Registration No.  33-______
                                                    
                                                    
                                                    
                      

           SECURITIES AND EXCHANGE COMMISSION
                  Washington, D.C. 20549

                         FORM S-8

                Registration Statement
          Under the Securities Act of 1933

               TIMBERLINE BANCSHARES, INC.
              Exact Name of Registrant as 
              Specified in its Charter)

  CALIFORNIA                       68-0269988     
  State or Other                (I.R.S.Employer
Jurisdiction of               Identification No.)   
Incorporation or 
Organization)                
                        
               123 NORTH MAIN STREET
              YREKA, CALIFORNIA 96097
     (Address of Principal Executive Offices)

 TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
             (Full Title of the Plan)

            ROBERT YOUNGS, PRESIDENT AND 
             CHIEF EXECUTIVE OFFICER
              123 NORTH MAIN STREET
             YREKA, CALIFORNIA 96097
      (Name and Address of Agent for Service)

                  (530) 842-6191
      (Telephone Number, including Area Code,  
              of Agent for Service)

                     Copy to:
               Thomas Q. Kwan, Esq.
        Gary Steven Findley & Associates
            1470 North Hundley Street
            Anaheim, California 92806
                 (714) 630-7136

  




     CALCULATION OF REGISTRATION FEE
                                                    
                                                    
                                                    
                                       
Title of Each Class Of Security to Be Registered                Common Stock
                                                                (No Par Value)

Amount to be Registered(a)                                      300,000 Shares 
                                                    
Proposed Maximum Offering Price Per Share(b)                    $13.75

Proposed Aggregate Offering Price                               $4,132,000

Amount of Registration Fee                                      $1,216.88

                                     
               
(a)  The number of shares being registered is the
number of shares issuable under the Timberline
Bancshares, Inc.1998 Stock Option Plan (the "1998 Plan"). 
Because of certain events specified in the 1998 Plan, an 
indeterminate number of shares may additionally become 
subject to issuance under the 1998 Plan.
(b)  Estimated pursuant to Rule 457(h) solely for the
purpose of computing the registration fee, utilizing 
the $13.75 as the average of the bid and asked price of 
Timberline Bancshares, Inc.'s common stock as of May 14, 1998.
                                                    
                                                    
                                                    
                                                    
   
                             PART II

Item 3.  Incorporation of Documents by Reference

Timberline Bancshares, Inc. (the "Registrant")
hereby incorporates by reference the documents
listed below.  All documents subsequently filed by the
Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 prior
to the filing of a post-effective amendment which
indicates that all securities offered have been
sold or which deregisters all securities then
remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part
hereof from the date of filing such documents.

(a)  The Registrant's last annual report filed on   
     Form 10-K for December 31, 1997 filed by the
     Registrant pursuant to Section 13(a) of the    
     Securities Exchange Act of 1934.

(b)  The Registrant's quarterly report filed on     
     Form 10-Q for the quarters ended March 31,      
     1998.

(c)  The description of the Registrant's common     
     stock is contained in its Registration      
     Statement on Form S-4, file number 33-40799.

Any statement contained herein or in any document
incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this
Registration Statement to the extent that another
statement contained herein or in any other document
subsequently filed, which also is incorporated by
reference herein, modifies or supersedes such
statement.  Any statement so modified or superseded
shall not be deemed, except as so modified or
superseded, to constitute a part of this
Registration Statement.

Item 4.  Description of Securities

Not Applicable.

Item 5.  Interests of Named Experts and Counsel

Not Applicable.

Item 6.  Indemnification of Directors and Officers

The Articles of Incorporation and Bylaws of the
Registrant provide for indemnification of agents
including directors, officers and employees to the
maximum extent allowed by California law.  The
Articles of Incorporation of the Registrant further
provide for the elimination of directors liability
for monetary damages to the maximum extent allowed
by California law.  The indemnification laws 
of the State of California generally allow
indemnification, in matters not involving the right
of the corporation, to an agent of the corporation
if such person acted in good faith, in a manner
such person reasonably believed to be in the best
interests of the corporation and in the case of a
criminal matter, had no reasonable cause to believe
the conduct of such person was unlawful. 
California laws, with respect to matters involving
the right of a corporation, allow indemnification
to an agent of the corporation, if such person
acted in good faith, in a manner such person
believed to be in the best interests of the
corporation and its shareholders; provided that
there shall be no indemnification for: (i) amounts
paid in the settlement without court approval for a
pending action; (ii) expenses incurred in defending
a pending action which is settled or otherwise
disposed of without court approval; (iii) matters
in which such person shall have been adjudged to be
liable to the corporation unless the court
determines that such person is entitled to be
indemnified; or (iv) other matters specified in the
California Corporations Code.

In addition, the Registrant has the power to
purchase and maintain insurance on behalf of any
agent of the Registrant against any liability
asserted against or incurred by the agent in such
capacity or arising out of the agent's status as
such whether or not the Registrant would have the
power to indemnify the agent against such liability
under the applicable provisions of the Registrant's
Bylaws.

Item 7.  Exemption from Registration Claimed

Not Applicable.

Item 8.  Exhibits                              Page

 5.1   Opinion re: Legality                      8 
23.1   Consent of Carlson, Pavlik and Drageset,     
       Certified Public Accountants.             9 
99.1   Timberline Bancshares, Inc. 1998 Stock       
       Option Plan and Agreements               10 

Item 9.  Undertakings

The undersigned Registrant hereby undertakes:

(1)  To file, during any period in which offers or  
     sales are being made, a post-effective
     amendment to this Registration Statement:

     (i)  To include any prospectus required by     
          Section 10(a)(3) of the Securities Act    
          of 1933;

     (ii) To reflect in the prospectus any facts or 
          events arising after the effective date   
          of the Registration Statement (or the       
          most recent post-effective amendment           
          thereof) which, individually or in the           
          aggregate, represent a fundamental change           
          in the information set forth in the           
          Registration Statement;

     (iii)To include any material information with  
          respect to the plan of distribution not
          previously disclosed in the Registration  
          Statement or any material change to such
          information in the Registration           
          Statement; 

     provided, however, that paragraphs (1)(i) and (1)(ii) do not           
     apply if the Registration Statement is on Form S-3 or Form S-8 
     and the information required to be included in a post-effective 
     amendment by those paragraphs is contained in periodic reports filed      
     with or furnished to the Commission by the Registrant pursuant to 
     Section 13 or Section 15(d) of the Securities Exchange Act of 1934 
     that are incorporated by reference in the Registration Statement.

(2)  That, for the purpose of determining any liability under the 
     Securities Act of 1933, each such post-effective amendment shall be      
     deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that      
     time shall be deemed to be the initial bona fide offering thereof.

(3)  To remove from registration by means of a post-effective amendment 
     any of the securities being registered which remain unsold at the    
     termination of the offering.

The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under
the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such
securities at that time shall be deemed to be the
initial bona fide offering thereof.

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of
the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable.  In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

                            SIGNATURES

Pursuant to the requirements of the Securities Act
of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto
duly authorized in the City of Yreka, State of
California, on May __, 1998.

                          TIMBERLINE BANCSHARES, INC.




                          /s/ Robert J. Youngs 
                                                 
                          Robert J. Youngs
                          President & CEO


Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been
signed by the following persons in the capacities
and on the dates indicated.



 /s/ Robert E. Banning , Director          May 18, 1998
Robert E. Banning


 /s/ Gareld J. Collins , Director          May 18, 1998
Gareld J. Collins


 /s/ Richard S. Day    , Director          May 18, 1998
Richard S. Day


 /s/ Norman E. Fiock   , Chairman          May 18, 1998
Norman E. Fiock


 /s/ Don L. Hilton     , Director          May 18, 1998
Don L. Hilton


 /s/ Elmo M. Smith     , Director          May 18, 1998
Elmo M. Smith


 /s/ Robert J. Youngs  , Director,         May 18, 1998
 Robert J. Youngs        President and 
                         Chief Executive 
                         Officer    


 /s/ Helen L. Gaulden  , Senior Vice       May 18, 1998
Helen L. Gaulden         President and
                         Treasurer, Principal       
                         Financial Officer 
                         and Principal 
                         Accounting Officer




                          EXHIBIT INDEX

                                                  
                                       Sequentially
Exhibit                                 Numbered
Number   Description                      Page      

 5.1     Opinion re: Legality               8

23.1     Consent of Carlson, Pavlik 
         and Drageset, CPA's                9

99.1     Timberline Bancshares, Inc. 
         1998 Stock Option Plan and 
         Agreements                        10




                           EXHIBIT 5.1

                      OPINION RE:  LEGALITY


                           May 15, 1998


Timberline Bancshares, Inc.
123 North Main Street
Yreka, California 96097

Re:  Registration Statement on Form S-8

Gentlemen:

At your request, we have examined the form of
Registration Statement to be filed with the
Securities and Exchange Commission in connection
with the registration under the Securities Act of
1933, as amended, for the offer and sale, pursuant
to the Timberline Bancshares, Inc. 1998 Stock
Option Plan, of 300,000 shares of Timberline
Bancshares, Inc. common stock, no par value (the
"Common Stock") issuable upon exercise of stock
options to be granted under the Timberline
Bancshares, Inc. 1998 Stock Option Plan.  We are
familiar with the actions taken or to be taken in
connection with the authorization, issuance and
sale of the Common Stock.

It is our opinion that, subject to said proceedings
being duly taken and completed as now contemplated
before the issuance of the Common Stock, said
Common Stock, will, upon the issuance and sale
thereof in accordance with the Timberline
Bancshares, Inc. 1998 Stock Option Plan referred to
in the Registration Statement, be legally and
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit
to the Registration Statement.

                   Respectfully submitted,

                   GARY STEVEN FINDLEY & ASSOCIATES

           By:     /s/ Thomas Q. Kwan


                   Thomas Q. Kwan
                   Attorney at Law

TQK:bl




                EXHIBIT 23.1

  CONSENT OF CARLSON, PAVLIK AND DRAGESET,
         CERTIFIED PUBLIC ACCOUNTANTS



          CARLSON, PAVLIK AND DRAGSET
          Certified Public Accountants
              Post Office Box 626
          Yreka, California 96097-0626
                (530) 842-2796



       CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the
Registration Statement of Timberline Bancshares,
Inc. on form S-8 of our report dated February 2,
1998, on our audits of the consolidated financial
statements of Timberline Bancshares, Inc. as of the
December 31, 1997, 1996 and 1995 and for the years
ended December 31, 1997, 1996 and 1995, which
report is incorporated be reference in the Annual
Report on form 10-K.



/s/Carlson, Pavlik and Drageset
Carlson, Pavlik and Drageset
Yreka, California
May 18, 1998
 




                  EXHIBIT 99.1

             TIMBERLINE BANCSHARES, INC.
       1998 STOCK OPTION PLAN AND AGREEMENTS



             TIMBERLINE BANCSHARES, INC.
              1998 STOCK OPTION PLAN



1.   Purpose
     The purpose of the Timberline Bancshares, Inc. 
1998 Stock Option Plan (the "Plan") is to
strengthen Timberline Bancshares, Inc.("Company")
and those corporations which are or hereafter
become subsidiary corporations of the Company by
providing an additional means of attracting and
retaining competent directors, officers and
management level employees and by providing to
participating directors, officers and management
level employees added incentive for high levels
of performance.  The Plan seeks to accomplish these
purposes and achieve these results by providing
a means whereby such directors, officers and
management level employees may purchase shares of
the common stock of the Company pursuant to options
granted in accordance with the Plan.
     Options granted pursuant to the Plan are
intended to be either "incentive stock options"
within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to
time (the "Code"), or "nonqualified stock options",
as shall be determined and designated upon the
grant of each option hereunder.

2.   Administration
     The Plan shall be administered by the Board of
Directors (the "Board").  Any action of the  Board
with respect to the administration of the Plan
shall be taken pursuant to a majority vote, or
the unanimous written consent, of its members. 
Subject to the express provisions of the Plan, the
Board shall have the authority to construe and
interpret the Plan, define the terms used herein,
prescribe, amend and rescind, the rules and
regulations relating to administration of the Plan,
and make all other determinations necessary or
advisable for administration of the Plan.
     All decisions, determinations, interpretations
or other actions by the Board shall be final,
conclusive and binding on all persons, optionees,
grantees, subsidiary corporations of the Company
and any successors-in-interest to such parties.

