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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR

|o | 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 0-25979

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Western Sierra Bancorp(Exact name of Registrant as specified in its charter)

California(State or other jurisdiction of
incorporation or organization)

68-0390121(I.R.S. Employer Identification No.)4080 Plaza Goldorado Plaza
Cameron Park, California(Address of principal executive offices)

95682(Zip code)


Registrant's telephone number, including area code:(530) 677-5600

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

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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 ý    No o

As
of May 1, 2002 there were 3,783,007 shares outstanding of the Registrant's common stock.

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WESTERN SIERRA BANCORP & SUBSIDIARIES    Index to Form 10-Q

|           |                       |    |                                                                                             |  | Page:
|---------- | --------------------- | -- | ------------------------------------------------------------------------------------------- |  | -----
|PART I.    | Financial Information |    |                                                                                            
|           | Item 1.               |    | Financial Statements                                                                        |  |      
|           |                       |    | Consolidated Balance Sheet (unaudited) March 31, 2002 and December 31, 2001                 |  | 3    
|           |                       |    | Consolidated Statement of Income (unaudited) Three months ended March 31, 2002 and 2001     |  | 4    
|           |                       |    | Consolidated Statement of Cash Flows (unaudited) Three months ended March 31, 2002 and 2001 |  | 5    
|           |                       |    | Notes to Unaudited Consolidated Financial Statements                                        |  | 6-8  
|           | Item 2.               |    | Management's Discussion and Analysis of Financial Condition and Results of Operations       |  | 9    
|           | Item 3.               |    | Quantitative and Qualitative Disclosure about Market Risk                                   |  | 18   
|PART II.   | Other Information     |    |                                                                                            
|           | Item 1.               |    | Legal proceedings                                                                           |  | 21   
|           | Item 2.               |    | Changes in Securities and Use of Proceeds                                                   |  | 21   
|           | Item 3.               |    | Defaults Upon Senior Securities                                                             |  | 21   
|           | Item 4.               |    | Submission of Matters to a Vote of Security Holders                                         |  | 21   
|           | Item 5.               |    | Other Information                                                                           |  | 21   
|           | Item 6.               |    | Exhibits and Report on Form 8-K                                                             |  | 21   
|SIGNATURES |                       | 22

2

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PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Western Sierra Bancorp and Subsidiaries  Consolidated Balance Sheet  (Unaudited)

|                                                                                          |                                                                                                                | March 31, 2002                |                            | December 31, 2001                          |        
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ----------------------------- | -------------------------- | ------------------------------------------ | -------
|
|Assets:                                                                                   |                                                                                                                |                               |                            |                                            |        
|Cash and due from banks                                                                   |                                                                                                                | $                             | 20,391                     |                                            | $      
|Federal funds sold                                                                        |                                                                                                                |                               | 35,495                     |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                | Cash and cash equivalents     |                            |                                            | 55,886 
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|Interest-bearing deposits in banks                                                        |                                                                                                                |                               |                            |                                            |        
|Loans held for sale                                                                       |                                                                                                                |                               | 4,295                      |                                            |        
|Investment securities:                                                                    |                                                                                                                |                               |                            |                                            |        
|                                                                                          | Trading                                                                                                        |                               |                            | 20                                         |        
|                                                                                          | Available-for-sale (amortized cost $63,693 in 2002 and $67,784 in 2001)                                        |                               |                            | 63,173                                     |        
|                                                                                          | Held-to-maturity (market value of $6,656 in 2002 and $7,284 in 2001)                                           |                               |                            | 6,570                                      |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                | Total investment securities   |                            |                                            | 69,763 
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|Portfolio loans and leases:                                                               |                                                                                                                |                               |                            |                                            |        
|                                                                                          | Real estatemortgage                                                                                           |                               |                            | 244,264                                    |        
|                                                                                          | Real estateconstruction                                                                                       |                               |                            | 68,943                                     |        
|                                                                                          | Commercial                                                                                                     |                               |                            | 63,184                                     |        
|                                                                                          | Agricultural                                                                                                   |                               |                            | 8,835                                      |        
|                                                                                          | Installment                                                                                                    |                               |                            | 4,087                                      |        
|                                                                                          | Lease financing                                                                                                |                               |                            | 3,068                                      |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                | Total loans and leases        |                            |                                            | 392,381
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          | Deferred loan and lease fees, net                                                                              |                               |                            | (1,118                                     | )      
|                                                                                          | Allowance for loan and lease losses                                                                            |                               |                            | (5,229                                     | )      
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                |                               | Net loans and leases       |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|Premises and equipment                                                                    |                                                                                                                |                               | 13,644                     |                                            |        
|Other real estate                                                                         |                                                                                                                |                               | 614                        |                                            |        
|Other assets                                                                              |                                                                                                                |                               | 12,044                     |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                |                               |                            | Total assets                               |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|Liabilities:                                                                              |                                                                                                                |                               |                            |                                            |        
|                                                                                          | Non-interest bearing                                                                                           |                               | $                          | 117,661                                    |        
|                                                                                          | Interest bearing:                                                                                              |                               |                            |                                            |        
|                                                                                          |                                                                                                                | NOW, money market and savings |                            |                                            | 149,739
|                                                                                          |                                                                                                                | Time, $100 thousand or more   |                            |                                            | 94,396 
|                                                                                          |                                                                                                                | Other time                    |                            |                                            | 113,220
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                | Total deposits                |                            |                                            | 475,016
|Borrowed funds                                                                            |                                                                                                                |                               | 5,000                      |                                            |        
|Other liabilities                                                                         |                                                                                                                |                               | 4,598                      |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                |                               | Total liabilities          |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|Mandatorily redeemable cumulative trust preferred securities of subsidiary grantor trusts |                                                                                                                |                               | 16,000                     |                                            |        
|Shareholders' equity:                                                                     |                                                                                                                |                               |                            |                                            |        
|                                                                                          | Preferred stockno par value; 10,000,000 shares authorized; none issued                                        |                               |                            |                                           |        
|                                                                                          | Common stockno par value; 10,000,000 shares authorized; issued 3,528,739 shares in 2002 and 3,634,538 in 2001 |                               |                            | 20,944                                     |        
|                                                                                          | Retained earnings                                                                                              |                               |                            | 21,416                                     |        
|                                                                                          | Unearned ESOP shares                                                                                           |                               |                            | (350                                       | )      
|                                                                                          | Accumulated other comprehensive loss                                                                           |                               |                            | (344                                       | )      
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                |                               | Total shareholders' equity |                                            |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        
|                                                                                          |                                                                                                                |                               |                            | Total liabilities and shareholders' equity |        
|                                                                                          |                                                                                                                |                               |                            |                                            |        

See notes to unaudited consolidated financial statements.

