<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 March 31, 1998
 
                                         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) 573-4800
                                          
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.  May 7, 1998:  3,302,911

--------------------------------------------------------------------------------
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                             This page is 1 of 22 pages.

<PAGE>

                                REDWOOD EMPIRE BANCORP
                                         AND
                                     SUBSIDIARIES

                                        INDEX

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
PART I.       Financial Information

    ITEM 1.   Financial Statements

              Consolidated Statements of Operations
              Three Months ended March 31, 1998 and 1997 . . . . . . . . . . 3

              Consolidated Balance Sheets
              March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . 4

              Consolidated Statements of Cash Flows
              Three Months Ended March 31, 1998 and 1997 . . . . . . . . . . 5

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


    ITEM 2.   Management's Discussion and Analysis
              of Financial Condition and Results of  Operations. . . . . . .10


PART II.      Other Information

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

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


SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
</TABLE>


                          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
                                                                 March 31,
                                                            1998          1997
                                                       -------------------------
<S>                                                    <C>          <C>
Interest income:
  Interest and fees on  loans                             $6,854       $8,628 
  Interest on investment securities                        1,126          829 
  Interest on federal funds sold                             326          278 
  Interest on time deposits due from 
    financial institutions                                  ---             3 
                                                       -------------------------
Total interest income                                      8,306        9,738 

Interest expense:
  Interest on deposits                                     3,381        4,288 
  Interest on subordinated notes                             277          278 
  Interest on other borrowings                                74           83 
                                                       -------------------------
Total interest expense                                     3,732        4,649 
                                                       -------------------------
Net interest income                                        4,574        5,089 
Provision for loan losses                                    510          585 
                                                       -------------------------

Net interest income after loan loss provision              4,064        4,504 

Other operating income:
  Service charges on deposit accounts                        274          296 
  Merchant draft processing, net                             441          422 
  Loan servicing income                                      179          316 
  Net realized gain on sale of 
    investment securities available for sale                 105            1 
  Gain on sale of loans and loan servicing                   947        1,070 
  Other income                                             1,381          467 
                                                       -------------------------
Total other operating income                               3,327        2,572 

Other operating expense:
  Salaries and employee benefits                           3,003        3,217 
  Occupancy and equipment expense                            809          885 
  Other                                                    1,837        1,974 
                                                       -------------------------
 Total other operating expense                             5,649        6,076 
                                                       -------------------------

  Income before income taxes                               1,742        1,000 
  Provision for income taxes                                 635          420 
                                                       -------------------------

Net income                                                 1,107          580 
Dividends on preferred stock                                 112          112 
                                                       -------------------------
Net income available for common stock shareholders          $995         $468 
                                                       -------------------------
                                                       -------------------------

Earnings per common share and common 
 equivalent share:
   Basic earnings per share                                 $.36         $.17
   Weighted average shares                             2,793,000    2,756,000
   Diluted earnings per share                               $.32         $.16
   Weighted average shares                             3,445,000    2,861,000

</TABLE>

See Notes to Consolidated Financial Statements.

                           This page is page 3 of 22 pages.

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                 March 31,         December 31,
                                                                                    1998                1997
                                                                               ---------------    --------------
<S>                                                                            <C>                <C>  
Cash and due from banks                                                           $35,823            $21,505 
Federal funds sold and repos                                                       36,746             34,553 
                                                                               ---------------    --------------

  Cash and cash equivalents                                                        72,569             56,058 

