UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

                              Form 10-QSB

 X  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
               
            For the quarterly period ended JUNE 30, 1998

    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                 For the transition period from       to      

                    Commission file number  33-40799            

                 TIMBERLINE BANCSHARES, INC.                           
   (Exact name of small business issuer as specified in its charter)

          California                                 68-0269988        
(State or other jurisdiction of                (IRS Employer Identification No.)
of incorporation or organization)

      123 N. Main Street   P. O. Box 1087, Yreka, Ca 96097
          (Address of principal executive offices)

                          ( 530 )842-6191                              
                     (Issuer's telephone number) 

                                                                       
(Former name, former address and former fiscal year, if changed since last
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter 
period that the registrant was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days.  Yes X   No   .

           APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
              PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and report required to be filed
by Section 12, 13 or 15(d) of the Exchange Act after the distribution of 
securities under a plan confirmed by a court.  Yes     No   

                 APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:    1,006,726 





                        PART 1 - FINANCIAL INFORMATION


Item 1.  Financial Statements

                         TIMBERLINE BANCSHARES, INC.
                        CONSOLIDATED INCOME STATEMENT
                              Periods Indicated

($ in thousand except per share)      
                                              Year    Prior Year Prior Year
                                 Quarter End to Date Quarter End  to Date   
                                   06/30/98  06/30/98  06/30/97  06/30/97

 1.  Interest and Fees on Loans     1,240     2,453     1,111     2,175       
 2.  Interest On Securities
     Held to Maturity                 197       368       182       283
     Available for Sale               100       219       120       254
 3.  Trading Account interest         -0-       -0-       -0-       -0-
 4.  Other interest                   159       323       129       312 
 5.  Total Interest Income          1,696     3,363     1,542     3,024        
 6.  Interest on Deposits             609     1,189       510     1,003       
 7.  Interest on short term borrowing -0-       -0-       -0-       -0-
 8.  Interest on long term debt       -0-       -0-       -0-       -0-
 9.  Total Interest Expense           609     1,189       510     1,003
10.  Net Interest Income            1,087     2,174     1,032     2,021
11.  Provision for Loan Losses         18        38       -0-       -0-
12.  Net Interest Income after                                       
       Provision for loan losses    1,069     2,136     1,032     2,021
13.  Other Income                     106       214       109       223
14.  Other Expenses                   872     1,797       844     1,691
15.  Income before Tax                303       553       297       553
16.  Income Tax Expense                68       128        40       122
17.  Income before extraordinary
       item                           235       425       257       431
18.  Extraordinary item net of tax    -0-       -0-       -0-       -0-
19.  Cumulative effect of accounting
       changes                        -0-       -0-       -0-       -0-
20.  Net Income                     $ 235     $ 425     $ 257     $ 431

21.  Earnings per share             $ .23     $ .42     $ .26     $ .43      





Note 1:  The financial statements included in this report are unaudited but,
in the opinion of management of the Corporation, reflect all adjustments 
(consisting only of normal recurring adjustments) necessary for a fair 
presentation of financial position, results of operations, and changes in 
financial position for the periods presented.
 

                                   -1-
                        TIMBERLINE BANCSHARES, INC.
                         CONSOLIDATED BALANCE SHEET
                                  06/30/98


     ASSETS

 1.  Cash and Due from Banks                           $ 4,605
 2.  Interest Bearing Deposits other banks                 -0-
 3.  Federal Funds sold and securities
       purchased under resale agreement                  9,100
 4.  Trading Account Assets                                -0-
 5.  Other short-term investments                        1,330             
 6.  Investment securities
     Held for Sale                                      14,107
     Held to Maturity                                    6,481
 7.  Loans, Total                                       49,153
          Allowance for loan losses                       (387)              
          Unearned Income                                 (101)
 8.  Premises and Equipment                              2,456
 9.  Due from customers on acceptances                     -0-          
10.  Other assets                                        1,211
11.  Total Assets                                     $ 87,955


     LIABILITIES

12.  Deposits, non-interest bearing                   $ 15,030               
          Interest bearing                              64,715
13.  Short-term borrowing                                  -0-          
14.  Bank Acceptances outstanding                          -0-          
15.  Other liabilities                                     578
16.  Long-term debt                                        -0-          
17.  Commitments and contingent liabilities                -0-          
18.  Minority Interests                                    -0-          
     SHAREHOLDERS EQUITY
19 & 20.  Preferred stock                                  -0-          
21.  Common Stock                                        2,992               
22.  Other Shareholders equity                           4,640
23.  Total Liabilities and Shareholders Equity        $ 87,955


($ in thousand)




Note:  Held for Sale amount stated net of unrealized loss of $2. 


