After the bank robbery the "gentlemen of the Strathbogie Ranges" again retired to their mountain fastnesses. Occasionally a paragraph in one of the local newspapers recorded the movements of the police or furnished a story about the black trackers, but these notices were necessarily very meagre, as the police declined to furnish any information as to their proceedings or intentions, because this would be of more use to the bushrangers than to any one else. For more than a month nothing reliable had been heard of them. Even the reports of the arrest and detention of numbers of "bush telegraphs" failed to attract any attention, and the Kelly gang had almost ceased to be spoken of, when suddenly the whole country was roused by the news that the bushrangers had stuck up the town of Jerilderie, in New South Wales. Jerilderie is situated on the Yanko Creek, not far from its junction with the Billabong, and at that time contained about 300 inhabitants, a bank, four public-houses, a post and telegraph office, and several churches, schools, and other buildings. The local police station and lock-up was near the outside of the town, and there were two officers—Constables Devine and Richards—stationed there. At midnight of February 8th, 1879, a man roused Constable Devine from his bed, and informed him that a row had taken place at Davidson's Hotel and a man had been killed. He exhorted the constable to "come quick." Constable Devine woke Constable Richards and both dressed as hastily as possible. When they came out they were confronted by Ned Kelly, revolver in hand, and ordered to "bail up." Not having their arms on them, and being taken completely by surprise, the two constables surrendered at once and were locked up in the cells. The bushrangers then compelled Mrs. Devine, who had also partially dressed, to hand over all arms and ammunition, and took possession of the lock-up, remaining quietly there till morning, their horses being placed in the police stables at the rear. It was Sunday morning, and as the Catholic church had not yet been finished, the court-house had been rented for religious purposes, and Mrs. Devine had been accustomed to clean up the place, set the temporary altar, and place the forms and chairs ready for mass. The bushrangers told her to perform her task as usual, after having extorted a promise from her that she would not mention their presence to any one, and to make certain of her keeping her word one of them, dressed as a constable, went with her to the court-house and stayed while she swept the floor and prepared the room. Then they returned to the lock-up, which was about one hundred yards from the court-house, and remained there all day, the bushrangers, arrayed in the constables' uniforms, sitting quietly in the guard-room. No doubt numbers of people passed and saw them, but no one had any suspicion that the bushrangers were in charge instead of the police.

Early on Monday morning Byrnes took two horses to the blacksmith's shop to be shod, and the blacksmith, feeling some doubt as to the bonâ-fides of the pseudo trooper, made a note of the brands on the horses. At about ten a.m. Ned and Dan Kelly, accompanied by Constable Richards, went to the Royal Hotel, the largest hotel in the town, where Richards formally introduced them to the proprietor, Mr. Cox. Ned informed Mr. Cox that he required the use of some rooms, as the gang intended sticking up the bank. He selected a large and a small room on the ground floor, near the bar, and conducted the few men about at the time into the large room, where they were ordered to remain until given permission to depart. Dan Kelly was placed on guard at the door to keep order and prevent anybody from escaping, and was instructed to shoot the first man who refused to do as he was told. On Mr. Cox passing his word, as a gentleman, not to mention their presence to any one who should come in, he was permitted to take charge of the bar as usual, and was given to understand that he would be held responsible for the discretion of the women and servants. Any one of them whom he could not trust was to be sent into the large room. The preliminaries were arranged so unostentatiously and quietly, that no rumour of the presence of the bushrangers had yet been heard, and as customers dropped into the hotel they were taken into the big room, and told to remain on penalty of death.

Having made these arrangements, Ned Kelly walked into the hotel yard to reconnoitre. There was a detached kitchen here, and the rear of the bank of New South Wales was only a few yards from the rear of this kitchen. The bank faced on another street, and there was no dividing fence between the yard at the back of the bank and the hotel yard. Hart was placed on watch near the kitchen, while Byrnes entered the back door of the bank. Mr. Living, the teller, was in the bank chamber. He was not surprised to hear a man enter by the back door, as Mr. Cox and other customers frequently came in that way, it being a short cut from the hotel. Suddenly, however, Byrnes came to the counter, pointed a revolver at Living's head, and cried out, "I'm Kelly, keep quiet." Living held his hands above his head. "Where's your pistols?" asked Byrnes. "I've got none," replied Living. Byrnes then ordered Living and the accountant Mackie to "Come over to the hotel." They came from behind the counter and did as they were told, Byrnes following them. When they reached the door of the large room Dan Kelly inquired, "Where's Tarleton?" "In his room," replied Living. "Then go and fetch him and no—— nonsense," said Dan. Living went back to the bank, but being unable to find the manager in his rooms began to fear that something might have happened to him. He was about to return to the hotel to inform the Kellys that he could not find the manager, when he heard a splashing. He went to the bathroom and knocked. Tarleton had been for a forty-mile ride that morning, and had just returned and was having a wash. When he opened the door and was informed that the town was in possession of the Kelly gang, and the bank was stuck up, he laughed heartily, believing it to be a huge joke. Living assured him that it was not a laughing matter, but he was still incredulous. However, he dressed and went to the hotel, where he soon discovered that what he had deemed impossible had come to pass. The three bank officials were placed in the large room. Tarleton, who took a seat next to Constable Richards, whispered, "I can knock Hart down, shall I?" "What's the good?" replied the constable, "Dan Kelly's there, and he'd shoot you down at once."