Interest bearing deposits due from financial institutions                               6                  6 
Investment securities:
  Held to maturity (market value of $28,063 and $31,273)                           27,720             30,658 
  Available for sale, at market                                                    35,059             41,907 
                                                                               ---------------    --------------
    Total investment securities                                                    62,779             72,565 
Mortgage loans held for sale                                                       30,236             16,929 
Loans:
    Residential real estate mortgage                                               88,284             93,516 
    Commercial real estate mortgage                                                56,618             57,425 
    Commercial                                                                     64,111             69,097 
    Real estate construction                                                       46,902             55,031 
    Installment and other                                                           5,985              9,200 
    Less deferred loan fees                                                        (1,697)            (1,873)
                                                                               ---------------    --------------
        Total portfolio loans                                                     260,203            282,396 
    Less allowance for loan losses                                                 (7,649)            (7,645)
                                                                               ---------------    --------------
        Net loans                                                                 252,554            274,751 
Premises and equipment, net                                                         4,252              4,055 
Mortgage servicing rights                                                             552                620 
Other real estate owned                                                             5,759              6,352 
Cash surrender value of life insurance                                              3,448              2,929 
Other assets and interest receivable                                               11,736             12,454 
                                                                               ---------------    --------------
     Total assets                                                                $443,891           $446,719 
                                                                               ---------------    --------------
                                                                               ---------------    --------------

Deposits:
  Noninterest bearing demand deposits                                             $92,591            $98,915 
  Interest-bearing transaction accounts                                           155,239            149,939 
  Time deposits $100,000 and over                                                  53,684             53,878 
  Other time deposits                                                              83,499             88,689 
                                                                               ---------------    --------------
    Total deposits                                                                385,013            391,421 
   
Other borrowings                                                                    5,626              2,341 
Subordinated notes                                                                 12,000             12,000 
Other liabilities and interest payable                                              6,919              7,714 
                                                                               ---------------    --------------
    Total liabilities                                                             409,558            413,476 

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 2,805,739 and 2,785,261 shares                        19,730             19,656 
  Retained earnings                                                                 9,021              8,024 
  Unrealized loss on investment securities carried as,
    or transferred from available for sale, net of income taxes                      (168)              (187)
                                                                               ---------------    --------------

     Total shareholders' equity                                                    34,333             33,243 
                                                                               ---------------    --------------
         
     Total liabilities and shareholders' equity                                  $443,891           $446,719 
                                                                               ---------------    --------------
                                                                               ---------------    --------------

</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>

                                                                                      Three Months Ended      
                                                                                            March 31,
                                                                                     1998               1997
                                                                                  ----------         ----------
<S>                                                                               <C>                <C>
Cash flows from operating activities:

  Net income                                                                       $1,107               $580 

Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization, net                                                  207                788 
  Net realized gains on securities available for sale                                (105)                (1)
  Loans originated for sale                                                       (92,263)           (61,778)
  Proceeds from sale of loans held for sale                                        87,930             79,980 
  Gain on sale of loans and loan servicing                                           (947)            (1,507)
  Provision for loan losses                                                           510                585 
  Change in other assets and interest receivable                                     (140)             6,525 
  Change in other liabilities and interest payable                                   (488)            (2,194)
  Noncash restructuring charge                                                      ---                ---   
  Other, net                                                                          248               (151)
                                                                                  ----------         ----------
  Total adjustments                                                                (5,048)            22,247 
                                                                                  ----------         ----------

  Net cash (used in) and provided by operating activities                          (3,941)            22,827 
                                                                                  ----------         ----------

Cash flows from investing activities:
  Net change in loans                                                              12,995              3,208 
  Proceeds from sales of loans in portfolio                                           172              1,311 
  Purchases of investment securities available for sale                           (11,081)            (5,000)
  Purchases of investment securities held to maturity                              (4,022)             ---   
  Sales of investment securities available for sale                                 2,955              6,974 
  Maturities of investment securities available for sale                           10,900              ---   
  Maturities of investment securities held to maturity                             11,229                500 
  Premises and equipment, net                                                        (582)              (425)
  Purchase of mortgage servicing rights                                                (2)              (148)
  Noninterest bearing demand deposits                                               ---                   (3)
  Proceeds from sale of other real estate owned                                     1,071                 98 
                                                                                  ----------         ----------

