Exhibit 10.12













                   TEMECULA VALLEY BANK, NATIONAL ASSOCIATION
                 1997 NONQUALIFIED STOCK OPTION PLAN (DIRECTORS)















































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                                                               TABLE OF CONTENTS

     1.   Purpose of the Plan...................................2

     2.   Legal Compliance......................................2

     3.   Administration of the Plan............................2

     4.   Board Power to Amend, Suspend, or Terminate the Plan..3

     5.   Shares Subject to the Plan............................3

     6.   Optionees.............................................4

     7.   Grants of Options.....................................4

     8.   Option Exercise Price.................................4

     9.   [Reserved]............................................5

     10.  Duration, Exercisability, and Termination of Options..5

     11.  Manner of Option Exercise; Rights and Obligations
          of Optionees..........................................5

     12.  Successive Grants. Successive grants of Options
          may be made to any Optionee under the Plan............6

     13.  Adjustments...........................................6

     14. [Reserved].............................................8

     15.  Tax Withholding.......................................8

     16.  Term of Plan..........................................9

     17.  Non-Exclusivity of the Plan...........................9

     18.  Governing Law.........................................9

     19.  Information to Optionees..............................9




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                   TEMECULA VALLEY BANK, NATIONAL ASSOCIATION
                1997 NONQUALIFIED STOCK OPTION PLAN (DIRECTORS)

     1.   Purpose of the Plan.

          The purpose of this 1997 Stock Option Plan ("Plan") of Temecula Valley
     Bank, National Association, a nationally chartered banking association
     ("Bank"), is to advance the interests of the Bank, its subsidiaries and its
     shareholders by providing directors who have substantial responsibility for
     the direction and management of the Bank with an entrepreneurial incentive
     to (a) provide high levels of performance, (b) undertake extraordinary
     efforts to increase the earnings of the Bank, and (c) increase their
     proprietary interest in the Bank. The Plan seeks to accomplish these
     purposes and achieve these results by providing options to Directors to
     purchase shares of the Bank's common stock, thereby encouraging their stock
     ownership in the Bank so that they may participate in the increased value
     of the Bank which their effort, initiative and skill help produce.

     2.   Legal Compliance.

          It is the intent of the Plan that all options granted under it
     ("Options") shall be nonqualified stock options (NQOs"). It is the further
     intent of the Plan that it conform in all respects with the requirements of
     Rule 16b-3 of the Securities and Exchange Commission under the Securities
     Exchange Act of 1934, as amended ("Rule 16b-3") if at any time, the Bank is
     subject to Rule 16b-3. To the extent that any aspect of the Plan or its
     administration shall at any time be viewed as inconsistent with the
     requirements of Rule 16b-3, if applicable, such aspect shall be deemed to
     be modified, deleted or otherwise changed as necessary to ensure continued
     compliance with such provisions.

     3.   Administration of the Plan.

          3.1. Plan Committee. The Plan shall be administered by a committee
     ("Committee"). The members of the Committee shall be all of the members of
     the Board of Directors of the Bank ("Board") and shall consist of not less
     than two (2) persons. Such persons shall be directors of the Bank.

          3.2. Grants of Options by the Committee. In accordance with the
     provisions of the Plan, the Committee, by resolution, shall select those
     eligible persons to whom Options shall be granted ("Optionees"); shall
     determine the time or times at which each Option shall be granted and the
     number of shares to be subject to each Option; and shall fix the time and
     manner in which the Option may be exercised, the Option exercise price, and
     the Option period. The Committee shall determine the form of option
     agreement to evidence the foregoing terms and conditions of each Option,
     which need not be identical, in the form provided for in Section 7. Such
     option agreement may include such other provisions as the Committee may
     deem necessary or desirable consistent with the Plan.


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          3.3. Committee Procedures. The Committee from time to time may adopt
     such rules and regulations for carrying out the purposes of the Plan as it
     may deem proper and in the best interests of the Bank. The Committee shall
     keep minutes of its meetings and records of its actions. A majority of the
     members of the Committee shall constitute a quorum for the transaction of
     any business by the Committee. The Committee may act at any time by an
     affirmative vote of a majority of those members voting. Such vote may be
     taken at a meeting (which may be conducted in person or by any
     telecommunication medium) or by written consent of Committee members
     without a meeting.

