<PAGE>

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

                            FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934

           For the quarterly period ended September 30, 1997
 
                              OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934

            Commission file number:  0-19231

               REDWOOD EMPIRE BANCORP
(Exact name of Registrant as specified in its charter)

     California                                  68-0166366
(State or other jurisdiction of                (IRS Employer
Incorporated or organization)                Identification No.)

111 Santa Rosa Avenue, Santa Rosa, California         95404-4905
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:  (707) 545-9611

Indicate by check mark whether the Registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 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    
                                                     -        -

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.  November 3, 1997:  2,784,200


                       This page is page 1 of 22 pages.


<PAGE>



                                REDWOOD EMPIRE BANCORP
                                         AND
                                     SUBSIDIARIES

                                        INDEX

                                                                          Page
                                                                          ----

PART I.  Financial Information

ITEM 1.  Financial Statements

         Consolidated Statements of Operations
         Three and Nine Months ended September 30, 1997 and 1996 . . . . . .3

         Consolidated Balance Sheets
         September 30, 1997 and December 31, 1996. . . . . . . . . . . . . .4

         Consolidated Statements of Cash Flows
         Nine Months Ended September 30, 1997 and 1996 . . . . . . . . . . .5

         Notes to Consolidated Financial Statements. . . . . . . . . . . . .7


ITEM 2.  Management's Discussion and Analysis
         of Financial Condition and Results of  Operations . . . . . . . . .9


PART II. Other Information

ITEM 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 21

ITEM 2.  Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 21

ITEM 3.  Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 21

ITEM 4.  Submission of Matters to a Vote of Securities Holders . . . . . . 21

ITEM 5.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . 21

ITEM 6.  Exhibits and Reports on Item 8-K. . . . . . . . . . . . . . . . . 21


SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22


                       This page is page 2 of 22 pages



<PAGE>


PART I.  FINANCIAL INFORMATION
ITEM 1.  Financial Statements


                       REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Operations
                    (dollars in thousands except per share data)
                                     (unaudited)

<TABLE>
<CAPTION>

                                                                Three Months Ended           Nine Months Ended
                                                                  September 30,                 September 30,
                                                               1997          1996            1997           1996
                                                              ---------------------        -----------------------
<S>                                                           <C>           <C>            <C>            <C>  
Interest income:
  Interest and fees on  loans                                 $7,898        $10,409        $24,922        $31,652 
  Interest on investment securities                              913            805          2,594          2,270 
  Interest on federal funds sold                                 387            210            902            721 
  Interest on time deposits due from 
    financial institutions                                         1             39              7            152 
                                                              ---------------------        -----------------------
Total interest income                                          9,199         11,463         28,425         34,795 

Interest expense:
  Interest on deposits                                         3,715          4,841         11,849         15,204 
  Interest on subordinated notes                                 276            277            830            838 
  Interest on other borrowings                                    69            447            187          1,274 
                                                              ---------------------        -----------------------
Total interest expense                                         4,060          5,565         12,866         17,316 
                                                              ---------------------        -----------------------

Net interest income                                            5,139          5,898         15,559         17,479 
Provision for loan losses                                        465            545          1,635          3,375 

Net interest income after loan loss provision                  4,674          5,353         13,924         14,104 

Other operating income:
  Service charges on deposit accounts                            271            315            852            921 
  Merchant draft processing, net                                 335            374          1,127          1,381 
  Loan servicing income                                          161            412            676          1,297 
  Net realized (losses) on sale of 
    investment securities available for sale                      30          ---               23             (8)
  Gain on sale of loans and loan servicing                       396          2,149          2,726          8,230 
  Other income                                                   899            679          2,032          2,104 
                                                              ---------------------        -----------------------
Total other operating income                                   2,092          3,929          7,436         13,925 

Other operating expense:
  Salaries and employee benefits                               2,614          4,331          8,768         12,941 
  Occupancy and equipment expense                                876          1,396          2,519          4,115 
  Other                                                        1,750          4,954          6,020         10,783 
                                                              ---------------------        -----------------------
Total other operating expense                                  5,240         10,681         17,307         27,839 
                                                              ---------------------        -----------------------

  Income (loss) before income taxes                            1,526          (1,399)        4,053            190 
  Provision (benefit) for income taxes                           601            (595)        1,664             70 
                                                              ---------------------        -----------------------

Net income (loss)                                                925            (804)        2,389            120 
Dividends on preferred stock                                     112            112            336            336 
                                                              ---------------------        -----------------------
Net income (loss) available for common shareholders             $813           ($916)       $2,053           ($216)
                                                              ---------------------        -----------------------
                                                              ---------------------        -----------------------


Earnings per common share and common equivalent share:
   Primary net income (loss) per share                          $.28           ($.33)         $.71           ($.08)
   Weighted average shares                                 2,914,000       2,742,000     2,885,000       2,712,000
   Fully diluted net income(loss) per share                     $.27           ($.33)         $.70           ($.08)
   Weighted average shares                                 3,436,000       2,742,000     3,424,000       2,712,000

Dividends per common share                                  $  ---         $  ---         $  ---         $  ---   

</TABLE>

See Notes to Consolidated Financial Statements.


                                     This page is page 3 of 22 pages.

