UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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


               For the quarterly period ended: September 30, 2005


                        Commission File Number: 000-31929


                              SONOMA VALLEY BANCORP
             (Exact name of Registrant as specified in its charter)


       California                                        68-0454068
(State or other jurisdiction               (I.R.S. Employer Identification No.)
of incorporation or organization)

                  202 West Napa Street Sonoma, California 95476
               (Address of principal executive offices) (Zip Code)

                                 (707) 935-3200
              (Registrant's telephone number, including area code)



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 o No |_|

Indicate by a check mark  whether the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No o

The number of shares outstanding of the registrant's Common Stock, no par value,
as of November, 1, 2005 was 2,204,949.








<PAGE>



INDEX

Part 1 Financial Information                                        Page Number


Item 1.  Financial Statements (Unaudited):

         Consolidated Balance Sheets at September 30, 2005,
         December 31, 2004 and September 30, 2004.............................3

         Consolidated Statements of Operations for the
         three months and nine months ended September 30, 2005 and 2004.......4

         Consolidated Statements of Changes in Shareholders' Equity
         for the nine months ended September 30, 2005,
         and the years ended December 31, 2004 and 2003.......................5

         Consolidated Statements of Cash Flows for the
         nine months ended September 30, 2005 and 2004........................7

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

         Average Balances, Yields and Rates Paid
         for the nine months ended September 30, 2005 and 2004...............11

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations.......................12

Item 3.  Quantitative and Qualitative Disclosure about Market Risk...........28

Item 4.  Controls and Procedures.............................................28


Part II  Other Information

Item 1.  Legal Proceedings...................................................28

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.........29

Item 3.  Default Upon Senior Securities......................................29

Item 4.  Submission of Matters to a Vote of Security Holders.................29

Item 5.  Other Information...................................................29

Item 6.  Exhibits............................................................29

Signatures...................................................................30

Certifications...............................................................31

The information  furnished in these interim statements  reflects all adjustments
and  accruals  which are, in the  opinion of  management,  necessary  for a fair
statement  of the results for such  periods.  The results of  operations  in the
interim  statements  are not  necessarily  indicative of the results that may be
expected for the full year.


                                     Page 2

<PAGE>



                         Part I - FINANCIAL INFORMATION

Item  1.  FINANCIAL  STATEMENTS  The  information  furnished  in  these  interim
statements  reflects all  adjustments  and accruals which are, in the opinion of
management,  necessary for a fair statement of the results for such periods. The
results of operations in the interim  statements are not necessarily  indicative
of the results  that may be  expected  for the full year.

                              FINANCIAL STATEMENTS
                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
       September 30,2005 (Unaudited) and December 31, 2004 (Audited) and
                         September 30, 2004 (Unaudited)
<TABLE>
<S>                                                                                     <C>              <C>              <C>
                                                                              September 30      December 31     September 30
ASSETS                                                                           2005              2004             2004
                                                                              ------------      -----------     ------------
Cash and due from banks                                                       $  6,172,079     $  5,471,669     $  8,292,339
Federal funds sold                                                                       0        9,840,000        1,685,000
Interest-bearing due from banks                                                     55,267           35,551           35,406
                                                                              ------------     ------------     ------------
                                          Total cash and cash equivalents        6,227,346       15,347,220       10,012,745
Investment securities available-for-sale, at fair value                         34,977,162       20,253,490       23,518,575
Investment securities held-to-maturity (fair
  value of $17,066,000, $17,842,000and
 $18,394,000, respectively)                                                     16,789,147       17,418,303       17,794,884
Loans and lease financing receivables, net                                     159,344,237      150,732,087      144,537,306
Premises and equipment, net                                                      1,250,525        1,364,879        1,369,688
Accrued interest receivable                                                      1,294,295        1,138,607        1,159,065
Cash surrender value of life insurance                                           9,147,268        8,913,136        8,851,899
Other assets                                                                     3,596,711        3,079,740        3,457,580
                                                                              ------------     ------------     ------------
                                                             Total assets     $232,626,691     $218,247,462     $210,701,742
                                                                              ============     ============     ============
LIABILITIES
Non interest-bearing demand deposits                                          $ 48,746,030     $ 44,557,377     $ 45,379,582
Interest-bearing transaction deposits                                           34,139,432       34,912,205       31,214,138
Savings and money market deposits                                               73,459,066       70,254,926       65,398,770
Time deposits, $100,000 and over                                                26,890,840       25,307,661       26,505,608
Other time deposits                                                             21,791,961       18,630,846       18,562,732
                                                                              ------------     ------------     ------------
                                                           Total deposits      205,027,329      193,663,015      187,060,830
Other borrowings                                                                   650,000                0
Accrued interest payable and other liabilities                                   4,509,919        3,903,287        3,756,149
                                                                              ------------     ------------     ------------
                                                        Total liabilities      210,187,248      197,566,302      190,816,979
SHAREHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized; 2,204,949 shares at
September 30, 2005, 2,142,104 shares at December 31, 2004 and 2,142,104
shares at September 30, 2004 issued & outstanding                               16,230,507       15,528,940       15,497,836
Retained earnings                                                                6,494,016        5,295,732        4,470,003
Accumulated other comprehensive loss                                              (285,080)        (143,512)         (83,076)
                                                                              ------------     ------------     ------------
                                               Total shareholders' equity       22,439,443       20,681,160       19,884,763
                                                                              ------------     ------------     ------------
                               Total liabilities and shareholders' equity     $232,626,691     $218,247,462     $210,701,742
                                                                              ============     ============     ============
</TABLE>

                                     Page 3
<PAGE>

                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S>                                                                  <C>             <C>               <C>               <C>

                                                                    For the Three Months               For the Nine Months
                                                                     Ended September 30,                Ended September 30,
                                                                   2005              2004             2005              2004
                                                                ------------     ------------     ------------     ------------


INTEREST INCOME
  Loans and leases                                              $  3,060,940     $  2,600,528     $  8,727,198     $  7,232,583
  Taxable securities                                                 277,861          199,716          782,668          626,080
  Tax-exempt securities                                              155,884          167,272          472,752          493,306
  Federal funds sold                                                     332           12,663           45,792           77,231
  Dividends                                                            8,609            8,093           23,129           13,849
                                                                ------------     ------------     ------------     ------------
                                      Total interest income        3,503,626        2,988,272       10,051,539        8,443,049
INTEREST EXPENSE
  Interest-bearing transaction deposits                               14,183           13,397           42,999           37,354
  Savings and money market deposits                                  231,021          109,155          586,123          312,162
  Time deposits, $100,000 and over                                   221,459          164,582          600,855          498,011
  Other time deposits                                                151,829           97,424          387,368          296,439
  Other borrowings                                                    20,019                0           81,821                0
                                                                ------------     ------------     ------------      -----------
                                     Total interest expense          638,511          384,558        1,699,166        1,143,966
                                                                ------------     ------------     ------------     ------------
                                        NET INTEREST INCOME        2,865,115        2,603,714        8,352,373        7,299,083
  Provision for loan and lease losses                                 95,000           40,000          345,000           70,000
                                                                ------------     ------------     ------------      -----------
                                        NET INTEREST INCOME
                                        AFTER PROVISION FOR
                                             LOAN AND LEASE
                                                     LOSSES        2,770,115        2,563,714        8,007,373        7,229,083