3.   Incentive Stock Options
     All options granted which are designated at
the time of grant as an "incentive stock option"
shall be deemed an incentive stock option.
     (a)  Incentive stock options granted under the
Plan are intended to be qualified under Section 422
of the Code.
     (b)  Full-time salaried officers and
management level employees of the Company or a
subsidiary corporation (as that term is defined in
Section 424(f) of the Code), shall be eligible for
selection to participate in the incentive stock
option portion of the Plan.  No director of the
Company who is not also a full-time salaried
officer or employee of the Company or a subsidiary
corporation, may be granted an incentive stock
option hereunder.  Subject to the express
provisions of the Plan, the Board shall (i) select
from the eligible class of employees and determine
to whom incentive stock options shall be granted,
(ii) determine the discretionary terms and
provisions of the respective incentive stock option
agreements (which need not be identical), (iii)
determine the times at which such incentive stock
options shall be granted, (iv) determine the number
of shares subject to each incentive stock option,
and (v) grant such incentive stock options to such
individuals.  An individual who has been granted an
incentive stock option may, if he or she is
otherwise eligible under the Plan, be granted
additional incentive stock options if the Board
shall so determine.
     (c)  Except as described in subsection (e)
below, the Board shall not grant an incentive
stock option to purchase shares of the Company's
common stock to any individual who, at the time
of the grant, owns stock possessing more than 10%
of the total combined voting power or value of
all classes of stock of the Company or a subsidiary
corporation.  The attribution rules of Section
424(d) of the Code shall apply in the determination
of ownership of stock for these purposes.
     (d)  The aggregate fair market value
(determined as of the time the incentive stock
option is granted) of stock with respect to which
incentive stock options are exercisable for the
first time by an individual during any calendar
year (under all plans of the Company and its
subsidiary corporations, if any) shall not exceed
$100,000, plus any greater amount as may be
permitted under subsequent amendments to the Code.
     (e)  The purchase price of stock subject to
each incentive stock option shall be determined
by the Board but shall not be less than one hundred
percent (100%) of the fair market value of such
stock at the time such option is granted, except,
in the case of optionees who at the time of the
grant own more than ten percent (10%) of the total
combined voting power of all classes of stock of
the Company, its parent or subsidiary corporation,
in which case the purchase price of the stock shall
not be less than one hundred ten percent (110%) of
the fair market value of such stock at the time
such option is granted and the term of such option
shall be for no more than five (5) years.  The fair
market value of such stock shall be determined in
accordance with any reasonable valuation method,
including the valuation methods described in
Treasury Regulation Section 20.2031-2.

4.   Nonqualified Stock Options
     (a)  All options granted which are (i) in
excess of the aggregate fair market value
limitations set forth in Section 3(d) hereof, (ii)
designated at the time of the grant as
"nonqualified", or (iii) intended to be incentive
stock options but do not meet the requirements of
incentive stock options, shall be deemed
nonqualified stock options.  Nonqualified stock
options granted hereunder shall be so designated in
the nonqualified stock option agreement entered
into between the Company and the optionee.
     (b)  Directors, full-time salaried officers
and management level employees of the Company or a
subsidiary corporation shall be eligible for
selection to participate in the nonqualified
stock option portion of the Plan.  Subject to the
express provisions of the Plan, the Board shall (i)
select from the eligible class of individuals and
determine to whom nonqualified stock options shall
be granted, (ii) determine the discretionary terms
and provisions of the respective nonqualified stock
option agreements (which need not be identical),
(iii) determine the times at which such 
nonqualified stock options shall be granted, (iv)
determine the number of shares subject to each
nonqualified stock option and (v) grant such
nonqualified stock options to such individuals.  An
individual who has been granted a nonqualified
stock option may, if he or she is otherwise
eligible under the Plan, be granted additional
nonqualified stock options if the Board shall so
determine.
     (c)  The purchase price of stock subject to
each nonqualified stock option shall be
determined by the Board but shall not be less than
one hundred percent (100%) of the fair market
value of such stock at the time such option is
granted, except, in the case of optionees who at
the time of the grant own more than ten percent
(10%) of the total combined voting power of all
classes of stock of the Company, its parent or
subsidiary corporations, in which case the purchase
price of the stock shall not be less than one
hundred ten percent (110%) of the fair market value
of such stock at the time such option is granted. 
The fair market value of such stock shall be
determined in accordance with any reasonable
valuation method, including the valuation methods
described in Treasury Regulation 20.2031-2.

5.   Stock Subject to the Plan
     Subject to adjustments as provided in Section
12, hereof, the stock to be offered under the
Plan shall be shares of the Company's authorized
but unissued common stock (hereinafter called
"stock") and the aggregate amount of stock to be
delivered upon exercise of all options granted
under the Plan shall not exceed 300,000 shares.  If
any option shall be canceled, surrendered or
expire for any reason without having been exercised
in full, the underlying shares subject thereto
shall again be available for purposes of the Plan.

6.   Continuation of Employment
     Nothing contained in the Plan (or in any
option agreement) shall obligate the Company or
a subsidiary corporation to employ any optionee for
any period or interfere in any way with the right
of the Company or a subsidiary corporation to
reduce the optionee's compensation.  However, the
Company may not reduce the terms of any option
without the approval of the optionee.

7.   Exercise of Options
     No option shall be exercisable until all
necessary regulatory and shareholder approvals of
the Plan are obtained.  Except as otherwise
provided in this section, each option shall be
exercisable in such installments, which need not be
equal, and upon such contingencies as the Board
shall determine; provided, however, that if an
optionee shall not in any given installment period
purchase all of the shares which the optionee is
entitled to purchase in such installment period,
the optionee's right to purchase any shares not
purchased in such installment period shall continue
until expiration or termination of such option. 
Notwithstanding the foregoing, the options shall
vest at the rate of at least 20% per year over a
five year period from the date the option is
granted.
     Fractional share interests shall be
disregarded, except that they may be accumulated. 
Not less than ten (10) shares may be purchased at
any one time unless the number of shares purchased
is the total number of shares which is exercisable
at such time.  Options may be exercised by written
notice delivered to the Company stating the number
of shares with respect to which the option is
being exercised, together with the full purchase
price for such shares.  Payment of the option price
in full, for the number of shares to be delivered,
must be made (a) in cash or (b) subject to
applicable law, with the Company's stock previously
acquired by the optionee and held by the optionee
for a period of at least six months.
Notwithstanding the foregoing, in the event an
optionee who has an incentive stock option does
exercise the incentive stock option by utilizing
(b) above, the optionee should obtain tax advice as
to the consequences of such action.  The equivalent
dollar value of shares used to effect a purchase
shall be the fair market value of the shares on the
date of exercise.  If the option is being exercised
by any person other than the optionee, said notice
shall be accompanied by proof, satisfactory to
counsel for the Company, of the right of such
person to exercise the option.  Optionees will have
no rights as shareholders with respect to stock of
the Company subject to their stock option
agreements until the date of issuance of the stock
certificate to them.

8.   Nontransferability of Options
     Each option shall, by its terms, be
nontransferable by the optionee other than by will
or the laws of descent and distribution, and shall
be exercisable during his or her lifetime only by
the optionee.

9.   Cessation of Directorship or Employment
     Except as provided in Sections 10 and 20
hereof, if an optionee ceases to be a director or
an employee of the Company or a subsidiary
corporation for any reason other than his or her
disability (as defined in Section 22(e)(3) of the
Code) or death, the optionee's option shall expire
three (3)months after the date of termination of
such directorship or employment.  During the period
after cessation of directorship or employment, such
option shall be exercisable only as to those
installments, if any, which have accrued and/or
vested as of the date on which the optionee ceased
to be a director or an employee of the Company or a
subsidiary corporation.

10.  Termination of Employment for Cause
     If the stock option agreement so provides and
if an optionee's employment by the Company or a
subsidiary corporation is terminated for cause, the
optionee's option shall expire thirty (30) days
from the date of such termination.  Termination for
cause shall include, but not be limited to,
termination for malfeasance or gross misfeasance in
the performance of duties or conviction of a crime
involving moral turpitude, and, in any event, the
determination of the Board with respect thereto
shall be final and conclusive.

11.  Disability or Death of Optionee
     If any optionee dies while serving as a
director or an employee of the Company or a
subsidiary corporation, the option shall expire one
(1) year after the date of such death, except as
provided in Section 20 hereof.  After such death
but before such expiration, the persons to whom
the optionee's rights under the option shall have
passed by will or by the laws of descent and
distribution or the executor or administrator of
optionee's estate shall have the right to exercise
such option to the extent that installments, if
any, had accrued and/or vested as of the date on
which the optionee ceased to be a director or an
employee of the Company or a subsidiary
corporation.
     If the optionee shall terminate his or her
directorship or employment because of disability
(as defined in Section 22(e)(3) of the Code), the
optionee may exercise this option to the extent he
or she is entitled to do so at the date of
termination, at any time within one (1) year of the
date of termination, except as provided in Section
20 hereof.
     If any optionee dies during the three (3)
month period referred to in Section 9 hereof, the
option shall expire one (1) year after the date of
such death, except as provided in Section 20
hereof.

12.  Adjustment Upon Changes in Capitalization
     If the outstanding shares of the stock of the
Company are increased, decreased, changed into
or exchanged for a different number or kind of
shares or securities of the Company through
reorganization, merger, recapitalization,
reclassification, stock split, stock dividend,
stock consolidation or otherwise, without
consideration to the Company, an appropriate and
proportionate adjustment shall be made in the
number and kind of shares as to which options may
be granted.  A corresponding adjustment changing
the number or kind of shares and the exercise price
per share allocated to unexercised options or
portions thereof, which shall have been granted
prior to any such change shall likewise be made. 
Any such adjustment, however, in an outstanding
option shall be made without change in the total
price applicable to the unexercised portion of the
option, but with a corresponding adjustment in the
price for each share subject to the option.  Any
adjustment under this Section 12 shall be made by
the Board, whose determination as to what
adjustments shall be made, and the extent thereof,
shall be final and conclusive.  No fractional
shares of stock shall be issued or made available
under the Plan on account of any such adjustment,
and fractional share-interests shall be
disregarded, except that they may be accumulated.

13.  Terminating Events
     A Terminating Event shall be defined as any
one of the following events: (i) a dissolution
or liquidation of the Company; (ii) a
reorganization, merger or consolidation of the
Company with one or more corporations, the result
of which (A) the Company is not the surviving
corporation, or (B) the Company becomes a
subsidiary of another corporation (which shall be
deemed to have occurred if another corporation
shall own directly or indirectly, over 80% of the
aggregate voting power of all outstanding equity
securities of the Company); (iii) a sale of
substantially all the assets of the Company to
another corporation; or (iv) a sale of the equity
securities of the Company representing more than
80% of the aggregate voting power of all
outstanding equity securities of the Company to any
person or entity, or any group of persons and/or
entities acting in concert.  When the Company knows
that a Terminating Event will occur (i) the Company
shall deliver to each optionee no less than thirty
(30) days prior to the Terminating Event, written
notification of the Terminating Event and the
optionee's right to exercise all options granted
pursuant to the Plan, whether or not vested under
the Plan or applicable stock option agreement, and
(ii) all outstanding options granted pursuant to
the Plan shall completely vest and become
immediately exercisable as to all shares granted
pursuant to the option immediately prior to such
Terminating Event.  This right of exercise shall be
conditional upon execution of a final plan of
dissolution or liquidation or a definitive
agreement of consolidation or merger.  Upon the
occurrence of the Terminating Event all
outstanding options and the Plan shall terminate;
provided, however, that any outstanding options
not exercised as of the occurrence of the
Terminating Event shall not terminate if there is a
successor corporation which assumes the outstanding
options or substitutes for such options, new
options covering the stock of the successor
corporation with appropriate adjustments as to the
number and kind of shares and prices.