3

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Western Sierra Bancorp and Subsidiaries  Consolidated Statements of Income  (Unaudited)

|                                                                                              |                                    | Three Months Ended       
|--------------------------------------------------------------------------------------------- | ---------------------------------- | -------------------------
|
|
|Interest Income:                                                                              |                                    |                          
|                                                                                              | Interest and fees on loans         |                          
|                                                                                              | Interest on investment securities: |                          
|                                                                                              |                                    | Taxable                  
|                                                                                              |                                    | Exempt from federal taxes
|                                                                                              | Interest on Federal funds sold     |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|Interest expense:                                                                             |                                    |                          
|                                                                                              | Interest on deposits               |                          
|                                                                                              | Interest on borrowed funds         |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|Provision for loan and lease losses                                                           |                                    |                          
|                                                                                              |                                    |                          
|Net interest income after provision for loan and lease losses                                 |                                    |                          
|                                                                                              |                                    |                          
|Non-interest income:                                                                          |                                    |                          
|Service charges and fees                                                                      |                                    |                          
|Gain on sale and packaging of residential mortgage and government-guaranteed commercial loans |                                    |                          
|Gain on sale of investment securities                                                         |                                    |                          
|Other income                                                                                  |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|Other expenses:                                                                               |                                    |                          
|                                                                                              | Salaries and benefits              |                          
|                                                                                              | Occupancy and equipment            |                          
|                                                                                              | Other expenses                     |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|Income before income taxes                                                                    |                                    |                          
|Income taxes                                                                                  |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|                                                                                              |                                    |                          
|Basic earnings per share                                                                      |                                    | $                        
|                                                                                              |                                    |                          
|Diluted earnings per share                                                                    |                                    | $                        
|                                                                                              |                                    |                          

See
notes to unaudited consolidated financial statements.

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Western Sierra Bancorp and Subsidiaries  Consolidated Statement of Cash Flows  (Unaudited)

|                                                                                  |                                                                                               | Three Months Ended                        |       
|--------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------- | ------
|
|
|Cash flows from operating activities:                                             |                                                                                               |                                           |       
|                                                                                  |                                                                                               | Net income                                |       
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                               |                                           |       
|                                                                                  | Provision for loan and lease losses                                                           |                                           |       
|                                                                                  | Depreciation and amortization                                                                 |                                           |       
|                                                                                  | Net increase in trading securities                                                            |                                           |       
|                                                                                  | Amortization (accretion) of investment security premiums                                      |                                           |       
|                                                                                  | Gain on sale of securities                                                                    |                                           |       
|                                                                                  | Loss on disposition of equipment                                                              |                                           |       
|                                                                                  | Increase in cash surrender value of life insurance policies                                   |                                           |       
|                                                                                  | Compensation costs associated with the Company's ESOP                                         |                                           |       
|                                                                                  | Decrease in loans held for sale                                                               |                                           |       
|                                                                                  | Deferred loan and lease origination fees, net                                                 |                                           |       
|                                                                                  | Decrease in other assets                                                                      |                                           |       
|                                                                                  | Increase (decrease) in other liabilities                                                      |                                           |       
|                                                                                  |                                                                                               |                                           |       
|                                                                                  |                                                                                               | Net cash provided by operating activities |       
|                                                                                  |                                                                                               |                                           |       
|Cash flows from investing activities:                                             |                                                                                               |                                           |       
|                                                                                  | Decrease in interest-bearing deposits in banks                                                |                                           |       
|                                                                                  | Proceeds from the sale and call of available-for-sale investment securities                   |                                           |       
|                                                                                  | Proceeds from the maturity of available-for-sale investment securities                        |                                           |       
|                                                                                  | Proceeds from the call of held-to-maturity investment securities                              |                                           |       
|                                                                                  | Proceeds from the principal payments on available-for-sale mortgage-backed and SBA securities |                                           |       
|                                                                                  | Proceeds from principal payments on held-to-maturity mortgage-backed securities               |                                           |       
|                                                                                  | Purchase of available-for-sale investment securities                                          |                                           |       
|                                                                                  | Net increase in loans and leases                                                              |                                           |       
|                                                                                  | Purchases of premises and equipment                                                           |                                           |       
|                                                                                  | Proceeds from sale of equipment                                                               |                                           |       
|                                                                                  |                                                                                               |                                           |       
|                                                                                  |                                                                                               | Net cash used in investing activities     |       
|                                                                                  |                                                                                               |                                           |       
|Cash flows from financing activities:                                             |                                                                                               |                                           |       
|                                                                                  | Net increase in demand, interest-bearing and savings deposits                                 |                                           |       
|                                                                                  | Net (decrease) in time deposits                                                               |                                           |       
|                                                                                  | Net increase in short-term borrowings                                                         |                                           |       
|                                                                                  | Repayment of ESOP borrowing                                                                   |                                           |       
|                                                                                  | Purchase of life insurance policies at cash value                                             |                                           |       
|                                                                                  | Proceeds from exercised stock options                                                         |                                           |       
|                                                                                  |                                                                                               |                                           |       
|                                                                                  |                                                                                               | Net cash provided by financing activities |       
|                                                                                  |                                                                                               |                                           |       
|Net increase in cash and cash equivalents                                         |                                                                                               |                                           | 32,848
|Cash and cash equivalents at beginning of year                                    |                                                                                               |                                           | 23,038
|                                                                                  |                                                                                               |                                           |       
|Cash and cash equivalents at end of period                                        |                                                                                               | $                                         | 55,886
|                                                                                  |                                                                                               |                                           |       
|Supplemental disclosures:                                                         |                                                                                               |                                           |       
|Cash paid during period for:                                                      |                                                                                               |                                           |       
|                                                                                  | Income taxes                                                                                  |                                           | $     
|                                                                                  | Other rear estate acquired through foreclosure                                                |                                           | $     
|                                                                                  | Interest                                                                                      |                                           | $     

