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 June 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 July 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                                                    18

        Item 2 - Management's Discussion and Analysis of Financial           19
                 Condition and Results of Operations

        Item 3 - Quantitative and Qualitative Disclosures about Market Risk  31

        Item 4 - Controls and Procedures                                     32

PART II - OTHER INFORMATION                                                  33

        Item 1 - Legal Proceedings                                           33

        Item 1A - Risk Factors                                               33

        Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 33

        Item 4 - Submission of Matters to a Vote of Security Holders         33

        Item 6 - Exhibits                                                    34

        Signatures                                                           36

        Exhibits                                                             37


<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 June 30,           At December 31,
                                                            2008              2007            2007
                                                       -----------------------------    ---------------
     <S>                                                    <C>               <C>              <C>

Assets:
     Cash and due from banks                              $76,658           $93,636          $88,798
     Federal funds sold                                         -             1,715                -
                                                       -----------------------------     --------------
         Cash and cash equivalents                         76,658            95,351           88,798
     Securities available-for-sale                        253,129           175,891          232,427
     Federal Home Loan Bank stock, at cost                  9,010             8,543            8,766
     Loans, net of allowance for loan losses
         of $24,281, $16,999 and $17,331                1,519,043         1,490,629        1,534,635
     Foreclosed assets, net of allowance for
         losses of $214, $180 and $180                      1,178               187              187
     Premises and equipment, net                           19,580            20,891           20,492
     Cash value of life insurance                          45,701            44,346           44,981
     Accrued interest receivable                            7,802             8,284            8,554
     Goodwill                                              15,519            15,519           15,519
     Other intangible assets, net                             920             1,421            1,176
     Other assets                                          31,950            25,965           25,086
                                                       -----------------------------    ---------------
         Total Assets                                  $1,980,490        $1,887,027       $1,980,621
                                                       =============================    ===============
Liabilities:
     Deposits:
         Noninterest-bearing demand                      $347,336          $366,321         $378,680
         Interest-bearing                               1,163,717         1,144,558        1,166,543
                                                       -----------------------------    ---------------
         Total deposits                                 1,511,053         1,510,879        1,545,223
     Federal funds purchased                              123,750            80,500           56,000
     Accrued interest payable                               5,119             6,614            7,871
     Reserve for unfunded commitments                       3,465             2,040            2,090
     Other liabilities                                     24,131            22,264           23,195
     Other borrowings                                      85,048            44,892          116,126
     Junior subordinated debt                              41,238            41,238           41,238
                                                       ------------------------------    --------------
         Total Liabilities                              1,793,804         1,708,427        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 June 30, 2008                       78,306
         15,917,291 at June 30, 2007                                         76,394
         15,911,550 at December 31, 2007                                                      78,775
     Retained earnings                                    111,360           106,985          111,655
     Accumulated other comprehensive income (loss), net    (2,980)           (4,779)          (1,552)
                                                       ------------------------------    --------------
         Total Shareholders' Equity                       186,686           178,600          188,878
                                                       ------------------------------    --------------
     Total Liabilities and Shareholders' Equity        $1,980,490        $1,887,027       $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 June 30,    Six months ended June 30,
                                                       2008           2007        2008           2007
                                                 --------------------------------------------------------
<S>                                                    <C>            <C>           <C>            <C>
Interest and dividend income:
Loans, including fees                                 $27,015      $29,882      $54,741        $58,305
Debt securities:
  Taxable                                               2,892        1,623        5,851          3,342
  Tax exempt                                              299          375          623            769
Dividends                                                 125          101          244            223
Federal funds sold                                          1            5            3              8
                                                  -------------------------------------------------------
Total interest income                                  30,332       31,986       61,462         62,647
                                                  -------------------------------------------------------
Interest expense:
Deposits                                                5,650        7,550       12,827         14,938
Federal funds purchased                                   711        1,014        1,523          1,536
Other borrowings                                          524          506        1,587            996
Junior subordinated debt                                  586          825        1,299          1,641
                                                  -------------------------------------------------------
Total interest expense                                  7,471        9,895       17,236         19,111
                                                  -------------------------------------------------------
Net interest income                                    22,861       22,091       44,226         43,536
                                                  -------------------------------------------------------
Provision for loan losses                               8,800          500       12,900            982
                                                  -------------------------------------------------------
Net interest income after provision for loan losses    14,061       21,591       31,326         42,554
                                                  -------------------------------------------------------
Noninterest income:
Service charges and fees                                5,826        5,375       10,954         10,436
Gain on sale of loans                                     316          279          574            545
Commissions on sale of non-deposit investment products    525          550          945          1,050
Increase in cash value of life insurance                  360          405          720            810
Other                                                     253          420          937            788
                                                  -------------------------------------------------------
Total noninterest income                                7,280        7,029       14,130         13,629
                                                  -------------------------------------------------------

Noninterest expense:
Salaries and related benefits                           9,645        9,619       19,125         19,361
Other                                                   8,199        7,824       16,292         15,042
                                                  -------------------------------------------------------
Total noninterest expense                              17,844       17,443       35,417         34,403
                                                  -------------------------------------------------------
Income before income taxes                              3,497       11,177       10,039         21,780
Provision for income taxes                              1,223        4,422        3,717          8,581
                                                  -------------------------------------------------------
Net income                                             $2,274       $6,755       $6,322        $13,199
                                                  =======================================================

Average shares outstanding                         15,744,881   15,916,313   15,793,483      15,897,621
Diluted average shares outstanding                 15,953,288   16,463,369   16,017,505      16,439,607
Per share data:
Basic earnings                                          $0.14        $0.42        $0.40          $0.83
Diluted earnings                                        $0.14        $0.41        $0.39          $0.80
Dividends paid                                          $0.13        $0.13        $0.26          $0.26

See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>
                                TRICO BANCSHARES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  (In thousands, except 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                                                   13,199                    13,199
Change in net unrealized gain on
   Securities available for sale, net                                        (258)       (258)
                                                                                      --------
Total comprehensive income                                                             12,941
Stock option vesting                                376                                   376
Stock options exercised             177,600       1,964                                 1,964
Tax benefit of stock options exercised              861                                   861
Repurchase of common stock         (117,516)       (546)     (2,295)                   (2,841)
Dividends paid ($0.26 per share)                             (4,137)                   (4,137)
                                 -------------------------------------------------------------
Balance at June 30, 2007         15,917,291     $76,394    $106,985      ($4,779)    $178,600
                                 =============================================================

Balance at December 31, 2007     15,911,550     $78,775    $111,655       ($1,552)   $188,878
Comprehensive income:                                                                ---------
Net income                                                    6,322                     6,322
Change in net unrealized gain on
   Securities available for sale, net                                      (1,428)     (1,428)
                                                                                      --------
Total comprehensive income                                                              4,894
Cumulative effect of change in
   Accounting principle, net of tax                            (522)                     (522)
Stock option vesting                                356                                   356
Repurchase of common stock         (166,669)       (825)     (1,996)                   (2,821)
Dividends paid ($0.26 per share)                             (4,099)                   (4,099)
                                 -------------------------------------------------------------
Balance at June 30, 2008          15,744,881    $78,306    $111,360       ($2,980)   $186,686
                                 =============================================================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

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

                                                                 For the six months ended June 30,
                                                                     2008               2007
                                                               -----------------------------------
<s>                                                                <c>                 <c>
Operating activities:
Net income                                                       $6,322             $13,199
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Depreciation and amortization of property and equipment       1,745               1,902
    Amortization of intangible assets                               256                 245
    Provision for loan losses                                    12,900                 982
    Amortization of investment securities premium, net              170                 380
    Originations of loans for resale                            (41,412)            (35,677)
    Proceeds from sale of loans originated for resale            41,574              35,853
    Gain on sale of loans                                          (574)               (545)
    Change in value of mortgage servicing rights                    172                  85
    Provision for losses on other real estate owned                  34                   -
    Loss on sale of fixed assets                                      2                   5
    Increase in cash value of life insurance                       (720)               (810)
    Stock option expense                                            356                 376
    Stock option tax benefits                                         -                (861)
    Change in:
      Reserve for unfunded commitments                            1,375                 191
      Interest receivable                                           752                 443
      Interest payable                                           (2,752)               (934)
      Other assets and liabilities, net                          (4,589)                879
                                                               ----------------------------------
        Net cash provided by operating activities                15,611              15,713
                                                               ----------------------------------
Investing activities:
Proceeds from maturities of securities available-for-sale        26,883              21,644
Purchases of securities available-for-sale                      (50,219)                  -
Purchases of Federal Home Loan Bank stock                          (244)               (223)
Loan originations and principal collections, net                  1,667               1,167
Proceeds from sale of premises and equipment                          1                  11
Purchases of premises and equipment                              (1,421)             (1,704)
                                                               ----------------------------------
Net cash (used in) provided by investing activities             (23,333)             20,895
                                                               ----------------------------------
Financing activities:
Net decrease in deposits                                        (34,170)            (88,270)
Net increase in Federal funds purchased                          67,750              42,500
Payments of principal on long-term other borrowings                 (39)                (34)
Net change in short-term other borrowings                       (31,039)              5,015
Stock option tax benefits                                             -                 861
Repurchase of common stock                                       (2,821)               (470)
Dividends paid                                                   (4,099)             (4,137)
Exercise of stock options                                             -                 264
                                                               ----------------------------------
      Net cash used in financing activities                      (4,418)            (44,271)
                                                               ----------------------------------
  Net change in cash and cash equivalents                       (12,140)             (7,663)
                                                               ----------------------------------
  Cash and cash equivalents and beginning of period              88,798             103,014
                                                               ----------------------------------
  Cash and cash equivalents at end of period                    $76,658             $95,351
                                                               ==================================
  Supplemental disclosure of noncash activities:
Loans transferred to other real estate owned                     $1,025                $187
Unrealized loss on securities available for sale                ($2,464)              ($446)
Value of shares tendered in lieu of cash paid to
  exercise stock options and to pay related tax withholding           -              $2,371
Supplemental disclosure of cash flow activity:
Cash paid for interest expense                                  $19,988             $20,045
Cash paid for income taxes                                       $8,100              $8,300
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.

                                       5
<PAGE>


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 six months ended June 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 June 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  $27,746,000  at June 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):
<TABLE>
<CAPTION>

                                         Three months ended June 30,    Six months ended June 30,
                                         --------------------------------------------------------
                                             2008          2007           2008          2007
    Allowance for loan losses:           --------------------------------------------------------
     <S>                                       <C>           <C>             <C>          <C>
     Balance at beginning of period         $19,383       $16,895         $17,331       $16,914
     Provision for loan losses                8,800           500          12,900           982
     Loans charged off:
       Real estate mortgage:
         Residential                           (167)            -            (221)            -
         Commercial                               -             -             (19)            -
       Consumer:
         Home equity lines                     (789)         (101)           (948)         (242)
         Home equity loans                     (161)            -            (250)            -
         Auto indirect                         (623)         (332)         (1,172)         (583)
         Other consumer                        (277)         (231)           (579)         (471)
       Commercial                              (254)          (87)           (389)         (194)
       Construction:
         Residential                         (1,905)            -          (2,983)            -
         Commercial                               -             -               -             -
                                          -------------------------------------------------------
     Total loans charged off                 (4,176)         (751)         (6,561)       (1,490)
     Recoveries of previously
       charged-off loans:
       Real estate mortgage:
         Residential                              -             -               -             -
         Commercial                              14            17              28            30
       Consumer:
         Home equity lines                        -             1               -             1
         Home equity loans                        -             5               -             5
         Auto indirect                           69           104             191           152
         Other consumer                         181           141             374           302
       Commercial                                10            87              18           103
       Construction:
         Residential                              -             -               -             -
         Commercial                               -             -               -             -
                                           ------------------------------------------------------
     Total recoveries of
       previously charged off loans             274           355             611           593
                                           ------------------------------------------------------
         Net charge-offs                     (3,902)         (396)         (5,950)         (897)
                                           ------------------------------------------------------
     Balance at end of period               $24,281       $16,999         $24,281       $16,999
                                           ======================================================

     Reserve for unfunded commitments:
     Balance at beginning of period          $2,915        $1,966         $2,090        $1,849
     Provision for losses -
       unfunded commitments                     550            74          1,375           191
                                           ------------------------------------------------------
     Balance at end of period                $3,465        $2,040         $3,465        $2,040
                                           ======================================================
     Balance at end of period:
     Allowance for loan losses                                           $24,281       $16,999
     Reserve for unfunded commitments                                      3,465         2,040
                                                                       --------------------------
     Allowance for losses                                                $27,746       $19,039
                                                                       ==========================
     As a percentage of total loans:
     Allowance for loan losses                                             1.57%          1.13%
     Reserve for unfunded commitments                                      0.23%          0.13%
                                                                       --------------------------
     Allowance for losses                                                  1.80%          1.26%
                                                                       ==========================
</TABLE>

                                       9
<PAGE>

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.

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):

                                          Six months ended June 30,
                                          -------------------------
                                               2008         2007
                                          -------------------------
Mortgage servicing rights:
Balance at beginning of period               $4,088        $3,912
Additions                                       412           369
Change in fair value                           (172)          (85)
                                          -------------------------
Balance at end of period                     $4,328        $4,196
                                          =========================
Servicing fees received                        $506          $491
Balance of loans serviced at:
    Beginning of period                    $406,743      $389,636
    End of period                          $417,080      $400,600
Weighted-average prepayment speed (CPR)        10.7%         11.5%
Discount rate                                  10.0%         10.0%

                                       10
<PAGE>

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
June 30, 2008 and December 31, 2008.

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

                            December 31,                                June 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.

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

                                  December 31,                          June 30,
                                      2007      Additions  Reductions     2008
   (Dollar in Thousands)          ----------------------------------------------
   Core deposit intangibles         $3,365         -             -      $3,365
   Accumulated amortization         (2,189)        -           (256)    (2,445)
                                  ----------------------------------------------
   Core deposit intangibles, net    $1,176         -          ($256)      $920
                                  ==============================================

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                            -

                                       11
<PAGE>

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.

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 June 30, 2008:

<TABLE>
<CAPTION>

                                                      Currently     Currently Not     Total
(dollars in thousands except exercise price)         Exercisable     Exercisable   Outstanding
<S>                                                      <C>             <C>           <C>
Number of options                                    1,159,911         274,570      1,434,481
Weighted average exercise price                         $13.36          $20.61         $14.74
Intrinsic value                                         $1,657               -         $1,657
Weighted average remaining contractual term (yrs.)        2.47            8.99           3.72
</TABLE>

The options for 274,570 shares that are not currently exercisable as of June 30,
2008 are  expected  to vest,  on a  weighted-average  basis,  over the next 3.39
years, and the Company is expected to recognize $1,817,000 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.

