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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2003

OR

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

For the transition period from         to

Commission file number 0-25135

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]  No [  ]
Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Exchange Act)
Yes [  ]   No [X]

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

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REDDING BANCORP & SUBSIDIARIES

Index to Form 10-Q

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PART I. FINANCIAL INFORMATION

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES

See accompanying notes to consolidated condensed financial statements.

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REDDING BANCORP & SUBSIDIARIES

1.      Consolidation and Basis of Presentation

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

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

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

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

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REDDING BANCORP & SUBSIDIARIES
Notes to Unaudited Consolidated Condensed Financial Statements

2.      Earnings per Share

Basic earnings per share excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The following table displays the computation of earnings per share for the three months ended March 31, 2003 and 2002.

3.     Stock Option Plans

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REDDING BANCORP & SUBSIDIARIES
Notes to Unaudited Consolidated Condensed Financial Statements

4.     Comprehensive Income

The Company’s total comprehensive earnings were as follows:

5.     Junior Subordinated Debentures (Trust Preferred Securities)

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

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

Forward looking statements and risk factors

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

For additional information concerning risks and uncertainties related to the Company and its operations please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 under the heading “Risk factors that may affect results”. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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

General

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

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

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

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

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

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

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

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

The services offered by the Bank include those traditionally offered by commercial banks of similar size and character in California, such as checking, interest-bearing checking (“NOW”) and savings accounts, money market deposit accounts, commercial, real estate, construction, and term loans; travelers checks, safe deposit boxes, collection services and electronic banking activities. The primary focus of the Bank is to provide services to the business and professional community of its major market area, including Small Business Administration loans, payroll and accounting packages, benefit administration and billing services. The Bank does not offer trust services or international banking services and does not plan to do so in the near future.

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

The Company’s goal is to be a premier provider of financial services to the business and professional community of its major market area including Small Business Administration (“SBA”) loans, commercial building financing, credit card services, payroll and accounting packages, lockbox and billing programs. The Company measures premier by monitoring key operating ratios to high performing peer information on a national level, and models strategies to meet or exceed such goals.

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

The Company derives its income from two principal sources: (i) net interest income, which is the difference between the interest income it receives on interest-earning assets and the interest expense it pays on interest-bearing liabilities, and (ii) fee income, which includes fees earned on deposit services, income from SBA lending, electronic-based cash management services, mortgage brokerage fee income and merchant credit card processing services.

Critical Accounting Policies

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

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s significant accounting policies are presented in Note 2 to the Consolidated Financial Statements contained in the Company’s 2002 Annual Report on Form 10-K. The Company follows accounting policies typical to the community commercial banking industry and in compliance with various regulations and guidelines as established by the Financial Accounting Standards Board (“FASB”) and the Bank’s primary federal regulator, the FDIC.

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

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

The calculation of the allowance for loan losses is by nature inexact, as the allowance represents Management’s best estimate of the loan losses inherent in the Company’s credit portfolios at the reporting date. These loan losses will occur in the future, and as such cannot be determined with absolute certainty at the reporting date.

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

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

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

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

Had compensation costs for the stock option Plans been determined based upon the fair value at the date of grant consistent with SFAS No. 123, “Accounting for Stock Based Compensation", the Company’s net income and earnings per share would have been reduced. The reduction in the Company’s net income had compensation costs been determined in accordance with FAS No. 123 would have been $19,000 and $42,000 in the first quarter 2003 and 2002, respectively. There would have been no change in diluted earnings per share in 2003 and $0.01 per share decrease in 2002.

The amount of the reduction for the fiscal years 2000 through 2002 is disclosed in Note 12 to the Consolidated Financial Statements contained in the 2002 Annual Report on Form 10-K, based upon the assumptions listed therein. Accounting principles generally accepted in the United States of America (GAAP), itself may change over time, having impact over the reporting of the Company’s financial activity. Although the economic substance of the Company’s transactions would not change, alterations in GAAP could affect the timing or manner of accounting or reporting.

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

Financial Highlights - Results of Operations

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

Net Income

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

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

Net Interest Income and Net Interest Margin

Net interest income is the primary source of the Company’s revenue. Net interest income represents the excess of interest and fees earned on interest-earning assets (loans, investments and Federal Funds sold) over the interest paid on deposits and borrowed funds. Net interest margin is net interest income expressed as a percentage of average earning assets. Net interest income was $3.5 million for the quarter ended March 31, 2003 compared with $2.6 million for the same period in 2002. (See tables on page 16)

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

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

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

The Company’s internal financial models indicate that in periods of falling interest rates the net interest margin is expected to decrease while in periods of rising interest rates its margin is expected to increase. The decrease of net interest margin is magnified by the fact that the Company’s assets reprice at a more rapid rate than liabilities. The volume of earning assets helps to mitigate some of the drop in yield. At the current low rates, any additional rate reductions will cause an additional reduction in interest margin.

Capital Resources

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

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

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

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

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

Liquidity

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

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

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

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

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

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

Short term borrowings

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

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

Provision for loan losses

The Company’s most significant management accounting estimate is the appropriate level for the allowance for loan losses. The Company follows a methodology for calculating the appropriate level for the allowance for loan losses. Provision for loan losses of $175,000 were provided for the three months ended March 31, 2003 compared with $65,000 for the same period of 2002. Redding Bancorp’s allowance for loan losses was 1.37% of total loans at March 31, 2003 and 1.38% at March 31, 2002, while its ratio of non-performing assets to total assets was 2.12% at March 31, 2003, compared to 0.11% at March 31, 2002. Year-to-date net charge-offs of $7,639 compare favorably to net charge-offs of $13,000 in the same period last year.

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

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

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

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

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