          3.4. Finality of Committee Action. The Committee shall resolve all
     questions arising under the Plan and option agreements entered into
     pursuant to the Plan. Each determination, interpretation, or other action
     made or taken by the Committee shall be final and conclusive and binding on
     all persons, including, without limitation, the Bank, its shareholders, the
     Committee and each of the members of the Committee, and the directors,
     officers and employees of the Bank, including Optionees and their
     respective successors in interest.

          3.5. Non-Liability of Committee Members. No Committee member shall be
     liable for any action or determination made by him or her in good faith
     with respect to the Plan or any Option granted under it.

     4.   Board Power to Amend, Suspend, or Terminate the Plan.

          The Board may, from time to time, make sue h changes in or additions
     to the Plan as it may deem proper and in the best interests of the Bank and
     its shareholders. The Board may also suspend or terminate the Plan at any
     time, without notice, and in its sole discretion. Notwithstanding the
     foregoing, no such change, addition, suspension, or termination by the
     Board shall (a) materially impair any option previously granted under the
     Plan without the express written consent of the optionee; or (b) materially
     increase the number of shares subject to the Plan, materially increase the
     benefits accruing to optionees under the Plan, materially modify the
     requirements as to eligibility to participate in the Plan or alter the
     method of determining the option exercise price described in Section 8,
     without shareholder approval.

     5.   Shares Subject to the Plan.

          For purposes of the Plan, the Committee is authorized to grant Options
     for up to 150,000 shares of the Bank's common stock ("Common Stock")/ or
     the number and kind of shares of stock or other securities which, in
     accordance with Section 13, shall be substituted for such shares of Common
     Stock or to which such shares shall be adjusted. The Committee is
     authorized to grant Options under the Plan with respect to such shares. Any
     or all unsold shares subject to an Option which for any reason expires or
     otherwise terminates (excluding shares returned to the Bank in payment of
     the exercise price for additional shares) may again be made subject to
     grant under the Plan.


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     6.   Optionees.

          Options shall be granted only to directors of the Bank. Any Optionee
     may hold more than one option to purchase Common Stock, whether such option
     is an Option held pursuant to the Plan or otherwise.

     7.   Grants of Options.

          The Committee shall have the sole discretion to grant Options under
     the Plan. The terms and conditions of Options granted under the Plan may
     differ from one another as the Committee, in its absolute discretion, shall
     determine as long as all Options granted under the Plan satisfy the
     requirements of the Plan. Upon determination by the Committee that an
     Option is to be granted to an Optionee, a written option agreement
     evidencing such Option shall be given to the Optionee, specifying the
     number of shares subject to the Option, the Option exercise price, that the
     Option is a NQO, and the other individual terms and conditions of such
     Option. Such option agreement may incorporate generally applicable
     provisions from the Plan, a copy of which shall be provided to all
     Optionees at the time of their initial grants under the Plan. The Option
     shall be deemed granted as of the date specified in the grant resolution of
     the Committee, and the option agreement shall be dated as of the date of
     such resolution. Notwithstanding the foregoing, unless the Committee
     consists solely of non-employee directors, any Option granted to a director
     or 10% beneficial owner for purposes of Section 16 of the Securities
     Exchange Act of 1934, as amended ("Section 16 of the 1934 Act"), shall
     either be (a) conditioned upon the Optionee's agreement not to sell the
     shares of Common Stock underlying the Option for at least six (6) months
     after the date of grant or (b) approved by the entire Board or by the
     shareholders of the Bank.

     8.   Option Exercise Price.

          The price per share to be paid by the Optionee at the time an NQO is
     exercised shall not be less than eighty-five percent (85%) of the Fair
     Market Value on the date on which the NQO is granted, as determined by the
     Committee. For purposes of the Plan, the "Fair Market Value" of a share of
     the Bank's Common Stock as of a given date shall be: (a) the closing price
     of a share of the Bank's Common Stock on the principal exchange on which
     shares of the Bank's Common Stock are then trading, if any, on the day
     immediately preceding such date, or, if shares were not traded on such
     date, then on the next preceding trading day during which a sale occurred;
     or (b) if the Bank's Common Stock

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     is not traded on an exchange but is quoted on Nasdaq or a successor
     quotation system, (1) the last sales price (if the Common Stock is then
     listed as a National Market Issue under the Nasdaq National Market System)
     or (2) the closing representative bid price (in all other cases) for the
     Common Stock on the day immediately preceding such date as reported by
     Nasdaq or such successor quotation system; or (c) if the Bank's Common
     Stock is not publicly traded on an exchange and not quoted on Nasdaq or a
     successor quotation system, the closing bid price for the Common Stock on
     such date as determined in good faith by the Committee; or (d) if the
     Bank's Common Stock is not publicly traded, the fair market value
     established by the Committee acting in good faith.

