================================================================================
                                  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 June 30, 2000

                                       or

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

For the transition period from ______ to ______

                         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. August 1, 2000: 3,005,715

<PAGE>




                             REDWOOD EMPIRE BANCORP
                                       AND
                                  SUBSIDIARIES

                                      Index


                                                                            Page
PART I.  Financial Information

     Item 1. Financial Statements

             Consolidated Statements of Operations
             Three and Six Months ended June 30, 2000.......................  3

             Consolidated Balance Sheets
             June 30, 2000 and December 31, 1999............................  5

             Consolidated Statements of Cash Flows
             Six Months Ended June 30, 2000.................................  6

             Notes to Consolidated Financial Statements.....................  8


     Item 2. Management's Discussion and Analysis
             of Financial Condition and Results of Operations............... 14

     Item 3. Quantitative and Qualitative Disclosure
             About Market Risk.............................................. 32


PART II. Other Information

     Item 4. Submissions of Matters to a Vote of Security Holders........... 33

     Item 6. Exhibits and Reports on Item 8-K............................... 34



SIGNATURES   ............................................................... 35

<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.      Financial Statements
<TABLE>
<CAPTION>

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

                                                              Three Months Ended                Six Months Ended
                                                                   June 30,                         June 30,
                                                            2000              1999              2000         1999
                                                      -----------------------------------   ---------------------------
<S>                                                             <C>               <C>             <C>          <C>
Interest income:
  Interest and fees on loans                                    $7,432            $6,330          $14,198      $12,424
  Interest on investment securities                              1,290             1,007            2,540        1,963
  Interest on federal funds sold                                    80                78              223          256
                                                      -----------------------------------   ---------------------------

Total interest income                                            8,802             7,415           16,961       14,643

Interest expense:
  Interest on deposits                                           3,443             2,578            6,614        4,905
  Interest on subordinated notes                                   ---               ---              ---          142
  Interest on other borrowings                                      84               ---              133          ---
                                                      -----------------------------------   ---------------------------
Total interest expense                                           3,527             2,578            6,747        5,047
                                                      -----------------------------------   ---------------------------

Net interest income                                              5,275             4,837           10,214        9,596
Provision for loan losses                                           50               200              150          500
                                                      -----------------------------------   ---------------------------

Net interest income after loan loss provision                    5,225             4,637           10,064        9,096

Noninterest income:
  Service charges on deposit accounts                              251               268              528          523
  Merchant draft processing, net                                 1,075               863            1,972        1,642
  Loan servicing income                                             80                48              120           64
  Net realized (loss)/gain on sale of
    investment securities available for sale                       (37)              ---              (38)          14
  Other income                                                     157               199              355          460
                                                      -----------------------------------   ---------------------------
Total noninterest  income                                        1,526             1,378            2,937        2,703

Noninterest expense:
  Salaries and employee benefits                                 2,092             2,306            4,242        4,464
  Occupancy and equipment expense                                  509               583            1,010        1,115
  Other                                                          1,404             1,262            2,611        2,377
                                                      -----------------------------------   ---------------------------
Total noninterest expense                                        4,005             4,151            7,863        7,956
                                                      -----------------------------------   ---------------------------

  Income from continuing operations before income taxes
     and extraordinary item                                      2,746             1,864            5,138        3,843
  Provision for income taxes                                     1,117               684            2,089        1,452
                                                      -----------------------------------   ---------------------------

Income from continuing operations before extraordinary
    item                                                         1,629             1,180            3,049        2,391

Discontinued Operations:
  Income from discontinued operations
    (less applicable income taxes of $10 and $51)                                     38                           121
                                                      -----------------------------------   ---------------------------

Income before extraordinary item                                 1,629             1,218            3,049        2,512

Extraordinary item                                                 ---               ---              ---          459
Income tax benefit                                                 ---               ---              ---         (183)
                                                      -----------------------------------   ---------------------------
Total extraordinary item, net of tax                               ---               ---              ---          276
                                                      -----------------------------------   --------------------------

Net income                                                      $1,629            $1,218           $3,049       $2,236
                                                      ===================================   ===========================


</TABLE>





<PAGE>


<TABLE>
<CAPTION>



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


                                                                 Three Months Ended          Six Months Ended
                                                                       June 30,                  June 30,
                                                                  2000         1999          2000        1999
                                                               ------------------------- -------------------------

<S>                                                              <C>          <C>           <C>         <C>
Basic earnings per common share:
   Income from continuing operations before extraordinary item       $0.52        $0.35         $0.95       $0.71
   Income from discontinued operations                                 ---         0.01           ---        0.04
   Income before extraordinary item                                   0.52         0.36          0.95        0.74
   Net income                                                         0.52         0.36          0.95        0.66
  Weighted average shares - basic                                3,157,000    3,395,000     3,205,000   3,383,000

Diluted earnings per common share and common equivalent share:
   Income from continuing operations before extraordinary item       $0.51        $0.34         $0.94       $0.69
   Income from discontinued operations                                 ---         0.01           ---        0.03
   Income before extraordinary item                                   0.51         0.35          0.94        0.72
   Net income                                                         0.51         0.35          0.94        0.64
  Weighted average shares - diluted                              3,213,000    3,503,000     3,239,000   3,483,000

See Notes to Consolidated Financial Statements.


</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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

                                                                               June 30,                December 31,
                                                                                 2000                      1999
                                                                           ------------------       -------------------
                                                                              (unaudited)
<S>                                                                                 <C>                      <C>
Assets:
Cash and due from banks                                                              $19,383                  $19,058
Federal funds sold and repurchase agreements                                           1,162                    1,497
                                                                           ------------------       -------------------
  Cash and cash equivalents                                                           20,545                   20,555

Investment securities:
  Held to maturity (fair value of $32,212 and $31,923)                                33,272                   32,967
  Available for sale, at fair value (amortized cost of $44,452
      and $44,667)                                                                    43,365                   43,738
                                                                           ------------------       -------------------
    Total investment securities                                                       76,637                   76,705
Loans:
    Residential real estate mortgage                                                 140,312                  130,504
    Commercial real estate mortgage                                                   83,306                   79,476
    Commercial                                                                        64,116                   61,165
    Real estate construction                                                          44,257                   40,059
    Installment and other                                                              4,549                    4,624
    Less deferred loan fees                                                           (1,311)                  (1,383)
                                                                           ------------------       -------------------
        Total portfolio loans                                                        335,229                  314,445
    Less allowance for loan losses                                                    (8,099)                  (7,931)
                                                                           ------------------       -------------------
        Net loans                                                                    327,130                  306,514

Premises and equipment, net                                                            2,753                    3,045
Mortgage servicing rights                                                                 28                       32
Other real estate owned                                                                1,296                    2,363
Cash surrender value of life insurance                                                 3,265                    3,187
Other assets and interest receivable                                                  11,043                   10,645
                                                                           ------------------       -------------------
     Total assets                                                                   $442,697                 $423,046
                                                                           ==================       ===================

Liabilities and Shareholders' equity:
Deposits:
  Noninterest bearing demand deposits                                                $85,361                   $77,753
  Interest-bearing transaction accounts                                              123,004                  124,357
  Time deposits $100,000 and over                                                     83,791                   69,294
  Other time deposits                                                                 99,878                   98,105
                                                                           ------------------       -------------------
    Total deposits                                                                   392,034                  369,509

Other borrowings                                                                       5,010                    4,695
Other liabilities and interest payable                                                10,097                   11,398
                                                                           ------------------       -------------------
     Total liabilities                                                               407,141                  385,602

Shareholders' equity:
  Preferred stock, no par value; authorized 2,000,000 shares;
      none outstanding                                                                   ---                      ---
  Common stock, no par value; authorized 10,000,000 shares;
      issued and outstanding: 3,005,715 and 3,228,771 shares                          17,965                   22,033
  Retained earnings                                                                   18,221                   15,950
  Accumulated other comprehensive loss, net                                             (630)                    (539)

                                                                           ------------------       -------------------
     Total shareholders' equity                                                       35,556                   37,444
                                                                           ------------------       -------------------
     Total liabilities and shareholders' equity                                     $442,697                 $423,046
                                                                           ==================       ===================

