Shares of Redwood Empire Bancorp are hot again amid rumors that the Santa Rosa, Calif., company is on the selling block.

Redwood Empire stock rose 9% Friday in heavy trading, to $26.875, and is up 55% since the beginning of the year. Though it retreated somewhat this week, to $25 at midday Wednesday, sources said the $434 million-asset company is a target of two California banks and one from elsewhere.

Analysts said Redwood Empire, which owns National Bank of the Redwoods, could fetch close to $100 million, or $27 to $30 a share.

Most hotly rumored as a suitor is Westamerica Bancorp in nearby San Rafael, Calif. That $3.8 billion-asset company has made no secret of its desire to make acquisitions, particularly in Northern and central California, where it operates 89 branches.

"It comes down to an issue of price and what David Payne"-Westamerica's chairman and chief executive officer-"is comfortable paying," said Joseph K. Morford 3d, an analyst at First Security Van Kasper in San Francisco.

Mr. Payne would not say whether his company was talking with Redwood Empire about a deal. Neither would James E. Beckwith, Redwood Empire's chief financial officer.

But Mr. Payne acknowledged that Westamerica is "having ongoing discussions with potential sellers."

Westamerica has not made a deal since 1996. But it has a history of targeting bank companies that it sees as having potential for cost savings, analysts said. Redwood Empire's efficiency ratio at the end of 1998 was about 69%, slightly higher than the average for other commercial banks its size in California.

"Redwood Empire would fit into Westamerica's strategy of making a deal and then reaping the efficiencies," said Olaf Vlieks, an analyst at Hoefer & Arnett in San Francisco.

A Westamerica deal for Redwood Empire would probably involve cash and stock, and use purchase accounting rather than the more popular pooling of interest. Securities and Exchange Commission rules prohibit banks from making pooling deals-in which buyers can offer only stock-during stock buybacks. Westamerica is in the midst of a three million-share buyback, which it would have to complete before making a pooling deal.

Redwood Empire, founded in 1985, hit a rough stretch in the mid-1990s when some of its real estate loans went sour. But the company is recovering and last year was able to reduce its nonperforming assets by 50%.

Redwood Empire operates seven branches and six loan offices in Northern California.

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