                                       12
<PAGE>

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

                                                 Three months ended June 30,  Six months ended June 30,

                                                      2008         2007           2008        2007
(in thousands)                                   -------------------------------------------------------
<S>                                                   <C>          <C>            <C>         <C>
Net income                                          $2,274       $6,755         $6,322     $13,199

Average number of common shares outstanding         15,745       15,916         15,793      15,898
Effect of dilutive stock options                       208          547            225         542
                                                 -------------------------------------------------------
Average number of common shares outstanding
   used to calculate diluted earnings per share     15,953       16,463         16,018      16,440
                                                 =======================================================
</TABLE>


There were 658,000 and 87,000 options  excluded from the  computation of diluted
earnings  per share for the three  month  periods  ended June 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 June 30,     Six Months Ended June 30,
                                             ---------------------------------------------------------
                                                 2008          2007             2008           2007
(in thousands)                               ---------------------------------------------------------
<S>                                               <C>           <C>              <C>            <C>
Unrealized holding losses on
   available-for-sale securities              ($5,185)      ($1,366)         ($2,464)         ($446)
Tax effect                                      2,180           575            1,036            188
                                             ---------------------------------------------------------
Unrealized holding losses on
   available-for-sale securities, net of tax  ($3,005)        ($791)         ($1,428)         ($258)
                                             =========================================================
</TABLE>

The   components  of  accumulated   other   comprehensive   loss,   included  in
shareholders' equity, are as follows:
<TABLE>
<CAPTION>
                                                                  June 30,   December 31,
                                                                    2008         2007
(in thousands)                                                   ------------------------
<S>                                                                  <C>           <C>
Net unrealized (losses) gains on available-for-sale securities    ($1,172)       $1,292
Tax effect                                                            493          (543)
                                                                 ------------------------
  Unrealized holding (losses) gains on
  available-for-sale securities, net of tax                         ($679)          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                              ($2,980)      ($1,552)
                                                                 ========================
</TABLE>

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.

                                       13
<PAGE>

The following table sets forth the net periodic  benefit cost recognized for the
plans:
<TABLE>
<CAPTION>
                                                                Three Months         Six Months
                                                               Ended June 30,      Ended June 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                $139       $150       $278     $300
Interest cost on projected benefit obligation                  166        146        332      292
Amortization of net obligation at transition                     -          -          -        -
Amortization of prior service cost                              45         45         90       90
Recognized net actuarial loss                                   37         28         74       56
                                                              -----------------------------------
Net periodic pension cost                                     $387       $369       $774     $738
                                                              ===================================
</TABLE>
During the six months ended June 30, 2008 and 2007, the Company  contributed and
paid out as benefits $314,000 and $284,000,  respectively, to participants under
the plans. For the year ending December 31, 2008, the Company  currently 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.

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 June 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.

                                       14
<PAGE>

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  currently quoted for comparable  instruments,  is used in the
completion  of the fair  value  measurement.  As such,  the  Company  classifies
mortgage servicing rights subjected to recurring fair value adjustments as Level
2.

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 June 30, 2008               Total     Level 1    Level 2   Level 3
Securities available-for-sale           $253,129         -    $253,129       -
Mortgage servicing rights                  4,328         -       4,328       -
                                        ----------------------------------------
Total assets measured at fair value     $257,457         -    $257,457       -
                                        ========================================

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

Fair value at June 30, 2008               Total     Level 1    Level 2   Level 3
Impaired loans                           $18,162         -          -    $18,162
                                         ---------------------------------------
Total assets measured at fair value      $18,162         -          -    $18,162

Recent Accounting Pronouncements
In February 2006, the Financial  Accounting  Standards  Board (FASB) issued FASB
Statement of Financial  Accounting  Standards  No. 155,  Accounting  for Certain
Hybrid  Financial  Instruments  an amendment of FASB  Statements No. 133 and 140
(SFAS 155). SFAS 155 amends SFAS 133, Accounting for Derivative  Instruments and
Hedging  Activities  and SFAS 140,  Accounting  for  Transfers  and Servicing of
Financial Assets and  Extinguishments of Liabilities.  SFAS 155 (i) permits fair
value  remeasurement  for any  hybrid  financial  instrument  that  contains  an
embedded  derivative  that otherwise would require  bifurcation,  (ii) clarifies
which  interest-only  strips and  principal-only  strips are not  subject to the
requirements of SFAS 133, (iii) establishes a requirement to evaluate  interests
in securitized  financial  assets to identify  interests  that are  freestanding
derivatives or that are hybrid  financial  instruments  that contain an embedded
derivative requiring  bifurcation,  (iv) clarifies that concentrations of credit
risk in the form of subordination are not embedded  derivatives,  and (v) amends
SFAS 140 to eliminate the  prohibition  on a qualifying  special  purpose entity
from holding a derivative  financial  instrument  that  pertains to a beneficial
interest  other  than  another  derivative  financial  instrument.  SFAS  155 is
effective  for the  Company on  January  1, 2007 and did not have a  significant
impact on the Company's consolidated financial statements.

                                       15
<PAGE>

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.

In June  2006,  the FASB  issued  FASB  Interpretation  No. 48,  Accounting  for
Uncertainty in Income Taxes, an  interpretation  of FASB Statement 109 (FIN 48).
FIN 48  prescribes a recognition  threshold and a measurement  attribute for the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected  to be taken in a tax return.  Benefits  from tax  positions  should be
recognized in the financial statements only when it is more likely than not that
the tax position will be sustained upon  examination by the  appropriate  taxing
authority  that would have full  knowledge  of all relevant  information.  A tax
position that meets the  more-likely-than-not  recognition threshold is measured
at the largest  amount of benefit that is greater than fifty  percent  likely of
being realized upon ultimate settlement. Tax positions that previously failed to
meet the more-likely-than-not  recognition threshold should be recognized in the
first  subsequent  financial  reporting  period in which that  threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
recognition  threshold should be derecognized in the first subsequent  financial
reporting  period in which that threshold is no longer met. FIN 48 also provides
guidance on the  accounting  for and  disclosure of  unrecognized  tax benefits,
interest and penalties.  FIN 48 was effective for the Company on January 1, 2007
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.

                                       16
<PAGE>

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.

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                TRICO BANCSHARES
                                Financial Summary
               (In thousands, except per share amounts; unaudited)

                                            Three months ended         Six months ended
                                                June 30,                   June 30,
                                         ------------------------------------------------
                                           2008           2007        2008         2007
                                         ------------------------------------------------
<S>                                          <C>           <C>         <C>         <C>
Net Interest Income (FTE)                 $23,029       $22,308     $44,575     $43,974
Provision for loan losses                  (8,800)         (500)    (12,900)       (982)
Noninterest income                          7,280         7,029      14,130      13,629
Noninterest expense                       (17,844)      (17,443)    (35,417)    (34,403)
Provision for income taxes (FTE)           (1,391)       (4,639)     (4,066)     (9,019)
                                         ------------------------------------------------
Net income                                 $2,274        $6,755      $6,322     $13,199
                                         ================================================
Earnings per share:
    Basic                                   $0.14         $0.42       $0.40       $0.83
    Diluted                                 $0.14         $0.41       $0.39       $0.80
Per share:
    Dividends paid                          $0.13         $0.13       $0.26       $0.26
    Book value at period end               $11.86        $11.22
    Tangible book value at period end      $10.81        $10.16

Average common shares outstanding          15,745        15,916      15,793      15,898
Average diluted shares outstanding         15,953        16,463      16,018      16,440
Shares outstanding at period end           15,745        15,917
At period end:
    Loans, net                         $1,519,043    $1,490,629
    Total assets                        1,980,490     1,887,027
    Total deposits                      1,511,053     1,510,879
    Other borrowings                       85,048        44,892
    Junior subordinated debt               41,238        41,238
    Shareholders' equity                 $186,686      $178,600
Financial Ratios:
During the period (annualized):
    Return on assets                         0.46%         1.44%      0.64%       1.41%
    Return on equity                         4.74%        15.11%      6.56%      14.95%
    Net interest margin(1)                   5.06%         5.25%      4.90%       5.19%
    Net loan charge-offs to average loans    1.01%         0.11%      0.77%       0.12%
    Efficiency ratio(1)                     58.87%        59.46%     60.33%      59.72%
At Period End:
    Equity to assets                         9.43%         9.46%
    Total capital to risk-adjusted assets   12.26%        11.76%
    Allowance for losses to loans(2)         1.80%         1.26%

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

                                       18
<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      Six months ended
                                            June 30,                June 30,
                                   ---------------------------------------------
                                     2008         2007          2008       2007
                                   ---------------------------------------------
Net Interest Income (FTE)           $23,029     $22,308       $44,575   $43,974
Provision for loan losses            (8,800)       (500)      (12,900)     (982)
Noninterest income                    7,280       7,029        14,130    13,629
Noninterest expense                 (17,844)    (17,443)      (35,417)  (34,403)
Provision for income taxes (FTE)     (1,391)     (4,639)       (4,066)   (9,019)
                                   ---------------------------------------------
Net income                           $2,274      $6,755        $6,322   $13,199
                                   =============================================

The Company had quarterly  earnings of  $2,274,000,  or $0.14 per diluted share,
for the three  months  ended  June 30,  2008.  This  represents  a  decrease  of
$4,481,000  (66.3%) when compared  with  earnings of $6,755,000  for the quarter
ended June 30, 2007.  Diluted  earnings per share for the quarter ended June 30,
2008  decreased  65.8% to $0.14 compared to $0.41 for the quarter ended June 30,
2007.  The decrease in earnings from the prior year quarter was primarily due to
the Company's  decision to increase by $8,300,000  the provision for loan losses
to  $8,800,000  and  increase by $476,000 the  provision  for losses on unfunded
commitments to $550,000.

The Company reported earnings of $6,322,000, or $0.39 per diluted share, for the
six months ended June 30, 2008. These results represent a decrease of $6,877,000
(52.1%) when compared with earnings of $13,199,000 for the six months ended June
30,  2007.  Diluted  earnings  per share for the six months  ended June 30, 2008
decreased  51.2% to $0.39  compared  to $0.80 for the six months  ended June 30,
2007. The decrease in earnings from the six month period ended June 30, 2007 was
primarily due to the Company's decision to increase by $11,918,000 the provision
for loan losses to  $12,900,000  and increase by  $1,184,000  the  provision for
losses on unfunded commitments to $1,375,000.

                                       19
<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       Six months ended
                                           June 30,                June 30,
                                ------------------------------------------------
                                     2008        2007         2008       2007
                                ------------------------------------------------
   Interest income                  $30,332      $31,986     $61,462    $62,647
   Interest expense                  (7,471)      (9,895)    (17,236)   (19,111)
   FTE adjustment                       168          217         349        438
                                ------------------------------------------------
      Net interest income (FTE)     $23,029      $22,308     $44,575    $43,974
                                ================================================
   Average interest-earning      $1,819,222   $1,698,620  $1,818,217 $1,695,597
     assets
   Net interest margin (FTE)          5.06%         5.25%       4.90%      5.19%

Net interest  income (FTE) during the second quarter of 2008 increased  $721,000
(3.2%) from the same period in 2007 to $23,029,000. The increase in net interest
income (FTE) was due to a $120,602,000  (7.1%)  increase in average  balances of
interest-earning  assets to $1,819,222,000  that was partially offset by a 0.19%
decrease in net interest  margin (FTE) to 5.06% from the quarter  ended June 20,
2007.

Net interest income (FTE) during the first six months of 2008 increased $601,000
(1.4%) from the same period in 2007 to $44,575,000. The increase in net interest
income (FTE) was due to a $122,620,000  (7.2%)  increase in average  balances of
interest-earning  assets to $1,818,217,000  that was partially offset by a 0.29%
decrease  in net  interest  margin  (FTE) to 4.90% from 5.19% from the six month
period ended June 30, 2007.

Interest and Fee Income
Interest  and  fee  income  (FTE)  for the  second  quarter  of  2008  decreased
$1,703,000  (5.3%) from the second  quarter of 2007.  The  decrease was due to a
0.87% decrease in the yield on average interest-earning assets to 6.71% that was
partially offset by a $120,602,000  (7.1%) increase in average  interest-earning
assets to  $1,819,222,000.  The growth in  interest-earning  assets was due to a
$39,344,000  (2.6%) increase in average loan balances to  $1,546,257,000  and an
increase  of  $81,500,000   (42.6%)  in  average   balances  of  investments  to
$272,811,000.  The decrease in the yield on average  interest-earning assets was
mainly due to a 0.94% decrease in yield on loans to 6.99%.  The decrease in loan
yields from the second 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 June 30, 2008.

Interest and fee income  (FTE) for the six months ended June 30, 2008  decreased
$1,274,000  (2.0%) from the same period of 2007. The decrease was due to a 0.64%
decrease  in the yield on  average  interest-earning  assets  to 6.80%  that was
partially offset by a $122,620,000  (7.2%) increase in average  interest-earning
assets to  $1,818,217,000.  The growth in  interest-earning  assets was due to a
$42,323,000  (2.8%) increase in average loan balances to  $1,540,807,000  and an
increase  of  $80,383,000   (40.9%)  in  average   balances  of  investments  to
$277,157,000.  The decrease in the yield on average  interest-earning assets was
mainly due to a 0.67% decrease in yield on loans to 7.11%.  The decrease in loan
yields  from the six  months  ended  June 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 June
30, 2008.

                                       20
<PAGE>

Interest Expense
Interest  expense  decreased  $2,424,000  (24.5%)  to  $7,471,000  in the second
quarter of 2008 compared to the second quarter of 2007.  The average  balance of
interest-bearing  liabilities increased $105,221,000 (8.0%) to $1,416,365,000 in
the second  quarter of 2008 compared to the second quarter of 2007. The increase
in the average  balance of  interest-bearing  liabilities  was due  primarily to
increases  of  $54,185,000  (71.2%)  and  $42,579,000  (101.1%)  in the  average
balances of Federal funds purchased and other borrowings, respectively, from the
second quarter of 2007. The average rate paid on interest-bearing liabilities in
the quarter ended June 30, 2008 decreased 0.91% to 2.11% compared to the quarter
ended June 30,  2007 as a result of lower  market  rates for almost all types of
interest-bearing liabilities.