See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>


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

                                                                             Six Months Ended
                                                                                 June 30,
                                                                         2000               1999
                                                                     -------------      --------------
<S>                                                                        <C>                <C>
Cash flows from operating activities:

  Net income                                                                $3,049             $2,236

Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization, net                                           650                749
  Net realized loss (gains) on securities available for sale                    38                (14)
  Loans originated for sale                                                    ---           (192,313)
  Proceeds from sale of loans held for sale                                    ---            190,865
  Gain on sale of loans and loan servicing                                     ---             (1,240)
  Provision for loan losses                                                    150                500
  Change in other assets and interest receivable                              (690)             3,073
  Change in other liabilities and interest payable                          (1,415)             8,953
  Other, net                                                                   ---                102
                                                                     -------------      --------------
  Total adjustments                                                         (1,267)            10,675
                                                                     -------------      --------------

  Net cash provided by operating activities                                  1,782             12,911
                                                                     -------------      --------------

Cash flows from investing activities:
  Net change in loans                                                      (20,983)           (22,411)
  Purchases of investment securities available for sale                     (3,943)            (7,016)
  Purchases of investment securities held to maturity                         (840)            (6,160)
  Proceeds from sales of investment securities available for sale            3,968                ---
  Maturities of investment securities available for sale                       149              5,000
  Maturities or calls of investment securities held to maturity                607              2,774
  Premises and equipment, net                                                 (358)              (516)
  Proceeds from sale of other real estate owned                              1,737              1,637

                                                                     -------------      --------------
    Net cash used in investing activities                                  (19,663)           (26,692)
                                                                     -------------      --------------

Cash flows from financing activities:
  Change in noninterest bearing transaction accounts                         7,608              7,749
  Change in interest bearing transaction accounts                           (1,353)           (12,954)
  Change in subordinated debt                                                  ---            (12,000)
  Change in time deposits                                                   16,270              7,047
  Change in other borrowings                                                   315             12,499
  Issuance/(repurchase) of common stock                                     (4,305)               214
  Dividends paid                                                              (664)              (273)
                                                                     -------------      --------------
    Net cash provided by financing activities                               17,871              2,282
                                                                     -------------      --------------


Net change in cash and cash equivalents                                        (10)           (11,499)
Cash and cash equivalents at beginning of period                            20,555             42,187
                                                                     -------------      --------------


Cash and cash equivalents at end of period                                 $20,545            $30,688
                                                                     =============      ==============

</TABLE>

                                             (Continued)

<PAGE>

<TABLE>
<CAPTION>

                                   Consolidated Statements of Cash Flows
                                              (in thousands)
                                                (Continued)

                                                                                   Six Months Ended
                                                                                       June 30,
                                                                               2000               1999
                                                                           --------------     --------------

<S>                                                                              <C>                 <C>
Supplemental Disclosures:

Cash paid during the period for:
  Interest expense                                                               7,864               5,798
  Income taxes                                                                   2,224                 410

Noncash investing and financing activities:
  Transfers from loans to other real estate owned                                  670               2,044
  Dividend declared                                                                451                 273
  Transfers from mortgage loans held for sale to portfolio loans                   ---               1,547






See notes to Consolidated Financial Statements.
</TABLE>



                                              (Concluded)





<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  1999 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 six  months  ended  June  30,  2000 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2000.

     In September 1999 the Company successfully completed the divestiture of its
mortgage  brokerage  and mortgage  banking  units,  Valley  Financial and Allied
Diversified  Credit.  The Company has disclosed the operations of these units as
well  as  the  after  tax  loss  on  disposition  as  discontinued   operations.
Accordingly,  historical  financial  information  has been recast to present the
operating  results  of  Valley  Financial  and  Allied   Diversified  Credit  as
discontinued operations.

     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 with original  maturities of 90 days or less.  Federal funds sold and
repurchase agreements are generally for one day periods.


2.   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.

<PAGE>

     The  Company's  pertinent  earnings  per  share  data  is  as  follows  (in
thousands, except per share data):

<TABLE>
<CAPTION>

                                                                              Three Months Ended
                                                                                  June 30,
                                                                      2000                        1999
                                                             ------------------------    ------------------------
                                                               Basic        Diluted        Basic        Diluted
                                                             ----------    ----------    ----------    ----------

<S>                                                              <C>          <C>    <C>    <C>           <C>    <C>
 Earnings per common share:

 Income from continuing operations before extraordinary item    $1,629        $1,629        $1,180        $1,180
 Earnings per share from income from continuing operations
   before extraordinary item                                     $0.52         $0.51         $0.35         $0.34

 Income from discontinued operations, net of tax                  $---          $---           $38           $38
 Earnings per share from income from discontinued operations     $0.00         $0.00         $0.01         $0.01

 Income before extraordinary item                               $1,629        $1,629        $1,218        $1,218
 Earnings per share before extraordinary item                    $0.52         $0.51         $0.36         $0.35

 Net income                                                     $1,629        $1,629        $1,218        $1,218
 Net income per share                                            $0.52         $0.51         $0.36         $0.35

 Weighted average common shares outstanding                      3,157         3,213 (1)     3,395         3,503 (1)

(1) The weighted average common shares outstanding  include the dilutive effects of common stock options of 56 and 108.
</TABLE>

<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                                  June 30,
                                                                       2000                       1999
                                                              -----------------------    -----------------------
                                                                Basic       Diluted        Basic       Diluted
                                                              ----------   ----------    ----------   ----------

<S>                                                              <C>          <C>    <C>    <C>          <C>     <C>
Earnings per common share:

 Income from continuing operations before extraordinary item     $3,049       $3,049        $2,391       $2,391
 Earnings per share from continuing operations before
   extraordinary item                                             $0.95        $0.94         $0.71        $0.69


 Income/(loss) from discontinued operations                        $---         $---          $121         $121
 Earnings per share from income/(loss) of discontinued
   operations                                                      $---         $---         $0.04        $0.03


 Income before extraordinary item                                $3,049       $3,049        $2,512       $2,512
 Earnings per share before extraordinary item                     $0.95        $0.94         $0.74        $0.72

 Net income                                                      $3,049       $3,049        $2,236       $2,236
 Net income per share                                             $0.95        $0.94         $0.66        $0.64

 Weighted average common shares outstanding                       3,205        3,239 (1)      3,383        3,483 (1)

(1)  The weighted average common shares outstanding include the dilutive effects of common stock options of 34 and 100.
</TABLE>


<PAGE>

3.   Comprehensive Income

     The Company's total comprehensive earnings presentation is as follows:

<TABLE>
<CAPTION>

                                                Three Months Ended                  Six Months Ended
                                                    June 30,                           June 30,
                                              2000             1999              2000             1999
                                          --------------   --------------    -------------    --------------
                                                  (In thousands)                     (In thousands)

<S>                                              <C>              <C>               <C>              <C>
 Net income as reported                          $1,629           $1,218            $3,049           $2,236
 Other comprehensive income (net of tax):
   Change in unrealized holding gain (losses)
      on available for sale securities                              (361)                              (543)
                                                     39                                (68)
   Reclassification adjustment
                                                    (22)               -               (23)              (8)
                                          --------------   --------------    -------------    --------------
 Total comprehensive income                      $1,646             $857            $2,958           $1,685
                                          ==============   ==============    =============    ==============
</TABLE>

4.   Common Stock Dividend

     On May 16, 2000 the Board of Directors  declared a quarterly  cash dividend
of 15 cents per share on the Company's  Common  Stock.  The dividend was paid on
July 17, 2000 to shareholders of record on June 30, 2000.


5.   Divestiture of Mortgage Banking and Mortgage Brokerage Units

     On September 10, 1999 the Company divested itself of its subprime  mortgage
brokerage  and mortgage  banking  units,  Allied  Diversified  Credit and Valley
Financial.  The divestiture took the form of an asset sale and employee transfer
to Valley Financial Funding,  Inc., whose shareholders include senior management
of  Valley  Financial  and  Allied  Diversified  Credit.  As  a  result  of  the
divestiture,  the Company lost ninety-five  employees of which  sixty-three were
transferred to Valley Financial  Funding,  Inc, while thirty-two were terminated
by the Company. As a result of its divestiture the Company recorded an after-tax
loss of $167,000  which is primarily  comprised  of  termination  benefits.  The
Company has  disclosed  the  operations  of these units as well as the after tax
loss  on  disposition  as  discontinued  operations.   Accordingly,   historical
financial  information regarding changes due to overhead and interest allocation
for all  segments  has been  recast to present the  operating  results of Valley
Financial and Allied Diversified Credit as discontinued operations. Revenue from
discontinued  operations  was  $1,664,000  and  $3,793,000 for the three and six
months ended June 30, 1999. There was no such revenue recognized in 2000.