<PAGE>

                           REDWOOD EMPIRE BANCORP AND SUBS
                             Consolidated Balance Sheets
                                (dollars in thousands)
                                     (unaudited)

<TABLE>
<CAPTION>

                                                           September 30    December 31,
                                                               1997           1996
                                                          -------------    ------------
<S>                                                        <C>             <C>
Cash and due from banks                                      $31,171        $20,261 
Federal funds sold                                            31,641         25,212 
Due from broker                                                ---            ---   
                                                           ---------      ---------
  Cash and cash equivalents                                   62,812         45,473 

Interest bearing deposits due from financial institutions          5            315 
Investment securities:
  Held to maturity (market value of $20,614 and $19,097)      20,045         18,781 
  Available for sale, at market                               34,012         33,852 
                                                           ---------      ---------
    Total investment securities                               54,057         52,633 
Mortgage loans held for sale                                  14,746         29,487 
Loans:
    Residential real estate mortgage                         112,024        124,765 
    Commercial real estate mortgage                           67,206         67,401 
    Commercial                                                55,954         66,525 
    Real estate construction                                  60,755         84,408 
    Installment and other                                      5,949          7,112 
    Less deferred loan fees                                   (2,243)        (2,797)
                                                           ---------      ---------
        Total portfolio loans                                299,645        347,414 
    Less allowance for loan losses                            (7,989)        (7,040)
                                                           ---------      ---------
        Net loans                                            291,656        340,374 

Premises and equipment, net                                    3,853          4,049 
Mortgage servicing rights                                        686            582 
Other real estate owned                                        4,741          2,132 
Cash surrender value of life insurance                         2,896          2,814 
Other assets and interest receivable                          13,429         21,607 
                                                           ---------      ---------
     Total assets                                           $448,881       $499,466 
                                                           ---------      ---------
                                                           ---------      ---------
Deposits:
  Noninterest bearing demand deposits                        $85,781        $71,814 
  Interest-bearing transaction accounts                      152,469        156,453 
  Time deposits $100,000 and over                             57,838         75,411 
  Other time deposits                                         96,582        132,772 
                                                           ---------      ---------
    Total deposits                                           392,670        436,450 

Other borrowings                                               5,282         10,307 
Subordinated notes                                            12,000         12,000 
Other liabilities and interest payable                         6,694         10,977 
                                                           ---------      ---------
     Total liabilities                                       416,646        469,734 

Shareholders' equity:
  Preferred stock, no par value; authorized 2,000,000 
     shares; issued and outstanding 575,000 shares             5,750          5,750 
  Common stock, no par value; authorized 10,000,000 
      shares; issued and outstanding 2,784,200 
      and 2,748,652 shares                                    19,640         19,281 
  Retained earnings                                            7,086          5,032 
  Unrealized gain (loss) on investment securities 
    carried as, or transferred from available for 
    sale, net of income taxes                                   (241)          (331)
                                                           ---------      ---------
     Total shareholders' equity                               32,235         29,732 
         
     Total liabilities and shareholders' equity             $448,881       $499,466 
                                                           ---------      ---------
                                                           ---------      ---------
</TABLE>

See Notes to Consolidated Financial Statements.


                             This page is page 4 of 22 pages.


<PAGE>


                       REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Cash Flows
                                   (in thousands)
                                    (unaudited)

<TABLE>
<CAPTION>

                                                                Nine Months Ended
                                                                   September 30,
                                                               1997            1996
                                                             -------         -------
<S>                                                           <C>             <C>
Cash flows from operating activities:

  Net income                                                  $2,389           $120 

Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization, net                             281          1,683 
  Net realized losses (gains) on securities 
  available for sale                                             (23)             8 
  Loans originated for sale                                 (133,868)    (1,200,172)
  Proceeds from sale of loans held for sale                  174,171      1,254,807 
  Gain on sale of loans and loan servicing                    (2,726)        (8,230)
  Provision for loan losses                                    1,635          3,375 
  Change in other assets and interest receivable               7,218          2,380 
  Change in other liabilities and interest payable            (4,639)         3,890 
  Noncash restructuring charge                                  ---            --- 
  Other, net                                                   1,712         (1,698)
                                                           ---------      ---------
  Total adjustments                                           43,761         56,043 
                                                           ---------      ---------
  Net cash provided by operating activities                   46,150         56,163 
                                                           ---------      ---------

Cash flows from investing activities:
  Net change in loans                                         18,308        (52,182)
  Proceeds from sales of loans in portfolio                    2,201          2,459 
  Purchases of investment securities available for sale      (20,839)       (23,202)
  Purchases of investment securities held to maturity           (730)          (304)
  Sales of investment securities available for sale            6,031          3,992 
  Maturities of investment securities available for sale      13,974         13,500 
  Maturities of investment securities held to maturity           500            938 
  Premises and equipment, net                                   (910)          (520)
  Purchase of mortgage servicing rights                         (319)           782 
  Noninterest bearing demand deposits                            310            105 
  Proceeds from sale of other real estate owned                1,514          2,148 
                                                           ---------      ---------
    Net cash provided by (used in) investment activities      20,040        (52,284)
                                                           ---------      ---------

Cash flows from financing activities:
  Change in noninterest bearing transaction accounts          13,967            631 
  Change in interest bearing transaction accounts             (3,985)        25,895 
  Change in time deposits                                    (53,762)       (38,539)
  Change in borrowings                                        (5,025)       (16,243)
  Issuance of stock                                              290            490 
  Dividends paid                                                (336)          (336)
                                                           ---------      ---------
    Net cash used in financing activities                    (48,851)       (28,102)
                                                           ---------      ---------

Net change in cash and cash equivalents                       17,339        (24,223)
Cash and cash equivalents at beginning of period              45,473         55,140 
                                                           ---------      ---------

Cash and cash equivalents at end of period                   $62,812        $30,917 
                                                           ---------      ---------
                                                           ---------      ---------
</TABLE>
                                (Continued)


                        This page is page 5 of 22 pages.