Interest expense  decreased  $1,875,000 (9.8%) to $17,236,000 for the six months
ended June 30, 2008  compared to  $19,111,000  for the six months ended June 30,
2007. The average balance of interest-bearing liabilities increased $108,600,000
(8.3%) to $1,411,779,000  for the six months ended June 30, 2008 compared to the
six  months  ended  June 30,  2007.  The  increase  in the  average  balance  of
interest-bearing  liabilities  was due  primarily to  increases  of  $59,113,000
(102.3%)  and  $52,994,000  (126.6%)  in the average  balances of Federal  funds
purchased and other borrowings, respectively, from the six months ended June 30,
2007.  The average rate paid on  interest-bearing  liabilities  in the six month
period ended June 30, 2008  decreased  0.49% to 2.44% compared to the six months
ended June 30,  2007 as a result of lower  Federal  funds rate and lower  market
rates for time deposits.

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

                                     Three months ended        Six months ended
                                          June 30,                  June 30,
                                     -------------------------------------------
                                      2008         2007        2008       2007
                                     -------------------------------------------
Yield on interest-earning assets      6.71%        7.58%       6.80%      7.44%
Rate paid on interest-bearing
     Liabilities                      2.11%        3.02%       2.44%      2.93%
                                     -------------------------------------------
     Net interest spread              4.60%        4.56%       4.36%      4.51%
Impact of all other net
     noninterest-bearing funds        0.46%        0.69%       0.54%      0.68%
                                     -------------------------------------------
        Net interest margin           5.06%        5.25%       4.90%      5.19%
                                     ===========================================

Net interest  margin for the three months  ended June 30, 2008  decreased  0.19%
compared to the three months ended June 30, 2007.  This decrease in net interest
margin   was   mainly   due  to  an  0.23%   decrease   in  the  impact  of  net
noninterest-bearing funds to 0.46% from 0.69% in the three months ended June 30,
2007 that was partially offset by a 0.04% increase in net interest spread as the
average yield on interest-earning  assets decreased 0.87% while the average rate
paid on interest-bearing liabilities decreased 0.91% from the three months ended
June 30, 2007.

Net  interest  margin for the six months  ended June 30,  2008  decreased  0.29%
compared to the six months  ended June 30, 2007.  This  decrease in net interest
margin  was due to a 0.14%  decrease  in the  impact of net  noninterest-bearing
funds to 0.54%  from 0.68% in the six months  ended June 30,  2007,  and a 0.15%
decrease in net interest spread as the average yield on interest-earning  assets
decreased  0.64% while the  average  rate paid on  interest-bearing  liabilities
decreased 0.49% from the six months ended June 30, 2007.

                                       21
<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
                                       ---------------------------------------------------------------
                                               June 30, 2008                    June 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                                  $1,546,257  $27,015    6.99%     $1,506,913  $29,882     7.93%
Investment securities - taxable           247,508    2,017    4.88%        160,444    1,724     4.30%
Investment securities - nontaxable         25,303      467    7.38%         30,867      592     7.68%
Federal funds sold                            154        1    1.71%            396        5     5.05%
                                       -----------------------------    ------------------------------
Total interest-earning assets           1,819,222   30,500    6.71%      1,698,620   32,203     7.58%
                                                   -------                          -------
Other assets                              167,452                          172,640
                                       ----------                       ----------
Total assets                           $1,986,674                       $1,871,260
                                       ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits         $215,661      134    0.25%       $225,632     $114     0.20%
Savings deposits                          392,938    1,172    1.19%        382,835    1,480     1.55%
Time deposits                             551,574    4,344    3.15%        543,249    5,956     4.39%
Federal funds purchased                   130,263      711    2.18%         76,078    1,014     5.33%
Other borrowings                           84,691      524    2.47%         42,112      506     4.81%
Junior subordinated debt                   41,238      586    5.68%         41,238      825     8.00%
                                       ----------------------------     ------------------------------
Total interest-bearing liabilities      1,416,365    7,471    2.11%      1,311,144    9,895     3.02%
                                                    ------                           ------
Noninterest-bearing deposits              347,079                          349,017
Other liabilities                          31,225                           32,263
Shareholders' equity                      192,005                          178,836
                                       ----------                        ---------
Total liabilities and shareholders'    $1,986,674                       $1,871,260
  equity                               ==========                       ==========
Net interest spread(1)                                        4.60%                             4.56%
Net interest income and interest margin(2)         $23,029    5.06%                 $22,308     5.25%
                                                   ================                 ===================
(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.
</TABLE>

                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                         For the three months ended
                                       ---------------------------------------------------------------
                                               June 30, 2008                    June 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                                  $1,540,807  $54,741    7.11%     $1,498,484 $58,305     7.78%
Investment securities - taxable           251,143    6,095    4.85%        165,258   3,565     4.31%
Investment securities - nontaxable         26,014      972    7.47%         31,516   1,207     7.66%
Federal funds sold                            253        3    2.37%            339       8     4.72%
                                       -----------------------------    ------------------------------
Total interest-earning assets           1,818,217   61,811    6.80%      1,695,597  63,085     7.44%
                                                    ------                          ------
Other assets                              169,453                          172,757
                                          -------                          -------
Total assets                           $1,987,670                       $1,868,354
                                       ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits         $217,074      221    0.20%       $227,852    $229     0.20%
Savings deposits                          390,214    2,674    1.37%        382,359   2,657     1.39%
Time deposits                             551,497    9,932    3.60%        552,081  12,052     4.37%
Federal funds purchased                   116,914    1,523    2.61%         57,801   1,536     5.31%
Other borrowings                           94,842    1,587    3.35%         41,848     996     4.76%
Junior subordinated debt                   41,238    1,299    6.30%         41,238   1,641     7.96%
                                       ----------------------------     ------------------------------
Total interest-bearing liabilities      1,411,779   17,236    2.44%      1,303,179  19,111     2.93%
                                                    ------                          ------
Noninterest-bearing deposits              350,643                          355,311
Other liabilities                          32,521                           33,315
Shareholders' equity                      192,727                          176,549
                                       ----------                       ----------
Total liabilities and shareholders'    $1,987,670                       $1,868,354
  equity                               ==========                       ==========
Net interest spread(1)                                        4.36%                            4.51%
Net interest income and interest margin(2)         $44,575    4.90%                $43,974     5.19%
                                                   ================                ===================
(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.
</TABLE>

                                       23
<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 June 30, 2008
                                            compared with three months
                                               ended June 30, 2007
                                          --------------------------------------
                                               Volume        Rate         Total
                                          --------------------------------------
Increase (decrease) in interest income:
Loans                                           $780       ($3,647)     ($2,867)
Investment securities                            987           181        1,168
Federal funds sold                                (3)           (1)          (4)
                                          --------------------------------------
   Total interest-earning assets               1,764        (3,467)      (1,703)
                                          --------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                  (5)           32           27
Savings deposits                                  49          (737)        (688)
Time deposits                                     86        (1,325)      (1,239)
Federal funds purchased                          722        (1,025)        (303)
Other borrowings                                 512          (494)          18
Junior subordinated debt                           -          (239)        (239)
                                          --------------------------------------
   Total interest-bearing liabilities          1,364        (3,788)      (2,424)
                                          --------------------------------------
Increase in Net Interest Income                 $400          $321         $721
                                          ======================================

                                             Six months ended June 30, 2008
                                              compared with three months
                                                 ended June 30, 2007
                                          --------------------------------------
                                               Volume        Rate         Total
                                          --------------------------------------
Increase (decrease) in interest income:
Loans                                         $1,646       ($5,210)     ($3,564)
Investment securities                          1,950           345        2,295
Federal funds sold                                (2)           (3)          (5)
                                          --------------------------------------
   Total interest-earning assets               3,594        (4,868)      (1,274)
                                          --------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                 (11)            3           (8)
Savings deposits                                  55           (38)          17
Time deposits                                    (13)       (2,107)      (2,120)
Federal funds purchased                        1,569        (1,582)         (13)
Other borrowings                               1,261          (670)         591
Junior subordinated debt                           -          (342)        (342)
                                          --------------------------------------
   Total interest-bearing liabilities          2,861        (4,736)      (1,875)
                                          --------------------------------------
Increase in Net Interest Income                 $733         ($132)        $601
                                          ======================================

Provision for Loan Losses
The Company  provided  $8,800,000  for loan losses in the second quarter of 2008
versus  $500,000 in the second  quarter of 2007. In the second  quarter of 2008,
the Company recorded  $3,902,000 of net loan charge-offs  versus $396,000 of net
loan  charge-offs  in the second  quarter of 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,  net charge-offs of $950,000
on home equity  lines and loans and $554,000 on auto  indirect  loans were taken
during the  second  quarter of 2008.  During  the  second  quarter of 2008,  the
Company also  increased its  allowance  for loan losses by  $4,898,000  from the
first  quarter of 2008 with such  additional  reserves  allocated  primarily  to
consumer loans, residential real estate and construction lending.

                                       24
<PAGE>

The Company  provided  $12,900,000  for loan losses  during the six months ended
June 30, 2008 versus  $982,000 during the six months ended June 30, 2007. In the
six months  ended June 30, 2008,  the Company  recorded  $5,950,000  of net loan
charge-offs versus $897,000 of net loan charge-offs in the six months ended June
30, 2007. 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.  A total of  $1,198,000  in home  equity  lines  and loans and
$981,000  on auto  indirect  loans have been  charged-off  during the six months
ended June 30,  2008.  During the six months  ended June 30,  2008,  the Company
increased its  allowance  for loan losses by  $6,950,000  from December 31, 2007
with such additional reserves allocated primarily to consumer loans, residential
real estate and construction lending.

                                       25
<PAGE>

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

                                             Three months ended           Six months ended
                                                  June 30,                    June 30,
                                             -------------------------------------------------
                                               2008          2007         2008         2007
                                             -------------------------------------------------
   <S>                                         <C>           <C>           <C>            <C>

  Service charges on deposit accounts        $3,963        $3,858        $7,801        $7,417
  ATM fees and interchange revenue            1,168         1,046         2,247         1,995
  Other service fees                            527           544         1,078         1,109
  Change in value of mortgage servicing rights  168         (73)         (172)          (85)
  Gain on sale of loans                         316           279           574           545
  Commissions on sale of
    nondeposit investment products              525           550           945         1,050
  Increase in cash value of life insurance      360           405           720           810
  Gain from VISA IPO                              -             -           396             -
  Other noninterest income                      253           420           541           788
                                             -------------------------------------------------
  Total noninterest income                   $7,280        $7,029       $14,130       $13,629
                                             =================================================
</TABLE>

Noninterest income for the second quarter of 2008 increased $251,000 (3.6%) from
the second  quarter of 2007,  mainly due to a $241,000  increase in the value of
mortgage  servicing rights to a positive $168,000 from a negative $73,000 in the
second quarter of 2007. Also contributing to the increase in noninterest  income
was a $105,000  (2.7%)  increase  in service  charges  on  deposit  accounts  to
$3,963,000,  and a $122,000  (11.7%)  increase  in ATM fees and  interchange  to
$1,168,000.  The increases in service  charges on deposit  accounts and ATM fees
and  interchange  revenue were primarily due to increased  numbers of customers.
The improvement in change in value of mortgage servicing rights is primarily due
to a slowdown in refinance activity which extends the estimated life of existing
mortgages and enhances the value of the related mortgage servicing rights.

Noninterest  income for the six months  ended June 30, 2008  increased  $501,000
(3.7%) to $14,130,000  from the same period in 2007. The increase in noninterest
income from the six months ended June 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 $384,000  (5.2%)  increase in service  charges on deposit
accounts  to  $7,801,000,  and a  $252,000  (12.6%)  increase  in ATM  fees  and
interchange to $2,247,000.  The increases in service charges on deposit accounts
and ATM fees and interchange  revenue were primarily due to increased numbers of
customers.

                                       26
<PAGE>

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

                                               Three months ended            Six months ended
                                                    June 30,                    June 30,
                                             --------------------------------------------------
                                                2008          2007         2008         2007
                                             --------------------------------------------------
   <S>                                         <C>           <C>           <C>            <C>
  Base salaries, net of
     deferred loan origination costs         $6,316        $5,940         $12,649       $11,934
  Incentive compensation                        830         1,281           1,390         2,485
  Benefits and other compensation costs       2,499         2,398           5,086         4,942
                                             --------------------------------------------------
     Total salaries and related benefits      9,645         9,619          19,125        19,361
                                             --------------------------------------------------

  Occupancy                                   1,228         1,178           2,416         2,348
  Equipment                                     998         1,072           1,980         2,170
  Telecommunications                            630           419           1,227           828
  Data processing and software                  596           499           1,211           918
  Provisions for losses-unfunded commitments    550            74           1,375           191
  ATM network charges                           529           498           1,023           926
  Professional fees                             509           462           1,002           809
  Advertising and marketing                     434           600             753         1,004
  Courier service                               275           284             538           582
  Postage                                       216           203             498           424
  Intangible amortization                       133           122             256           245
  Operational losses                             92           125             205           185
  Assessments                                    83            84             165           165
  Other                                       1,926         2,204           3,643         4,247
                                            ---------------------------------------------------
  Total other noninterest expense             8,199         7,824          16,292        15,042
                                            ---------------------------------------------------
  Total noninterest expense                 $17,844       $17,443         $35,417       $34,403
                                            ===================================================
  Average full time equivalent staff            626           630             626           631
  Noninterest expense to revenue (FTE)        58.87%        59.46%         60.33%        59.72%
</TABLE>

Noninterest  expense for the second  quarter of 2008 increased  $401,000  (2.3%)
compared to the second quarter of 2007.  Salaries and benefits expense increased
$26,000 (0.3%) to $9,645,000 mainly due to annual salary increases and increased
benefit costs that were substantially offset by reduced incentive  compensation.
Other noninterest  expense increased $375,000 (4.8%) primarily due to a $476,000
(643%) increase in provision for losses on unfunded commitments.

Noninterest expense for the six months ended June 30, 2008 increased  $1,014,000
(2.9%)  compared to the six months  ended June 30,  2007.  Salaries and benefits
expense  decreased  $236,000  (1.2%) to  $19,125,000  mainly due to a $1,095,000
(44.1%) decrease in incentive  compensation  that was partially offset by annual
salary  increases  and  increased  benefits  costs.  Other  noninterest  expense
increased  $1,250,000  (8.3%)  primarily due to a $1,184,000  (620%) increase in
provision for losses on unfunded commitments.

