SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

For the fiscal year                               Commission File Number 0-10661
ended December 31, 2002

                                TriCo Bancshares
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

            California                                           94-2792841
- --------------------------------------------------------------------------------
(State or other jurisdiction of                               (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
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, without par value
                         -------------------------------
                                (Title of Class)

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  periods 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 an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).

                                 YES       NO   X
                                     -----    -----

The aggregate market value of the voting common stock held by  non-affiliates of
the  Registrant,  as of  March 18, 2003, was  approximately  $134,685,000.  This
computation  excludes a total of 1,968,408 shares  which are  beneficially owned
by the  officers  and  directors  of  Registrant  who  may be  deemed  to be the
affiliates of Registrant  under  applicable rules of the Securities and Exchange
Commission.

The number of shares  outstanding of Registrant's  common stock, as of March 18,
2003, was 7,073,795 shares of common stock, without par value.

The following  documents are incorporated  herein by reference into the parts of
Form 10-K indicated: Registrant's Proxy Statement for use in connection with its
2003 Annual Meeting of Shareholders, for Part III.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III of the  Form  10-K or any
amendment to this Form 10-K.
                            ---




                                TABLE OF CONTENTS

                                                                  Page Number
PART I

Item 1        Business                                                  2
Item 2        Properties                                                8
Item 3        Legal Proceedings                                         9
Item 4        Submission of Matters to a Vote of Security
              Holders                                                   9

PART II

Item 5        Market for Registrant's Common Equity and Related
                 Stockholder Matters                                    9
Item 6        Selected Financial Data                                  10
Item 7        Management's Discussion and Analysis of
                 Financial Condition and Results of Operations         11
Item 7A       Qualitative and Qualitative Disclosures About
                 Market Risk                                           31
Item 8        Financial Statements and Supplementary Data              31
Item 9        Changes in and Disagreements on Accounting and
                 Financial Disclosure                                  61

PART III

Item 10       Directors and Executive Officers of the Registrant       62
Item 11       Executive Compensation                                   62
Item 12       Security Ownership of Certain Beneficial Owners
                and Management, and Related Stockholder Matters        62
Item 13       Certain Relationships and Related Transactions           62
Item 14       Controls and Procedures                                  62
Item 15       Exhibits, Financial Statement Schedules and Reports
                 on Form 8-K                                           63
Item 16       Principal Accountant Fees and Services                   65





FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K 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,
mean 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.  These factors include but are not
limited to:

     -   a continued slowdown in the national and California economies;
     -   increased economic uncertainty created by the recent  terrorist attacks
         on the United States and the actions taken in response;
     -   the  prospect of additional  terrorist attacks in the United States and
         the  uncertain  effect  of  these events on the  national and  regional
         economies;
     -   changes in the interest rate environment;
     -   changes in the regulatory environment;
     -   significantly increasing competitive pressure in the banking industry;
     -   operational risks including data processing system failures or fraud;
     -   volatility of rate sensitive deposits; and
     -   asset/liability matching risks and liquidity risks.

In October 2002, the Company  announced that it had entered into an agreement to
acquire North State  National Bank located in Chico,  California.  Many possible
events or factors could affect the future  financial  results and performance of
the Company or North State National Bank before the merger, or the Company after
the merger, including:

     -   actual  cost  savings  resulting  from the  merger  are  less  than  we
         expected, we  are unable to realize  those cost  savings as soon  as we
         expected or we incur additional or unexpected costs;
     -   revenues after the merger are less than we expected;
     -   competition among financial services companies increases;
     -   we have more trouble integrating our businesses than we expected;
     -   changes in the interest rate environment reduces our interest margins;
     -   general economic conditions change or are worse than we expected;
     -   legislative or regulatory changes adversely affect our business;
     -   changes occur in business conditions and inflation;
     -   personal or commercial customers' bankruptcies increase;
     -   changes occur in the securities markets; and
     -   technology-related changes are more difficult to make or more expensive
         than we expected.

                                      -1-



                                     PART I

ITEM 1. BUSINESS

Information About TriCo Bancshares' Business

TriCo  Bancshares (the "Company") was  incorporated in California on October 13,
1981.  It was  organized  at the  direction  of the  board of  directors  of Tri
Counties Bank (the "Bank") for the purpose of forming a bank holding company. On
September 7, 1982, the shareholders of Tri Counties Bank became the shareholders
of TriCo and Tri Counties  Bank became a wholly owned  subsidiary  of TriCo.  At
that time, TriCo became a bank holding company subject to the supervision of the
Federal  Reserve  under the Bank Holding  Company Act of 1956,  as amended.  Tri
Counties Bank remains subject to the supervision of the California Department of
Financial  Institutions  and the FDIC.  Tri Counties Bank  currently is the only
subsidiary  of  TriCo  and  TriCo  is not  conducting  any  business  operations
independent of Tri Counties Bank.

On October 7, 2002, TriCo Bancshares announced that on October 3, 2002 it signed
a definitive agreement with Tri Counties Bank, its wholly owned subsidiary,  and
North State National Bank,  pursuant to which TriCo  Bancshares will acquire all
of the  outstanding  stock of North State  National Bank in exchange for cash of
approximately  $13 million,  approximately  716,000  shares of TriCo  Bancshares
common  stock and  options  to  purchase  approximately  92,450  shares of TriCo
Bancshares  common stock,  subject to adjustments as set forth in the agreement.
Based upon a closing price of $23.92 per share of TriCo Bancshares  common stock
on October 3, 2002, the  transaction  was valued at $31.8 million.  On March 19,
2003, shareholders of North State National Bank approved the proposed merger.

Business of Tri Counties Bank

Tri Counties Bank was incorporated as a California  banking  corporation on June
26, 1974, and received its certificate of authority to begin banking  operations
on March 11, 1975. Tri Counties Bank engages in the general  commercial  banking
business in the California counties of Butte,  Contra Costa, Del Norte,  Fresno,
Glenn,  Kern, Lake,  Lassen,  Madera,  Mendocino,  Merced,  Nevada,  Sacramento,
Shasta, Siskiyou, Stanislaus, Sutter, Tehama, Tulare and Yuba. Tri Counties Bank
currently has 32 traditional branches and 10 in-store branches.

General Banking Services

The Bank conducts a commercial  banking  business  including  accepting  demand,
savings and time  deposits  and making  commercial,  real  estate,  and consumer
loans. It also offers  installment note collection,  issues cashier's checks and
money orders,  sells travelers  checks and provides safe deposit boxes and other
customary  banking  services.  Brokerage  services  are  provided  at the Bank's
offices by the Bank's  association with Raymond James Financial  Services,  Inc.
The Bank does not offer trust services or international banking services.

The Bank has  emphasized  retail  banking  since it  opened.  Most of the Bank's
customers are retail  customers and small to medium-sized  businesses.  The Bank
emphasizes serving the needs of local businesses,  farmers and ranchers, retired
individuals and wage earners.  The majority of the Bank's loans are direct loans
made to  individuals  and  businesses  in the  regions of  California  where its
branches are located.  At December  31, 2002,  the total of the Bank's  consumer
installment loans outstanding was $201,858,000  (29.4%), the total of commercial
loans outstanding was $125,982,000  (18.3%),  and the total of real estate loans
including  construction loans of $39,713,000 was $359,682,000  (52.3%). The Bank
takes real estate,  listed and unlisted  securities,  savings and time deposits,
automobiles,  machinery,  equipment,  inventory,  accounts  receivable and notes
receivable secured by property as collateral for loans.

Most of the Bank's deposits are attracted from individuals and  business-related
sources. No single person or group of persons provides a material portion of the
Bank's  deposits,  the loss of any one or more of which would have a  materially
adverse  effect on the  business of the Bank,  nor is a material  portion of the
Bank's  loans  concentrated  within  a  single  industry  or  group  of  related
industries.

                                      -2-



In order to attract  loan and deposit  business  from  individuals  and small to
medium-sized  businesses,  branches of the Bank set lobby  hours to  accommodate
local demands.  In general,  lobby hours are from 9:00 a.m. to 5:00 p.m.  Monday
through  Thursday,  and from 9:00 a.m. to 6:00 p.m. on Friday.  Certain branches
with less activity open later and close earlier.  Some Bank offices also utilize
drive-up  facilities  operating  from 9:00 a.m.  to 7:00  p.m.  The  supermarket
branches are open from 9:00 a.m. to 7:00 p.m. Monday through  Saturday and 11:00
a.m. to 5:00 p.m. on Sunday.

The Bank offers 24-hour ATMs at almost all branch locations. The ATMs are linked
to several national and regional  networks such as CIRRUS and STAR. In addition,
banking  by  telephone  on a  24-hour  toll-free  number  is  available  to  all
customers.  This service allows a customer to obtain  account  balances and most
recent transactions,  transfer moneys between accounts,  make loan payments, and
obtain interest rate information.

In  February  1998,  the Bank became the first bank in the  Northern  Sacramento
Valley to offer banking services on the Internet.  This banking service provides
customers one more tool for anywhere, anytime access to their accounts.

Other Activities

The  Bank may in the  future  engage  in other  businesses  either  directly  or
indirectly  through  subsidiaries  acquired  or  formed by the Bank  subject  to
regulatory constraints. See "Regulation and Supervision."

Employees

At December 31, 2002,  the Company and the Bank employed 550 persons,  including
five executive officers.  Full time equivalent  employees were 465. No employees
of the Company or the Bank are presently represented by a union or covered under
a  collective  bargaining  agreement.  Management  believes  that  its  employee
relations are excellent.

Competition

The banking business in California generally,  and in the Bank's primary service
area  specifically,  is  highly  competitive  with  respect  to both  loans  and
deposits.  It is dominated by a relatively small number of major banks with many
offices  operating over a wide geographic  area. Among the advantages such major
banks have over the Bank is their  ability to finance wide  ranging  advertising
campaigns and to allocate their  investment  assets to regions of high yield and
demand. By virtue of their greater total  capitalization  such institutions have
substantially higher lending limits than does the Bank.

In addition to competing  with savings  institutions,  commercial  banks compete
with other financial markets for funds.  Yields on corporate and government debt
securities  and  other  commercial  paper may be higher  than on  deposits,  and
therefore  affect the ability of commercial  banks to attract and hold deposits.
Commercial banks also compete for available funds with money market  instruments
and mutual funds. During past periods of high interest rates, money market funds
have  provided  substantial  competition  to  banks  for  deposits  and they may
continue  to do so in the  future.  Mutual  funds  are  also a major  source  of
competition for savings dollars.

As a consequence of the extensive regulation of commercial banking activities in
the  United  States,  the  business  of  the  Company  and  its  subsidiary  are
particularly  susceptible  to being  affected by  enactment of federal and state
legislation  which may have the effect of increasing  or decreasing  the cost of
doing business,  modifying  permissible  activities or enhancing the competitive
position of other financial institutions.

The Bank relies substantially on local promotional  activity,  personal contacts
by  its  officers,  directors,  employees  and  shareholders,   extended  hours,
personalized  service  and its  reputation  in the  communities  it  services to
compete effectively.

                                      -3-



Regulation and Supervision

As a consequence of the extensive regulation of commercial banking activities in
California and the United States, the business of the Company,  and the Bank are
particularly  susceptible  to  changes  in state  and  federal  legislation  and
regulations, which may have the effect of increasing the cost of doing business,
limiting  permissible  activities  or  increasing  competition.  Following  is a
summary of some of the laws and regulations  which effect their  business.  This
summary  should  be read  with  the  management's  discussion  and  analysis  of
financial condition and results of operation included at Item 7 of this report.

As a registered  bank holding company under the Bank Holding Company Act of 1956
(the "BHC Act"), the Company is subject to the regulation and supervision of the
Board of Governors of the Federal Reserve System  ("FRB").  The BHC Act requires
the  Company to file  reports  with the FRB and provide  additional  information
requested by the FRB. The Company must receive the approval of the FRB before it
may acquire all or substantially  all of the assets of any bank, or ownership or
control  of the  voting  shares  of any bank if,  after  giving  effect  to such
acquisition  of shares,  the Company would own or control more than 5 percent of
the voting shares of such bank.

The Company and any subsidiaries it may acquire or organize will be deemed to be
affiliates  of the Bank within the Federal  Reserve  Act.  That Act  establishes
certain  restrictions,  which  limit the extent to which the Bank can supply its
funds to the  Company  and other  affiliates.  The  Company  is also  subject to
restrictions  on the  underwriting  and the  public  sale  and  distribution  of
securities.  It is prohibited  from engaging in certain tie-in  arrangements  in
connection  with  any  extension  of  credit,  sale or  lease  of  property,  or
furnishing of services.

The Company is generally  prohibited  from  engaging in, or acquiring  direct or
indirect  control of any company engaged in non-banking  activities,  unless the
FRB by order or regulation has found such activities to be so closely related to
banking or managing or  controlling  banks as to be a proper  incident  thereto.
Notwithstanding this prohibition, under the Financial Services Modernization Act
of 1999, the Company may engage in any activity,  and may acquire and retain the
shares of any company  engaged in any  activity,  that the FRB, in  coordination
with the Secretary of the Treasury,  determines  (by  regulation or order) to be
financial in nature or incidental  to such  financial  activities.  Furthermore,
such law dictates  several  activities  that are  considered  to be financial in
nature, and therefore are not subject to FRB approval.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley  Act, signed into law on November 12, 1999, is the result
of a decade of debate in the Congress regarding a fundamental reformation of the
nation's  financial  system.  The  law  is  subdivided  into  seven  titles,  by
functional area. Title I acts to facilitate  affiliations among banks, insurance
companies  and  securities  firms.  Title II  narrows  the  exemptions  from the
securities  laws previously  enjoyed by banks,  requires the Federal Reserve and
the SEC to work together to draft rules governing certain securities  activities
of banks and creates a new, voluntary investment bank holding company. Title III
restates the proposition  that the states are the functional  regulators for all
insurance   activities,   including  the  insurance   activities  by  depository
institutions.  The law  encourages  the states to develop  uniform or reciprocal
rules for the licensing of insurance agents.  Title IV prohibits the creation of
additional  unitary  thrift  holding  companies.  Title  V  imposes  significant
requirements  on  financial  institutions  related to the  transfer of nonpublic
personal  information.  These provisions require each institution to develop and
distribute to accountholders an information disclosure policy, and requires that
the policy allow  customers  to, and for the  institution  to honor a customer's
request  to,  "opt-out"  of  the  proposed   transfer  of  specified   nonpublic
information to third parties. Title VI reforms the Federal Home Loan Bank system
to allow broader access among  depository  institutions  to the systems  advance
programs,  and to improve  the  corporate  governance  and  capital  maintenance
requirements for the system. Title VII addresses a multitude of issues including
disclosure  of  ATM  surcharging  practices,   disclosure  of  agreements  among
non-governmental  entities and insured  depository  institutions which donate to
non-governmental  entities  regarding  donations  made in  connection  with  the
Community  Reinvestment  Act and  disclosure by the  recipient  non-governmental
entities of how such funds are used. Additionally, the law extends the period of
time between Community Reinvestment Act examinations of community banks.

                                      -4-



The  Company  has  undertaken  efforts  to  comply  with all  provisions  of the
Gramm-Leach-Bliley   Act  and  all  implementing   regulations,   including  the
development   of   appropriate   policies   and   procedures   to   meet   their
responsibilities  in connection  with the privacy  provisions of Title V of that
act.

Safety and Soundness Standards

The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
implemented  certain  specific  restrictions  on  transactions  and required the
regulators  to adopt  overall  safety and  soundness  standards  for  depository
institutions  related to internal control,  loan underwriting and documentation,
and asset growth.  Among other things,  FDICIA limits the interest rates paid on
deposits by undercapitalized  institutions, the use of brokered deposits and the
aggregate  extension  of  credit by a  depository  institution  to an  executive
officer,  director,  principal  stockholder  or related  interest,  and  reduces
deposit insurance coverage for deposits offered by undercapitalized institutions
for deposits by certain employee benefits accounts.

The federal financial  institution  agencies published a final rule effective on
August 9, 1995, implementing safety and soundness standards.  The FDICIA added a
new Section 39 to the Federal Deposit  Insurance Act which required the agencies
to establish safety and soundness  standards for insured financial  institutions
covering:

     -   internal controls, information systems and internal audit systems;
     -   loan documentation;
     -   credit underwriting;
     -   interest rate exposure;
     -   asset growth;
     -   compensation, fees and benefits;
     -   asset quality, earnings and stock valuation; and
     -   excessive  compensation for executive  officers, directors or principal
         shareholders which could lead to material financial loss.

The  agencies  issued  the  final  rule  in the  form  of  guidelines  only  for
operational,  managerial  and  compensation  standards  and reissued for comment
proposed  standards  related  to  asset  quality  and  earnings  which  are less
restrictive  than the  earlier  proposal in  November  1993.  Unlike the earlier
proposal,  the  guidelines  under  the  final  rule do not  apply to  depository
institution  holding companies and the stock valuation  standard was eliminated.
If an  agency  determines  that  an  institution  fails  to  meet  any  standard
established by the guidelines,  the agency may require the financial institution
to submit to the  agency  an  acceptable  plan to  achieve  compliance  with the
standard.  If the  agency  requires  submission  of a  compliance  plan  and the
institution  fails to  timely  submit  an  acceptable  plan or to  implement  an
accepted  plan,  the  agency  must  require  the   institution  to  correct  the
deficiency.  Under the final rule, an  institution  must file a compliance  plan
within  30 days of a request  to do so from the  institution's  primary  federal
regulatory  agency.  The  agencies may elect to initiate  enforcement  action in
certain cases rather than rely on an existing plan particularly where failure to
meet one or more of the standards could threaten the safe and sound operation of
the institution.

Restrictions on Dividends and Other Distributions

The power of the board of  directors  of an insured  depository  institution  to
declare a cash dividend or other distribution with respect to capital is subject
to statutory and regulatory  restrictions  which limit the amount  available for
such  distribution  depending  upon the earnings,  financial  condition and cash
needs  of the  institution,  as  well as  general  business  conditions.  FDICIA
prohibits  insured  depository  institutions  from paying management fees to any
controlling  persons  or,  with  certain  limited  exceptions,   making  capital
distributions,  including dividends, if, after such transaction, the institution
would be undercapitalized.  Additionally,  under FDICIA, a bank may not make any
capital distribution,  including the payment of dividends,  if after making such
distribution  the  bank  would be in any of the  "under-capitalized"  categories
under the FDIC's Prompt Corrective Action regulations.

Under  the  Financial  Institution's  Supervisory  Act,  the  FDIC  also has the
authority to prohibit a bank from engaging in business  practices  that the FDIC
considers to be unsafe or unsound. It is possible,  depending upon the financial
condition  of a bank and  other  factors  that the FDIC  could  assert  that the
payment of dividends or other  payments in some  circumstances  might be such an
unsafe or unsound practice and thereby prohibit such payment.

                                      -5-



Under  California  law,  dividends  and other  distributions  by the Company are
subject to  declaration  by the board of directors at its  discretion out of net
assets.  Dividends  cannot be declared and paid when such payment would make the
Company insolvent.  Federal Reserve policy prohibits a bank holding company from
declaring or paying a cash  dividend  which would  impose undue  pressure on the
capital of subsidiary banks or would be funded only through  borrowings or other
arrangements  that  might  adversely  affect  the  holding  company's  financial
position.  The policy  further  declares that a bank holding  company should not
continue its existing rate of cash  dividends on its common stock unless its net
income is  sufficient to fully fund each  dividend and its  prospective  rate of
earnings  retention appears consistent with its capital needs, asset quality and
overall financial  condition.  Other Federal Reserve policies forbid the payment
by bank  subsidiaries to their parent  companies of management  fees,  which are
unreasonable  in amount or exceed a fair market value of the  services  rendered
(or, if no market exists, actual costs plus a reasonable profit).

In  addition,  the Federal  Reserve  has  authority  to  prohibit  banks that it
regulates  from  engaging  in  practices,  which in the  opinion of the  Federal
Reserve  are unsafe or  unsound.  Such  practices  may  include  the  payment of
dividends under some  circumstances.  Moreover,  the payment of dividends may be
inconsistent  with capital  adequacy  guidelines.  The Company may be subject to
assessment to restore the capital of the Bank should it become impaired.

Consumer Protection Laws and Regulations

The bank regulatory  agencies are focusing greater  attention on compliance with
consumer  protection laws and their  implementing  regulations.  Examination and
enforcement have become more intense in nature,  and insured  institutions  have
been advised to monitor carefully compliance with such laws and regulations. The
Company is subject to many federal consumer  protection statues and regulations,
some of which are discussed below.

The  Community  Reinvestment  Act is intended to  encourage  insured  depository
institutions,  while operating safely and soundly, to help meet the credit needs
of their  communities.  This act  specifically  directs the  federal  regulatory
agencies  to assess a bank's  record of  helping  meet the  credit  needs of its
entire community, including low- and moderate-income  neighborhoods,  consistent
with safe and sound practices.  This act further requires the agencies to take a
financial  institution's  record of  meeting  its  community  credit  needs into
account when evaluating applications for, among other things, domestic branches,
mergers or  acquisitions,  or holding company  formations.  The agencies use the
Community  Reinvestment  Act assessment  factors in order to provide a rating to
the financial  institution.  The ratings range from a high of "outstanding" to a
low of "substantial noncompliance."

The Equal Credit  Opportunity  Act  generally  prohibits  discrimination  in any
credit transaction,  whether for consumer or business purposes,  on the basis of
race,  color,  religion,  national origin,  sex, marital status,  age (except in
limited  circumstances),  receipt of income from public assistance programs,  or
good faith exercise of any rights under the Consumer Credit  Protection Act. The
Truth-in-Lending  Act is designed to ensure that credit terms are disclosed in a
meaningful  way so that  consumers  may compare  credit  terms more  readily and
knowledgeably.  As a result of the such  act,  all  creditors  must use the same
credit  terminology  to  express  rates  and  payments,   including  the  annual
percentage rate, the finance charge, the amount financed, the total payments and
the payment schedule, among other things.

The Fair Housing Act regulates many practices,  including making it unlawful for
any lender to discriminate in its housing-related lending activities against any
person because of race,  color,  religion,  national  origin,  sex,  handicap or
familial status. A number of lending  practices have been found by the courts to
be, or may be  considered,  illegal under this Act,  including some that are not
specifically  mentioned in the Act itself. The Home Mortgage Disclosure Act grew
out of public concern over credit shortages in certain urban  neighborhoods  and
provides public  information that will help show whether financial  institutions
are serving the housing  credit needs of the  neighborhoods  and  communities in
which they are  located.  This act also  includes a "fair  lending"  aspect that
requires the  collection  and  disclosure  of data about  applicant and borrower
characteristics as a way of identifying possible discriminatory lending patterns
and enforcing anti-discrimination statutes.