<PAGE>


                       REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Cash Flows
                                   (in thousands)
                                    (unaudited)

<TABLE>
<CAPTION>

                                                                Nine Months Ended
                                                                   September 30,
                                                               1997            1996
                                                             -------         -------
<S>                                                          <C>             <C>
Supplemental Disclosures:

Cash paid during the period for:
  Income taxes                                                   $60         $2,730 
  Interest expense                                            14,651         17,719 

Noncash investing and financing activities:
  Transfers from loans to other real estate owned              4,781          1,643 
  Transfer from loans to mortgage loans held for sale           ---          50,000 
  Transfer from mortgage loans held for sale to loans          1,377           ---   
  Transfer of investment securities from available 
    for sale to held to maturity                                ---          17,193 


</TABLE>


                       This page is page 6 of 22 pages.



<PAGE>


                       REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
                      Notes to Consolidated Financial Statements
                                     (Unaudited)

1.  Basis of Presentation

    The accompanying unaudited consolidated financial statements should be 
read in conjunction with the financial statements and related notes contained 
in Redwood Empire Bancorp's 1996 Annual Report to shareholders.  The 
statements include the accounts of Redwood Empire Bancorp ("Redwood"), and 
its wholly owned subsidiary, National Bank of the Redwoods ("NBR").  All 
significant inter-company balances and transactions have been eliminated.  
The financial information contained in this report reflects all adjustments 
which, in the opinion of management, are necessary for a fair presentation of 
the results of the  interim periods.  All such adjustments are of a normal 
recurring nature. The results of operations and cash flows for the nine 
months ended September 30, 1997 are not necessarily indicative of the results 
that may be expected for the year ending December 31, 1997.

    Certain reclassifications were made to prior period financial statements 
to conform to current period presentations.

    For purposes of reporting cash flows, cash and cash equivalents include 
cash on hand, amounts due from banks and federal funds sold.  Federal funds 
sold are generally for one day periods.

2.  On March 24, 1997, Allied Bank, F.S.B. a wholly owned subsidiary of 
Redwood, was merged into NBR.  In connection with the merger, NBR assumed all 
of Allied's rights and obligations.  As a result of the merger Allied Bank, 
F.S.B. ceased to exist.

3.  Net Income per Share

    Net income per share is calculated based on the weighted average number 
of shares of common stock outstanding and common stock equivalents 
outstanding during the periods ended September 30, 1997 and 1996.

4.  New Accounting Pronouncements

    The Company has adopted SFAS No. 125 "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishments of Liabilities" in 1997.  
The statement provides accounting and reporting standards for transfers and 
servicing of financial assets and extinguishments of liabilities.  These 
standards are based on consistent application of a financial-component 
approach that focuses on control.  Under this approach, after a transfer of 
financial assets, an entity recognizes the financial and servicing assets it 
controls and liabilities it has incurred, derecognizes financial assets when 
control has been surrendered, and derecognizes liabilities when extinguished. 
 Management believes that adoption of SFAS 125 does not have a material 
effect on the financial condition or results of operations of the Company.


                          This is page 7 of 22 pages.


<PAGE>


    In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 128, "Earnings per Share" 
(SFAS 128).  The Company is required to adopt SFAS 128 in the fourth quarter 
of 1997 and will restate at that time earnings per share (EPS) data for prior 
periods to conform with SFAS 128.  Earlier application is not permitted.  

    SFAS 128 replaces current EPS reporting requirements and requires a dual 
presentation of basic and diluted EPS.  Basic EPS excludes dilution and is 
currently computed by dividing net income available to common shareholders by 
the weighted average of common shares outstanding for the period.  Diluted 
EPS reflects the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into common 
stock. 

    If SFAS 128 had been in effect during the current and prior year periods, 
basic EPS would have been $.29 and ($.33) for the quarters ended September 
30, 1997 and 1996 and $.74 and ($.08) for the year ended September 30, 1997 
and 1996 respectively.  Diluted EPS under SFAS 128 would not have been 
significantly different than fully diluted EPS reported for the periods.



                              This page is page 8 of 22

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

    Redwood Empire Bancorp ("Redwood," and with its subsidiaries the 
"Company") is a financial institution holding company headquartered in Santa 
Rosa, California.  Redwood has one subsidiary, National Bank of the Redwoods, 
a national bank ("NBR").

    Certain statements in this quarterly report on Form 10-Q include 
forward-looking information within the meaning of Section 27A of the 
Securities Act of 1933, as amended, and Section 21E of the Securities 
Exchange Act of 1934, as amended, and are subject to the "safe harbor" 
created by those sections.  These forward-looking statements involve certain 
risks and uncertainties that could cause actual results to differ materially 
from those in the forward-looking statements.  Such risks and uncertainties 
include, but are not limited to, the following factors:  competitive pressure 
in the banking industry; changes in the interest rate environment; general 
economic conditions, either nationally or regionally, are less favorable than 
expected, resulting in, among other things, a deterioration in credit quality 
and an increase in the provision for possible loan losses; changes in the 
regulatory environment; and changes in business conditions, volatility of 
rate sensitive deposits, operational risks including data processing system 
failures or fraud; asset/liability matching risks and liquidity risks; and 
changes in the securities markets.  In addition, such risks and uncertainties 
include mortgage banking activities, merchant card processing and 
concentration of lending activities all of which have been described in 
"Certain Important Considerations for Investors".