14.  Amendment and Termination
     The Board may at any time suspend, amend or
terminate the Plan and may, with the consent
of the optionee, make such modification of the
terms and conditions of the option as it shall deem
advisable; provided that, except as permitted under
the provisions of Sections 12 and 13 hereof, no
amendment or modification which would:
     (a)  increase the maximum number of shares     
      which may be purchased pursuant to           
options granted under the Plan either in           
the aggregate or by an individual;

     (b)  change the minimum option price;

     (c)  increase the maximum term of options      
     provided for herein; or

     (d)  permit options to be granted to anyone    
       other than directors, full-time salaried     
      officers or management level employees of     
      the Company or a subsidiary corporation;

may be adopted without the Company having first
obtained any necessary regulatory and shareholder
approvals required by law.
     No option may be granted during any suspension
or after termination of the Plan.  Amendment,
suspension or termination of the Plan shall not
(except as otherwise provided in Section 12
hereof), without the consent of the optionee, alter
or impair any rights or obligations under any
option theretofore granted.

15.  Time of Granting Options
     The time an option is granted, sometimes
referred to as the date of grant, shall be the day
of the action of the Board described in Sections
3(b) and 4(b) hereof; provided, however, that if
appropriate resolutions of the Board indicate that
an option is granted as of and on some future date,
the time such option is granted shall be such
future date.  If action by the Board is taken by
unanimous written consent of its members, the
action of the Board shall be deemed to be at the
time the last member of the  Board signs the
consent.



16.  Privileges of Stock Ownership;
     Securities Law Compliance; Notice of Sale
     
     No optionee shall be entitled to the
privileges of stock ownership as to any shares of
stock not actually issued.  No shares shall be
purchased upon the exercise of any option unless
and until the Company has fully complied with all
applicable requirements of any regulatory agency
having jurisdiction over the Company including
registration of the stock options and underlying
shares, as necessary, and all applicable
requirements of any exchange upon which stock of
the Company may be listed.  The optionee shall give
the Company notice of any sale or disposition of
any such shares not more than five (5) days after
such sale or disposition.

17.  Effective Date of the Plan

     The Plan shall be deemed adopted by the Board
as of February 12, 1998 and shall be effective
immediately subject to approval by the shareholders
of the Company within twelve months of the date the
Plan is adopted, by the vote of a majority of the
outstanding shares represented and voting at a duly
held meeting of shareholders at which a quorum is
present, or by the written consent vote of the
holders of a majority of the outstanding shares of
the Company's stock.  No option under the Plan
shall be exercised prior to the shareholders'
approval of the Plan.

18.  Termination

     Unless previously terminated by the Board, the
Plan shall terminate at the close of business
on February 12, 2008.  No options shall be granted
under the Plan thereafter, but such termination
shall not affect any option theretofore granted.



19.  Option Agreement

     Each option shall be evidenced by a written
stock option agreement executed by the Company and
the optionee and shall contain each of the
provisions and agreements herein specifically
required to be contained therein, and such other
terms and conditions as are deemed desirable and
are not inconsistent with the Plan.  Each incentive
stock option agreement shall contain such terms and
provisions as the Board may determine to be
necessary in order to qualify such option as an
incentive stock option within the meaning of
Section 422 of the Code.

20.  Option Period

     Each option and all rights and obligations
thereunder shall expire on such date as the Board
may determine, but not later than ten (10) years
from the date such option is granted, and shall be
subject to earlier termination as provided
elsewhere in the Plan.

21.  Exculpation and Indemnification

     To the extent permitted by applicable law in
effect from time to time, no member of the
Board shall be liable for any act or omission of
any other member of the Board nor for any act or
omission on the member's own part, except the
member's own willful misconduct or gross
negligence.  The Company and its subsidiary
corporations shall pay expenses incurred by, and
satisfy a judgment or fine rendered or levied
against, a present or former member of the Board in
any action brought by a third party against such
person (whether or not the Company is joined as
a party defendant) to impose a liability or penalty
on such person while a member of the Board
arising with respect to the Plan or administration
thereof or out of membership on the Board or all
or any combination of the preceding; provided, the
Board determines in good faith that such member
of the Board was acting in good faith, within what
such member of the Board reasonably believed
to be the scope of his or her employment or
authority, and for a purpose which he or she
reasonably believed to be in the best interests of
the Company or its shareholders.  Payments
authorized hereunder include amounts paid and
expenses incurred in settling any such action or
threatened action.  This Section 21 does not apply
to any action instituted or maintained in the right
of the Company by a shareholder or holder of a
voting trust certificate representing shares of the
Company or a subsidiary corporation thereof.  The
provisions of this Section 21 shall apply to the
estate, executor, administrator, heirs, legatees or
devisees of a member of the Board and the term
"person" as used in this Section 21 shall include
the estate, executor, administrator, heirs,
legatees or devisees of such person.

22.  Agreement and Representations of Optionee

     Unless the shares of stock covered by the Plan
have been registered with the Securities Exchange
Commission, each optionee shall, by accepting an
option, represent and agree, for himself or herself
and his or her transferees by will or the laws of
descent and distribution, that all stock will be
acquired for investment and not for resale or
distribution.  Upon such exercise of any portion of
an option, the person entitled to exercise the same
shall, upon request of the Company, furnish
evidence satisfactory to the Company (including a
written and signed representation) to the effect
that the stock is being acquired in good faith for
investment and not for resale or distribution. 
Furthermore, the Company, at its sole discretion,
may take all reasonable steps, including affixing
the following legend (and/or such other legend or
legends as counsel shall require) on certificates
embodying the shares:

     The shares represented by this certificate     
     have not been registered under the
     Securities Act of 1933 and may not be sold,    
     pledged, hypothecated or otherwise
     transferred or offered for sale in the absence 
     of an effective registration statement
     with respect to them under the Securities Act  
     of 1933 or a written opinion of counsel
     for the optionee which opinion shall be      
     acceptable to counsel for the Company that
     registration is not required.

to assure itself against any sale or distribution
by the optionee which does not comply with the Plan
or any federal or state securities laws.
     The Company agrees to remove any legend
affixed to the certificates embodying the shares
pursuant to this Section 22 when all of the
restrictions on the transfer of the shares, whether
imposed by the Plan or federal or state law, have
terminated.

23.  Information to Employees
     The Company shall provide optionees with
financial statements of the Company at least
annually.







NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, NO SHARES OF THE COMPANY'S COMMON STOCK
SHALL BE ISSUED PURSUANT HERETO UNLESS THE
TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS
OF THE COMPANY.


       TIMBERLINE BANCSHARES, INC.

    INCENTIVE STOCK OPTION AGREEMENT


     This Incentive Stock Option Agreement (the
"Agreement") is made and entered into as of
the ______ day of __________, _____, by and between
Timberline Bancshares, Inc., a California
corporation (the "Company"), and ________________
("Optionee");
     WHEREAS, pursuant to the Timberline
Bancshares, Inc. 1998 Stock Option Plan (the
"Plan"), a copy of which is attached hereto, the
Board of Directors of the Company has authorized
granting to Optionee an incentive stock option to
purchase all or any part of ______________
(_____) authorized but unissued shares of the
Company's common stock at the price of ________
Dollars and _______ Cents ($__.__) per share, such
option to be for the term and upon the terms and
conditions hereinafter stated;
     NOW, THEREFORE, it is hereby agreed:
     1.   Grant of Option.  Pursuant to said action
of the Board of Directors, the Company hereby
grants to Optionee the option to purchase, upon and
subject to the terms and conditions of the Plan
which is incorporated in full herein by this
reference, all or any part of ______________
(_____) shares of the Company's common stock
(hereinafter called "stock") at the price of
_____________ Dollars and _______ Cents ($__.__)
per share, which price is not less than one
hundred percent (100%) of the fair market value of
the stock (or not less than 110% of the fair
market value of the stock for Optionee-shareholders
who own securities possessing more than ten
percent (10%) of the total combined voting power of
all classes of securities of the Company, its
parent or subsidiary corporation) as of the date of
action of the Board of Directors granting this
option.
     2.   Exercisability.  This option shall be
exercisable as to ______________________________
________________________________________________
________________________________________________
_______________________________________________. 
This option shall remain exercisable as to all
vested shares until ______________ __, _____ (but
not later than ten (10) years from the date this
option is granted) unless this option has expired or
terminated earlier in accordance with the
provisions hereof or in the Plan.  Subject to
paragraphs 4 and 5, shares as to which this option
becomes exercisable pursuant to the foregoing
provision may be purchased at any time prior to
expiration of this option.
     3.   Exercise of Option.  This option may be
exercised by written notice (substantially in the
form as that which is attached as Exhibit A)
delivered to the Company stating the number of
shares with respect to which this option is being
exercised, together with (a) cash in the amount of
the purchase price of such shares, or (b) subject
to applicable law, with the Company's stock
previously acquired by Optionee and held by
Optionee for a period of at least six months. 
Notwithstanding the foregoing, in the event
Optionee does exercise the option by utilizing (b)
above, Optionee should obtain tax advice as to the
consequences of such action.  Not less than ten
(10) shares may be purchased at any one time unless
the number purchased is the total number which
may be purchased under this option and in no event
may the option be exercised with respect to
fractional shares.  Upon exercise, Optionee shall
make appropriate arrangements and shall be
responsible for the withholding of any federal and
state taxes then due.
     4.   Cessation of Employment.  Except as
provided in Paragraphs 2 and 5 hereof, if
Optionee shall cease to be an employee of the
Company or a subsidiary corporation for any reason
other than Optionee's death or disability [as
defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended from time to time (the
"Code")], this option shall expire three (3) months
thereafter.  During the three (3) month period this
option shall be exercisable only as to those
installments, if any, which had accrued as of the
date when Optionee ceased to be an employee of
the Company or a subsidiary corporation.
     5.   Termination of Employment for Cause.  If
Optionee's employment with the Company or a
subsidiary corporation is terminated for cause,
this option shall expire thirty (30) days
from the date of such termination.  Termination for
cause shall include, but not be limited to,
termination for malfeasance or gross misfeasance in
the performance of duties or conviction of a
crime involving moral turpitude, and, in any event,
the determination of the Board of Directors with
respect thereto shall be final and conclusive.
     6.   Nontransferability; Death or Disability
of Optionee.  This option shall not be transferable
except by will or by the laws of descent and
distribution and shall be exercisable during
Optionee's lifetime only by Optionee.  If Optionee
dies while serving as an employee of the Company or
a subsidiary corporation, or during the three (3)
month period referred to in Paragraph 4 hereof,
this option shall expire one (1) year after the
date of Optionee's death or on the day specified in
Paragraph 2 hereof, whichever is earlier.  After
Optionee's death but before such expiration, the
persons to whom Optionee's rights under this option
shall have passed by will or by the laws of descent
and distribution or the executor or administrator
of Optionee's estate shall have the right to
exercise this option as to those shares for which
installments had accrued under Paragraph 2 hereof
as of the date on which Optionee ceased to be an
employee of the Company or a subsidiary
corporation.
     If Optionee terminates his or her employment
because of disability (as defined in Section
22(e)(3) of the Code), Optionee may exercise this
option to the extent he or she is entitled to do so
at the date of termination, at any time within one
(1) year of the date of termination, or before the
expiration date specified in Paragraph 2 hereof,
whichever is earlier.
     7.   Employment.  This Agreement shall not
obligate the Company or a subsidiary
corporation to employ Optionee for any period, nor
shall it interfere in any way with the right of the
Company or a subsidiary corporation to reduce
Optionee's compensation.
     8.   Privileges of Stock Ownership.  Optionee
shall have no rights as a shareholder with
respect to the Company's stock subject to this
option until the date of issuance of stock
certificates to Optionee.  Except as provided in
the Plan, no adjustment will be made for dividends
or other rights for which the record date is prior
to the date such stock certificates are issued.
     9.   Modification and Termination.  The rights
of Optionee are subject to modification and
termination upon the occurrence of certain events
as provided in Sections 13 and 14 of the Plan.
     10.  Notification of Sale.  Optionee agrees
that Optionee, or any person acquiring shares
upon exercise of this option, will notify the
Company not more than five (5) days after any sale
or other disposition of such shares.
     11.  Representations of Optionee.  No shares
issuable upon the exercise of this option shall be
issued and delivered unless and until the Company
has complied with all applicable requirements of
California and federal law and of the Securities
and Exchange Commission and the California
Department of Corporations pertaining to the
issuance and sale of such shares, and all
applicable listing requirements of the securities
exchanges, if any, on which shares of the Company
of the same class are then listed.  Optionee agrees
to ascertain that such requirements shall have been
complied with at the time of any exercise of this
option.  In addition, if the Optionee is an
"affiliate" for purposes of the Securities Act of
1933, there may be additional restrictions on the
resale of stock, and Optionee therefore agrees to
ascertain what those restrictions are and to abide
by the restrictions and other applicable federal
and state securities laws. 
     Furthermore, the Company may, if it deems
appropriate, issue stop transfer instructions
against any shares of stock purchased upon the
exercise of this option and affix to any
certificate representing such shares the legends
which the Company deems appropriate.
     Optionee represents that the Company, its
directors, officers, employees and agents have not
and will not provide tax advice with respect to the
option, and Optionee agrees to consult with his
or her own tax advisor as to the specific tax
consequences of the option, including the
application and effect of federal, state, local and
other tax laws.
     12.  Notices.  Any notice to the Company
provided for in this Agreement shall be
addressed to it in care of its President or Chief
Financial Officer at its main office and any notice
to Optionee shall be addressed to Optionee's
address on file with the Company or a subsidiary
corporation, or to such other address as either may
designate to the other in writing.  Any notice
shall be deemed to be duly given if and when
enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage
prepaid, with the United States Postal Service.  In
lieu of giving notice by mail as aforesaid, any
written notice under this Agreement may be given to
Optionee in person, and to the Company by personal
delivery to its President or Chief Financial
Officer.
     13.  Incentive Stock Option.  This Agreement
is intended to be an incentive stock option
agreement as defined in Section 422 of the Code;
provided, however, that if the option shall fail to
constitute an incentive stock option for any
reason, the option shall thereafter be governed by
the provisions of the Plan regarding nonqualified
stock options.