See notes to unaudited consolidated financial statements

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Basis of Presentation

The accompanying unaudited consolidated financial statements of Western Sierra Bancorp and subsidiaries (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, all adjustments (which consist solely of normal recurring accruals) considered necessary for a fair presentation of the results for the
interim periods presented have been included. These interim consolidated financial statements should be read in conjunction with the financial statements and related notes contained in the Company's
2001 Annual Report to Shareholders.

The
consolidated financial statements include the accounts of the Company its wholly owned bank subsidiaries, Western Sierra National Bank (WSNB) and Lake Community Bank (LCB) and its
two wholly owned nonblank subsidiaries, Western Sierra Trust I and Western Sierra Trust II. During the first quarter of 2002, the Company formed and funded WSNB Investment Trust. WSNB Investment Trust
was created as an operating subsidiary of WSNB for the purpose of investing in, holding, and managing certain participation interests in real estate secured and non-real estate secured
loans. The Company created this subsidiary to enable WSNB to segregate certain assets for management purposes, to provide WSNB with the flexibility to raise regulatory capital in the future through
the sale of preferred stock and other capital-enhancing securities in WSNB Investment Trust, and to confer certain state tax benefits. WSNB contributed loans with a book value of $168.1 million
in exchange for 100% of the common stock and the Company and WSNB contributed $250,000 on cash for 100% of the preferred stock of WSNB Investment Trust. All significant inter-company balances and
transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002.

2.    Earnings per Share

Basic earnings per share (EPS), which excludes dilution, is computed by dividing net income by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock that shares
in the earnings of the Company. Earnings per share is retroactively adjusted for stock dividends for all periods presented. A reconciliation of the

6

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numerators and denominators of the basic and diluted EPS computations is as follows (dollars in thousands, except for per share data).

Three Months EndedMarch 31,
2002

March 31,
2001Basic EPS Computation:Numeratornet income

$
1,816

$
1,134Denominatorweighted average number of shares outstanding


3,528,562


3,621,221Basic earnings per share

$
.51

$
.31Diluted EPS Computation:Numeratornet income

$
1,816

$
1,134DenominatorWeighted average number of shares outstanding


3,528,562


3,621,221Effect of dilutive stock options


133,828


88,4043,662,390


3,709,625Diluted earnings per share

$
.50

$
.31


3.    Stock Repurchase Plans

On June 21, 2001, the Company announced that its Board of Directors approved a plan to repurchase up to 5% (or 160,000 shares) of the Company's common
stock. During the year 2001, the Company completed its repurchase at an average price of $14.84 per share. The repurchase was in contemplation of reissuing such shares as part of the Company's
recurring declaration of a 5% annual stock dividends.

On
October 23, 2001, the Company announced that its Board of Directors approved a second repurchase plan to repurchase up to 165,000 shares of the Company's common stock for the
same reason. No shares have been repurchased to date. This plan will expire on May 31, 2002.

4.    Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141,Business
Combinations. This Statement addresses financial accounting and reporting for business combinations which are to be accounted for using a single methodthe purchase
method. In addition, this Statement requires that intangible assets be recognized as assets apart from goodwill if they meet one of two criteriathe contractual-legal criterion or the
separability criterion. The provisions of this Statement apply to all business combinations initiated after June 30, 2001. This Statement also applies to all business combinations accounted for
using the purchase method for which the date of acquisition is July 1, 2001, or later.

In
June 2001, the FASB issued SFAS 142,Goodwill and Other Intangible Assets. This Statement addresses financial accounting
and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested annually for
impairment. Intangible assets that have finite useful lives continue to be amortized over their useful lives, but without the constraint of an arbitrary ceiling. Because goodwill and other intangible
assets will no longer be amortized, the reported amounts of goodwill and intangible assets will not decrease at the same time and in the same manner as under previous standards. The provisions of this
Statement are required to be applied starting with the years beginning after December 15, 2001.

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However, goodwill and intangible assets acquired after June 30, 2001, will be subject immediately to the provisions of this Statement.

Western
Sierra accounted for the acquisitions of Roseville First National Bank, Lake Community Bank and Sentinel Community as pooling of interests. The proposed acquisition of Central
California Bank will be treated in accordance with the abovementioned SFAS 141 and 142.

5.    Acquisition of Central California Bank

On April 1, 2002 the Company consummated its acquisition of Central California Bank. The acquisition will be accounted for as a purchase and the acquired
assets and liabilities assumed will be recorded at estimated fair value. The Company is in the process of identifying intangibles that meet the separability criteria of SFAS No.. 124. The purchase
price of $8.6 million was paid in cash and common stock.

6.    Comprehensive Income

The Company's total comprehensive income was as follows:

Three Months EndedMarch 31,
2002

March 31,
2001Net income as reported

$
1,816

$
1,134Other comprehensive income (net of tax):Change in unrealized holding gain on available for sale securities


(129
)

425Total comprehensive income

$
1,687

$
1,559


8

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATION.