                                      -6-



Finally,  the Real Estate Settlement  Procedures Act requires lenders to provide
borrowers  with  disclosures  regarding  the  nature  and  cost of  real  estate
settlements.  Also,  this  act  prohibits  certain  abusive  practices,  such as
kickbacks, and places limitations on the amount of escrow accounts.

Penalties  under the above  laws may  include  fines,  reimbursements  and other
penalties. Due to heightened regulatory concern related to compliance with these
acts generally, the Company may incur additional compliance costs or be required
to expend additional funds for investments in their local community.

USA Patriot Act of 2001

President  Bush signed the USA Patriot  Act of 2001 on October  26,  2001.  This
legislation  was  enacted  in  response  to the  terrorist  attacks in New York,
Pennsylvania  and  Washington,  D.C. on September  11, 2001.  The Patriot Act is
intended to strengthen U.S. law enforcement  and the  intelligence  communities'
ability  to work  together  to combat  terrorism  on a variety  of  levels.  The
potential impact of the Patriot Act on financial institutions is significant and
wide  ranging.  The Patriot Act  contains  sweeping  anti-money  laundering  and
financial transparency laws and requires various regulations, including:

     -   Due diligence requirements for financial  institutions that administer,
         maintain, or manage private bank accounts or correspondent accounts for
         non-U.S. persons;
     -   Standards for verifying customer identification at account opening;
     -   Rules to promote cooperation among  financial institutions, regulators,
         and law enforcement entities to assist in the identification of parties
         that may be involved in terrorism or money laundering;
     -   Reports to  be filed  by non-financial  trades and  business  with  the
         Treasury   Department's  Financial   Crimes  Enforcement   Network  for
         transactions exceeding $10,000; and
     -   The filing of suspicious  activities reports by securities  brokers and
         dealers  if they  believe a  customer may  be violating  U.S. laws  and
         regulations.

Capital Requirements

Federal regulation imposes upon all financial  institutions a variable system of
risk-based capital guidelines designed to make capital requirements sensitive to
differences in risk profiles among banking  organizations,  to take into account
off-balance sheet exposures and to promote  uniformity in the definition of bank
capital uniform nationally.

The Bank, and the Company are subject to the minimum capital requirements of the
FDIC, and the Federal Reserve,  respectively. As a result of these requirements,
the growth in assets is limited by the amount of its capital accounts as defined
by the respective regulatory agency.  Capital requirements may have an effect on
profitability  and the payment of dividends on the common stock of the Bank, and
the Company. If an entity is unable to increase its assets without violating the
minimum  capital  requirements  or is forced to reduce  assets,  its  ability to
generate earnings would be reduced.

The Federal Reserve, and the FDIC have adopted guidelines utilizing a risk-based
capital structure.  Qualifying capital is divided into two tiers. Tier 1 capital
consists  generally of common  stockholders'  equity,  qualifying  noncumulative
perpetual preferred stock,  qualifying  cumulative perpetual preferred stock (up
to 25% of total Tier 1 capital) and minority interests in the equity accounts of
consolidated  subsidiaries,  less goodwill and certain other intangible  assets.
Tier 2 capital  consists of, among other  things,  allowance  for loan and lease
losses up to 1.25% of weighted risk assets,  perpetual  preferred stock,  hybrid
capital  instruments,  perpetual debt,  mandatory  convertible  debt securities,
subordinated  debt  and  intermediate-term   preferred  stock.  Tier  2  capital
qualifies  as part of total  capital  up to a maximum of 100% of Tier 1 capital.
Amounts  in excess of these  limits may be issued  but are not  included  in the
calculation  of  risk-based  capital  ratios.  Under  these  risk-based  capital
guidelines,  the Bank and the Company are required to maintain  capital equal to
at  least 8% of its  assets,  of which at least 4% must be in the form of Tier 1
capital.

The  guidelines  also  require  the  Company  and the Bank to maintain a minimum
leverage ratio of 4% of Tier 1 capital to total assets (the  "leverage  ratio").
The leverage ratio is determined by dividing an institution's  Tier 1 capital by
its quarterly  average total assets,  less goodwill and certain other intangible
assets.  The  leverage  ratio  constitutes  a minimum  requirement  for the most
well-run banking organizations.

                                      -7-



Prompt Corrective Action

Prompt  Corrective  Action  Regulations of the federal bank regulatory  agencies
establish  five  capital  categories  in  descending  order  (well  capitalized,
adequately  capitalized,  undercapitalized,  significantly  undercapitalized and
critically undercapitalized), assignment to which depends upon the institution's
total risk-based  capital ratio,  Tier 1 risk-based  capital ratio, and leverage
ratio.  Institutions classified in one of the three undercapitalized  categories
are subject to certain mandatory and discretionary  supervisory  actions,  which
include increased  monitoring and review,  implementation of capital restoration
plans,  asset growth  restrictions,  limitations upon expansion and new business
activities, requirements to augment capital, restrictions upon deposit gathering
and interest rates,  replacement of senior executive officers and directors, and
requiring divestiture or sale of the institution.  Both the Company and the Bank
have  been  classified  as a  well-capitalized  bank  since  adoption  of  these
regulations.

Impact of Monetary Policies

Banking is a business that depends on interest rate  differentials.  In general,
the  difference  between the  interest  paid by a bank on its deposits and other
borrowings, and the interest rate earned by banks on loans, securities and other
interest-earning assets comprises the major source of banks' earnings. Thus, the
earnings and growth of banks are subject to the influence of economic conditions
generally,  both  domestic  and  foreign,  and also to the  monetary  and fiscal
policies  of the  United  States  and its  agencies,  particularly  the  Federal
Reserve.  The Federal  Reserve  implements  national  monetary  policy,  such as
seeking to curb inflation and combat recession,  by its open-market  dealings in
United States government securities, by adjusting the required level of reserves
for  financial   institutions   subject  to  reserve  requirements  and  through
adjustments  to the discount  rate  applicable  to borrowings by banks which are
members of the Federal  Reserve.  The  actions of the  Federal  Reserve in these
areas  influence  the growth of bank loans,  investments  and  deposits and also
affect  interest  rates.  The nature  and  timing of any future  changes in such
policies  and their  impact on the Company  cannot be  predicted.  In  addition,
adverse  economic  conditions  could make a higher  provision  for loan losses a
prudent  course and could cause  higher loan loss  charge-offs,  thus  adversely
affecting the Company's net earnings.

Insurance of Deposits

The  Bank's  deposit  accounts  are  insured  up to a maximum  of  $100,000  per
depositor by the FDIC. The FDIC issues regulations and generally  supervises the
operations of its insured  banks.  This  supervision  and regulation is intended
primarily for the protection of depositors, not shareholders.

As of December  31,  2002,  the deposit  insurance  premium rate was $0.0171 per
$100.00 in deposits.  In November  1990,  federal  legislation  was passed which
removed the cap on the amount of deposit insurance  premiums that can be charged
by the  FDIC.  Under  this  legislation,  the FDIC is able to  increase  deposit
insurance  premiums as it sees fit. This could result in a significant  increase
in the  cost of doing  business  for the  Bank in the  future.  The FDIC now has
authority to adjust deposit  insurance  premiums paid by insured banks every six
months.

ITEM 2. PROPERTIES

The Company is engaged in the banking business through 42 offices in 20 counties
in Northern and Central  California  including  eight  offices each in Butte and
Shasta Counties,  three in Siskiyou County, two each in Glenn,  Sutter,  Lassen,
Yuba, Stanislaus and Sacramento Counties,  and one each in Madera, Merced, Lake,
Mendocino,  Del Norte,  Tehama,  Nevada,  Contra Costa,  Kern, Tulare and Fresno
Counties.  All offices are constructed and equipped to meet prescribed  security
requirements.

The Company owns 16 branch office locations and one administrative  building and
leases 26 branch office locations and 5 administrative  facilities.  Most of the
leases contain  multiple  renewal  options and provisions for rental  increases,
principally  for  changes  in the  cost of  living  index,  property  taxes  and
maintenance.

                                      -8-



ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor its  subsidiary,  the Bank,  is a party to any  material
pending  legal  proceeding,  nor is their  property  the subject of any material
pending legal proceeding,  except ordinary routine legal proceedings  arising in
the ordinary course of their business.  None of these proceedings is expected to
have a material adverse impact upon the Company's  business,  financial position
or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the shareholders  during the fourth
quarter of 2002.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

The  Company's  common  stock is traded on the  NASDAQ  National  Market  System
("NASDAQ")  under the symbol "TCBK." The following  table shows the high and the
low prices  for the common  stock,  for each  quarter in the past two years,  as
reported by NASDAQ:


                    2002:                High             Low
                 First quarter          $21.05          $18.05
                 Second quarter         $27.40          $21.10
                 Third quarter          $27.45          $21.60
                 Fourth quarter         $25.25          $22.01

                    2001:
                 First quarter          $16.63          $14.88
                 Second quarter         $17.33          $14.81
                 Third quarter          $19.80          $16.75
                 Fourth quarter         $19.74          $17.93


As of December 31, 2002, there were  approximately  1,701 shareholders of record
of the Company's common stock.

On February 3, 2003, the Securities and Exchange  Commission  declared effective
the  Company's  S-4  Registration  Statement  relating to the  issuance of up to
approximately  784,000 shares of the Company's  common stock to  shareholders of
North State  National  Bank. In October  2002,  the Company and the Bank entered
into an agreement  with North State  National Bank to merge North State National
Bank into the Bank. At completion of the merger,  former  shareholders  of North
State  National Bank would receive  Company  common stock and/or cash with value
ranging from approximately  $23.52 to $28.17 for each share of North State stock
outstanding,  depending on the average  closing  price of the  Company's  common
stock. On October 3, 2003, the total merger consideration would have been valued
at $31.8  million.  The merger  remains  subject to the  approval of North State
shareholders and bank regulatory agencies.

The Company has paid cash  dividends on its common stock in every  quarter since
March 1990,  and it is currently  the intention of the Board of Directors of the
Company to continue payment of cash dividends on a quarterly basis.  There is no
assurance,  however,  that any  dividends  will be paid since they are dependent
upon earnings,  financial condition and capital  requirements of the Company and
the Bank.  As of December 31, 2002,  $15,390,000  was  available  for payment of
dividends  by the  Company  to  its  shareholders,  under  applicable  laws  and
regulations.  The Company paid cash  dividends of $0.20 per common share in each
of the quarters ended March 31, June 30, September 30, and December 31, 2002 and
2001.

As discussed in Note 9 to the consolidated financial statements included as Item
8 of this  report,  in June  2001,  the  Company  announced  that  its  Board of
Directors adopted and entered into a Shareholder Rights Plan designed to protect
and maximize  shareholder value and to assist the Board of Directors in ensuring
fair and equitable  benefit to all shareholders in the event of a hostile bid to
acquire the Company.

                                      -9-





ITEM 6. SELECTED FINANCIAL DATA


                                            TRICO BANCSHARES
                                            Financial Summary
                                (in thousands, except per share amounts)

=========================================================================================================
Year ended December 31,                        2002         2001         2000         1999         1998
- ---------------------------------------------------------------------------------------------------------
                                                                                     
Interest income                              $64,696      $71,998      $76,327      $67,808       $64,404
Interest expense                              12,914       23,486       28,543       24,370        25,296
- ---------------------------------------------------------------------------------------------------------
Net interest income                           51,782       48,512       47,784       43,438        39,108
Provision for loan losses                      2,800        4,400        5,000        3,550         4,200
Noninterest income                            19,180       16,238       14,922       12,775        13,494
Noninterest expense                           45,971       40,607       37,846       34,726        34,583
- ---------------------------------------------------------------------------------------------------------
Income before income taxes                    22,191       19,743       19,860       17,937        13,819
Provision for income taxes                     8,122        7,324        7,237        6,534         5,049
- ---------------------------------------------------------------------------------------------------------
     Net income                              $14,069      $12,419      $12,623      $11,403        $8,770
- ---------------------------------------------------------------------------------------------------------

Earnings per share1:
     Basic                                     $2.00        $1.76        $1.76        $1.60        $1.25
     Diluted                                    1.96         1.72         1.72         1.56         1.21
Per share:
     Dividends paid                            $0.80        $0.80        $0.79        $0.70        $0.49
     Book value at December 31                 14.02        12.42        11.87        10.22        10.22
     Tangible book value at December 31        13.45        11.69        11.11         9.32         9.14

Average common shares outstanding              7,019        7,073        7,192        7,130         7,017
Average diluted common shares outstanding      7,193        7,219        7,341        7,319         7,277
Shares outstanding at December 31              7,061        7,001        7,181        7,152         7,051

At December 31:
Loans, net                                  $673,145     $645,674     $628,721     $576,942      $524,227
Total assets                               1,144,574    1,005,447      972,071      924,796       904,599
Total deposits                             1,005,237      880,393      837,832      794,110       769,173
Debt financing and notes payable              22,924       22,956       33,983       45,505        37,924
Shareholders' equity                          99,014       86,933       85,233       73,123        72,029

Financial Ratios:

For the year:
     Return on assets                         1.35%         1.27%        1.35%        1.26%        1.03%
     Return on equity                        15.03%        14.19%       16.03%       15.59%       12.80%
     Net interest margin2                     5.61%         5.58%        5.70%        5.40%        5.19%
     Net loan losses to average loans         0.22%         0.47%        0.70%        0.13%        0.50%
     Efficiency ratio2                       63.66%        61.62%       59.25%       60.53%       64.58%
     Average equity to average assets         9.00%         8.94%        8.40%        8.09%        8.07%
At December 31:
     Equity to assets                         8.65%         8.65%        8.77%        7.91%        7.96%
     Total capital to risk-adjusted assets   11.97%        11.68%       12.20%       11.77%       11.83%
     Allowance for loan losses to loans       2.09%         1.98%        1.82%        1.88%        1.54%



1 Retroactively adjusted to reflect 3-for-2 stock split effected in 1998
2 Fully taxable equivalent

                                      -10-



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
        OF OPERATIONS

The Company's  discussion and analysis of its financial condition and results of
operations  is intended  to provide a better  understanding  of the  significant
changes and trends  relating to the Company's  financial  condition,  results of
operations, liquidity and interest rate sensitivity. The following discussion is
based  on the  Company's  consolidated  financial  statements  which  have  been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States  of  America.  Please  read the  Company's  audited  consolidated
financial statements and the related notes included as Item 8 of this report.

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 of America.  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,  investments,  and intangible assets. 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 one accounting estimate
that  materially  affects the  financial  statements  is the  allowance for loan
losses.  The Company's  policies  related to estimates on the allowance for loan
losses,  other than  temporary  impairment  of  investments  and  impairment  of
intangible assets can be found in Note 1 to the Company's  audited  consolidated
financial statements and the related notes included as Item 8 of this report.

As the Company has not  commenced  any business  operations  independent  of the
Bank, the following discussion pertains primarily to the Bank. Average balances,
including  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  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 consolidated  financial statements of the Company and the related notes
at Item 8 of this report.

                                      -11-



Net Income

Following  is a summary of the  Company's  net  income for the past three  years
(dollars in thousands, except per share amounts):

   Components of Net Income
- -----------------------------------------------------------------------------
 Year ended December 31,                        2002       2001       2000
                                              -------------------------------
 Net interest income *                        $53,029    $49,666    $48,954
 Provision for loan losses                     (2,800)    (4,400)    (5,000)
 Noninterest income                            19,180     16,238     14,922
 Noninterest expense                          (45,971)   (40,607)   (37,846)
 Taxes *                                       (9,369)    (8,478)    (8,407)
                                              -------------------------------
                                              $14,069    $12,419    $12,623
                                              ===============================
 Net income per average fully-diluted share     $1.96      $1.72      $1.72
 Net income as a percentage of average
      shareholders' equity                     15.03%     14.19%     16.03%
 Net income as a percentage of average
      total assets                              1.35%      1.27%      1.35%
=============================================================================
 * Fully tax-equivalent (FTE)


The Company  achieved  earnings of $14.1 million in 2002,  representing  a 13.3%
increase  from the $12.4 million  earned in 2001,  which was down 1.6% from 2000
earnings of $12.6 million.  Net interest income on a fully  tax-equivalent basis
for 2002 increased $3.4 million (6.8%) compared to 2001. Higher average balances
of interest  earning assets added $4.4 million to net interest income on a fully
tax-equivalent  basis,  while  changes in interest  rates  reduced net  interest
income on a fully  tax-equivalent basis by $1.0 million. The loan loss provision
was reduced by $1.6 million  (36.4%),  and noninterest  income grew $2.9 million
(18.1%). Partially offsetting this higher revenue,  noninterest expense expanded
$5.4 million (13.2%).

Earnings in 2001 decreased $204,000 or 1.6% from 2000. Net interest income (FTE)
grew $712,000 (1.45%) due to a $31.0 million (3.61%) increase in average earning
assets that was  partially  offset by a net  interest  margin that fell 11 basis
points.  The loan loss  provision was reduced by $600,000 in 2001 from 2000, and
noninterest income increased $1.3 million (8.82%) while noninterest expense also
increased $2.8 million (7.30%).

The  Company's  return on average  total  assets was 1.35% in 2002,  compared to
1.27% and 1.35% in 2001 and 2000, respectively. Return on average equity in 2002
was 15.03%, compared to 14.19% in 2001 and 16.03% percent in 2000.

Net Interest Income

The Company's  primary  source of revenue is net interest  income,  which is the
difference  between  interest  income on earning assets and interest  expense on
interest-bearing  liabilities.  Net interest income (FTE) increased $3.4 million
(6.8%) from 2001 to $53.0 million in 2002.  Comparing 2001 to 2000, net interest
income (FTE) increased $712,000 or 1.45%.

Following is a summary of the Company's  net interest  income for the past three
years (dollars in thousands):

    Components of Net Interest Income
   -----------------------------------------------------------------
    Year ended December 31,            2002       2001       2000
                                     -------------------------------
    Interest income                  $64,696    $71,998    $76,327
    Interest expense                 (12,914)   (23,486)   (28,543)
    FTE adjustment                     1,247      1,154      1,170
                                     -------------------------------
    Net interest income (FTE)        $53,029    $49,666    $48,954
   =================================================================
    Net interest margin (FTE)          5.61%      5.58%      5.70%
   =================================================================

                                      -12-



Interest  income (FTE)  decreased $7.2 million (9.9%) from 2001 to 2002, the net
effect of lower earning-asset yields partially offset by higher average balances
of those assets. The total yield on earning assets dropped from 8.21% in 2001 to
6.98% in 2002,  following the trend in overall interest markets in which federal
funds rates were reduced to  historical  lows ending 2002 at 1.25%.  The average
yield on loans  decreased 113 basis points to 7.94% during 2002. The decrease in
average yield on interest-earning  assets reduced interest income (FTE) by $11.1
million,   while  a  $54.8  million  (6.2%)  increase  in  average  balances  of
interest-earning assets added $3.9 million to interest income (FTE) during 2002.

Interest  expense  decreased $10.6 million (45.0%) in 2002 from $23.5 million in
2001,   principally   due  to  lower  rates  paid.  The  average  rate  paid  on
interest-bearing  liabilities  was 1.73% in 2002,  155 basis points or 47% lower
than in 2001.  The most  pronounced  declines  included  rates  paid on  savings
deposits  (down  from  2.11% to 1.02%)  and time  deposits  (down  from 5.07% to
2.99%). Rates paid on interest-bearing demand deposits decreased 68 basis points
to 0.27%.  The  decrease in average  rate paid on  interest-bearing  liabilities
decreased  interest expense by $10.1 million,  and changes in the mix of average
balances of interest-bearing  liabilities decreased interest expense by $509,000
in 2002  despite an overall  increase  of $30.8  million  (4.3%) in the  average
balance of interest-bearing liabilities.

Interest income (FTE) decreased $4.4 million (5.6%) from 2000 to 2001, primarily
due to lower  yields on  earning  assets.  Yields on loans fell to 9.07% in 2001
from 9.90% in 2000. Overall, the yield on the Company's earning assets decreased
from 9.02% in 2000 to 8.21% in 2001.  During 2001, the average  balance of loans
and federal funds sold grew $22.6 million and $30.5 million, respectively, while
the average  balance of  investments  declined  $22.1  million.  The decrease in
average yield on  interest-earning  assets reduced interest income (FTE) by $7.0
million,  while a net increase of $31.0  million  (3.6%) in average  balances of
interest earning assets added $2.6 million to interest income (FTE) during 2001.

Interest expense  decreased $5.1 million (17.7%) in 2001 due to a 77 basis point
decrease in the average rate paid on interest-bearing  liabilities from 4.05% to
3.28%.  The  largest  individual  decrease  was the rate paid on  federal  funds
purchased which fell 431 basis points to 2.42% in 2001. The average rate paid on
savings  deposits  also fell from  3.13% to 2.11%.  Partially  offsetting  these
decreases  was an $11.2  million  (1.59%)  increase in average  interest-bearing
liabilities from 2000 to 2001.

Net Interest Margin

Following is a summary of the Company's  net interest  margin for the past three
years:

   Components of Net Interest Margin
  --------------------------------------------------------------------------
   Year ended December 31,                       2002       2001      2000
                                               -----------------------------
   Yield on earning assets                       6.98%      8.21%     9.02%
   Rate paid on interest-bearing liabilities     1.73%      3.28%     4.05%
                                               -----------------------------
   Net interest spread                           5.24%      4.93%     4.96%
   Impact of all other net
      noninterest-bearing funds                  0.35%      0.65%     0.74%
                                               -----------------------------
   Net interest margin (FTE)                     5.61%      5.58%     5.70%
  ==========================================================================

The Company's  aggressive reaction to declining market rates throughout 2001 and
2002 has allowed it to maintain a relatively  stable net interest margin.  While
the  Company  was able to  reduce  the  average  rate paid on  interest  bearing
liabilities at  approximately  the same rate or faster than the average yield on
interest earning assets,  and thus maintain or increase its net interest spread,
the positive impact of all other net  noninterest  bearing funds on net interest
margin was reduced due to the lower market rates of interest at which they could
be  invested.  In  addition,  while  the  Company  has been able to  maintain  a
relatively  stable net  interest  margin  throughout  2001 and 2002,  it becomes
increasingly more difficult to do so as interest rates are reduced further.

