# TIMBERLINE BANCSHARES INC.

|Filing Type:      |  | 10QSB                          
|----------------- |  | -------------------------------
|Description:      |  | Quarterly Report               
|Filing Date:      |  | May 7, 2001                    
|Period End:       |  | March 31, 2001                 
|Primary Exchange: |  | Over the Counter Bulletin Board
|Ticker:           |  | TBLS                           

# Table of Contents
10QSB

| | PART 1              | .................................................................................................................. | 2
| | ------------------- | ------------------------------------------------------------------------------------------------------------------ | -
| | Item 1              | .................................................................................................................. | 2
| | Income Statement    | .................................................................................................................. | 2
| | Balance Sheet       | .................................................................................................................. | 3
| | Cash Flow Statement | .................................................................................................................. | 4
| | Item 2              | .................................................................................................................. | 5
| | Item 3              | .................................................................................................................. | 6
| | Item 4              | .................................................................................................................. | 6
| | Item 5              | .................................................................................................................. | 6
| | Item 6              | .................................................................................................................. | 6

# 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 March 31, 2001
[_]    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 Incorporation) | (I.R.S. Employer Identification No.)

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

(530) 842-4200
(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:    1,006,860

Page 1

PART 1 - FINANCIAL INFORMATION

Item 1.    Financial Statements

TIMBERLINE BANCSHARES, INC.
      CONSOLIDATED INCOME STATEMENT
          Periods Indicated

|                                                    | Q 03/31/01 | Q 03/31/00
|--------------------------------------------------- | ---------- | ----------
|INTEREST AND FEES ON LOANS                          | 1,317      | 1,337     
|INTEREST AND DIVIDENDS ON INVESTMENT   SECURITIES   | 359        | 283       
|TRADING ACCOUNT INTEREST                            | --         | --        
|OTHER INTEREST                                      | --         | 74        
|TOTAL INTEREST INCOME                               | 1,676      | 1,694     
|INTEREST ON DEPOSITS                                | 669        | 585       
|INTEREST ON SHORT TERM BORROWING                    | --         | --        
|INTEREST ON LONG TERM DEBT                          | --         | --        
|TOTAL INTEREST EXPENSE                              | 669        | 585       
|NET INTEREST INCOME                                 | 1,007      | 1,109     
|PROVISION FOR LOAN LOSSES                           | 0          | 21        
|NET INTEREST INCOME AFTER ALLOWANCE FOR LOAN LOSSES | 1,007      | 1,088     
|OTHER INCOME                                        | 147        | 100       
|OTHER EXPENSES                                      | 975        | 922       
|INCOME BEFORE TAX                                   | 179        | 266       
|INCOME TAX EXPENSE                                  | 93         | 74        
|INCOME BEFORE EXTRAORDINARY ITEMS                   | 86         | 192       
|EXTRAORDINARY ITEM NET OF TAX                       | --         | --        
|CUMULATIVE EFFECT OF ACCOUNTING CHANGES             | --         | --        
|NET INCOME                                          | 86         | 192       
|EARNINGS PER SHARE                                  | 0.09       | 0.19      

Note 1:  The financial statements in this report are unaudited, however, in
the opinion of management they 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.

Page 2

TIMBERLINE BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET

|                                   | 3/31/01 | 3/31/00
|---------------------------------- | ------- | -------
|ASSETS                             |         |        
|CASH & DUE FROM BANKS              | $5,748  | $7,415 
|INTEREST BEARING DEPOSITS IN OTHER | 100     | 100    
|FED FUNDS & RESALE SECURITY AGREE  | 19,200  | 1,500  
|TRADING ACCOUNT ASSETS             | 0       | 0      
|OTHER SHORT TERM                   | 0       | 0      
|INVESTMENT SECURITIES              |         |        
|HELD FOR SALE                      | 9,367   | 17,244 
|MATURITY                           | 1,802   | 3,018  
|LOANS (NET)                        | 56,643  | 58,827 
|PREMISES & EQUIPMENT               | 1,691   | 1,830  
|DUE FROM CUSTOMERS, ACCEPTANCES    | 0       | 0      
|OTHER ASSETS                       | 4,080   | 4,020  
|TOTAL                              | $98,107 | $93,954
|LIABILITIES                        |         |        
|DEPOSITS, NON-INTEREST BEARING     | $18,935 | $18,411
|INTEREST BEARING                   | 69,680  | 66,746 
|SHORT TERM BORROWING               | 0       | 0      
|BANK ACCEPTANCES                   | 0       | 0      
|OTHER LIABILITIES                  | 953     | 839    
|LONG TERM DEBT                     | 0       | 0      
|COMMITMENTS & CONTINGENT LIABILITY | 0       | 0      
|MINORITY INTERESTS                 | 0       | 0      
|SHAREHOLDER EQUITY                 |         |        
|PREFERRED STOCK                    | 0       | 0      
|COMMON STOCK                       | 2,994   | 2,993  
|OTHER SHAREHOLDER EQUITY           | 5,545   | 4,965  
|TOTAL                              | $98,107 | $93,954

