thrift, Allied Bank. Redwood Empire, a $511 million-asset holding company that also owns National Bank of the Redwoods, has retained Sandler O'Neill & Partners of New York to help evaluate the sale of Allied, a $305-million thrift. The decision to market the unit marks the end of an experiment for Redwood Empire. It had hoped that owning a thrift as well as a bank would help it keep an even keel amid business and rate cycles that affect them differently. Now Redwood wants to concentrate on commercial banking, jettisoning its core mortgage banking operation along with Allied. Redwood also has been buying commercial banks in Northern California. Last year Redwood acquired Codding Bank, a small institution in Rohnert Park, north of San Francisco. "Recognizing that enhancing shareholder value will come through a strengthening of our core commercial banking activities, our board of directors has approved an aggressive search for potential commercial bank acquisitions in Northern California," chief executive Patrick W. Kilkenny said in a press release. "Their strategy was interesting in that they have both a savings and loan institution and a commercial bank," said Campbell Chaney, analyst with Rodman & Renshaw Inc. in San Francisco. "The idea was when the mortgage bank wasn't performing at peak level, the commercial bank would take over. The strategy worked well for a while, but now that the refinancing boom has ended, it's been tougher. That's probably what's motivating the move." Allied has three depository branches, in Santa Rosa, Lakeport and Ukiah; and four loan production offices, in Santa Rosa, San Jose, Sacramento, and Portland, Ore. Allied has had its ups and downs during the past five years. The thrift turned a profit of more than $4 million in 1993 and earned $2.3 million in 1992. Things turned sour in 1994, as Allied lost more than $2.6 million. This year has been better, with Allied registering gains for the past three quarters and netting nearly $1.5 million through Sept. 30. Shadowing its thrift subsidiary, Redwood Empire lost $3 million in 1994, but earned $1.6 million in the first half of the year. It earned almost $4.5 million in 1993, for a 1.19% return on assets. Investors responded favorably Friday to the news regarding Allied. Redwood Empire Bancorp stock rose nearly 5%, to $87.5 cents in trading on the American Stock Exchange. Mr. Chaney said Redwood should be ideally situated to increase its commercial bank holdings, provided it can find the capital. "There's no shortage of banks in the area they could talk to," he said.

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