                                      -13-



Summary of Average Balances, Yields/Rates and Interest Differential

The following tables present,  for the past three years,  information  regarding
the Company's consolidated average assets, liabilities and shareholders' equity,
the amounts of interest income from average 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):




                                                                   Year ended December 31, 2002
                                                         -----------------------------------------------
                                                                             Interest           Rates
                                                            Average           income/          earned/
                                                            balance           expense           paid
                                                         -----------------------------------------------
                                                                                         
      Assets
      Loans                                                $660,668          $52,472            7.94%
      Investment securities - taxable                       204,155            9,430            4.62%
      Investment securities - nontaxable                     43,871            3,435            7.83%
      Federal funds sold                                     36,692              606            1.65%
                                                         ----------       ----------
      Total earning assets                                  945,386           65,943            6.98%
                                                                          ----------
      Other assets                                           94,080
                                                         ----------
           Total assets                                  $1,039,466
                                                         ==========

      Liabilities and shareholders' equity
      Interest-bearing demand deposits                     $176,484              469            0.27%
      Savings deposits                                      264,444            2,710            1.02%
      Time deposits                                         282,084            8,441            2.99%
      Federal funds purchased                                   116                2            1.47%
      Long-term debt                                         22,939            1,292            5.63%
                                                         ----------       ----------
             Total interest-bearing liabilities             746,067           12,914            1.73%
                                                                          ----------
      Noninterest-bearing demand                            182,569
      Other liabilities                                      17,250
      Shareholders' equity                                   93,580
                                                         ----------
             Total liabilities and shareholders' equity  $1,039,466
                                                         ==========
      Net interest spread (1)                                                                   5.24%
      Net interest income and interest margin (2)                            $53,029            5.61%
                                                                          ==========         ========



(1)  Net interest spread represents the average yield earned on interest earning
        assets less the average rate paid on interest bearing liabilities.
(2)  Net interest  margin is  computed by dividing net  interest income by total
        average earning assets.

                                      -14-






                                                                   Year ended December 31, 2001
                                                         -----------------------------------------------
                                                                             Interest           Rates
                                                            Average           income/          earned/
                                                            balance           expense           paid
                                                         -----------------------------------------------
                                                                                        
      Assets
      Loans                                                $647,317          $58,730            9.07%
      Investment securities - taxable                       159,465            9,543            5.98%
      Investment securities - nontaxable                     44,615            3,373            7.56%
      Federal funds sold                                     39,204            1,506            3.84%
                                                         ----------       ----------
      Total earning assets                                  890,601           73,152            8.21%
                                                                          ----------
      Other assets                                           87,941
                                                         ----------
           Total assets                                    $978,542
                                                         ==========

      Liabilities and shareholders' equity
      Interest-bearing demand deposits                     $156,629            1,487            0.95%
      Savings deposits                                      225,137            4,759            2.11 %
      Time deposits                                         301,023           15,261            5.07%
      Federal funds purchased                                   289                7            2.42%
      Long-term debt                                         32,133            1,972            6.14%
                                                         ----------       ----------
             Total interest-bearing liabilities             715,211           23,486            3.28%
                                                                          ----------
      Noninterest-bearing demand                            160,152
      Other liabilities                                      15,660
      Shareholders' equity                                   87,519
                                                         ----------
             Total liabilities and shareholders' equity    $978,542
                                                         ==========
      Net interest spread (1)                                                                   4.93%
      Net interest income and interest margin (2)                            $49,666            5.58%
                                                                          ==========         ========



(1)  Net interest spread represents the average yield earned on interest-earning
        assets less the average rate paid on interest-bearing liabilities.
(2)  Net  interest margin is computed  by dividing net interest  income by total
        average earning assets.





                                                                   Year ended December 31, 2000
                                                         -----------------------------------------------
                                                                             Interest           Rates
                                                            Average           income/          earned/
                                                            balance           expense           paid
                                                         -----------------------------------------------
                                                                                        
    Assets
      Loans                                                $624,717          $61,835            9.90%
      Investment securities - taxable                       181,316           11,704            6.46%
      Investment securities - nontaxable                     44,847            3,420            7.63%
      Federal funds sold                                      8,696              538            6.19%
                                                         ----------       ----------
      Total earning assets                                  859,576           77,497            9.02%
                                                                          ----------
      Other assets                                           78,214
                                                         ----------
           Total assets                                    $937,790
                                                         ==========

      Liabilities and shareholders' equity
      Interest-bearing demand deposits                     $149,412            2,360            1.58%
      Savings deposits                                      218,286            6,837            3.13%
      Time deposits                                         278,968           15,806            5.67%
      Federal funds purchased                                 9,261              623            6.73%
      Long-term debt                                         48,078            2,917            6.07%
                                                         ----------       ----------
             Total interest-bearing liabilities             704,005           28,543            4.05%
                                                                          ----------
      Noninterest-bearing demand                            141,767
      Other liabilities                                      13,277
      Shareholders' equity                                   78,741
                                                         ----------
             Total liabilities and shareholders' equity    $937,790
                                                         ==========
      Net interest spread (1)                                                                   4.96%
      Net interest income and interest margin (2)                            $48,954            5.70%
                                                                          ==========         ========



(1)  Net interest spread represents the average yield earned on interest-earning
        assets less the average rate paid on interest-bearing liabilities.
(2)  Net interest  margin is computed  by dividing net  interest income by total
        average earning assets.

                                      -15-



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  table  sets  forth a summary  of the  changes  in the  Company's
interest income and interest expense from changes in average asset and liability
balances  (volume)  and  changes  in average  interest  rates for the past three
years. The rate/volume variance has been included in the rate variance.  Amounts
are calculated on a fully taxable equivalent basis (dollars in thousands):




                                                       2002 over 2001                          2001 over 2000
                                            -----------------------------------------------------------------------------
                                                             Yield/                                 Yield/
                                              Volume          Rate       Total        Volume         Rate       Total
                                            -----------------------------------------------------------------------------
Increase (decrease) in                                                 (dollars in thousands)
  interest income:
                                                                                               
    Loans                                     $1,211        ($7,469)    ($6,258)      $2,237       ($5,342)    ($3,105)
    Investment securities                      2,781         (2,832)        (51)      (1,477)         (731)     (2,208)
    Federal funds sold                           (96)          (804)       (900)       1,887          (919)        968
                                            -----------------------------------------------------------------------------
      Total                                    3,896        (11,105)     (7,209)       2,647        (6,992)     (4,345)
                                            -----------------------------------------------------------------------------
Increase (decrease) in
  interest expense:
    Demand deposits (interest-bearing)           188         (1,206)     (1,018)         114          (987)       (873)
    Savings deposits                             831         (2,880)     (2,049)         215        (2,293)     (2,078)
    Time deposits                               (960)        (5,860)     (6,820)       1,250        (1,795)       (545)
    Federal funds purchased                       (4)            (1)         (5)        (604)          (12)       (616)
    Long-term borrowings                        (564)          (116)       (680)        (967)           22        (945)
                                            -----------------------------------------------------------------------------
      Total                                     (509)       (10,063)    (10,572)           8        (5,065)     (5,057)
                                            -----------------------------------------------------------------------------
Increase (decrease) in
  net interest income                         $4,405        ($1,042)     $3,363       $2,639       ($1,927)       $712
                                            =============================================================================



Provision for Loan Losses

In 2002, the Bank provided $2.8 million for loan losses compared to $4.4 million
in 2001.  Net loan  charge-offs  decreased  $1.5  million  (51%) to $1.5 million
during 2002. Net  charge-offs of commercial,  financial and  agricultural  loans
decreased  $2.3  million  (83%) in 2002,  while net  charge-offs  of real estate
mortgage and consumer  installment loans increased  $662,000 (463%) and $105,000
(205%),  respectively.  The 2002 net  charge-offs  represented  0.22% of average
loans outstanding versus 0.47% in 2001.  Nonperforming loans were 1.19% of total
loans at December  31, 2002 versus  0.92% at  December  31,  2001.  The ratio of
allowance  for loan  losses to  nonperforming  loans was 176% at the end of 2002
versus 216% at the end of 2001.

In 2001,  the Bank provided $4.4 million for loan losses  compared to $5 million
in 2000. Net loan charge-offs  decreased $1.4 million (31%) to $3 million during
2001.  Included  in the $3 million  of net loan  charge-offs  during  2001 is $2
million of charge-offs on a group of agricultural related loans to one borrower.
During the quarter ended March 31, 2001, the Company  received  proceeds of $6.1
million  from  the  sale  of  this   nonperforming   agricultural-related   loan
relationship  that was first  reported as  nonperforming  in the  quarter  ended
September  30,  2000.  The  Company  recorded  charge-offs  related to this loan
relationship  of $2  million  in 2001  and  $3.8  million  in  2000.  This  loan
relationship was sold to a third party without recourse to the Company. As such,
the  Company  is not  subject  to any  future  charge-offs  related to this loan
relationship.  Net charge-offs of consumer  installment  loans increased $51,000
(104%).  Net  charge-offs  of  commercial,   financial  and  agricultural  loans
decreased  $1.4  million  (34%) in 2001,  while net  charge-offs  of real estate
mortgage loans decreased $6,000 (4%). The 2001 charge-offs  represented 0.47% of
average  loans  outstanding  versus  0.70%  in  2000.  Nonperforming  loans as a
percentage  of total loans were 0.92% and 2.29% at  December  31, 2001 and 2000,
respectively.  The ratio of allowance for loan losses to nonperforming loans was
216% at the end of 2001 versus 80% at the end of 2000.

                                      -16-



Noninterest Income

The following  table  summarizes the Company's  noninterest  income for the past
three years (dollars in thousands):


      Components of  Noninterest Income
     ---------------------------------------------------------------------------
      Year ended December 31,                       2002       2001       2000
                                                --------------------------------
      Service charges on deposit accounts          $8,915     $5,875     $5,421
      ATM fees and interchange                      1,823      1,423      1,250
      Other service fees                              548        797        813
      Commissions on sale of
          nondeposit investment products            2,467      2,576      2,784
      Gain on sale of loans                         3,641      2,095        802
      Increase in cash value of life insurance        606        476        657
      Other noninterest income                      1,180      1,204      1,685
      Gain on sale of investments                       -         36          -
      Gain on sale of insurance company stock           -      1,756          -
      Gain on receipt of insurance company stock        -          -      1,510
                                                --------------------------------
      Total noninterest income                    $19,180    $16,238    $14,922
     ===========================================================================

Noninterest  income increased $2.9 million (18.1%) to $19.2 million in 2002. The
increase was mainly due to a $3.0 million (52%)  increase in service  charges on
deposit  accounts to $8.9 million,  and a $1.5 million (74%) increase in gain on
sale of loans to $3.6 million  during 2002.  Except for a $1.8 million gain from
sale of  investments  and insurance  company stock in 2001,  noninterest  income
would have increased $4.7 million  (29.2%).  The increase in service  charges on
deposit  accounts was almost  entirely due to the  introduction of the Company's
overdraft  privilege product in July 2002. The increase in gain on sale of loans
is due to continued and increased residential mortgage refinance activity during
2002.  The Company  originated  and sold  residential  mortgages  totaling  $178
million, $126 million, and $50 million in 2002, 2001, and 2000, respectively.

Noninterest  income  increased $1.3 million (8.8%) to $16.2 million in 2001. The
increase  was mainly due to a $1.3  million  (161%)  increase in gain on sale of
loans to $2.1 million during 2001.  During 2001, the Company sold its investment
in insurance  company stock and  recognized a gain of  $1,756,000.  In 2000, the
Company  recognized a gain of  $1,510,000  on the receipt of its  investment  in
insurance company stock when the insurance company demutualized.

Securities Transactions

During  2002 the Bank had no sales of  securities.  Also during  2002,  the Bank
received  proceeds from maturities of securities  totaling  $131.6 million,  and
used $241.8 million to purchase securities.

During  2001 the Bank  realized  net gains of $36,000 on the sale of  securities
with market  values of $10.8  million.  Also,  the Bank  realized a gain of $1.8
million on the sale of its  investment  in an  insurance  company  with a market
value of $3.3 million. In addition, during 2001, the Bank received proceeds from
maturities of securities totaling $85.6 million,  and purchased $93.1 million of
securities.

                                      -17-



Noninterest Expense

Salaries and Benefits

Salary and benefit  expenses  increased $3.1 million (14.6%) to $24.3 million in
2002 compared to 2001.  Base  salaries  increased  $1.4 million  (9.5%) to $15.7
million  in 2002.  The  increase  in base  salaries  was  mainly  due to an 8.2%
increase in average full time  equivalent  employees from 402 during 2001 to 435
during 2002,  primarily due to the opening of four  branches in 2002.  Incentive
and  commission  related  salary  expenses  increased  $866,000  (33.5%) to $3.5
million in 2002. The increase in incentive and commission related salary expense
was mainly due to  increased  commissions  paid on  origination  of  residential
mortgage  loans,  and other  functions  that exhibited  exceptional  performance
during 2002.  These results are consistent  with the Bank's  strategy of working
more efficiently with fewer employees who are compensated in part based on their
business unit's  performance or on their ability to generate  revenue.  Benefits
expense, including retirement,  medical and workers' compensation insurance, and
taxes, increased $855,000 (20.2%) to $5.1 million during 2002.

Salary and benefit  expenses  increased  $1.3 million (6.7%) to $21.2 million in
2001  compared  to  2000.  Incentive  and  commission  related  salary  expenses
increased  $310,000  (13.6%) to $2.6 million in 2001. Base salaries and benefits
increased  $744,000  (5.5%)  to $14.2  million  in 2001.  The  increase  in base
salaries  was mainly due to a 2.6%  increase  in  average  full time  equivalent
employees  from 392 during 2000 to 402 during 2001,  and an average  annual base
salary increase of 2.9% during 2001.

Other Noninterest Expenses

The following table summarizes the Company's other  noninterest  expense for the
past three years (dollars in thousands):


     Components of  Noninterest Expense
    ---------------------------------------------------------------------------
     Year ended December 31,                     2002         2001         2000
                                           -------------------------------------
     Equipment and data processing             $4,095       $3,694       $3,376
     Occupancy                                  2,954        2,806        2,587
     Professional fees                          1,696        1,087        1,005
     Telecommunications                         1,422        1,253          957
     Advertising                                1,263        1,132        1,336
     Intangible amortization                      911          911          965
     ATM network charges                          847          913          770
     Postage                                      801          639          486
     Courier service                              720          661          608
     Operational losses                           534          227          807
     Assessments                                  233          223          222
     Net other real estate owned expense           26          175          127
     Other                                      6,179        5,687        4,737
                                           -------------------------------------
     Total noninterest expense                $21,681      $19,408      $17,983
    ============================================================================

Other  expenses  increased  $2.3  million  (11.7%)  to  $21.7  million  in 2002.
Increases  in  the  areas  of   equipment   and  data   processing,   occupancy,
telecommunications, courier service, and other were mainly due to the opening of
four branches in 2002.  Increases in professional  fees and  operational  losses
were related to the overdraft  privilege  product  introduced in July 2002,  and
were more than offset by the large revenue that product is producing.

Other  noninterest  expense  increased  $1.4 million  (7.9%) to $19.4 million in
2001.  Increases  in the  areas of  equipment  and data  processing,  occupancy,
telecommunications,  and ATM network  charges  were mainly due to the first full
year of operation of the Paradise  branch,  and  enhancements to data processing
and ATM network  equipment.  Also contributing to the increase in other expenses
in 2001 was a $314,000  (34%)  increase in various loan  production  expenses to
$1.3  million.  Helping  to  offset  these  increases  in  other  expenses  were
reductions of $580,000 in operational  losses and $204,000 in advertising during
2001.  The  decrease  in  operational  losses was  mainly due to a  nonrecurring
$434,000 customer fraud loss in 2000.

                                      -18-



Provision for Taxes

The effective tax rate on income was 36.6%, 37.1%, and 36.4%, in 2002, 2001, and
2000,  respectively.  The  effective  tax rate  was  greater  than  the  federal
statutory  tax rate due to state tax expense of $2 million,  $1.9  million,  and
$1.9 million,  respectively,  in these years.  Tax-free  income of $2.2 million,
$2.2 million,  and $2.3 million,  respectively,  from  investment  securities in
these years helped to reduce the effective tax rate.

Financial Ratios

The following table shows the Company's key financial  ratios for the past three
years:

   Year ended December 31,                        2002        2001       2000
                                               --------------------------------
   Return on average total assets                 1.35%       1.27%      1.35%
   Return on average shareholders' equity        15.03%      14.19%     16.03%
   Shareholders' equity to total assets           8.65%       8.65%      8.77%
   Common shareholders' dividend payout ratio    39.95%      45.43%     45.00%
  =============================================================================

Loans

The Bank concentrates its lending activities in four principal areas: commercial
loans (including agricultural loans), consumer loans, real estate mortgage loans
(residential  and commercial  loans and mortgage loans originated for sale), and
real estate  construction  loans.  At December 31, 2002,  these four  categories
accounted for approximately  18%, 29%, 47%, and 6% of the Bank's loan portfolio,
respectively,  as compared to 20%, 23%,  50%, and 7%, at December 31, 2001.  The
shift in the percentages was primarily due to the Bank's ability to increase its
consumer loan portfolio  during 2002. The increase in consumer loans during 2002
was mainly due to increases in home equity lines of credit and automobile loans.
The interest  rates  charged for the loans made by the Bank vary with the degree
of risk, the size and maturity of the loans,  the borrower's  relationship  with
the Bank and  prevailing  money  market rates  indicative  of the Bank's cost of
funds.

The majority of the Bank's loans are direct loans made to  individuals,  farmers
and  local  businesses.  The Bank  relies  substantially  on  local  promotional
activity, personal contacts by bank officers, directors and employees to compete
with other  financial  institutions.  The Bank makes  loans to  borrowers  whose
applications  include a sound purpose,  a viable  repayment source and a plan of
repayment established at inception and generally backed by a secondary source of
repayment.

At December 31, 2002 loans totaled $687.5 million and was a 4.4% ($28.8 million)
increase over the balances at the end of 2001.  Demand for home equity loans and
auto loans (both  classified  as consumer  loans) were strong  throughout  2002.
Residential mortgage loan activity was extremely strong in 2002, but the Company
generally sells all such loans.  Commercial and agriculture  related loan growth
continued to be relatively weak in 2002 as the economy continued to be weak, and
competition for such loans was high. The average  loan-to-deposit  ratio in 2002
was 71.1% compared to 76.8% in 2001.

At December 31, 2001 loans totaled $658.7 million and was a 2.9% ($18.3 million)
increase  over  the  balances  at the end of 2000.  Demand  for  commercial  and
agriculture  related loans weakened as the economy weakened in 2001.  Demand for
home equity loans remained strong  throughout 2001, while  residential  mortgage
loans increased significantly throughout 2001. The average loan-to-deposit ratio
in 2001 was 76.8% compared to 79.2% in 2000.

                                      -19-



Loan Portfolio Composite

The following table shows the Company's loan balances for the past three years:



                                                                            December 31,
                                                                                               
(dollars in thousands)                           2002           2001            2000           1999            1998
                                             --------------------------------------------------------------------------
Commercial, financial and agricultural         $125,982        $130,054       $148,135       $138,313        $106,796
Consumer installment                            201,858         155,046        120,247         79,273          71,634
Real estate mortgage                            319,969         326,897        334,010        332,116         316,927
Real estate construction                         39,713          46,735         37,999         38,277          37,076
                                             --------------------------------------------------------------------------
    Total loans                                $687,522        $658,732       $640,391       $587,979        $532,433
                                             ==========================================================================


Nonperforming Assets

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 not be classified as nonaccrual. 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.  The  reclassification  of
loans as nonaccrual does not  necessarily  reflect  management's  judgment as to
whether they are collectible.

Interest income on nonaccrual loans, which would have been recognized during the
year,  ended December 31, 2002, if all such loans had been current in accordance
with their  original  terms,  totaled $1.2  million.  Interest  income  actually
recognized on these loans in 2002 was $733,000.

The  Bank'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 other
real estate owned ("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.

                                      -20-



The following tables set forth the amount of the Bank's nonperforming assets net
of  guarantees  of  the  U.S.   government,   including  its  agencies  and  its
government-sponsored agencies, as of the dates indicated:




                                                  December 31, 2002             December 31, 2001
                                              -------------------------    -------------------------
(dollars in thousands):                         Gross Guaranteed  Net       Gross Guaranteed   Net
                                              ------------------------------------------------------
                                                                             
Performing nonaccrual loans                   $13,199   $8,432   $4,767     $2,733       -   $2,733
Nonperforming, nonaccrual loans                 4,091      718    3,373      3,120    $387    2,733
                                              ------------------------------------------------------
     Total nonaccrual loans                    17,290    9,150    8,140      5,853     387    5,466
Loans 90 days past due and still accruing          40        -       40        584       -      584
                                              ------------------------------------------------------
     Total nonperforming loans                 17,330    9,150    8,180      6,437     387    6,050
Other real estate owned                           932        -      932         71       -       71
                                              ------------------------------------------------------
     Total nonperforming loans and OREO       $18,262   $9,150   $9,112     $6,508    $387   $6,121
                                              ======================================================

Nonperforming loans to total loans                                1.19%                       0.92%
Allowance for loan losses/nonperforming loans                      176%                        216%
Nonperforming assets to total assets                              0.80%                       0.61%
Allowance for loan losses to nonperforming assets                  158%                        213%





                                                  December 31, 2000             December 31, 1999
                                              -------------------------    -------------------------
(dollars in thousands):                         Gross Guaranteed  Net       Gross Guaranteed   Net
                                              ------------------------------------------------------
                                                                             
Performing nonaccrual loans                    $4,331     $142   $4,189       $666     $62     $604
Nonperforming, nonaccrual loans                 8,161       88    8,073      1,662     508    1,154
                                              ------------------------------------------------------
     Total nonaccrual loans                    12,492      230   12,262      2,328     570    1,758
Loans 90 days past due and still accruing         965        -      965        923       -      923
                                              ------------------------------------------------------
     Total nonperforming loans                 13,457      230   13,227      3,251     570    2,681
Other real estate owned                         1,441        -    1,441        760       -      760
                                              ------------------------------------------------------
     Total nonperforming loans and OREO       $14,898     $230  $14,668     $4,011    $570   $3,441
                                              ======================================================

Nonperforming loans to total loans                                2.07%                       0.46%
Allowance for loan losses/nonperforming loans                       88%                        412%
Nonperforming assets to total assets                              1.51%                       0.37%
Allowance for loan losses to nonperforming assets                   80%                        321%



                                                  December 31, 1998
                                             ---------------------------
(dollars in thousands):                        Gross  Guaranteed   Net
                                             ---------------------------
Performing nonaccrual loans                     $344        -      $344
Nonperforming, nonaccrual loans                  733      $32       701

     Total nonaccrual loans                    1,077       32     1,045
Loans 90 days past due and still accruing        620        -       620

     Total nonperforming loans                 1,697              1,665
Other real estate owned                        1,412        -     1,412

     Total nonperforming loans and OREO       $3,109      $32    $3,077

Nonperforming loans to total loans                                0.31%
Allowance for loan losses/nonperforming loans                      493%
Nonperforming assets to total assets                              0.34%
Allowance for loan losses to nonperforming assets                  267%

During 2002,  nonperforming  assets net of  government  guarantees  increased $3
million (49%) to a total of $9.1 million.  Nonperforming loans net of government
guarantees  increased $2.1 million (35%) to $8.2 million,  and other real estate
owned  (OREO)  increased   $861,000  to  $932,000  during  2002.  The  ratio  of
nonperforming  loans to total loans at December  31, 2002 was 1.19% versus 0.92%
at the end of 2001. Classifications of nonperforming loans as a percent of total
loans at the end of 2002 were as follows:  secured by real estate, 62%; loans to
farmers, 27%; commercial loans, 10%; and consumer loans, 1%.