<PAGE>

6.   Extraordinary Item

     In the first quarter of 1999 the Company recorded an  extraordinary  charge
of  $276,000,  net of tax.  Such charge is  comprised  of the  unamortized  debt
issuance costs  associated  with the Company's  $12,000,000  subordinated  debt,
which was early  redeemed in the first  quarter of 1999. In the first quarter of
1999 Redwood obtained  funding for the early redemption  through an $8.0 million
dividend  from NBR,  the  redemption  of a $3.0  million  note from NBR and $1.0
million from Redwood's general corporate funds.


7.   Business Segments

     Through September 10, 1999, the Company operated in four principal industry
segments: core community banking, merchant card services, sub prime lending, and
residential mortgage banking and brokerage. The Company's core community banking
segment includes commercial, commercial real estate, construction, and permanent
residential lending along with all depository activities. The Company's merchant
card services industry group provides credit card settlement services for 49,000
merchants  throughout the United  States.  The Company's sub prime lending unit,
known as  Allied  Diversified  Credit  and the  Company's  residential  mortgage
banking and brokerage arm, known as Valley  Financial were divested on September
10, 1999. The divestiture took the form of an asset sale and employee  transfer.
The Company has disclosed the operations of these units as well as the after tax
loss  on  disposition  as  discontinued  operations.   Accordingly,   historical
financial information regarding segments has been restated to reflect only those
segments associated with continuing operations.

     The  condensed  income  statements  and  average  assets of the  individual
segments  are set forth in the table  below.  The  information  in this table is
derived from the internal  management  reporting  system used by  management  to
measure  the  performance  of the  segments  and  the  Company.  The  management
reporting  system  assigns  balance  sheet and  income  statement  items to each
segment based on internal management accounting policies. Net interest income is
determined  by the Company's  internal  funds  transfer  pricing  system,  which
assigns a cost of funds or credit  for funds to assets or  liabilities  based on
their  type,  maturity  or  repricing  characteristics.  Noninterest  income and
expense directly attributable to a segment are assigned to that business.  Total
other operating expense including  indirect costs, such as overhead,  operations
and  technology  expense are allocated to the segments based on an evaluation of
costs for product or data  processing.  All amounts  other than  allocations  of
interest and indirect  costs are derived from third  parties.  The provision for
credit  losses  is  allocated  based  on  the  required  reserves  and  the  net
charge-offs  for each respective  segment.  The Company  allocates  depreciation
expense without allocating the related depreciable asset to that segment.


     Information  related to the  internal  allocation  of interest  expense and
overhead to segments  presented in previous periods has been restated to present
such  amounts   consistent  with  standards  for  accounting  for   discontinued
operations.  These  standards do not allow the  allocation of general  corporate
overhead to discontinued operations and generally require that the allocation of
interest to discontinued  operations be based on the marginal  interest  expense
that would not have been incurred were it not for the  discontinued  operations.
Summary financial data by industry segment follows:

<PAGE>

<TABLE>
<CAPTION>                                                        For the quarter ended June 30, 2000
                                                               ---------------------------------------

                                                                Community                   Total
                                                                 Banking     Bankcard      Company
                                                               ---------------------------------------
                                                                           (in thousands)

<S>                                                                <C>           <C>        <C>
Total Interest Income                                                $8,802      $   ---      $8,802
Total Interest Expense                                                3,527                    3,527
                                                                                     ---
Interest income/(expense) allocation                                   (287)         287         ---
                                                               ---------------------------------------
Net Interest Income                                                   4,988          287       5,275
Provision for Loan Losses                                                50                       50
                                                                                     ---
Total other Operating Income                                            451        1,075       1,526
Total other Operating Expense                                         3,526          479       4,005
                                                               ---------------------------------------
Income from continuing operations before income taxes
   and extraordinary item                                             1,863          883       2,746
Provision for income taxes                                              757          360       1,117
                                                               ---------------------------------------
Income from continuing operations before extraordinary item          $1,106         $523      $1,629
                                                               =======================================

Total Average Assets                                               $416,243      $26,083    $442,326
                                                               =======================================
</TABLE>


<TABLE>
<CAPTION>
                                                            For the quarter ended June 30, 1999
                                                          ---------------------------------------

                                                           Community                   Total
                                                            Banking     Bankcard      Company
                                                          ---------------------------------------
                                                                      (in thousands)

<S>                                                           <C>          <C>          <C>
Total Interest Income                                           $7,415       $ ---        $7,415
Total Interest Expense                                           2,578                     2,578
                                                                               ---
Interest income/(expense) allocation                             (138)         138           ---
                                                          ---------------------------------------
Net Interest Income                                              4,699         138         4,837
Provision for Loan Losses                                          200                       200
                                                                               ---
Total other Operating Income                                       515         863         1,378
Total other Operating Expense                                    3,804         347         4,151
                                                          ---------------------------------------
Income from continuing operations before income taxes
   and extraordinary item                                        1,210         654         1,864
Provision for income taxes                                         448         236           684
                                                          ---------------------------------------
Income from continuing operations before extraordinary            $762        $418        $1,180
item
                                                          =======================================

Total Average Assets                                          $383,142     $21,660      $404,802
                                                          =======================================
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                           For the six months ended June 30, 2000
                                                           ---------------------------------------

                                                            Community                   Total
                                                             Banking      Bankcard     Company
                                                           ---------------------------------------
                                                                       (in thousands)

<S>                                                            <C>           <C>         <C>
Total Interest Income                                           $16,961        $ ---      $16,961
Total Interest Expense                                            6,747          ---        6,747
Interest income/(expense) allocation                              (582)          582          ---
                                                           ---------------------------------------
Net Interest Income                                               9,632          582       10,214
Provision for Loan Losses                                           150          ---          150
Total other Operating Income                                        965        1,972        2,937
Total other Operating Expense                                     6,935          928        7,863
                                                           ---------------------------------------
Income from continuing operations before income taxes
  and extraordinary item                                          3,512        1,626        5,138
Provision for income taxes                                        1,427          662        2,089
                                                           ---------------------------------------
Income from continuing operations before extraordinary
  item                                                           $2,085         $964       $3,049

                                                           =======================================

Total Average Assets                                           $410,605      $25,007     $435,612
                                                           =======================================
</TABLE>




<TABLE>
<CAPTION>
                                                           For the six months ended June 30, 1999
                                                           ---------------------------------------

                                                            Community                   Total
                                                             Banking      Bankcard     Company
                                                           ---------------------------------------
                                                                       (in thousands)

<S>                                                           <C>            <C>         <C>
Total Interest Income                                           $14,643        $ ---      $14,643
Total Interest Expense                                            5,044            3        5,047
Interest income/(expense) allocation                              (275)          275          ---
                                                           ---------------------------------------
Net Interest Income                                               9,324          272        9,596
Provision for Loan Losses                                           500          ---          500
Total other Operating Income                                      1,061        1,642        2,703
Total other Operating Expense                                     7,286          670        7,956
                                                           ---------------------------------------
Income from continuing operations before income taxes
  and extraordinary item                                          2,599        1,244        3,843
Provision for income taxes                                          990          462        1,452
                                                           ---------------------------------------
Income from continuing operations before extraordinary           $1,609         $782       $2,391
item
                                                           =======================================

Total Average Assets                                           $374,794      $21,019     $395,813
                                                           =======================================

</TABLE>


<PAGE>


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

Forward-Looking Information

     This  Quarterly  Report on Form 10-Q includes  forward-looking  information
which is subject to the "safe harbor"  created by the Securities Act of 1933 and
Securities  Act of 1934.  These  forward-looking  statements  (which involve the
Company's  plans,  beliefs and goals,  refer to estimates or use similar  terms)
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:

     o    Competitive  pressure  in the  banking  industry  and  changes  in the
          regulatory environment.

     o    Changes  in the  interest  rate  environment  and  volatility  of rate
          sensitive loans and deposits.

     o    The health of the economy  declines  nationally  or  regionally  which
          could  reduce the demand for loans or reduce the value of real  estate
          collateral securing most of the Company's loans.

     o    Credit  quality  deterioration  which  could  cause an increase in the
          provision for loan losses.

     o    Dividend restrictions.

     o    Regulatory discretion.

     o    Material  losses in the  Company's  merchant  credit  card  processing
          business from card holder fraud or merchant business failure.

     o    Asset/liability repricing risks and liquidity risks.

     o    Changes in the securities markets.