                                       -2-
                            TIMBERLINE BANCSHARES, INC
                       CONSOLIDATED STATEMENT OF CASH FLOWS
                              For Periods Indicated
                                                                   
                                             Year                 Year   
($ in thousand)                             to Date              to Date   
                                            06/30/98             06/30/97
          
Cash Flow from Operating Activities
     Net Income                                $425               $ 435       
     Non-cash items included in income                   
     Depreciation                               153                  93   
     Net change in Bad Debt Provision           (14)                 (3) 
     Cumulative effect of accounting 
         change          
     (Increase)Decrease in:
          Other Assets                          370                  52      
     Increase(Decrease) in:
          Accrued Expenses                       36                  32      
     Prior period adjustment                    -0-                 -0-     
                                                                             
     Net cash provided by operations            970                 609        

Cash Flow from Investing Activities
     Increase(Decrease) in:
          Deposits                            2,187               2,499         
     (Increase)Decrease in:
          Short term investments                (27)                -0-
          Securities:  Held for Sale           (992)             (7,493)       
                    Held to Maturity            723                1585      
          Federal Funds Sold                 (2,100)              6,200        
          Loans                                (551)             (3,466)   
          (Purchase)Sale of Fixed assets       (577)                (35)     
                                                                         
     Net cash (used for) provided by    
     investing activities                    (1,337)               (710)     

Cash Flow from Financing Activities
     Dividends Paid                            (252)               (251)   
               Additional Paid In Capital       -0-                 166      
                                     
     Net cash (applied to)provided by
               financing activities            (252)                (85)     
               Net cash increase (decrease) in
               cash and due from banks         (619)               (186)
Cash and Due from Banks at
     beginning of year                        5,224               5,202  
         

Cash and Due from Banks at
     end of period                           $4,605              $5,016



                                       -3-

Item 2.  Management's Discussion

(a) Plan of Operation

Timberline Bancshares management is an "overlay" of its wholly-owned subsidiary,
Timberline Community Bank, and therefore shares the same concepts regarding 
growth of the institution, protection and preservation of assets, shareholder 
enhancement, and fulfilling the joint mission statement to assist the 
communities which we serve.

(b) Management's Discussion and Analysis of Financial condition and Results of 
Operations 

As reflected in the financial comparisons of 1997 and 1998, the bank has 
continued growth in net interest income.  This growth has slowed somewhat from 
prior years due to the economic conditions of the county in which the bank is 
located. 
While economic indicators report the nation's unemployment rate at 4.7% Siskiyou
County has a current unemployment rate of 11.6%.  The county has been in an 
economic downturn for years as it's main economy was based on timber products 
and services.  The quarter just completed has seen an additional loss of some 
400 hundred jobs in the timber industry.

In view of those economic conditions , the Bank has accelerated its program of 
buying participations from other financial institutions outside its normal 
lending area.   As a relatively small bank in a sparsely populated county, the 
bank has not seen fit to offer mutual funds or insurance as an avenue of 
enhancing income.  Nor has the bank greatly increased service fees to its 
customers, but has relied on the traditional banking revenue sources; 
i.e. income from lending.

At the same time, the Bank has increased services to its customer base by the 
installation of 24 hour telephone banking in the first quarter of the year and 
a Visa debit card program for its customers in the second quarter of the year.
 The bank has also been addressing the Y2K situation diligently, being on 
schedule with the guidelines established by the regulatory authorities including
necessary upgrading of equipment and application testing.  The bank is also 
offering seminars on the Y2K to all  business located in Siskiyou County.  
The cost of these programs and the increased personnel to handle same are
reflected in the nominal increase in other operating expenses.

 In addition, the Bank has continued its dividend program paying a $.25 per 
share cash dividend to shareholders of record in the second quarter of the year.
     


                                    -4-

                        PART 11 - OTHER INFORMATION

Item 1. Legal Proceedings

There are no legal proceedings pending other than those in the normal course of 
doing business that may have a material impact on the bank.

Item 2.  Changes in Securities

None

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8-K

None






                                SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly 
authorized.


                              TIMBERLINE BANCSHARES, INC.




Date   7/28/98                 /ss Robert J. Youngs                          
                               Robert J. Youngs,  President & CEO




Date  7/28/98                  /ss Helen L. Gaulden                          
                               Helen L. Gaulden, Sr. V. P. & Treasurer