Ned Kelly had hitherto been walking round as a sort of inspector-general of the proceedings and giving orders. He now entered the room and ordered drinks to be served all round. Then he made a speech in which he blamed Constable Fitzpatrick for all that had occurred. "I wasn't within a hundred miles of Greta when he was shot," said Ned, "and up to then I'd never killed a man in my life." He went on to say that he had stolen two hundred and eighty horses from Whitby's station, and had sold them at Baumgarten's. He took out a revolver and exclaimed: "This was Lonergan's! I took it from him. The gun I shot him with was a crooked, worn-out thing, not worth picking up. I shot him because he threatened my mother and my sister if they refused to tell where Ned Kelly was. The police are worse than the—— black trackers. I came here to shoot Devine and Richards, and I'm going to do it." The men at the table began to intercede for Richards, who was sitting quietly among them and who did not speak, but Kelly exclaimed dramatically, "He must die."

Ned got the key of the bank safe and took £1450 worth of notes and money from it. He also took £691 from the teller's drawers. While thus employed, Messrs. Gill, Hardie, and Rankin came in on business in the ordinary course and were ordered to bail up. They turned and ran. Ned Kelly followed and caught Rankin, but the others got away. Ned was furious at this escape. He said that news of their presence would be all over the place in a few minutes, and he swore he would shoot Rankin in revenge. He took Rankin to the hotel, stood him up against the wall in the passage and flourished his revolver about. The men in the room pleaded that Rankin might be spared, and urged that he could not have prevented Gill and Hardie from running away. While this was going on Byrnes came in with Mr. Hardie and said that they could not find Gill, the proprietor of the local newspaper, as he had not returned to his office. Ned Kelly then let Rankin go and declared that he would burn the newspaper office. Mr. Gill it is said went out of the town and hid in a clump of trees by the side of the river till evening. Ned then walked down to McDougall's Hotel and shouted for about thirty men who were in or about the hotel at the time. On his return to the Royal Hotel he was informed that Hart had robbed the Rev. Mr. Gribble of a gold watch. He called Hart up and asked indignantly, "What right has a thing like you to rob a clergyman?" He swore a good deal and compelled Hart to give the watch back. Complaints were made that he had stolen a new saddle and bridle from a saddler's shop, and some other articles from other places. Ned called him a —— thief, and ordered him to return everything he had taken.

Ned Kelly paid more than one visit to the Post and Telegraph Office to "see how things were going on." The robbers had cut the wires on either side of the town before their entry and had chopped down seven telegraph posts in the main street near the office. They had given orders to Mr. Jefferson, the telegraph master, that no repairs should be attempted until permission was given, and Ned took care that these orders were obeyed. The robbers held the town for three days, in imitation of the manner in which the Hall and Gilbert gang had held Canowindra. Jerilderie was at this time slightly larger than Canowindra at the time when it had been stuck up and held, but there was less traffic through it, and consequently less connection between it and the outer world than with Canowindra. The road running through Jerilderie leads from Conargo to Narrandera. Jerilderie is about thirty miles from Conargo and sixty-five from Narrandera. All round are huge sheep and cattle stations, with only a few men employed on them except at shearing or mustering time. All through the remainder of the year the traffic is inconsiderable. There was in Jerilderie, however, a large wool-washing and fellmongery establishment which employed a fair number of workmen. Canowindra, on the other hand, was a wayside town on the main road from Bathurst to Forbes, the traffic being considerable all the year round. There were also several small diggings settlements not far away, and the residents of these frequently came to purchase articles from the stores at Canowindra. It was far easier, therefore, to isolate Jerilderie for three days than it had been Canowindra in the earlier days of bushranging. The Hall and Gilbert gang also robbed everybody except the landlord of the hotel they took possession of. The Kellys, on the other hand, robbed no one outside of the bank. Jerilderie also was a much more compact town than Canowindra, the latter consisting of one long straggling street, with only a few houses outside this line, while Jerilderie had several cross streets, and at least two parallel with the river.