    The following sections discuss significant changes and trends in 
financial condition, capital resources and liquidity of the Company from 
December 31, 1996 to September 30, 1997, and significant changes and trends 
in the Company's results of operations for the three and nine months ended 
September 30, 1997, compared to the same period, in 1996.

SUMMARY OF FINANCIAL RESULTS

    The Company reported net income of $925,000 ($.27 per share, fully 
diluted) for the three months ended September 30 1997, compared to net loss 
$804,000 (a loss of $.33 per share, fully diluted, due to the effect of the 
preferred dividend) for the same period in 1996.  Net income for the nine 
months ended September 30, 1997 was $2,389,000 ($.70 per share, fully 
diluted) compared to $120,000 ($.08 per share, fully diluted) for the same 
period in 1996.

    The principal cause for the dramatic improvement in net income for the 
three and nine month periods ended September 30, 1997, as compared to the 
same periods one year ago relates to a reduction in operating expenses of 
$5,441,000 and $10,532,000 respectively.  Such reduction was a direct result 
of the Company's restructuring efforts in late 1996 and several nonrecurring 
charges recorded in 1996.


                            This page is page 9 of 22 pages.

<PAGE>


NET INTEREST INCOME

    Net interest income decreased $759,000 for the third quarter of 1997 
compared to the third quarter of 1996.  The decrease is primarily due to a 
decrease in average earning assets of $56,828,000 or 11%.  Net interest 
margin for the quarter ended September 30, 1997 amounted to 5.08% as compared 
to 4.76% one year ago and 5.37% for the second quarter of 1997.

    Net interest income of $15,559,000 declined $1,920,00 or 11% for the nine 
months ended September 30, 1997 when compared to the same period one year 
ago.  The decrease is primarily due to a decline in earning assets of 
$79,490,000 or 16% offset by an increase in net interest margin.  Net 
interest margin for the first nine months of 1997 was 4.90% as compared to 
4.64% for the same period one year ago.

    The decline in earning assets of the Company is due principally to the 
decline in mortgage loans held for sale.  The average of such loans declined 
$64,243,000 from $85,084,000 as of September 30, 1996 to $20,841,000 as of 
September 30, 1997.  Average mortgage loans held for sale amounted to 
$20,019,000 in the third quarter of 1997 as compared to $82,802,000 in the 
same period one year ago.  Such average was $20,841,000 for the first nine 
months of 1997 as compared to $85,084,000 for the first nine months of 1996.  
This decline was a direct result of management's fourth quarter of 1996 
decision to significantly curtail its "A paper" wholesale mortgage banking 
operations.

    In contrast, the net interest margin, on a year to date basis, increased 
significantly due to an increased yield on earning assets and a decline on 
interest bearing liabilities.  Due to a change in the earning asset mix 
resulting from the reduction of mortgage loans held for sale, the yield on 
earning assets for the first nine months of 1997 increased from 8.38% to 
9.25%. As a result of decreased funding needs, the Company significantly 
reduced its higher cost time certificates of deposits.  Total time 
certificates of deposits amounted to $154,420,000 as of September 30, 1997 as 
compared to $224,815,000 as of September 30, 1996 which results in a decline 
of $70,395,000 or 31%.  This reduction in higher cost liabilities had a 
positive effect on overall rate paid for interest-bearing liabilities.  Such 
rate declined from 5.21% in the third quarter of 1996 to 5.09% for the same 
quarter in 1997.  For the nine months ended September 30, 1997, such rate 
declined from 5.28% to 5.08% when compared to the same period one year ago.


                            This page is page 10 of 22 pages.


<PAGE>


The following is an analysis of the net interest margin:

<TABLE>
<CAPTION>

                                Three months ended          Three months ended
                                September 30, 1997          September 30, 1997

                             Average               %       Average               %
(dollars in thousands)       Balance   Interest  Yield     Balance   Interest  Yield
                            --------------------------    --------------------------
<S>                          <C>       <C>       <C>       <C>       <C>       <C> 

Earning assets (1)           $404,816  $9,199    9.09      $495,706  $11,463   9.25
Interest-bearing 
 liabilities                  324,020   4,060    5.01       427,128    5,565   5.21
                                      -------                        ------- 
Net interest income                    $5,139                         $5,898 
                                      -------                        -------
                                      -------                        -------
Net interest income to 
  earning assets                                 5.08                          4.76


                                 Nine months ended          Nine months ended
                                September 30, 1997          September 30, 1997

                             Average               %       Average               %
(dollars in thousands)       Balance   Interest  Yield     Balance   Interest  Yield
                            --------------------------    --------------------------
Earning assets (1)           $423,266  $28,425   8.95      $502,756  $34,795   9.23
Interest-bearing 
 liabilities                  337,585   12,866   5.08       437,072   17,316   5.28
                                      -------                        ------- 
Net interest income                    $15,559                       $17,479 
                                      -------                        ------- 
                                      -------                        ------- 
Net interest income to 
  earning assets                                 4.90                          4.64


</TABLE>

(1)     Nonaccrual loans are included in the calculation of the average 
        balance of earning assets, and interest not accrued is excluded.
  