     9.   [Reserved].


     10.  Duration, Exercisability, and Termination of Options.

          10.1. Option Period. The option period shall be determined by the
     Committee with respect to each Option granted. In no event, however, may
     the option period exceed ten (10) years from the date on which the Option
     is granted.

          10.2. Exercisability of Options. Each Option shall be exercisable in
     whole or in consecutive installments, cumulative or otherwise, during its
     term as determined in the discretion of the Committee.

          10.3. [Reserved] .


     11.  Manner of Option Exercise; Rights and Obligations of Optionees.

          11.1. Written Notice of Exercise. An Optionee may elect to exercise an
     Option in whole or in part, from time to time, subject to the terms and
     conditions contained in the Plan and in the agreement evidencing such
     Option, by giving written notice of exercise to the Bank at its principal
     executive office.

          11.2. Cash Payment for Optioned Shares. If an Option is exercised for
     cash, such notice shall be accompanied by a cashier's or personal check, or
     money order, made payable to the Bank for the full exercise price of the
     shares purchased.

          11.3. [Reserved].


          11.4. Investment Representation for Non-Registered Shares and Legality
     of Issuance. The receipt of shares of Common Stock upon the exercise of an
     Option shall be conditioned upon the Optionee providing to the Committee a
     written representation that, at the time of such exercise, it is the intent
     of such person(s) to acquire the shares for investment only and not with a
     view toward distribution. The certificate for unregistered shares issued
     for investment shall be restricted by the Bank as to transfer unless the
     Bank receives an opinion of counsel satisfactory to the Bank to the effect
     that such restriction is not necessary under then pertaining law. The
     providing of such representation and such restrictions on transfer shall
     not, however, be required upon any person's receipt of shares of Common
     Stock under the Plan in the event that, at the time of grant of the Option
     relating to such receipt or upon such receipt, whichever is the appropriate
     measure under applicable federal or state securities laws, the shares
     subject to the Option shall be (a) covered by an effective and current
     registration statement under the Securities Act of 1933, as amended, and
     (b) either qualified or exempt from qualification under applicable state
     securities laws. The Bank shall, however, under no circumstances be
     required to sell or issue any shares under the Plan if, in the opinion of
     the Committee, (a) the issuance of such shares would constitute a violation
     by the Optionee or the Bank of any applicable law or regulation of any
     governmental authority, or (b) the consent or approval of any governmental
     body is necessary or desirable as a condition of, or in connection with,
     the issuance of such shares.


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          11.5. Shareholder Rights of Optionee. Upon exercise, the Optionee
     shall be recorded on the books of the Bank as the owner of the shares, and
     the Bank shall deliver to such record owner one or more duly issued stock
     certificates evidencing such ownership. No person shall have any rights as
     a shareholder with respect to any shares of Common Stock covered by an
     Option granted pursuant to the Plan until such person shall have become the
     holder of record of such shares. Except as provided in Section 13, no
     adjustments shall be made for cash dividends or other distributions or
     other rights as to which there is a record date preceding the date such
     person becomes the holder of record of such shares.

          11.6. Holding Periods for Tax Purposes. The Plan does not provide that
     an Optionee must hold shares of Common Stock acquired under the Plan for
     any minimum period of time. Optionees are urged to consult with their own
     tax advisors with respect to the tax consequences to them of their
     individual participation in the Plan.