                                      -21-



During 2001,  nonperforming  assets net of government  guarantees decreased $8.5
million (58%) to $6.1 million.  Nonperforming loans decreased $7.2 million (54%)
to $6.1 million, and other real estate owned (OREO) decreased $1.4 million (95%)
to $71,000  during  2001.  The ratio of  nonperforming  loans to total  loans at
December 31, 2001 was 0.92% versus 2.07% at the end of 2000. The decrease in the
ratio of  nonperforming  loans to total loans was due in part to the sale of one
nonperforming  loan relationship  during 2001 that accounted for $8.4 million of
nonperforming loan balances at December 31, 2000. During the quarter ended March
31, 2001,  the Company  received  proceeds of $6.1 million from the sale of this
nonperforming  agricultural-related loan relationship that was first reported as
nonperforming  in the quarter  ended  September 30, 2000.  The Company  recorded
charge-offs  related  to this loan  relationship  of $2 million in 2001 and $3.8
million  in 2000.  This  loan  relationship  was sold to a third  party  without
recourse  to the  Company.  As such,  the  Company is not  subject to any future
charge-offs related to this loan relationship.  Classifications of nonperforming
loans as a percent of the total at the end of 2001 were as  follows:  secured by
real estate,  65%; loans to farmers,  4%;  commercial  loans,  30%; and consumer
loans, 1%.

Allowance for Loan Losses

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 and lease 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 the remainder of this discussion,  "loans" shall include all loans and lease
contracts, which are a part of the Bank's portfolio.

Assessment of the Adequacy of the Allowance for Loan Losses

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 and  lease  portfolio,  and to a lesser
extent the Company's loan and lease 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 occurs 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 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.).  Allowances for
identified  problem loans are based on specific analysis of individual  credits.
Allowance  factors for loan pools are based on the  previous 5 years  historical
loss experience by product type.  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.

The Components of the Allowance for Loan Losses

As noted  above,  the  overall  allowance  consists of a specific  allowance,  a
formula  allowance,  and an  allowance  for  environmental  factors.  The  first
component,  the specific  allowance,  results  from the  analysis of  identified
credits that meet management's criteria for specific evaluation. These loans are
reviewed  individually  to  determine  if such  loans are  considered  impaired.
Impaired loans are those where management has concluded that it is probable that
the borrower will be unable to pay all amounts due under the contractual  terms.
Loans specifically reviewed,  including those considered impaired, are evaluated
individually  by  management  for  loss  potential  by  evaluating   sources  of
repayment,  including  collateral as applicable,  and a specified  allowance for
loan losses is established where necessary.

                                      -22-



The second  component,  the formula  allowance,  is an estimate of the  probable
losses that have occurred across the major loan categories in the Company's loan
portfolio. This analysis is based on loan grades by pool and the loss history of
these pools. This analysis covers the Company's entire loan portfolio  including
unused commitments but excludes any loans, which were analyzed  individually and
assigned a specific allowance as discussed above. The total amount allocated for
this component is determined by applying loss estimation  factors to outstanding
loans  and loan  commitments.  The  loss  factors  are  based  primarily  on the
Company's  historical  loss  experience  tracked  over a  five-year  period  and
adjusted as  appropriate  for the input of current  trends and  events.  Because
historical loss  experience  varies for the different  categories of loans,  the
loss  factors  applied to each  category  also differ.  In addition,  there is a
greater  chance that the Company has suffered a loss from a loan that was graded
less than satisfactory than if the loan was last graded satisfactory. Therefore,
for any given category,  a larger loss estimation factor is applied to less than
satisfactory  loans than to those that the Company last graded as  satisfactory.
The resulting formula allowance is the sum of the allocations determined in this
manner.

The third or  "unallocated"  component of the  allowance  for credit losses is a
component that is not allocated to specific loans or groups of loans, but rather
is  intended  to  absorb  losses  that  may  not be  provided  for by the  other
components.

There are several  primary  reasons that the other  components  discussed  above
might not be  sufficient  to absorb the losses  present in  portfolios,  and the
unallocated portion of the allowance is used to provide for the losses that have
occurred because of them.

The first  reason is that  there are  limitations  to any  credit  risk  grading
process.  The volume of loans makes it  impractical to re-grade every loan every
quarter.  Therefore,  it is possible that some  currently  performing  loans not
recently  graded will not be as strong as their last grading and an insufficient
portion of the  allowance  will have been  allocated  to them.  Grading and loan
review often must be done  without  knowing  whether all  relevant  facts are at
hand.  Troubled  borrowers may  deliberately  or  inadvertently  omit  important
information from reports or conversations  with lending officers regarding their
financial condition and the diminished strength of repayment sources.

The second  reason is that the loss  estimation  factors are based  primarily on
historical loss totals.  As such, the factors may not give sufficient  weight to
such considerations as the current general economic and business conditions that
affect the Company's  borrowers  and specific  industry  conditions  that affect
borrowers in that industry. The factors might also not give sufficient weight to
other  environmental  factors such as changing economic  conditions and interest
rates,  portfolio  growth,  entrance  into new  markets or  products,  and other
characteristics as may be determined by Management.

Specifically,  in assessing how much unallocated allowance needed to be provided
at December 31, 2002, management considered the following:

     -   with   respect  to  loans  to  the  agriculture   industry,  management
         considered  the effects on borrowers of weather conditions and overseas
         market conditions  for exported products as well as commodity prices in
         general;

     -   with  respect to changes  in the interest rate  environment  management
         considered  the  recent changes  in  interest  rates and the  resultant
         economic impact it may have had on borrowers  with high leverage and/or
         low profitability; and

     -   with  respect  to  loans  to  borrowers  in new markets  and growth  in
         general, management  considered the relatively  short seasoning of such
         loans and the lack of experience with such borrowers.

                                      -23-



Each of these  considerations  was assigned a factor and applied to a portion or
all of the loan  portfolio.  Since these factors are not derived from experience
and are applied to large  non-homogeneous  groups of loans,  they are considered
unallocated  and are  available  for use across the  portfolio  as a whole.  The
following  table  sets  forth  the  Bank's  loan  loss  reserve  as of the dates
indicated:




                                                         December 31,
                               -------------------------------------------------------------
                                   2002        2001         2000        1999         1998
                               -------------------------------------------------------------
                                                    (dollars in thousands)
                                                                       
Specific allowance                $5,299      $5,672       $3,266        $600         $253
Formula allowance                  8,839       7,183        8,067      10,250        7,744
Unallocated allowance                239         203          337         187          209
                               -------------------------------------------------------------
    Total allowance              $14,377     $13,058      $11,670     $11,037       $8,206
                               =============================================================


The  allowance  for loan losses to total  loans at  December  31, 2002 was 2.09%
versus 1.98% at the end of 2001.  At December 31, 2000,  the  allowance for loan
losses to total loans was 1.82%.

Based on the current conditions of the loan portfolio,  management believes that
the $14.4 million  allowance for loan losses at December 31, 2002 is adequate to
absorb probable  losses inherent in the Bank'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.

The following table  summarizes,  for the years  indicated,  the activity in the
allowance for loan losses:




                                                               December 31,
                                     ----------------------------------------------------------------
                                         2002        2001          2000         1999         1998
                                     ----------------------------------------------------------------
                                                              (dollars in thousands)
                                                                               
Balance, beginning of year             $13,058      $11,670      $11,037       $8,206       $6,459
Provision charged to operations          2,800        4,400        5,000        3,550        4,200

Loans charged off:
Commercial, financial and
  agricultural                            (668)      (2,861)      (4,450)        (865)      (1,865)
Consumer installment                      (299)        (134)        (103)        (148)        (702)
Real estate mortgage                      (819)        (218)        (152)         (69)        (188)
                                     ----------------------------------------------------------------
Total loans charged-off                 (1,786)      (3,213)      (4,705)      (1,082)      (2,755)
                                     ----------------------------------------------------------------
Recoveries:
Commercial, financial and
  agricultural                             197           92          281          327          164
Consumer installment                        94           34           54           36          130
Real estate mortgage                        14           75            3           --            8
                                     ----------------------------------------------------------------
Total recoveries                           305          201          338          363          302
                                     ----------------------------------------------------------------
Net loans charged-off                   (1,481)      (3,012)      (4,367)        (719)      (2,453)
                                     ----------------------------------------------------------------
Balance, year end                      $14,377      $13,058      $11,670      $11,037       $8,206
                                     ================================================================
Average total  loans                  $660,668     $647,317     $624,717     $566,738     $487,598
                                     ----------------------------------------------------------------
Ratios:
Net charge-offs during period
  to average loans outstanding
  during period                          0.22%        0.47%        0.70%        0.13%        0.50%
Provision for loan losses to aver-
  age loans outstanding                  0.42%        0.68%        0.80%        0.63%        0.86%
Allowance to loans at year end           2.09%        1.98%        1.82%        1.88%        1.54%
                                     ----------------------------------------------------------------


                                      -24-





The following  tables  summarize the allocation of the allowance for loan losses
between loan types at December 31, 2002 and 2001:

                                               December 31, 2002        December 31, 2001         December 31, 2000
                                           ------------------------- ------------------------  ------------------------
 (dollars in thousands)                                Percent of                Percent of                Percent of
                                                      loans in each             loans in each             loans in each
                                                       category to               category to               category to
                                            Amount     total loans    Amount     total loans    Amount     total loans

Balance at end of period applicable to:
                                                                                             
Commercial, financial and agricultural      $6,791        18.4%       $6,929        19.8%       $6,873        43.4%
Consumer installment                         2,833        29.4%        1,896        23.5%        1,373        15.9%
Real estate mortgage                         4,229        46.4%        3,709        49.6%        2,925        34.8%
Real estate construction                       524         5.8%          524         7.1%          499         5.9%
                                          ---------     --------    ---------     --------    ---------     --------
                                           $14,377       100.0%      $13,058       100.0%      $11,670       100.0%
                                          =========     ========    =========     ========    =========     ========





                                                          December 31, 1999        December 31, 1998
                                                       -----------------------  -----------------------
 (dollars in thousands)                                             Percent of                Percent of
                                                                   loans in each             loans in each
                                                                    category to               category to
Balance at end of period applicable to:                  Amount     total loans    Amount     total loans

                                                                                      
Commercial, financial and agricultural                   $5,224        44.7%       $3,345        39.8%
Consumer installment                                      1,464        13.6%        1,154        13.6%
Real estate mortgage                                      3,671        35.2%        3,153        39.6%
Real estate construction                                    678         6.5%          554         7.0%
                                                       ---------     --------     --------     --------
                                                        $11,037       100.0%       $8,206       100.0%
                                                       =========     ========     ========     ========



Other Real Estate Owned

The  December  31, 2002  balance of other real estate  owned (OREO) was $932,000
versus  $71,000 at December 31, 2001.  The Bank  disposed of  properties  with a
value of $79,000 in 2002. OREO properties  consist of a mixture of land,  single
family residences, and commercial buildings.

Intangible Assets

At  December  31,  2002 and 2001,  the Bank had  intangible  assets  totaling $4
million and $5.1 million,  respectively. The intangible assets resulted from the
Bank's 1997  acquisitions  of certain  Wells Fargo  branches  and Sutter  Buttes
Savings Bank, and the recognition of an additional  minimum pension liability in
2001.  Intangible  assets at December  31, 2002 and 2001 were  comprised  of the
following:
                                                  December 31,
                                             2002              2001
                                           --------------------------
                                             (dollars in thousands)
Core-deposit intangible                     $3,642            $4,553
Additional minimum pension liability           401               517
                                           --------------------------
  Total intangible assets                   $4,043            $5,070
                                           ==========================


Amortization of core deposit intangible assets amounting to $911,000,  $911,000,
and $965,000 was recorded in 2002,  2001,  and 2000,  respectively.  The minimum
pension liability  intangible asset is not amortized but adjusted annually based
upon actuarial estimates.

Deposits

Deposits  at  December  31, 2002 were up $124.8  million  (14.2%)  over the 2001
year-end balances to $1.0 billion. All categories of deposits increased in 2002.
Included in the December 31, 2002 certificate of deposit balances is $20 million
from the State of California. The Bank participates in a deposit program offered
by the State of  California  whereby  the State may make  deposits  at the Banks
request subject to collateral and credit worthiness constraints.  The negotiated
rates on these State deposits are generally favorable to other wholesale funding
sources available to the Bank.

                                      -25-



Deposits at December  31, 2001 were up $42.6  million  (5.1%) to $880.4  million
over 2000 year-end balances.  All categories of deposits except  certificates of
deposit  increased in 2001.  Included in the December  31, 2001  certificate  of
deposit balance is $20 million from the State of California,  which represents a
decrease of $20 million  from the $40  million  the State of  California  had on
deposit at the Bank at December 31, 2000.  During 2001,  the Bank elected not to
renew $20 million of the $40 million  State  certificates  of deposit  that were
outstanding at December 31, 2000.

Long-Term Debt

During 2002, the Bank repaid  $32,000 of long-term  debt. In 2001, the Bank made
principal  payments of $11 million on long-term debt obligations.  See Note 7 to
the consolidated financial statements at Item 8 of this report.

Equity

See Note 9 and Note 20 in the financial  statements at Item 8 of this report for
a discussion  of  shareholder's  equity and  regulatory  capital,  respectively.
Management   believes  that  the  Company's   capital  is  adequate  to  support
anticipated growth, meet the cash dividend  requirements of the Company and meet
the future risk-based capital requirements of the Bank and the Company.

Market Risk Management

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

Asset/Liability  Management.  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  Bank's  assets,   liabilities  and
off-balance  sheet  items.  The Bank  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 Bank 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.

                                      -26-



The following table  summarizes the effect on net interest income and net income
due to  changing  interest  rates as  measured  against a flat rate (no  change)
scenario:

Interest  Rate Risk  Simulation  of Net  Interest  Income  and Net  Income as of
December 31, 2002

                               Estimated Change in          Estimated Change in
   Change in Interest       Net Interest Income (NII)         Net Income (NI)
   Rates (Basis Points)         (as % of "flat" NII)        (as % of "flat" NI)
   +300 (ramp)                        1.27%                        2.76%
   +200 (ramp)                        0.56%                        1.23%
   +100 (ramp)                        0.03%                        0.07%
   +   0 (flat)                          --                           --
   -100 (ramp)                       (0.93)%                      (2.01)%
   -200 (ramp)                       (1.91)%                      (4.12)%
   -300 (ramp)                       (3.75)%                      (8.07)%

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.

The  following  table  summarizes  the  effect on market  value of equity due to
changing interest rates as measured against a flat rate (no change) scenario:

Interest Rate Risk Simulation of Market Value of Equity as of December 31, 2002

                                          Estimated Change in
   Change in Interest                Market Value of Equity (MVE)
   Rates (Basis Points)                  (as % of "flat" MVE)
   +300 (shock)                                 3.51%
   +200 (shock)                                 3.00%
   +100 (shock)                                 2.24%
   +   0 (flat)                                    --
   -100 (shock)                                (7.00)%
   -200 (shock)                               (10.03)%
   -300 (shock)                                (4.77)%

These results  indicate that the balance sheet is slightly asset sensitive since
earnings  increase when interest rates rise. 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.

As with any method of measuring  interest rate risk,  certain  shortcomings  are
inherent  in the method of  analysis  presented  in the  preceding  tables.  For
example,  although certain of the Bank's assets and liabilities may have similar
maturities  or  repricing  time frames,  they may react in different  degrees to
changes in market interest rates. In addition,  the interest rates on certain of
the Bank's asset and liability categories may precede, or lag behind, changes in
market  interest  rates.  Also,  the actual  rates of  prepayments  on loans and
investments could vary significantly  from the assumptions  utilized in deriving
the results as  presented  in the  preceding  table.  Further,  a change in U.S.
Treasury rates  accompanied by a change in the shape of the treasury yield curve
could result in different estimations from those presented herein.  Accordingly,
the results in the  preceding  tables should not be relied upon as indicative of
actual results in the event of changing market interest rates. Additionally, the
resulting  estimates  of changes in market  value of equity are not  intended to
represent, and should not be construed to represent, estimates of changes in the
underlying value of the Bank.

                                      -27-



Interest rate sensitivity is a function of the repricing  characteristics of the
Bank's  portfolio  of assets  and  liabilities.  One  aspect of these  repricing
characteristics is the time frame within which the  interest-bearing  assets and
liabilities  are  subject to change in  interest  rates  either at  replacement,
repricing  or   maturity.   An  analysis  of  the   repricing   time  frames  of
interest-bearing  assets and  liabilities  is sometimes  called a "gap" analysis
because it shows the gap between assets and liabilities repricing or maturing in
each of a number of periods.  Another aspect of these repricing  characteristics
is the relative magnitude of the repricing for each category of interest earning
asset and  interest-bearing  liability  given various changes in market interest
rates.  Gap analysis gives no indication of the relative  magnitude of repricing
given various changes in interest rates.  Interest rate  sensitivity  management
focuses on the maturity of assets and  liabilities  and their  repricing  during
periods of changes in market interest rates.  Interest rate sensitivity gaps are
measured as the difference  between the volumes of assets and liabilities in the
Bank's current portfolio that are subject to repricing at various time horizons.

The following interest rate sensitivity table shows the Bank's repricing gaps as
of December 31, 2002. In this table transaction deposits,  which may be repriced
at will by the Bank, have been included in the less than 3-month  category.  The
inclusion of all of the transaction  deposits in the less than 3-month repricing
category  causes the Bank to appear  liability  sensitive.  Because the Bank may
reprice its transaction  deposits at will,  transaction  deposits may or may not
reprice  immediately with changes in interest rates. In recent years of moderate
interest  rate  changes  the  Bank's  earnings  have  reacted  as though the gap
position  is  slightly   asset   sensitive   mainly  because  the  magnitude  of
interest-bearing  liability  repricing  has  been  less  than the  magnitude  of
interest-earning asset repricing.  This difference in the magnitude of asset and
liability  repricing is mainly due to the Bank's strong core deposit base, which
although they may be repriced within three months,  historically,  the timing of
their  repricing  has been longer than three  months and the  magnitude of their
repricing has been minimal.

Due to the limitations of gap analysis,  as described  above,  the Bank does not
actively  use gap analysis in managing  interest  rate risk.  Instead,  the Bank
relies on the more  sophisticated  interest rate risk simulation model described
above as its primary tool in measuring and managing interest rate risk.




Interest Rate Sensitivity - December 31, 2002
                                                                          Repricing within:
                                          -------------------------------------------------------------------------------
(dollars in thousands)                     Less than 3         3 - 6            6 - 12            1 - 5            Over
                                             months            months           months            years           5 years
                                          -------------------------------------------------------------------------------
                                                                                                     
Interest-earning  assets:
    Securities                               $47,661           $49,460          $59,805          $141,138         $38,387
    Loans                                    344,356            31,624           47,189           205,256          39,920
                                          -------------------------------------------------------------------------------
Total interest-earning assets               $392,017           $81,084         $106,994          $346,394         $78,307
                                          -------------------------------------------------------------------------------
Interest-bearing liabilities
    Transaction deposits                    $480,742        $      ---       $      ---      $        ---    $        ---
    Time                                      84,209            65,410           61,137            81,121             119
    Long-term borrowings                          10                10               21               226          22,657
                                          -------------------------------------------------------------------------------
Total interest-bearing liabilities          $564,961           $65,420          $61,158           $81,347         $22,776
                                          -------------------------------------------------------------------------------
Interest sensitivity gap                   ($172,944)          $15,664          $45,836          $265,047         $55,530
Cumulative sensitivity gap                 ($172,944)        ($157,280)       ($111,444)         $153,604        $209,134
As a percentage of earning assets:
 Interest sensitivity gap                   (17.21%)           1.56%             4.56%           26.38%           5.53%
 Cumulative sensitivity gap                 (17.21%)         (15.65%)          (11.09%)          15.29%          20.81%



                                      -28-



Liquidity

Liquidity refers to the Bank's ability to provide funds at an acceptable cost to
meet loan demand and deposit  withdrawals,  as well as contingency plans to meet
unanticipated funding needs or loss of funding sources.  These objectives can be
met from  either  the  asset  or  liability  side of the  balance  sheet.  Asset
liquidity sources consist of the repayments and maturities of loans,  selling of
loans,  short-term money market investments,  maturities of securities and sales
of  securities  from the  available-for-sale  portfolio.  These  activities  are
generally  summarized as investing  activities in the Consolidated  Statement of
Cash Flows. Net cash used by investing  activities totaled  approximately $144.4
million in 2002.  Increased  investment  balances were responsible for the major
use of funds in this category.

Liquidity is generated from  liabilities  through  deposit growth and short-term
borrowings.  These  activities  are included under  financing  activities in the
Consolidated  Statement of Cash Flows. In 2002,  financing  activities  provided
funds totaling $119.4 million.  Internal deposit growth provided funds amounting
to $124.8 million.  The Bank also had available  correspondent  banking lines of
credit  totaling $55.0 million at year-end.  In addition,  at December 31, 2002,
the  Company  had loans  and  securities  available  to  pledge  towards  future
borrowings from the Federal Home Loan Bank of up to $197 million. As of December
31, 2002, the Company had $22.9 million of long-term  debt and other  borrowings
as described in Note 7 of the consolidated  financial  statements of the Company
and the related notes at Item 8 of this report. While these sources are expected
to continue to provide significant amounts of funds in the future, their mix, as
well as the possible use of other  sources,  will depend on future  economic and
market  conditions.  Liquidity  is also  provided or used through the results of
operating  activities.  In 2002,  operating  activities  provided  cash of $22.3
million.

The Bank classifies its entire investment portfolio as available for sale (AFS).
The AFS  securities  plus  cash  and  cash  equivalents  in  excess  of  reserve
requirements  totaled  $412.8  million at December 31, 2002,  which was 36.1% of
total assets at that time.  This was up from $302.1 million and 30.0% at the end
of 2001.