    The following table sets forth changes in interest income and interest 
expense for each major category of interest-earning asset and 
interest-bearing liability, and the amount of change attributable to volume 
and rate changes for the nine months ended September 30, 1997 and 1996.  
Changes not solely attributable to rate or volume have been allocated to rate.


                                                    September 30, 1997 over
                                                      September 30, 1996
                                               --------------------------------
                                                 Volume       Rate        Total
                                               --------------------------------
                                                        (in thousands)        
Increase (decrease) in interest income:
  Portfolio loans                              ($1,202)   ($2,526)     ($3,728)
  Mortgage loans held for sale                  (3,325)       323       (3,002)
  Investment securities                            118        206          324 
  Interest-earning deposits with other 
    institutions                                  (144)        (1)        (145)
  Federal funds sold                                69        112          181 
                                               --------------------------------
Total increase (decrease)                       (4,484)    (1,886)      (6,370)
                                               --------------------------------

Increase (decrease) in interest expense: 
  Interest-bearing transaction accounts           (201)       308          107 
  Time deposits                                 (2,866)      (595)      (3,461)
  Other borrowings                              (1,343)       247       (1,096)
                                               --------------------------------
Total increase (decrease)                       (4,410)       (40)      (4,450)
                                               --------------------------------

Increase in net interest income                   ($74)   ($1,846)     ($1,920)
                                               --------------------------------
                                               --------------------------------
 
                            This page is 11 of 22 pages.


<PAGE>


PROVISION FOR LOAN LOSSES

    The provision for loan losses for the three months ended September 30, 
1997 amounted to $465,000 as compared to $545,000 in the same quarter in the 
previous year.  For the nine months ended September 30, 1997 the provision 
decreased $1,740,000 from $3,375,000 in 1996 to $1,635,000 in 1997.  The 
decrease in the provision for loan losses for the comparable three month and 
nine month period is due principally to a 1996 loan loss provision relating 
to an acquired lease portfolio of $1,412,000, the Seller/Servicer of which 
filed for bankruptcy, and the downgrading of several other problem loans in 
1996.  In addition, the 1996 loan loss provision was negatively effected by 
net loan charge-offs which amounted to $594,000 and $1,427,000 for the three 
months and nine months ended September 30, 1996 as compared to $24,000 and 
$594,000 in 1997.


OTHER OPERATING INCOME AND EXPENSE AND INCOME TAXES

    Other Operating Income

    The following table sets forth the components of the Company's other 
operating income for the nine months ended September 30, 1997, as compared to 
the same period in 1996.



                              Three Months Ended       Nine Months Ended
                                 September 30     %        September 30     %
                              ---------------          ----------------
(dollars in thousands)           1997    1996  Change     1997     1996  Change
                               -----    -------------  -------   --------------
Service charges on deposit 
  accounts                        271     315    (14)      852      921     (7)
Merchant draft processing, net    335     374    (10)    1,127    1,381    (18)
Loan servicing income             161     412    (61)      676    1,297    (48)
Gain (loss) on securities          30      --     --        23       (8)  (388)
Gain on sale of loans and 
  servicing                       396   2,149    (82)    2,726    8,230    (67)
Other income                      899     679     32     2,032    2,104     (3)
                               ------  ------           ------  -------
Total other operating income   $2,092  $3,929    (47)   $7,436  $13,925    (47)
                               ------  ------           ------  -------


    Other operating income decreased $1,837,000 or 47% to $2,092,000 for the 
third quarter of 1997 when compared to $3,929,000 for the same period in 
1996. Such decline is primarily due to a  82% decline in gain on sale of 
loans and servicing of $1,753,000.  Other operating income decreased 
$6,489,000 for the nine months ended September 30, 1997 compared to the same 
period in 1996.  Such decline is due primarily to a 67% decline in gains on 
sales of loans and servicing of $5,504,000.  As previously mentioned, the 
Company significantly curtailed its mortgage "A paper" wholesale mortgage 
banking business the fourth quarter of 1996.  Accordingly, gain on sale of 
loan revenue from mortgage banking operations has significantly declined in 
both the third quarter of 1997 and for the first nine months when compared to 
the same period one year ago.


                                This page is 12 of 22 pages.



<PAGE>


    Due to the Company's sale of mortgage loan servicing rights associated 
with $839,945,000 mortgage loans in the third and fourth quarters 1996, loan 
servicing income declined $251,000 in the third quarter of 1997 and $621,000 
on a year-to-date basis.  With a significant reduction in serviced loans, 
revenue from these operations will continue to be less than comparable 
historical performance.

    Currently the Company's mortgage banking operation is comprised of 
sub-prime mortgage banking and residential mortgage loan brokerage.  For the 
remainder of the year revenue from these operations is expected to be 
significantly less than comparable historical performance of the Company's 
mortgage banking unit.

    Merchant draft processing revenues declined $39,000 or 10% in the third 
quarter of 1997 and $254,000 or 18% in the first nine months when compared to 
the same periods one year ago.  Such decline is attributable to the loss of a 
substantial account in 1996 due to the customer's bankruptcy.  The customer 
in question was unable to fulfill it's contractual obligations associated 
with accepting credit cards as payment for services, thus requiring the 
Company to stand in the place of the merchant and honor their obligations 
associated with customer charge-backs.