     12. Successive Grants. Successive grants of Options may be made to any
Optionee under the Plan.

     13.  Adjustments.

          13.1. If the outstanding Common Stock shall be hereafter increased or
     decreased, or changed into or exchanged for a different number or kind of
     shares or other securities of the Bank or of another corporation, by reason
     of a recapitalization, reclassification, reorganization, merger,


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     consolidation, share exchange, or other business combination in which the
     Bank is the surviving parent corporation, stock split-up, combination of
     shares, or dividend or other distribution payable in capital stock or
     rights to acquire capital stock, appropriate adjustment shall be made by
     the Committee in the number and kind of shares for which options may be
     granted under the Plan. In addition, the Committee shall make appropriate
     adjustment in the number and kind of shares as to which outstanding and
     unexercised options shall be exercisable, to the end that the proportionate
     interest of the holder of the option shall, to the extent practicable, be
     maintained as before the occurrence of such event. Such adjustment in
     outstanding options shall be made without change in the total price
     applicable to the unexercised portion of the option but with a
     corresponding adjustment in the exercise price per share.

          13.2. In the event of the dissolution or liquidation of the Bank, any
     outstanding and unexercised options shall terminate as of a future date to
     be fixed by the Committee.

          13.3. In the event of a Reorganization (as hereinafter defined), then,

               a. If there is no plan or agreement with respect to the
          Reorganization ("Reorganization Agreement"), or if the Reorganization
          Agreement does not specifically provide for the adjustment, change,
          conversion, or exchange of the outstanding and unexercised options for
          cash or other property or securities of another corporation, then any
          outstanding and unexercised options shall terminate as of a future
          date to be fixed by the Committee; or

               b. If there is a Reorganization Agreement, and the Reorganization
          Agreement specifically provides for the adjustment, change,
          conversion, or exchange of the outstanding and unexercised options for
          cash or other property or securities of another corporation, then the
          Committee shall adjust the shares under such outstanding and
          unexercised options, and shall adjust the shares remaining under the
          Plan which are then available for the issuance of options under the
          Plan if the Reorganization Agreement makes specific provisions
          therefor, in a manner not inconsistent with the provisions of the
          Reorganization Agreement for the adjustment, change, conversion, or
          exchange of such options and shares.

          13.4. The term "Reorganization" as used in this Section 13 shall mean
     any reorganization, merger, consolidation, share exchange, or other
     business combination pursuant to which the Bank is not the surviving parent
     corporation after the effective date of the Reorganization, or any sale or
     lease of all or substantially all of the assets of the Bank. Nothing herein
     shall require the Bank to adopt a Reorganization Agreement, or to make
     provision for the adjustment, change, conversion, or exchange of any
     options, or the shares subject thereto, in any Reorganization Agreement
     which it does adopt.



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          13.5. The Committee shall provide to each optionee then holding an
     outstanding and unexercised option not less than thirty (30) calendar days'
     advanced written notice of any date fixed by the Committee pursuant to this
     Section 13 and of the terms of any Reorganization Agreement providing for
     the adjustment, change, conversion, or exchange of outstanding and
     unexercised options. Except as the Committee may otherwise provide, each
     optionee shall have the right during such period to exercise his option
     only to the extent that the option was exercisable on the date such notice
     was provided to the optionee.

          13.6. No modification, extension, renewal, or other change in any
     option granted under the Plan may be made, after the grant of such option,
     without the optionee's consent, unless the same is permitted by the
     provisions of the Plan and the option agreement.

          13.7. All adjustments and determinations under this Section 13 shall
     be made by the Committee in good faith in its sole discretion.

     14.  [Reserved].


     15.  Tax Withholding.

          The exercise of any Option granted under the Plan is subject to the
     condition that if at any time the Bank shall determine, in its discretion,
     that the satisfaction of withholding tax or other withholding liabilities
     under any federal, state or local law is necessary or desirable as a
     condition of, or in connection with, such exercise or a later lapsing of
     time or restrictions on or disposition of the shares of Common Stock
     received upon such exercise, then in such event, the exercise of the Option
     shall not be effective unless such withholding shall have been effected or
     obtained in a manner acceptable to the Bank. When an Optionee is required
     to pay to the Bank an amount required to be withheld under applicable
     income tax laws in connection with the exercise of any Option, the Optionee
     may, subject to the approval of the Committee, which approval shall not
     have been disapproved at any time after the election is made, satisfy the
     obligation, in whole or in part, by electing to have the Bank withhold
     shares of Common Stock having a value equal to the amount required to be
     withheld. The value of the Common Stock withheld pursuant to the election
     shall be determined by the Committee, in accordance with the criteria set
     forth in Section 8, with reference to the date the amount of tax to be
     withheld is determined. The Optionee shall pay to the Bank in cash any
     amount required to be withheld that would otherwise result in the
     withholding of a fractional share.