The  maturity  distribution  of  certificates  of  deposit in  denominations  of
$100,000  or more is set  forth  in the  following  table.  These  deposits  are
generally  more rate  sensitive  than other  deposits and,  therefore,  are more
likely to be withdrawn to obtain higher yields elsewhere if available.  The Bank
participates in a program  wherein the State of California  places time deposits
with the Bank at the Bank's option.  At December 31, 2002 and 2001, the Bank had
$20 million of these State deposits.

Certificates of Deposit in Denominations of $100,000 or More

                                         Amounts as of December 31,
                                     ----------------------------------
(dollars in thousands)                 2002          2001         2000
                                     ----------------------------------
Time remaining until maturity:
Less than 3 months                   $32,932       $38,114      $55,721
3 months to 6 months                  16,311        10,431       14,002
6 months to 12 months                 12,455        15,383       18,686
More than 12 months                   28,706         6,374        4,933
                                     ----------------------------------
  Total                              $90,404       $70,302      $93,342

                                      -29-



Loan demand also affects the Bank's  liquidity  position.  The  following  table
presents the maturities of loans at December 31, 2002:




Loan Maturities - December 31, 2002
                                                                                 After
                                                                                One But
                                                               Within           Within            After 5
                                                              One Year          5 Years            Years            Total
                                                             ---------------------------------------------------------------
                                                                                  (dollars in thousands)
                                                                                                          
Loans with predetermined interest rates:
  Commercial, financial and agricultural                        $18,573          $34,214            $8,137          $60,924
  Consumer installment                                           25,106           47,707            21,582           94,395
  Real estate mortgage                                           26,217           49,193            57,394          132,804
  Real estate construction                                       10,388            2,151             2,003           14,542
                                                             ---------------------------------------------------------------
                                                                $80,284         $133,265           $89,116         $302,665
                                                             ---------------------------------------------------------------
Loans with floating interest rates:
  Commercial, financial and agricultural                        $47,382          $12,696            $4,980          $65,058
  Consumer installment                                          107,462                -                 -          107,462
  Real estate mortgage                                           28,205           48,281           110,680          187,166
  Real estate construction                                       15,398            7,507             2,266           25,171
                                                             ---------------------------------------------------------------
                                                               $198,447          $68,484          $117,926         $384,857
                                                             ---------------------------------------------------------------
      Total loans                                              $278,731         $201,749          $207,042         $687,522
                                                             ===============================================================



The maturity distribution and yields of the investment portfolio is presented in
the following table.  The timing of the maturities  indicated in the table below
is based on final contractual maturities. Most mortgage-backed securities return
principal throughout their contractual lives. As such, the weighted average life
of mortgage-backed  securities based on outstanding principal balance is usually
significantly  shorter than the final contractual  maturity  indicated below. At
December 31, 2002, the Bank had no held-to-maturity securities.




Securities Maturities and Weighted Average Tax Equivalent Yields - December 31, 2002

                                                       After One Year   After Five Years
                                          Within         but Through       but Through       After Ten
                                         One Year        Five Years         Ten Years          Years           Total
                                      ------------------------------------------------------------------------------------
                                       Amount  Yield    Amount  Yield     Amount  Yield    Amount  Yield    Amount  Yield
                                      ------------------------------------------------------------------------------------
Securities Available-for-Sale                                        (dollars in thousands)
                                                                                       
US Treasury securities and
  obligations  of  US government
  corporations and agencies           $10,146  3.06%   $48,995  5.74%       -     0.00%       -    0.00%   $59,141  5.28%
Obligations of states and
  political subdivisions                2,003  5.67%     1,700  5.86%      5,143  7.10%    35,190  7.90%    44,036  7.63%
Mortgage-backed securities                 -   0.00%     6,613  6.14%     81,982  4.47%   129,868  4.97%   218,463  4.82%
Corporate bonds                            -   0.00%     2,255  7.65%          -  0.00%     9,716  2.51%    11,971  3.47%
- --------------------------------------------------------------------------------------------------------------------------
Total securities available-for-sale   $12,149  3.49%   $59,563  5.86%    $87,125  4.62%  $174,774  5.42%  $333,611  5.22%
Other securities                                                                            4,413  5.19%     4,413  5.19%
                                      ------------------------------------------------------------------------------------
Total investment securities           $12,149  3.49%   $59,563  5.86%    $87,125  4.62%  $179,187  5.42%  $338,024  5.22%
==========================================================================================================================



The  principal  cash  requirements  of the Company are dividends on common stock
when  declared.  The Company is dependent  upon the payment of cash dividends by
the Bank to service its commitments. The Company expects that the cash dividends
paid by the  Bank  to the  Company  will be  sufficient  to  meet  this  payment
schedule.   Dividends   from  the  Bank  are   subject  to  certain   regulatory
restrictions.

                                      -30-



Off-Balance Sheet Items

The Bank has certain ongoing commitments under operating and capital leases. See
Note 8 of the financial statements at Item 8 of this report for the terms. These
commitments do not significantly  impact operating  results.  As of December 31,
2002  commitments  to extend credit 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. Loan
commitments  increased  to $227.2  million  from $195.1  million at December 31,
2001. The commitments represent 33.0% of the total loans outstanding at year-end
2002 versus 29.6% at December 31, 2001.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Market Risk Management" under Item 7 of this report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO FINANCIAL STATEMENTS
                                                                       Page

  Consolidated Balance Sheets as of December 31, 2002 and 2001          32
  Consolidated Statements of Income and Comprehensive Income
     for the years ended December 31, 2002, 2001, and 2000              33
  Consolidated Statements of Changes in Shareholders' Equity
     for  the years ended December 31, 2002, 2001, and 2000             34
  Consolidated Statements of Cash Flows for the years ended
     December 31, 2002, 2001, and 2000                                  35
  Notes to Consolidated Financial Statements                            36
  Independent Auditors' Report                                          58
  Management's Letter of Financial Responsibility                       60


                                      -31-



                                TRICO BANCSHARES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                                          At December 31,
                                                       2002            2001
                                                 -------------------------------
Assets:
   Cash and due from banks                           $67,170         $59,264
   Federal funds sold                                  8,100          18,700
                                                 -------------------------------
      Cash and cash equivalents                       75,270          77,964
   Investment securities available for sale          338,024         224,590
   Loans
      Commercial                                     125,982         130,054
      Consumer                                       201,858         155,046
      Real estate mortgages                          319,969         326,897
      Real estate construction                        39,713          46,735
                                                 -------------------------------
                                                     687,522         658,732
      Allowance for loan losses                      (14,377)        (13,058)
                                                 -------------------------------
      Loans, net of allowance for loan losses        673,145         645,674
   Premises and equipment, net                        17,224          16,457
   Cash value of life insurance                       15,208          14,602
   Other real estate owned                               932              71
   Accrued interest receivable                         5,644           5,522
   Deferred income taxes                               8,429           9,334
   Intangible assets                                   4,043           5,070
   Other assets                                        6,655           6,163
                                                 -------------------------------
      Total Assets                                $1,144,574      $1,005,447
                                                 ===============================
Liabilities:
   Deposits:
      Noninterest-bearing demand                    $232,499        $190,386
      Interest-bearing demand                        182,816         165,542
      Savings                                        297,926         247,399
      Time                                           291,996         277,066
                                                 -------------------------------
      Total deposits                               1,005,237         880,393
   Accrued interest payable                            2,927           3,488
   Other Liabilities                                  14,472          11,677
   Long-term debt and other borrowings                22,924          22,956
                                                 -------------------------------
      Total Liabilities                            1,045,560         918,514
                                                 -------------------------------
Shareholders' Equity:
   Common stock, no par value: Authorized 20,000,000 shares;
   Issued and outstanding:
         7,060,965 at December 31, 2002               50,472
         7,000,980 at December 31, 2001                               49,679
   Retained earnings                                  46,239          37,909
   Accumulated other comprehensive income, net         2,303            (655)
                                                 -------------------------------
      Total Shareholders' Equity                      99,014          86,933
                                                 -------------------------------
Total Liabilities and Shareholders' Equity        $1,144,574      $1,005,447
                                                 ===============================

See Notes to Consolidated Financial Statements

                                      -32-






                                            TRICO BANCSHARES
                       CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                 (In thousands, except per share data)

                                                                          Years ended December 31,
                                                                 ------------------------------------------
                                                                     2002           2001           2000
                                                                 ------------------------------------------
                                                                                          
Interest Income:
   Interest and fees on loans                                      $52,472        $58,730        $61,835
   Interest on federal funds sold                                      606          1,506            538
   Interest on investment securities available for sale
     Taxable                                                         9,430          9,543         11,704
     Tax exempt                                                      2,188          2,219          2,250
                                                                 ------------------------------------------
     Total interest income                                          64,696         71,998         76,327
                                                                 ------------------------------------------
Interest Expense:
   Interest on interest-bearing demand deposits                        469          1,487          2,360
   Interest on savings                                               2,710          4,759          6,837
   Interest on time certificates of deposit                          8,441         15,261         15,806
   Interest on short-term borrowing                                      2              7            623
   Interest on long-term debt                                        1,292          1,972          2,917
                                                                 ------------------------------------------
     Total interest expense                                         12,914         23,486         28,543
                                                                 ------------------------------------------
Net Interest Income                                                 51,782         48,512         47,784
                                                                 ------------------------------------------
Provision for loan losses                                            2,800          4,400          5,000
                                                                 ------------------------------------------
Net Interest Income After Provision for Loan Losses                 48,982         44,112         42,784
                                                                 ------------------------------------------
Noninterest Income:
   Service charges and fees                                         11,286          8,095          7,484
   Commissions on sale of non-deposit investment products            2,467          2,576          2,784
   Gain on sale of loans                                             3,641          2,095            802
   Other                                                             1,786          1,680          2,342
   Gain on sale of investments                                           -             36              -
   Gain on sale of insurance company stock                               -          1,756              -
   Gain on receipt of insurance company stock                            -              -          1,510
                                                                 ------------------------------------------
   Total Noninterest Income                                         19,180         16,238         14,922
                                                                 ------------------------------------------
Noninterest Expense:
   Salaries and related benefits                                    24,290         21,199         19,863
   Other                                                            21,681         19,408         17,983
                                                                 ------------------------------------------
   Total Noninterest Expense                                        45,971         40,607         37,846
                                                                 ------------------------------------------
Income Before Income Taxes                                          22,191         19,743         19,860
                                                                 ------------------------------------------
   Provision for income taxes                                        8,122          7,324          7,237
                                                                 ------------------------------------------
Net Income                                                         $14,069        $12,419        $12,623
                                                                 ------------------------------------------
Comprehensive Income:
   Change in unrealized gain on securities available for sale, net   2,931            441          5,209
   Net change in minimum pension liability                              27           (772)             -
                                                                 ------------------------------------------
Comprehensive Income                                               $17,027        $12,088        $17,832
                                                                 ==========================================
Average Shares Outstanding                                           7,019          7,072          7,192
Diluted Average Shares Outstanding                                   7,193          7,219          7,341

Per Share Data
   Basic Earnings                                                    $2.00          $1.76          $1.76
   Diluted Earnings                                                  $1.96          $1.72          $1.72
   Dividends Paid                                                    $0.80          $0.80          $0.79



See Notes to Consolidated Financial Statements

                                      -33-






                                     TRICO BANCSHARES
                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                      (In thousands)
                                                                     Accumulated
                                                                        Other
                                             Common      Retained   Comprehensive
                                              Stock      Earnings    Income, net      Total
                                            -------------------------------------------------
                                                                           
Balance, December 31, 1999                   $50,043      $28,613      ($5,533)      $73,123
  Net income for the period                                12,623                     12,623
    Stock issued, including
    stock option tax benefits                    665                                     665
  Repurchase of common stock                    (349)        (427)                      (776)
  Dividends                                                (5,680)                    (5,680)
  Unrealized gain on securities available
    for sale, net                                                        5,209         5,209
                                            -------------------------------------------------
Balance, December 31, 2000                   $50,428      $35,129        ($324)      $85,233
  Net income for the period                                12,419                     12,419
    Stock issued, including
    stock option tax benefits                  1,872                                   1,872
  Repurchase of common stock                  (2,621)      (3,997)                    (6,618)
  Dividends                                                (5,642)                    (5,642)
  Unrealized gain on securities available
    for sale, net                                                          441           441
  Change in minimum pension liability, net                                (772)         (772)
                                            -------------------------------------------------
Balance, December 31, 2001                   $49,679      $37,909        ($655)      $86,933
  Net income for the period                                14,069                     14,069
  Stock issued, including
    stock option tax benefits                    863                                     863
  Repurchase of common stock                     (70)        (119)                      (189)
  Dividends                                                (5,620)                    (5,620)
  Unrealized gain on securities available
    for sale, net                                                        2,931         2,931
  Change in minimum pension liability, net                                  27            27
                                            -------------------------------------------------
Balance December 31, 2002                    $50,472      $46,239       $2,303       $99,014
                                            =================================================



See Notes to Consolidated Financial Statements

                                      -34-






                                                 TRICO BANCSHARES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
                                                                           For the year ended December 31,
                                                                     2002               2001                2000
                                                                ----------------------------------------------------
                                                                                                 
Operating Activities:
  Net income                                                       $14,069            $12,419             $12,623
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation of property and equipment, and amortization       2,608              2,708               2,641
      Amortization of intangible assets                                911                911                 965
      Provision for loan losses                                      2,800              4,400               5,000
      Amortization of investment securities premium, net             1,841                398                 217
      Deferred income taxes                                         (1,247)              (660)               (650)
      Investment security gains, net                                     -             (1,792)             (1,510)
      Originations of loans for resale                            (177,796)          (125,675)            (50,254)
      Proceeds from sale of loans originated for resale            179,415            126,961              50,798
      Gain on sale of loans                                         (3,641)            (2,095)               (802)
      Amortization of mortgage servicing rights                        713                223                 186
      Amortization of stock options                                      -                  -                  69
      Loss (gain) on sale of fixed assets                                8                 (9)                 77
      Gain on sale of other real estate owned, net                      (8)               (80)                (83)
      Provision for losses on other real estate owned                    -                 18                  25
      Change in assets and liabilities:
        (Increase) decrease in interest receivable                    (122)             1,413                (859)
        (Decrease) increase in interest payable                       (561)            (1,757)              1,052
        Increase (decrease) in other assets and liabilities          3,316             (2,161)               (132)
                                                                ----------------------------------------------------
Net Cash Provided by Operating Activities                            22,306            15,222              19,363
                                                                ----------------------------------------------------
Investing Activities:
  Proceeds from maturities of securities available-for-sale        131,592             85,619              39,663
  Proceeds from sales of securities available-for-sale                   -             14,119                   -
  Purchases of securities available-for-sale                      (241,794)           (93,125)            (27,567)
  Net increase in loans                                            (31,203)           (21,678)            (58,330)
Proceeds from sale of premises and equipment                            17                 32                  40
  Purchases of property and equipment                               (3,121)            (1,951)             (2,998)
  Proceeds from sale of other real estate owned                         79              1,757                 928
                                                                ----------------------------------------------------
Net Cash Used by Investing Activities                             (144,430)           (15,227)            (48,264)
                                                                ----------------------------------------------------
Financing Activities:
  Net increase in deposits                                         124,844             42,561              43,722
  Net (decrease) increase in federal funds purchased                     -               (500)                500
  Borrowings under long-term debt agreements                             -                  -              35,000
  Payments of principal on long-term debt agreements                   (32)           (11,027)            (46,522)
  Repurchase of Common Stock                                          (189)            (6,618)               (776)
  Dividends paid                                                    (5,620)            (5,642)             (5,680)
  Exercise of stock options/issuance of Common Stock                   427              1,005                 411
                                                                ----------------------------------------------------
Net Cash Provided by Financing Activities                          119,430             19,779              26,655
                                                                ----------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents                (2,694)            19,774              (2,246)
                                                                ----------------------------------------------------
Cash and Cash Equivalents and Beginning of Period                   77,964             58,190              60,436
                                                                ----------------------------------------------------
Cash and Cash Equivalents at End of Period                         $75,270            $77,964             $58,190
                                                                ====================================================
Supplemental Disclosure of Noncash Activities:
  Loans transferred to other real estate owned                         932                325               1,551
Supplemental Disclosure of Cash Flow Activity:
  Cash paid for interest expense                                    13,475             25,243              27,491
  Cash paid for income taxes                                         7,900              9,089               7,573
  Income tax benefit from stock option exercises                      $436               $867                $254



See Notes to Consolidated Financial Statements

                                      -35-



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2002, 2001 and 2000

Note 1 - General Summary of Significant Accounting Policies

The  accounting  and  reporting  policies of TriCo  Bancshares  (the  "Company")
conform  to  generally  accepted  accounting   principles.   The  following  are
descriptions of the more significant accounting and reporting policies.

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 10 in-store  branch  offices in the
California  counties of Butte,  Contra Costa, Del Norte,  Fresno,  Glenn,  Kern,
Lake, Lassen, Madera, Mendocino,  Merced, Nevada, Sacramento,  Shasta, Siskiyou,
Stanislaus,  Sutter,  Tehama,  Tulare 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 one accounting  estimate that materially  affects the financial
statements is the allowance for loan losses.

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. In
2002 and 2001,  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 comprehensive  income 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 a permanent decline in value has occurred.

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 not be classified as nonaccrual.  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.

                                      -36-



Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans 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,  leases and
commitments  to  extend  credit,  based on  evaluations  of the  collectibility,
impairment and prior loss experience of loans,  leases and commitments to extend
credit.  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,  commitments,  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.

Mortgage Operations

Transfers and servicing of financial assets and  extinguishments  of liabilities
are  accounted  for  and  reported   based  on  consistent   application   of  a
financial-components  approach  that focuses on control.  Transfers of financial
assets  that are  sales  are  distinguished  from  transfers  that  are  secured
borrowings.  Retained  interests  (mortgage  servicing rights) in loans sold are
measured by allocating the previous  carrying amount of the  transferred  assets
between the loans sold and retained  interest,  if any,  based on their relative
fair value at the date of transfer.  Fair values are estimated using  discounted
cash flows based on a current market interest rate.

The  Company  recognizes  a gain and a related  asset for the fair  value of the
rights to  service  loans for  others  when  loans are sold.  The  Company  sold
substantially  all  of  its  conforming  long-term  residential  mortgage  loans
originated during 2002, 2001, and 2000 for cash proceeds equal to the fair value
of the loans.

The following table summarizes the Company's mortgage servicing rights assets as
of December 31, 2002 and 2001.

                               December 31,                         December 31,
  (Dollars in thousands)          2001      Additions   Reductions     2002
                               -------------------------------------------------
  Mortgage Servicing Rights      $1,512      $2,022       ($713)      $2,821
                               =================================================

The recorded value of mortgage servicing rights is included in other assets, and
is amortized in proportion  to, and over the period of,  estimated net servicing
revenues.  The  Company  assesses  capitalized  mortgage  servicing  rights  for
impairment based upon the fair value of those rights at each reporting date. For
purposes  of  measuring  impairment,  the rights are  stratified  based upon the
product type, term and interest  rates.  Fair value is determined by discounting
estimated  net future  cash  flows  from  mortgage  servicing  activities  using
discount rates that  approximate  current market rates and estimated  prepayment
rates, among other assumptions.  The amount of impairment recognized, if any, is
the  amount by which the  capitalized  mortgage  servicing  rights for a stratum
exceeds their fair value. Impairment,  if any, is recognized through a valuation
allowance for each individual stratum.

At December  31,  2002,  the Company  had no  mortgage  loans held for sale.  At
December 31, 2002 and 2001, the Company  serviced real estate mortgage loans for
others of $307 million and $196 million, respectively.

Premises and Equipment

Premises 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.

Other Real Estate Owned

Real estate  acquired  by  foreclosure  is carried at the lower of the  recorded
investment in the property or its fair value less estimated  disposition  costs.
Prior to  foreclosure,  the value of the underlying  loan is written down to the
fair value of the real estate to be acquired less estimated disposition costs by
a charge to the  allowance  for loan  losses,  when  necessary.  Any  subsequent
write-downs  are  recorded  as a  valuation  allowance  with a  charge  to other
expenses in the income  statement  together with other expenses  related to such
properties,  net of  related  income.  Gains and losses on  disposition  of such
property are included in other income or other expenses as applicable.

                                      -37-



Identifiable Intangible Assets

Identifiable  intangible assets consist of core deposit  intangibles and minimum
pension liability.

The following table summarizes the Company's core deposit intangible as of
December 31, 2002 and 2001.

                               December 31,                         December 31,
  (Dollar in Thousands)           2001      Additions   Reductions      2002
                               -------------------------------------------------
  Core deposit intangibles      $10,278                               $10,278
  Accumulated amortization       (5,725)                   ($911)      (6,636)
                               -------------------------------------------------
  Core deposit intangibles, net  $4,553                    ($911)      $3,642
                               =================================================
Core deposit premiums are scheduled to amortize at a rate of $227,700 per
quarter through the quarter ended December 31, 2006. Core deposit premiums are
amortized using an accelerated method over a period of ten years. The Company
reviews for impairment of certain intangibles held, whenever events or changes
indicate that the carrying amount of an asset may not be recoverable. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair market value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.

The following table summarizes the Company's minimum pension liability
intangible as of December 31, 2002 and 2001.

                                    December 31,                    December 31,
(Dollar in Thousands)                  2001     Additions Reductions    2002
                                    --------------------------------------------
Minimum pension liability intangible   $517                 ($116)      $401
                                    ============================================

Intangible  assets related to minimum  pension  liability are adjusted  annually
based upon actuarial estimates.

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.

Cash Flows

For purposes of reporting cash flows, cash and cash equivalents  include cash on
hand, amounts due from banks and federal funds sold.

Stock-Based Compensation

The Company  uses the  intrinsic  value  method to account for its stock  option
plans (in accordance with the provisions of Accounting  Principles Board Opinion
No. 25).  Under this method,  compensation  expense is recognized  for awards of
options to purchase shares of common stock to employees under compensatory plans
only if the fair  market  value of the stock at the option  grant date (or other
measurement  date, if later) is greater than the amount the employee must pay to
acquire  the  stock.  Statement  of  Financial  Accounting  Standards  No.  123,
Accounting for Stock-Based Compensation (SFAS 123) permits companies to continue
using the  intrinsic  value  method  or to adopt a fair  value  based  method to
account  for  stock  option  plans.  The fair  value  based  method  results  in
recognizing as expense over the vesting period the fair value of all stock-based
awards on the date of grant.  The  Company  has  elected to  continue to use the
intrinsic value method.