    Other Operating Expense
    
    Other operating expense decreased by $5,441,000 or 51% to $5,240,000 
during the third quarter of 1997 compared to $10,681,000 for the third 
quarter of 1996, primarily due to the Company's restructuring plan, initiated 
in the fourth quarter of 1996, which included the termination of employees, 
the closing of several mortgage loan production offices, write-off of 
duplicate or unnecessary fixed assets, and the merger of Allied Bank, F.S.B. 
into NBR.  In addition, during the third quarter of 1996 the company was 
assessed $2,192,000 associated with the recapitalization of the SAIF fund.  
Such amount was included in other expense in the third quarter of 1996.  
Other operating expense decreased 38% to $17,307,000 from $27,839,000 for the 
nine months ended September 30, 1997 compared to the same period in 1996.

    The following table sets forth the components of the Company's other 
operating expense during the three months ended September 30, 1997, as 
compared to the same period in 1996.


                              Three Months Ended       Nine Months Ended
                                 September 30     %        September 30     %
                              ---------------          ----------------
(dollars in thousands)          1997    1996  Change      1997     1996  Change
                               -----    -------------  -------   --------------
Salaries and employee 
  benefits                    $2,614   $4,331   (40)    $8,768   $12,941  (32)
Occupancy and equipment 
  expense                        876    1,396   (37)     2,519     4,115  (39)
Other                          1,750    4,954   (65)     6,020    10,783  (44)
                              ------  -------         --------   -------
Total other operating 
 expense                      $5,420  $10,681   (51)   $17,307   $27,839  (38)
                              ------  -------         --------   -------
                              ------  -------         --------   -------

    For the nine months ended September 30, 1997 the Company recorded a 
provision for potential mortgage loan repurchases of $599,000 which is 
included in other expense.  For further discussion of this matter see 
Nonperforming Assets.


                       This page is page 13 of 22 pages.

<PAGE>


    The Company expects other operating expense will continue to decline for 
the remainder of the year, when compared to the previous year, due to the 
virtual elimination of the "A paper" wholesale mortgage banking operations 
and the effect of consolidating Allied Bank, F.S.B. into NBR.

    Income Taxes

    The Company's effective tax rate varies with changes in the relative 
amounts of its non-taxable income and nondeductible expenses.  The effective 
rate was 41.1% for the nine-months ended September 30, 1997, compared to 
36.8% for the same period in 1996.

MORTGAGE LOANS HELD FOR SALE

    Mortgage loans held for sale decreased $14,741,000 or 50% to $14,746,000 
at September 30, 1997 compared to $29,487,000 at December 31, 1996.  The 
decrease was due to the Company's decision to significantly curtail its "A 
paper" wholesale mortgage banking operations in the fourth quarter of 1996.

LOANS

    Total loans decreased $47,769,000 or 14% to $299,645,000 at September 30, 
1997 compared to $347,414,000 at December 31, 1996.  The principal reason for 
this decline relates to real estate mortgage loans whose balance declined 
$12,741,000 and construction loans whose balance declined $23,653,000, both 
due to loan payoffs.  The following table summarizes the composition of the 
loan portfolio at September 30, 1997 and December 31, 1996.


                                September 30, 1997   December 31, 1996
                                ------------------  ------------------
(dollars in thousands)              Amount       %       Amount     %
                                ------------------  ------------------

Residential real estate mortgage  $112,024      38%    $124,765    37% 
Commercial real estate mortgage     67,206      22       67,401    19 
Commercial                          55,954      19       66,525    19 
Real estate construction            60,755      20       84,408    24 
Installment and other                5,949       2        7,112     2 
Less deferred fees                  (2,243)     (1)      (2,797)   (1)
                                 ------------------   ----------------
    Total loans                    299,645     100%     347,414   100% 
Less allowance for loan losses      (7,989)  ------     (7,040)  -----
                                 ---------   ------   ---------  -----
    Net loans                     $291,656            $340,374  
                                 ---------            --------
                                 ---------            --------


                         This page is page 14 of 22 pages.


<PAGE>


ALLOWANCE FOR LOAN LOSSES

    The allowance for loan losses is established through charges to earnings 
in the form of the provision for loan losses.  Loan losses are charged to, 
and recoveries are credited to, the allowance for loan losses.  The provision 
for loan losses is determined after considering various factors such as loan 
loss experience, current economic conditions, maturity of the portfolio, size 
of the portfolio, industry concentrations, borrower credit history, the 
existing allowance for loan losses, independent loan reviews, current charges 
and recoveries to the allowance for loan losses, and the overall quality of 
the portfolio, as determined by management, regulatory agencies, and 
independent credit review consultants retained by the Company.

    The adequacy of the Company's allowance for loan losses is based on 
specific and formula allocations to the Company's loan portfolio.  Specific 
allocations of the allowance for loan losses are made to identified problem 
or potential problem loans.  The specific allocations are increased or 
decreased through management's reevaluation of the status of the particular 
problem loans. Loans which do not receive a specific allocation receive an 
allowance allocation based on a formula, represented by a percentage factor 
based on underlying collateral, type of loan, historical charge-offs and 
general economic conditions and other qualitative factors.