The robbers held the town from midnight on Saturday, until about four p.m. on the Wednesday following. Shortly before the men were allowed to leave the Royal Hotel, Ned Kelly gave Living a paper which he said gave a history of his life, and the truth about what he had done. Living promised that he would do his best to get it published, and handed it to Mr. Gill, who read it and forwarded it to the Government. It was a long rambling statement, in some parts quite incoherent, and much of it false. It was never published. At about four o'clock Byrnes left the town in the direction of the Murray River. He was riding his own horse, and had the money stolen from the bank packed on one of the police horses, which he was leading. A minute or two later Dan Kelly and Steve Hart mounted their horses, and galloped several times up and down the main street, flourishing their revolvers and shouting, "Hurrah for the good old times of Morgan and Ben Hall." Then they left the town along the main road. Ned Kelly, mounted on his gray mare and leading a second police horse, left some minutes later. Before going, he rode from the police station to the Royal Hotel, and told the men detained in the large room there that they were free.

The bushrangers had left the town by different routes, probably to prevent any information as to the road they had travelled from being furnished to the police, but no doubt they had arranged where they should meet outside at a safe distance. Late in the evening they rode up to Wannamurra station, about twenty-five miles from Jerilderie, when Ned Kelly asked Mr. A. Mackie whether his brother was at home yet? Mr. Mackie replied that he did not know. "I'm going to shoot him for giving horses to Living and Tarleton to ride to Deniliquin for the traps," said Ned. They all went to the station together, but evidence was soon brought forward to prove that the bank employés had not obtained horses from Mr. Mackie, and at length Ned exonerated that gentleman for what he called "his treachery," but forcibly expressed his intention of shooting Living. "I gave him back his life policy," he said, "and I only burned two or three of the bank books instead of the lot to oblige him. He asked for them, and I treated him as fair as I could, and now he takes advantage of my kindness to betray me." He walked up and down on the verandah of the house for several minutes swearing at Living, and more than once said he had a good mind to go back and "settle him" at once. His rage, however, soon subsided, and the gang proceeded on their way, no attempt being made to detain them.

Jerilderie lies about one hundred and fifty miles, as the crow flies, from where the bushrangers were supposed to have been hidden, in the Strathbogie Mountains, and when the news of the bank robbery at Jerilderie was telegraphed all over the country, wonder was everywhere expressed as to how the robbers had crossed this country, some of it thickly populated, without being perceived. The skill with which the robbery had been planned, the boldness and completeness of the arrangements, and the apparent ease with which it had been accomplished, made the Kelly gang the principal topic of conversation. The New South Wales Government issued a proclamation declaring Ned and Dan Kelly, Joe Byrnes, and Steve Hart outlaws, and offered a reward of £3000 for their capture, dead or alive. The associated banks of the colony supplemented this reward by another of £1000. The Victorian Government increased the rewards already offered to the same amount as was offered by the New South Wales Government, while the banks in that colony added another £1000; thus making the total reward offered for the capture of the four members of the gang £8000. Two thousand pounds per man was the highest reward ever offered for the capture of bushrangers in Australia.

For some time the police of New South Wales scoured the country round Jerilderie and the plains between that town and the Victorian border, while the Victorian police were quite as active on their side of the Murray River, until at length it was definitely ascertained that the bushrangers were safe back in their mountain fastnesses. The paragraphs published from time to time in the Beechworth, the Benalla, and the Wangaratta papers, and in local papers even further removed from the home of the Kellys, tend to show that although the black boys failed to follow a trail in the mountains with the certainty and skill displayed by them in leveller country, they still kept the outlaws in a continual state of fear of capture. Ned Kelly is reported to have called them "those six little black devils," and to have sworn to shoot them if ever he "got the chance." "Those—— trackers," he cried, "I'd like to shoot 'em. They're no —— good in this country. They can't track in Victoria. I can track as well as they can out on the plains. I can run an emu's trail for miles as well as them. They may be good in Queensland or the plains, but they're no good in the mountains." Nevertheless they worried him, as his frequent complaints of their activity prove. The district was no doubt a difficult one to track in. None but a first-class horseman could ride through it with any degree of certainty, and no one but an aborigine or a white man born in the district could cross the ravines and gullies without getting hopelessly "bushed," without a guide.