Page 3

TIMBERLINE BANCSHARES, INC.
                      CONSOLIDATED CASH FLOWS

|CASH FLOW FROM OPERATING ACT                  | YTD 3/31/01 | YTD 3/31/00
|--------------------------------------------- | ----------- | -----------
|NET INCOME                                    | 86          | 192        
|NON-CASH                                      |             |            
|DEPRECIATION                                  | 82          | 54         
|NET CHANGE BAD DEBTS PROV                     | --          | 12         
|CUMU EFFECT ACCTG CH                          | --          | --         
|(INCREASE) DECREASE IN OTHER ASSETS           | 523         | 14         
|INCREASE (DECREASE) IN ACCRUED EXPENSES       | 146         | 73         
|CASH PROVIDED BY OPS                          | 784         | 345        
|CASH FROM INVESTING                           |             |            
|INCREASE (DECREASE) IN DEPOSITS               | 4,818       | 2,006      
|(INCREASE) DECREASE IN SHORT TERM INVESTMENTS | 0           | 0          
|SECURITIES:  FOR SALE                         | 7,434       | (46)       
|HOLD                                          | 87          | 154        
|FED FUNDS                                     | (17,700)    | (700)      
|LOANS                                         | 722         | (1,285)    
|(PURCHASE) SALE OF F.A.                       | 0           | (10)       
|CASH (USED) PROVIDED                          | (4,586)     | 119        
|CASH FROM FINANCING                           |             |            
|DIVIDENDS PAID                                | 0           | 0          
|ADDITIONAL PD IN CAP                          | 0           | 0          
|CASH(APPLIED) PROVIDED                        | 0           | 0          
|NET CHANGE                                    | (3802)      | 464        
|OPEN                                          | 9,450       | 6,951      
|CLOSE                                         | 5,648       | 7,415      

Page 4

Item 2.    Management's DiscussionGeneral Operations

Timberline Bancshares, Inc. is the parent company of its wholly owned subsidiary, Timberline Community Bank (hereafter referred to as
"Timberline" or the "bank").  Accordingly, they share the same concepts regarding growth of the institution, protection and
preservation of assets, shareholder enhancement, and fulfilling the mission statement to assist the communities being served.

Timberline intends to increase its market share in the areas it serves, upgrade services to its customers, offer loans to the
customers in it's service area, enhance earnings, control costs, and enhance the shareholders' value.Management's Discussion and Analysis of Financial Condition and Results of Operations

Net interest income in the first quarter of 2001 was lower than that of
the first quarter of 2000 and resulted from a combination of a declining rate environment, a decrease in loans outstanding and an
increase in interest-bearing deposits.

Siskiyou County, the northern most county in California, has economically been dependent upon the timber products and services
industries.  As such, it has historically experienced lower growth rates and higher levels of unemployment than the regional economy
in general and the more localized economy in southern Oregon.  In view of this economic environment, the bank 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 does not offer mutual funds or insurance as a way of enhancing
income.  Nor has the bank greatly increased service fees to its customers.  It has relied on the traditional banking revenue sources
such as income from lending.  With a loan delinquency of less than one percent, the bank has reduced the amount set aside in loan
loss reserves while still maintaining an adequate reserve.Subsequent Event

On April 16, 2001 (closing date of merger), Timberline Bancshares, Inc. was acquired by PremierWest Bancorp (OTCBB: PRWT),
headquartered in Medford, Oregon.  At the same time, Timberline Community Bank, the only wholly owned subsidiary of Timberline
Bancshares Inc., merged its operations into PremierWest Bank (PremierWest Bancorp's wholly owned subsidiary).  The acquisition was
accounted for as a purchase transaction.  As a result, Timberline's operations will be combined with PremierWest's as of the closing
date of merger.

Shareholders of Timberline are being compensated with a combination of stock and cash at $13.50 per share in value.  The aggregate
purchase price is approximately $13.6 million, excluding costs associated with the acquisition.

Page 5

PART II - 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

At a special meeting held March 14, 2001, the shareholders of the registrant
voted to approve the merger of the registrant with and into PremierWest Bancorp.
A total of 801,586 shares were represented at the meeting by proxy or in person.
769,420 votes were cast in favor, 24,002 against, and 8,164 abstained.

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: May 3, 2001 | By:    /s/John Linton                             
|                  | John Linton, President and Chief Executive Officer

Page 6