Had  compensation  cost  for the  Company's  option  plans  been  determined  in
accordance  with SFAS 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:




(in thousands, except per share amounts)                    2002         2001         2000
                                                                             
Net income                              As reported       $14,069      $12,419      $12,623
                                          Pro forma       $13,857      $12,253      $12,507
Basic earnings per share                As reported        $2.00         $1.76        $1.76
                                          Pro forma        $1.97         $1.73        $1.74
Diluted earnings per share              As reported        $1.96         $1.72        $1.72
                                          Pro forma        $1.93         $1.70        $1.70
Stock-based employee compensation
  cost, net of related tax effects,
  included in net income                As reported           $0            $0          $40
                                          Pro forma         $212          $166         $156



                                      -38-



The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 2002, 2001 and 2000:  risk-free  interest rate of
4.01%, 4.80% and 6.65%; expected dividend yield of 3.3%, 4.9% and 4.7%; expected
life of 6 years, 6 years and 6 years;  expected  volatility of 27%, 28% and 30%,
respectively.  The  weighted  average  grant  date  fair  value of an  option to
purchase one share of common stock was %5.37, $3.26, and $3.99, respectively.

Comprehensive Income

For the  Company,  comprehensive  income  includes  net income  reported  on the
statement  of  income,  changes  in the  fair  value  of its  available-for-sale
investments,  and  changes  in  the  minimum  pension  liability  reported  as a
component of shareholders'  equity. The changes in the components of accumulated
other comprehensive income for the years ended December 31, 2002, 2001, and 2000
are reported as follows:




                                                                               2002             2001            2000
                                                                             ----------------------------------------
Unrealized Gain (Loss) on Securities                                                       (in thousands)
                                                                                                       
Beginning Balance                                                              $117            ($324)        ($5,533)
Unrealized gain (loss) arising during the period, net of tax                  2,931             (669)         $5,209
Less: Reclassification adjustment for net realized gains
on securities available for sale included in net
income during the year, net of tax of $0, $681 and $0, respectively              --            1,110              --
                                                                             ----------------------------------------
Ending Balance                                                               $3,048             $117           ($324)
                                                                             ========================================
Minimum Pension Liability
Beginning Balance                                                             ($772)            $ --            $ --
Change in minimum pension liability, net of tax
 of 18, ($517), and $0, respectively                                             27            ($772)             --
                                                                             ----------------------------------------
Ending Balance                                                                ($745)           ($772)             --
                                                                             ========================================
Total accumulated other comprehensive income (loss), net                     $2,303            ($655)          ($324)
                                                                             ========================================



Reclassifications

Certain amounts  previously  reported in the 2001 and 2000 financial  statements
have  been   reclassified   to   conform   to  the  2002   presentation.   These
reclassifications  did not  affect  previously  reported  net  income  or  total
shareholders' equity.

Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard No. 141, "Business  Combinations" (SFAS 141),
and  Statement of Financial  Accounting  Standard No. 142,  "Goodwill  and Other
Intangible  Assets" (SFAS 142).  SFAS 141 requires  that the purchase  method of
accounting be used for all business  combinations  initiated after June 30, 2001
and specifies  criteria that  intangible  assets  acquired in a purchase  method
business  combination  must  meet  to be  recognized  and  reported  apart  from
goodwill.  SFAS 142 requires that goodwill and intangible assets with indefinite
useful  lives no longer be  amortized  after 2001,  but instead be  periodically
evaluated  for  impairment.  Intangible  assets with  definite  useful lives are
required to be amortized over their  respective  estimated useful lives to their
estimated residual values, and also reviewed for impairment.

Effective  January 1, 2002,  the Company was required to adopt the provisions of
SFAS 142. Accordingly,  any goodwill and any intangible asset determined to have
an indefinite useful life that are acquired in a purchase  business  combination
will not be  amortized,  but will  continue to be evaluated  for  impairment  in
accordance  with the  appropriate  accounting  literature.  The Company was also
required to reassess the useful lives and residual values of all such intangible
assets and make any necessary amortization period adjustments by March 31, 2002.
No such adjustments were required to be made.

As of the date of  adoption,  the Company  had  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 Company  has no goodwill  (unidentifiable
intangible assets).

                                      -39-



Note 2 - Restricted Cash Balances

Reserves  (in the form of deposits  with the Federal  Reserve  Bank) of $500,000
were maintained to satisfy Federal regulatory  requirements at December 31, 2002
and December 31, 2001. These reserves are included in cash and due from banks in
the accompanying balance sheets.

Note 3 - Investment Securities

The amortized  cost and estimated  fair values of investments in debt and equity
securities  are  summarized  in  the  following  tables.  Also  included  in the
following table are other securities that do not have readily  determinable fair
value because their ownership is restricted and they lack a market.  These other
securities  are  carried at cost and  consist  mainly of Federal  Home Loan Bank
stock with a cost of  $4,228,000  and  $4,000,000 at December 31, 2002 and 2001,
respectively:



                                                                                  December 31, 2002
                                                                                  -----------------
                                                                               Gross            Gross         Estimated
                                                           Amortized        Unrealized       Unrealized         Fair
                                                             Cost              Gains           Losses           Value
                                                           ------------------------------------------------------------
Securities Available-for-Sale                                                      (in thousands)
                                                                                                       
U.S. Treasury securities and obligations of
  U.S. government corporations and agencies                $  58,823          $   319          $      -     $   59,142
Obligations of states and political subdivisions              42,016            2,028                (8)        44,036
Mortgage-backed securities                                   213,770            4,693                 -        218,463
Corporate debt securities                                     13,742              261            (2,033)        11,970
                                                           ------------------------------------------------------------
Total securities available-for-sale                          328,351            7,301            (2,041)       333,611
Other securities                                               4,413                                             4,413
                                                           ------------------------------------------------------------
    Totals                                                 $ 332,764          $ 7,301          $ (2,041)     $ 338,024
                                                           ============================================================





                                                                                  December 31, 2001
                                                                                  -----------------
                                                                               Gross            Gross         Estimated
                                                           Amortized        Unrealized       Unrealized         Fair
                                                             Cost              Gains           Losses           Value
                                                           ------------------------------------------------------------
Securities Available-for-Sale                                                      (in thousands)
                                                                                                       
U.S. Treasury securities and obligations of
  U.S. government corporations and agencies                $  29,991          $    34          $   (142)     $  29,883
Obligations of states and political subdivisions              44,524              833              (124)        45,233
Mortgage-backed securities                                   131,972            1,246              (217)       133,001
Corporate debt securities                                     13,731              177            (1,620)        12,288
                                                           ------------------------------------------------------------
Total securities available-for-sale                          220,218            2,290            (2,103)       220,405
Other securities                                               4,185                                             4,185
                                                           ------------------------------------------------------------
Totals investment securities                               $ 224,403          $ 2,290          $ (2,103)     $ 224,590
                                                           ============================================================



The amortized cost and estimated  fair value of debt  securities at December 31,
2002 by contractual  maturity are shown below. Actual maturities may differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                      -40-



                                                                   Estimated
                                              Amortized              Fair
                                                Cost                 Value
                                              ------------------------------
                                                      (in thousands)
Investment Securities
Due in one year                                $11,974              $12,149
Due after one year through five years           58,864               59,563
Due after five years through ten years          85,889               87,125
Due after ten years                            171,624              174,774
No stated maturity                               4,413                4,413
                                              ------------------------------
Totals                                        $332,764             $338,024
                                              ==============================


Proceeds from sales of investment securities were as follows:

                         Gross          Gross         Gross
For the Year           Proceeds         Gains        Losses
- -----------------------------------------------------------
                                   (in thousands)

     2002                    --            --           --
     2001               $14,119        $1,796           $4
     2000                    --            --           --

Investment  securities  with an aggregate  carrying  value of  $104,561,000  and
$93,605,000  at  December  31,  2002 and 2001,  respectively,  were  pledged  as
collateral for specific borrowings, lines of credit and local agency deposits.

Note 4 - Allowance for Loan Losses

Activity in the allowance for loan losses was as follows:
                                                     Years Ended December 31,
                                                  2002        2001        2000
                                                --------------------------------
                                                        (in thousands)
Balance, beginning of year                      $13,058     $11,670     $11,037
Provision for loan losses                         2,800       4,400       5,000
Loans charged off                                (1,786)     (3,213)     (4,705)
Recoveries of loans previously charged off          305         201         338
                                                --------------------------------
Balance, end of year                            $14,377     $13,058     $11,670
                                                ================================

Loans classified as nonaccrual amounted to approximately $8,140,000,  $5,466,000
and  $12,262,000  at December  31, 2002,  2001,  and 2000,  respectively.  These
nonaccrual  loans were  classified  as impaired and are included in the recorded
balance in impaired loans for the respective  years shown below.  If interest on
those  loans  had been  accrued,  such  income  would  have  been  approximately
$477,000, $260,000 and $731,000 in 2002, 2001 and 2000, respectively.

                                      -41-



As of December 31, the Company's  recorded  investment in impaired loans and the
related valuation allowance were as follows (in thousands):

                                                        2002
                                           -----------------------------
                                            Recorded           Valuation
                                           Investment          Allowance
                                           -----------------------------
Impaired loans -
  Valuation allowance required                $8,180              $881
  No valuation allowance required                 --                --
                                           -----------------------------
    Total impaired loans                      $8,180              $881
                                           =============================

                                                        2001
                                           -----------------------------
                                            Recorded           Valuation
                                           Investment          Allowance
                                           -----------------------------
Impaired loans -
  Valuation allowance required                $6,050              $881
  No valuation allowance required                 --                --
                                           -----------------------------
    Total impaired loans                      $6,050              $881
                                           =============================

This  valuation  allowance  is included in the  allowance  for loan losses shown
above for the respective year. The average recorded investment in impaired loans
was  $7,115,000,  $9,639,000  and,  $7,954,000  for the years ended December 31,
2002, 2001 and 2000,  respectively.  The Company  recognized  interest income on
impaired loans of $733,000, $441,000 and $1,171,000 for the years ended December
31, 2002, 2001 and 2000, respectively.

Note 5 - Premises and Equipment

Premises and equipment were comprised of:
                                               December 31,
                                         2002               2001
                                        -------------------------
                                              (in thousands)
Premises                                $13,031           $12,269
Furniture and equipment                  18,092            16,133
                                        -------------------------
                                         31,123            28,402
Less:
  Accumulated depreciation
    and amortization                    (17,401)          (15,466)
                                        -------------------------
                                         13,722            12,936
Land and land improvements                3,502             3,521
                                        -------------------------
                                        $17,224           $16,457
                                        =========================

Depreciation and amortization of premises and equipment  amounted to $2,329,000,
$2,243,000 and $2,152,000 in 2002, 2001 and 2000, respectively.

                                      -42-



Note 6 - Time Deposits

At December 31, 2002, the scheduled  maturities of time deposits were as follows
(in thousands):

                                                      Scheduled
                                                     Maturities
                                                     ----------
        2003                                          $210,757
        2004                                            17,970
        2005                                             8,577
        2006                                               966
        2007 and thereafter                             53,726
                                                     ----------
          Total                                       $291,996
                                                     ==========

Note 7 - Long-Term Debt and Other Borrowings

Long-term debt is as follows:



                                                                                                 December 31,
                                                                                            2002              2001
                                                                                          --------------------------
                                                                                                (in thousands)
                                                                                                        
FHLB loan, fixed rate of 5.41% payable on April 7, 2008, callable
   in its entirety by FHLB on a quarterly basis beginning April 7, 2003                   $20,000           $20,000
FHLB loan, fixed rate of 5.35% payable on December 9, 2008                                  1,500             1,500
FHLB loan, fixed rate of 5.77% payable on February 23, 2009                                 1,000             1,000
Capital lease obligation on premises, effective rate of 13% payable
  monthly in varying amounts through December 1, 2009                                         424               456
                                                                                          --------------------------
Total long-term debt                                                                      $22,924           $22,956
                                                                                          ==========================


The Company maintains a collateralized line of credit with the Federal Home Loan
Bank of San  Francisco.  Based on the FHLB stock  requirements  at December  31,
2002,  this  line  provided  for  maximum  borrowings  of  $58,848,000  of which
$22,500,000  was  outstanding,   leaving  $36,348,000  available.   The  maximum
month-end  outstanding  balances of short term reverse repurchase  agreements in
2002 and 2001 were $0 and $0,  respectively.  The Company has  available  unused
lines of credit totaling  $52,500,000 for Federal funds transactions at December
31, 2002.

Note 8 - Commitments and Contingencies (See also Note 16)

At December 31, 2002, future minimum  commitments under  non-cancelable  capital
and operating  leases with initial or remaining terms of one year or more are as
follows:

                                               Capital              Operating
                                               Leases                Leases
                                               ------------------------------
                                                       (in thousands)
     2003                                        $90                 $1,115
     2004                                         91                    970
     2005                                         92                    828
     2006                                         93                    660
     2007                                         94                    604
     Thereafter                                  192                  2,102
                                               ------------------------------
     Future minimum lease payments               652                 $6,279
     Less amount representing interest           228               ==========
                                               -------
     Present value of future lease payments     $424
                                               =======

Rent expense under operating  leases was $1,201,000 in 2002,  $1,241,000 in 2001
and $971,000 in 2000.

                                      -43-



The  Company is a  defendant  in legal  actions  arising  from  normal  business
activities.  Management  believes,  after consultation with legal counsel,  that
these  actions  are  without  merit  or that  the  ultimate  liability,  if any,
resulting from them will not materially affect the Company's  financial position
or results from operations.

Note 9 - Shareholders' Equity

Dividends Paid

The  Bank  paid to the  Company  cash  dividends  in the  aggregate  amounts  of
$5,779,000, $12,187,000 and $7,118,000 in 2002, 2001 and 2000, respectively. The
Bank is regulated by the Federal Deposit  Insurance  Corporation  (FDIC) and the
State of California  Department of Financial  Institutions.  California  banking
laws limit the Bank's  ability to pay  dividends  to the lesser of (1)  retained
earnings  or (2)  net  income  for  the  last  three  fiscal  years,  less  cash
distributions  paid during such period.  Under this regulation,  at December 31,
2002, the Bank may pay dividends of $15,390,000.

Shareholders' Rights Plan

On June 25, 2001, the Company  announced that its Board of Directors adopted and
entered  into a  Shareholder  Rights  Plan  designed  to  protect  and  maximize
shareholder  value and to assist the Board of  Directors  in  ensuring  fair and
equitable  benefit to all  shareholders in the event of a hostile bid to acquire
the Company.

The Company  adopted this Rights Plan to protect  stockholders  from coercive or
otherwise unfair takeover  tactics.  In general terms, the Rights Plan imposes a
significant  penalty  upon any person or group that  acquires 15% or more of the
Company's  outstanding  common stock without  approval of the Company's Board of
Directors.  The Rights Plan was not adopted in response to any known  attempt to
acquire control of the Company.

Under the Rights  Plan, a dividend of one  Preferred  Stock  Purchase  Right was
declared  for each  common  share held of record as of the close of  business on
July 10, 2001.  No separate  certificates  evidencing  the Rights will be issued
unless and until they become exercisable.

The Rights  generally  will not become  exercisable  unless an acquiring  entity
accumulates or initiates a tender offer to purchase 15% or more of the Company's
common stock. In that event, each Right will entitle the holder,  other than the
unapproved acquirer and its affiliates,  to purchase either the Company's common
stock or shares in an acquiring entity at one-half of market value.

The Right's initial  exercise price,  which is subject to adjustment,  is $49.00
per Right. The Company's Board of Directors generally will be entitled to redeem
the Rights at a  redemption  price of $.01 per Right until an  acquiring  entity
acquires a 15% position. The Rights expire on July 10, 2011.

Stock Repurchase Plan

On March 15, 2001, the Company  announced the completion of its stock repurchase
plan  initially  announced on July 20, 2000.  Under this  repurchase  plan,  the
Company  repurchased  a total of 150,000  shares of which  110,000  shares  were
repurchased since December 31, 2000.

On  October  19,  2001,  the  Company  announced  the  completion  of its  stock
repurchase  plan initially  announced on March 15, 2001.  Under this  repurchase
plan, the Company repurchased a total of 150,000 shares.

Also on October 19,  2001,  the Company  announced  that its Board of  Directors
approved  a new  plan  to  repurchase,  as  conditions  warrant,  up to  150,000
additional  shares of the  Company's  stock on the open  market or in  privately
negotiated transactions.  The timing of purchases and the exact number of shares
to be purchased will depend on market conditions.  The 150,000 shares covered by
this repurchase plan represented  approximately 2.2% of the Company's  6,992,080
then  outstanding  common  shares.  As of  December  31,  2002,  the Company had
repurchased 118,800 shares under this new plan.

Note 10 - Stock Options

In May 2001,  the Company  adopted the TriCo  Bancshares  2001 Stock Option Plan
(2001 Plan) covering officers,  employees,  directors of, and consultants to the
Company.  Under the 2001  Plan,  the option  price  cannot be less than the fair
market  value of the  Common  Stock at the date of grant  except  in the case of
substitute options. Options for the 2001 Plan expire on the tenth anniversary of
the  grant  date.   Vesting   schedules  under  the  2001  Plan  are  determined
individually for each grant.

In May 1995,  the Company  adopted the TriCo  Bancshares  1995  Incentive  Stock
Option Plan (1995 Plan) covering key employees.  Under the 1995 Plan, the option
price  cannot be less than the fair market value of the Common Stock at the date
of grant. Options for the 1995 Plan expire on the tenth anniversary of the grant
date. Vesting schedules under the 1995 Plan are determined individually for each
grant.

                                      -44-



The  Company  also has  outstanding  options  under  the TriCo  Bancshares  1993
Nonqualified  Stock  Option Plan (1993 Plan).  Options  under the 1993 Plan were
granted at an exercise price less than the fair market value of the common stock
and vest over a six year period. Unexercised options for the 1993 Plan terminate
10 years from the date of the grant.

Stock option activity is summarized in the following table:




                                                                        Weighted      Weighted
                                                                         Average       Average
                                   Number           Option Price        Exercise     Fair Value
                                  Of Shares           Per Share           Price       of Grants
                                                                             
Outstanding at
  December 31, 1999                500,891        4.95   to   18.25        7.82
    Options granted                118,900       16.13   to   16.13       16.13         $3.99
    Options exercised              (78,625)       5.24   to    5.24        5.24
    Options forfeited                 (750)      18.25   to   18.25       18.25
Outstanding at
  December 31, 2000                540,416        4.95   to   18.25       10.01
    Options granted                323,000       16.10   to   16.40       16.38         $3.26
    Options exercised             (192,530)       4.95   to    5.24        5.22
    Options forfeited              (12,000)      16.13   to   18.25       16.92
Outstanding at
  December 31, 2001                658,886       $5.24   to  $18.25      $14.41
    Options granted                 40,500       23.44   to   24.76       23.88         $5.37
    Options exercised              (69,986)       5.24   to   18.25        6.10
    Options forfeited               (2,000)      24.25   to   24.25       24.25
Outstanding at
  December 31, 2002                627,400       $5.24   to  $24.76      $15.92




                                      -45-




The following table shows the number,  weighted-average  exercise price, and the
weighted  average  remaining  contractual life of options  outstanding,  and the
number and weighted-average exercise price of options exercisable as of December
31, 2002 by range of exercise price:




                                          Outstanding Options                            Exercisable Options
                            ------------------------------------------------        -----------------------------
                                                            Weighted-Average
       Range of                         Weighted-Average        Remaining                        Weighted-Average
     Exercise Price         Number       Exercise Price     Contractual Life        Number        Exercise Price
                                                                                        
          $4-$6             31,550            $5.24               0.92 years        31,550            $5.24
          $8-$10            20,700            $8.93               2.44              20,700            $8.93
         $12-$14            30,000           $12.25               3.48              30,000           $12.25
         $14-$16            15,000           $14.17               4.01              15,000           $14.17
         $16-$18           432,400           $16.32               8.11             176,284           $16.30
         $18-$20            59,250           $18.25               4.78              59,250           $18.25
         $22-$24            20,000           $23.44               9.94                   -             -
         $24-$26            18,500           $24.32               9.37                 500           $24.76



Of the stock  options  outstanding  as of December  31,  2002,  2001,  and 2000,
options on shares totaling 333,284,  330,046,  and 426,902,  respectively,  were
exercisable  at  weighted   average  prices  of  $14.70,   $12.50,   and  $8.38,
respectively.

The Company has stock options outstanding under the three option plans described
above.  The Company  accounts  for these  plans under APB Opinion No. 25,  under
which no compensation  cost has been  recognized  except for the options granted
under the 1993 plan. The Company  recognized  expense of $0, $0, and $69,000 for
the 1993 Plan options in 2002, 2001 and 2000, respectively.

Note 11 - Other Noninterest Income and Expenses

The components of other noninterest income were as follows:

                                                      Years Ended December 31,
                                                    2002       2001       2000
                                                  ------------------------------
                                                         (in thousands)
Increase in cash value of insurance policies        $606        $476       $657
Sale of customer checks                              264         283        286
Gain on sale of other real estate owned                7          80         83
Other                                                909         841      1,316
                                                  ------------------------------
     Total other noninterest income               $1,786      $1,680     $2,342
                                                  ==============================

The components of other noninterest expenses were as follows:
                                               Years Ended December 31,
                                              2002       2001       2000
                                            ------------------------------
                                                   (in thousands)
Equipment and data processing                $4,095     $3,694     $3,376
Occupancy                                     2,954      2,806      2,587
Professional fees                             1,696      1,087      1,005
Telecommunications                            1,422      1,253        957
Advertising                                   1,263      1,132      1,336
Intangible amortization                         911        911        965
ATM network charges                             847        913        770
Postage                                         801        639        486
Courier service                                 720        661        608
Operational losses                              534        227        807
Assessments                                     233        223        222
Net other real estate owned expense              26        175        127
Other                                         6,179      5,687      4,737
                                            ------------------------------
     Total other noninterest expenses       $21,681    $19,408    $17,983
                                            ==============================

                                      -46-



Note 12 - Income Taxes

The current and deferred  components of the income tax provision  were comprised
of:

                                 Years Ended December 31,
                                2002       2001       2000
                              ------------------------------
                                      (in thousands)
Current Tax Provision:
  Federal                      $6,826     $5,975     $5,890
  State                         2,543      2,009      1,997
                              ------------------------------
    Total current               9,369      7,984      7,887

Deferred Tax Benefit:
  Federal                        (735)      (518)      (511)
  State                          (512)      (142)      (139)
                              ------------------------------
    Total deferred             (1,247)      (660)      (650)
                              ------------------------------
Provision for income taxes     $8,122     $7,324     $7,237
                              ==============================

Taxes  recorded  directly  to  shareholders'  equity  are  not  included  in the
preceding table.  These taxes (benefits)  relating to changes in minimum pension
liability  amounting  to  ($19,000)  in 2002,  $541,000  in 2001 and $0 in 2000,
unrealized  gains  and  losses  on   available-for-sale   investment  securities
amounting  to $2,142  in 2002,  $258,000  in 2001 and  $2,996,000  in 2000,  and
benefits related to employee stock options of ($436,000) in 2002,  ($867,000) in
2001 and ($254,000) in 2000 were recorded directly to shareholders' equity.