     The Company  undertakes  no  obligation  to revise or publicly  release the
results of any  revision to these  forward-looking  statements.  For  additional
information  concerning risks and  uncertainties  related to the Company and its
operations please refer to the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 and 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, 1999
to June 30, 2000.  Significant  changes and trends in the  Company's  results of
operations  for the three and six months  ended June 30,  2000,  compared to the
same period in 1999 are also discussed.

<PAGE>

Summary of Financial Results

     On September 10, 1999 the Company divested itself of its mortgage brokerage
and mortgage banking units,  Valley Financial and Allied Diversified Credit. The
divestiture  took the form of an asset  sale and  employee  transfer  to  Valley
Financial Funding,  Inc., whose shareholders include senior management of Valley
Financial and Allied  Diversified  Credit.  As a result of the divestiture,  the
Company lost  ninety-five  employees of which  sixty-three  were  transferred to
Valley Financial Funding,  Inc, while thirty-two were terminated by the Company.
The Company has disclosed the operations of these units as well as the after tax
loss  on  disposition  as  discontinued  operations.   Accordingly,   historical
financial information has been recast to present the operating results of Valley
Financial and Allied Diversified Credit as discontinued operations. Revenue from
discontinued  operations  was  $1,664,000  and  $3,793,000 for the three and six
months ended June 30, 1999.  There was no such revenue  recognized for the three
and six months ended June 30, 2000.

     The Company reported income from continuing  operations of $1,629,000 ($.51
per diluted share) for the three months ended June 30, 2000 and $1,180,000 ($.34
per diluted  share) for the same period in 1999.  The Company did not  recognize
any income or loss associated with its discontinued  operations during the three
and six month period ended June 30, 2000, as compared to income of $38,000 ($.01
per diluted  share) and $121,000 ($.03 per diluted share) for the same period in
1999. Net income was  $1,629,000  ($.51 per diluted share) for the quarter ended
June 30, 2000 and  $1,218,000  ($.35 per  diluted  share) for the same period in
1999.  Net income from  continuing  operations  for the first six months of 2000
increased  $658,000,  or 28%,  to  $3,049,000  ($.94  per  diluted  share)  from
$2,391,000  ($.69 per diluted share) as compared to the same period in 1999. Net
income for the six months ended June 30, 2000 was  $3,049,000  ($.94 per diluted
share) as  compared  to  $2,236,000  ($.64 per  diluted  share),  an increase of
$813,000 or 36%. This increase is due to an increase of $618,000 in net interest
income,  an  increase  of  $234,000  in  noninterest  income,  a decrease in the
provision  for loan losses of $350,000 and a decrease of $93,000 in  noninterest
expense.


Net Interest Income

     Net interest  income from continuing  operations  increased from $4,837,000
during the second  quarter of 1999 to $5,275,000 in the second  quarter of 2000,
which represents an increase of $438,000 or 9%. While the Company's net interest
margin  decreased  to 5.09% for the three  months ended June 30, 2000 from 5.28%
for the three months ended June 30, 1999, the growth in earning assets more than
made up for the  decline in margin  resulting  in an  increase  in net  interest
income.  Average  earning  assets from  continuing  operations,  which  excludes
mortgage loans held for sale, increased $48,092,000 or 13% from $366,164,000 for
the quarter ended June 30, 1999 to  $414,256,000  for the quarter ended June 30,
2000.


<PAGE>

     Net interest  income from  continuing  operations of $10,214,000  increased
$618,000 or 6% for the six months ended June 30, 2000 when  compared to the same
period one year ago.  Such  increase is due to an  increase  in average  earning
assets from continuing operations,  which excludes mortgage loans held for sale,
of  $49,526,000  or 14% to  $407,482,000  from  $357,956,000.  The Company's net
interest  margin  declined to 5.04% for the six months  ended June 30, 2000 from
5.36% for the six  months  ended June 30,  1999.  Factors  that will  affect the
Company's  interest  margin include the earning asset mix,  competitive  factors
affecting loan and deposit  pricing and retention and the general  interest rate
environment.

     For the  first  six  months  of 2000,  the  yield on  earning  assets  from
continuing  operations,  which excludes mortgage loans held for sale,  increased
from 8.18% to 8.37%.  This  increase is primarily due to earning asset growth of
$49,526,000 or 14%, and an increase in general interest rates as evidenced by an
increase in the prime rate from 7.75% at June 30, 1999 to 9.5% at June 30, 2000.
Yield paid on interest bearing liabilities increased to 4.41% for the six months
ended June 30, 2000 as compared to 3.91% for the same period in 1999.

     Average earning assets from continuing operations,  which excludes mortgage
loans  held  for  sale,  increased  during  the  first  six  months  of  2000 to
$407,482,000 as compared to $357,956,000 for the six months ended June 30, 1999.
The  increase  in average  earning  assets of  $49,526,000  during the first six
months of 2000 when  compared to 1999 is primarily due to an increase in average
portfolio  loans  of  $39,398,000  and  investment  securities  of  $12,923,000,
partially offset by a decrease in federal funds sold of $2,795,000.

     Further  contributing  to the decrease in the Company's net interest margin
was a change in the  Company's  funding  mix.  Total  average  interest  bearing
liabilities  increased from $258,031,000  during the first six months of 1999 to
$307,905,000  for the same period in 2000,  an increase of  $49,874,000  or 19%.
This  increase  was  coupled  with a  decrease  in average  noninterest  bearing
transaction  accounts  of  $10,682,000.  This  decrease in  noninterest  bearing
transaction  accounts is a result of a decrease in balances  deposited by one of
the Company's large customers.

     The following is an analysis of the net interest margin:

<TABLE>
<CAPTION>
                                        Three months ended                         Three months ended
                                          June 30, 2000                               June 30, 1999
                              ----------------------------------------    ----------------------------------------

                                Average                       %             Average                       %
(dollars in thousands)          Balance      Interest       Yield           Balance      Interest       Yield
                              ----------------------------------------    ----------------------------------------

<S>                               <C>            <C>             <C>          <C>             <C>            <C>
Earning assets (1)                $414,256       $8,802          8.50         $366,164        $7,415         8.10
Interest-bearing liabilities       313,379        3,527          4.50          265,309         2,578         3.89
                                           -------------                               --------------
Net interest income                              $5,275                                       $4,837
                                           =============                               ==============
Net interest income to
  earning assets                                                 5.09                                        5.28

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                        Six months ended                             Six months ended
                                          June 30, 2000                                June 30, 1999

                             ----------------------------------------     ----------------------------------------
                                Average                      %              Average                       %
(dollars in thousands)          Balance      Interest      Yield            Balance      Interest       Yield
                             ----------------------------------------     ----------------------------------------

<S>                               <C>           <C>             <C>           <C>           <C>              <C>
Earning assets (1)                $407,482      $16,961         8.37          $357,956      $14,643          8.18
Interest-bearing liabilities       307,905        6,747         4.41           258,031       $5,047          3.91
                                           -------------                               -------------
Net interest income                             $10,214                                      $9,596
                                           =============                               =============
Net interest income to
  earning assets                                                5.04                                         5.36
</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 and six  months  ended  June 30,  2000 and 1999.  Changes  not  solely
attributable to rate or volume have been allocated to rate.