NON-INTEREST INCOME                                                  497,931          452,131        1,443,620        1,264,243
NON-INTEREST EXPENSE
  Salaries and employee benefits                                   1,120,639        1,102,331        3,346,883        3,113,135
  Premises and equipment                                             268,641          230,840          745,665          662,949
  Other                                                              578,003          533,372        1,792,276        1,629,757
                                                                ------------     ------------     -------------    ------------
                                 Total non-interest expense        1,967,283        1,866,543        5,884,824        5,405,841
                                                                ------------     ------------     -------------    ------------
                                    Income before provision
                                           for income taxes        1,300,763        1,149,302        3,566,169        3,087,485
  Provision for income taxes                                         453,212          404,574        1,217,381        1,005,594
                                                                ------------     ------------     -------------    ------------

                                                 NET INCOME     $    847,551     $    744,728     $  2,348,788     $  2,081,891
                                                                ============     ============     ============     ============
NET INCOME PER SHARE                                            $        .39     $        .35     $       1.09     $        .97
                                                                ============     ============     ============     ============
NET INCOME PER SHARE-
ASSUMING DILUTION                                               $        .37     $        .32     $       1.02     $        .89
                                                                ============     ============     ============     ============
</TABLE>




                                     Page 4

<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                  For the nine months ended September 30, 2005
               (Unaudited), and the years ended December 31, 2004
                          (Audited) and 2003 (Audited)

<TABLE>
<S>                                       <C>            <C>          <C>                 <C>                <C>                <C>
                                                                                                     Accumulated
                                                                                                        Other
                               Comprehensive         Common  Stock                 Retained         Comprehensive
                                  Income          Shares         Amount            Earnings             Income            Total
                               -------------     ---------   -------------     --------------     -----------------  --------------
BALANCE AT
   JANUARY 1, 2003                               1,401,146   $  12,936,225     $    6,215,790     $          88,295  $   19,240,310

5% stock dividend                                   68,665       1,997,422         (1,997,422)
Fractional shares                                                                     (14,193)                              (14,193)
Redemption and retirement
  of stock                                         (38,987)       (361,296)          (729,099)                           (1,090,395)
Stock options exercised and
 related tax benefits                               26,770         489,285                                                  489,285
Net income for the year        $   2,911,007                                        2,911,007                             2,911,007
Other comprehensive loss,
  net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $45,274                       (64,735)
                               -------------
Other comprehensive loss,
  net of taxes                       (64,735)                                                               (64,735)        (64,735)
                               -------------     ---------   -------------     --------------     -----------------  --------------

Total comprehensive income     $   2,846,272
                               =============

BALANCE AT
  DECEMBER 31, 2003                              1,457,594      15,061,636          6,386,083                23,560      21,471,279

Redemption and retirement
  of stock                                            (601)         (6,218)           (11,839)                              (18,057)
Stock options exercised and
  related tax benefits                              97,494       1,786,065                                                1,786,065
Redemption of stock
  under tender offer                              (126,208)     (1,416,223)        (3,071,903)                           (4,488,126)
Cash dividend                                                                        (906,732)                             (906,732)
Stock options granted                                              103,680                                                  103,680
3 for 2 stock split                                713,825
Fractional shares                                                                      (7,498)                               (7,498)
Net income for the year        $   2,907,621                                        2,907,621                             2,907,621
Other comprehensive loss,
  net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $116,844                     (167,072)
                               -------------

Other comprehensive loss,
  net of taxes                      (167,072)                                                              (167,072)       (167,072)
                               -------------     ---------   -------------     --------------     -----------------  --------------

Total comprehensive income     $   2,740,549
                               =============
</TABLE>

                                     Page 5

<PAGE>


                      SONOMA VALLEY BANCORP AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                   For the nine months ended September30, 2005
               (Unaudited), and the years ended December 31, 2004
                          (Audited) and 2003 (Audited)

<TABLE>
<S>                                           <C>          <C>           <C>                <C>                 <C>            <C>

                                                                                                       Accumulated
                                                                                                         Other
                                   Comprehensive            Common Stock               Retained       Comprehensive
                                      Income            Shares         Amount          Earnings           Income           Total
                                 -----------------    ---------     ------------    -------------     -------------    ------------

BALANCE AT
  DECEMBER 31, 2004                                   2,142,104     $ 15,528,940    $   5,295,732     $   (143,512)    $ 20,681,160

Redemption and retirement
  of stock                                               (5,616)         (41,165)         (72,503)                         (113,668)
Cash dividends                                                                         (1,078,001)                       (1,078,001)
Stock options granted                                                     77,760                                             77,760
Stock options exercised and
  related tax benefits                                   68,461          664,972                                            664,972
Net income for the period        $       2,348,788                                      2,348,788                         2,348,788
Other comprehensive loss,
  net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $ 99,007                           (141,568)
                                 -----------------
Other comprehensive loss,
  net of taxes                            (141,568)                                                       (141,568)        (141,568)
                                 -----------------    ---------     ------------    -------------     -------------    ------------


Total comprehensive income       $       2,207,220
                                 =================


BALANCE AT
 September 30, 2005                                   2,204,949     $ 16,230,507    $   6,494,016    $    (285,080)    $ 22,439,443
                                                      =========     ============    =============    =============     ============
</TABLE>




                                                                 Page 6
<PAGE>






                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
              For the nine months ended September 30, 2005 and 2004
<TABLE>
<S>                                                                                            <C>            <C>
                                                                                               2005           2004
                                                                                           -----------    -----------
OPERATING ACTIVITIES

    Net income                                                                             $ 2,348,788    $ 2,081,891
    Adjustments to reconcile net income to net cash provided by operating activities:
      Provision for loan losses                                                                345,000         70,000
      Depreciation                                                                             230,659        227,462
      Gain on sale of premise and equipment                                                          0           (366)
      Gain on sale of securities                                                                (5,094)             0
      Amortization and other                                                                   124,933        105,667
      Stock options granted                                                                     77,760         72,576
      Net change in interest receivable                                                       (155,688)      (252,107)
      Net change in cash surrender value of life insurance                                    (234,132)    (1,121,299)
      Net change in other assets                                                              (417,964)       (94,540)
      Net change in interest payable and other liabilities                                     606,632        235,907
                                                                                           -----------    -----------
                                             NET CASH PROVIDED BY OPERATING ACTIVITIES       2,920,894      1,325,191
INVESTING ACTIVITIES
   Purchases of securities held-to-maturity                                                   (399,570)    (2,519,972)
   Purchases of securities available-for sale                                              (15,014,860)    (8,154,336)
   Proceeds from maturing securities held-to-maturity                                          959,500      1,201,900
   Proceeds from maturing securities available-for sale                                              0      4,550,000
   Net change in loans                                                                      (8,957,150)   (24,773,318)
   Purchases of premises and equipment                                                        (116,305)      (282,789)
                                                                                           -----------    -----------
                                                NET CASH USED FOR INVESTING ACTIVITIES     (23,528,385)   (29,978,515)
FINANCING ACTIVITIES
   Net change in demand, interest-bearing transaction and savings deposits                   6,620,020      7,896,538
   Net change in time deposits                                                               4,744,294       (950,324)
   Cash dividend paid                                                                       (1,078,001)      (906,732)
   Net change in FHLB borrowings                                                               650,000              0
   Exercise of stock options                                                                   664,972      1,786,065
   Stock repurchases                                                                          (113,668)    (4,506,183)
   Fractional shares purchased                                                                       0         (7,497)
                                                                                           -----------    -----------
                                             NET CASH PROVIDED BY FINANCING ACTIVITIES      11,487,617      3,311,867
                                                                                           -----------    -----------
                                               NET CHANGE IN CASH AND CASH EQUIVALENTS      (9,119,874)   (25,341,457)
   Cash and cash equivalents at beginning of period                                         15,347,220     35,354,202
                                                                                           -----------    -----------
                                            CASH AND CASH EQUIVALENTS AT END OF PERIOD     $ 6,227,346    $10,012,745
                                                                                           ===========    ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
   Interest                                                                                $ 1,678,070    $ 1,145,990
   Income taxes                                                                              1,273,047        115,000
Change in unrealized gains and losses
 on securities available-for-sale                                                             (240,575)      (181,212)
Change in deferred income taxes on
  unrealized holding gains and losses on securities                                             99,007         74,577
</TABLE>