Provision for Income Tax
The  effective  tax rate for the three  months ended June 30, 2008 was 35.0% and
reflects a decrease  from 39.6% for the three months  ended June 30,  2007.  The
effective tax rate for the six months ended June 30, 2008 was 37.0% and reflects
a decrease from 39.4% for the six months ended June 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.

                                       27
<PAGE>

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 June 30, 2008            At December 31, 2007
                          -------------------------    -------------------------
                            Gross  Guaranteed  Net      Gross  Guaranteed   Net
                          ------------------------------------------------------
Classified loans          $55,674   $5,600  $50,074    $18,570  $5,948  $12,622
Other classified assets     1,178        -    1,178        187       -      187
                          ------------------------------------------------------
Total classified assets   $56,852   $5,600  $51,252    $18,757  $5,948  $12,809
                          ======================================================
Allowance for loan losses/classified loans     48.5%                      137.3%

Classified  assets,  net of  guarantees  of the U.S.  Government,  including its
agencies and its government-sponsored  agencies, increased $38,443,000 (300%) to
$51,252,000 at June 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.

Interest income on nonaccrual loans, which would have been recognized during the
six months ended June 30, 2008, if all such loans had been current in accordance
with their original terms, totaled $952,000. Interest income actually recognized
on these loans during the six months ended June 30, 2008 was $415,000.

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.

                                       28
<PAGE>

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  $8,288,000  (107.7%) to  $15,986,000  during the first six
months of 2008.  Nonperforming  assets net of  guarantees  represented  0.81% of
total  assets  at June 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 June 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                   $13,826   $5,425   $8,401     $9,098  $5,814   $3,284
Nonperforming, nonaccrual loans                 6,426       47    6,379      4,227       -    4,227
                                              ------------------------------------------------------
     Total nonaccrual loans                    20,252    5,472   14,780     13,325   5,814    7,511
Loans 90 days past due and still accruing          28        -       28          -       -        -
                                              ------------------------------------------------------
Total nonperforming loans                      20,280    5,472   14,808     13,325   5,814    7,511
Other real estate owned                         1,178        -    1,178        187       -      187
                                              ------------------------------------------------------
Total nonperforming assets                    $21,458   $5,472  $15,986    $13,512  $5,814   $7,698
                                              ======================================================
Nonperforming loans to total loans                                 0.96%                       0.48%
Nonperforming assets to total assets                               0.81%                       0.39%
Allowance for loan losses/nonperforming loans                       164%                        231%
</TABLE>

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 June 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
$186,686,000 at June 30, 2008.  This amount  represents a decrease of $2,192,000
from  December 31, 2007,  the net result of the  repurchase of common stock with
value of $2,821,000,  dividends paid of $4,099,000, and the cumulative effect of
a change in accounting principle,  net of tax, of $522,000,  partially offset by
comprehensive income for the period of $4,894,000 and the effect of stock option
vesting of $356,000.  The  Company's  ratio of equity to total assets was 9.43%,
9.46%,  and 9.54% as of June 30,  2008,  June 30,  2007,  and December 31, 2007,
respectively.

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

                               At June 30,         At            Minimum
                           -----------------    December 31,    Regulatory
                           2008       2007        2007          Requirement
                           ------------------------------------------------
     Tier I Capital        11.01%     10.76%     10.90%         4.00%
     Total Capital         12.26%     11.76%     11.90%         8.00%
     Leverage ratio        10.80%     11.11%     11.16%         4.00%

                                       29
<PAGE>

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 June 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 $651,448,000 and $690,633,000 at June 30,
2008 and December 31, 2007,  respectively,  and represent 42.2% and 44.5% of the
total loans  outstanding  at June 30, 2008 and December 31, 2007,  respectively.
Commitments  related to the Bank's deposit  overdraft  privilege product totaled
$37,882,000   and   $33,517,000   at  June  30,  2008  and  December  31,  2007,
respectively.

                                       30
<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 June 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 June 30, 2008 and 2007,  the Company  had no  material  derivative  financial
instruments.

                                       31
<PAGE>


Liquidity
The  Company's  principal  source of asset  liquidity is federal  funds sold and
marketable  investment  securities available for sale. At June 30, 2008, federal
funds sold and investment  securities  available for sale totaled  $253,129,000,
representing  an increase of  $20,427,000  (8.9%) from December 31, 2007, and an
increase of  $77,238,000  (43.9%) from June 30, 2007.  In addition,  the Company
generates  additional  liquidity  from its operating  activities.  The Company's
profitability  during  the first six  months of 2008  generated  cash flows from
operations of $15,611,000 compared to $15,713,000 during the first six 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 $26,883,000 during the six months
ended June 30, 2008  compared to  $21,664,000  for the six months ended June 30,
2007.  During  the  six  months  ended  June  30,  2008,  the  Company  invested
$50,463,000  in  securities  and  received  $1,667,000  of  net  loan  principal
reductions,  compared to $223,000  invested in securities  and $1,167,000 of net
loan principal  reductions,  respectively,  during the first six months of 2007.
These changes in investment  and loan balances  contributed  to net cash used by
investing  activities of $23,333,000  during the six months ended June 30, 2008,
compared to net cash provided by investing  activities of $20,895,000 during the
six months ended June 30, 2007. Financing activities used net cash of $4,418,000
during  the six  months  ended  June 30,  2008,  compared  to net  cash  used in
financing  activities of $44,271,000  during the six months ended June 30, 2007.
Deposit balance  decreases  accounted for $34,170,000 of financing uses of funds
during the six months ended June 30, 2008, compared to $88,270,000 of funds used
by  decreases  in  deposits  during the six months  ended June 30,  2007.  A net
decrease in short-term other  borrowings  accounted for $31,039,000 of financing
uses of funds during the six months ended June 30, 2008,  compared to $5,015,000
of funds provided by an increase in short-term other  borrowings  during the six
months ended June 30, 2007.  Dividends  paid used  $4,099,000  and $4,137,000 of
cash  during  the six  months  ended June 30,  2008 and 2007,  respectively.  An
increase in Federal funds purchased provided  $67,750,000 of cash during the six
months  ended June 30,  2008.  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  June  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 six  months of 2008  that  have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                       32
<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.

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>
Apr. 1-30, 2008           -              -                    -                    333,400
May 1-31, 2008            -              -                    -                    333,400
Jun. 1-30, 2008           -              -                    -                    333,400
---------------------------------------------------------------------------------------------------
Total                     -              -                    -                    333,400
</TABLE>


Item 4 - Submission of Matters to a Vote of Security Holders

(a) The Company's Annual Meeting of Shareholders was held on May 20, 2008.
(b)and (c) The following ten directors were elected at the meeting:

                                 Votes For  Votes Against/Withheld   Abstentions
       William J. Casey          13,390,064        168,025              -
       Donald J. Amaral          13,411,367        146,722              -
       Craig S. Compton          13,396,454        161,635              -
       John S.A. Hasbrook        13,425,253        132,836              -
       Michael W. Koehnen        13,416,425        141,664              -
       Donald E. Murphy          13,397,377        160,712              -
       Steve G. Nettleton        13,415,303        142,786              -
       Richard P. Smith          13,398,194        159,895              -
       Carroll R. Taresh         13,420,131        137,958              -
       Alex A. Vereschagin, Jr.  11,785,398      1,722,691              -
       L. Gage Chrysler III      13,392,452        165,637              -

The  shareholders  ratified  the  appointment  of Moss Adams LLP as  independent
public accountants of the Company for 2008. 13,250,013 shares were voted for the
ratification, 24,420 shares were voted against and 283,656 shares abstained.

                                       33
<PAGE>


Item 6 - Exhibits

     3.1*      Restated  Articles of  Incorporation  dated May 9, 2003, filed as
               Exhibit  3.1 to  TriCo's  Quarterly  Report  on Form 10-Q for the
               quarter ended March 31, 2003.

     3.2*      Bylaws of TriCo Bancshares,  as amended,  filed as Exhibit 3.2 to
               TriCo's Form S-4  Registration  Statement  dated January 16, 2003
               (No. 333-102546).

     4*        Certificate of  Determination  of Preferences of Series AA Junior
               Participating  Preferred  Stock  filed as Exhibit  3.3 to TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2001.

     10.1*     Rights  Agreement  dated June 25, 2001,  between TriCo and Mellon
               Investor  Services  LLC filed as  Exhibit 1 to  TriCo's  Form 8-A
               dated July 25, 2001.

     10.2*     Form of Change of Control  Agreement dated as of August 23, 2005,
               between  TriCo,  Tri Counties Bank and each of Bruce Belton,  Dan
               Bailey,  Craig Carney, Gary Coelho,  W.R. Hagstrom,  Rick Miller,
               Richard O'Sullivan, Thomas Reddish, and Ray Rios filed as Exhibit
               10.2 to  TriCo's  Quarterly  Report on Form 10-Q for the  quarter
               ended September 30, 2005.

     10.6*     TriCo's 1995 Incentive  Stock Option Plan filed as Exhibit 4.1 to
               TriCo's  Form S-8  Registration  Statement  dated August 23, 1995
               (No. 33-62063).

     10.7*     TriCo's 2001 Stock Option Plan, as amended, filed as Exhibit 10.7
               to TriCo's  Quarterly  Report on Form 10-Q for the quarter  ended
               June 30, 2005.

     10.8*     Amended  Employment  Agreement  between  TriCo and Richard  Smith
               dated as of August  23,  2005  filed as  Exhibit  10.8 to TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2005.

     10.9*     Tri Counties Bank Executive  Deferred  Compensation Plan restated
               April 1, 1992,  and  January  1, 2005  filed as  Exhibit  10.9 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2005.

     10.10*    Tri  Counties  Bank  Deferred  Compensation  Plan  for  Directors
               effective  January  1, 2005  filed as  Exhibit  10.10 to  TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2005.

     10.11*    2005 Tri Counties Bank Deferred  Compensation Plan for Executives
               and Directors effective January 1, 2005 filed as Exhibit 10.11 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2005.

     10.13*    Tri Counties  Bank  Supplemental  Retirement  Plan for  Directors
               dated September 1, 1987, as restated January 1, 2001, and amended
               and  restated  January 1, 2004 filed as Exhibit  10.12 to TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     10.14*    2004 TriCo Bancshares  Supplemental Retirement Plan for Directors
               effective  January  1, 2004  filed as  Exhibit  10.13 to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

                                       34
<PAGE>

     10.15*    Tri  Counties  Bank   Supplemental   Executive   Retirement  Plan
               effective  September 1, 1987, as amended and restated  January 1,
               2004 filed as Exhibit 10.14 to TriCo's  Quarterly  Report on Form
               10-Q for the quarter ended June 30, 2004.

     10.16*    2004 TriCo  Bancshares  Supplemental  Executive  Retirement  Plan
               effective  January  1, 2004  filed as  Exhibit  10.15 to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     10.17*    Form of Joint  Beneficiary  Agreement  effective  March 31,  2003
               between Tri Counties  Bank and each of George  Barstow,  Dan Bay,
               Ron Bee, Craig Carney,  Robert Elmore, Greg Gill, Richard Miller,
               Richard  O'Sullivan,  Thomas  Reddish,  Jerald  Sax,  and Richard
               Smith, filed as Exhibit 10.14 to TriCo's Quarterly Report on Form
               10-Q for the quarter ended September 30, 2003.

     10.18*    Form of Joint  Beneficiary  Agreement  effective  March 31,  2003
               between Tri Counties Bank and each of Don Amaral,  William Casey,
               Craig Compton,  John Hasbrook,  Michael  Koehnen,  Donald Murphy,
               Carroll Taresh,  and Alex  Vereshagin,  filed as Exhibit 10.15 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2003.

     10.19*    Form of  Tri-Counties  Bank  Executive  Long Term Care  Agreement
               effective  June 10, 2003  between Tri  Counties  Bank and each of
               Craig Carney,  Richard  Miller,  Richard  O'Sullivan,  and Thomas
               Reddish,  filed as Exhibit 10.16 to TriCo's  Quarterly  Report on
               Form 10-Q for the quarter ended September 30, 2003.

     10.20*    Form of  Tri-Counties  Bank  Director  Long Term  Care  Agreement
               effective June 10, 2003 between Tri Counties Bank and each of Don
               Amaral,  William  Casey,  Craig Compton,  John Hasbrook,  Michael
               Koehnen,  Donald Murphy,  Carroll Taresh,  and Alex  Vereschagin,
               filed as Exhibit 10.17 to TriCo's  Quarterly  Report on Form 10-Q
               for the quarter ended September 30, 2003.

     10.21*    Form of  Indemnification  Agreement between TriCo  Bancshares/Tri
               Counties Bank and each of the  directors of TriCo  Bancshares/Tri
               Counties  Bank  effective on the date that each director is first
               elected,  filed as Exhibit 10.18 to TriCo'S Annual Report on Form
               10-K for the year ended December 31, 2003.

     10.22*    Form of  Indemnification  Agreement between TriCo  Bancshares/Tri
               Counties  Bank  and  each  of  Dan  Bailey,  Craig  Carney,  W.R.
               Hagstrom,  Rick Miller,  Richard O'Sullivan,  Thomas Reddish, Ray
               Rios,  and  Richard  Smith  filed as  Exhibit  10.21  to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     21.1      Tri  Counties  Bank,  a  California  banking  corporation,  TriCo
               Capital  Trust I, a Delaware  business  trust,  and TriCo Capital
               Trust II, a Delaware business trust, are the only subsidiaries of
               Registrant

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

     * Previously filed and incorporated by reference.

                                       35
<PAGE>


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:  August 5, 2008       /s/ Thomas J. Reddish
                            ---------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer
                            (Principal financial officer)

                                       36
<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: August 5, 2008        /s/ Richard P. Smith
                            --------------------
                            Richard P. Smith
                            President and Chief Executive Officer

                                       37
<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.   ny 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: August 5, 2008        /s/ Thomas J. Reddish
                            ---------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer

                                       38
<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 June 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 June 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.