<TABLE>
<CAPTION>

                                                              Three months ended June 30, 2000 compared
                                                               to the three months ended June 30, 1999
                                                         --------------------------------------------------
                                                             Volume            Rate             Total
                                                         --------------------------------------------------
                                                                           (in thousands)
<S>                                                                 <C>             <C>             <C>
Increase (decrease) in interest income:
  Portfolio loans                                                   $808            $294            $1,102
  Investment securities                                              177             106               283
  Federal funds sold                                                 (12)             14                 2
                                                         --------------------------------------------------
Total increase                                                       973             414             1,387
                                                         --------------------------------------------------

Increase (decrease) in interest expense:
  Interest-bearing transaction accounts                              (57)             54                (3)
  Time deposits                                                      649             219               868
  Other borrowings                                                   ---              84                84
                                                         --------------------------------------------------
Total increase                                                       592             357               949
                                                         --------------------------------------------------

Increase in net interest income                                     $381             $57              $438
                                                         ==================================================

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                                              Six months ended June 30, 2000 compared
                                                                to the six months ended June 30, 1999
                                                              Volume            Rate            Total
                                                         ---------------------------------------------------
                                                                           (in thousands)
<S>                                                                <C>               <C>             <C>
Increase (decrease) in interest income:
  Portfolio loans                                                  $1,731              $43           $1,774
  Investment securities                                               391              186              577
  Federal funds sold                                                 (68)               35             (33)
                                                         ---------------------------------------------------
Total increase                                                      2,054              264            2,318
                                                         ---------------------------------------------------

Increase (decrease) in interest expense:
  Interest-bearing transaction accounts                             (117)               92             (25)
  Time deposits                                                     1,439              295            1,734
  Other borrowings                                                     84             (93)              (9)
                                                         ---------------------------------------------------
Total increase                                                      1,406              294            1,700
                                                         ---------------------------------------------------

Increase (decrease) in net interest income                           $648            ($30)             $618
                                                         ===================================================
</TABLE>

Provision for Loan Losses

     The  provision  for loan  losses for the  quarter  ended June 30,  2000 was
$50,000 as compared to $200,000 in the same  quarter in the previous  year.  For
the six  months  ended  June 30,  2000 the  provision  decreased  $350,000  from
$500,000 in 1999 to $150,000 in 2000.  For further  discussion see Allowance for
Loan Losses and Nonperforming Loans.


Noninterest Income and Expense and Income Taxes

        Noninterest Income

     The following tables set forth the components of the Company's  noninterest
income from  continuing  operations  for the three and six months ended June 30,
2000, as compared to the same period in 1999.

<TABLE>
<CAPTION>

                                                  Three Months Ended
                                                      June 30,
                                             --------------------------
                                                                               $          %
                                                2000           1999         Change      Change
                                             -----------     ----------   -----------------------
                                                (dollars in thousands)

<S>                                              <C>            <C>             <C>         <C>
Service charges on deposit accounts                $251           $268          ($17)        (6)
Merchant draft processing, net                    1,075            863            212         25
Loan servicing income                                80             48             32         67
Gain (loss) on sale of securities                  (37)            ---           (37)        ---
Other income                                        157            199           (42)       (21)
                                             -----------     ----------   ------------
Total noninterest income                         $1,526         $1,378           $148         11
                                             ===========     ==========   ============
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
                                                   Six Months Ended
                                                        June 30,
                                             --------------------------
                                                                               $          %
                                                2000           1999         Change      Change
                                             -----------     ----------   -----------------------


<S>                                              <C>            <C>              <C>        <C>
Service charges on deposit accounts                 528            523             $5          1
Merchant draft processing, net                    1,972          1,642            330         20
Loan servicing income                               120             64             56         88
Gain (loss) on sale of securities                   (38)            14            (52)      (371)
Other income                                        355            460           (105)       (23)
                                             -----------     ----------   ------------
Total noninterest income                         $2,937         $2,703           $234          9
                                             ===========     ==========   ============
</TABLE>



     Noninterest income from continuing  operations increased $148,000 or 11% to
$1,526,000  for the second  quarter of 2000 when compared to $1,378,000  for the
same period in 1999.  Such  increase is primarily due to an increase in merchant
card net  revenue  of  $212,000  and an  increase  in loan  servicing  income of
$32,000.  These increases were partially  offset by a decline of $37,000 in loss
on securities and $42,000 in other income.

     Noninterest income from continuing  operations  increased $234,000 or 9% to
$2,937,000  for the six months ended June 30, 2000 when  compared to  $2,703,000
for the same period in 1999. The increase of $234,000 is primarily  attributable
to an increase of $330,000 in merchant draft  processing  income and an increase
of $56,000 in loan servicing income.



        Noninterest Expense

     The following tables set forth the components of the Company's  noninterest
expense  during the three and six months ended June 30, 2000, as compared to the
same period in 1999.

<TABLE>
<CAPTION>

                                            Three Months Ended
                                                June 30,
                                     -----------------------------
                                                                          $          %
                                         2000            1999          Change     Change
                                     -------------   -------------   ----------------------
                                         (dollars in thousands)

<S>                                        <C>             <C>           <C>          <C>
Salaries and employee benefits             $2,092          $2,306        ($214)        (9)
Occupancy and equipment expense               509             583          (74)       (13)
Other                                       1,404           1,262          142         11
                                     -------------   -------------   -----------
Total noninterest expense                  $4,005          $4,151        ($146)        (4)
                                     =============   =============   ===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                           Six Months Ended
                                               June 30,                  $          %
                                     -----------------------------
                                         2000            1999          Change     Change
                                     -------------   -------------   ----------------------


<S>                                        <C>             <C>           <C>           <C>
Salaries and employee benefits             $4,242          $4,464        ($222)        (5)
Occupancy and equipment expense             1,010           1,115         (105)        (9)
Other                                       2,611           2,377          234         10
                                     -------------   -------------   -----------
Total noninterest expense                  $7,863          $7,956         ($93)        (1)
                                     =============   =============   ===========
</TABLE>


     Noninterest expense from continuing  operations decreased by $146,000 or 4%
to $4,005,000  during the second  quarter of 2000 compared to $4,151,000 for the
second  quarter of 1999.  For the six months  ended June 30,  2000,  noninterest
expense  from  continuing   operations  decreased  $93,000  from  $7,956,000  to
$7,863,000.  The  decrease  in  noninterest  expense for the three and six month
periods  ending June 30, 2000 as  compared to the same  periods  ending June 30,
1999 is  attributable  to a decrease in salaries  and  employee  benefits.  Such
decrease is a direct  result of the decline in the number of people  employed by
the Company. At June 30, 2000 the Company had 150 full time equivalent employees
compared to 179 one year ago.

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 tax
rate was 40.7 for the three and six months  ended  June 30,  2000,  compared  to
36.7% and 37.7% for the same periods in 1999.


Business Segments

     Through  September 10, 1999, the Company operated in four principal product
and service lines:  core community  banking,  merchant card services,  sub prime
lending,  and  residential  mortgage  banking and brokerage.  The Company's core
community   banking  segment  includes   commercial,   commercial  real  estate,
construction,  and  permanent  residential  lending  along  with all  depository
activities.  The Company's merchant card services industry group provides credit
card settlement services for 49,000 merchants  throughout the United States. The
Company's  sub prime lending unit,  known as Allied  Diversified  Credit and the
Company's  residential  mortgage  banking  and  brokerage  arm,  known as Valley
Financial were divested on September 10, 1999. The divestiture  took the form of
an asset sale and employee transfer. The Company has disclosed the operations of
these  units  as  discontinued  operations.  Accordingly,  historical  financial
information  regarding segments has been restated to reflect only those segments
associated with continuing operations.