                                     Page 7
<PAGE>

                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)

Note 1 - Basis of Presentation

In the opinion of  Management,  the  unaudited  interim  consolidated  financial
statements  contain all  adjustments  of a normal  recurring  nature,  which are
necessary to present  fairly the financial  condition of Sonoma  Valley  Bancorp
(the  "Company")  and Subsidiary at September 30, 2005 and results of operations
for the three and nine months then ended.

Certain information and footnote  disclosures  presented in the Company's annual
financial  statements  are not included in these interim  financial  statements.
Accordingly,   the  accompanying   unaudited  interim   consolidated   financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes thereto  included in the  Company's  2004 Annual Report on
Form 10- K. The  results  of  operations  for the  three and nine  months  ended
September  30, 2005 are not  necessarily  indicative  of the  operating  results
through December 31, 2005.

Note 2 - Consolidation

The  consolidated  financial  statements  include the accounts of Sonoma  Valley
Bancorp  and its wholly  owned  subsidiary  Sonoma  Valley  Bank.  All  material
intercompany accounts and transactions have been eliminated in consolidation.

Note 3 - Commitments

The Company has no  outstanding  performance  letters of credit at September 30,
2005 and September 30, 2004.

Note 4 - Net Income Per Common Share

Net income per share is calculated by using the weighted  average  common shares
outstanding.  The weighted average number of common shares used in computing the
net  income  per  common  share for the period  ending  September  30,  2005 was
2,159,380 and for the period ending September 30, 2004 was 2,155,646.

Net income per share  (diluted)  is  calculated  by using the  weighted  average
common  shares  (diluted)  outstanding.  The weighted  average  number of common
shares (diluted) used in computing the net income per common share (diluted) for
the period  ending  September  30, 2005 was  2,299,258 and for the period ending
September 30, 2004 was 2,343,047.




                                     Page 8

<PAGE>



Note 5 - Stock Option Accounting

The Company has a stock-based employee and director  compensation plan. Prior to
January 1, 2003, the Company  accounted for this plan under the  recognition and
measurement  principles  of APB Opinion No. 25,  Accounting  for Stock Issued to
Employees,  and related  Interpretations.  No stock- based  compensation cost is
reflected in net income for stock  options  granted prior to January 1, 2003, as
all options  granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant.  Effective January 1,
2003, the Company adopted the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based  Compensation,  prospectively  to all employee awards
granted,  modified, or settled after January 1, 2003. No options were granted in
2003.  Awards under the Company's plan vest over five years. The cost related to
stock-based employee compensation included in the determination of net income is
less than that which would have been  recognized  if the fair value based method
had been applied to all awards since the original  effective  date SFAS No. 123.
The following table  illustrates the effect on net income and earnings per share
if the fair value based method had been applied to all  outstanding and unvested
awards in each period.
<TABLE>
<S>                                                  <C>              <C>              <C>              <C>

                                                       For the Three Months           For the Nine Months
                                                        Ended September 30             Ended September 30

                                                     2005             2004            2005             2004
                                                 ------------     ------------     -----------     -----------

    Net Income, as reported                      $    847,551     $    744,728     $ 2,348,788     $ 2,081,891
    Deduct: Total stock-based
       compensation expense determined
       under fair value based method for all
       awards, net of related tax effects                              (46,253)                       (138,759)
                                                 ------------    -------------     -----------     -----------
    Pro forma net income                         $    847,551     $    698,475     $ 2,348,788     $ 1,943,132
                                                 ============     ============     ===========     ===========

Net income per share:
    Basic - As reported                          $        .39     $        .35     $      1.09     $       .97
                                                 ============     ============     ===========     ===========
    Basic - Pro forma                            $        .39     $        .32     $      1.09     $       .90
                                                 ============     ============     ===========     ===========
    Diluted - As reported                        $        .37     $        .32     $      1.02     $       .89
                                                 ============     ============     ===========     ===========
    Diluted - Pro forma                          $        .37     $        .30     $      1.02     $       .83
                                                 ============     ============     ===========     ===========
</TABLE>





                                     Page 9

<PAGE>



Note 6 - Employee Benefit Plans

The Bancorp  provides  retirement  plans to its key officers and directors.  The
plans are unfunded and provide for the Bancorp to pay the officers and directors
specified amounts for specified periods after retirement.  The amount of pension
expense related to this plan, and the components of pension expense for the nine
months ended September 30, 2005 and 2004 are as follows:

<TABLE>
<S>                                            <C>              <C>            <C>              <C>
                                                    Directors                       Officers
                                           ---------------------------     ---------------------------
                                               2005            2004           2005             2004
                                           -----------     -----------     -----------     -----------

Service cost                               $    27,273     $    47,407     $    86,432     $   138,276
Interest cost on projected benefit              31,832          16,363          57,673          51,853
Amortization of unrecognized liability
  at transition                                 (7,126)                         11,348         (22,644)
                                           -----------     -----------     -----------     -----------
Net periodic pension cost recognized       $    51,979     $    63,770     $   155,453     $   167,485
                                           ===========     ===========     ===========     ===========
</TABLE>