<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year
first above written.

OPTIONEE                TIMBERLINE BANCSHARES, INC.

By__________________    By_______________________   
                        By_______________________   
                     




                EXHIBIT A


   NOTICE OF STOCK OPTION EXERCISE





Mr. Robert J. Youngs
President and Chief Executive Officer
Timberline Bancshares, Inc.
123 Main Street
Yreka, California 96097

Dear Mr. Youngs:

Pursuant to my incentive stock option agreement
dated _______________, I am exercising my stock
option to acquire ____________ shares of common
stock of Timberline Bancshares, Inc.  I am also
enclosing payment by means of (cash in the amount
of $_________, or ________ qualifying shares
of Timberline Bancshares, Inc. having a fair market
value) equal to the sum of the option exercise
price.

I further acknowledge that Timberline Bancshares,
Inc. makes no representations as to federal or
state tax matters, and that I am to consult with my
own tax attorney or tax accountant for advice with
respect to the exercise of my stock option and the
effect of the sale of the option shares.  [(For
executive officers of the Company or insiders of
the Company) I further acknowledge that I am an
affiliate or insider of Timberline Bancshares, Inc.
and that federal securities laws are applicable to
the exercise of the stock option and any subsequent
sale of the option shares including the
applicability of the Securities Act of 1933 and
Rule 144 (both dealing with the sale of shares by
an affiliate).  I agree to comply with such
securities laws and rules.]

                              Sincerely,


                              ________________
                              (Name of Optionee)






NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, NO SHARES OF THE COMPANY'S COMMON STOCK
SHALL BE ISSUED PURSUANT HERETO UNLESS THE
TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS
OF THE COMPANY.


       TIMBERLINE BANCSHARES, INC.

  NONQUALIFIED STOCK OPTION AGREEMENT


     This Nonqualified Stock Option Agreement (the
"Agreement") is made and entered into as of the
______ day of _____________, _____, by and between
Timberline Bancshares, Inc., a California
corporation (the "Company"), and _______________,
("Optionee"); WHEREAS, pursuant to the Timberline
Bancshares, Inc. 1998 Stock Option Plan (the
"Plan"), a copy of which is attached hereto, the
Board of Directors of the Company has authorized
granting to Optionee a nonqualified stock option to
purchase all or any part of  _______________
(_________) authorized but unissued shares of the
Company's common stock at the price of ________
Dollars and _______ Cents ($__.__) per share, such
option to be for the term and upon the terms and
conditions hereinafter stated; NOW, THEREFORE, it
is hereby agreed:
     1.   Grant of Option.  Pursuant to said action
of the Board of Directors, the Company hereby
grants to Optionee the option to purchase, upon and
subject to the terms and conditions of the Plan
which is incorporated in full herein by this
reference, all or any part of _______________
(______) shares of the Company's common stock
(hereinafter called "stock") at the price of 
________ Dollars and _______ Cents ($__.__) per
share, which price is not less than one hundred
percent (100%) of the fair market value of the
stock (or less than 110% of the fair market value
of the stock if the Optionee owns securities
possessing more than ten percent (10%) of the total
combined voting power of all classes of securities
of the Company, its parent or subsidiary
corporations) as of as of the date of the action of
the Board of Directors granting this option.
     2.   Exercisability.  This option shall be
exercisable as to _________________________________
___________________________________________________
___________________________________________________
__________________________________________________. 

This option shall remain exercisable as to all
vested shares until __________ __, _____ (but not
later than ten (10) years from the date this option
is granted) unless this option has expired or
terminated earlier in accordance with the
provisions hereof or in the Plan.  Subject to
paragraphs 4 and 5, shares as to which this option
becomes exercisable pursuant to the foregoing
provision may be purchased at any time prior to
expiration of this option.
     3.   Exercise of Option.  This option may be
exercised by written notice (substantially in the
form as that which is attached as Exhibit A)
delivered to the Company stating the number of
shares with respect to which this option is being
exercised, together with (a) cash in the amount of
the purchase price of such shares, or (b) subject
to applicable law, with the Company's stock
previously acquired by Optionee and held by
Optionee for a period of at least six months. 
Notwithstanding the foregoing, in the event
Optionee does exercise the option by utilizing (b)
above, Optionee should obtain tax advice as to the
consequences of such action.  Not less than ten
(10) shares may be purchased at any one time unless
the number purchased is the total number which
may be purchased under this option and in no event
may the option be exercised with respect to
fractional shares.  Upon exercise, Optionee shall
make appropriate arrangements and shall be
responsible for the withholding of any federal and
state taxes then due.
     4.   Cessation of Directorship or Employment. 
Except as provided in Paragraphs 2 and
5 hereof, if Optionee shall cease to be a director
or an employee of the Company or a subsidiary
corporation for any reason other than Optionee's
death or disability [as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended
from time to time (the "Code")], this option shall
expire three (3) months thereafter.  During the
three (3) month period this option shall be
exercisable
only as to those installments, if any, which had
accrued as of the date when Optionee ceased to be
a director or an employee of the Company or a
subsidiary corporation.  If Optionee is both a
director and an employee, then such option shall
expire three (3) months after the latter of the
date of termination of Optionee's directorship or
employment.
     5.   Termination of Employment for Cause.  If
Optionee's employment with the Company or a
subsidiary corporation is terminated for cause,
this option shall expire thirty (30) days from the
date of such termination.  Termination for cause
shall include, but not be limited to, termination
for malfeasance or gross misfeasance in the
performance of duties or conviction of a crime
involving moral turpitude, and, in any event, the
determination of the Board of Directors with
respect thereto shall be final and conclusive.
     6.   Nontransferability; Death or Disability
of Optionee.  This option shall not be transferable
except by will or by the laws of descent and
distribution and shall be exercisable during
Optionee's lifetime only by Optionee.  If Optionee
dies while serving as a director or an employee
of the Company or a subsidiary corporation, or
during the three (3) month period referred to in
Paragraph 4 hereof, this option shall expire one
(1) year after the date of Optionee's death or on
the day specified in Paragraph 2 hereof, whichever
is earlier.  After Optionee's death but before such
expiration, the persons to whom Optionee's rights
under this option shall have passed by will or by
the laws of descent and distribution or the
executor or administrator of Optionee's estate
shall have the right to exercise this option as to
those shares for which installments had accrued
under Paragraph 2 hereof as of the date on which
Optionee ceased to be a director or an employee of
the Company or a subsidiary corporation.
     If Optionee terminates his or her directorship
or employment because of disability (as defined in
Section 22(e)(3) of the Code), Optionee may
exercise this option to the extent he or she
is entitled to do so at the date of termination, at
any time within one (1) year of the date of
termination, or before the expiration date
specified in Paragraph 2 hereof, whichever is
earlier.
     7.   Employment.  This Agreement shall not
obligate the Company or a subsidiary corporation to
employ Optionee for any period, nor shall it
interfere in any way with the right of theCompany
or a subsidiary corporation to reduce Optionee's
compensation.
     8.   Privileges of Stock Ownership.  Optionee
shall have no rights as a shareholder with respect
to the Company's stock subject to this option until
the date of issuance of stock certificates to
Optionee.  Except as provided in the Plan, no
adjustment will be made for dividends or other
rights for which the record date is prior to the
date such stock certificates are issued.
     9.   Modification and Termination.  The rights
of Optionee are subject to modification and
termination upon the occurrence of certain events
as provided in Sections 13 and 14 of the Plan.
     10.  Notification of Sale.  Optionee agrees
that Optionee, or any person acquiring shares
upon exercise of this option, will notify the
Company not more than five (5) days after any sale
or other disposition of such shares.
     11.  Representations of Optionee.  No shares
issuable upon the exercise of this option shall be
issued and delivered unless and until the Company
has complied with all applicable requirements of
California and federal law and of the Securities
and Exchange Commission and the California
Department of Corporations pertaining to the
issuance and sale of such shares, and all
applicable listing requirements of the securities
exchanges, if any, on which shares of the Company
of the same class are then listed.  Optionee agrees
to ascertain that such requirements shall have been
complied with at the time of any exercise of this
option.  In addition, if the Optionee is an
"affiliate" for purposes of the Securities Act of
1933, there may be additional restrictions on the
resale of stock, and Optionee therefore agrees to
ascertain what those restrictions are and to abide
by the restrictions and other applicable federal
and state securities laws.
     Furthermore, the Company may, if it deems
appropriate, issue stop transfer instructions
against any shares of stock purchased upon the
exercise of this option and affix to any
certificate representing such shares the legends
which the Company deems appropriate.
     Optionee represents that the Company, its
directors, officers, employees and agents have not
and will not provide tax advice with respect to the
option, and Optionee agrees to consult with his
or her own tax advisor as to the specific tax
consequences of the option, including the
application and effect of federal, state, local and
other tax laws.
     12.  Notices.  Any notice to the Company
provided for in this Agreement shall be addressed
to it in care of its President or Chief Financial
Officer at its main office and any notice to
Optionee shall be addressed to Optionee's address
on file with the Company or a subsidiary
corporation, or to such other address as either may
designate to the other in writing.  Any notice
shall be deemed to be duly given if and when
enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage
prepaid, with the United States Postal Service.  In
lieu of giving notice by mail as aforesaid, any
written notice under this Agreement may be given to
Optionee in person, and to the Company by personal
delivery to its President or Chief Financial
Officer.



IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year
first above written.

OPTIONEE                TIMBERLINE BANCSHARES, INC.

By_________________       By______________________
                          By______________________






                            EXHIBIT A


                 NOTICE OF STOCK OPTION EXERCISE





Mr. Robert J. Youngs
President and Chief Executive Officer
Timberline Bancshares, Inc.
123 Main Street
Yreka, California 96097

Dear Mr. Youngs:

Pursuant to my nonqualified stock option agreement
dated _______________, I am exercising my stock
option to acquire ____________ shares of common
stock of Timberline Bancshares, Inc.  I am also
enclosing payment by means of (cash in the amount
of $_________, or ________ qualifying shares of
Timberline Bancshares, Inc. having a fair market
value) equal to the sum of the option exercise
price.

I further acknowledge that Timberline Bancshares,
Inc. makes no representations as to federal or
state tax matters, and that I am to consult with my
own tax attorney or tax accountant for advice with
respect to the exercise of my stock option and the
effect of the sale of the option shares.  [(For
executive officers of the Company or insiders of
the Company) I further acknowledge that I am an
affiliate or insider of Timberline Bancshares, Inc.
and that federal securities laws are applicable to
the exercise of the stock option and any subsequent
sale of the option shares including the
applicability of the Securities Act of 1933 and
Rule 144 (both dealing with the sale of shares by
an affiliate).  I agree to comply with such
securities laws and rules.]