    Net cash provided by investment activities                                     23,635              6,515 
                                                                                  ----------         ----------

Cash flows from financing activities:
  Change in noninterest bearing transaction accounts                               (6,324)            (1,893)
  Change in interest bearing transaction accounts                                   5,302                890 
  Change in time deposits                                                          (5,386)           (30,640)
  Change in borrowings                                                              3,285             (5,103)
  Issuance of stock                                                                    52                143 
  Dividends paid                                                                     (112)              (112)
                                                                                  ----------         ----------
    Net cash used in financing activities                                          (3,183)           (36,715)
                                                                                  ----------         ----------


Net change in cash and cash equivalents                                            16,511             (7,373)
Cash and cash equivalents at beginning of period                                   56,058             45,473 
                                                                                  ----------         ----------


Cash and cash equivalents at end of period                                        $72,569            $38,100 
                                                                                  ----------         ----------
                                                                                  ----------         ----------

</TABLE>

                                            (Continued)

                           This page is page 5 of 22 Pages

<PAGE>

                       REDWOOD EMPIRE BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Cash Flows
                                    (in thousands)
                                     (Continued)
<TABLE>
<CAPTION>

                                                          Three Months Ended
                                                               March 31,
                                                           1998         1997
                                                         --------    ---------
<S>                                                      <C>         <C>
Supplemental Disclosures:

Cash paid during the period for:
  Interest expense                                         5,261       4,625 

Noncash investing and financing activities:
  Transfers from loans to other real estate owned            726       1,292 
  Transfer from mortgage loans held for sale to loans        216         --- 

</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 1997 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 three 
months ended March 31, 1998 are not necessarily indicative of the results 
that may be expected for the year ending December 31, 1998.
     
     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, federal funds sold and repurchase 
agreements. Federal funds sold and repurchase agreements 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.

                               This page is pge 7 of 22

<PAGE>

3.   Earnings per Share
     
     Basic earnings per share excludes dilution and is computed by dividing 
income available to common shareholders by the weighted-average number of 
common shares outstanding for the period.  Diluted earnings per share 
reflects the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into common stock 
or resulted in the issuance of common stock that then shared in the earnings 
of the entity.

<TABLE>
<CAPTION>

                                                               Year Ended 
                                                                March 31,  
                                                            1998        1997 
                                                         -----------  ----------
                                                          (in thousands except 
                                                           per share amounts)
<S>                                                      <C>           <C>
 Basic Earnings per share: 
 Net income                                                $1,107        $580 
 Less: Preferred stock dividend                               112         112 
                                                          --------    --------
 Net income available to common stock shareholders           $995        $468 
                                                          --------    --------
                                                          --------    --------

 Weighted average common shares outstanding                 2,793       2,756 
                                                          --------    --------
                                                          --------    --------
                                                                            
 Basic earnings per share                                   $0.36       $0.17 
                                                          --------    --------
                                                          --------    --------

 Diluted Earnings per share:                                                
 Net income available to common stock shareholders           $995        $468 
 Dilutive effect of Preferred Stock dividend      
                                                          --------    --------
                                                           $1,107        $580 
                                                          --------    --------
                                                          --------    --------
 Weighted average common shares outstanding                 2,793       2,756
 Effect of outstanding stock options                          153         105
 Effect of Convertible Preferred Stock                        499
                                                          --------    --------
                                                            3,445       2,861
                                                          --------    --------
                                                          --------    --------
 Diluted earnings per share                                 $0.32       $0.16 
                                                          --------    --------
                                                          --------    --------

</TABLE>

                              This page is page 8 of 22.