                                       39
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{"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": "08999925"}, "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 June 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 July 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                                                    18

        Item 2 - Management's Discussion and Analysis of Financial           19
                 Condition and Results of Operations

        Item 3 - Quantitative and Qualitative Disclosures about Market Risk  31

        Item 4 - Controls and Procedures                                     32

PART II - OTHER INFORMATION                                                  33

        Item 1 - Legal Proceedings                                           33

        Item 1A - Risk Factors                                               33

        Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 33

        Item 4 - Submission of Matters to a Vote of Security Holders         33

        Item 6 - Exhibits                                                    34

        Signatures                                                           36

        Exhibits                                                             37
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 June 30,           At December 31,
                                                            2008              2007            2007
                                                       -----------------------------    ---------------
Assets:
     Cash and due from banks                              $76,658           $93,636          $88,798
     Federal funds sold                                         -             1,715                -
                                                       -----------------------------     --------------
         Cash and cash equivalents                         76,658            95,351           88,798
     Securities available-for-sale                        253,129           175,891          232,427
     Federal Home Loan Bank stock, at cost                  9,010             8,543            8,766
     Loans, net of allowance for loan losses
         of $24,281, $16,999 and $17,331                1,519,043         1,490,629        1,534,635
     Foreclosed assets, net of allowance for
         losses of $214, $180 and $180                      1,178               187              187
     Premises and equipment, net                           19,580            20,891           20,492
     Cash value of life insurance                          45,701            44,346           44,981
     Accrued interest receivable                            7,802             8,284            8,554
     Goodwill                                              15,519            15,519           15,519
     Other intangible assets, net                             920             1,421            1,176
     Other assets                                          31,950            25,965           25,086
                                                       -----------------------------    ---------------
         Total Assets                                  $1,980,490        $1,887,027       $1,980,621
                                                       =============================    ===============
Liabilities:
     Deposits:
         Noninterest-bearing demand                      $347,336          $366,321         $378,680
         Interest-bearing                               1,163,717         1,144,558        1,166,543
                                                       -----------------------------    ---------------
         Total deposits                                 1,511,053         1,510,879        1,545,223
     Federal funds purchased                              123,750            80,500           56,000
     Accrued interest payable                               5,119             6,614            7,871
     Reserve for unfunded commitments                       3,465             2,040            2,090
     Other liabilities                                     24,131            22,264           23,195
     Other borrowings                                      85,048            44,892          116,126
     Junior subordinated debt                              41,238            41,238           41,238
                                                       ------------------------------    --------------
         Total Liabilities                              1,793,804         1,708,427        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 June 30, 2008                       78,306
         15,917,291 at June 30, 2007                                         76,394
         15,911,550 at December 31, 2007                                                      78,775
     Retained earnings                                    111,360           106,985          111,655
     Accumulated other comprehensive income (loss), net    (2,980)           (4,779)          (1,552)
                                                       ------------------------------    --------------
         Total Shareholders' Equity                       186,686           178,600          188,878
                                                       ------------------------------    --------------
     Total Liabilities and Shareholders' Equity        $1,980,490        $1,887,027       $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 June 30,    Six months ended June 30,
                                                       2008           2007        2008           2007
                                                 --------------------------------------------------------
Interest and dividend income:
Loans, including fees                                 $27,015      $29,882      $54,741        $58,305
Debt securities:
  Taxable                                               2,892        1,623        5,851          3,342
  Tax exempt                                              299          375          623            769
Dividends                                                 125          101          244            223
Federal funds sold                                          1            5            3              8
                                                  -------------------------------------------------------
Total interest income                                  30,332       31,986       61,462         62,647
                                                  -------------------------------------------------------
Interest expense:
Deposits                                                5,650        7,550       12,827         14,938
Federal funds purchased                                   711        1,014        1,523          1,536
Other borrowings                                          524          506        1,587            996
Junior subordinated debt                                  586          825        1,299          1,641
                                                  -------------------------------------------------------
Total interest expense                                  7,471        9,895       17,236         19,111
                                                  -------------------------------------------------------
Net interest income                                    22,861       22,091       44,226         43,536
                                                  -------------------------------------------------------
Provision for loan losses                               8,800          500       12,900            982
                                                  -------------------------------------------------------
Net interest income after provision for loan losses    14,061       21,591       31,326         42,554
                                                  -------------------------------------------------------
Noninterest income:
Service charges and fees                                5,826        5,375       10,954         10,436
Gain on sale of loans                                     316          279          574            545
Commissions on sale of non-deposit investment products    525          550          945          1,050
Increase in cash value of life insurance                  360          405          720            810
Other                                                     253          420          937            788
                                                  -------------------------------------------------------
Total noninterest income                                7,280        7,029       14,130         13,629
                                                  -------------------------------------------------------

Noninterest expense:
Salaries and related benefits                           9,645        9,619       19,125         19,361
Other                                                   8,199        7,824       16,292         15,042
                                                  -------------------------------------------------------
Total noninterest expense                              17,844       17,443       35,417         34,403
                                                  -------------------------------------------------------
Income before income taxes                              3,497       11,177       10,039         21,780
Provision for income taxes                              1,223        4,422        3,717          8,581
                                                  -------------------------------------------------------
Net income                                             $2,274       $6,755       $6,322        $13,199
                                                  =======================================================

Average shares outstanding                         15,744,881   15,916,313   15,793,483      15,897,621
Diluted average shares outstanding                 15,953,288   16,463,369   16,017,505      16,439,607
Per share data:
Basic earnings                                          $0.14        $0.42        $0.40          $0.83
Diluted earnings                                        $0.14        $0.41        $0.39          $0.80
Dividends paid                                          $0.13        $0.13        $0.26          $0.26

See accompanying notes to unaudited condensed consolidated financial statements.
3
TRICO BANCSHARES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  (In thousands, except 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                                                   13,199                    13,199
Change in net unrealized gain on
   Securities available for sale, net                                        (258)       (258)
                                                                                      --------
Total comprehensive income                                                             12,941
Stock option vesting                                376                                   376
Stock options exercised             177,600       1,964                                 1,964
Tax benefit of stock options exercised              861                                   861
Repurchase of common stock         (117,516)       (546)     (2,295)                   (2,841)
Dividends paid ($0.26 per share)                             (4,137)                   (4,137)
                                 -------------------------------------------------------------
Balance at June 30, 2007         15,917,291     $76,394    $106,985      ($4,779)    $178,600
                                 =============================================================

Balance at December 31, 2007     15,911,550     $78,775    $111,655       ($1,552)   $188,878
Comprehensive income:                                                                ---------
Net income                                                    6,322                     6,322
Change in net unrealized gain on
   Securities available for sale, net                                      (1,428)     (1,428)
                                                                                      --------
Total comprehensive income                                                              4,894
Cumulative effect of change in
   Accounting principle, net of tax                            (522)                     (522)
Stock option vesting                                356                                   356
Repurchase of common stock         (166,669)       (825)     (1,996)                   (2,821)
Dividends paid ($0.26 per share)                             (4,099)                   (4,099)
                                 -------------------------------------------------------------
Balance at June 30, 2008          15,744,881    $78,306    $111,360       ($2,980)   $186,686
                                 =============================================================
See accompanying notes to unaudited condensed consolidated financial statements.

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

                                                                 For the six months ended June 30,
                                                                     2008               2007
                                                               -----------------------------------
Operating activities:
Net income                                                       $6,322             $13,199
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Depreciation and amortization of property and equipment       1,745               1,902
    Amortization of intangible assets                               256                 245
    Provision for loan losses                                    12,900                 982
    Amortization of investment securities premium, net              170                 380
    Originations of loans for resale                            (41,412)            (35,677)
    Proceeds from sale of loans originated for resale            41,574              35,853
    Gain on sale of loans                                          (574)               (545)
    Change in value of mortgage servicing rights                    172                  85
    Provision for losses on other real estate owned                  34                   -
    Loss on sale of fixed assets                                      2                   5
    Increase in cash value of life insurance                       (720)               (810)
    Stock option expense                                            356                 376
    Stock option tax benefits                                         -                (861)
    Change in:
      Reserve for unfunded commitments                            1,375                 191
      Interest receivable                                           752                 443
      Interest payable                                           (2,752)               (934)
      Other assets and liabilities, net                          (4,589)                879
                                                               ----------------------------------
        Net cash provided by operating activities                15,611              15,713
                                                               ----------------------------------
Investing activities:
Proceeds from maturities of securities available-for-sale        26,883              21,644
Purchases of securities available-for-sale                      (50,219)                  -
Purchases of Federal Home Loan Bank stock                          (244)               (223)
Loan originations and principal collections, net                  1,667               1,167
Proceeds from sale of premises and equipment                          1                  11
Purchases of premises and equipment                              (1,421)             (1,704)
                                                               ----------------------------------
Net cash (used in) provided by investing activities             (23,333)             20,895
                                                               ----------------------------------
Financing activities:
Net decrease in deposits                                        (34,170)            (88,270)
Net increase in Federal funds purchased                          67,750              42,500
Payments of principal on long-term other borrowings                 (39)                (34)
Net change in short-term other borrowings                       (31,039)              5,015
Stock option tax benefits                                             -                 861
Repurchase of common stock                                       (2,821)               (470)
Dividends paid                                                   (4,099)             (4,137)
Exercise of stock options                                             -                 264
                                                               ----------------------------------
      Net cash used in financing activities                      (4,418)            (44,271)
                                                               ----------------------------------
  Net change in cash and cash equivalents                       (12,140)             (7,663)
                                                               ----------------------------------
  Cash and cash equivalents and beginning of period              88,798             103,014
                                                               ----------------------------------
  Cash and cash equivalents at end of period                    $76,658             $95,351
                                                               ==================================
  Supplemental disclosure of noncash activities:
Loans transferred to other real estate owned                     $1,025                $187
Unrealized loss on securities available for sale                ($2,464)              ($446)
Value of shares tendered in lieu of cash paid to
  exercise stock options and to pay related tax withholding           -              $2,371
Supplemental disclosure of cash flow activity:
Cash paid for interest expense                                  $19,988             $20,045
Cash paid for income taxes                                       $8,100              $8,300
See accompanying notes to unaudited condensed consolidated financial
statements.

                                       5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 six months ended June 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 June 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  $27,746,000  at June 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 June 30,    Six months ended June 30,
                                         --------------------------------------------------------
                                             2008          2007           2008          2007
    Allowance for loan losses:           --------------------------------------------------------
Balance at beginning of period         $19,383       $16,895         $17,331       $16,914
     Provision for loan losses                8,800           500          12,900           982
     Loans charged off:
       Real estate mortgage:
         Residential                           (167)            -            (221)            -
         Commercial                               -             -             (19)            -
       Consumer:
         Home equity lines                     (789)         (101)           (948)         (242)
         Home equity loans                     (161)            -            (250)            -
         Auto indirect                         (623)         (332)         (1,172)         (583)
         Other consumer                        (277)         (231)           (579)         (471)
       Commercial                              (254)          (87)           (389)         (194)
       Construction:
         Residential                         (1,905)            -          (2,983)            -
         Commercial                               -             -               -             -
                                          -------------------------------------------------------
     Total loans charged off                 (4,176)         (751)         (6,561)       (1,490)
     Recoveries of previously
       charged-off loans:
       Real estate mortgage:
         Residential                              -             -               -             -
         Commercial                              14            17              28            30
       Consumer:
         Home equity lines                        -             1               -             1
         Home equity loans                        -             5               -             5
         Auto indirect                           69           104             191           152
         Other consumer                         181           141             374           302
       Commercial                                10            87              18           103
       Construction:
         Residential                              -             -               -             -
         Commercial                               -             -               -             -
                                           ------------------------------------------------------
     Total recoveries of
       previously charged off loans             274           355             611           593
                                           ------------------------------------------------------
         Net charge-offs                     (3,902)         (396)         (5,950)         (897)
                                           ------------------------------------------------------
     Balance at end of period               $24,281       $16,999         $24,281       $16,999
                                           ======================================================

     Reserve for unfunded commitments:
     Balance at beginning of period          $2,915        $1,966         $2,090        $1,849
     Provision for losses -
       unfunded commitments                     550            74          1,375           191
                                           ------------------------------------------------------
     Balance at end of period                $3,465        $2,040         $3,465        $2,040
                                           ======================================================
     Balance at end of period:
     Allowance for loan losses                                           $24,281       $16,999
     Reserve for unfunded commitments                                      3,465         2,040
                                                                       --------------------------
     Allowance for losses                                                $27,746       $19,039
                                                                       ==========================
     As a percentage of total loans:
     Allowance for loan losses                                             1.57%          1.13%
     Reserve for unfunded commitments                                      0.23%          0.13%
                                                                       --------------------------
     Allowance for losses                                                  1.80%          1.26%
                                                                       ==========================
9
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.

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):

                                          Six months ended June 30,
                                          -------------------------
                                               2008         2007
                                          -------------------------
Mortgage servicing rights:
Balance at beginning of period               $4,088        $3,912
Additions                                       412           369
Change in fair value                           (172)          (85)
                                          -------------------------
Balance at end of period                     $4,328        $4,196
                                          =========================
Servicing fees received                        $506          $491
Balance of loans serviced at:
    Beginning of period                    $406,743      $389,636
    End of period                          $417,080      $400,600
Weighted-average prepayment speed (CPR)        10.7%         11.5%
Discount rate                                  10.0%         10.0%

                                       10
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
June 30, 2008 and December 31, 2008.

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

                            December 31,                                June 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.

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

                                  December 31,                          June 30,
                                      2007      Additions  Reductions     2008
   (Dollar in Thousands)          ----------------------------------------------
   Core deposit intangibles         $3,365         -             -      $3,365
   Accumulated amortization         (2,189)        -           (256)    (2,445)
                                  ----------------------------------------------
   Core deposit intangibles, net    $1,176         -          ($256)      $920
                                  ==============================================

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                            -

                                       11
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.

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 June 30, 2008:
Currently     Currently Not     Total
(dollars in thousands except exercise price)         Exercisable     Exercisable   Outstanding
Number of options                                    1,159,911         274,570      1,434,481
Weighted average exercise price                         $13.36          $20.61         $14.74
Intrinsic value                                         $1,657               -         $1,657
Weighted average remaining contractual term (yrs.)        2.47            8.99           3.72
The options for 274,570 shares that are not currently exercisable as of June 30,
2008 are  expected  to vest,  on a  weighted-average  basis,  over the next 3.39
years, and the Company is expected to recognize $1,817,000 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.

