EXHIBIT 10.40

              SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF ALL CLAIMS


     THIS  SETTLEMENT  AGREEMENT  AND  MUTUAL  RELEASE  OF  CLAIMS  (hereinafter
referred to as the  "Agreement")  is made and entered  into on March 26, 1996 by
and between the following parties: Sierra Tahoe Bancorp; Truckee River Bank; and
Sierra Bank of Nevada, a Nevada Banking  Corporation,  its employees,  officers,
directors,  shareholders,  affiliates,  by and through its counsel  (hereinafter
collectively  the  "Defendants"),  and,  Bank of  Illinois  in  Dupage;  Bank of
Hamilton;  Bank of San Bernardino;  Burlingame Bank and Trust Company;  Cerritos
Valley Bank;  Citizens  Bank,Inc.;  Clovis  Community  Bank;  Comstock  Bank; El
Capitan  National Bank;  First  National  Bank;  First National Bank of Durango;
First Citizens  Bankshares,  Inc.;  Founders National Bank of Los Angeles;  Good
Time Restaurant,  Inc.; Great Valley Bank; Hergent National Bank; Humboldt Bank;
Imperial Thrift and Loan  Association;  Jim Thorpe National Bank;  Landmark Bank
Mid Cities;  Mid-Peninsula  Bank;  National Bank of Coxsackie;  National Bank of
Fairbury;  National Bank of Vernon;  North County Bank;  Ocean  National Bank of
Kennebunk; Prior Lake State Bank; Republic Bank, Inc.; San Benito Bank; San Jose
National Bank; Shoreline Bank and Trust Company;  Tri-State Bank; Union National
Bank & Trust Company;  Union State Bank;  Visalia  Community Bank; and,  Western
Sierra National Bank, their respective employees,  officers,  owners, directors,
shareholders,  affiliates  and agents,  by and through its counsel  (hereinafter
"Plaintiffs").


Plaintiffs and Defendants agree as follows:


                                                  W I T N E S S E T H:


WHEREAS, in 1994, the Plaintiffs initiated a legal action against the Defendants
known as American River Bank, et al. v. Mutual Fund,  Inc., et al. in the United
States District Court, Central District of California, known as Case No. 94-7151
JSL (the "Pending Case"); and,

WHEREAS,  without  admitting or acknowledging  any fault in bringing the action;
defending the action;  or resolving the action,  Plaintiffs and Defendants which
to fully settle,  resolve and end the Pending Case and all the matters contained
therein, with prejudice;

     NOW, THEREFORE, Plaintiffs and Defendants agree as follows:

     1. INCORPORATION OF RECITALS.  The above-referenced Recitals are hereby
incorporated into this Agreement by this reference as if set forth in full.



<PAGE>



     2.  MUTUAL  RELEASE.  In  consideration  of the total  sum of  Thirty  Five
Thousand Dollars ($35,000.00),  and for good and valuable  consideration recited
herein,   the  receipt  and  sufficiency  of  which  are  hereby   acknowledged,
Plaintiffs,  and each of them,  hereby fully release and forever  discharges the
Defendants,  and each of them, the Defendants  employees,  officers,  directors,
contractors  and  agents,  from  any and all  present  and  future  monetary  or
nonmonetary responsibilities arising under or through the matters alleged in the
Pending  Case,  or matters  reasonably  related  thereto.  Said  mutual  release
includes,  but is not limited to, any and all claims to  damages,  interest  and
fees of any and all types (whether earned or unearned).

     3. INDEMNIFICATION. Each party agrees not to, directly or indirectly, bring
any action  against  the other  party,  its  affiliates,  agents,  employees  or
officers in any court, tribunal, arbitration,  mediation or other forum relating
to the Pending Case or matters reasonably related thereto. Should such an action
be  brought  in  contravention  of this  Mutual  Release,  the party  wrongfully
bringing  such an action  agrees,  in addition  to any other  relief that may be
sought by the other party,  to fully and  completely  indemnify  the other party
against losses,  costs or expenses  associated  thereby.  Should any third party
bring an action against any one of the parties  hereto,  that party shall defend
that action without  involving the other party.  This Mutual Release shall be an
absolute  preclusion  from  additional  direct or indirect  recovery from either
party as to the Pending Case, and matters reasonably related thereto.

     4.  MISCELLANEOUS.  This Mutual Release is to be construed according to the
laws of the State of California and is intended to be a complete  release.  This
Mutual Release is binding upon the heirs, representatives and successors of each
of the parties  hereto.  Each party  represents  that they/it has the  requisite
authority to enter into this Mutual Release. Once executed,  this Mutual Release
will be valid and binding on each party  hereto.  No other act is  necessary  by
either party to make this Mutual Release  effective.  This Mutual Release is the
complete  expression  of the terms and  conditions  agreed  upon by the  parties
hereto  and may not be alter or  amended  except  in  writing  executed  by both
parties.  Plaintiffs and Defendants  expressly waive any and all retained rights
or interests pursuant to Section 1542 of the California Civil Code. Section 1542
specifically states the following:

     A general  release does not extend to claims  which the  creditor  does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.



<PAGE>



IN WITNESS  WHEREOF,  we have  executed  this  Settlement  Agreement  and Mutual
Release of Claims.


/s/ Brian Bird
Brian Bird, Esq.
Counsel for Plaintiffs




/s/ Alan B. Rabkin
Alan B. Rabkin, Esq.
Counsel for Defendants

<PAGE>