<PAGE>

4.   Change in Accounting Principles

     Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income".  This 
Statement requires that all items recognized under accounting standards as 
components of comprehensive earnings be reported in an annual financial 
statement that is displayed with the same prominence as other annual 
financial statements.  This Statement also requires that an entity classify 
items of other comprehensive earnings by their nature in an annual financial 
statement.  For example, other comprehensive earnings may include foreign 
currency translation adjustments, minimum pension liability adjustments, and 
unrealized gains and losses on marketable securities classified as 
available-for-sale.  Annual financial statements for prior periods will be 
reclassified, as required.  The Company's total comprehensive earnings were 
as follows:

<TABLE>
<CAPTION>

Three Months Ended March 31,                             1998         1997
                                                       ---------     -------
<S>                                                    <C>           <C>
Net income as reported                                  $1,107        $580
Other comprehensive income (net of tax):
  Change in unrealized holding gain (losses)
     on available for sale securities                       44        (270)
  Reclassification adjustment                              (25)         (1)
                                                       ---------     -------
Total comprehensive income                              $1,126        $309
                                                       ---------     -------
                                                       ---------     -------

</TABLE>


5.   Preferred Stock Redemption

     On March 19, 1998 the Company called for redemption of its outstanding 
7.8% Noncumulative Convertible Perpetual Preferred Stock, Series A. The 
redemption notice provided that all shares will be redeemed on April 30, 1998 
at $10.39 per share, payable to shareholders of record as of March 27, 1998, 
who surrender their preferred stock certificates to the conversion agent, 
Chase Mellon Shareholder Services LLC.  The preferred stock is convertible at 
the option of the holder, into 0.8674 shares of common stock for each share 
of preferred stock.  The total number of shares subject to redemption will be 
reduced by the number of shares of preferred stock converted into common 
stock between the record date and the redemption date.  
     
     As a result of the redemption 573,290 shares of the preferred shares 
were converted into 497,172 shares of common stock effective April 30, 1998. 
Preferred shares to be redeemed for cash at $10.39 per share amounted to 
1,710.

                           This page is page 9 of 22 pages.

<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, 1997 to March 31, 1998, and significant changes and trends in 
the Company's results of operations for the three months ended March 31, 
1998, compared to the same period in 1997.
     
     
SUMMARY OF FINANCIAL RESULTS

     The Company reported net income of $1,107,000 ($.32 per share, diluted) 
for the three months ended March 31 1998, compared to $580,000 ($.16 per 
share, diluted)for the same period in 1997.  The increase in net income in 
the first quarter of 1998 when compared to the same period in 1997 is due to 
an increase of $755,000 in non interest income, a decrease of $427,000 in non 
interest expense, all being offset by a decline of $515,000 in net interest 
income.

                          This page is page 10 of 22 pages.

<PAGE>

NET INTEREST INCOME

     Net interest income decreased $515,000 for the first quarter of 1998 
compared to the first quarter of 1997.  The decrease is primarily due to a 
decrease in average earning assets of $46,521,000 or 11%.  Net interest 
margin for the quarter ended March 31, 1998 amounted to 4.73% as compared to 
4.69% one year ago.
     
     The decline in earning assets of the Company is due principally to the 
decline in residential and construction loans.  The average of residential 
mortgage and construction loans declined $5,548,000 and $27,352,000 from 
$98,499,000 and $73,152,000 as of March 31, 1997 to $92,951,000 and 
$45,800,000 as of March 31, 1998. This decline in residential loans was a 
result of a relatively low mortgage rate environment which spurred refinance 
activity.  The decrease in construction loans was due to decreased 
originations brought about by management's desire to lower the relative size 
of the Company's construction loan portfolio.
     
     With respect to the net interest margin, the yield on earning assets 
decreased  from 8.98% to 8.58%.  However, as a result of decreased funding 
needs, the Company significantly reduced its higher cost time certificates of 
deposits.  Total time certificates amounted to $137,183,000 as of March 31, 
1998 as compared to $177,542,000 as of March 31, 1997 which results in a 
decline of $40,359,000 or 29%.  This reduction in higher cost liabilities had 
an effect on overall yield paid for interest-bearing liabilities.  Such yield 
declined from 5.02% in the first quarter of 1997 to 4.91% for the same 
quarter in 1997.