<PAGE>


     Summary financial data by industry segment as follows:

<TABLE>
<CAPTION>
                                                           For the quarter ended June 30, 2000
                                                          ---------------------------------------

                                                           Community                   Total
                                                            Banking     Bankcard      Company
                                                          ---------------------------------------
                                                                      (in thousands)

<S>                                                           <C>          <C>          <C>
Total Interest Income                                           $8,802       $ ---        $8,802
Total Interest Expense                                           3,527         ---         3,527
Interest income/(expense) allocation                             (287)         287           ---
                                                          ---------------------------------------
Net Interest Income                                              4,988         287         5,275
Provision for Loan Losses                                           50         ---            50
Total other Operating Income                                       451       1,075         1,526
Total other Operating Expense                                    3,526         479         4,005
                                                          ---------------------------------------
Income from continuing operations before income taxes
   and extraordinary item                                        1,863         883         2,746
Provision for income taxes                                         757         360         1,117
                                                          ---------------------------------------
Income from continuing operations before extraordinary          $1,106        $523        $1,629
item
                                                          =======================================

Total Average Assets                                          $416,243     $26,083      $442,326
                                                          =======================================

</TABLE>

<TABLE>
<CAPTION>
                                                           For the quarter ended June 30, 1999
                                                          ---------------------------------------

                                                           Community                   Total
                                                            Banking     Bankcard      Company
                                                          ---------------------------------------
                                                                      (in thousands)

<S>                                                           <C>          <C>          <C>
Total Interest Income                                           $7,415       $ ---        $7,415
Total Interest Expense                                           2,578         ---         2,578
Interest income/(expense) allocation                             (138)         138           ---
                                                          ---------------------------------------
Net Interest Income                                              4,699         138         4,837
Provision for Loan Losses                                          200         ---           200
Total other Operating Income                                       515         863         1,378
Total other Operating Expense                                    3,804         347         4,151
                                                          ---------------------------------------
Income from continuing operations before income taxes
   and extraordinary item                                        1,210         654         1,864
Provision for income taxes                                         448         236           684
                                                          ---------------------------------------
Income from continuing operations before extraordinary
  item                                                            $762        $418        $1,180
                                                          =======================================

Total Average Assets                                          $383,142     $21,660      $404,802
                                                          =======================================
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                                           For the six months ended June 30, 2000
                                                           ---------------------------------------

                                                            Community                   Total
                                                             Banking      Bankcard     Company
                                                           ---------------------------------------
                                                                       (in thousands)

<S>                                                            <C>           <C>         <C>
Total Interest Income                                           $16,961        $ ---      $16,961
Total Interest Expense                                            6,747          ---        6,747
Interest income/(expense) allocation                              (582)          582          ---
                                                           ---------------------------------------
Net Interest Income                                               9,632          582       10,214
Provision for Loan Losses                                           150          ---          150
Total other Operating Income                                        965        1,972        2,937
Total other Operating Expense                                     6,935          928        7,863
                                                           ---------------------------------------
Income from continuing operations before income taxes
  and extraordinary item                                          3,512        1,626        5,138
Provision for income taxes                                        1,427          662        2,089
                                                           ---------------------------------------
Income from continuing operations before extraordinary
   item                                                          $2,085         $964       $3,049
                                                           =======================================

Total Average Assets                                           $410,605      $25,007     $435,612
                                                           =======================================
</TABLE>



<TABLE>
<CAPTION>

                                                           For the six months ended June 30, 1999
                                                           ---------------------------------------

                                                            Community                   Total
                                                             Banking      Bankcard     Company
                                                           ---------------------------------------
                                                                       (in thousands)

<S>                                                            <C>           <C>         <C>
Total Interest Income                                           $14,643        $ ---      $14,643
Total Interest Expense                                            5,044            3        5,047
Interest income/(expense) allocation                              (275)          275          ---
                                                           ---------------------------------------
Net Interest Income                                               9,324          272        9,596
Provision for Loan Losses                                           500          ---          500
Total other Operating Income                                      1,061        1,642        2,703
Total other Operating Expense                                     7,286          670        7,956
                                                           ---------------------------------------
Income from continuing operations before income taxes
  and extraordinary item                                          2,599        1,244        3,843
Provision for income taxes                                          990          462        1,452
                                                           ---------------------------------------
Income from continuing operations before extraordinary
   item                                                          $1,609         $782       $2,391
                                                           =======================================

Total Average Assets                                           $374,794      $21,019     $395,813
                                                           =======================================
</TABLE>


<PAGE>

     Community Banking

     The Community  Banking  segment's income from continuing  operations before
income tax and extraordinary item increased for the quarter and six months ended
June 30, 2000 when compared to the same periods in 1999.  The increase is due to
reduced  operating  expenses,  a lower  provision  for loan losses and growth in
earning  assets.  For the quarter  and six months  ended June  30,2000,  segment
expenses declined primarily due to reduced overhead and administrative expenses.
Additionally, the Company increased its loan portfolio through renewed marketing
efforts.  Total average  portfolio loans were $330,769,000 in the second quarter
of 2000 up from  $293,321,000  in the second  quarter of 1999,  a 13%  increase.
Average  portfolio loans for the six months ended June 30, 2000 was $334,622,000
as compared to $282,698,000 in 1999, an 18% increase.

     Bankcard

     The  Merchant  Card  segment  provides  Visa  and  Mastercard  credit  card
processing  and  settlement   services  for  roughly  49,000  merchants  located
throughout  the United  States.  Yearly  processing  volume is in excess of $1.3
billion.  The  Company's  merchant  card  services  customer  base is made up of
merchants  located  in its  primary  market  area and  merchants  who have  been
acquired by the Company through the use of independent sales  organizations,  or
ISO's.

     The Merchant Card processing segment has experienced three successive years
of revenue and earnings  growth due to an increase in the number of merchants it
services and an increase of independent  sales  organizations  (ISO's) to market
its  services.  In  December  1998  the  Company  renegotiated  the  terms  of a
processing  contract  with  an  ISO  who  represented  $1,736,000  or 66% of the
Company's 1998 merchant draft net processing revenue,  $1,412,000 or 45% of such
revenue in 1999 and  $840,000 or 43% of such  revenue  for the six months  ended
June  30,  2000.  As a  result  of the  renegotiation  the ISO  bought  down its
processing rate in consideration for a payment of $2,600,000 to the Company. The
term of the  renegotiated  contract is for two years and requires the Company to
continue to process merchant card transaction  volume from this ISO's customers.
The  Company  has  amortized  such  payment  over the  life of the  renegotiated
contract  into  income.  During  the three and six months  ended June 30,  2000,
$360,000  and  $852,000 of this payment was  recognized  as revenue  compared to
$191,000  and  $601,000  for the same  periods in 1999.  The amount of  unearned
processing  revenue was  $600,000 as of June 30,  2000,  which will be amortized
into income in the third and fourth quarters of 2000.


<PAGE>

     The  Company  was  informed  in July  that  the  ISO  discussed  above  was
transferring  all of its remaining  customers  processed by the Company to a new
processor.  The effective date of this transfer was July 24, 2000. Subsequent to
this  transaction  date,  the  Company  will  continue  to  process  charge-back
transactions  originating  from merchant card sales activity  occurring prior to
the  final  transfer  date  through  the end of  2000.  Under  the  terms of the
renegotiated  contract the Company is to receive a contract  completion bonus in
the amount of $500,000.  Such bonus is expected to be recorded as revenue in the
second half of 2000. The remaining  deferred  revenue of $600,000 as of June 30,
2000 associated  with the $2,600,000  payment will be recorded as revenue in the
third and fourth quarters of 2000.  Since April 1999, in an effort to offset the
anticipated  decline in future merchant  bankcard  processing  revenues from the
completion of the contract  discussed  above,  the Company has been building its
overall merchant card processing  business through  additional  direct marketing
efforts and developing new ISO relationships.

     The Company bears certain risks  associated  with its merchant  credit card
processing  business.  Due to a contractual  obligation between NBR and Visa and
MasterCard, NBR stands in the place of the merchant in the event that a merchant
is unable to pay charge-backs from cardholders.  As a result of this obligation,
NBR may  incur  losses  associated  with its  merchant  credit  card  processing
business.  Accordingly,  NBR has  established  a reserve to  provide  for losses
associated with charge-back losses.  Such reserve,  which totaled $1,145,000 and
$694,000 as of June 30, 2000 and 1999,  was  estimated  based upon industry loss
data as a percentage of  transaction  volume  throughout  each year,  historical
losses incurred by the Company, and management's  assumptions regarding merchant
and ISO risk.  The provision for  charge-back  losses,  which is included in the
financial  statements as a reduction in merchant draft  processing  income,  was
$102,000 and $88,000 for the quarters  ended June 30, 2000 and 1999 and $237,000
and  $235,000  for the six  months  ended  June 30,  2000  and  June  30,  1999,
respectively.  While  charge  offs were  minimal,  the  increase  in the reserve
reflects the growth in proprietary merchant account volume,  increased exposures
to internet  merchants,  and a new ISO relationship in which the Company assumes
fraud risk directly rather than looking first to the ISO. For further discussion
see "Certain Important Considerations for Investors".