                                     Page 10

<PAGE>



                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
              For the nine months ended September 30, 2005 and 2004
<TABLE>
<S>                                                      <C>             <C>        <C>              <C>              <C>        <C>
                                                                   2005                                      2004
                                                                   ----                                      ----
                                                    Average          Income/     Yield/        Average           Income/      Yield/
ASSETS                                              Balance          Expense     Rate          Balance           Expense      Rate
                                                -------------    ------------    -----     -------------    ------------     ------
Interest-earning assets:
Loans(2):
  Commercial                                    $ 107,098,464    $  5,968,483     7.45%    $  95,539,374    $  5,089,093      7.12%
  Consumer                                         18,654,492         981,252     7.03%       13,667,086         680,820      6.65%
  Real estate construction                         20,648,462       1,166,398     7.55%       18,756,143       1,084,908      7.73%
  Real estate mortgage                              9,688,980         499,248     6.89%        4,438,653         245,014      7.37%
  Tax exempt loans (1)                              2,669,420         165,242     8.28%        3,055,176         191,748      8.38%
  Leases                                               40,268           2,758     9.16%           32,775           6,195     25.25%
  Tax exempt leases (1)                                     0               0     0.00%            1,160               0      0.00%
  Unearned loan fees                                 (477,560)                                  (447,186)
                                                -------------    ------------              -------------    ------------
         Total loans                              158,322,526       8,783,381     7.42%      135,043,181       7,297,778      7.22%
Investment securities
  Available for sale:
         Taxable                                   33,163,279         774,306     3.12%       23,626,348         614,145      3.47%
         Tax exempt(1)                                      0               0     0.00%                0               0      0.00%
  Hold to maturity:
         Taxable                                      373,045           7,652     2.74%          393,102           7,598      2.58%
         Tax exempt (1)                            16,697,603         716,292     5.74%       17,154,985         747,433      5.82%
                                                -------------    ------------              -------------    ------------
         Total investment securities               50,233,927       1,498,250     3.99%       41,174,435       1,369,176      4.44%
Federal funds sold                                  2,589,245          45,791     2.36%       10,639,836          77,231      0.97%
Federal Home Loan Bank stock                          796,622          23,129     3.88%          564,053          13,849      3.28%
Total due from banks/Interest-bearing                  55,637             710     1.71%          193,904           4,337      2.99%
                                                -------------    ------------              -------------    ------------
  Total interest-earning assets                   211,997,957    $ 10,351,261     6.53%      187,615,409    $  8,762,371      6.24%
                                                                 ============                               ============
Noninterest-bearing assets:
  Reserve for loan losses                          (2,634,249)                                (2,444,198)
  Cash and due from banks                           6,680,842                                  9,651,736
  Premises and equipment                            1,302,903                                  1,363,995
  Other assets                                     12,673,007                                 12,038,029
                                                -------------                              -------------
                              Total assets      $ 230,020,460                              $ 208,224,971
                                                =============                              =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing deposits
         Interest-bearing transaction              33,959,362    $     42,999     0.17%    $  32,923,799    $     37,355      0.15%
         Savings deposits                          74,005,285         586,122     1.06%       66,393,976         312,161      0.63%
         Time deposits over $100,000               26,812,131         600,855     3.00%       25,446,133         498,011      2.61%
         Other time deposits                       19,829,702         387,368     2.61%       18,750,433         296,439      2.11%
                                                -------------    ------------              -------------    ------------
           Total interest-bearing deposits        154,606,480       1,617,344     1.40%      143,514,341       1,143,966      1.06%
  Federal Funds purchased                                   0               0     0.00%                0               0      0.00%
  Other short term borrowings                       3,479,004          81,822     3.14%                0               0      0.00%
                                                -------------    ------------              -------------    ------------     -----
        Total interest-bearing liabilities        158,085,484    $  1,699,166     1.44%      143,514,341    $  1,143,966      1.06%
                                                                 ============                               ============
Non interest-bearing liabilities:
  Non interest-bearing demand deposits             46,256,797                                 40,293,157
  Other liabilities                                 4,107,577                                  3,467,560
                      Shareholders' equity         21,570,602                                 20,949,913
                                                -------------                              -------------
Total liabilities and shareholders' equity      $ 230,020,460                              $ 208,224,971
                                                =============                              =============
Interest rate spread                                                              5.13%                                       5.18%
                                                                                  ====                                       =====
Interest income                                                  $ 10,351,260     6.53%                     $  8,762,371      6.24%
Interest expense                                                    1,699,166     1.07%                        1,143,966      0.81%
                                                                 ------------     ----                      ------------     ------
Net interest income/margin                                       $  8,652,094     5.46%                     $  7,618,405      5.43%
                                                                 ============     ====                      ============     ======
</TABLE>


(1)  Fully tax equivalent  adjustments are based on a federal income tax rate of
     34% in 2005 and 2004
(2)  Non accrual loans have been included in loans for the purposes of the above
     presentation.  Loan fees of $259,262 and $224,508 for the nine months ended
     September 30, 2005 and September 30, 2004, respectively,  were amortized to
     the appropriate interest income categories.

                                     Page 11





Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

With the exception of historical facts stated herein,  the matters  discussed in
this  Form  10-Q  are  "forward  looking"  statements  that  involve  risks  and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
projected  results.  Such  "forward  looking"  statements  include,  but are not
necessarily  limited  to  statements  regarding  anticipated  levels  of  future
revenues  and  earnings  from the  operation  of Sonoma  Valley  Bancorp's  (the
"Company") wholly owned subsidiary,  Sonoma Valley Bank (the "Bank"),  projected
costs and  expenses  related  to  operations  of the bank's  liquidity,  capital
resources,  and the  availability  of  future  equity  capital  on  commercially
reasonable  terms.  Factors that could cause actual results to differ materially
include,  in addition to the other factors  discussed in Sonoma Valley Bancorp's
Form 10-K for the year ended December 31, 2004, and subsequent periodic reports,
the  following;  (i) increased  competition  from other banks,  savings and loan
associations,  thrift and loan associations,  finance companies,  credit unions,
offerors of money market funds, and other financial institutions; (ii) the risks
and uncertainties  relating to general economic and political  conditions,  both
domestically and internationally,  including,  but not limited to, inflation, or
natural  disasters  affecting the primary  service area of the Bank or its major
industries;  or (iii) changes in the laws and  regulations  governing the Bank's
activities at either the state or federal  level.  Readers of this Form 10-Q are
cautioned not to put undue reliance on "forward  looking"  statements  which, by
their nature, are uncertain as reliable indicators of future performance. Sonoma
Valley  Bancorp  disclaims  any  obligation  to publicly  update these  "forward
looking" statements,  whether as a result of new information,  future events, or
otherwise.

For the Nine Month Periods
Ended September 30, 2005 and 2004

Overview

The  Company  reported  net income of  $2,348,788  as of  September  30, 2005 an
increase of $266,897  from  $2,081,891  reported as of September  30, 2004.  The
increase in net income is in part a result of loan  growth of 10.4%  compared to
the comparable  period of 2004. This increase in loans contributed to the strong
earnings  growth.  Deposits  have  grown  9.6% in the  same  period,  but due to
pressure to increase  deposit rates this has reduced somewhat the benefit of the
growth in interest income. The Banco de Sonoma Office,  although still showing a
year to date  loss of  $81,744  is on track to show  profitability  sooner  than
anticipated.  On a per share basis,  net income equaled $1.09 compared with $.97
per share during the same period in 2004.

Return on average total assets on an annualized basis for the nine-month  period
was 1.37% in 2005 and 1.34% in 2004. Return on average  shareholders'  equity on
an  annualized  basis for the same periods was 14.56% and 13.27%,  respectively.
The  higher  return on equity is the result of the growth in income for the nine
month  period of 2005 offset by the  $621,000  increase  in average  equity from
$21.0 million in 2004 to $21.6 million in 2005.



                                     Page 12

<PAGE>



The Company  continues  to  experience  loan and deposit  growth at the Banco de
Sonoma Office from $6.2 million in deposits and $653,462 in loans as of December
31, 2004 to $11.2  million in deposits and $1.8 million in loans as of September
30, 2005. For the first three or four years the costs  associated with opening a
new office  will have a negative  effect on the  Company's  Consolidated  Income
Statement.  For the year 2005, it was  anticipated  that the additional  expense
will approximate  $200,000,  but the branch seems to be progressing  better than
anticipated,  showing a loss of $81,744 as of  September  30,  2005.  The Bank's
branch is  offering  services  to the  Latino  community  in our  market  place.
Management  identified  this as a niche  market  which  was  underserved  and an
opportunity for potential future growth and profitability. Most of the employees
at the branch  are  bilingual  and the Bank  offers  full  service  banking.  An
additional  product  which has been added is the ability for customers to effect
an immediate transfer of funds to Mexico. Management anticipates that the growth
in the branch will be slow and steady and profitable within three or four years.