                          This page is page 11 of 22 pages.

<PAGE>

     The following is an analysis of the net interest margin:

<TABLE>
<CAPTION>

                                            Three months ended                           Three months ended  
                                              March 31, 1998                               March 31, 1997
                                     Average                           %         Average                                %
    (dollars in thousands)           Balance        Interest         Yield       Balance         Interest             Yield
                                  -------------------------------------------------------------------------------------------
    <S>                               <C>               <C>              <C>         <C>             <C>                  <C>
    Earning assets (1)                  $387,101        $8,306           8.58       $433,622         $9,738               8.98
    Interest-bearing liabilities         303,867         3,732           4.91        370,501          4,649               5.02
                                                        --------                     ---------
    Net interest income                                 $4,574                        $5,089 
                                                        --------                     ---------
                                                        --------                     ---------
    Net interest income to
       earning assets                                                    4.73                                             4.69

</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 three months ended March 31, 1998 and 1997.  Changes 
not solely attributable to rate or volume have been allocated to rate.

<TABLE>
<CAPTION>

                                                                        March 31, 1998 over 
                                                                            March 31, 1997
                                                            --------------------------------------------
                                                               Volume            Rate         Total
                                                            --------------------------------------------
                                                                            (in thousands) 
<S>                                                         <C>               <C>           <C>
Increase (decrease) in interest income:
  Portfolio loans                                            ($1,615)           ($77)       ($1,692)
  Mortgage loans held for sale                                   108            (190)           (82)
  Investment securities                                          195              99            294 
  Interest-earning deposits with other institutions            ---             ---            ---   
  Federal funds sold                                              67             (19)            48 
                                                            --------------------------------------------
Total increase (decrease)                                     (1,245)           (187)        (1,432)
                                                            --------------------------------------------

Increase (decrease) in interest expense:
  Interest-bearing transaction accounts                          (48)            (42)           (90)
  Time deposits                                                 (771)            (46)          (817)
  Other borrowings                                              (139)            129            (10)
                                                            --------------------------------------------
Total increase (decrease)                                       (958)             41           (917)
                                                            --------------------------------------------

Increase in net interest income                                ($287)          ($228)         ($515)
                                                            --------------------------------------------
                                                            --------------------------------------------

</TABLE>

PROVISION FOR LOAN LOSSES

     The provision for loan losses for the three months ended March 31, 1998 
amounted to $510,000 as compared to $585,000 in the same quarter in the 
previous year.  For further discussion see Allowance for Loan Losses.

                             This page is page 12 of 22.

<PAGE>

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 three months ended March 31, 1998, as compared to 
the same period in 1997.

<TABLE>
<CAPTION>

                                            Three Months Ended
                                                 March 31        
                                           ----------------------        %
(dollars in thousands)                      1998           1997       Change
                                           -------       ------------------
<S>                                        <C>           <C>        <C>
Service charges on deposit accounts           274           296           (7)
Merchant draft processing, net                441           422            5 
Loan servicing income                         179           316          (43)
Gain (loss) on securities                     105             1       10,400 
Gain on sale of loans and servicing           947         1,070          (11)
Other income                                1,381           467          196 
                                           ------        ------
Total other operating income               $3,327        $2,572           29
                                           ------        ------

</TABLE>


     Other operating income increased $755,000 or 29% to $3,327,000 for the 
first quarter of 1998 when compared to $2,572,000 for the same period in 
1997. Such increase is primarily due to a $914,000 increase in other income, 
which includes net brokerage revenue associated with the Company's mortgage 
loan brokerage operation.   The change is offset by a decrease of gain on 
sale of loans and servicing of $123,000.  The Company's mortgage loan 
brokerage division, Valley Financial, experienced significant growth in the 
first quarter of 1998. Net revenue from the mortgage loan brokerage operation 
amounted to $1,096,000 in the first quarter of 1998 as compared to $374,000 
in the same period one year ago. The significant increase is due primarily to 
a favorable interest rate environment and a strong residential purchase 
market in Northern California.  