Investment Securities

     Total investment  securities  remained stable at $76,637,000 as of June 30,
2000 compared to  $76,705,000  as of December 31, 1999.  The  Company's  average
federal  fund  position  was  $7,685,000  for the  first  six  months of 2000 as
compared to $10,480,000 in 1999.

<PAGE>

Loans

     Total loans  increased  $20,784,000 or 7% to  $335,229,000 at June 30, 2000
compared to  $314,445,000  at December 31, 1999. The increase in portfolio loans
is  primarily  attributable  to the  Company's  marketing  efforts and a general
expansion  of  businesses   within  the  Company's   market  area.  Real  estate
construction loans have increased  $4,198,000 to $44,257,000 at June 30, 2000 as
compared to  $40,059,000  at  December  31,  1999.  Commercial  loans  increased
$2,951,000  to  $64,116,000  at June 30,  2000 as  compared  to  $61,165,000  at
December 31, 1999.  Within the residential real estate mortgage  portfolio,  the
Company has emphasized the funding of multi-family  permanent  residential  real
estate loans in the first six months of 2000. Multi-family permanent residential
real estate loans increased $17,523,000 from $884,000 as of December 31, 1999 to
$18,407,000  at June 30,  2000.  In addition,  commercial  real estate has grown
$3,830,000 to $83,306,000 compared to $79,476,000 at December 31, 1999.

     The following  table  summarizes  the  composition of the loan portfolio at
June 30, 2000 and December 31, 1999.

<TABLE>
<CAPTION>
                                                   June 30, 2000                         December 31, 1999
                                         ------------------------------------    ------------------------------------
                                               Amount              %                   Amount              %
                                         ------------------------------------    ------------------------------------
                                                (dollars in thousands)                  (dollars in thousands)
 <S>                                             <C>                     <C>             <C>                     <C>
Residential real estate mortgage                 $140,312                 42             $130,504                 42
 Commercial real estate mortgage                   83,306                 25               79,476                 25
 Commercial                                        64,116                 19               61,165                 19
 Real estate construction                          44,257                 13               40,059                 13
 Installment and other                              4,549                  1                4,624                  1
 Less deferred loan fees                           (1,311)                 0               (1,383)                 0
                                         ------------------------------------    ------------------------------------
     Total portfolio loans                        335,229                100              314,445                100
                                                           ==================                      ==================
 Less allowance for loan losses                    (8,099)                                 (7,931)
                                         ------------------                      ------------------
     Net loans                                   $327,130                                $306,514
                                         ==================                      ==================

</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.


<PAGE>

     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          Six months ended
                                                               June 30,                   June 30,
                                                      ---------------------------  ----------------------------
                                                          2000           1999          2000           1999
                                                      ------------   ------------  ------------    ------------
                                                                      (dollars in thousands)
<S>                                                       <C>             <C>         <C>            <C>
Beginning allowance for loan losses                       $7,980          $8,242      $7,931         $8,041
Provision for loan losses                                     50             200         150            500
Charge-offs                                                  (80)           (656)       (147)          (913)
Recoveries                                                   149             215         165            373
                                                      ------------   ------------  ------------    ------------
Ending allowance for loan losses                          $8,099          $8,001      $8,099         $8,001
                                                      ============   ============  ============    ============


Net (recoveries)/charge-offs to average
   loans (annualized)                                     (0.08%)           0.60%      (0.01%)         0.38%

</TABLE>

     The allowance for loan losses as a percentage of portfolio  loans decreased
from 2.62% at December 31, 1999 to 2.42% at June 30, 2000.  This decrease is due
to several factors which include an improvement in the overall credit quality of
the Company's loan portfolio,  reflected in a reduction in loan charge-offs, the
reduction of nonperforming loans and growth in the Company's loan portfolio. The
growth in the Company's loan portfolio is primarily  comprised of commercial and
residential  real  estate  loans that  generally  bear a lower  credit risk than
construction  or commercial  loans.  Accordingly,  under the Company's loan loss
reserve  methodology,  such loans  generally  receive a lower loan loss  reserve
allocation as compared to commercial or construction loans.

<PAGE>



Nonperforming Assets

     The following table summarizes the Company's nonperforming assets.

<TABLE>
<CAPTION>
                                                                June 30,            December 31,
                                                                  2000                 1999
                                                              --------------       --------------
                                                                    (dollars in thousands)
<S>                                                                  <C>                  <C>
Nonaccrual loans                                                     $1,129               $3,063
Accruing loans past due 90 days or more                                 ---                  ---
Restructured loans                                                      305                1,018
                                                              --------------       --------------
Total nonperforming loans                                             1,434                4,081
Other real estate owned                                               1,296                2,363
                                                              --------------       --------------
Total nonperforming assets                                           $2,730               $6,444
                                                              ==============       ==============



Nonperforming assets to total assets                                  0.62%                1.52%

</TABLE>


     Nonperforming assets have decreased from $6,444,000 as of December 31, 1999
to $2,730,000 as of June 30, 2000. The decrease is attributable to a decrease in
restructured loans of $713,000, a decrease in nonaccrual loans of $1,934,000 and
a decline in other real estate owned of $1,067,000.

     Nonperforming  loans  consist  of loans to 24  borrowers,  5 of which  have
balances  in excess of  $100,000.  The two  largest  have  recorded  balances of
$305,000 and  $185,000.  Both  properties  are 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 5  properties.  Two  properties  are
residential, two are commercial buildings and the remaining is a motel. Based on
information  currently  available,  management  believes  that no  reserves  are
required as loan to values in this portfolio mitigate any loss exposure.

     Although  the volume of  nonperforming  assets  will  depend in part on the
future economic environment,  there are five additional loan relationships which
totals approximately  $1,140,000 about which management has serious doubts as to
the ability of the  borrower to comply with the present  repayment  terms.  This
loan may become a nonperforming  asset based on the information  presently known
about possible credit problems of the borrower.

     At June 30, 2000, the Company's total recorded investment in impaired loans
(as defined by SFAS 114 and 118) was $1,611,000 of which  $1,306,000  relates to
the recorded  investment for which there is a related  allowance for loan losses
of $412,000. The remaining $305,000 did not require a valuation allowance.

<PAGE>

     The average recorded investment in the impaired loans during the six months
ended June 30, 2000 and 1999 was $1,762,000 and  $7,660,000.  The decline in the
average  recorded  investment  of impaired  loans of $5,898,000 at June 30, 2000
compared  to June 30,  1999 is a  direct  result  of the  Company's  decline  in
nonperforming  loans of  $4,903,000.  The  related  amount  of  interest  income
recognized  during the  periods  that such loans were  impaired  was $12,000 and
$27,000 for the three and six month  periods ended June 30, 2000 and $91,000 and
$213,000 for the three and six months ended June 30, 1999.

     From time to time the Company may be required to repurchase  mortgage loans
from mortgage loan investors  depending upon  representations  and warranties of
the purchase  agreement  between the  investor and the Company.  The Company may
also be required to reimburse a mortgage loan investor for losses  incurred as a
result of liquidating  collateral  which had secured a mortgage loan sold by the
Company. Such representations and warranties include valid appraisal,  status of
borrower or fraud.  In the first six months of 2000 the Company was not required
to repurchase any such loans.  The Company  maintains a reserve for its estimate
of potential  losses  associated with the repurchase of previously sold mortgage
loans.  Such  reserve  amounts to $50,000 as of June 30, 2000 and $142,000 as of
December 31,  1999.  The Company  expects that it may be required to  repurchase
loans in the future.  During the first  quarter a payment of $92,000 was made to
reimburse  an investor  for a loss  incurred on the  liquidation  of  collateral
supporting a loan sold by the Company to such investor. Such payment was charged
against the reserve.

Liquidity

     Redwood's  primary  source of  liquidity is  dividends  from its  financial
institution  subsidiary.  Redwood's  primary uses of liquidity has  historically
been  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 June 30, 2000,  Redwood held $9,000 in deposits
at NBR.

     In 1998,  Redwood reinstated a cash dividend to its common stock holders at
a quarterly rate of $.04 per share. In 1999 Redwood  increased this dividend 50%
to $.06 per share.  In the fourth quarter of 1999, the dividend  increased again
to $.10 per share.  Further, in May 2000 such dividend was increased to $.15 per
share.  Prior to March 1999  Redwood was  required to make  monthly  payments of
interest at 8.5% on $12,000,000 of subordinated  debentures  issued in 1993. The
subordinated  debentures  were  early  redeemed  in the first  quarter  of 1999.
Payment of these  obligations  is ultimately  dependent on dividends from NBR to
Redwood.  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
dividends  to its  common  shareholders.  No  assurance  can be  given as to the
ability of NBR to pay dividends to Redwood.


