President's Message

Rising above our circumstances to get desired results has been the center of our efforts since " The Great Recession " started in September of 2008. We have to accept the current economic conditions for what they are and work through them to get the desired results. Lately, your Senior Management Team has been reading the above referenced book as a source of encouragement and as a source of direction. I recommend this to all.

The 2nd Quarter of 2011 marks further progress in advancing our financial status. Our net income for the 2nd Quarter was sufficient to again enable the Board to declare a quarterly cash dividend of $.06 a share thereby making Sierra Bancorp one of the few bank holding companies to be both generating net income and paying a cash dividend. We were also pleased to report in the 2nd Quarter that Sierra Bancorp was the 8th most profitable bank holding company in California with assets under $2 billion as measured by a three year average Return on Equity (ROE). This was reported in U.S. Banker magazine.

During the 2nd Quarter we were engaged in developing a new identity theft insurance product to be offered through nationally known Affinion Group. This we believe will be a high value product that will assist our consumer customers in dealing with the ongoing and ever growing identity theft problem. This yet to be named product will be offered later this year. It will also add a new source of non-interest income and that will be welcomed too.

We also made key personnel moves in the 2nd Quarter. In our Ag Credit Center we added two senior level officers (Brian Ray and Gail Dawson) both domiciled in Kern County to assist in developing a stronger presence in this key agricultural County. We also established a Real Estate Industries Center to expand our mortgage warehouse line of credit business and other real estate related credit. This new Center will be managed by Jeri Eubanks formerly the Visalia Area Manager.

Simultaneously, we appointed veteran banker David Soares as Visalia Area Manager to replace Jeri and to continue to expand our presence in that market. We also named Michelle Quillin-Reynolds as Manager of our River lakes Office to assist in our growing presence in the Bakersfield and Kern County markets. We will continue to strengthen the talent factor in our bank whenever the opportunities present themselves.

We have now concluded the first half of 2011 and we are well into the second half. Our primary challenge is building a quality loan portfolio in a weak economy while continuing to decrease the level of non-performing assets. Other challenges exist in the areas of non-interest income and operating expense control. This is all part of managing a dynamic business in these exciting times.

As we move forward our capital levels are very strong and position us well to continue on in an uncertain economy. Eventually this capital will be deployed through organic growth or growth through acquisition.

We are always open to opportunities, but we are patient enough to seek out and evaluate propositions as they materialize. I look forward to reporting our progress.

Sincerely

James C. Holly

President, CEO and Director