Private securities litigation reform act safe harbor statement

This quarterly report on Form 10-Q includes forward-looking information, which is subject to the "safe harbor" created by the Securities Act of
1933, and Securities Act of 1934. These forward-looking statements (which involve the Company's plans, beliefs and goals) involve certain risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors:



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, 2001 under the heading "Forward-Looking Information". 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 January 1, 2002 to March 31, 2002.
Also discussed are significant trends and changes in the Company's results of operations for the three months ended March 31, 2002, compared to the same periods in 2001. The consolidated
financial statements and related notes appearing elsewhere in this report are unaudited.

General

Western Sierra Bancorp (the "Company") was incorporated under the laws of the State of California on July 11, 1996. The Company was organized pursuant to a
plan of reorganization for the purpose of becoming the parent corporation of Western Sierra National Bank, and on December 31, 1996, the reorganization was effected and shares of the Company
common stock were issued to the shareholders of Western Sierra National Bank for the common shares held by Western Sierra National Bank's shareholders. In April 1999, the Company acquired
Roseville 1st National Bank and Lake Community Bank in a stock for stock exchange. In May of 2000, the Company acquired Sentinel Community Bank in a stock for stock exchange. In addition, these
mergers were accounted for as poolings of interests and accordingly, all prior period financial statements have been restated to reflect the combined operations of the Company, Roseville 1st National
Bank, Lake Community Bank and Sentinel Community Bank. Sentinel Community Bank was merged into Western Sierra National Bank. Also, in May of 2000, Roseville 1st National Bank was merged into Western
Sierra National Bank. In October of 2000, Western Sierra National Bank purchased the deposits and certain other assets and

9

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liabilities of the Columbia branch of Pacific State Bank. The Company is a registered bank holding company under the Bank Holding Company Act. The Company conducts its operations at 4080 Plaza
Goldorado Circle, Cameron Park, California 95682.

Western
Sierra National Bank was organized under national banking laws and commenced operations as a national bank on January 4, 1984. Western Sierra National Bank is a member of
the Federal Reserve System and its deposits are insured to the maximum amount permitted by law by the FDIC. Western Sierra National Bank's head office is located at 4011 Plaza Goldorado Circle,
Cameron Park
and its branch offices are located at 2661 Sanders Drive, Pollock Pines, 3970 J Missouri Flat Road, Placerville, 1450 Broadway, Placerville, 3880 El Dorado Hills Blvd., El Dorado Hills, 571 5th
Street, Lincoln, 1545 River Park Dr. #101 & #200, Sacramento, 229 South Washington Street, Sonora, 13753-A Mono Way, Sonora, 18711 Tiffeni Drive, Twain Harte, 1801 Douglas
Blvd., Roseville, 6951 Douglas Blvd., Granite Bay, and 22712 Main Street, Columbia

Roseville
1st National Bank was founded in 1983 as Countryside Thrift and Loan (Countryside). Countryside operated as an industrial loan company until its conversion to a national bank
on July 1, 1992. Roseville 1st National Bank was merged into Western Sierra National Bank in May of 2000, and operates as a DBA Roseville 1st National Banka branch of Western
Sierra National Bank.

Lake
Community Bank was incorporated as a banking corporation under the laws of the State of California on March 9, 1984 and commenced operations as a California state-chartered
bank on November 15, 1984. Lake Community Bank is an insured bank under the Federal Deposit Insurance Act and is not a member of the Federal Reserve System. Lake Community Bank engages in the
general commercial banking business in Lake County in the State of California from its headquarters banking office located at 805 Eleventh Street, Lakeport, California and its branch located at 4280
Main Street, Kelseyville, California.

Sentinel
Community was incorporated under the laws of the State of California on December 24, 1980, and commenced operations on April 2, 1982. The corporation was formed as
a State Chartered Savings and Loan Association. Sentinel Community converted its charter to a Federal Savings and Loan Association on June 9, 1989. In October of 1996, Sentinel Community
changed its name to Sentinel Community Bank, while remaining chartered as a Federal Savings and Loan Association. Sentinel Community Bank was merged into Western Sierra National Bank in
May 2000, and operates as a DBA Sentinel Community Banka branch of Western Sierra National Bank.

The
Company has an inactive subsidiary (acquired from Sentinel), Sentinel Associates, Inc., which is administered out of the main office. Sentinel Associates, Inc., was
formed in October 1983, for the purpose of developing single-family residential real estate.

On
November 15, 2001 the Board of Directors entered into a proposed merger agreement with Central California Bank (CCB). Under the agreement, CCB would become a wholly-owned
subsidiary of the Company. The merger was completed on April 1, 2002 at the agreed price of $14.10 per share of CCB stock owned at January 30, 2002, or approximately $8,640,000. Each CCB
shareholder received a fixed value of $14.10 in cash, the Company's stock or a combination thereof. The merger was accounted for under the purchase method of accounting.

On
March 1, 2002 WSNB formed a non-bank subsidiary, WSNB Investment Trust, a Maryland Real Estate Investment Trust.

Banking Services.The Company is a locally owned and operated bank holding company, and its primary service area is the
Northern California communities of Cameron Park, Pollock Pines, Placerville, El Dorado Hills, Lincoln, Sacramento, Roseville, Granite Bay, Sonora, Twain Harte, Columbia, Lakeport and the surrounding
communities. The Company's primary business is servicing the banking needs of these communities and its marketing strategy stresses its local ownership and commitment to serve the banking needs of
individuals living and working in the Company's primary

10

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service areas and local businesses, including retail, professional and real estate-related activities, in those service areas.

