SANTA ROSA, Calif. - Redwood Empire Bancorp, reeling from rising interest rates and a highly competitive mortgage market, reported a net loss for the fourth quarter of $3.74 million, or $1.45 a share.

Included in the results was a nonrecurring charge of $1.59 million pretax for additional restructuring of the company's mortgage operations, which began in the third quarter of 1994.

In addition, the company set up a reserve totaling $5.53 million for unrealized losses associated with mortgage loans held for sale. A year earlier, the company reported net income of $1.09 million, or 34 cents per share.

For all of 1994, the company reported a loss of $3.04 million, or $1.31 a share, compared with net income of $4.56 million, or $1.44 per share, in 1993.

"The company continues the restructuring of its mortgage operations, due to the decline in fixed-rate mortgage loan production volume," said John H. Downey, chairman.

"During the quarter, we closed several nonproductive offices. The closings, along with measures taken in the third quarter, should result in cost savings of $3.15 million annually," he said.

A difficult operating environment has forced many mortgage lending operations to cut back drastically. With industrywide volume down by as much as 40% from last year's peak, mortgage lenders are resorting to price competition to attract borrowers.

Noninterest income declined 43% for 1994, reflecting lower volume of mortgage banking activities as well as the effect of the mark-to-market of the mortgages held for sale. Noninterest expenses, excluding the restructuring charge, were up 20% from 1993.

Redwood Empire Bancorp is the holding company for two operating subsidiaries: Allied Bank, a savings institution; and National Bank of the Redwoods, a commercial bank. The company operates in various California locations and Portland, Ore.

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