Total shareholders' equity increased by $1.8 million or 8.5% for the nine months
ended September 30, 2005. At September 30, 2005, the Company reported net income
of $2.3  million.  In March the Company  paid out  $537,842  for cash  dividends
declared in February,  2005 and in August the Company paid out $540,159 for cash
dividends  declared in July,  2005. In 2004 stock options were granted to senior
employees with a fifth of the options vesting each year over a five year period.
In 2005,  13,500 options vested which increased  equity by $77,760 year to date.
The net income  figure of $2.3  million  also  reflects an expense for the stock
options of $77,760,  therefore  the net effect of the stock  option  transaction
relative to equity was zero.  Directors  exercised  68,461  options  which added
$532,635 to the capital accounts. The tax benefit of these options was $132,337,
which also increased equity. In September,  2005, the Company  repurchased 5,616
shares which  lowered  equity by $113,668.  The net effect of this  activity was
capital  of  $22,439,443  as of  September  30,  2005,  compared  to  capital of
$20,681,160  as of  December  31,  2004.  See page 6 for detail of  "Changes  in
Shareholder Equity."

Section 404 of the  Sarbanes-Oxley  Act of 2002  requires  the SEC to  prescribe
rules  requiring the  establishment,  maintenance  and evaluation of an issuer's
internal control of financial reporting.  Accordingly,  in the annual report for
December 31, 2006,  management was going to be required to include an assessment
on the effectiveness of the Company's internal controls over financial reporting
in accordance  with  standards set by the Public  Company  Accounting  Oversight
Board.  On September 21, 2005,  the  Securities  and Exchange  Commission  (SEC)
extended  for another  year the  deadline  for  non-accelerated  filers to first
certify  compliance  with Section 404. This means that the Company will not have
to certify  compliance until December 31, 2007,  unless the Company's market cap
exceeds  $75  million  at June 30,  2006.  The  Company's  external  independent
auditors  are  required to attest to and report on  management's  assessment  of
internal control over financial  reporting.  The Company's  management and staff
are working  diligently  toward  evaluating and documenting the internal control
systems in order to allow management to report on, and the Company's independent
auditors to attest to, the Company's internal control over financial  reporting.
The Company has retained the services of a consulting firm to assist  management
and staff with this  process and to address  any  material  weaknesses  and plan
accordingly to maintain adequate processes.  Even so, there can be no assurances
that  the  evaluation   required  by  Sarbanes-Oxley  will  not  result  in  the
identification  of  significant  control  deficiencies  or  that  the  Company's
auditors will be able to attest to the  effectiveness  of our internal  controls
over financial reporting.




                                     Page 13

<PAGE>



RESULTS OF OPERATIONS

Net interest Income

Net interest  income is the difference  between total interest  income and total
interest expense.  Net interest income,  adjusted to a fully taxable  equivalent
basis,  as shown on the table- Average  Balance,  Yields and Rates Paid, on page
11, is higher than net interest  income on the  statement  of income  because it
reflects adjustments applicable to tax-exempt income from certain securities and
loans ($300,000 in 2005 and $319,000 in 2004,  based on a 34% federal income tax
rate).

The  improvement in net interest  income for the nine months ended September 30,
2005 (stated on a fully taxable  equivalent basis) is a result of the net effect
of a $1.6 million  increase in interest income offset by an increase in interest
expense of  $555,000,  the net effect  being an  increase of $1.0  million.  The
increase in interest  income is a result of the growth in the loan portfolio and
the 200 basis point increase in the prime lending rate since September, 2004.

Net interest income (stated on a fully taxable  equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's  net  interest  margin for 2005  increased to 5.46% from 5.43% for the
same period in 2004.  The increase in the net  interest  margin is the result of
the 200 basis point  increase in the prime lending  rate,  growth in loan volume
and the transition of assets from fed funds sold to loan products.

Interest Income

As previously  stated,  interest  income  (stated on a fully taxable  equivalent
basis) increased by $1.6 million to $10.4 million in the nine months of 2005, an
18.1% increase over the $8.8 million realized during the same period in 2004.

The $1.6  million  increase in interest  income was the result of a $1.4 million
increase  due to the  growth in  volume of  average  balances,  together  with a
$183,000  increase in income related to higher interest rates paid. The yield on
earning assets was 6.53% as of September,  2005 compared to 6.24% as of the same
period in 2004, a 29 basis point increase.  The increase is primarily the result
of the  $15.2  million  or 10.4%  growth  in loans  from  $146.9  million  as of
September, 2004 to $162.1 million in 2005.

Interest Expense

Total  interest  expense  increased  by $.6 million to $1.7 million for the 2005
period ending September compared to $1.1 million during the same period of 2004.
The average rate paid on all interest-bearing  liabilities  increased from 1.06%
in 2004 to 1.44% in 2005, a 38 basis point increase.  Average balances increased
from $143.5 million to $158.1 million, a 10.2% gain in earning  liabilities.  Of
the  increase  in  average  interest  bearing  liabilities,   $3.5  million  was
borrowings  at the Federal Home Loan Bank.  The Company  continues to experience
stronger loan growth than deposit growth,  so the Company  determined it is more
cost  effective to satisfy its liquidity  needs by borrowing at the Federal Home
Loan Bank.

The gain in volume of average balances was responsible for a $81,000 increase in
interest  expense  and the  higher  rates paid were  responsible  for a $474,000
increase in interest expense resulting in higher interest expense of $555,000.



                                     Page 14

<PAGE>



Individual  components of interest  income and interest  expense are provided in
the table-Average Balances, Yields and Rates Paid on page 11.

Provision for Loan Losses

The provision for loan losses charged to operations as of September 30, 2005 was
$345,000 compared to $70,000 for the same period of 2004. The provision for loan
losses charged to operations is based on the Company's monthly evaluation of the
loan  portfolio and the adequacy of the allowance for loan losses in relation to
total loans  outstanding.  The Company has experienced strong loan growth during
the first nine months of 2005. Management anticipates that loan growth will slow
somewhat  allowing a lower charge to the  provision  for loan losses.  There has
been a regulatory focus on  concentrations of commercial real estate loans among
many financial institutions. The Company does have a concentration of commercial
real estate loans and although they are  adequately  collateralized,  management
accounted  for these loans in  determining  the adequacy of the  provision.  The
provision for loan losses at year end 2004 was $130,000.

The  non-accrual  portfolio was less than 1% of total loans during both the nine
months of 2005 and 2004.  Non accrual  loans were down 7.2% or $77,000  from the
level of non-accrual loans as of September, 2004. Loans charged-off were $37,000
and  recoveries  were $51,000 for the nine months of 2005 compared with $336,000
in  charge-offs  and $13,000 in recoveries for the same period in 2004. See page
19 for an analysis in the changes in allowance for loan losses  including charge
offs and recoveries.

Non-interest Income

Non-interest  income  of $1.4  million  increased  14.2%  from the $1.3  million
recorded in the comparable  period in 2004.  Service charges on deposit accounts
increased $141,000 to $937,000 for the nine months of 2005 from $796,000 for the
same  period of 2004,  an  increase  of 17.7%.  Other fee  income  grew 15.8% or
$35,000  from  $222,000  in 2004 to  $257,000  in  2005.  Credit  card  merchant
processing fees were largely attributable for the increase.