                              Sincerely,


                              _____________________
                              (Name of Optionee)
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Registration No.  33-______
                                                    
                                                    
                                                    
                      

           SECURITIES AND EXCHANGE COMMISSION
                  Washington, D.C. 20549

                         FORM S-8

                Registration Statement
          Under the Securities Act of 1933

               TIMBERLINE BANCSHARES, INC.
              Exact Name of Registrant as 
              Specified in its Charter)

  CALIFORNIA                       68-0269988     
  State or Other                (I.R.S.Employer
Jurisdiction of               Identification No.)   
Incorporation or 
Organization)                
                        
               123 NORTH MAIN STREET
              YREKA, CALIFORNIA 96097
     (Address of Principal Executive Offices)

 TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
             (Full Title of the Plan)

            ROBERT YOUNGS, PRESIDENT AND 
             CHIEF EXECUTIVE OFFICER
              123 NORTH MAIN STREET
             YREKA, CALIFORNIA 96097
      (Name and Address of Agent for Service)

                  (530) 842-6191
      (Telephone Number, including Area Code,  
              of Agent for Service)

                     Copy to:
               Thomas Q. Kwan, Esq.
        Gary Steven Findley & Associates
            1470 North Hundley Street
            Anaheim, California 92806
                 (714) 630-7136

  

     CALCULATION OF REGISTRATION FEE
                                                    
                                                    
                                                    
                                       
Title of Each Class Of Security to Be Registered                Common Stock
                                                                (No Par Value)

Amount to be Registered(a)                                      300,000 Shares 
                                                    
Proposed Maximum Offering Price Per Share(b)                    $13.75

Proposed Aggregate Offering Price                               $4,132,000

Amount of Registration Fee                                      $1,216.88

                                     
               
(a)  The number of shares being registered is the
number of shares issuable under the Timberline
Bancshares, Inc.1998 Stock Option Plan (the "1998 Plan"). 
Because of certain events specified in the 1998 Plan, an 
indeterminate number of shares may additionally become 
subject to issuance under the 1998 Plan.
(b)  Estimated pursuant to Rule 457(h) solely for the
purpose of computing the registration fee, utilizing 
the $13.75 as the average of the bid and asked price of 
Timberline Bancshares, Inc.'s common stock as of May 14, 1998.
                                                    
                                                    
                                                    
                                                    
   
                             PART II

Item 3.  Incorporation of Documents by Reference

Timberline Bancshares, Inc. (the "Registrant")
hereby incorporates by reference the documents
listed below.  All documents subsequently filed by the
Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 prior
to the filing of a post-effective amendment which
indicates that all securities offered have been
sold or which deregisters all securities then
remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part
hereof from the date of filing such documents.

(a)  The Registrant's last annual report filed on   
     Form 10-K for December 31, 1997 filed by the
     Registrant pursuant to Section 13(a) of the    
     Securities Exchange Act of 1934.

(b)  The Registrant's quarterly report filed on     
     Form 10-Q for the quarters ended March 31,      
     1998.

(c)  The description of the Registrant's common     
     stock is contained in its Registration      
     Statement on Form S-4, file number 33-40799.

Any statement contained herein or in any document
incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this
Registration Statement to the extent that another
statement contained herein or in any other document
subsequently filed, which also is incorporated by
reference herein, modifies or supersedes such
statement.  Any statement so modified or superseded
shall not be deemed, except as so modified or
superseded, to constitute a part of this
Registration Statement.

Item 4.  Description of Securities

Not Applicable.

Item 5.  Interests of Named Experts and Counsel

Not Applicable.

Item 6.  Indemnification of Directors and Officers

The Articles of Incorporation and Bylaws of the
Registrant provide for indemnification of agents
including directors, officers and employees to the
maximum extent allowed by California law.  The
Articles of Incorporation of the Registrant further
provide for the elimination of directors liability
for monetary damages to the maximum extent allowed
by California law.  The indemnification laws 
of the State of California generally allow
indemnification, in matters not involving the right
of the corporation, to an agent of the corporation
if such person acted in good faith, in a manner
such person reasonably believed to be in the best
interests of the corporation and in the case of a
criminal matter, had no reasonable cause to believe
the conduct of such person was unlawful. 
California laws, with respect to matters involving
the right of a corporation, allow indemnification
to an agent of the corporation, if such person
acted in good faith, in a manner such person
believed to be in the best interests of the
corporation and its shareholders; provided that
there shall be no indemnification for: (i) amounts
paid in the settlement without court approval for a
pending action; (ii) expenses incurred in defending
a pending action which is settled or otherwise
disposed of without court approval; (iii) matters
in which such person shall have been adjudged to be
liable to the corporation unless the court
determines that such person is entitled to be
indemnified; or (iv) other matters specified in the
California Corporations Code.

In addition, the Registrant has the power to
purchase and maintain insurance on behalf of any
agent of the Registrant against any liability
asserted against or incurred by the agent in such
capacity or arising out of the agent's status as
such whether or not the Registrant would have the
power to indemnify the agent against such liability
under the applicable provisions of the Registrant's
Bylaws.

Item 7.  Exemption from Registration Claimed

Not Applicable.

Item 8.  Exhibits                              Page

 5.1   Opinion re: Legality                      8 
23.1   Consent of Carlson, Pavlik and Drageset,     
       Certified Public Accountants.             9 
99.1   Timberline Bancshares, Inc. 1998 Stock       
       Option Plan and Agreements               10 

Item 9.  Undertakings

The undersigned Registrant hereby undertakes:

(1)  To file, during any period in which offers or  
     sales are being made, a post-effective
     amendment to this Registration Statement:

     (i)  To include any prospectus required by     
          Section 10(a)(3) of the Securities Act    
          of 1933;

     (ii) To reflect in the prospectus any facts or 
          events arising after the effective date   
          of the Registration Statement (or the       
          most recent post-effective amendment           
          thereof) which, individually or in the           
          aggregate, represent a fundamental change           
          in the information set forth in the           
          Registration Statement;

     (iii)To include any material information with  
          respect to the plan of distribution not
          previously disclosed in the Registration  
          Statement or any material change to such
          information in the Registration           
          Statement; 

     provided, however, that paragraphs (1)(i) and (1)(ii) do not           
     apply if the Registration Statement is on Form S-3 or Form S-8 
     and the information required to be included in a post-effective 
     amendment by those paragraphs is contained in periodic reports filed      
     with or furnished to the Commission by the Registrant pursuant to 
     Section 13 or Section 15(d) of the Securities Exchange Act of 1934 
     that are incorporated by reference in the Registration Statement.

(2)  That, for the purpose of determining any liability under the 
     Securities Act of 1933, each such post-effective amendment shall be      
     deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that      
     time shall be deemed to be the initial bona fide offering thereof.

(3)  To remove from registration by means of a post-effective amendment 
     any of the securities being registered which remain unsold at the    
     termination of the offering.

The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under
the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such
securities at that time shall be deemed to be the
initial bona fide offering thereof.

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of
the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable.  In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the
successful defense of any action, suit or
proceeding) is asserted by such director, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

                            SIGNATURES

Pursuant to the requirements of the Securities Act
of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto
duly authorized in the City of Yreka, State of
California, on May __, 1998.

                          TIMBERLINE BANCSHARES, INC.

                          /s/ Robert J. Youngs 
                                                 
                          Robert J. Youngs
                          President & CEO

Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been
signed by the following persons in the capacities
and on the dates indicated.

 /s/ Robert E. Banning , Director          May 18, 1998
Robert E. Banning

 /s/ Gareld J. Collins , Director          May 18, 1998
Gareld J. Collins

 /s/ Richard S. Day    , Director          May 18, 1998
Richard S. Day

 /s/ Norman E. Fiock   , Chairman          May 18, 1998
Norman E. Fiock

 /s/ Don L. Hilton     , Director          May 18, 1998
Don L. Hilton

 /s/ Elmo M. Smith     , Director          May 18, 1998
Elmo M. Smith

 /s/ Robert J. Youngs  , Director,         May 18, 1998
 Robert J. Youngs        President and 
                         Chief Executive 
                         Officer    

 /s/ Helen L. Gaulden  , Senior Vice       May 18, 1998
Helen L. Gaulden         President and
                         Treasurer, Principal       
                         Financial Officer 
                         and Principal 
                         Accounting Officer

                          EXHIBIT INDEX

                                                  
                                       Sequentially
Exhibit                                 Numbered
Number   Description                      Page      

 5.1     Opinion re: Legality               8

23.1     Consent of Carlson, Pavlik 
         and Drageset, CPA's                9

99.1     Timberline Bancshares, Inc. 
         1998 Stock Option Plan and 
         Agreements                        10

                           EXHIBIT 5.1

                      OPINION RE:  LEGALITY

                           May 15, 1998

Timberline Bancshares, Inc.
123 North Main Street
Yreka, California 96097

Re:  Registration Statement on Form S-8

Gentlemen:

At your request, we have examined the form of
Registration Statement to be filed with the
Securities and Exchange Commission in connection
with the registration under the Securities Act of
1933, as amended, for the offer and sale, pursuant
to the Timberline Bancshares, Inc. 1998 Stock
Option Plan, of 300,000 shares of Timberline
Bancshares, Inc. common stock, no par value (the
"Common Stock") issuable upon exercise of stock
options to be granted under the Timberline
Bancshares, Inc. 1998 Stock Option Plan.  We are
familiar with the actions taken or to be taken in
connection with the authorization, issuance and
sale of the Common Stock.

It is our opinion that, subject to said proceedings
being duly taken and completed as now contemplated
before the issuance of the Common Stock, said
Common Stock, will, upon the issuance and sale
thereof in accordance with the Timberline
Bancshares, Inc. 1998 Stock Option Plan referred to
in the Registration Statement, be legally and
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit
to the Registration Statement.

                   Respectfully submitted,

                   GARY STEVEN FINDLEY & ASSOCIATES

           By:     /s/ Thomas Q. Kwan

                   Thomas Q. Kwan
                   Attorney at Law

TQK:bl

                EXHIBIT 23.1

  CONSENT OF CARLSON, PAVLIK AND DRAGESET,
         CERTIFIED PUBLIC ACCOUNTANTS

          CARLSON, PAVLIK AND DRAGSET
          Certified Public Accountants
              Post Office Box 626
          Yreka, California 96097-0626
                (530) 842-2796

       CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the
Registration Statement of Timberline Bancshares,
Inc. on form S-8 of our report dated February 2,
1998, on our audits of the consolidated financial
statements of Timberline Bancshares, Inc. as of the
December 31, 1997, 1996 and 1995 and for the years
ended December 31, 1997, 1996 and 1995, which
report is incorporated be reference in the Annual
Report on form 10-K.

/s/Carlson, Pavlik and Drageset
Carlson, Pavlik and Drageset
Yreka, California
May 18, 1998
 

                  EXHIBIT 99.1

             TIMBERLINE BANCSHARES, INC.
       1998 STOCK OPTION PLAN AND AGREEMENTS

             TIMBERLINE BANCSHARES, INC.
              1998 STOCK OPTION PLAN

1.   Purpose
     The purpose of the Timberline Bancshares, Inc. 
1998 Stock Option Plan (the "Plan") is to
strengthen Timberline Bancshares, Inc.("Company")
and those corporations which are or hereafter
become subsidiary corporations of the Company by
providing an additional means of attracting and
retaining competent directors, officers and
management level employees and by providing to
participating directors, officers and management
level employees added incentive for high levels
of performance.  The Plan seeks to accomplish these
purposes and achieve these results by providing
a means whereby such directors, officers and
management level employees may purchase shares of
the common stock of the Company pursuant to options
granted in accordance with the Plan.
     Options granted pursuant to the Plan are
intended to be either "incentive stock options"
within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to
time (the "Code"), or "nonqualified stock options",
as shall be determined and designated upon the
grant of each option hereunder.

2.   Administration
     The Plan shall be administered by the Board of
Directors (the "Board").  Any action of the  Board
with respect to the administration of the Plan
shall be taken pursuant to a majority vote, or
the unanimous written consent, of its members. 
Subject to the express provisions of the Plan, the
Board shall have the authority to construe and
interpret the Plan, define the terms used herein,
prescribe, amend and rescind, the rules and
regulations relating to administration of the Plan,
and make all other determinations necessary or
advisable for administration of the Plan.
     All decisions, determinations, interpretations
or other actions by the Board shall be final,
conclusive and binding on all persons, optionees,
grantees, subsidiary corporations of the Company
and any successors-in-interest to such parties.

