Blood Bank of the Redwoods announced Thursday its intention to merge with its San Francisco rival after financial losses left its future in jeopardy.

The nonprofit blood center, which was founded in Santa Rosa in 1948, has lost money for two consecutive years following a decline in blood donations and demand from hospitals for its services, said Kent Corley, spokesman for the organization.

"We may be able to hold on," he said. "But that is too risky of a proposition."

Blood Bank of the Redwoods collects life-saving blood and distributes it to nine hospitals located in Sonoma, Lake and Mendocino counties.

Its revenues from selling that blood dropped about 15 percent between 2008 and 2010, falling to $11.6 million last year, according to its 2010 financial report to the Internal Revenue Service. Its losses grew from $6,300 in 2009 to $444,000 last year.

The blood bank froze salaries and went through three rounds of layoffs, but its ability to remain operational in the coming years is now in doubt, Corley said.

The blood bank signed a letter of intent Friday to merge with Blood Centers of the Pacific, a San Francisco nonprofit that is about six times larger.

"We can all save money and provide better services to the hospitals," said Lisa Bloch, spokeswoman for the San Francisco nonprofit.

Blood Bank of the Redwoods said it has been hit hard by two factors: a drop in blood donations and falling demand from hospitals.

Higher unemployment has meant fewer people have health insurance, and that has pushed down the number of elective surgeries where hospitals would need to buy donated blood, Corley said.

Blood Bank of the Redwoods also lost its contract to supply Santa Rosa Memorial Hospital in 2008, a relationship that reportedly generated roughly $3.5 million annually, or a quarter of the blood bank's revenues. Memorial Hospital instead decided to use Blood Centers of the Pacific, saying it was a less expensive supplier.

If the two former rivals finalize the deal, the Santa Rosa blood bank will likely be absorbed by Blood Centers of the Pacific, Bloch said.

"I think they will come under our banner and assume our name," she said.

The two organizations have about two months to conduct due diligence to ensure the deal makes sense.

No announcements were made about potential staffing cuts to the Santa Rosa organization's remaining 110 employees, but its facilities would likely be used as a regional hub, according to Thursday's announcement.