The
Company offers a broad range of services to individuals and businesses in its primary service areas with an emphasis upon efficiency and personalized attention. The Company provides
a full line of consumer services and also offers specialized services, such as courier services to small businesses, middle market companies and professional firms. Each of the Company's subsidiary
banks offers personal and business checking and savings accounts (including individual interest-bearing negotiable orders of withdrawal ("NOW"), money market accounts and/or accounts combining
checking and savings accounts with automatic transfer), IRA accounts, time certificates of deposit and direct deposit of social security, pension and payroll checks, computer cash management and
internet banking including bill payment. The Company's subsidiary banks also make available commercial, construction, accounts receivable, inventory, automobile, home improvement, real estate,
commercial real estate, single family mortgage, agricultural, Small Business Administration, office equipment, leasehold improvement, installment and credit card loans (as well as overdraft protection
lines of credit), issue drafts and standby letters of credit, sell travelers' checks (issued by an independent entity), offer ATMs tied in with major statewide and national networks, extend
special considerations to senior citizens and offer other customary commercial banking services.

Most
of the Company's deposits are obtained from commercial businesses, professionals and individuals. There is no concentration of deposits or any customer with 5% or more of any of the
subsidiary banks' deposits.

Other
special services and products include both personal and business economy checking products, business cash management products and mortgage products and services.

Employees.At March 31, 2002, the Company and its subsidiaries employed 191 persons on a full-time
equivalent basis. The Company believes its employee relations are excellent.

Financial Condition

The Company has grown from $510.6 million at December 31, 2001 to $542.3 million at March 31, 2002, an increase of
$32.3 million. Since the first of the year, total gross loans and leases has increased by $2.9 million, cash and due from banks has increased by $3.1 million and Federal funds
sold has increased by $29.7 million. This growth was funded by a decrease in investments of $4.9 million and an increase in deposits of $26.4 million.

Results of Operations

The Company reported net income of $1.8 million for the three months ended March 31, 2002 (or $0.50 per share, diluted) compared to
$1.1 million (or $0.31 per share, diluted) for the same period in 2001. The quarterly earnings represent a $682,000 (or 60%) increase over the same period in 2001.

Factors
contributing to the increase in operating results during the first quarter of 2002 as compared to the first quarter of 2001 include the following:



11

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These
increases in income were offset by an increase in salaries and benefits of $216,000 and data processing expenses of $141,000 for the first quarter of 2002 These increases are
attributable to internal growth. In addition, occupancy and equipment expense decreased by $94,000.

Net Interest Income

Net interest income is the primary source of income for the Company and 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. For the three
months ended March 31, 2002, interest income decreased by $901,000 (or 9.6%) over the same period in 2001. However, interest expense on deposit accounts and borrowings decreased
$1.9 million (45.5%) over the same three-month period in 2001. Average earning assets yielded 7.12% versus 8.43% a year ago, offset by a decrease in the average cost of funds to 2.46% from
4.66% a year ago. The net interest margin increased 55 basis points to 5.19% from 4.64% for the same period a year ago. The increase in net interest margin is attributed to the Company's ability to
reprice deposits to reflect the decreasing interest rate environment during 2001 and the fact that a significant portion of maturing time deposits were reinvested in interest bearing demand or savings
deposits.

12

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The
following table sets forth the Company's daily average balance sheet, related interest income or expense and yield or rate paid for the periods indicated. Tax-exempt
investment yields have not been adjusted to a tax-equivalent yield basis (dollars in thousands).

Average Balances, Interest Income/Expense and Yields/Rates Paid

|                                            |                                              | Three Months Ended                         |                                                   
|------------------------------------------- | -------------------------------------------- | ------------------------------------------ | --------------------------------------------------
|
|
|Earning assets:                             |                                              |                                            |                                                   
|                                            | Portfolio loans                              |                                            | $                                                 
|                                            | Tax exempt securities                        |                                            |                                                   
|                                            | Taxable securities                           |                                            |                                                   
|                                            | Federal funds sold                           |                                            |                                                   
|                                            | Interest bearing deposits                    |                                            |                                                   
|                                            | Other securities                             |                                            |                                                   
|                                            |                                              |                                            |                                                   
|                                            |                                              | Total average earning assets               |                                                   
|                                            |                                              |                                            |                                                   
|Average non-interest bearing assets         |                                              |                                            | 44,093                                            
|Allowance for loan and lease losses         |                                              |                                            | (5,230                                            
|                                            |                                              |                                            |                                                   
|                                            |                                              | Average total assets                       |                                                   
|                                            |                                              |                                            |                                                   
|Interest bearing liabilities:               |                                              |                                            |                                                   
|                                            | Interest bearing demand and savings deposits |                                            | $                                                 
|                                            | Time deposits                                |                                            |                                                   
|                                            | Borrowings                                   |                                            |                                                   
|                                            |                                              |                                            |                                                   
|                                            |                                              | Total average interest-bearing liabilities |                                                   
|                                            |                                              |                                            |                                                   
|Other liabilities                           |                                              |                                            | 97,909                                            
|Shareholders' equity                        |                                              |                                            | 42,408                                            
|                                            |                                              |                                            |                                                   
|                                            |                                              |                                            | Average total liabilities and shareholders' equity
|                                            |                                              |                                            |                                                   
|Net interest income and net interest margin |                                              |                                            |                                                   
|                                            |                                              |                                            |                                                   

13

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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 (dollars in thousands).