                                       12
Earnings per share have been computed based on the following:
Three months ended June 30,  Six months ended June 30,

                                                      2008         2007           2008        2007
(in thousands)                                   -------------------------------------------------------
Net income                                          $2,274       $6,755         $6,322     $13,199

Average number of common shares outstanding         15,745       15,916         15,793      15,898
Effect of dilutive stock options                       208          547            225         542
                                                 -------------------------------------------------------
Average number of common shares outstanding
   used to calculate diluted earnings per share     15,953       16,463         16,018      16,440
                                                 =======================================================
There were 658,000 and 87,000 options  excluded from the  computation of diluted
earnings  per share for the three  month  periods  ended June 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 June 30,     Six Months Ended June 30,
                                             ---------------------------------------------------------
                                                 2008          2007             2008           2007
(in thousands)                               ---------------------------------------------------------
Unrealized holding losses on
   available-for-sale securities              ($5,185)      ($1,366)         ($2,464)         ($446)
Tax effect                                      2,180           575            1,036            188
                                             ---------------------------------------------------------
Unrealized holding losses on
   available-for-sale securities, net of tax  ($3,005)        ($791)         ($1,428)         ($258)
                                             =========================================================
The   components  of  accumulated   other   comprehensive   loss,   included  in
shareholders' equity, are as follows:
June 30,   December 31,
                                                                    2008         2007
(in thousands)                                                   ------------------------
Net unrealized (losses) gains on available-for-sale securities    ($1,172)       $1,292
Tax effect                                                            493          (543)
                                                                 ------------------------
  Unrealized holding (losses) gains on
  available-for-sale securities, net of tax                         ($679)          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                              ($2,980)      ($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.

                                       13
The following table sets forth the net periodic  benefit cost recognized for the
plans:
Three Months         Six Months
                                                               Ended June 30,      Ended June 30,
                                                             ----------------     ---------------
(in thousands)                                                2008       2007       2008     2007
                                                              ----       ----       ----     ----
Net pension cost included the following components:
Service cost-benefits earned during the period                $139       $150       $278     $300
Interest cost on projected benefit obligation                  166        146        332      292
Amortization of net obligation at transition                     -          -          -        -
Amortization of prior service cost                              45         45         90       90
Recognized net actuarial loss                                   37         28         74       56
                                                              -----------------------------------
Net periodic pension cost                                     $387       $369       $774     $738
                                                              ===================================
During the six months ended June 30, 2008 and 2007, the Company  contributed and
paid out as benefits $314,000 and $284,000,  respectively, to participants under
the plans. For the year ending December 31, 2008, the Company  currently 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.

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 June 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.

                                       14
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  currently quoted for comparable  instruments,  is used in the
completion  of the fair  value  measurement.  As such,  the  Company  classifies
mortgage servicing rights subjected to recurring fair value adjustments as Level
2.

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 June 30, 2008               Total     Level 1    Level 2   Level 3
Securities available-for-sale           $253,129         -    $253,129       -
Mortgage servicing rights                  4,328         -       4,328       -
                                        ----------------------------------------
Total assets measured at fair value     $257,457         -    $257,457       -
                                        ========================================

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

Fair value at June 30, 2008               Total     Level 1    Level 2   Level 3
Impaired loans                           $18,162         -          -    $18,162
                                         ---------------------------------------
Total assets measured at fair value      $18,162         -          -    $18,162

Recent Accounting Pronouncements
In February 2006, the Financial  Accounting  Standards  Board (FASB) issued FASB
Statement of Financial  Accounting  Standards  No. 155,  Accounting  for Certain
Hybrid  Financial  Instruments  an amendment of FASB  Statements No. 133 and 140
(SFAS 155). SFAS 155 amends SFAS 133, Accounting for Derivative  Instruments and
Hedging  Activities  and SFAS 140,  Accounting  for  Transfers  and Servicing of
Financial Assets and  Extinguishments of Liabilities.  SFAS 155 (i) permits fair
value  remeasurement  for any  hybrid  financial  instrument  that  contains  an
embedded  derivative  that otherwise would require  bifurcation,  (ii) clarifies
which  interest-only  strips and  principal-only  strips are not  subject to the
requirements of SFAS 133, (iii) establishes a requirement to evaluate  interests
in securitized  financial  assets to identify  interests  that are  freestanding
derivatives or that are hybrid  financial  instruments  that contain an embedded
derivative requiring  bifurcation,  (iv) clarifies that concentrations of credit
risk in the form of subordination are not embedded  derivatives,  and (v) amends
SFAS 140 to eliminate the  prohibition  on a qualifying  special  purpose entity
from holding a derivative  financial  instrument  that  pertains to a beneficial
interest  other  than  another  derivative  financial  instrument.  SFAS  155 is
effective  for the  Company on  January  1, 2007 and did not have a  significant
impact on the Company's consolidated financial statements.

                                       15
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.

In June  2006,  the FASB  issued  FASB  Interpretation  No. 48,  Accounting  for
Uncertainty in Income Taxes, an  interpretation  of FASB Statement 109 (FIN 48).
FIN 48  prescribes a recognition  threshold and a measurement  attribute for the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected  to be taken in a tax return.  Benefits  from tax  positions  should be
recognized in the financial statements only when it is more likely than not that
the tax position will be sustained upon  examination by the  appropriate  taxing
authority  that would have full  knowledge  of all relevant  information.  A tax
position that meets the  more-likely-than-not  recognition threshold is measured
at the largest  amount of benefit that is greater than fifty  percent  likely of
being realized upon ultimate settlement. Tax positions that previously failed to
meet the more-likely-than-not  recognition threshold should be recognized in the
first  subsequent  financial  reporting  period in which that  threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
recognition  threshold should be derecognized in the first subsequent  financial
reporting  period in which that threshold is no longer met. FIN 48 also provides
guidance on the  accounting  for and  disclosure of  unrecognized  tax benefits,
interest and penalties.  FIN 48 was effective for the Company on January 1, 2007
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.

                                       16
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.

                                       17
TRICO BANCSHARES
                                Financial Summary
               (In thousands, except per share amounts; unaudited)

                                            Three months ended         Six months ended
                                                June 30,                   June 30,
                                         ------------------------------------------------
                                           2008           2007        2008         2007
                                         ------------------------------------------------
Net Interest Income (FTE)                 $23,029       $22,308     $44,575     $43,974
Provision for loan losses                  (8,800)         (500)    (12,900)       (982)
Noninterest income                          7,280         7,029      14,130      13,629
Noninterest expense                       (17,844)      (17,443)    (35,417)    (34,403)
Provision for income taxes (FTE)           (1,391)       (4,639)     (4,066)     (9,019)
                                         ------------------------------------------------
Net income                                 $2,274        $6,755      $6,322     $13,199
                                         ================================================
Earnings per share:
    Basic                                   $0.14         $0.42       $0.40       $0.83
    Diluted                                 $0.14         $0.41       $0.39       $0.80
Per share:
    Dividends paid                          $0.13         $0.13       $0.26       $0.26
    Book value at period end               $11.86        $11.22
    Tangible book value at period end      $10.81        $10.16

Average common shares outstanding          15,745        15,916      15,793      15,898
Average diluted shares outstanding         15,953        16,463      16,018      16,440
Shares outstanding at period end           15,745        15,917
At period end:
    Loans, net                         $1,519,043    $1,490,629
    Total assets                        1,980,490     1,887,027
    Total deposits                      1,511,053     1,510,879
    Other borrowings                       85,048        44,892
    Junior subordinated debt               41,238        41,238
    Shareholders' equity                 $186,686      $178,600
Financial Ratios:
During the period (annualized):
    Return on assets                         0.46%         1.44%      0.64%       1.41%
    Return on equity                         4.74%        15.11%      6.56%      14.95%
    Net interest margin(1)                   5.06%         5.25%      4.90%       5.19%
    Net loan charge-offs to average loans    1.01%         0.11%      0.77%       0.12%
    Efficiency ratio(1)                     58.87%        59.46%     60.33%      59.72%
At Period End:
    Equity to assets                         9.43%         9.46%
    Total capital to risk-adjusted assets   12.26%        11.76%
    Allowance for losses to loans(2)         1.80%         1.26%

    (1)   Fully taxable equivalent (FTE).
    (2)   Allowance  for losses  includes  allowance for loan losses and reserve
          for unfunded commitments.
18
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      Six months ended
                                            June 30,                June 30,
                                   ---------------------------------------------
                                     2008         2007          2008       2007
                                   ---------------------------------------------
Net Interest Income (FTE)           $23,029     $22,308       $44,575   $43,974
Provision for loan losses            (8,800)       (500)      (12,900)     (982)
Noninterest income                    7,280       7,029        14,130    13,629
Noninterest expense                 (17,844)    (17,443)      (35,417)  (34,403)
Provision for income taxes (FTE)     (1,391)     (4,639)       (4,066)   (9,019)
                                   ---------------------------------------------
Net income                           $2,274      $6,755        $6,322   $13,199
                                   =============================================

The Company had quarterly  earnings of  $2,274,000,  or $0.14 per diluted share,
for the three  months  ended  June 30,  2008.  This  represents  a  decrease  of
$4,481,000  (66.3%) when compared  with  earnings of $6,755,000  for the quarter
ended June 30, 2007.  Diluted  earnings per share for the quarter ended June 30,
2008  decreased  65.8% to $0.14 compared to $0.41 for the quarter ended June 30,
2007.  The decrease in earnings from the prior year quarter was primarily due to
the Company's  decision to increase by $8,300,000  the provision for loan losses
to  $8,800,000  and  increase by $476,000 the  provision  for losses on unfunded
commitments to $550,000.

The Company reported earnings of $6,322,000, or $0.39 per diluted share, for the
six months ended June 30, 2008. These results represent a decrease of $6,877,000
(52.1%) when compared with earnings of $13,199,000 for the six months ended June
30,  2007.  Diluted  earnings  per share for the six months  ended June 30, 2008
decreased  51.2% to $0.39  compared  to $0.80 for the six months  ended June 30,
2007. The decrease in earnings from the six month period ended June 30, 2007 was
primarily due to the Company's decision to increase by $11,918,000 the provision
for loan losses to  $12,900,000  and increase by  $1,184,000  the  provision for
losses on unfunded commitments to $1,375,000.

                                       19
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       Six months ended
                                           June 30,                June 30,
                                ------------------------------------------------
                                     2008        2007         2008       2007
                                ------------------------------------------------
   Interest income                  $30,332      $31,986     $61,462    $62,647
   Interest expense                  (7,471)      (9,895)    (17,236)   (19,111)
   FTE adjustment                       168          217         349        438
                                ------------------------------------------------
      Net interest income (FTE)     $23,029      $22,308     $44,575    $43,974
                                ================================================
   Average interest-earning      $1,819,222   $1,698,620  $1,818,217 $1,695,597
     assets
   Net interest margin (FTE)          5.06%         5.25%       4.90%      5.19%

Net interest  income (FTE) during the second quarter of 2008 increased  $721,000
(3.2%) from the same period in 2007 to $23,029,000. The increase in net interest
income (FTE) was due to a $120,602,000  (7.1%)  increase in average  balances of
interest-earning  assets to $1,819,222,000  that was partially offset by a 0.19%
decrease in net interest  margin (FTE) to 5.06% from the quarter  ended June 20,
2007.

Net interest income (FTE) during the first six months of 2008 increased $601,000
(1.4%) from the same period in 2007 to $44,575,000. The increase in net interest
income (FTE) was due to a $122,620,000  (7.2%)  increase in average  balances of
interest-earning  assets to $1,818,217,000  that was partially offset by a 0.29%
decrease  in net  interest  margin  (FTE) to 4.90% from 5.19% from the six month
period ended June 30, 2007.

Interest and Fee Income
Interest  and  fee  income  (FTE)  for the  second  quarter  of  2008  decreased
$1,703,000  (5.3%) from the second  quarter of 2007.  The  decrease was due to a
0.87% decrease in the yield on average interest-earning assets to 6.71% that was
partially offset by a $120,602,000  (7.1%) increase in average  interest-earning
assets to  $1,819,222,000.  The growth in  interest-earning  assets was due to a
$39,344,000  (2.6%) increase in average loan balances to  $1,546,257,000  and an
increase  of  $81,500,000   (42.6%)  in  average   balances  of  investments  to
$272,811,000.  The decrease in the yield on average  interest-earning assets was
mainly due to a 0.94% decrease in yield on loans to 6.99%.  The decrease in loan
yields from the second 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 June 30, 2008.

Interest and fee income  (FTE) for the six months ended June 30, 2008  decreased
$1,274,000  (2.0%) from the same period of 2007. The decrease was due to a 0.64%
decrease  in the yield on  average  interest-earning  assets  to 6.80%  that was
partially offset by a $122,620,000  (7.2%) increase in average  interest-earning
assets to  $1,818,217,000.  The growth in  interest-earning  assets was due to a
$42,323,000  (2.8%) increase in average loan balances to  $1,540,807,000  and an
increase  of  $80,383,000   (40.9%)  in  average   balances  of  investments  to
$277,157,000.  The decrease in the yield on average  interest-earning assets was
mainly due to a 0.67% decrease in yield on loans to 7.11%.  The decrease in loan
yields  from the six  months  ended  June 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 June
30, 2008.

                                       20
Interest Expense
Interest  expense  decreased  $2,424,000  (24.5%)  to  $7,471,000  in the second
quarter of 2008 compared to the second quarter of 2007.  The average  balance of
interest-bearing  liabilities increased $105,221,000 (8.0%) to $1,416,365,000 in
the second  quarter of 2008 compared to the second quarter of 2007. The increase
in the average  balance of  interest-bearing  liabilities  was due  primarily to
increases  of  $54,185,000  (71.2%)  and  $42,579,000  (101.1%)  in the  average
balances of Federal funds purchased and other borrowings, respectively, from the
second quarter of 2007. The average rate paid on interest-bearing liabilities in
the quarter ended June 30, 2008 decreased 0.91% to 2.11% compared to the quarter
ended June 30,  2007 as a result of lower  market  rates for almost all types of
interest-bearing liabilities.

Interest expense  decreased  $1,875,000 (9.8%) to $17,236,000 for the six months
ended June 30, 2008  compared to  $19,111,000  for the six months ended June 30,
2007. The average balance of interest-bearing liabilities increased $108,600,000
(8.3%) to $1,411,779,000  for the six months ended June 30, 2008 compared to the
six  months  ended  June 30,  2007.  The  increase  in the  average  balance  of
interest-bearing  liabilities  was due  primarily to  increases  of  $59,113,000
(102.3%)  and  $52,994,000  (126.6%)  in the average  balances of Federal  funds
purchased and other borrowings, respectively, from the six months ended June 30,
2007.  The average rate paid on  interest-bearing  liabilities  in the six month
period ended June 30, 2008  decreased  0.49% to 2.44% compared to the six months
ended June 30,  2007 as a result of lower  Federal  funds rate and lower  market
rates for time deposits.