3.   Incentive Stock Options
     All options granted which are designated at
the time of grant as an "incentive stock option"
shall be deemed an incentive stock option.
     (a)  Incentive stock options granted under the
Plan are intended to be qualified under Section 422
of the Code.
     (b)  Full-time salaried officers and
management level employees of the Company or a
subsidiary corporation (as that term is defined in
Section 424(f) of the Code), shall be eligible for
selection to participate in the incentive stock
option portion of the Plan.  No director of the
Company who is not also a full-time salaried
officer or employee of the Company or a subsidiary
corporation, may be granted an incentive stock
option hereunder.  Subject to the express
provisions of the Plan, the Board shall (i) select
from the eligible class of employees and determine
to whom incentive stock options shall be granted,
(ii) determine the discretionary terms and
provisions of the respective incentive stock option
agreements (which need not be identical), (iii)
determine the times at which such incentive stock
options shall be granted, (iv) determine the number
of shares subject to each incentive stock option,
and (v) grant such incentive stock options to such
individuals.  An individual who has been granted an
incentive stock option may, if he or she is
otherwise eligible under the Plan, be granted
additional incentive stock options if the Board
shall so determine.
     (c)  Except as described in subsection (e)
below, the Board shall not grant an incentive
stock option to purchase shares of the Company's
common stock to any individual who, at the time
of the grant, owns stock possessing more than 10%
of the total combined voting power or value of
all classes of stock of the Company or a subsidiary
corporation.  The attribution rules of Section
424(d) of the Code shall apply in the determination
of ownership of stock for these purposes.
     (d)  The aggregate fair market value
(determined as of the time the incentive stock
option is granted) of stock with respect to which
incentive stock options are exercisable for the
first time by an individual during any calendar
year (under all plans of the Company and its
subsidiary corporations, if any) shall not exceed
$100,000, plus any greater amount as may be
permitted under subsequent amendments to the Code.
     (e)  The purchase price of stock subject to
each incentive stock option shall be determined
by the Board but shall not be less than one hundred
percent (100%) of the fair market value of such
stock at the time such option is granted, except,
in the case of optionees who at the time of the
grant own more than ten percent (10%) of the total
combined voting power of all classes of stock of
the Company, its parent or subsidiary corporation,
in which case the purchase price of the stock shall
not be less than one hundred ten percent (110%) of
the fair market value of such stock at the time
such option is granted and the term of such option
shall be for no more than five (5) years.  The fair
market value of such stock shall be determined in
accordance with any reasonable valuation method,
including the valuation methods described in
Treasury Regulation Section 20.2031-2.

4.   Nonqualified Stock Options
     (a)  All options granted which are (i) in
excess of the aggregate fair market value
limitations set forth in Section 3(d) hereof, (ii)
designated at the time of the grant as
"nonqualified", or (iii) intended to be incentive
stock options but do not meet the requirements of
incentive stock options, shall be deemed
nonqualified stock options.  Nonqualified stock
options granted hereunder shall be so designated in
the nonqualified stock option agreement entered
into between the Company and the optionee.
     (b)  Directors, full-time salaried officers
and management level employees of the Company or a
subsidiary corporation shall be eligible for
selection to participate in the nonqualified
stock option portion of the Plan.  Subject to the
express provisions of the Plan, the Board shall (i)
select from the eligible class of individuals and
determine to whom nonqualified stock options shall
be granted, (ii) determine the discretionary terms
and provisions of the respective nonqualified stock
option agreements (which need not be identical),
(iii) determine the times at which such 
nonqualified stock options shall be granted, (iv)
determine the number of shares subject to each
nonqualified stock option and (v) grant such
nonqualified stock options to such individuals.  An
individual who has been granted a nonqualified
stock option may, if he or she is otherwise
eligible under the Plan, be granted additional
nonqualified stock options if the Board shall so
determine.
     (c)  The purchase price of stock subject to
each nonqualified stock option shall be
determined by the Board but shall not be less than
one hundred percent (100%) of the fair market
value of such stock at the time such option is
granted, except, in the case of optionees who at
the time of the grant own more than ten percent
(10%) of the total combined voting power of all
classes of stock of the Company, its parent or
subsidiary corporations, in which case the purchase
price of the stock shall not be less than one
hundred ten percent (110%) of the fair market value
of such stock at the time such option is granted. 
The fair market value of such stock shall be
determined in accordance with any reasonable
valuation method, including the valuation methods
described in Treasury Regulation 20.2031-2.

5.   Stock Subject to the Plan
     Subject to adjustments as provided in Section
12, hereof, the stock to be offered under the
Plan shall be shares of the Company's authorized
but unissued common stock (hereinafter called
"stock") and the aggregate amount of stock to be
delivered upon exercise of all options granted
under the Plan shall not exceed 300,000 shares.  If
any option shall be canceled, surrendered or
expire for any reason without having been exercised
in full, the underlying shares subject thereto
shall again be available for purposes of the Plan.

6.   Continuation of Employment
     Nothing contained in the Plan (or in any
option agreement) shall obligate the Company or
a subsidiary corporation to employ any optionee for
any period or interfere in any way with the right
of the Company or a subsidiary corporation to
reduce the optionee's compensation.  However, the
Company may not reduce the terms of any option
without the approval of the optionee.

7.   Exercise of Options
     No option shall be exercisable until all
necessary regulatory and shareholder approvals of
the Plan are obtained.  Except as otherwise
provided in this section, each option shall be
exercisable in such installments, which need not be
equal, and upon such contingencies as the Board
shall determine; provided, however, that if an
optionee shall not in any given installment period
purchase all of the shares which the optionee is
entitled to purchase in such installment period,
the optionee's right to purchase any shares not
purchased in such installment period shall continue
until expiration or termination of such option. 
Notwithstanding the foregoing, the options shall
vest at the rate of at least 20% per year over a
five year period from the date the option is
granted.
     Fractional share interests shall be
disregarded, except that they may be accumulated. 
Not less than ten (10) shares may be purchased at
any one time unless the number of shares purchased
is the total number of shares which is exercisable
at such time.  Options may be exercised by written
notice delivered to the Company stating the number
of shares with respect to which the option is
being exercised, together with the full purchase
price for such shares.  Payment of the option price
in full, for the number of shares to be delivered,
must be made (a) in cash or (b) subject to
applicable law, with the Company's stock previously
acquired by the optionee and held by the optionee
for a period of at least six months.
Notwithstanding the foregoing, in the event an
optionee who has an incentive stock option does
exercise the incentive stock option by utilizing
(b) above, the optionee should obtain tax advice as
to the consequences of such action.  The equivalent
dollar value of shares used to effect a purchase
shall be the fair market value of the shares on the
date of exercise.  If the option is being exercised
by any person other than the optionee, said notice
shall be accompanied by proof, satisfactory to
counsel for the Company, of the right of such
person to exercise the option.  Optionees will have
no rights as shareholders with respect to stock of
the Company subject to their stock option
agreements until the date of issuance of the stock
certificate to them.

8.   Nontransferability of Options
     Each option shall, by its terms, be
nontransferable by the optionee other than by will
or the laws of descent and distribution, and shall
be exercisable during his or her lifetime only by
the optionee.

9.   Cessation of Directorship or Employment
     Except as provided in Sections 10 and 20
hereof, if an optionee ceases to be a director or
an employee of the Company or a subsidiary
corporation for any reason other than his or her
disability (as defined in Section 22(e)(3) of the
Code) or death, the optionee's option shall expire
three (3)months after the date of termination of
such directorship or employment.  During the period
after cessation of directorship or employment, such
option shall be exercisable only as to those
installments, if any, which have accrued and/or
vested as of the date on which the optionee ceased
to be a director or an employee of the Company or a
subsidiary corporation.

10.  Termination of Employment for Cause
     If the stock option agreement so provides and
if an optionee's employment by the Company or a
subsidiary corporation is terminated for cause, the
optionee's option shall expire thirty (30) days
from the date of such termination.  Termination for
cause shall include, but not be limited to,
termination for malfeasance or gross misfeasance in
the performance of duties or conviction of a crime
involving moral turpitude, and, in any event, the
determination of the Board with respect thereto
shall be final and conclusive.

11.  Disability or Death of Optionee
     If any optionee dies while serving as a
director or an employee of the Company or a
subsidiary corporation, the option shall expire one
(1) year after the date of such death, except as
provided in Section 20 hereof.  After such death
but before such expiration, the persons to whom
the optionee's rights under the option shall have
passed by will or by the laws of descent and
distribution or the executor or administrator of
optionee's estate shall have the right to exercise
such option to the extent that installments, if
any, had accrued and/or vested as of the date on
which the optionee ceased to be a director or an
employee of the Company or a subsidiary
corporation.
     If the optionee shall terminate his or her
directorship or employment because of disability
(as defined in Section 22(e)(3) of the Code), the
optionee may exercise this option to the extent he
or she is entitled to do so at the date of
termination, at any time within one (1) year of the
date of termination, except as provided in Section
20 hereof.
     If any optionee dies during the three (3)
month period referred to in Section 9 hereof, the
option shall expire one (1) year after the date of
such death, except as provided in Section 20
hereof.

12.  Adjustment Upon Changes in Capitalization
     If the outstanding shares of the stock of the
Company are increased, decreased, changed into
or exchanged for a different number or kind of
shares or securities of the Company through
reorganization, merger, recapitalization,
reclassification, stock split, stock dividend,
stock consolidation or otherwise, without
consideration to the Company, an appropriate and
proportionate adjustment shall be made in the
number and kind of shares as to which options may
be granted.  A corresponding adjustment changing
the number or kind of shares and the exercise price
per share allocated to unexercised options or
portions thereof, which shall have been granted
prior to any such change shall likewise be made. 
Any such adjustment, however, in an outstanding
option shall be made without change in the total
price applicable to the unexercised portion of the
option, but with a corresponding adjustment in the
price for each share subject to the option.  Any
adjustment under this Section 12 shall be made by
the Board, whose determination as to what
adjustments shall be made, and the extent thereof,
shall be final and conclusive.  No fractional
shares of stock shall be issued or made available
under the Plan on account of any such adjustment,
and fractional share-interests shall be
disregarded, except that they may be accumulated.

13.  Terminating Events
     A Terminating Event shall be defined as any
one of the following events: (i) a dissolution
or liquidation of the Company; (ii) a
reorganization, merger or consolidation of the
Company with one or more corporations, the result
of which (A) the Company is not the surviving
corporation, or (B) the Company becomes a
subsidiary of another corporation (which shall be
deemed to have occurred if another corporation
shall own directly or indirectly, over 80% of the
aggregate voting power of all outstanding equity
securities of the Company); (iii) a sale of
substantially all the assets of the Company to
another corporation; or (iv) a sale of the equity
securities of the Company representing more than
80% of the aggregate voting power of all
outstanding equity securities of the Company to any
person or entity, or any group of persons and/or
entities acting in concert.  When the Company knows
that a Terminating Event will occur (i) the Company
shall deliver to each optionee no less than thirty
(30) days prior to the Terminating Event, written
notification of the Terminating Event and the
optionee's right to exercise all options granted
pursuant to the Plan, whether or not vested under
the Plan or applicable stock option agreement, and
(ii) all outstanding options granted pursuant to
the Plan shall completely vest and become
immediately exercisable as to all shares granted
pursuant to the option immediately prior to such
Terminating Event.  This right of exercise shall be
conditional upon execution of a final plan of
dissolution or liquidation or a definitive
agreement of consolidation or merger.  Upon the
occurrence of the Terminating Event all
outstanding options and the Plan shall terminate;
provided, however, that any outstanding options
not exercised as of the occurrence of the
Terminating Event shall not terminate if there is a
successor corporation which assumes the outstanding
options or substitutes for such options, new
options covering the stock of the successor
corporation with appropriate adjustments as to the
number and kind of shares and prices.