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     16. Term of Plan. 16.1. Effective Date. Subject to shareholder approval,
the Plan shall become effective as of March 19, 1997. 16.2. Termination Date.
Except as to options granted and outstanding under the Plan prior to such time,
the Plan shall terminate at midnight on March 20, 2007, and no Option shall be
granted after that time. Options then outstanding may continue to be exercised
in accordance with their terms. The Plan may be suspended or terminated at any
earlier time by the Board within the limitations set forth in Section 4.

     17.  Non-Exclusivity of the Plan.

          Nothing contained in the Plan is intended to amend, modify, or rescind
     any previously approved compensation plans, programs or options entered
     into by the Bank. This Plan shall be construed to be in addition to and
     independent of any and all such other arrangements. Neither the adoption of
     the Plan by the Board nor the submission of the Plan to the shareholders of
     the Bank for approval shall be construed as creating any limitations on the
     power or authority of the Board to adopt, with or without share holder
     approval, such additional or other compensa tion arrangements as the Board
     may from time to time deem desirable.

     18.  Governing Law.

          The Plan and all rights and obligations under it shall be construed
     and enforced in accordance with the laws of the State of California.

     19.  Information to Optionees.

          Optionees under the Plan who do not otherwise have access to financial
     statements of the Bank will receive the Bank's financial statements at
     least annually.

          For reference purposes, this Plan was adopted by the Board of
     Directors of the Bank on March 19, 1997 and subsequently approved by the
     shareholders of the Bank on April 29, 1997.





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                  FIRST AMENDMENT TO THE TEMECULA VALLEY BANK,
                              NATIONAL ASSOCIATION
                             1997 NONQUALIFIED STOCK
                            OPTION PLAN (DIRECTORS)



     This First Amendment ("First Amendment") to the 1997 Nonqualified Stock
Option Plan (Directors) ("Plan") is effective May 15, 2001.

     Having received the requisite approvals of the Board of Directors and
Shareholders of Temecula Valley Bank, N.A., Section 5 of the Plan, as of the
date hereof, shall be deemed to include an additional 150,000 shares of common
stock.

     Except as modified hereby, the Plan shall remain in full force and effect.

     IN WITNESS WHEREOF, the undersigned officers of Temecula Valley Bank, N.A.
have executed this First Amendment as of May 15, 2001 on behalf of the Bank.


                                         Temecula Valley Bank, N.A.


                                         By:  /s/ STEPHEN H. WACKNITZ
                                              ------------------------
                                                  Stephen H. Wacknitz
                                                  President and
                                                  Chief Executive Officer



                                         By:  /s/ DONALD A. PITCHER
                                              ----------------------
                                                  Donald A. Pitcher
                                                  Chief Financial Officer




<PAGE>



                     Second Amendment to the Temecula Valley
                           Bank, National Association
                             1997 Nonqualified Stock
                            Option Plan (Directors)
                          ----------------------------


     This Second Amendment ("Second Amendment") to the Temecula Valley Bank,
N.A. 1997 Nonqualified Stock Option Plan (Directors) ("Plan") is effective May
15, 2002. All terms not otherwise defined herein shall have the meaning ascribed
in the Plan.

          1. Authorized Shares. As a result of two 2 for 1 stock splits and an
     increase in the number of shares of Common Stock authorized for grant
     pursuant to Options, the number of shares of Common Stock authorized under
     the Plan equals 750,000 and, as of April 30, 2002, there are 70,268 shares
     available for grant under the Plan and 543,871 shares subject to
     outstanding Options.

          2. Authorization of Amendment. Pursuant to Section 4 of the Plan, the
     Board may make such changes in or additions to the Plan as it deems proper
     and in the best interests of the Bank and its shareholders, provided that
     the Board may not change the Plan to the extent such change would: (i)
     materially impair any Option previously granted under the Plan without the
     express written consent of the Optionee; or (ii) materially increase the
     number of shares subject to the Plan, materially increase the benefits
     accruing to Optionees under the Plan, materially modify the requirements as
     to eligibility under the Plan or alter the method of determining the option
     exercise price, without shareholder approval.