Analysis of Changes in Net Interest Income

Three Months Ended March 31, 2002 over 2001Volume

Rate

TotalIncrease (decrease) in interest income:Portfolio loans

$
1,014

$
(1,276
)
$
(262
)Investment securities, taxable


138


(4
)

134Investment securities, non taxable


(134
)

(178
)

(312
)Federal funds sold


(101
)

(365
)

(466
)Interest bearing deposits


(10
)

6


(4
)Equity investments


12


(3
)

9Total net increase (decreases)


919


(1,820
)

(901
)Increase (decrease) in interest expense:Interest bearing accounts


57


(380
)

(323
)Time deposits


(246
)

(1,565
)

(1,811
)Borrowings


227


(1
)

226Total net increase (decrease)


38


(1,946
)

(1,908
)Net increase

$
881

$
126

$
1,007


Noninterest Income

The Company's noninterest income consists of service charges on deposit accounts, and other service fees, mortgage loan origination and processing fees and gain
on the sale of investment securities. For the three months ended March 31, 2002, noninterest income increased $402,000 (or 37%) over the same period in 2001. Income from service charges and
fees increased $124,000 (24%) due to a repricing of charges and fees and an increase in volume. In addition, income from mortgage loan origination and packaging fees increased $264,000 (or 53%) over
the same period in the prior year. The reasons for the increases are threefold:



Noninterest Expense

Noninterest expenses consist of salaries and related employee benefits, occupancy and equipment expenses, data processing fees, professional fees, directors' fees
and other operating expenses. For the three months ended March 31, 2002, noninterest expense increased $356,000 (8.3%) over the same period in 2001

Salaries
and benefits increased $216,000 (9.3%) over the same three-month period last year. This increase was due primarily to the increase in commissions related to the increased income
on mortgage loan origination and packaging fees and the implementation of new company-wide incentive programs.

14

---

The
following table sets forth a summary of noninterest expense for the periods indicated (dollars in thousands):

Three Months EndedMarch 31, 2002

March 31, 2001Noninterest Expense:Salaries and Benefits

$
2,540

$
2,324Occupancy & Equipment


565


659Data Processing


309


168Other Expenses


1,255


1,162Total Noninterest expense

$
4,669

$
4,313


Income Taxes

The Company's provision for income taxes includes both federal and state income taxes and reflects the application of federal and state statutory rates to the
Company's net income before taxes. The principal difference between statutory tax rates and the Company's effective tax rate is the benefit derived from investing in tax-exempt securities.
Increases and decreases in the provision for taxes reflect changes in the Company's net income before tax.

The
following table reflects the Company's tax provision and the related effective tax rate for the periods indicated (dollars in thousands):

Three Months EndedMarch 31, 2002

March 31, 2001Tax provision

$
747

$
686Effective tax rate


29.15
%

37.69
%


The
Company's effective tax rate varies with changes in the relative amounts of its non-taxable income and non-deductible expenses. The decrease in the Company's
effective tax rate is primarily attributable to tax strategies designed to reduce the Company's California franchise tax expense.

Asset Quality

The Company concentrates its lending activities primarily within areas directly served by branches as previously discussed.

The
Company manages its credit risk through diversification of its loan portfolio and the application of underwriting policies and procedures and credit monitoring practices. Although
the Company has a diversified loan portfolio, a significant portion of its borrowers' ability to repay their loans is dependent upon the professional services and residential real estate industry
sectors. Generally, loans are secured by real estate or other assets and are expected to be repaid from the cash flows of the borrower or proceeds from the sale of collateral.

15

---

The
following table sets forth the amounts of loans outstanding by category as of the dates indicated (dollars in thousands):

|                                         |  | March 31,
2002 |         | % Of Total |        | December 31,
2001 |   | % Of Total |  
|---------------------------------------- |  | -------------- | ------- | ---------- | ------ | ----------------- | - | ---------- | -
|Commercial                               |  | $              | 63,184  |            | 16.15  | %                 | $ | 64,931     |  
|Real estatemortgage                     |  |                | 244,264 |            | 62.43  | %                 |   | 235,981    |  
|Real estateconstruction                 |  |                | 68,943  |            | 17.62  | %                 |   | 72,051     |  
|Agricultural                             |  |                | 8,835   |            | 2.26   | %                 |   | 8,574      |  
|Lease financing                          |  |                | 3,068   |            | 0.78   | %                 |   | 3,496      |  
|Installment and other                    |  |                | 4,087   |            | 1.04   | %                 |   | 4,461      |  
|Deferred loan fees and costs, net        |  |                | (1,118  | )          | (0.28  | )%                |   | (1,060     | )
|                                         |  |                |         |            |        |                   |   |            |  
|Total                                    |  |                | 391,263 |            | 100.00 | %                 |   | 388,434    |  
|                                         |  |                |         |            |        |                   |   |            |  
|Less allowance for loan and lease losses |  |                | (5,229  | )          |        |                   |   | (5,097     | )
|                                         |  |                |         |            |        |                   |   |            |  
|Total net loans and leases               |  | $              | 386,034 |            |        |                   | $ | 383,337    |  
|                                         |  |                |         |            |        |                   |   |            |  

The
following table sets forth a summary of the Company's nonperforming assets as of the dates indicated (dollars in thousands):

March 31,
2002

December 31,
2001Non-performing assets:Nonaccrual loans

$
1,532

$
1,12190 days and still accruingTotal non-performing assets

$
1,532

$
1,121Other Real Estate Owned

$
614

$



Allowance for Loan and Lease Losses (ALLL)

The Company makes provisions to the ALLL on a regular basis through charges to operations that are reflected in the Company's statements of income as a provision
for loan and lease losses. When a loan or lease is deemed uncollectible, it is charged against the allowance. Any recoveries of previously charged-off loans are credited back to the
allowance. There is no precise method of predicting specific losses or amounts that ultimately may be charged-off on particular categories of the loan portfolio.

Similarly,
the adequacy of the ALLL and the level of the related provision for possible loan and lease losses is determined on a judgmental basis by management based on consideration of
certain qualitative factors including, but not limited to, (i) economic conditions, (ii) borrowers' financial condition, (iii) loan impairment, (iv) evaluation of industry
trends, (v) industry and other concentrations, (vi) loans which are contractually current as to payment terms but demonstrate a higher degree of risk as identified by management,
(vii) continuing evaluation of the performing loan portfolio, (viii) monthly review and evaluation of problem loans identified as having loss potential, (ix) quarterly review by
the Board of Directors, (x) off balance sheet risks and (xi) assessments by regulators and other third parties. Management and the Board of Directors evaluate the ALLL and determine its
desired level considering objective and subjective measures, such as knowledge of the borrowers' business, valuation of collateral, the determination of impaired loans or leases and exposure to
potential losses.