14.  Amendment and Termination
     The Board may at any time suspend, amend or
terminate the Plan and may, with the consent
of the optionee, make such modification of the
terms and conditions of the option as it shall deem
advisable; provided that, except as permitted under
the provisions of Sections 12 and 13 hereof, no
amendment or modification which would:
     (a)  increase the maximum number of shares     
      which may be purchased pursuant to           
options granted under the Plan either in           
the aggregate or by an individual;

     (b)  change the minimum option price;

     (c)  increase the maximum term of options      
     provided for herein; or

     (d)  permit options to be granted to anyone    
       other than directors, full-time salaried     
      officers or management level employees of     
      the Company or a subsidiary corporation;

may be adopted without the Company having first
obtained any necessary regulatory and shareholder
approvals required by law.
     No option may be granted during any suspension
or after termination of the Plan.  Amendment,
suspension or termination of the Plan shall not
(except as otherwise provided in Section 12
hereof), without the consent of the optionee, alter
or impair any rights or obligations under any
option theretofore granted.

15.  Time of Granting Options
     The time an option is granted, sometimes
referred to as the date of grant, shall be the day
of the action of the Board described in Sections
3(b) and 4(b) hereof; provided, however, that if
appropriate resolutions of the Board indicate that
an option is granted as of and on some future date,
the time such option is granted shall be such
future date.  If action by the Board is taken by
unanimous written consent of its members, the
action of the Board shall be deemed to be at the
time the last member of the  Board signs the
consent.

16.  Privileges of Stock Ownership;
     Securities Law Compliance; Notice of Sale
     
     No optionee shall be entitled to the
privileges of stock ownership as to any shares of
stock not actually issued.  No shares shall be
purchased upon the exercise of any option unless
and until the Company has fully complied with all
applicable requirements of any regulatory agency
having jurisdiction over the Company including
registration of the stock options and underlying
shares, as necessary, and all applicable
requirements of any exchange upon which stock of
the Company may be listed.  The optionee shall give
the Company notice of any sale or disposition of
any such shares not more than five (5) days after
such sale or disposition.

17.  Effective Date of the Plan

     The Plan shall be deemed adopted by the Board
as of February 12, 1998 and shall be effective
immediately subject to approval by the shareholders
of the Company within twelve months of the date the
Plan is adopted, by the vote of a majority of the
outstanding shares represented and voting at a duly
held meeting of shareholders at which a quorum is
present, or by the written consent vote of the
holders of a majority of the outstanding shares of
the Company's stock.  No option under the Plan
shall be exercised prior to the shareholders'
approval of the Plan.

18.  Termination

     Unless previously terminated by the Board, the
Plan shall terminate at the close of business
on February 12, 2008.  No options shall be granted
under the Plan thereafter, but such termination
shall not affect any option theretofore granted.

19.  Option Agreement

     Each option shall be evidenced by a written
stock option agreement executed by the Company and
the optionee and shall contain each of the
provisions and agreements herein specifically
required to be contained therein, and such other
terms and conditions as are deemed desirable and
are not inconsistent with the Plan.  Each incentive
stock option agreement shall contain such terms and
provisions as the Board may determine to be
necessary in order to qualify such option as an
incentive stock option within the meaning of
Section 422 of the Code.

20.  Option Period

     Each option and all rights and obligations
thereunder shall expire on such date as the Board
may determine, but not later than ten (10) years
from the date such option is granted, and shall be
subject to earlier termination as provided
elsewhere in the Plan.

21.  Exculpation and Indemnification

     To the extent permitted by applicable law in
effect from time to time, no member of the
Board shall be liable for any act or omission of
any other member of the Board nor for any act or
omission on the member's own part, except the
member's own willful misconduct or gross
negligence.  The Company and its subsidiary
corporations shall pay expenses incurred by, and
satisfy a judgment or fine rendered or levied
against, a present or former member of the Board in
any action brought by a third party against such
person (whether or not the Company is joined as
a party defendant) to impose a liability or penalty
on such person while a member of the Board
arising with respect to the Plan or administration
thereof or out of membership on the Board or all
or any combination of the preceding; provided, the
Board determines in good faith that such member
of the Board was acting in good faith, within what
such member of the Board reasonably believed
to be the scope of his or her employment or
authority, and for a purpose which he or she
reasonably believed to be in the best interests of
the Company or its shareholders.  Payments
authorized hereunder include amounts paid and
expenses incurred in settling any such action or
threatened action.  This Section 21 does not apply
to any action instituted or maintained in the right
of the Company by a shareholder or holder of a
voting trust certificate representing shares of the
Company or a subsidiary corporation thereof.  The
provisions of this Section 21 shall apply to the
estate, executor, administrator, heirs, legatees or
devisees of a member of the Board and the term
"person" as used in this Section 21 shall include
the estate, executor, administrator, heirs,
legatees or devisees of such person.

22.  Agreement and Representations of Optionee

     Unless the shares of stock covered by the Plan
have been registered with the Securities Exchange
Commission, each optionee shall, by accepting an
option, represent and agree, for himself or herself
and his or her transferees by will or the laws of
descent and distribution, that all stock will be
acquired for investment and not for resale or
distribution.  Upon such exercise of any portion of
an option, the person entitled to exercise the same
shall, upon request of the Company, furnish
evidence satisfactory to the Company (including a
written and signed representation) to the effect
that the stock is being acquired in good faith for
investment and not for resale or distribution. 
Furthermore, the Company, at its sole discretion,
may take all reasonable steps, including affixing
the following legend (and/or such other legend or
legends as counsel shall require) on certificates
embodying the shares:

     The shares represented by this certificate     
     have not been registered under the
     Securities Act of 1933 and may not be sold,    
     pledged, hypothecated or otherwise
     transferred or offered for sale in the absence 
     of an effective registration statement
     with respect to them under the Securities Act  
     of 1933 or a written opinion of counsel
     for the optionee which opinion shall be      
     acceptable to counsel for the Company that
     registration is not required.

to assure itself against any sale or distribution
by the optionee which does not comply with the Plan
or any federal or state securities laws.
     The Company agrees to remove any legend
affixed to the certificates embodying the shares
pursuant to this Section 22 when all of the
restrictions on the transfer of the shares, whether
imposed by the Plan or federal or state law, have
terminated.

23.  Information to Employees
     The Company shall provide optionees with
financial statements of the Company at least
annually.

NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, NO SHARES OF THE COMPANY'S COMMON STOCK
SHALL BE ISSUED PURSUANT HERETO UNLESS THE
TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS
OF THE COMPANY.

       TIMBERLINE BANCSHARES, INC.

    INCENTIVE STOCK OPTION AGREEMENT

     This Incentive Stock Option Agreement (the
"Agreement") is made and entered into as of
the ______ day of __________, _____, by and between
Timberline Bancshares, Inc., a California
corporation (the "Company"), and ________________
("Optionee");
     WHEREAS, pursuant to the Timberline
Bancshares, Inc. 1998 Stock Option Plan (the
"Plan"), a copy of which is attached hereto, the
Board of Directors of the Company has authorized
granting to Optionee an incentive stock option to
purchase all or any part of ______________
(_____) authorized but unissued shares of the
Company's common stock at the price of ________
Dollars and _______ Cents ($__.__) per share, such
option to be for the term and upon the terms and
conditions hereinafter stated;
     NOW, THEREFORE, it is hereby agreed:
     1.   Grant of Option.  Pursuant to said action
of the Board of Directors, the Company hereby
grants to Optionee the option to purchase, upon and
subject to the terms and conditions of the Plan
which is incorporated in full herein by this
reference, all or any part of ______________
(_____) shares of the Company's common stock
(hereinafter called "stock") at the price of
_____________ Dollars and _______ Cents ($__.__)
per share, which price is not less than one
hundred percent (100%) of the fair market value of
the stock (or not less than 110% of the fair
market value of the stock for Optionee-shareholders
who own securities possessing more than ten
percent (10%) of the total combined voting power of
all classes of securities of the Company, its
parent or subsidiary corporation) as of the date of
action of the Board of Directors granting this
option.
     2.   Exercisability.  This option shall be
exercisable as to ______________________________
________________________________________________
________________________________________________
_______________________________________________. 
This option shall remain exercisable as to all
vested shares until ______________ __, _____ (but
not later than ten (10) years from the date this
option is granted) unless this option has expired or
terminated earlier in accordance with the
provisions hereof or in the Plan.  Subject to
paragraphs 4 and 5, shares as to which this option
becomes exercisable pursuant to the foregoing
provision may be purchased at any time prior to
expiration of this option.
     3.   Exercise of Option.  This option may be
exercised by written notice (substantially in the
form as that which is attached as Exhibit A)
delivered to the Company stating the number of
shares with respect to which this option is being
exercised, together with (a) cash in the amount of
the purchase price of such shares, or (b) subject
to applicable law, with the Company's stock
previously acquired by Optionee and held by
Optionee for a period of at least six months. 
Notwithstanding the foregoing, in the event
Optionee does exercise the option by utilizing (b)
above, Optionee should obtain tax advice as to the
consequences of such action.  Not less than ten
(10) shares may be purchased at any one time unless
the number purchased is the total number which
may be purchased under this option and in no event
may the option be exercised with respect to
fractional shares.  Upon exercise, Optionee shall
make appropriate arrangements and shall be
responsible for the withholding of any federal and
state taxes then due.
     4.   Cessation of Employment.  Except as
provided in Paragraphs 2 and 5 hereof, if
Optionee shall cease to be an employee of the
Company or a subsidiary corporation for any reason
other than Optionee's death or disability [as
defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended from time to time (the
"Code")], this option shall expire three (3) months
thereafter.  During the three (3) month period this
option shall be exercisable only as to those
installments, if any, which had accrued as of the
date when Optionee ceased to be an employee of
the Company or a subsidiary corporation.
     5.   Termination of Employment for Cause.  If
Optionee's employment with the Company or a
subsidiary corporation is terminated for cause,
this option shall expire thirty (30) days
from the date of such termination.  Termination for
cause shall include, but not be limited to,
termination for malfeasance or gross misfeasance in
the performance of duties or conviction of a
crime involving moral turpitude, and, in any event,
the determination of the Board of Directors with
respect thereto shall be final and conclusive.
     6.   Nontransferability; Death or Disability
of Optionee.  This option shall not be transferable
except by will or by the laws of descent and
distribution and shall be exercisable during
Optionee's lifetime only by Optionee.  If Optionee
dies while serving as an employee of the Company or
a subsidiary corporation, or during the three (3)
month period referred to in Paragraph 4 hereof,
this option shall expire one (1) year after the
date of Optionee's death or on the day specified in
Paragraph 2 hereof, whichever is earlier.  After
Optionee's death but before such expiration, the
persons to whom Optionee's rights under this option
shall have passed by will or by the laws of descent
and distribution or the executor or administrator
of Optionee's estate shall have the right to
exercise this option as to those shares for which
installments had accrued under Paragraph 2 hereof
as of the date on which Optionee ceased to be an
employee of the Company or a subsidiary
corporation.
     If Optionee terminates his or her employment
because of disability (as defined in Section
22(e)(3) of the Code), Optionee may exercise this
option to the extent he or she is entitled to do so
at the date of termination, at any time within one
(1) year of the date of termination, or before the
expiration date specified in Paragraph 2 hereof,
whichever is earlier.
     7.   Employment.  This Agreement shall not
obligate the Company or a subsidiary
corporation to employ Optionee for any period, nor
shall it interfere in any way with the right of the
Company or a subsidiary corporation to reduce
Optionee's compensation.
     8.   Privileges of Stock Ownership.  Optionee
shall have no rights as a shareholder with
respect to the Company's stock subject to this
option until the date of issuance of stock
certificates to Optionee.  Except as provided in
the Plan, no adjustment will be made for dividends
or other rights for which the record date is prior
to the date such stock certificates are issued.
     9.   Modification and Termination.  The rights
of Optionee are subject to modification and
termination upon the occurrence of certain events
as provided in Sections 13 and 14 of the Plan.
     10.  Notification of Sale.  Optionee agrees
that Optionee, or any person acquiring shares
upon exercise of this option, will notify the
Company not more than five (5) days after any sale
or other disposition of such shares.
     11.  Representations of Optionee.  No shares
issuable upon the exercise of this option shall be
issued and delivered unless and until the Company
has complied with all applicable requirements of
California and federal law and of the Securities
and Exchange Commission and the California
Department of Corporations pertaining to the
issuance and sale of such shares, and all
applicable listing requirements of the securities
exchanges, if any, on which shares of the Company
of the same class are then listed.  Optionee agrees
to ascertain that such requirements shall have been
complied with at the time of any exercise of this
option.  In addition, if the Optionee is an
"affiliate" for purposes of the Securities Act of
1933, there may be additional restrictions on the
resale of stock, and Optionee therefore agrees to
ascertain what those restrictions are and to abide
by the restrictions and other applicable federal
and state securities laws. 
     Furthermore, the Company may, if it deems
appropriate, issue stop transfer instructions
against any shares of stock purchased upon the
exercise of this option and affix to any
certificate representing such shares the legends
which the Company deems appropriate.
     Optionee represents that the Company, its
directors, officers, employees and agents have not
and will not provide tax advice with respect to the
option, and Optionee agrees to consult with his
or her own tax advisor as to the specific tax
consequences of the option, including the
application and effect of federal, state, local and
other tax laws.
     12.  Notices.  Any notice to the Company
provided for in this Agreement shall be
addressed to it in care of its President or Chief
Financial Officer at its main office and any notice
to Optionee shall be addressed to Optionee's
address on file with the Company or a subsidiary
corporation, or to such other address as either may
designate to the other in writing.  Any notice
shall be deemed to be duly given if and when
enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage
prepaid, with the United States Postal Service.  In
lieu of giving notice by mail as aforesaid, any
written notice under this Agreement may be given to
Optionee in person, and to the Company by personal
delivery to its President or Chief Financial
Officer.
     13.  Incentive Stock Option.  This Agreement
is intended to be an incentive stock option
agreement as defined in Section 422 of the Code;
provided, however, that if the option shall fail to
constitute an incentive stock option for any
reason, the option shall thereafter be governed by
the provisions of the Plan regarding nonqualified
stock options.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year
first above written.