     Other Operating Expense
     
     Other operating expense decreased by $427,000 or 7% to $5,649,000 during 
the first quarter of 1998 compared to $6,086,000 for the first quarter of 
1997, primarily due to the reduced head count and a reduction in data 
processing, occupancy and legal and professional expenses.
     
     The following table sets forth the components of the Company's other 
operating expense during the three months ended March 31, 1998, as compared 
to the same period in 1997.

<TABLE>
<CAPTION>

                                                    Three Months Ended
                                                         March 31      
                                                    -------------------     %
(dollars in thousands)                                1998       1997     Change
                                                    --------    ----------------
<S>                                                 <C>         <C>       <C>

Salaries and employee benefits                      $3,003      $3,217     (7)
Occupancy and equipment expense                        809         885     (9)
Other                                                1,837       1,974     (7)

                                                    --------    --------
Total other operating expense                       $5,649      $6,076     (7)
                                                    --------    --------
                                                    --------    --------

                             This page is page 13 of 22.

<PAGE>

</TABLE>

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 36.5% for the three months ended March 31, 1998, compared to 42.0% 
for the same period in 1997.  The decline in the Company's effective tax rate 
in the first quarter of 1998 is due to recording the benefit of certain items 
arising in previous years.

INVESTMENT SECURITIES

     Total investment securities decreased $9,766,000 or 13% to $62,779,000 
as of March 31, 1998 when compared to $72,565,000 as of December 31, 1997.  
The principal reason for the decline relates to callable agency securities 
being called by the issuer.  Such called securities amounted to $11,900,000 in 
the first quarter of 1998.  As a result of this action the Company recorded 
$70,000 as  gain on sale.

MORTGAGE LOANS HELD FOR SALE

     Mortgage loans held for sale increased $13,307,000 or 78% to $30,236,000 
at March  31, 1998 compared to $16,929,000 at December 31, 1997. The increase 
in mortgage loans held for sale is due to the current low interest rate 
environment and increased production capability within the Valley Financial 
unit.  In addition to brokering to other financial institutions, Valley 
Financial also originates loans for sale into the secondary market.

LOANS
     
     Total loans decreased $22,193,000 or 8% to $260,203,000 at March 31, 
1998 compared to $282,396,000 at December 31, 1997.  All loan categories 
declined in the first quarter of 1998.  Increased competition in the 
Company's market along with rate reduction and refinance activity were the 
principal reasons for such decline.  The Company anticipates that these 
forces will remain intact for the foreseeable future.

                             This page is page 14 of 22.

<PAGE>


      The following table summarizes the composition of the loan portfolio at 
March 31, 1998 and December 31, 1997.

<TABLE>
<CAPTION>

                                          March 31, 1998      December 31, 1997
                                       ---------------------  ------------------
 (dollars in thousands)                 Amount           %     Amount       % 
                                       ---------------------  ------------------
<S>                                    <C>              <C>    <C>          <C>

 Residential real estate mortgage       $88,284          34%   $93,516      33%
 Commercial real estate mortgage         56,618          22     57,425      20
 Commercial                              64,111          25     69,097      24
 Real estate construction                46,902          18     55,031      21
 Installment and other                    5,985           2      9,200       3
 Less deferred fees                      (1,697)         (1)    (1,873)     (1)
                                       ---------------------  ------------------
     Total loans                        260,203         100%   282,396     100%
                                                        ----               ----
                                                        ----               ----
 Less allowance for loan losses          (7,649)                (7,645)
                                       ---------              ---------
     Net loans                         $252,554               $274,751
                                       ---------              ---------
                                       ---------              ---------

</TABLE>

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:

<TABLE>
<CAPTION>

                                             Three months ended 
                                                  March 31,
                                            ---------------------
(dollars in thousands)                       1998           1997
                                            -------       -------
<S>                                         <C>           <C>
Beginning allowance for loan losses         7,645          7,040 
Provision for loan losses                     510            585 
Charge-offs                                  (537)          (575)
Recoveries                                     31             35 
                                            -------       -------
Ending allowance for loan losses            7,649          7,085 
                                            -------       -------
                                            -------       -------

</TABLE>

                          This page is page 15 of 22 pages.