<PAGE>

     During the first six months of 2000, NBR declared a dividend of $3,000,000.
Management  believes that as of June 30, 2000, 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 six months ended
June 30, 2000 the Company received cash of $1,896,000 from operating  activities
and  $17,757,000 in financing  activities  while using  $19,663,000 in investing
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.
<PAGE>

     The following  table  summarizes  the  consolidated  capital ratios and the
capital ratios of the principal subsidiaries at June
30, 2000 and December 31, 1999.





<TABLE>
<CAPTION>
                                                           Well-         Minimum
                                           Actual       Capitalized    Requirement
                                      -----------------------------------------------
<S>                                          <C>             <C>             <C>
Company
   Leverage                                   7.97%            n/a           4.00%
   Tier 1 risk-based                         10.42             n/a           4.00
   Total risk-based                          11.68             n/a           8.00

 NBR
   Leverage                                   8.57            5.00           4.00
   Tier 1 risk-based                         11.22            6.00           4.00
   Total risk-based                          12.48           10.00           8.00

</TABLE>

     Since the fourth quarter of 1998 the Company has been an active acquirer of
its own common stock.  Since  inception and under three  separate Board approved
common stock  repurchase  authorizations,  the Company has  repurchased  478,175
shares at an average cost of $19.31.  In the second quarter of 2000, the Company
repurchased  270,175  shares at an average cost of $17.64.  Under the repurchase
program the Company can  repurchase  shares from time to time on the open market
or through privately negotiated transactions.



Certain Important Considerations for Investors


     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.  The Company  utilizes  ISO's to acquire
merchant credit card customers.  The Company's  ability to maintain and grow net
revenue from its merchant  credit card  processing  operation is dependent  upon
maintaining and adding to these ISO relationships.



<PAGE>

     Merchant bankcard  processing  services are highly regulated by credit card
associations  such as VISA. In order to participate in the credit card programs,
the Company must comply with the credit card association's rules and regulations
that may change from time to time.  During  November 1999,  VISA adopted several
rule changes to reduce risks in high-risk  merchant  bankcard programs and these
rule changes affect the Company's Merchant Bankcard  business.  The rule changes
go into effect on March 31, 2001.  These changes  include a  requirement  that a
processor's  reported  fraud  ratios be no greater than three times the national
average.  At December 31, 1999 (the most recent period  available from VISA) the
Company's overall fraud ratio was below the VISA requirement. Other VISA changes
include  the  requirement  that total  processing  volume in  certain  high-risk
categories (as defined by VISA) be less than 20% of total processing  volume. At
December  31,  1999  (the  most  recent  information  available  from  VISA) the
Company's total VISA transactions within these certain high-risk categories were
10.4% of VISA total processing  volume.  Other changes VISA announced  include a
requirement  that  weekly  VISA  volumes  be less  than 60% of an  institution's
tangible equity capital,  and a requirement that aggregate  charge-backs for the
previous  six  months  be less  than  5% of the  institution's  tangible  equity
capital. At December 31, 1999, (the most recent information available from VISA)
the  Company's  weekly  VISA volume was 54.4% of tangible  equity  capital,  and
aggregate charge-backs for the previous six months were 11.1% of tangible equity
capital.  Merchant bankcard participants,  such as the Company, must comply with
these new VISA rules by filing a compliance  plan with VISA.  Such plan has been
filed by the Company and  accepted  by VISA.  At this time the Company  believes
that it will be in compliance  with all rule changes when they go into effect on
March 31, 2001.  Should the Company be unable to comply with these rule changes,
the Company  would seek a waiver from VISA.  However,  should VISA not grant the
Company a waiver,  the Company would need to restructure  the merchant  bankcard
unit, which could adversely affect merchant bankcard revenue.

     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 the
real  estate  market  in  the  Company's   lending  areas.  At  June  30,  2000,
approximately  80% of the Company's loans were secured by real estate,  of which
31% 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.

     Government  Regulation.   Redwood  and  its  subsidiaries  are  subject  to
extensive federal and state  governmental  supervision,  regulation and control,
and  future  legislation  and  government  policy  could  adversely  affect  the
financial industry.  Although the full impact of such legislation and regulation
cannot be predicted,  future changes may alter the structure of and  competitive
relationship among financial institutions.


<PAGE>

     Competition  from Other Financial  Institutions.  The Company  competes for
deposits and loans  principally with major commercial  banks,  other independent
banks,   savings  and  loan  associations,   savings  banks,   thrift  and  loan
associations,  credit unions, mortgage companies,  insurance companies and other
lending  institutions.   With  respect  to  deposits,   additional   significant
competition  arises from corporate and governmental debt securities,  as well as
money market  mutual  funds.  The Company also  depends for its  origination  of
mortgage  loans  on  independent  mortgage  brokers  who are  not  contractually
obligated  to do business  with the Company and are  regularly  solicited by the
Company's competitors.  Aggressive policies of such competitors have in the past
resulted, and may in the future result, in a decrease in the Company's volume of
mortgage  loan  originations  and/or a  decrease  in the  profitability  of such
originations,  especially during periods of declining  mortgage loan origination
volumes.  Several of the  nation's  largest  savings and loan  associations  and
commercial  banks have a  significant  number of branch  offices in the areas in
which the Company  conducts  operations.  Among the advantages  possessed by the
larger of these  institutions  are their ability to make larger  loans,  finance
extensive  advertising   campaigns,   access  international  money  markets  and
generally  allocate  their  investment  assets to regions  of highest  yield and
demand.


Item 3.  Quantitative and Qualitative Disclosure about Market Risk

     There  were no  significant  changes  to the  Company's  market  risk  from
December 31, 1999 to June 30, 2000.
<PAGE>


                          PART II. - OTHER INFORMATION

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

     (a)  The Company held its Annual Meeting of Shareholders on May 16, 2000.

     (b)  Proxies for the Annual Meeting were  solicited  pursuant to Regulation
          14  under  the  Securities   Exchange  Act  of  1934.   There  was  no
          solicitation in opposition to  management's  nominees for directors as
          listed in the Company's proxy statement for the Annual Meeting. Tom D.
          Whitaker  resigned  his  directorship  on May 15,  2000  and  withdrew
          acceptance of his nomination.

     (c)  The vote for the nominated directors was as follows:

                         Nominee                    For         Withheld

                     Richard I. Colombini          2,687,082      309,106
                     Robert D. Cook                2,688,198      307,990
                     Margie L. Handley             2,686,935      309,253
                     Dana R. Johnson               2,685,412      310,776
                     Patrick W. Kilkenny           2,678,898      317,290
                     Patricia "Padi" Selwyn        2,687,198      308,990
                     Gregory J. Smith              2,685,265      310,923
                     William B. Stevenson          2,685,265      310,923


          The vote for ratifying the appointment of Deloitte & Touche LLP as the
          Company's independent auditors was as follows:

                          For                                  2,684,899
                          Against                                  5,159
                          Abstain                                306,129
                          Broker Non-Vote                            -0-

<PAGE>


Item 6.  Exhibits and Reports on Form 8-K.

1.   Exhibits.

     The following  documents are included or  incorporated by reference in Form
     10-Q.

         Exhibit Number                              Description
       -------------------                         ---------------

               27.                   Financial Data Schedule for the period
                                     ended June 30, 2000.


2.   Reports on Form 8-K

     1.   Form 8-K filing dated May 25, 2000 announcing  quarterly cash dividend
          increase to 15 cents on common stock, completion of Redwood's 5% share
          repurchase  announced on November 22, 1999 and  authorization  for the
          repurchase  of  an  additional  10%  of  the  Company's  total  shares
          outstanding or 316,000 shares,  and announcement of changes in Holding
          Company and Subsidiary Chairmanships.



<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:          8/11/00              BY:      /s/ James E. Beckwith
                                            James E. Beckwith
                                            Executive Vice President,
                                            Chief Operating Officer,
                                            Principal Financial Officer, and
                                            Principal Accounting Officer