OPTIONEE                TIMBERLINE BANCSHARES, INC.

By__________________    By_______________________   
                        By_______________________   
                     

                EXHIBIT A

   NOTICE OF STOCK OPTION EXERCISE

Mr. Robert J. Youngs
President and Chief Executive Officer
Timberline Bancshares, Inc.
123 Main Street
Yreka, California 96097

Dear Mr. Youngs:

Pursuant to my incentive stock option agreement
dated _______________, I am exercising my stock
option to acquire ____________ shares of common
stock of Timberline Bancshares, Inc.  I am also
enclosing payment by means of (cash in the amount
of $_________, or ________ qualifying shares
of Timberline Bancshares, Inc. having a fair market
value) equal to the sum of the option exercise
price.

I further acknowledge that Timberline Bancshares,
Inc. makes no representations as to federal or
state tax matters, and that I am to consult with my
own tax attorney or tax accountant for advice with
respect to the exercise of my stock option and the
effect of the sale of the option shares.  [(For
executive officers of the Company or insiders of
the Company) I further acknowledge that I am an
affiliate or insider of Timberline Bancshares, Inc.
and that federal securities laws are applicable to
the exercise of the stock option and any subsequent
sale of the option shares including the
applicability of the Securities Act of 1933 and
Rule 144 (both dealing with the sale of shares by
an affiliate).  I agree to comply with such
securities laws and rules.]

                              Sincerely,

                              ________________
                              (Name of Optionee)

NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, NO SHARES OF THE COMPANY'S COMMON STOCK
SHALL BE ISSUED PURSUANT HERETO UNLESS THE
TIMBERLINE BANCSHARES, INC. 1998 STOCK OPTION PLAN
SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS
OF THE COMPANY.

       TIMBERLINE BANCSHARES, INC.

  NONQUALIFIED STOCK OPTION AGREEMENT

     This Nonqualified Stock Option Agreement (the
"Agreement") is made and entered into as of the
______ day of _____________, _____, by and between
Timberline Bancshares, Inc., a California
corporation (the "Company"), and _______________,
("Optionee"); WHEREAS, pursuant to the Timberline
Bancshares, Inc. 1998 Stock Option Plan (the
"Plan"), a copy of which is attached hereto, the
Board of Directors of the Company has authorized
granting to Optionee a nonqualified stock option to
purchase all or any part of  _______________
(_________) authorized but unissued shares of the
Company's common stock at the price of ________
Dollars and _______ Cents ($__.__) per share, such
option to be for the term and upon the terms and
conditions hereinafter stated; NOW, THEREFORE, it
is hereby agreed:
     1.   Grant of Option.  Pursuant to said action
of the Board of Directors, the Company hereby
grants to Optionee the option to purchase, upon and
subject to the terms and conditions of the Plan
which is incorporated in full herein by this
reference, all or any part of _______________
(______) shares of the Company's common stock
(hereinafter called "stock") at the price of 
________ Dollars and _______ Cents ($__.__) per
share, which price is not less than one hundred
percent (100%) of the fair market value of the
stock (or less than 110% of the fair market value
of the stock if the Optionee owns securities
possessing more than ten percent (10%) of the total
combined voting power of all classes of securities
of the Company, its parent or subsidiary
corporations) as of as of the date of the action of
the Board of Directors granting this option.
     2.   Exercisability.  This option shall be
exercisable as to _________________________________
___________________________________________________
___________________________________________________
__________________________________________________. 

This option shall remain exercisable as to all
vested shares until __________ __, _____ (but not
later than ten (10) years from the date this option
is granted) unless this option has expired or
terminated earlier in accordance with the
provisions hereof or in the Plan.  Subject to
paragraphs 4 and 5, shares as to which this option
becomes exercisable pursuant to the foregoing
provision may be purchased at any time prior to
expiration of this option.
     3.   Exercise of Option.  This option may be
exercised by written notice (substantially in the
form as that which is attached as Exhibit A)
delivered to the Company stating the number of
shares with respect to which this option is being
exercised, together with (a) cash in the amount of
the purchase price of such shares, or (b) subject
to applicable law, with the Company's stock
previously acquired by Optionee and held by
Optionee for a period of at least six months. 
Notwithstanding the foregoing, in the event
Optionee does exercise the option by utilizing (b)
above, Optionee should obtain tax advice as to the
consequences of such action.  Not less than ten
(10) shares may be purchased at any one time unless
the number purchased is the total number which
may be purchased under this option and in no event
may the option be exercised with respect to
fractional shares.  Upon exercise, Optionee shall
make appropriate arrangements and shall be
responsible for the withholding of any federal and
state taxes then due.
     4.   Cessation of Directorship or Employment. 
Except as provided in Paragraphs 2 and
5 hereof, if Optionee shall cease to be a director
or an employee of the Company or a subsidiary
corporation for any reason other than Optionee's
death or disability [as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended
from time to time (the "Code")], this option shall
expire three (3) months thereafter.  During the
three (3) month period this option shall be
exercisable
only as to those installments, if any, which had
accrued as of the date when Optionee ceased to be
a director or an employee of the Company or a
subsidiary corporation.  If Optionee is both a
director and an employee, then such option shall
expire three (3) months after the latter of the
date of termination of Optionee's directorship or
employment.
     5.   Termination of Employment for Cause.  If
Optionee's employment with the Company or a
subsidiary corporation is terminated for cause,
this option shall expire thirty (30) days from the
date of such termination.  Termination for cause
shall include, but not be limited to, termination
for malfeasance or gross misfeasance in the
performance of duties or conviction of a crime
involving moral turpitude, and, in any event, the
determination of the Board of Directors with
respect thereto shall be final and conclusive.
     6.   Nontransferability; Death or Disability
of Optionee.  This option shall not be transferable
except by will or by the laws of descent and
distribution and shall be exercisable during
Optionee's lifetime only by Optionee.  If Optionee
dies while serving as a director or an employee
of the Company or a subsidiary corporation, or
during the three (3) month period referred to in
Paragraph 4 hereof, this option shall expire one
(1) year after the date of Optionee's death or on
the day specified in Paragraph 2 hereof, whichever
is earlier.  After Optionee's death but before such
expiration, the persons to whom Optionee's rights
under this option shall have passed by will or by
the laws of descent and distribution or the
executor or administrator of Optionee's estate
shall have the right to exercise this option as to
those shares for which installments had accrued
under Paragraph 2 hereof as of the date on which
Optionee ceased to be a director or an employee of
the Company or a subsidiary corporation.
     If Optionee terminates his or her directorship
or employment because of disability (as defined in
Section 22(e)(3) of the Code), Optionee may
exercise this option to the extent he or she
is entitled to do so at the date of termination, at
any time within one (1) year of the date of
termination, or before the expiration date
specified in Paragraph 2 hereof, whichever is
earlier.
     7.   Employment.  This Agreement shall not
obligate the Company or a subsidiary corporation to
employ Optionee for any period, nor shall it
interfere in any way with the right of theCompany
or a subsidiary corporation to reduce Optionee's
compensation.
     8.   Privileges of Stock Ownership.  Optionee
shall have no rights as a shareholder with respect
to the Company's stock subject to this option until
the date of issuance of stock certificates to
Optionee.  Except as provided in the Plan, no
adjustment will be made for dividends or other
rights for which the record date is prior to the
date such stock certificates are issued.
     9.   Modification and Termination.  The rights
of Optionee are subject to modification and
termination upon the occurrence of certain events
as provided in Sections 13 and 14 of the Plan.
     10.  Notification of Sale.  Optionee agrees
that Optionee, or any person acquiring shares
upon exercise of this option, will notify the
Company not more than five (5) days after any sale
or other disposition of such shares.
     11.  Representations of Optionee.  No shares
issuable upon the exercise of this option shall be
issued and delivered unless and until the Company
has complied with all applicable requirements of
California and federal law and of the Securities
and Exchange Commission and the California
Department of Corporations pertaining to the
issuance and sale of such shares, and all
applicable listing requirements of the securities
exchanges, if any, on which shares of the Company
of the same class are then listed.  Optionee agrees
to ascertain that such requirements shall have been
complied with at the time of any exercise of this
option.  In addition, if the Optionee is an
"affiliate" for purposes of the Securities Act of
1933, there may be additional restrictions on the
resale of stock, and Optionee therefore agrees to
ascertain what those restrictions are and to abide
by the restrictions and other applicable federal
and state securities laws.
     Furthermore, the Company may, if it deems
appropriate, issue stop transfer instructions
against any shares of stock purchased upon the
exercise of this option and affix to any
certificate representing such shares the legends
which the Company deems appropriate.
     Optionee represents that the Company, its
directors, officers, employees and agents have not
and will not provide tax advice with respect to the
option, and Optionee agrees to consult with his
or her own tax advisor as to the specific tax
consequences of the option, including the
application and effect of federal, state, local and
other tax laws.
     12.  Notices.  Any notice to the Company
provided for in this Agreement shall be addressed
to it in care of its President or Chief Financial
Officer at its main office and any notice to
Optionee shall be addressed to Optionee's address
on file with the Company or a subsidiary
corporation, or to such other address as either may
designate to the other in writing.  Any notice
shall be deemed to be duly given if and when
enclosed in a properly sealed envelope and
addressed as stated above and deposited, postage
prepaid, with the United States Postal Service.  In
lieu of giving notice by mail as aforesaid, any
written notice under this Agreement may be given to
Optionee in person, and to the Company by personal
delivery to its President or Chief Financial
Officer.

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year
first above written.

OPTIONEE                TIMBERLINE BANCSHARES, INC.

By_________________       By______________________
                          By______________________

                            EXHIBIT A

                 NOTICE OF STOCK OPTION EXERCISE

Mr. Robert J. Youngs
President and Chief Executive Officer
Timberline Bancshares, Inc.
123 Main Street
Yreka, California 96097

Dear Mr. Youngs:

Pursuant to my nonqualified stock option agreement
dated _______________, I am exercising my stock
option to acquire ____________ shares of common
stock of Timberline Bancshares, Inc.  I am also
enclosing payment by means of (cash in the amount
of $_________, or ________ qualifying shares of
Timberline Bancshares, Inc. having a fair market
value) equal to the sum of the option exercise
price.

I further acknowledge that Timberline Bancshares,
Inc. makes no representations as to federal or
state tax matters, and that I am to consult with my
own tax attorney or tax accountant for advice with
respect to the exercise of my stock option and the
effect of the sale of the option shares.  [(For
executive officers of the Company or insiders of
the Company) I further acknowledge that I am an
affiliate or insider of Timberline Bancshares, Inc.
and that federal securities laws are applicable to
the exercise of the stock option and any subsequent
sale of the option shares including the
applicability of the Securities Act of 1933 and
Rule 144 (both dealing with the sale of shares by
an affiliate).  I agree to comply with such
securities laws and rules.]

                              Sincerely,

                              _____________________
                              (Name of Optionee)