          3. Board Approval. On May 15, 2002, the Board approved the terms of
     this Second Amendment, as authorized by Section 4 of the Plan.

          4. The Amendment. A new Section9 is hereby added to the Plan which
     shall apply to all Optionsissued after the date of this Second Amendment
     and shall readin its entirety as follows:

               9.   Parameters of Option Agreements.




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                    9.1 Compliance with California and Other State Laws.
               Notwithstanding anything to the contrary contained in this Plan,
               no Options shall be granted under the Plan after the effective
               date of this Second Amendment unless such Option complies with
               applicable California law, other applicable state laws then in
               effect with respect to such Option and the following provisions
               of this Section 9.

                    9.2 Exercise Price Limitations. The exercise price of any
               Option shall not be less than 85% of the fair value (as
               determined in accordance with Section 260.140.50, Title 10 of the
               California Code of Regulations) at the time the option is
               granted, except that the exercise price shall be 100% of the fair
               value in the case of any person who owns securities of the Bank
               and/or its parent possessing more than 10% of the total combined
               voting power of all classes of securities of the Bank or its
               parent or subsidiaries.

                    9.3 Transfer Limitations. Options shall not be transferable
               other than by will, by the laws of descent and distribution or by
               instrument to an inter vivos or testamentary trust in which the
               options are to be passed to beneficiaries upon the death of the
               trustor (settlor), or by gift to "immediate family" as that term
               is defined in 17 C.F.R. ss.240.16a- Kc) .

                    9.4 Vesting Restrictions. Options shall be exercisable at
               the rate of at least 20% per year over 5 years from the date the
               Option is granted, subject to reasonable conditions such as
               continued Board membership. However, in the case of Options
               granted to directors of the Bank or its parent, the option may
               become fully exercisable, subject to reasonable conditions such
               as continued Board membership, at any time or during any period
               established by the Bank or its parent.


<PAGE>

                    9.5 Term of Options. Unless a director is removed from the
               Board "For Cause" (as defined in Section 302 of the California
               Corporations Code), the right to exercise in the event of
               termination or resignation as a Board member of the Bank or its
               parent, to the extent that the Option is exercisable on the date
               of termination or resignation:

                    (1)  The Optionee shall have 1 year from the date of
                         termination or resignation if termination was caused by
                         death or disability (as defined below).

                    (2)  The Optionee shall have 1 year from the date of
                         termination or resignation if termination was caused by
                         other than death or disability.

                    9.6 Effect of Termination For Cause. To the extent the
               director is removed from the Board for cause, the right to
               exercise any Option ceases immediately and all outstanding
               Options, vested or otherwise, are deemed terminated.

                    9.7 Shareholder Approval of the Plan. It is acknowledged
               that the Plan received shareholder approval within 12 months
               before or after the date the Plan was adopted by the Board.

                    9.8 Information to Optionees. Optionees shall receive, at
               least annually, financial statements of the Bank, in compliance
               with Section 260.140.46 of Title 10 of the California Code of
               Regulations.

                    9.9 Equal Rights. Common Stock issued upon the exercise of
               Options shall carry equal voting rights with other holders of the
               Bank's Common Stock.

<PAGE>

                    9.10 Disability Defined. "Disability" for purposes of the
               Plan means the inability of the Optionee, in the opinion of a
               qualified physician acceptable to the Bank or its parent, to
               perform the major duties of the Optionee's position with the Bank
               or its parent because of the sickness or injury of the Optionee.

     Except as modified by the First Amendment and this Second Amendment, the
Plan shall remain in full force and effect.

     IN WITNESS WHEREOF, the undersigned officers of Temecula Valley Bank, N.A.
have executed this Second Amendment as of May 15, 2002.

                                         Temecula Valley Bank, N.A.


                                         By:  /s/ STEPHEN H. WACKNITZ
                                              ------------------------
                                                  Stephen H. Wacknitz
                                                  President and
                                                  Chief Executive Officer



                                         By:  /s/ DONALD A. PITCHER
                                              ----------------------
                                                  Donald A. Pitcher
                                                  Chief Financial Officer