The provisions for income taxes  applicable to income before taxes for the years
ended December 31, 2002, 2001 and 2000 differ from amounts  computed by applying
the statutory Federal income tax rates to income before taxes. The effective tax
rate and the statutory federal income tax rate are reconciled as follows:

                                                      Years Ended December 31,
                                                     2002       2001       2000
                                                    ----------------------------
Federal statutory income tax rate                   35.0%      35.0%      34.0%
State income taxes, net of federal tax benefit       6.0        6.5        6.2
Tax-exempt interest on municipal obligations        (3.3)      (3.9)      (3.9)
Other                                               (1.1)      (0.5)       0.1
                                                    ----------------------------
Effective Tax Rate                                  36.6%      37.1%      36.4%
                                                    ============================

                                      -47-



The  components  of the net deferred tax asset of the Company as of December 31,
were as follows:

                                              2002              2001
                                            --------------------------
                                                  (in thousands)
Deferred Tax Assets:
  Loan losses                                $6,045            $5,223
  Deferred compensation                       3,523             3,061
  Intangible amortization                       980               895
  State taxes                                   871               695
  Pension liability                             522               541
  Fixed asset write down                        232               220
  Nonaccrual interest                           201               109
  OREO write downs                              160               167
  Stock option amortization                      32                93
                                            --------------------------
    Total deferred tax assets                12,566            11,004
                                            --------------------------
Deferred Tax Liabilities:
  Unrealized gain on securities              (2,221)              (79)
  Depreciation                                 (645)             (658)
  Securities income                            (419)             (331)
  Securities accretion                         (418)             (368)
  Capital leases                                (95)              (98)
  Other, net                                   (339)             (136)
                                            --------------------------
    Total deferred tax liability             (4,137)           (1,670)
                                            --------------------------
    Net deferred tax asset                   $8,429            $9,334
                                            ==========================

Note 13 - Retirement Plans

Substantially  all employees  with at least one year of service are covered by a
discretionary  employee stock ownership plan (ESOP).  Contributions  are made to
the plan at the  discretion  of the  Board of  Directors.  Contributions  to the
plan(s)  totaling  $955,000 in 2002,  $850,000 in 2001 and  $842,000 in 2000 are
included in salary expense.

The Company has an Executive Deferred  Compensation Plan and a Director Deferred
Compensation  Plan,  which allow directors and key executives  designated by the
Board of Directors of the Company to defer a portion of their compensation.  The
Company has purchased  insurance on the lives of the participants and intends to
use the cash values of these policies ($6,564,000 and $6,304,000 at December 31,
2002 and 2001,  respectively)  to pay the deferred  compensation  obligations of
$4,451,000 and $3,609,000 at December 31, 2002 and 2001, respectively.

The Company has a supplemental  retirement plan for directors and a supplemental
executive retirement plan covering 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  ($8,644,000  and  $8,298,000  at  December  31,  2002 and 2001,
respectively) to pay the retirement obligations.

In accordance with the provisions of Statement of Financial Accounting Standards
No.  87,  "Employers'  Accounting  for  Pensions,"  the Bank  recorded  in Other
Liabilities an additional minimum pension liability of $1,642,000 related to the
supplemental  retirement plan as of December 31, 2002.  These amounts  represent
the amount by which the accumulated benefit obligations for this retirement plan
exceeded the fair value of plan assets plus amounts  previously  accrued related
to the plan.  These  additional  liabilities  have been offset by an  intangible
asset to the extent of previously  unrecognized net transitional  obligation and
unrecognized  prior  service  costs  of each  plan.  The  amount  in  excess  of
previously  unrecognized  prior service cost and  unrecognized  net transitional
obligation is recorded as a reduction of  shareholders'  equity in the amount of
$745,000, representing the after-tax impact, at December 31, 2002.

                                      -48-




The following table sets forth the plans' status:
                                                                 December 31,
                                                              2002        2001
                                                            --------------------
                                                                 (in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year                     $(6,261)    $(5,134)
Service cost                                                   (107)        (86)
Interest cost                                                  (428)       (372)
Amendments                                                       --        (108)
Actuarial gain (loss)                                          (367)       (862)
Benefits paid                                                   482         301
                                                            --------------------
Benefit obligation at end of year                           $(6,681)    $(6,261)
                                                            ====================
Change in plan assets:
Fair value of plan assets at beginning of year              $    --     $    --
                                                            --------------------
Fair value of plan assets at end of year                    $    --     $    --
                                                            ====================
Funded status                                               $(6,681)    $(6,261)
Unrecognized net obligation existing at January 1, 1986          80         115
Unrecognized net actuarial loss                               2,354       2,075
Unrecognized prior service cost                                 321         402
Intangible asset                                               (401)       (517)
Accumulated other comprehensive income                       (1,243)     (1,289)
                                                            --------------------
Accrued benefit cost                                        $(5,570)    $(5,475)
                                                            ====================


                                                        Years Ended December 31,
                                                        2002      2001      2000
                                                        ------------------------
                                                             (in thousands)
Net pension cost included the following components:
Service cost-benefits earned during the period          $107      $ 86      $ 74
Interest cost on projected benefit obligation            428       372       317
Amortization of net obligation at transition              35        35        35
Amortization of prior service cost                        81        39        13
Recognized net actuarial loss                             87        53        41
                                                        ------------------------
Net periodic pension cost                               $738      $585      $480
                                                        ========================

The net periodic pension cost was determined using a discount rate assumption of
7.00% for 2002,  7.25% for 2001 and 7.25% for 2000,  respectively.  The rates of
increase in compensation used in each year were 2.5% to 5%.

                                      -49-




Note 14 - Earnings per Share

The Company's basic and diluted  earnings per share are as follows (in thousands
except per share data):




                                                                  Year Ended December 31, 2002
                                                                        Weighted Average
                                                             Income          Shares           Per Share Amount
                                                                                             
Basic Earnings per Share
   Net income available to common shareholders                $14,069        7,019,205              $2.00
Common stock options outstanding                                  --           173,809
                                                              -------        --------
Diluted Earnings per Share
   Net income available to common shareholders                $14,069        7,193,014              $1.96
                                                              =======        =========              =====

                                                                    Year Ended December 31, 2001
                                                                        Weighted Average
                                                             Income          Shares          Per Share Amount
Basic Earnings per Share
   Net income available to common shareholders                $12,419       7,072,588               $1.76
Common stock options outstanding                                  --          146,641
                                                              -------       ---------
Diluted Earnings per Share
   Net income available to common shareholders                $12,419       7,219,229               $1.72
                                                              =======       =========               =====

                                                                    Year Ended December 31, 2000
                                                                        Weighted Average
                                                             Income          Shares          Per Share Amount
Basic Earnings per Share
   Net income available to common shareholders                $12,623       7,191,790               $1.76
Common stock options outstanding                                  --          148,939
                                                              -------       ---------
Diluted Earnings per Share
   Net income available to common shareholders                $12,623       7,340,729               $1.72
                                                              =======       =========               =====



Excluded from the computation of diluted earnings per share were 36,000,  0, and
184,150  options  for the  years  ended  December  31,  2002,  2001,  and  2000,
respectively, because the effect of these options was antidilutive.

Note 15 - Related Party Transactions

Certain directors,  officers,  and companies with which they are associated were
customers of, and had banking  transactions with, the Company or the Bank in the
ordinary  course of  business.  It is the  Company's  policy  that all loans and
commitments to lend to officers and directors be made on substantially  the same
terms, including interest rates and collateral,  as those prevailing at the time
for comparable transactions with other borrowers of the Bank.

The following table summarizes the activity in these loans for 2002:

     Balance                                                Balance
   December 31,      Advances/          Removed/          December 31,
       2001          New Loans          Payments              2002
   -------------------------------------------------------------------
                            (in thousands)
      $6,369          $1,291             $4,322              $3,338


Note 16 - Financial Instruments With Off-Balance Sheet Risk

The Company is a party to financial  instruments with off-balance  sheet risk in
the normal  course of business  to meet the  financing  needs of its  customers.
These  financial  instruments  include  commitments to extend credit and standby
letters of credit.  Those instruments  involve, to varying degrees,  elements of
credit  risk in  excess of the  amount  recognized  in the  balance  sheet.  The
contract  amounts of those  instruments  reflect the extent of  involvement  the
Company has in particular classes of financial instruments.

                                      -50-



The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby  letters of credit written is represented by the  contractual  amount of
those  instruments.  The  Company  uses  the  same  credit  policies  in  making
commitments  and  conditional  obligations  as  it  does  for  on-balance  sheet
instruments.


                                                Contractual Amount
                                                   December 31,
                                            --------------------------
                                              2002              2001
                                                  (in thousands)
Financial instruments whose contract
  amounts represent credit risk:

  Commitments to extend credit:
    Commercial loans                         $69,295           $72,646
    Consumer loans                           117,917            91,170
    Real estate mortgage loans                 6,028             2,932
    Real estate construction loans            25,105            23,952
    Standby letters of credit                  8,818             4,391

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally have fixed expiration  dates of one year or less or other  termination
clauses  and may require  payment of a fee.  Since many of the  commitments  are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily  represent  future cash  requirements.  The Company  evaluates  each
customer's credit  worthiness on a case-by-case  basis. The amount of collateral
obtained,  if deemed necessary by the Company upon extension of credit, is based
on Management's  credit evaluation of the customer.  Collateral held varies, but
may include accounts receivable,  inventory,  property,  plant and equipment and
income-producing commercial properties.

Standby letters of credit are conditional  commitments  issued by the Company to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily issued to support private borrowing arrangements. Most standby letters
of credit are issued for one year or less.  The credit risk  involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers. Collateral requirements vary, but in general follow the
requirements for other loan facilities.

Note 17 - 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.

Note 18 - Disclosure of Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument  for which it is practical to estimate  that
value.  Cash and due from banks, fed funds purchased and sold,  accrued interest
receivable  and payable,  and short-term  borrowings  are considered  short-term
instruments. For these short-term instruments their carrying amount approximates
their fair value.

Securities

For all  securities,  fair  values are based on quoted  market  prices or dealer
quotes. See Note 3 for further analysis.

Loans

The fair  value of  variable  rate  loans is the  current  carrying  value.  The
interest rates on these loans are regularly  adjusted to market rates.  The fair
value of other types of fixed rate loans is estimated by discounting  the future
cash flows using current rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities. The allowance for
loan losses is a reasonable estimate of the valuation allowance needed to adjust
computed fair values for credit quality of certain loans in the portfolio.

Deposit Liabilities and Long-Term Debt

The fair value of demand deposits,  savings  accounts,  and certain money market
deposits is the amount payable on demand at the reporting date.  These values do
not consider the estimated fair value of the Company's core deposit  intangible,
which is a significant unrecognized asset of the Company. The fair value of time
deposits and debt is based on the discounted value of contractual cash flows.

                                      -51-



Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments is estimated  using the fees currently  charged to
enter into similar  agreements,  taking into account the remaining  terms of the
agreements and the present credit  worthiness of the counter parties.  For fixed
rate loan commitments,  fair value also considers the difference between current
levels of interest rates and the committed  rates.  The fair value of letters of
credit is based on fees  currently  charged  for  similar  agreements  or on the
estimated  cost to terminate them or otherwise  settle the  obligation  with the
counter parties at the reporting date.

Fair value for financial instruments are management's estimates of the values at
which the  instruments  could be  exchanged  in a  transaction  between  willing
parties.  These estimates are subjective and may vary significantly from amounts
that would be realized in actual  transactions.  In addition,  other significant
assets are not  considered  financial  assets  including,  any mortgage  banking
operations,  deferred tax assets, and premises and equipment.  Further,  the tax
ramifications  related to the realization of the unrealized gains and losses can
have a  significant  effect  on the  fair  value  estimates  and  have  not been
considered in any of these estimates.

The estimated fair values of the Company's financial instruments are as follows:

                                            December 31, 2002
                                      -----------------------------
                                        Carrying            Fair
                                         Amount            Value
                                      -----------------------------
Financial assets:                             (in thousands)
  Cash and due from banks                $67,170          $67,170
  Federal funds sold                       8,100            8,100
  Securities:
    Available-for-sale                   338,024          338,024
  Loans, net                             673,145          667,535
  Accrued interest receivable              5,644            5,644
Financial liabilities:
  Deposits                             1,005,237          972,323
  Accrued interest payable                 2,927            2,927
  Long-term borrowings                    22,924           25,347

                                        Contract
                                         Amount
                                      -----------------------------
Off-balance sheet:
  Commitments                            218,345           21,835
  Standby letters of credit                8,818               88



                                            December 31, 2001
                                      -----------------------------
                                        Carrying            Fair
                                         Amount            Value
                                      -----------------------------
Financial assets:                             (in thousands)
  Cash and due from banks                $59,264          $59,264
  Federal funds sold                      18,700           18,700
  Securities:
    Available-for-sale                   224,590          224,590
  Loans, net                             645,674          637,000
  Accrued interest receivable              5,522            5,522
Financial liabilities:
  Deposits                               880,393          832,380
  Accrued interest payable                 3,488            3,488
  Long-term borrowings                    22,956           24,156

                                        Contract
                                         Amount
                                      -----------------------------
Off-balance sheet:
  Commitments                            108,700           10,870
  Standby letters of credit                4,391               44


                                      -52-



Note 19 - TriCo Bancshares Financial Statements

TriCo Bancshares (Parent Only) Balance Sheets

                                                             December 31,
Assets                                                  2002              2001
                                                      --------------------------
                                                            (in thousands)
Cash and Cash equivalents                                $239              $241
Securities available-for-sale                             180               180
Investment in Tri Counties Bank                        96,708            85,446
Other assets                                            1,887             1,066
                                                      --------------------------
  Total assets                                        $99,014           $86,933
                                                      ==========================
Liabilities and shareholders' equity

  Total liabilities                                   $    --           $    --
                                                      --------------------------
Shareholders' equity:
Common stock, no par value:
    Authorized 20,000,000 shares;
    issued and outstanding 7,060,965
    and 7,000,980 shares, respectively                $50,472           $49,679
Retained earnings                                      46,239            37,909
Accumulated other comprehensive income (loss)           2,303              (655)
                                                      --------------------------
   Total shareholders' equity                          99,014            86,933
                                                      --------------------------
  Total liabilities and shareholders' equity          $99,014           $86,933
                                                      ==========================


Statements of Income                             Years Ended December 31,
                                                2002       2001       2000
                                              ------------------------------
                                                      (in thousands)
Interest income                                   $18        $17        $18
                                              ------------------------------
Administration expense                            416        980        980
                                              ------------------------------
Loss before equity in net income of
  Tri Counties Bank                              (398)      (963)      (962)
Equity in net income of Tri Counties Bank:
   Distributed                                  5,779     12,187      7,118
   Undistributed                                8,522        798      6,070
Income taxes                                      166        397        397
                                              ------------------------------
   Net income                                 $14,069    $12,419    $12,623
                                              ==============================


                                      -53-






Statements of Cash Flows
                                                                        Years ended December 31,
                                                                2002              2001             2000
                                                              -------------------------------------------
                                                                             (in thousands)
                                                                                          
Operating activities:
   Net income                                                 $14,069           $12,419          $12,623
   Adjustments to reconcile net income to net cash provided
     by operating activities:
      Undistributed equity in Tri Counties Bank                (8,522)             (798)          (6,070)
      Deferred income taxes                                      (167)             (397)            (397)
                                                              -------------------------------------------
        Net cash provided by operating activities               5,380            11,224            6,156
                                                              -------------------------------------------

Financing activities:
   Issuance of common stock                                       427             1,005              411
   Repurchase of common stock                                    (189)           (6,618)            (776)
   Cash dividends-- common                                     (5,620)           (5,642)          (5,680)
                                                              -------------------------------------------
        Net cash used for financing activities                 (5,382)          (11,255)          (6,045)
                                                              -------------------------------------------
        (Decrease) increase  in cash and cash equivalents          (2)              (31)             111

Cash and cash equivalents at beginning of year                    241               272              161
                                                              -------------------------------------------
Cash and cash equivalents at end of year                         $239              $241             $272
                                                              ===========================================



Note 20 - Regulatory Matters

The Company is subject to various regulatory capital  requirements  administered
by federal banking  agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Company's  financial  statements.  Under  capital  adequacy  guidelines  and the
regulatory  framework  for  prompt  corrective  action,  the  Company  must meet
specific capital guidelines that involve quantitative  measures of the Company's
assets,  liabilities  and certain  off-balance-sheet  items as calculated  under
regulatory   accounting   practices.   The   Company's   capital   amounts   and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Company to  maintain  minimum  amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted  assets, and of Tier I
capital to average assets.  Management  believes,  as of December 31, 2002, that
the Company meets all capital adequacy requirements to which it is subject.

As of December 31, 2002, the most recent  notification from the FDIC categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action. To be categorized as well capitalized the Bank must maintain
minimum total  risk-based,  Tier I risk-based and Tier I leverage  ratios as set
forth  in the  table  below.  There  are no  conditions  or  events  since  that
notification that Management believes have changed the institution's category.

                                      -54-



The Bank's actual capital amounts and ratios are also presented in the table.


                                                                                                           To Be Well
(Dollars in thousands)                                                                                  Capitalized Under
                                                                                 For Capital            Prompt Corrective
                                                        Actual                Adequacy Purposes         Action Provisions
                                                  Amount       Ratio           Amount      Ratio         Amount      Ratio
                                                                                                    
As of December 31, 2002:
Total Capital (to Risk Weighted Assets):
  Consolidated                                   $102,378     11.97%         =>$68,427    =>8.0%       =>$85,534    =>10.0%
  Tri Counties Bank    $                          100,046     11.73%         =>$68,259    =>8.0%       =>$85,324    =>10.0%
Tier I Capital (to Risk Weighted Assets):
  Consolidated                                    $91,641     10.71%         =>$34,213    =>4.0%       =>$51,320    => 6.0%
  Tri Counties Bank                               $89,335     10.47%         =>$34,130    =>4.0%       =>$51,195    => 6.0%
Tier I Capital (to Average Assets):
  Consolidated                                    $91,641      8.27%         =>$44,304    =>4.0%       =>$55,380    => 5.0%
  Tri Counties Bank                               $89,369      8.08%         =>$44,222    =>4.0%       =>$55,278    => 5.0%


As of December 31, 2001:
Total Capital (to Risk Weighted Assets):
  Consolidated                                    $91,418     11.68%         =>$62,620    =>8.0%       =>$78,275    =>10.0%
  Tri Counties Bank                               $89,253     11.43%         =>$62,466    =>8.0%       =>$78,083    =>10.0%
Tier I Capital (to Risk Weighted Assets):
  Consolidated                                    $81,595     10.43%         =>$31,310    =>4.0%       =>$46,965    => 6.0%
  Tri Counties Bank                               $79,454     10.18%         =>$31,233    =>4.0%       =>$46,850    => 6.0%
Tier I Capital (to Average Assets):
  Consolidated                                    $81,595      8.17%         =>$39,941    =>4.0%       =>$49,926    => 5.0%
  Tri Counties Bank                               $79,454      7.97%         =>$39,865    =>4.0%       =>$49,832    => 5.0%



Note 21 - Summary of Quarterly Results of Operations (unaudited)

The following  table sets forth the results of operations  for the four quarters
of 2002 and 2001, and is unaudited;  however,  in the opinion of Management,  it
reflects  all  adjustments  (which  include only normal  recurring  adjustments)
necessary to present fairly the summarized results for such periods.


                                             2002 Quarters Ended
                            December 31,  September 30,   June 30,     March 31,
(Dollars in thousands, except per share data)
Interest income               $16,228        16,435        16,075       15,958
Interest expense                3,245         3,227         3,179        3,263
                              -------       -------       -------      -------
Net interest income            12,983        13,208        12,896       12,695
Provision for loan losses         800           700           500          800
                              -------       -------       -------      -------
Net interest income after
   provision for loan losses   12,183        12,508        12,396       11,895
Noninterest income              5,998         5,413         3,943        3,826
Noninterest expense            12,473        12,133        10,963       10,402
                              -------       -------       -------      -------
Income before income taxes      5,708         5,788         5,376        5,319
Income tax expense              1,960         2,161         2,011        1,990
                              -------       -------       -------      -------
Net income                    $ 3,748       $ 3,627       $ 3,365      $ 3,329
                              =======       =======       =======      =======

Per common share:
   Net income (diluted)       $  0.52       $  0.50       $  0.47      $  0.47
                              =======       =======       =======      ========
   Dividends                  $  0.20       $  0.20       $  0.20      $  0.20
                              =======       =======       =======      =======

                                      -55-




                                             2001 Quarters Ended
                            December 31,  September 30,   June 30,     March 31,
(Dollars in thousands, except per share data)
Interest income               $16,860       $18,259       $18,327      $18,552
Interest expense                4,356         5,612         6,323        7,195
                              -------       -------       -------      -------
Net interest income            12,504        12,647        12,004       11,357
Provision for loan losses       1,150           600           775        1,875
                              -------       -------       -------      -------
Net interest income after
   provision for loan losses   11,354        12,047        11,229        9,482
Noninterest income              3,920         3,713         3,577        5,028
Noninterest expense            10,170        10,465        10,233        9,739
                              -------       -------       -------      -------
Income before income taxes      5,104         5,295         4,573        4,771
Income tax expense              1,746         2,050         1,736        1,792
                              -------       -------       -------      -------
Net income                     $3,358       $ 3,245       $ 2,837      $ 2,979
                              =======       =======       =======      =======

Per common share:
   Net income (diluted)       $  0.47       $  0.45       $  0.39      $  0.41
                              =======       =======       =======      =======
   Dividends                  $  0.20       $  0.20       $  0.20      $  0.20
                              =======       =======       =======      =======


Note 22 - Business Segments

The Company is principally  engaged in traditional  community banking activities
provided  through its 32 branches and 10 in-store  branches  located  throughout
Northern and Central California. Community banking activities include the Bank's
commercial and retail  lending,  deposit  gathering and investment and liquidity
management  activities.  In addition to its community banking services, the Bank
offers investment brokerage and leasing services. These activities are monitored
and reported by Bank management as separate operating segments.