Non-interest Expense

Total non-interest expense increased 8.9% to $5.9 million during the nine months
of 2005 from $5.4 million for the same period in 2004.  Non-interest  expense on
an annualized basis  represented  3.42% of average total assets in 2005 compared
with 3.47% for the  comparable  period of 2004.  The decline in the 2005 expense
ratio reflects managements' efforts to control expenses in 2005.

The expenses for salaries and benefits  increased 7.5% from $3.1 million in 2004
to $3.4 million in 2005. The $234,000  increase in 2005 is largely the result of
normal merit and  incentive  increases and  increases in employee  benefits.  At
September 30, 2005, total full time equivalent  employees were 49 compared to 56
in 2004.

Expense  related to premises and equipment  increased  12.5% to $746,000 in 2005
from  $663,000 in 2004.  The $83,000  increase in expense in 2005 is a result of
additional  lease  expense for the new  Finance  Center and  remodeling  expense
required to make it serviceable,  increased  expenses related to maintenance and
repairs both for buildings and fixed assets, increases in property tax


                                     Page 15

<PAGE>



and increases in utility costs. The bank continues to emphasize  security in its
computer  operations.  Equipment  and  software  are  monitored  and upgraded as
appropriate to ensure  confidentiality of customer and company data contributing
to  additional  increases in expense.  The company  continues  to emphasize  the
utilization of technology to accommodate customer and market demands.

Other  operating  expenses  increased by 10.0% in 2005 to $1.8 million from $1.6
million in 2004. All  categories of other  operating  expense  remained level or
declined from the prior year except for professional fees and operational losses
and  outages,  which  increased  by 22.1% or  $194,000  and  176.2% or  $22,000,
respectively.  The growth in professional  fees is  predominately  the result of
additional   accruals  for  expenses   associated  with  the  implementation  of
Sarbanes-Oxley,  Rule 404, regarding internal controls over financial reporting.
The delay in  implementation  could mitigate or spread out the ongoing  expenses
relative to this process.

The  increase  in  operational  losses  and  outages  is the  result  of  losses
associated  with  check  forgeries.  The  Company  has a positive  track  record
relative to  operational  losses and has  implemented  additional  training  and
controls in an attempt to mitigate future losses.

Provision for Income Taxes

The provision  for income taxes  increased to an effective tax rate of 34.1% for
the nine months of 2005  compared  with 32.6% for the nine  months of 2004.  The
higher effective tax rate is a reflection of the increase in taxable income when
compared with income derived from tax exempt investments.  Income taxes reported
in the  financial  statements  include  deferred  taxes  resulting  from  timing
differences  in the  recognition  of  items  for  tax  and  financial  reporting
purposes.

BALANCE SHEET ANALYSIS

Investments

Investment securities were $51.8 million at September 30, 2005, a 37.4% increase
from the $37.7  million at  December  31, 2004 and a 25.3%  increase  from $41.3
million at September  30, 2004.  The  significant  increase in the  portfolio is
management's  attempt to generate higher earnings by moving funds from Fed Funds
Sold to higher yielding investments. The Company purchases securities rated A or
higher by Standard and Poor's and or Moody's Investors  Service.  In the event a
security is downgraded,  the Company will monitor the investment more closely or
sell if appropriate.  Local tax-exempt bonds are occasionally  purchased without
an A rating.

Securities are classified as held to maturity (HTM), if the Company has both the
intent and the ability to hold these securities to maturity. As of September 30,
2005, the Company had  securities  totaling $16.8 million with a market value of
$17.1 million  categorized as held to maturity.  Decisions to acquire  municipal
securities,  which  are  generally  placed  in this  category,  are based on tax
planning needs, pledge requirements and earnings.

Securities are classified as available for sale (AFS) if the Company  intends to
hold these debt securities for an indefinite period of time, but not necessarily
to maturity.  Investment  securities which are categorized as available for sale
are acquired as part of the overall asset and liability  management function and
serve as a primary  source of  liquidity.  Decisions  to  acquire  or dispose of
different  investments  are  based on an  assessment  of  various  economic  and
financial factors,


                                     Page 16

<PAGE>



including,  but not  limited  to,  interest  rate risk,  liquidity  and  capital
adequacy.  Securities  held in the  available  for sale category are recorded at
market  value,  which is $35.0  million  compared to an amortized  cost of $35.5
million as of September 30, 2005.

There were thirty Federal Farm Credit Bank, Federal Home Loan Bank, Federal Home
Loan Mortgage  Corporation or Federal National Mortgage  Association  securities
with a fair value of $29.6  million  and six U.S.  Treasury  securities  of $5.4
million in the AFS  portfolio and twenty two  municipal  securities  with a fair
market value of $7.4 million in the HTM portfolio that are temporarily  impaired
as of September 30, 2005. Of the above,  there were nineteen Federal Farm Credit
Bank, Federal Home Loan Bank, Federal Home Loan Mortgage  Corporation or Federal
National Mortgage  Association  securities of $16.6 million in the AFS portfolio
and seven  municipal  securities of $2.4 million in the HTM portfolio  that have
been in a continuous  loss  position  for 12 months or more as of September  30,
2005. The primary cause of the  impairment of these  securities is interest rate
volatility  inherent in a rising rate environment  which causes the market value
of the security to decline.  Management understood the potential market risks at
the time of acquisition  and  determined  that the benefit to the Company of the
higher interest rates received more than offset the potential  deterioration  in
value.  It is the Company's  intent to carry the securities to maturity date, at
which time the Company will receive face value for the securities at no loss.

Although the quoted market values fluctuate, investment securities are generally
held to  maturity,  and  accordingly,  gains and  losses are  recognized  in the
accounts upon sale, or at such time as  management  determines  that a permanent
decline in value exists.  In the opinion of management,  there was no investment
in securities at September 30, 2005 that  constituted a material  credit risk to
the  Company.  The lower  market  value to  amortized  costs was a result of the
increase in market interest rates and not an indication of lower credit quality.

Loans

The Company's  loan portfolio was $162.1 million at September 30, 2005, or 79.1%
of  total  deposits.  This  compares  with  $153.2  million,  or  79.1% of total
deposits,  at December 31, 2004 and $146.9 million,  or 78.5% of total deposits,
at  September  30,  2004. A  comparative  schedule of average  loan  balances is
presented  in the  table  on page  11;  period-end  and  year-end  balances  are
presented in the following table.



<TABLE>
<S>                               <C>           <C>          <C>            <C>          <C>            <C>

                             September 30,   Percentage   December 31,   Percentage  September 30,  Percentage
                                  2005        of Total       2004         of Total      2004         of Total
                             ------------    ----------  ------------    ----------  ------------   ----------

Commercial                   $114,451,600      70.4%     $109,324,569      71.2%     $107,850,150      73.1%
Consumer                       19,670,435      12.1%       16,249,913      10.6%       15,147,103      10.3%
Real estate construction       15,279,749       9.4%       20,291,506      13.2%       17,483,054      11.9%
Real estate mortgage           13,148,765       8.1%        7,732,177       5.0%        6,857,318       4.7%
Leases                             31,296       0.0%           47,717       0.0%           20,714       0.0%
                             ------------     -----      ------------     -----      ------------     -----
                              162,581,845     100.0%      153,645,882     100.0%      147,358,339     100.0%
                                              =====                       =====                       =====
Deferred loan fees
 and costs, net                  (450,329)                   (485,223)                   (439,618)
Allowance for loan
 and lease losses              (2,787,279)                 (2,428,572)                 (2,381,415)
                             ------------                ------------                ------------

                             $159,344,237                $150,732,087                $144,537,306
                             ============                ============                ============
</TABLE>

                                    Page 17

<PAGE>

Risk Elements

The majority of the Company's  loan activity is with  customers  located  within
Sonoma  County.  Approximately  88.6% of the total loan  portfolio is secured by
real estate located in the Company's service area. Significant concentrations of
credit  risk may exist if a number of loan  customers  are  engaged  in  similar
activities and have similar  economic  characteristics.  The Company believes it
has policies in place to identify problem loans and to monitor concentrations of
credits.