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

                                     Three months ended        Six months ended
                                          June 30,                  June 30,
                                     -------------------------------------------
                                      2008         2007        2008       2007
                                     -------------------------------------------
Yield on interest-earning assets      6.71%        7.58%       6.80%      7.44%
Rate paid on interest-bearing
     Liabilities                      2.11%        3.02%       2.44%      2.93%
                                     -------------------------------------------
     Net interest spread              4.60%        4.56%       4.36%      4.51%
Impact of all other net
     noninterest-bearing funds        0.46%        0.69%       0.54%      0.68%
                                     -------------------------------------------
        Net interest margin           5.06%        5.25%       4.90%      5.19%
                                     ===========================================

Net interest  margin for the three months  ended June 30, 2008  decreased  0.19%
compared to the three months ended June 30, 2007.  This decrease in net interest
margin   was   mainly   due  to  an  0.23%   decrease   in  the  impact  of  net
noninterest-bearing funds to 0.46% from 0.69% in the three months ended June 30,
2007 that was partially offset by a 0.04% increase in net interest spread as the
average yield on interest-earning  assets decreased 0.87% while the average rate
paid on interest-bearing liabilities decreased 0.91% from the three months ended
June 30, 2007.

Net  interest  margin for the six months  ended June 30,  2008  decreased  0.29%
compared to the six months  ended June 30, 2007.  This  decrease in net interest
margin  was due to a 0.14%  decrease  in the  impact of net  noninterest-bearing
funds to 0.54%  from 0.68% in the six months  ended June 30,  2007,  and a 0.15%
decrease in net interest spread as the average yield on interest-earning  assets
decreased  0.64% while the  average  rate paid on  interest-bearing  liabilities
decreased 0.49% from the six months ended June 30, 2007.

                                       21
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
                                       ---------------------------------------------------------------
                                               June 30, 2008                    June 30, 2007
                                       -----------------------------     -----------------------------
                                                   Interest    Rates               Interest    Rates
                                        Average    Income/    Earned    Average    Income/     Earned
                                        Balance    Expense    Paid      Balance    Expense     Paid
                                       -----------------------------    ------------------------------
Assets:
Loans                                  $1,546,257  $27,015    6.99%     $1,506,913  $29,882     7.93%
Investment securities - taxable           247,508    2,017    4.88%        160,444    1,724     4.30%
Investment securities - nontaxable         25,303      467    7.38%         30,867      592     7.68%
Federal funds sold                            154        1    1.71%            396        5     5.05%
                                       -----------------------------    ------------------------------
Total interest-earning assets           1,819,222   30,500    6.71%      1,698,620   32,203     7.58%
                                                   -------                          -------
Other assets                              167,452                          172,640
                                       ----------                       ----------
Total assets                           $1,986,674                       $1,871,260
                                       ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits         $215,661      134    0.25%       $225,632     $114     0.20%
Savings deposits                          392,938    1,172    1.19%        382,835    1,480     1.55%
Time deposits                             551,574    4,344    3.15%        543,249    5,956     4.39%
Federal funds purchased                   130,263      711    2.18%         76,078    1,014     5.33%
Other borrowings                           84,691      524    2.47%         42,112      506     4.81%
Junior subordinated debt                   41,238      586    5.68%         41,238      825     8.00%
                                       ----------------------------     ------------------------------
Total interest-bearing liabilities      1,416,365    7,471    2.11%      1,311,144    9,895     3.02%
                                                    ------                           ------
Noninterest-bearing deposits              347,079                          349,017
Other liabilities                          31,225                           32,263
Shareholders' equity                      192,005                          178,836
                                       ----------                        ---------
Total liabilities and shareholders'    $1,986,674                       $1,871,260
  equity                               ==========                       ==========
Net interest spread(1)                                        4.60%                             4.56%
Net interest income and interest margin(2)         $23,029    5.06%                 $22,308     5.25%
                                                   ================                 ===================
(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
For the three months ended
                                       ---------------------------------------------------------------
                                               June 30, 2008                    June 30, 2007
                                       -----------------------------     -----------------------------
                                                   Interest    Rates               Interest    Rates
                                        Average    Income/    Earned    Average    Income/     Earned
                                        Balance    Expense    Paid      Balance    Expense     Paid
                                       -----------------------------    ------------------------------
Assets:
Loans                                  $1,540,807  $54,741    7.11%     $1,498,484 $58,305     7.78%
Investment securities - taxable           251,143    6,095    4.85%        165,258   3,565     4.31%
Investment securities - nontaxable         26,014      972    7.47%         31,516   1,207     7.66%
Federal funds sold                            253        3    2.37%            339       8     4.72%
                                       -----------------------------    ------------------------------
Total interest-earning assets           1,818,217   61,811    6.80%      1,695,597  63,085     7.44%
                                                    ------                          ------
Other assets                              169,453                          172,757
                                          -------                          -------
Total assets                           $1,987,670                       $1,868,354
                                       ==========                       ==========
Liabilities and shareholders' equity:
Interest-bearing demand deposits         $217,074      221    0.20%       $227,852    $229     0.20%
Savings deposits                          390,214    2,674    1.37%        382,359   2,657     1.39%
Time deposits                             551,497    9,932    3.60%        552,081  12,052     4.37%
Federal funds purchased                   116,914    1,523    2.61%         57,801   1,536     5.31%
Other borrowings                           94,842    1,587    3.35%         41,848     996     4.76%
Junior subordinated debt                   41,238    1,299    6.30%         41,238   1,641     7.96%
                                       ----------------------------     ------------------------------
Total interest-bearing liabilities      1,411,779   17,236    2.44%      1,303,179  19,111     2.93%
                                                    ------                          ------
Noninterest-bearing deposits              350,643                          355,311
Other liabilities                          32,521                           33,315
Shareholders' equity                      192,727                          176,549
                                       ----------                       ----------
Total liabilities and shareholders'    $1,987,670                       $1,868,354
  equity                               ==========                       ==========
Net interest spread(1)                                        4.36%                            4.51%
Net interest income and interest margin(2)         $44,575    4.90%                $43,974     5.19%
                                                   ================                ===================
(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.
23
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 June 30, 2008
                                            compared with three months
                                               ended June 30, 2007
                                          --------------------------------------
                                               Volume        Rate         Total
                                          --------------------------------------
Increase (decrease) in interest income:
Loans                                           $780       ($3,647)     ($2,867)
Investment securities                            987           181        1,168
Federal funds sold                                (3)           (1)          (4)
                                          --------------------------------------
   Total interest-earning assets               1,764        (3,467)      (1,703)
                                          --------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                  (5)           32           27
Savings deposits                                  49          (737)        (688)
Time deposits                                     86        (1,325)      (1,239)
Federal funds purchased                          722        (1,025)        (303)
Other borrowings                                 512          (494)          18
Junior subordinated debt                           -          (239)        (239)
                                          --------------------------------------
   Total interest-bearing liabilities          1,364        (3,788)      (2,424)
                                          --------------------------------------
Increase in Net Interest Income                 $400          $321         $721
                                          ======================================

                                             Six months ended June 30, 2008
                                              compared with three months
                                                 ended June 30, 2007
                                          --------------------------------------
                                               Volume        Rate         Total
                                          --------------------------------------
Increase (decrease) in interest income:
Loans                                         $1,646       ($5,210)     ($3,564)
Investment securities                          1,950           345        2,295
Federal funds sold                                (2)           (3)          (5)
                                          --------------------------------------
   Total interest-earning assets               3,594        (4,868)      (1,274)
                                          --------------------------------------
Increase (decrease) in interest expense:
Interest-bearing demand deposits                 (11)            3           (8)
Savings deposits                                  55           (38)          17
Time deposits                                    (13)       (2,107)      (2,120)
Federal funds purchased                        1,569        (1,582)         (13)
Other borrowings                               1,261          (670)         591
Junior subordinated debt                           -          (342)        (342)
                                          --------------------------------------
   Total interest-bearing liabilities          2,861        (4,736)      (1,875)
                                          --------------------------------------
Increase in Net Interest Income                 $733         ($132)        $601
                                          ======================================

Provision for Loan Losses
The Company  provided  $8,800,000  for loan losses in the second quarter of 2008
versus  $500,000 in the second  quarter of 2007. In the second  quarter of 2008,
the Company recorded  $3,902,000 of net loan charge-offs  versus $396,000 of net
loan  charge-offs  in the second  quarter of 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,  net charge-offs of $950,000
on home equity  lines and loans and $554,000 on auto  indirect  loans were taken
during the  second  quarter of 2008.  During  the  second  quarter of 2008,  the
Company also  increased its  allowance  for loan losses by  $4,898,000  from the
first  quarter of 2008 with such  additional  reserves  allocated  primarily  to
consumer loans, residential real estate and construction lending.

                                       24
The Company  provided  $12,900,000  for loan losses  during the six months ended
June 30, 2008 versus  $982,000 during the six months ended June 30, 2007. In the
six months  ended June 30, 2008,  the Company  recorded  $5,950,000  of net loan
charge-offs versus $897,000 of net loan charge-offs in the six months ended June
30, 2007. 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.  A total of  $1,198,000  in home  equity  lines  and loans and
$981,000  on auto  indirect  loans have been  charged-off  during the six months
ended June 30,  2008.  During the six months  ended June 30,  2008,  the Company
increased its  allowance  for loan losses by  $6,950,000  from December 31, 2007
with such additional reserves allocated primarily to consumer loans, residential
real estate and construction lending.

                                       25
Noninterest Income
The following  table  summarizes the  components of  noninterest  income for the
periods indicated (dollars in thousands).
Three months ended           Six months ended
                                                  June 30,                    June 30,
                                             -------------------------------------------------
                                               2008          2007         2008         2007
                                             -------------------------------------------------
Service charges on deposit accounts        $3,963        $3,858        $7,801        $7,417
  ATM fees and interchange revenue            1,168         1,046         2,247         1,995
  Other service fees                            527           544         1,078         1,109
  Change in value of mortgage servicing rights  168         (73)         (172)          (85)
  Gain on sale of loans                         316           279           574           545
  Commissions on sale of
    nondeposit investment products              525           550           945         1,050
  Increase in cash value of life insurance      360           405           720           810
  Gain from VISA IPO                              -             -           396             -
  Other noninterest income                      253           420           541           788
                                             -------------------------------------------------
  Total noninterest income                   $7,280        $7,029       $14,130       $13,629
                                             =================================================
Noninterest income for the second quarter of 2008 increased $251,000 (3.6%) from
the second  quarter of 2007,  mainly due to a $241,000  increase in the value of
mortgage  servicing rights to a positive $168,000 from a negative $73,000 in the
second quarter of 2007. Also contributing to the increase in noninterest  income
was a $105,000  (2.7%)  increase  in service  charges  on  deposit  accounts  to
$3,963,000,  and a $122,000  (11.7%)  increase  in ATM fees and  interchange  to
$1,168,000.  The increases in service  charges on deposit  accounts and ATM fees
and  interchange  revenue were primarily due to increased  numbers of customers.
The improvement in change in value of mortgage servicing rights is primarily due
to a slowdown in refinance activity which extends the estimated life of existing
mortgages and enhances the value of the related mortgage servicing rights.

Noninterest  income for the six months  ended June 30, 2008  increased  $501,000
(3.7%) to $14,130,000  from the same period in 2007. The increase in noninterest
income from the six months ended June 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 $384,000  (5.2%)  increase in service  charges on deposit
accounts  to  $7,801,000,  and a  $252,000  (12.6%)  increase  in ATM  fees  and
interchange to $2,247,000.  The increases in service charges on deposit accounts
and ATM fees and interchange  revenue were primarily due to increased numbers of
customers.

                                       26
Noninterest Expense
The following  table  summarizes the  components of noninterest  expense for the
periods indicated (dollars in thousands).
Three months ended            Six months ended
                                                    June 30,                    June 30,
                                             --------------------------------------------------
                                                2008          2007         2008         2007
                                             --------------------------------------------------
Base salaries, net of
     deferred loan origination costs         $6,316        $5,940         $12,649       $11,934
  Incentive compensation                        830         1,281           1,390         2,485
  Benefits and other compensation costs       2,499         2,398           5,086         4,942
                                             --------------------------------------------------
     Total salaries and related benefits      9,645         9,619          19,125        19,361
                                             --------------------------------------------------

  Occupancy                                   1,228         1,178           2,416         2,348
  Equipment                                     998         1,072           1,980         2,170
  Telecommunications                            630           419           1,227           828
  Data processing and software                  596           499           1,211           918
  Provisions for losses-unfunded commitments    550            74           1,375           191
  ATM network charges                           529           498           1,023           926
  Professional fees                             509           462           1,002           809
  Advertising and marketing                     434           600             753         1,004
  Courier service                               275           284             538           582
  Postage                                       216           203             498           424
  Intangible amortization                       133           122             256           245
  Operational losses                             92           125             205           185
  Assessments                                    83            84             165           165
  Other                                       1,926         2,204           3,643         4,247
                                            ---------------------------------------------------
  Total other noninterest expense             8,199         7,824          16,292        15,042
                                            ---------------------------------------------------
  Total noninterest expense                 $17,844       $17,443         $35,417       $34,403
                                            ===================================================
  Average full time equivalent staff            626           630             626           631
  Noninterest expense to revenue (FTE)        58.87%        59.46%         60.33%        59.72%
Noninterest  expense for the second  quarter of 2008 increased  $401,000  (2.3%)
compared to the second quarter of 2007.  Salaries and benefits expense increased
$26,000 (0.3%) to $9,645,000 mainly due to annual salary increases and increased
benefit costs that were substantially offset by reduced incentive  compensation.
Other noninterest  expense increased $375,000 (4.8%) primarily due to a $476,000
(643%) increase in provision for losses on unfunded commitments.

Noninterest expense for the six months ended June 30, 2008 increased  $1,014,000
(2.9%)  compared to the six months  ended June 30,  2007.  Salaries and benefits
expense  decreased  $236,000  (1.2%) to  $19,125,000  mainly due to a $1,095,000
(44.1%) decrease in incentive  compensation  that was partially offset by annual
salary  increases  and  increased  benefits  costs.  Other  noninterest  expense
increased  $1,250,000  (8.3%)  primarily due to a $1,184,000  (620%) increase in
provision for losses on unfunded commitments.