The
ALLL is a general reserve available against the total loan and lease portfolio and off balance sheet credit exposure. It is maintained without any interallocation to the categories
of the loan portfolio, and the entire allowance is available to cover loan and lease losses. While management uses

16

---

available information to recognize potential losses on loans and leases, future additions to the allowance may be necessary based on changes in economic conditions and other factors. In addition,
various regulatory agencies, as an integral part of their examination process, periodically review the Company's ALLL. Such agencies may require the Company to provide additions to the allowance based
on their judgment of information available to them at the time of their examination. There is also uncertainty concerning future economic trends. Accordingly, it is not possible to predict the effect
that future economic trends may have on the level of the provision for possible loan and lease losses in future periods.

The
ALLL should not be interpreted as an indication that charge-offs in future periods will occur in the stated amounts or proportions.

The
adequacy of the ALLL calculation is based on three components. First is the dollar weighted risk rating of the loan portfolio, including all outstanding loans and leases, off balance
sheet items, and commitments to lend. Every extension of credit has been assigned a risk rating based upon a comprehensive definition intended to measure the inherent risk of lending money. Each
rating has an assigned risk factor expressed as a reserve percentage. Secondly, established specific reserves are assigned to individual loans currently on the Company's Problem Loan Reports. These
are estimated potential losses associated with specific borrowers based upon collateral value and event(s) causing the risk rating. Thirdly, the Company maintains an unallocated reserve for
qualitative factors that may effect the portfolio as a whole, such as those factors described above.

Management
believes the assigned risk grades and methods for managing changes in assigned risk grades are satisfactory.

The
following table summarizes the activity in the ALLL for the periods indicated (dollars in thousands):

Three Months EndedMarch 31, 2002

March 31, 2001Beginning balance for allowance for loan and lease losses

$
5,097

$
4,395Provision for loan and lease losses


400


90Charge offs:Commercial


(14
)

0Real estate


0


(2
)Agricultural


(256
)

0Other


(6
)

(5
)Total charge offs


(276
)

(7
)Recoveries:Commercial


5


43Real estate


0


0Agricultural


0


0Other


3


4Total recoveries


8


47Net charge offs


(268
)

40Ending balance

$
5,229

$
4,525ALLL to total loans


1.32
%

1.34
%Annualized net charge offs to average loans


0.28
%

(0.04
)%


17

---



Investment Portfolio

Total investment securities decreased $4.9 million in the first three months of 2002, or 6.56%. The decrease was primarily due to the call of
mortgage-backed securities as a result of the decrease in rates. The decrease in investments was used to partially fund the $2.9 million increase in the loan and lease portfolio.

Liquidity

A Funds Management Policy has been developed by the Company's management and approved by the Company's Board of Directors that establishes guidelines for the
investments and the liquidity of the Company. The goals of this policy are to provide liquidity to meet the financial requirements of the Company's customers, maintain adequate reserves as required by
regulatory agencies and maximize earnings of the Company. The Company's liquidity ratio at March 31, 2002 was 26.85% as compared to 29.69% at December 31, 2001, based on liquid assets
(consisting of cash and due from banks, investments not pledged, federal funds sold and loans available-for-sale) divided by total liabilities. Management believes that the
Company's liquidity levels are adequate.

Capital Adequacy

Overall capital adequacy is monitored on a day-to-day basis by the Company's management and reported to the Company's Board of Directors
on a monthly basis. The Bank's regulators measure capital adequacy by using a risk-based capital framework and by monitoring compliance with minimum leverage ratio guidelines. Under the
risk-based capital standard, assets reported on the Company's balance sheet and certain off-balance sheet items are assigned to risk categories, each of which is assigned a
risk weight.

This
standard characterizes an institution's capital as being "Tier 1" capital (defined as principally comprising shareholders' equity) and "Tier 2" capital (defined as principally
comprising the qualifying portion of the ALLL).

The
minimum ratio of total risk-based capital to risk-weighted assets, including certain off-balance sheet items, is 8%. At least one-half
(4%) of the total risk-based capital (Tier 1) is to be comprised of common equity; the balance may consist of debt securities and a limited portion of the ALLL.

The
following table sets forth the Company's and its banking subsidiaries capital ratios as of the dates indicated.

|                                                  |  | March 31, 2002 |   | December 31, 2001 |  
|------------------------------------------------- |  | -------------- | - | ----------------- | -
|
|Total risk-based capital to risk-weighted assets  |  | 10.7           | % | 11.3              | %
|Tier 1 capital to risk-weighted assets            |  | 9.5            | % | 10.1              | %
|Tier 1 capital to average assets (leverage ratio) |  | 8.8            | % | 7.9               | %

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a financial institution, the Company's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both
the level of income and level of expense recorded on a large portion of the Company's assets and liabilities, and the market value of all interest earning assets and interest bearing liabilities,
other than those which possess a short term to

18

---

maturity. Virtually all of the Company's interest earning assets and all of the Company's interest bearing liabilities are located at the banking subsidiary level. Thus, virtually all of the
Company's interest rate risk exposure lies at the banking subsidiary level. As a result, all significant interest rate risk management procedures are performed at the banking subsidiary level. In
addition, the Company's real estate loan portfolios, concentrated primarily within northern California, are subject to risks associated with the local economies.

The
fundamental objective of the Company's management of its assets and liabilities is to maximize the Company's economic value while maintaining adequate liquidity and an exposure to
interest rate risk deemed by management to be acceptable. Management believes an acceptable degree of exposure to interest rate risk results from the management of assets and liabilities through
maturities, pricing and mix to attempt to neutralize the potential impact of changes in market interest rates. The Company's profitability is dependent to a large extent upon its net interest income
that is the difference between its interest income on interest-earning assets, such as loans and investments, and its interest expense on interest-bearing liabilities, such as deposits and borrowings.
The Company is subject to interest rate risk to the degree that its interest-earning assets reprice differently than its interest-bearing liabilities. The Company manages the mix of assets and
liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds.