<PAGE>

     The allowance for loan losses as a percentage of portfolio loans 
increased from 2.71%  at December 31, 1997 to 2.93% at March 31, 1998.  The 
increase in this percentage is due to a $22,162,000 decline in the Company's 
total loan portfolio.
     

NONPERFORMING ASSETS
     
     The following table summarizes the Company's  nonperforming assets.
     
<TABLE>
<CAPTION>

                                                   March 31,    December 31,
(dollars in thousands)                                 1998          1997
                                                   ----------    ----------
<S>                                                <C>          <C>
Nonaccrual loans                                     $7,215        $7,883
Accruing loans past due 90 days or more                 167           735
Restructured loans                                    1,109         1,109
                                                   ----------    ----------
Total nonperforming loans                             8,491         9,727
Other real estate owned                               5,759         6,352
Other assets owned                                      455           542
                                                   ----------    ----------
Total nonperforming assets                          $14,705       $16,621
                                                   ----------    ----------
                                                   ----------    ----------

Nonperforming assets to total assets                   3.31%         3.72%

</TABLE>

     Nonperforming assets have decreased from $16,621,000 as of December 31, 
1997 to $14,698,000 as of March 31, 1998.  The principal reasons for this 
decrease relate to a decrease in nonaccrual loans of $668,000, a decrease in 
other real estate owned of $593,000 and a decrease in accruing loans past due 
90 days or more of $575,000.
     
     Nonperforming loans consist of loans to 52 borrowers, 25 of which have 
balances in excess of $100,000. The two largest have recorded balances of 
$926,000 and $737,000, both  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 30 properties.  18 properties are 
residential, 6 construction lots and the remaining are undeveloped acres and 
commercial buildings .  Other assets owned included contract receivable 
rights and repossessed personal property carried at $455,000.
     
     Although the volume of nonperforming assets will depend in part on the 
future economic environment, there are also nine loan relationships which 
total approximately $2,135,000 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.

                             This page is page 16 of 22.

<PAGE>

     In the first three months of 1998 the Company was required by various 
mortgage loan investors to repurchase four non performing residential 
mortgage loans.  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 $307,000 as of March 
31, 1998.
     
     At March 31, 1998 the Company's total recorded investment in impaired 
loans (as defined by SFAS 114 and 118) was $11,596,000 of which $8,475,000 
relates to the recorded investment for which there is a related allowance for 
credit losses of $1,654,000 determined in accordance with these statements 
and $3,121,000 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 three 
months ended March 31, 1998 and March 31, 1997 was $11,608,000 and 
$16,928,000; the related amount of interest income recognized during the 
periods that such loans were impaired was $118,000 for the three month period 
ended March 31, 1998 and $14,000 for the same period in 1997.   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 March 31, 1998, Redwood held $1,986,000 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.

                          This page is page 17 of 22 Pages.

<PAGE>

     During the first quarter of 1998, NBR declared dividends of $300,000. 
Management believes that at March 31, 1998, the Company's liquidity position 
was adequate for the operations of Redwood and its subsidiary for the 
foreseeable future.
     
     Although each entity within the consolidated Company manages its own 
liquidity, the Company's consolidated cash flow can be divided into three 
distinct areas; operating, investing and financing.  For the three months 
ended March 31, 1998 the Company received $3,941,000 and $23,635,000 in cash 
flows from operating and investing activities while using $3,183,000 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, 1997 and March 
31, 1998.