The accounting  policies of the segments are the same as those described in Note
1. The Company  evaluates  segment  performance based on net interest income, or
profit or loss from operations,  before income taxes not including  nonrecurring
gains and losses. The results of the separate branches have been aggregated into
a  single  reportable  segment,   Community  Banking.   The  Company's  leasing,
investment  brokerage  and  real  estate  segments  do not meet  aggregation  or
materiality  criteria and  therefore  are  reported as "Other" in the  following
table.

Summarized financial information for the years ended December 31, 2002, 2001 and
2000 concerning the Bank's reportable segments is as follows (in thousands):

                                    Community
                                     Banking         Other         Total
 2002
 Net interest income                  $50,755        $1,027        $51,782
 Noninterest income                    16,243         2,937         19,180
 Noninterest expense                   43,904         2,067         45,971
 Net income                            12,864         1,205         14,069
 Assets                            $1,128,148       $16,426     $1,144,574

 2001
 Net interest income                  $46,804        $1,708        $48,512
 Noninterest income                    13,331         2,907         16,238
 Noninterest expense                   38,654         1,953         40,607
 Net income                            10,729         1,690         12,419
 Assets                              $990,279       $15,168     $1,005,447

 2000
 Net interest income                  $46,902          $882        $47,784
 Noninterest income                    11,783         3,139         14,922
 Noninterest expense                   35,864         1,982         37,846
 Net income                            11,328         1,295         12,623
 Assets                              $956,447       $15,624       $972,071

                                      -56-



Note 23 - Acquisition

On October 7, 2002, TriCo Bancshares announced that on October 3, 2002 it signed
a definitive agreement with Tri Counties Bank, its wholly owned subsidiary,  and
North State National Bank,  pursuant to which TriCo  Bancshares will acquire all
of the  outstanding  stock of North State  National Bank in exchange for cash of
approximately  $13 million,  approximately  716,000  shares of TriCo  Bancshares
common  stock and  options  to  purchase  approximately  92,450  shares of TriCo
Bancshares  common stock,  subject to adjustments as set forth in the agreement.
Based upon a closing price of $23.92 per share of TriCo Bancshares  common stock
on October 3, 2002, the  transaction  was valued at $31.8 million.  On March 19,
2003, shareholders of North State National Bank approved the proposed merger.



                                      -57-




                          Independent Auditors' Report



To the Board of Directors
TriCo Bancshares and Subsidiary:


We have audited the accompanying  consolidated balance sheet of TriCo Bancshares
and Subsidiary as of December 31, 2002, and the related consolidated  statements
of income and  comprehensive  income,  changes in shareholders'  equity and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  based on our  audit.  The
consolidated  financial  statements of TriCo Bancshares as of December 31, 2001,
and for the two years then ended were audited by other  auditors who have ceased
operations.  Those auditors expressed an unqualified  opinion on those financial
statements in their report dated January 18, 2002.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the 2002 consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position of TriCo
Bancshares  and  Subsidiary  as of December 31,  2002,  and the results of their
operations  and their  cash  flows for the year then  ended in  conformity  with
accounting principles generally accepted in the United States of America.


/s/ KPMG LLP



Sacramento, California
January 17, 2003


                                      -58-




                        Independent Auditors' Report(1)



To the Board of Directors and Shareholders of TriCo Bancshares and Subsidiary:

     We have  audited  the  accompanying  consolidated  balance  sheets of TriCo
Bancshares (a California corporation) and Subsidiary as of December 31, 2001 and
2000,   and  the  related   consolidated   statements  of  income,   changes  in
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 2001. These financial  statements are the  responsibility  of
the  Corporation's  management.  Our  responsibility is to express an opinion on
these financial statements based on our audits.
     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.
     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position of TriCo
Bancshares  and  Subsidiary as of December 31, 2001 and 2000, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2001 in  conformity  with  accounting  principles  generally
accepted in the United States.


/s/ Arthur Andersen LLP


San Francisco, California
January 18, 2002


(1)  This report is a copy  of a previously  issued report  and the  predecessor
     auditor  has not reissued  the report. Revisions to prior-period  financial
     statements are considered inconsequential.


                                      -59-




MANAGEMENT'S LETTER OF FINANCIAL RESPONSIBILITY

To Our Shareholders:

The  Management  of  TriCo   Bancshares  is  responsible  for  the  preparation,
integrity,  reliability  and  consistency of the  information  contained in this
annual report. The consolidated financial statements,  which necessarily include
amounts based on judgments  and  estimates,  were  prepared in  conformity  with
generally accepted accounting principles and prevailing practices in the banking
industry.  All other  financial  information  appearing  throughout  this annual
report is  presented  in a manner  consistent  with the  consolidated  financial
statements.

Management  has  established  and  maintains a system of internal  controls that
provides reasonable assurance that the underlying financial records are reliable
for  preparing  the  consolidated  financial  statements,  and that  assets  are
safeguarded  from  unauthorized  use or loss.  This  system  includes  extensive
written  policies and operating  procedures and a  comprehensive  internal audit
function,  and is supported by the careful  selection and training of staff,  an
organizational structure providing for division of responsibility, and a Code of
Ethics covering standards of personal and business conduct.

Management  believes  that,  as of December 31,  2002,  the  Company's  internal
control  environment  is  adequate  to provide  reasonable  assurance  as to the
integrity and reliability of the consolidated  financial  statements and related
financial information contained in the annual report.  However, there are limits
inherent in all systems of internal accounting control and Management recognizes
that errors or irregularities may occur. Based on the recognition that the costs
of such  systems  should not  exceed  the  benefits  to be  derived,  Management
believes the Company's system provides an appropriate cost/benefit balance.

The system of internal  controls is under the general  oversight of the Board of
Directors  acting through its Audit  Committee,  which is comprised  entirely of
outside  directors.  The  Audit  Committee  monitors  the  effectiveness  of and
compliance  with  internal  controls  through a  continuous  program of internal
audit. This is accomplished through periodic meetings with Management,  internal
auditors  and  independent  auditors to assure  that each is carrying  out their
responsibilities.

The Company's 2002 consolidated  financial  statements have been audited by KPMG
LLP,  independent  certified  public auditors elected by the  shareholders.  All
financial  records and related data, as well as the minutes of shareholders  and
directors meetings,  have been made available to them.  Management believes that
all  representations  made to the  independent  auditors during their audit were
valid and appropriate.

Richard P. Smith
President and Chief Executive Officer

Thomas J. Reddish
Vice President and Chief Financial Officer


                                      -60-




ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 22,  2002,  the  Company  decided  not to renew the  engagement  of its
independent  public   accountants,   Arthur  Andersen  LLP  ("Andersen").   This
determination  followed  the  Company's  decision to seek  proposals  from other
independent accountants to audit the Company's consolidated financial statements
for the year ending December 31, 2002.

The  decision not to renew the  engagement  of Andersen was made by the Board of
Directors based upon a recommendation of its Audit Committee.

During the  Company's  the fiscal year ended  December 31, 2001,  and during the
interim  period from  December  31, 2001 through  March 22, 2002,  there were no
disagreements  between  the Company  and  Andersen  on any matter of  accounting
principles,  financial  statement  disclosure,  or auditing  scope or  procedure
which, if not resolved to Andersen's satisfaction, would have caused Andersen to
make  reference  to the  matter of the  disagreement  in  connection  with their
reports. The audit reports of Andersen on the consolidated  financial statements
of the Company as of December  31, 2001 and 2000 and for each of the three years
in the period  ended  December  31, 2001 did not contain any adverse  opinion or
disclaimer  of  opinion,  nor were these  opinions  qualified  or modified as to
uncertainty,  audit scope or accounting  principles.  The Company requested that
Andersen furnish it with a letter,  addressed to the commission  stating whether
or not it  agrees  with the  above  statements.  The  letter  from  Andersen  is
incorporated by reference from the Company's 8-K dated March 27, 2002.

Effective March 22, 2002, the Board of Directors, based upon a recommendation of
its Audit Committee,  retained KPMG LLP ("KPMG") as its independent  accountants
to audit the Company's  consolidated  financial  statements  for the year ending
December 31, 2002. The decision to retain KPMG was ratified by  shareholders  at
the Annual Meeting of Shareholders in May 2002.

During the  Company's two fiscal years ended  December 31, 2001,  and during the
interim  period  through  March 22,  2002,  there were no  reportable  events as
defined in Item 301 (a)(1)(v) of Regulation S-K.

During the  Company's two fiscal years ended  December 31, 2001,  and during the
interim  period  through  March 22, 2002,  the Company did not consult with KPMG
regarding either:

         (i)  the application of accounting  principles to a specified
              transaction,  either completed or  proposed; or the type
              of audit opinion that might be rendered on the Company's
              financial statements; or

         (ii) any matter that was either the subject of a disagreement
              (as defined in  Item 304(a)(1)(iv) of regulation S-K and
              related instruction  to this Item) or a reportable event
              identified   (as  described   in  Item  304(a)(1)(v)  of
              Regulation S-K and related instruction to this Item).


                                      -61-



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  regarding  directors and executive  officers of the registrant
required by this Item 10 is incorporated  herein by reference from the "Board of
Directors",  "Executive  Officers" and "Ownership of Voting Securities" sections
of the Company's  Proxy  Statement for the annual meeting of  shareholders to be
held on May 13,  2003,  which  will be filed  with the  commission  pursuant  to
Regulation 14A.

ITEM 11.  EXECUTIVE COMPENSATION

The  information  required by this Item 11 is  incorporated  herein by reference
from the  "Compensation  of Executive  Officers"  section of the Company's Proxy
Statement  for the annual  meeting of  shareholders  to be held on May 13, 2003,
which will be filed with the commission pursuant to Regulation 14A.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table shows Company common stock authorized for issuance under the
Company's equity compensation plans as of December 31, 2002:




                                                        # of securities         Weighted       # of securities remaining
                                                         to be issued           average          available for future
                                                         upon exercise       exercise price      issuance under equity
                                                        of outstanding       of outstanding       compensation plans
                                                       options, warrants    options, warrants    (excluding securities
Plan category                                           and rights (a)       and rights (b)   reflected in column (a)) (c)
- -------------                                           ------------------------------------------------------------
                                                                                                
Equity compensation plans approved by security holders      627,400             $15.92                 475,825
Equity compensation plans not approved by security holders        0                 --                       0



The  information  required by this Item 12 is  incorporated  herein by reference
from the  "Ownership  of  Voting  Securities"  section  of the  Company's  Proxy
Statement  for the annual  meeting of  shareholders  to be held on May 13, 2003,
which will be filed with the commission pursuant to Regulation 14A.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this Item 13 is  incorporated  herein by reference
from the "Committees and Meetings of the Board of Directors and  Compensation of
Directors"  sections of the Company's  Proxy Statement for the annual meeting of
shareholders to be held on May 13, 2003, which will be filed with the commission
pursuant to Regulation 14A.

ITEM 14.  CONTROLS AND PROCEDURES

(a)       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 a date within 90 days of the
          filing of this report ("Evaluation  Date").  Based on that evaluation,
          they concluded that as of the Evaluation Date the Company's disclosure
          controls and procedures are effective to allow timely communication to
          them of  information  relating to the Company and the Bank required to
          be  disclosed  in  its  filings  with  the   Securities  and  Exchange
          Commission  ("SEC")  under the  Securities  Exchange  Act of 1934,  as
          amended  ("Exchange  Act").  Disclosure  controls and  procedures  are
          Company controls and other procedures that are designed to ensure that
          information  required  to be  disclosed  by the Company in the reports
          that  it  files  under  the  Exchange  Act  is  recorded,   processed,
          summarized and reported within the time periods specified in the SEC's
          rules and forms.

(a)       There  have been no  significant  changes  in the  Company's  internal
          controls or in other  factors  that could  significantly  affect these
          controls subsequent to the Evaluation Date.

                                      -62-



ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Documents filed as part of this report:

     1.   All Financial Statements.

          The consolidated financial statements of Registrant are listed at page
          32 of Item 8 of this report, and are incorporated herein by reference.

     2.   Financial statement schedules.

          Schedules have been omitted because they are not applicable or are not
          required under the instructions contained in Regulation S-X or because
          the  information  required to be set forth  therein is included in the
          consolidated  financial  statements or notes thereto at Item 8 of this
          report.

     3.   Exhibits.

          The following  documents are included or  incorporated by reference in
          this annual  report on Form 10-K,  and this list  includes the Exhibit
          Index.

Exhibit No.                         Exhibit Index
- -----------                         -------------

     2*   Acquisition Agreement and Plan of Merger dated October 3, 2002, by and
          among TriCo  Bancshares,  Tri Counties  Bank and North State  National
          Bank  filed as Exhibit 2 to TriCo's  Form S-2  Registration  Statement
          dated January 16, 2003 (No. 333-102546)

   3.1*   Articles of Incorporation of TriCo  Bancshares,  as amended,  filed as
          Exhibit 3.1 to TriCo's Report on Form 10-K for the year ended December
          31, 1989.

   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 April 1, 2001, between TriCo
          and each of Craig Carney, Richard O'Sullivan, Thomas Reddish, Ray Rios
          and Richard  Smith,  filed as Exhibit  10.9 to TriCo's  Report on Form
          10-Q for the quarter ended September 30, 2001

  10.3*   TriCo's 1993  Non-Qualified  Stock Option Plan filed as Exhibit 4.1 to
          TriCo's Form S-8  Registration  Statement  dated January 18, 1995 (No.
          33-88704)

  10.4*   TriCo's  Non-Qualified  Stock  Option  Plan  filed as  Exhibit  4.2 to
          TriCo's Form S-8  Registration  Statement  dated January 18, 1995 (No.
          33-88704)

  10.5*   TriCo's  Incentive  Stock  Option Plan filed as Exhibit 4.3 to TriCo's
          Form S-8 Registration Statement dated January 18, 1995 (No. 33-88704)

  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)

                                      -63-



  10.7*   TriCo's  2001 Stock Option Plan filed as Exhibit 4 to TriCo's Form S-8
          Registration Statement dated July 27, 2001 (No. 33-66064)

  10.8*   Employment  Agreement  between TriCo and Richard Smith dated April 10,
          2001, filed as Exhibit 10.8 to TriCo's Form S-4 Registration Statement
          dated January 16, 2003 (No. 333-102546)

  10.9*   Tri Counties Bank Executive Deferred Compensation Plan dated September
          1, 1987,  as restated  April 1, 1992,  and amended  November 12, 2002,
          filed as Exhibit 10.9 to TriCo's Form S-4 Registration Statement dated
          January 16, 2003 (No. 333-102546)

 10.10*   Tri Counties Bank  Supplemental  Retirement  Plan for Directors  dated
          September 1, 1987, as restated January 1, 2001, filed as Exhibit 10.10
          to TriCo's Form S-4 Registration Statement dated January 16, 2003 (No.
          333-102546)

 10.11*   Tri Counties Bank  Supplemental  Executive  Retirement  Plan effective
          September  1,  1987,  filed  as  Exhibit  10.11  to  TriCo's  Form S-4
          Registration Statement dated January 16, 2003 (No. 333-102546)

 10.12*   Tri Counties Bank Deferred  Compensation Plan for Directors  effective
          April 1, 1992, filed as Exhibit 10.12 to TriCo's Form S-4 Registration
          Statement dated January 16, 2003 (No. 333-102546)

  11.1    Computation of earnings per share

  21.1    Tri  Counties  Bank,  a California  banking  corporation,  is the sole
          subsidiary of Registrant

  23.1    Consent of KPMG LLP

  99.1    CEO  Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  99.2    CFO  Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Previously filed and incorporated herein by reference.

(b)  Reports on Form 8-K:

     During the quarter  ended December 31, 2002 the Company filed the following
     Current Reports on Form 8-K:

           Description                                     Date of Report
           -------------------------------------------     ---------------
           Acquisition agreement and plan of merger by     October 3, 2002
           and among  TriCo  Bancshares, Tri  Counties
           Bank and North State National Bank

(c)  Exhibits filed:

     See Exhibit  Index under  Item 15(a)(3)  above for  the  list  of  exhibits
     required to be filed by Item 601 of regulation S-K with this report.

(d)  Financial statement schedules filed:

     See Item 15(a)(2) above.

                                      -64-




ITEM 16.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  information  required by this Item 16 is  incorporated  herein by reference
from  the  "Independent  Public  Accountants"  section  of the  Company's  Proxy
Statement  for the annual  meeting of  shareholders  to be held on May 13, 2003,
which will be filed with the commission pursuant to Regulation 14A.


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  March 18, 2003                       TRICO BANCSHARES

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.


Date:  March 18, 2003                  /s/ Richard P. Smith
                                       ----------------------------------------
                                       Richard P. Smith, President, Chief
                                       Executive Officer and Director
                                       (Principal Executive Officer)


Date:  March 18, 2003                  /s/ Thomas J. Reddish
                                       ----------------------------------------
                                       Thomas J. Reddish, Vice President and
                                       Chief Financial Officer (Principal
                                       Financial and Accounting Officer)


Date:  March 18, 2003                  /s/ Donald J. Amaral
                                       ----------------------------------------
                                       Donald J. Amaral, Director


Date:  March 18, 2003                  /s/ William J. Casey
                                       ----------------------------------------
                                       William J. Casey, Director and Chairman
                                       of the Board


Date:  March 18, 2003                  /s/ Craig S. Compton
                                       ----------------------------------------
                                       Craig S. Compton, Director


Date:  March 20, 2003                  /s/ Wendell J. Lundberg
                                       ----------------------------------------
                                       Wendell J. Lundberg, Director


Date:  March 18, 2003                  /s/ Donald E. Murphy
                                       ----------------------------------------
                                       Donald E. Murphy, Director and
                                       Vice Chairman of the Board

                                      -65-




Date:
                                       ----------------------------------------
                                       Robert H. Steveson, Director and Vice
                                       Chairman of the Board


Date:  March 18, 2003                  /s/ Carroll R. Taresh
                                       ----------------------------------------
                                       Carroll R. Taresh, Director


Date:  March 18, 2003                  /s/ Alex A. Vereschagin, Jr.
                                       ----------------------------------------
                                       Alex A. Vereschagin, Jr., Director




                                      -66-




CERTIFICATIONS

I, Richard P. Smith, certify that;

     1.   I have reviewed this annual report on Form 10-K of TriCo Bancshares;
     2.   Based on my knowledge,  this annual 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 annual report;
     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  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 annual 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-14 and 15d-14) for the  Registrant
          and we have:
          a.   Designed such  disclosure  controls and procedures 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
               annual report is being prepared;
          b.   Evaluated  the  effectiveness  of  the  Registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c.   Presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;
     5.   The Registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the Registrant's  auditors and the
          audit committee of the Registrant's board of directors:
          a.   All  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the Registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  Registrant's  auditors any material
               weakness in internal controls; and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  Registrant's
               internal controls; and
     6.   The Registrant's other certifying officer and I have indicated in this
          annual  report  whether  or not  there  were  significant  changes  in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.



Date: March 18, 2003                    /s/ Richard P. Smith
                                        --------------------------------------
                                        Richard P. Smith
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)



                                      -67-




I, Thomas J. Reddish, certify that;

     1.   I have reviewed this annual report on Form 10-K of TriCo Bancshares;
     2.   Based on my knowledge,  this annual 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 annual report;
     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  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 annual 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-14 and 15d-14) for the  Registrant
          and we have:
          a.   Designed such  disclosure  controls and procedures 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
               annual report is being prepared;
          b.   Evaluated  the  effectiveness  of  the  Registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and
          c.   Presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;
     5.   The Registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the Registrant's  auditors and the
          audit committee of the Registrant's board of directors:
          a.   All  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the Registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  Registrant's  auditors any material
               weakness in internal controls; and
          b.   Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  Registrant's
               internal controls; and
     6.   The Registrant's other certifying officer and I have indicated in this
          annual  report  whether  or not  there  were  significant  changes  in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.



Date: March 18, 2003                    /s/ Thomas J. Reddish
                                        ---------------------------------------
                                        Thomas J. Reddish
                                        Vice President and Chief Financial
                                        Officer (Principal Financial Officer)



                                      -68-




EXHIBITS

Exhibit 11.1

TRICO  BANCSHARES
Computation of Earnings Per Share on Common and Common  Equivalent Shares and on
Common Shares Assuming Full Dilution




                                                                    Years ended December 31

                                                    2002         2001         2000         1999         1998
                                                    ----         ----         ----         ----         ----
                                                                                         
Shares used in the computation
  of earnings per share1
    Weighted daily average
    of shares outstanding                        7,019,205    7,072,588    7,191,790    7,129,560    7,017,306

    Shares used in the computation
    of diluted earnings per share                7,193,014    7,219,229    7,340,729    7,318,520    7,267,602
                                                 =========    =========    =========    =========    =========

Net income used in the computation
    of earnings per common stock                   $14,069      $12,419      $12,623      $11,403       $8,770
                                                   =======      =======      =======      =======       ======

Basic earnings per share                           $  2.00      $  1.76      $  1.76      $  1.60      $  1.25
                                                   =======      =======      =======      =======      =======

Diluted earnings per share                         $  1.96      $  1.72      $  1.72      $  1.56      $  1.21
                                                   =======      =======      =======      =======      =======



1Retroactively adjusted for stock dividends and stock splits.



                                      -69-




Exhibit 23.1


                          Independent Auditors' Consent



To the Audit Committee of the Board of Directors
TriCo Bancshares and Subsidiary:


We consent to the  incorporation  by  reference in the  registration  statements
(Nos. 33-88702,  33-62063, and 33-66064) on Form S-8 of our report dated January
17, 2003,  relating to the  consolidated  balance sheet of TriCo  Bancshares and
Subsidiary  as of December 31, 2002 and the related  consolidated  statements of
income and comprehensive income, and shareholders' equity and cash flows for the
year ended  December  31, 2002,  which report  appears in the December 31, 2002,
annual report on Form 10-K of TriCo Bancshares and Subsidiary.

Our report, dated January 17, 2003, contains an explanatory paragraph indicating
that the  consolidated  balance sheet of TriCo  Bancshares  and Subsidiary as of
December 31, 2001, and the related  statements of income,  stockholders'  equity
and  comprehensive  income,  and cash  flows for the two years  then  ended were
audited by other auditors who have ceased operations.



/s/ KPMG LLP


Sacramento, California
March 20, 2003


                                      -70-




Exhibit 99.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

In connection with the Annual Report of TriCo Bancshares (the "Company") on Form
10-K for the period ending  December 31, 2002 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


Exhibit 99.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

In connection with the Annual Report of TriCo Bancshares (the "Company") on Form
10-K for the period ending  December 31, 2002 as filed with the  Securities  and
Exchange  Commission  on the date hereof (the  "Report"),  I, Thomas J. Reddish,
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
          Vice President and Chief Financial Officer



                                      -71-