Non Performing Assets

Management  classifies all loans as non-accrual loans when they become more than
90 days past due as to principal or interest,  or when the timely  collection of
interest or principal becomes uncertain,  if earlier, unless they are adequately
secured and in the process of collection.

A loan remains in a  non-accrual  status until both  principal and interest have
been current for six months and meets cash flow or  collateral  criteria or when
the loan is  determined  to be  uncollectible  and is charged  off  against  the
allowance for loan losses,  or, in the case of real estate loans, is transferred
to other real estate owned. A loan is classified as a restructured loan when the
interest  rate is  materially  reduced,  when the term is  extended  beyond  the
original  maturity date or other  concessions are made by the Company because of
the inability of the borrower to repay the loan under the original  terms. As of
September 30, 2005 there were $835,000 in restructured loans.

There were $1.0 million of  non-accrual  loans and no loans 90 days or more past
due and still  accruing  at  September  30,  2005.  There  were $1.1  million of
non-accrual  loans and no loans 90 days or more past due and still  accruing  at
September 30, 2004. The decline in non- accrual loans is management's attempt to
recognize and handle problems early.

Allowance for Loan Losses

The allowance for loan losses is  maintained at a level  considered  adequate to
provide  for  losses  that  can be  reasonably  anticipated.  The  allowance  is
increased by provisions charged to operating expense and reduced by charge-offs,
net of recoveries.  The allowance is based on estimates, and ultimate losses may
vary from the current  estimates.  These estimates are reviewed  monthly and, as
adjustments  become  necessary,  they are reported in earnings in the periods in
which they become known.

The  review   process  is  intended  to  identify  loan  customers  who  may  be
experiencing financial difficulties. In these circumstances,  a specific reserve
allocation  or  charge-off  may be  recommended.  Other  factors  considered  by
management in evaluating  the adequacy of the  allowance  include:  loan volume,
historical net loan loss experience,  the condition of industries and geographic
areas  experiencing  or  expected to  experience  economic  adversities,  credit
evaluations and current  economic  conditions.  The allowance for loan losses is
not a precise amount,  but based on the factors above,  represents  management's
best  estimate of losses that may be  ultimately  realized from the current loan
portfolio.



                                     Page 18

<PAGE>



Worsening  conditions in certain  economic  sectors and  geographic  areas could
adversely affect the loan portfolio,  necessitating  larger  provisions for loan
losses  than  currently  estimated.  Based on its risk  management  review and a
review of its loan portfolio,  management believes that its allowance for losses
for the quarter  ending  September  30, 2005,  is  sufficient  to absorb  losses
inherent in the loan portfolio. This assessment is based upon the best available
information and does involve  uncertainty and matters of judgment.  Accordingly,
the adequacy of the loan loss reserve  cannot be determined  with  precision and
could be susceptible to significant change in future periods.

At September 30, 2005, the allowance for loan losses was $2.8 million,  or 1.72%
of period-end loans,  compared with $2.4 million,  or 1.59% at December 31, 2004
and $2.4 million, or 1.62% at September 30, 2004.

An  analysis  of the  changes  in  the  allowance  for  loan  losses,  including
charge-offs and recoveries by loan categories, is presented below.
<TABLE>
<S>                                               <C>                    <C>                <C>

                                              For the Nine           For the Year       For the Nine
                                              Months Ended              Ended            Months Ended
                                                9/30/05               12/31/04             9/30/04

Balance beginning of year                   $     2,428,572     $     2,634,625     $     2,634,625
Charge-offs:
  Commercial                                        (20,198)           (290,000)           (290,000)
  Consumer                                          (16,738)            (63,007)            (46,369)
                                            ---------------     ---------------     ---------------

                      Total charge-offs             (36,936)           (353,007)           (336,369)
Recoveries:

  Commercial                                         50,543              15,416              11,621
  Consumer                                              100               1,538               1,538
                                            ---------------     ---------------     ---------------

                       Total recoveries              50,643              16,954              13,159

Net (chargeoffs) recoveries                          13,707            (336,053)           (323,210)
Provision charged to operations                     345,000             130,000              70,000
                                            ---------------     ---------------     ---------------
Balance end of period                       $     2,787,279     $     2,428,572     $     2,381,415
                                            ===============     ===============     ===============
Ratio of net charge-offs (recoveries)
 annualized to average loans                          -0.01%               0.24%               0.32%
Balance in allowance as a percentage                   1.72%               1.59%               1.62%
  of loans outstanding at period end
</TABLE>




                                     Page 19

<PAGE>



Deposits

A comparative  schedule of average deposit balances is presented in the table on
page 11; period end and year-end deposit balances are presented in the following
table.

<TABLE>
<S>                                 <C>              <C>            <C>               <C>              <C>               <C>
                          September 30,     Percentage       December 31,     Percentage     September 30,       Percentage
                               2005          of Total           2004           of Total         2004              of Total
                          ------------     ------------    ------------       ----------     ------------        ----------

Interest-bearing
 transaction deposits     $ 34,139,432            16.7%     $34,912,205            18.0%      $31,214,138             16.6%
Savings deposits            73,459,066            35.8%      70,254,926            36.3%       65,398,770             35.0%
Time deposits,
$100,000
 and over                   26,890,840            13.1%      25,307,661            13.1%       26,505,608             14.2%
Other time deposits         21,791,961            10.6%      18,630,846             9.6%       18,562,732              9.9%
                          ------------          ------     ------------           -----      ------------             ----
Total interest bearing
 deposits                  156,281,299            76.2%     149,105,638            77.0%      141,681,248             75.7%
Demand deposits             48,746,030            23.8%      45,557,377            23.0%       45,379,582             24.3%
                          ------------          ------     ------------           -----      ------------            -----
Total deposits            $205,027,329           100.0%    $193,663,015           100.0%     $187,060,830            100.0%
                          ============          ======     ============           =====      ============            =====
</TABLE>

Total deposits  increased by $11.4  million,  during the nine months of 2005, to
$205.0 million from $193.7 million at December 31, 2004 and $187.1 million as of
September  30, 2004. As of September  30, 2005,  non interest  demand showed the
strongest  growth of $4.2 million or 9.4% to $48.7 million from $44.6 million as
of December 31, 2004.  Savings deposits  (including money market savings) showed
growth  of $3.2  million  or 4.6% to $73.5  million  from  $70.3  million  as of
December 31 ,2004.  Other time  deposits  were $21.8  million  compared to $18.6
million an increase  of 17.0% or $3.2  million and time  deposits  greater  than
$100,000 showed growth of $1.6 million or 6.3% from $25.3 million as of December
31, 2004 to $26.9 million as of September 30, 2005.  Interest  bearing  checking
was the only  category of deposits  which showed a decline from $34.9 million as
of December 31, 2004 to $34.1  million as of September  30, 2005, a 2.2% decline
or $773,000.  This decline in interest  bearing  checking could be the result of
customers moving funds to higher yielding deposit accounts.