    The following table summarizes the Company's allowance for loan losses:


                               Three months ended    Nine months ended
                                   September 30       September 30
                               ------------------   ------------------
(dollars in thousands)             1997     1996       1997      1996
                               --------  -------     ------    ------- 

Beginning allowance for loan 
  losses                         $7,548   $7,034     $7,040    $5,037 
Provision for loan losses           465      545      1,635     3,375 
Charge-offs                        (272)    (630)    (1,027)   (1,532)
Recoveries                          248       36        341       105 
                               --------  -------     ------    -------
Ending allowance for loan 
  losses                         $7,989   $6,985     $7,989    $6,985 
                               --------  -------     ------    -------
                               --------  -------     ------    -------

Net charge-offs to average 
   loans (annualized)              .03%     .69%       .27%      .55%



    The allowance for loan losses as a percentage of portfolio loans 
increased from 2.03%  at December 31, 1996 to 2.67% at September 30, 1997.  
The increase in this percentage is due to a $47,769,000 decline in the 
Company's total loan portfolio.  The decrease in the provision for loan 
losses for the nine months ended September 30, 1997 of $1,740,000 over the 
same period in 1996 is primarily due to an increased provision year ago due 
to a lease portfolio of $1,412,000 purchased from a company currently in 
bankruptcy proceedings who retained the servicing of such portfolio and 
several other problem credits.


                      This page is page 15 of 22 pages.

<PAGE>



NONPERFORMING ASSETS

    The following table summarizes the Company's  nonperforming assets.


                                              September 30,  December 31,
(dollars in thousands)                             1997         1996
                                               ----------    ---------
Nonaccrual loans                                  $10,275       $8,246 
Accruing loans past due 90 days or more               174        1,536 
Restructured loans                                  1,112          599
                                               ----------    --------- 
Total nonperforming loans                          11,561       10,381 
Other real estate owned                             4,741        2,132 
Other assets owned                                    576          668
                                               ----------    --------- 
Total nonperforming assets                        $16,878      $13,181
                                               ----------    ---------
                                               ----------    --------- 

Nonperforming assets to total                       3.76%        2.64%


    Nonperforming assets have increased from $13,181,000 as of December 31, 
1996 to $16,878,000 as of September 30, 1997.  The principal reasons for this 
increase relate to an increase in restructured loans of $513,000, an increase 
in nonaccrual loans of $2,029,000, an increase in other real estate owned of 
$2,609,000, all being offset by a decline in accruing loans past due 90 days 
or more of $1,362,000.

    Nonperforming loans consist of loans to 78 borrowers, 32 of which have 
balances in excess of $100,000. The two largest have recorded balances of 
$738,000 secured by general business assets and $650,000 secured by real 
estate. Based on information currently available, management believes that 
adequate reserves are included in the allowance for loan losses to cover any 
loss exposure that may result from these loans.

    Other real estate owned consists of 26 properties.  20 properties are 
residential and 6 construction lots.  Other assets owned included contract 
receivable rights and repossessed personal property carried at $576,000.

    Although the volume of nonperforming assets will depend in part on the 
future economic environment, there are also nine loan relationships which 
total approximately $1,940,000 about which management has serious doubts as 
to the ability of the borrowers to comply with the present repayment terms 
and which may become nonperforming assets based on the information presently 
known about possible credit problems of the borrower.

    Construction lending generally bears a greater degree of risk than other 
forms of real estate lending.  Accordingly, due to the Company's current 
level of outstanding construction loans, the Company may experience an 
increase in nonperforming loans from this loan category.


                         This page is page 16 of 22 pages.



<PAGE>


    In the first nine months of 1997 the Company was required by various 
mortgage loan investors to repurchase twenty-one non performing residential 
mortgage loans or purchase foreclosed real property.  From time to time the 
Company may be required to repurchase mortgage loans from investors depending 
upon representations and warranties of the purchase agreement between the 
investor and the Company.  Such representations and warranties include valid 
appraisal, status of borrower, first payment default or fraud.  Primarily 
these repurchases involve loans which are in default.  The Company expects 
that it may be required to repurchase loans in the future.  The Company 
maintains a reserve for its estimate of potential losses associated with the 
potential repurchase of previously sold mortgage loans.  Such reserve amounts 
to $390,000 as of September 30, 1997.

    At September 30, 1997 the Company's total recorded investment in impaired 
loans (as defined by SFAS 114 and 118) was $12,665,000 of which $11,847,000 
relates to the recorded investment for which there is a related allowance for 
credit losses of $1,620,000 determined in accordance with these statements 
and $817,000 relates to the amount of that recorded investment for which 
there is no related allowance for credit losses determined in accordance with 
these standards.

    The average recorded investment in the impaired loans during the nine 
months ended September 30, 1997 and September 30, 1996 was $13,000,000 and 
$9,714,000; the related amount of interest income recognized during the 
periods that such loans were impaired was $43,000 and $433,000 for the three 
and nine month periods ended September 30, 1997 and $17,000 and $269,000 for 
the same period in 1996.   No interest income was recognized using a 
cash-basis method of accounting during the period that the loans were 
impaired.

LIQUIDITY

    Redwood's primary source of liquidity is dividends from its financial 
institution subsidiary.  Redwood's primary uses of liquidity are associated 
with cash payments made to the subordinated debt holders, dividend payments 
made to the preferred stock holders, and operating expenses of the parent.  
It is Redwood's general policy to retain liquidity at Redwood at a level 
which management believes to be consistent with the safety and soundness of 
the Company as a whole.  As of September 30, 1997, Redwood held $2,196,000 in 
deposits at NBR and a $3,000,000 subordinated note issued by NBR.  

