this  written  statement  required by Section 906 has been
provided  to TriCo  Bancshares  and will be  retained  by TriCo  Bancshares  and
furnished to the Securities and Exchange Commission or its staff upon request.

                                       34