<TABLE>
<CAPTION>

                                                         Company           NBR
                                                       -------------------------
<S>                                                    <C>               <C>
March 31, 1998
  Total capital to risk based assets                      15.59%         14.74%
  Tier 1 capital to risk based assets                     10.50          12.52
  Leverage ratio                                           7.35           9.19

December 31, 1997
  Total capital to risk based assets                      14.64          13.83
  Tier 1 capital to risk based assets                      9.72          11.65
  Leverage ratio                                           7.10           8.58

</TABLE>

CERTAIN IMPORTANT CONSIDERATIONS FOR INVESTORS
     
     MORTGAGE BANKING ACTIVITY.  The Company's historic results of operations 
has been significantly influenced by mortgage banking activity, which can 
fluctuate significantly, in both volume and profitability, with changes in 
interest rate movements.  In the fourth quarter of 1996, the Company 
significantly curtailed its "A paper" wholesale mortgage loan production.  As 
a result of this action, the Company's future mortgage loan production 
revenue and expenses will be significantly reduced from pre 1997 levels.
     
     MERCHANT CREDIT CARD PROCESSING.  The Company's profitability can be 
negatively impacted should one of the Company's merchant credit card 
customers be unable to pay on charge-backs from cardholders.  Due to a 
contractual obligation between the Company and Visa and Mastercard, NBR 
stands in the place of the merchant in the event that a merchant is unable to 
pay on charge-backs from cardholders.  Management has taken certain actions 
to decrease the risk of merchant bankruptcy with its merchant bankcard 
business.  These steps include the discontinuance of high-risk accounts.

                             This page is page 19 of 22.

<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 March 31, 
1998, approximately 74% of the Company's loans were secured by real estate, 
of which 22% 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.

<PAGE>

                            PART II. - OTHER INFORMATION


Item 2.   CHANGES IN SECURITIES - On March 19, 1998 the Company called for 
redemption of its outstanding 7.8% Noncumulative Convertible Perpetual 
Preferred Stock Series A. The redemption notice provided that all shares will 
be redeemed on April 30, 1998 at $10.39 per share, payable to shareholders of 
record as of March 27, 1998, who surrender their preferred stock certificates 
to the conversion agent, Chase Mellon Shareholder Services LLC. The preferred 
stock is convertible at the option of the holder, into 0.8674 shares of 
common stock for each share of preferred stock. The total number of shares 
subject to redemption will be reduced by the number of shares of preferred 
stock converted into common stock between the record date and the redemption 
date.

     As a result of the redemption 573,290 shares of the preferred shares 
were converted into 497,172 shares of common stock effective April 30, 1998. 
Preferred shares to be redeemed for cash at $10.39 per share amounted to 
1,710.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a) EXHIBIT 11
     
              Basic earnings per share excludes dilution and is computed by 
              dividing income available to common shareholders by the 
              weighted-average number of common shares outstanding for the 
              period.  Diluted earnings per share reflects the potential 
              dilution that could occur if securities or other contracts to 
              issue common stock were exercised or converted into common 
              stock or resulted in the issuance of common stock that then 
              shared in the earnings of the entity. See Footnote 3 "Earnings 
              per Share."

     
         (b)  REPORTS ON FORM 8-K

              Form 8-K dated March 25, 1998 announcing the call for 
              redemption of its outstanding 7.8% Noncumulative Convertible 
              Preferred Stock, Series A.

              Form 8-K dated January 28, 1998 announcing declaration of 
              quarterly dividend on preferred stock and its fourth quarter 
              and full year 1997 financial results.

                             This page is page 21 of 22.

<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:         05/13/98         BY: /s/ James E. Beckwith     
              --------            --------------------------
                                  James E. Beckwith
                                  Executive Vice President, 
                                  Chief Financial Officer,
                                  Principal Financial Officer, and 
                                  Principal Accounting Officer