    Redwood pays quarterly dividends of 7.8% on its preferred stock of 
$5,750,000 and interest at 8.5% on $12,000,000 of subordinated debentures 
issued in 1993.  Payment of these obligations is dependent on dividends from 
NBR. Federal regulatory agencies have the authority to prohibit the payment 
of dividends by NBR to Redwood if a finding is made that such payment would 
constitute an unsafe or unsound practice, or if NBR became undercapitalized. 
If NBR is restricted from paying dividends, Redwood could be unable to pay 
the above obligations.  No assurance can be given as to the ability of NBR to 
pay dividends to Redwood.

    During both the first and  second quarters of 1997, NBR declared 
dividends of $215,000.  Management believes that at September 30, 1997, the 
Company's liquidity position was adequate for the operations of Redwood and 
its subsidiary for the foreseeable future.


                    This page is page 17 of 22 pages.



<PAGE>


    Although each entity within the consolidated group manages its own 
liquidity, the Company's consolidated cash flow can be divided into three 
distinct areas; operating, investing and financing.  For the nine months 
ended September 30, 1997 the Company received $46,150,000 and $20,040,000 in 
cash flows from operating and investing activities while using $48,851,000 in 
financing activities.

CAPITAL RESOURCES

    A strong capital base is essential to the Company's continued ability to 
service the needs of its customers.  Capital protects depositors and the 
deposit insurance fund from potential losses and is a source of funds for the 
substantial investments necessary for the Company to remain competitive.  In 
addition, adequate capital and earnings enable the Company to gain access to 
the capital markets to supplement its internal growth of capital.  Capital is 
generated internally primarily through earnings retention.

    The Company and NBR are required to maintain minimum capital ratios 
defined by various federal government regulatory agencies. The FRB and the 
OCC have each established capital guidelines, which include minimum capital 
requirements. The regulations impose three sets of standards: a "risk-based", 
"leverage" and "tangible" capital standard.

    Under the risk-based capital standard, assets reported on an 
institution's balance sheet and certain off-balance sheet items are assigned 
to risk categories, each of which is assigned a risk weight.  This standard 
characterizes an institution's capital as being "Tier 1" capital (defined as 
principally comprising shareholders' equity and noncumulative preferred 
stock) and "Tier 2" capital (defined as principally comprising the allowance 
for loan losses and subordinated debt).

    Under the leverage capital standard, an institution must maintain a 
specified minimum ratio of Tier 1 capital to total assets, with the minimum 
ratio ranging from 4% to 6%.  The leverage ratio for the Company and NBR is 
based on average assets for the quarter. 



                   This page is page 18 of 22 pages.


<PAGE>

    The following table summarizes the consolidated capital ratios and the 
capital ratios of the principal subsidiaries at December 31, 1996 and 
September 30, 1997.


      
                                              Company     NBR
                                          ----------------------
September 30, 1997
  Total capital to risk based assets          14.01%     13.26%
  Tier 1 capital to risk based assets          9.18      11.11
  Leverage ratio                               7.03       8.48

December 31, 1996
  Total capital to risk based assets          12.12      12.28
  Tier 1 capital to risk based assets          7.63       9.40
  Leverage ratio                               5.46       6.87


                     This page is page 19 of 22 pages

<PAGE>

    CONCENTRATION OF LENDING ACTIVITIES.  Concentration of the Company's
lending activities in the real estate sector, including construction loans could
have the effect of intensifying the impact on the Company of adverse changes in
real estate market in the Company's lending areas.  At September 30, 1997,
approximately 80% of the Company's loans were secured by real estate, of which
28% were secured by commercial real estate, including small office buildings,
owner-user office/warehouses, mixed use residential and commercial properties
and retail properties.  Substantially all of the properties that secure the
Company's present loans are located within Northern and Central California.  The
ability of the Company to continue to originate mortgage or construction loans
may be impaired by adverse changes in local or regional economic conditions,
adverse changes in the real estate market, increasing interest rates, or acts of
nature (including earthquakes, which may cause uninsured damage and other loss
of value to real estate that secures the Company's loans).  Due to the
concentration of the Company's real estate collateral, such events could have a
significant adverse impact on the value of such collateral or the Company's
earnings.


                           This page is page 20 of 22 pages
<PAGE>


                             PART II. - OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS - NONE


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

         (a)  EXHIBIT 11

         Weighted average shares, used in the computation of per share
         earnings, include the common stock equivalents impact of common stock
         options outstanding.  Primary earnings per share includes the
         reduction of net income by the declared Preferred Stock dividend.  The
         impact on earnings per share assuming conversion of the Preferred
         Stock was reflected in the fully-dilutive computation.  The
         computation of per share earnings is incorporated by reference in the
         Consolidated Statement of Operations on page 3 herein.

(b) REPORTS ON FORM 8-K

         Form 8-K dated July 22, 1997 announcing the dividend on preferred
         stock payable on July 30, 1997.

         Form 8-K dated July 29, 1997 announcing  second quarter 1997 financial
         results.

                           This page is page 21 of 22 pages
<PAGE>



                                      SIGNATURES



    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized and in the capacity indicated.





                                REDWOOD EMPIRE BANCORP
                                     (Registrant)




DATE:    x-x-97         BY:  /s/ James E. Beckwith
         ------              -----------------------------------
                             James E. Beckwith
                             Executive Vice President,
                             Chief Financial Officer,
                             Principal Financial Officer, and
                             Principal Accounting Officer



                           This page is page 22 of 22 pages