Provision for Income Tax
The  effective  tax rate for the three  months ended June 30, 2008 was 35.0% and
reflects a decrease  from 39.6% for the three months  ended June 30,  2007.  The
effective tax rate for the six months ended June 30, 2008 was 37.0% and reflects
a decrease from 39.4% for the six months ended June 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.

                                       27
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 June 30, 2008            At December 31, 2007
                          -------------------------    -------------------------
                            Gross  Guaranteed  Net      Gross  Guaranteed   Net
                          ------------------------------------------------------
Classified loans          $55,674   $5,600  $50,074    $18,570  $5,948  $12,622
Other classified assets     1,178        -    1,178        187       -      187
                          ------------------------------------------------------
Total classified assets   $56,852   $5,600  $51,252    $18,757  $5,948  $12,809
                          ======================================================
Allowance for loan losses/classified loans     48.5%                      137.3%

Classified  assets,  net of  guarantees  of the U.S.  Government,  including its
agencies and its government-sponsored  agencies, increased $38,443,000 (300%) to
$51,252,000 at June 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.

Interest income on nonaccrual loans, which would have been recognized during the
six months ended June 30, 2008, if all such loans had been current in accordance
with their original terms, totaled $952,000. Interest income actually recognized
on these loans during the six months ended June 30, 2008 was $415,000.

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.

                                       28
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  $8,288,000  (107.7%) to  $15,986,000  during the first six
months of 2008.  Nonperforming  assets net of  guarantees  represented  0.81% of
total  assets  at June 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 June 30, 2008            At December 31, 2007
                                              -------------------------    -------------------------
                                                Gross  Guaranteed  Net      Gross  Guaranteed   Net
                                              ------------------------------------------------------
(dollars in thousands):
Performing nonaccrual loans                   $13,826   $5,425   $8,401     $9,098  $5,814   $3,284
Nonperforming, nonaccrual loans                 6,426       47    6,379      4,227       -    4,227
                                              ------------------------------------------------------
     Total nonaccrual loans                    20,252    5,472   14,780     13,325   5,814    7,511
Loans 90 days past due and still accruing          28        -       28          -       -        -
                                              ------------------------------------------------------
Total nonperforming loans                      20,280    5,472   14,808     13,325   5,814    7,511
Other real estate owned                         1,178        -    1,178        187       -      187
                                              ------------------------------------------------------
Total nonperforming assets                    $21,458   $5,472  $15,986    $13,512  $5,814   $7,698
                                              ======================================================
Nonperforming loans to total loans                                 0.96%                       0.48%
Nonperforming assets to total assets                               0.81%                       0.39%
Allowance for loan losses/nonperforming loans                       164%                        231%
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 June 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
$186,686,000 at June 30, 2008.  This amount  represents a decrease of $2,192,000
from  December 31, 2007,  the net result of the  repurchase of common stock with
value of $2,821,000,  dividends paid of $4,099,000, and the cumulative effect of
a change in accounting principle,  net of tax, of $522,000,  partially offset by
comprehensive income for the period of $4,894,000 and the effect of stock option
vesting of $356,000.  The  Company's  ratio of equity to total assets was 9.43%,
9.46%,  and 9.54% as of June 30,  2008,  June 30,  2007,  and December 31, 2007,
respectively.

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

                               At June 30,         At            Minimum
                           -----------------    December 31,    Regulatory
                           2008       2007        2007          Requirement
                           ------------------------------------------------
     Tier I Capital        11.01%     10.76%     10.90%         4.00%
     Total Capital         12.26%     11.76%     11.90%         8.00%
     Leverage ratio        10.80%     11.11%     11.16%         4.00%

                                       29
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 June 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 $651,448,000 and $690,633,000 at June 30,
2008 and December 31, 2007,  respectively,  and represent 42.2% and 44.5% of the
total loans  outstanding  at June 30, 2008 and December 31, 2007,  respectively.
Commitments  related to the Bank's deposit  overdraft  privilege product totaled
$37,882,000   and   $33,517,000   at  June  30,  2008  and  December  31,  2007,
respectively.

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

                                       31
Liquidity
The  Company's  principal  source of asset  liquidity is federal  funds sold and
marketable  investment  securities available for sale. At June 30, 2008, federal
funds sold and investment  securities  available for sale totaled  $253,129,000,
representing  an increase of  $20,427,000  (8.9%) from December 31, 2007, and an
increase of  $77,238,000  (43.9%) from June 30, 2007.  In addition,  the Company
generates  additional  liquidity  from its operating  activities.  The Company's
profitability  during  the first six  months of 2008  generated  cash flows from
operations of $15,611,000 compared to $15,713,000 during the first six 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 $26,883,000 during the six months
ended June 30, 2008  compared to  $21,664,000  for the six months ended June 30,
2007.  During  the  six  months  ended  June  30,  2008,  the  Company  invested
$50,463,000  in  securities  and  received  $1,667,000  of  net  loan  principal
reductions,  compared to $223,000  invested in securities  and $1,167,000 of net
loan principal  reductions,  respectively,  during the first six months of 2007.
These changes in investment  and loan balances  contributed  to net cash used by
investing  activities of $23,333,000  during the six months ended June 30, 2008,
compared to net cash provided by investing  activities of $20,895,000 during the
six months ended June 30, 2007. Financing activities used net cash of $4,418,000
during  the six  months  ended  June 30,  2008,  compared  to net  cash  used in
financing  activities of $44,271,000  during the six months ended June 30, 2007.
Deposit balance  decreases  accounted for $34,170,000 of financing uses of funds
during the six months ended June 30, 2008, compared to $88,270,000 of funds used
by  decreases  in  deposits  during the six months  ended June 30,  2007.  A net
decrease in short-term other  borrowings  accounted for $31,039,000 of financing
uses of funds during the six months ended June 30, 2008,  compared to $5,015,000
of funds provided by an increase in short-term other  borrowings  during the six
months ended June 30, 2007.  Dividends  paid used  $4,099,000  and $4,137,000 of
cash  during  the six  months  ended June 30,  2008 and 2007,  respectively.  An
increase in Federal funds purchased provided  $67,750,000 of cash during the six
months  ended June 30,  2008.  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  June  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 six  months of 2008  that  have  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                       32
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.

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
---------------------------------------------------------------------------------------------------
Apr. 1-30, 2008           -              -                    -                    333,400
May 1-31, 2008            -              -                    -                    333,400
Jun. 1-30, 2008           -              -                    -                    333,400
---------------------------------------------------------------------------------------------------
Total                     -              -                    -                    333,400
Item 4 - Submission of Matters to a Vote of Security Holders

(a) The Company's Annual Meeting of Shareholders was held on May 20, 2008.
(b)and (c) The following ten directors were elected at the meeting:

                                 Votes For  Votes Against/Withheld   Abstentions
       William J. Casey          13,390,064        168,025              -
       Donald J. Amaral          13,411,367        146,722              -
       Craig S. Compton          13,396,454        161,635              -
       John S.A. Hasbrook        13,425,253        132,836              -
       Michael W. Koehnen        13,416,425        141,664              -
       Donald E. Murphy          13,397,377        160,712              -
       Steve G. Nettleton        13,415,303        142,786              -
       Richard P. Smith          13,398,194        159,895              -
       Carroll R. Taresh         13,420,131        137,958              -
       Alex A. Vereschagin, Jr.  11,785,398      1,722,691              -
       L. Gage Chrysler III      13,392,452        165,637              -

The  shareholders  ratified  the  appointment  of Moss Adams LLP as  independent
public accountants of the Company for 2008. 13,250,013 shares were voted for the
ratification, 24,420 shares were voted against and 283,656 shares abstained.

                                       33
Item 6 - Exhibits

     3.1*      Restated  Articles of  Incorporation  dated May 9, 2003, filed as
               Exhibit  3.1 to  TriCo's  Quarterly  Report  on Form 10-Q for the
               quarter ended March 31, 2003.

     3.2*      Bylaws of TriCo Bancshares,  as amended,  filed as Exhibit 3.2 to
               TriCo's Form S-4  Registration  Statement  dated January 16, 2003
               (No. 333-102546).

     4*        Certificate of  Determination  of Preferences of Series AA Junior
               Participating  Preferred  Stock  filed as Exhibit  3.3 to TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2001.

     10.1*     Rights  Agreement  dated June 25, 2001,  between TriCo and Mellon
               Investor  Services  LLC filed as  Exhibit 1 to  TriCo's  Form 8-A
               dated July 25, 2001.

     10.2*     Form of Change of Control  Agreement dated as of August 23, 2005,
               between  TriCo,  Tri Counties Bank and each of Bruce Belton,  Dan
               Bailey,  Craig Carney, Gary Coelho,  W.R. Hagstrom,  Rick Miller,
               Richard O'Sullivan, Thomas Reddish, and Ray Rios filed as Exhibit
               10.2 to  TriCo's  Quarterly  Report on Form 10-Q for the  quarter
               ended September 30, 2005.

     10.6*     TriCo's 1995 Incentive  Stock Option Plan filed as Exhibit 4.1 to
               TriCo's  Form S-8  Registration  Statement  dated August 23, 1995
               (No. 33-62063).

     10.7*     TriCo's 2001 Stock Option Plan, as amended, filed as Exhibit 10.7
               to TriCo's  Quarterly  Report on Form 10-Q for the quarter  ended
               June 30, 2005.

     10.8*     Amended  Employment  Agreement  between  TriCo and Richard  Smith
               dated as of August  23,  2005  filed as  Exhibit  10.8 to TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2005.

     10.9*     Tri Counties Bank Executive  Deferred  Compensation Plan restated
               April 1, 1992,  and  January  1, 2005  filed as  Exhibit  10.9 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2005.

     10.10*    Tri  Counties  Bank  Deferred  Compensation  Plan  for  Directors
               effective  January  1, 2005  filed as  Exhibit  10.10 to  TriCo's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               2005.

     10.11*    2005 Tri Counties Bank Deferred  Compensation Plan for Executives
               and Directors effective January 1, 2005 filed as Exhibit 10.11 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2005.

     10.13*    Tri Counties  Bank  Supplemental  Retirement  Plan for  Directors
               dated September 1, 1987, as restated January 1, 2001, and amended
               and  restated  January 1, 2004 filed as Exhibit  10.12 to TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     10.14*    2004 TriCo Bancshares  Supplemental Retirement Plan for Directors
               effective  January  1, 2004  filed as  Exhibit  10.13 to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

                                       34
10.15*    Tri  Counties  Bank   Supplemental   Executive   Retirement  Plan
               effective  September 1, 1987, as amended and restated  January 1,
               2004 filed as Exhibit 10.14 to TriCo's  Quarterly  Report on Form
               10-Q for the quarter ended June 30, 2004.

     10.16*    2004 TriCo  Bancshares  Supplemental  Executive  Retirement  Plan
               effective  January  1, 2004  filed as  Exhibit  10.15 to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     10.17*    Form of Joint  Beneficiary  Agreement  effective  March 31,  2003
               between Tri Counties  Bank and each of George  Barstow,  Dan Bay,
               Ron Bee, Craig Carney,  Robert Elmore, Greg Gill, Richard Miller,
               Richard  O'Sullivan,  Thomas  Reddish,  Jerald  Sax,  and Richard
               Smith, filed as Exhibit 10.14 to TriCo's Quarterly Report on Form
               10-Q for the quarter ended September 30, 2003.

     10.18*    Form of Joint  Beneficiary  Agreement  effective  March 31,  2003
               between Tri Counties Bank and each of Don Amaral,  William Casey,
               Craig Compton,  John Hasbrook,  Michael  Koehnen,  Donald Murphy,
               Carroll Taresh,  and Alex  Vereshagin,  filed as Exhibit 10.15 to
               TriCo's  Quarterly  Report  on Form  10-Q for the  quarter  ended
               September 30, 2003.

     10.19*    Form of  Tri-Counties  Bank  Executive  Long Term Care  Agreement
               effective  June 10, 2003  between Tri  Counties  Bank and each of
               Craig Carney,  Richard  Miller,  Richard  O'Sullivan,  and Thomas
               Reddish,  filed as Exhibit 10.16 to TriCo's  Quarterly  Report on
               Form 10-Q for the quarter ended September 30, 2003.

     10.20*    Form of  Tri-Counties  Bank  Director  Long Term  Care  Agreement
               effective June 10, 2003 between Tri Counties Bank and each of Don
               Amaral,  William  Casey,  Craig Compton,  John Hasbrook,  Michael
               Koehnen,  Donald Murphy,  Carroll Taresh,  and Alex  Vereschagin,
               filed as Exhibit 10.17 to TriCo's  Quarterly  Report on Form 10-Q
               for the quarter ended September 30, 2003.

     10.21*    Form of  Indemnification  Agreement between TriCo  Bancshares/Tri
               Counties Bank and each of the  directors of TriCo  Bancshares/Tri
               Counties  Bank  effective on the date that each director is first
               elected,  filed as Exhibit 10.18 to TriCo'S Annual Report on Form
               10-K for the year ended December 31, 2003.

     10.22*    Form of  Indemnification  Agreement between TriCo  Bancshares/Tri
               Counties  Bank  and  each  of  Dan  Bailey,  Craig  Carney,  W.R.
               Hagstrom,  Rick Miller,  Richard O'Sullivan,  Thomas Reddish, Ray
               Rios,  and  Richard  Smith  filed as  Exhibit  10.21  to  TriCo's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2004.

     21.1      Tri  Counties  Bank,  a  California  banking  corporation,  TriCo
               Capital  Trust I, a Delaware  business  trust,  and TriCo Capital
               Trust II, a Delaware business trust, are the only subsidiaries of
               Registrant

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

     * Previously filed and incorporated by reference.

                                       35
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:  August 5, 2008       /s/ Thomas J. Reddish
                            ---------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer
                            (Principal financial officer)

                                       36
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: August 5, 2008        /s/ Richard P. Smith
                            --------------------
                            Richard P. Smith
                            President and Chief Executive Officer

                                       37
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.   ny 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: August 5, 2008        /s/ Thomas J. Reddish
                            ---------------------
                            Thomas J. Reddish
                            Executive Vice President and Chief Financial Officer

                                       38
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 June 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 June 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.

                                       39