The
Company seeks to control interest rate risk exposure in a manner that will allow for adequate levels of earnings and capital over a range of possible interest rate environments. The
Company has adopted formal policies and practices to monitor and manage interest rate risk exposure. As part of this effort, the Company measures interest rate risk utilizing third-party sources that
are based on the Call Reports of the individual subsidiary banks' data that is downloaded from the mainframe computer system and management's assumptions. This analysis determines the affect that 100
and 200 basis point changes in the prime rate up or down have on net interest income over a projected twelve-month period. At March 31, 2002, the estimated annualized increase in net interest
attributable to a 100 and 200 basis point increase in the prime rate was $215,000 and $322,000, respectively. Additionally, the estimated annualized decrease in net interest income attributable to a
100 and 200 basis point decrease in the prime rate was $495,000 and $1.1 million, respectively

The
following table sets forth as of March 31, 2002, the distribution of repricing opportunities for the Company's earning assets and interest-bearing liabilities, the interest
rate sensitivity gap, the

19

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cumulative interest rate sensitivity gap, the interest rate sensitivity gap ratio (i.e. earning assets divided by interest-bearing liabilities) and the cumulative interest rate sensitivity gap ratio.

|                                                             |  | Within
Three
Months |         | After Three
Months But
Within One
Year |   | After
One Year
But Within
Five Years |    | After Five
Years |         | Total |  
|------------------------------------------------------------ |  | ------------------- | ------- | -------------------------------------- | - | ------------------------------------ | -- | ---------------- | ------- | ----- | -
|Earning assets:                                              |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Federal funds sold                                           |  | $                   | 35,495  |                                        |   |                                      |    |                  |         |       |  
|Investment securities and other                              |  |                     | 6,351   |                                        | $ | 8,895                                |    | $                | 14,260  |       | $
|Loans                                                        |  |                     | 137,498 |                                        |   | 55,401                               |    |                  | 100,136 |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Total earning assets                                         |  |                     | 179,344 |                                        |   | 64,296                               |    |                  | 114,396 |       |  
|Other assets                                                 |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Total assets                                                 |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Interest-bearing liabilities:                                |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Savings                                                      |  |                     | 22,503  |                                        |   | 11,251                               |    |                  |         |       |  
|Interest-bearing transaction accounts                        |  |                     | 91,053  |                                        |   | 24,903                               |    |                  |         |       |  
|Time deposits                                                |  |                     | 98,954  |                                        |   | 93,016                               |    |                  | 15,545  |       |  
|Other borrowings                                             |  |                     | 21,000  |                                        |   |                                      |    |                  | 350     |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Total interest-bearing liabilities                           |  |                     | 233,510 |                                        |   | 129,170                              |    |                  | 15,895  |       |  
|Other liabilities                                            |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Total liabilities                                            |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|                                                             |  |                     |         |                                        |   |                                      |    |                  |         |       |  
|Interest rate sensitivity gap                                |  | $                   | (54,166 | )                                      | $ | (64,874                              | )  | $                | 98,501  |       | $
|Cumulative interest rate sensitivity gap                     |  | $                   | (54,166 | )                                      | $ | (119,040                             | )  | $                | (20,539 | )     | $
|Interest rate sensitivity gap to total assets                |  |                     | (10.00  | )%                                     |   | (11.98                               | )% |                  | 18.19   | %     |  
|Cumulative interest rate sensitivity Gap to total assets     |  |                     | (10.00  | )%                                     |   | (21.98                               | )% |                  | (3.79   | )%    |  
|Ratio of rate sensitive assets to rate sensitive liabilities |  |                     | 0.77    |                                        |   | 0.50                                 |    |                  | 7.20    |       |  
|Cumulative ratio                                             |  |                     | 0.77    |                                        |   | 0.67                                 |    |                  | 0.95    |       |  

The
opportunity to reprice assets in the same dollar amounts and at the same time as liabilities would minimize interest rate risk in any interest rate environment. The difference
between the amounts of assets and liabilities repriced at the same time, or "gap", represents the risk, or opportunity, in repricing. In general, if more assets than liabilities are repriced at a
given time in a rising rate environment, net interest income would improve; while in a declining rate environment, net interest income would decline. If more liabilities than assets were repriced
under the same conditions the opposite would result. The Company appears liability sensitive in the immediate to one year area, and turns asset sensitive in the longer term. This can be and is
influenced by the fact that interest-bearing transaction accounts which consist of money market, NOW and savings deposit accounts are classified as repricing within three months when in fact these
deposits may be immediately repriced at management's option, thus assisting in the further management of interest rate risk. The Company lists these deposits as it has because this is the actual
historical trend the Company has experienced.

20

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PART II. Other Information

Item 1. Legal proceedings

The Company and its subsidiaries are involved in various legal actions arising in the ordinary course of business. The Company believes that the ultimate
disposition of all currently pending matters will not have a material adverse effect on the Company's financial condition or results of operations.

Item #2. Changes in securities and use of proceeds

N/A

Item #3. Defaults upon Senior Securities

N/A.

Item #4. Submission of Matters to a vote of Security Holders

The company did not submit any matter to the vote of the security holders during the first quarter of 2002.

Item #5. Other Information

N/A.

Item #6A. Exhibits

N/A

Item #6B. Reports on Form 8-K

No report on F 8 K was filed during the first quarter of 2002.

21

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SIGNATURES

Following the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                  |  | WESTERN SIERRA BANCORP(Registrant)                            
|----------------- |  | --------------------------------------------------------------
|Date May 14, 2002 |  |                                                               
|                  |  | /s/GARY D. GALLGary D. Gall President/Chief Executive Officer 
|                  |  | /s/DAMON WOODWARDDamon Woodward Acting Chief Financial Officer

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