With the future of  interest  rates  uncertain  the Company  cannot  predict how
quickly  rates may  change on deposit  accounts.  In a rising  rate  environment
deposit  rates  could  increase  which would  cause the net  interest  margin to
decline,  resulting in lower net income. Already the Company has seen a 34 basis
point  increase in the yield on deposits  from 1.06% as of September 30, 2004 to
1.40% for the nine months ended September 30, 2005.

Although  the Company has  experienced  strong  deposit  growth this year,  loan
demand has exceeded  expectations,  therefore the Company has taken advantage of
its ability of borrow at the Federal Home Loan Bank. These short-term borrowings
are  responsible  for a 4 basis point increase in the yield of interest  bearing
liabilities   or  38  basis  points  over  the  prior  year,  as  shown  on  the
table-Average Balance,  Yields and Rates Paid, on page 11. The decision was made
by


                                     Page 20


<page>
management  that it was more cost  effective to borrow  instead of paying higher
rates of interest on long term deposits.

Risk-Based Capital

The Federal Deposit Insurance  Corporation (FDIC) has adopted risk-based capital
guidelines  which establish a risk-adjusted  ratio relating capital to different
categories of assets and off- balance sheet exposures. Under current guidelines,
as of September  30,  2005,  the Company was required to have minimum Tier I and
total  risk-based  capital  ratios  of 4%  and  8%,  respectively.  To  be  well
capitalized under Prompt  Corrective  Action Provisions  requires minimum Tier I
and total risk-based capital ratios of 6% and 10%, respectively.

The FDIC has also adopted new minimum  leverage ratio  guidelines for compliance
by banking organizations.  The guidelines require a minimum leverage ratio of 4%
of Tier 1 capital to total average assets.  Banks experiencing high growth rates
are expected to maintain  capital  positions well above the minimum levels.  The
leverage ratio in conjunction  with the risk-based  capital ratio constitute the
basis for determining the capital adequacy of banking organizations.

The table below presents Tier 1 capital,  total capital and total  risk-weighted
assets at September 30, 2005,  along with the related  risk-based  capital ratio
and leverage ratio.

(dollars in thousands)
<TABLE>
<S>          <C>            <C>        <C>         <C>         <C>        <C>
            Total
         Risked-based      TIER 1                 TOTAL                Leverage
            Assets        Capital     Ratio      Capital     Ratio      Ratio
         ------------     -------     -----     --------     -----     --------

         $    234,279     $21,662     10.76%    $24,183      12.01%        9.25%
</TABLE>


Off Balance Sheet Commitments

The Company's off balance sheet  commitments  consist of  commitments  to extend
credit of $38.2  million  and  standby  letters  of credit  of  $348,000.  These
commitments  are  extended to customers  in the normal  course of business.  The
Company also has  contractual  obligations  consisting  of operating  leases for
various facilities and payments to participants under the Company's supplemental
executive retirement plan and deferred compensation plan.

Market Risk Management

Overview.  Market risk is the risk of loss from adverse changes in market prices
and rates.  The Company's  market risk arises  primarily from interest rate risk
inherent in its loan,  investment and deposit  functions.  The goal for managing
the assets and liabilities of the Company is to maximize  shareholder  value and
earnings  while  maintaining a high quality  balance sheet without  exposing the
Company  to undue  interest  rate  risk.  The  Board of  Directors  has  overall
responsibility  for the interest rate risk  management  policies.  Sonoma Valley
Bank has an Asset and Liability Management Committee (ALCO) that establishes and
monitors  guidelines  to  control  the  sensitivity  of  earnings  to changes in
interest rates.



                                     Page 21

<PAGE>



Asset/Liability  Management.  Activities involved in asset/liability  management
include but are not  limited to lending,  accepting  and  placing  deposits  and
investing  in  securities.  Interest  rate  risk  is  the  primary  market  risk
associated with asset/liability management.  Sensitivity of earnings to interest
rate changes  arises when yields on assets change in a different  time period or
in a different  amount from that of interest costs on  liabilities.  To mitigate
interest rate risk,  the structure of the balance sheet is managed with the goal
that  movements of interest rates on assets and  liabilities  are correlated and
contribute to earnings even in periods of volatile interest rates. When interest
rates increase,  the market value of securities held in the investment portfolio
declines.  Generally,  this decline is offset by an increase in  earnings.  When
interest rates decline,  the market value of securities increases while earnings
decrease due to the bank's asset sensitivity  caused by the variable rate loans.
Usually the Company is able to mitigate its risk from changes in interest  rates
with  this  balance  sheet  structure.  At  the  present  time,  the  market  is
experiencing  an anomaly  from  historical  norms.  While  short term rates have
increased  over the past year as a result of the Federal  Open Market  Committee
increasing  the Fed Funds  target  rate from  1.00% to 3.75%,  the  Company  has
actually experienced a decline in long term interest rates from September, 2004,
following the market trend. The asset/liability management policy sets limits on
the  acceptable  amount of variance in net  interest  margin and market value of
equity under changing interest environments.  The Company uses simulation models
to forecast earnings, net interest margin and market value of equity.

Simulation  of earnings is the primary tool used to measure the  sensitivity  of
earnings to interest  rate  changes.  Using  computer-modeling  techniques,  the
Company is able to estimate the potential  impact of changing  interest rates on
earnings.  A balance sheet forecast is prepared quarterly using inputs of actual
loans,  securities and interest bearing  liabilities (i.e.  deposits/borrowings)
positions as the beginning base. The forecast balance sheet is processed against
five interest  rate  scenarios.  The  scenarios  include 100 and 200 basis point
rising rate forecasts,  a flat rate forecast and 100 and 200 basis point falling
rate forecasts  which take place within a one year time frame.  The net interest
income is measured  during the year assuming a gradual  change in rates over the
twelve- month  horizon.  The  Company's  2005 net interest  income,  as forecast
below,  was modeled  utilizing a forecast balance sheet projected from September
30, 2005  balances.  The following  table  summarizes the effect on net interest
income  (NII) of +/-100 and +/-200  basis  point  changes in  interest  rates as
measured against a constant rate (no change) scenario.

Interest Rate Risk  Simulation  of Net Interest  Income as of September 30, 2005
(In thousands)
<TABLE>
<S>               <C>                                        <C>

Variation from a constant rate scenario            $ Change in NII
                  +200bp                           $         (639)
                  +100bp                                     (321)
                  -100bp                                     (195)
                  -200bp                                     (403)
</TABLE>


The  simulations of earnings do not incorporate  any management  actions,  which
might moderate the negative consequences of interest rate deviations. Therefore,
they do not reflect likely actual results,  but serve as conservative  estimates
of interest rate risk.

Since the primary tool used by  management  to measure and manage  interest rate
exposure  is a  simulation  model,  use  of the  model  to  perform  simulations
reflecting  changes  in  interest  rates  over a twelve  month  horizon  enables
management to develop and initiate  strategies for managing exposure to interest
rate risks. Management believes that both individually and in the aggregate


                                     Page 22

<PAGE>



its modeling  assumptions are  reasonable,  but the complexity of the simulation
modeling process results in a sophisticated  estimate, not an absolutely precise
calculation of exposure.

Interest Rate Sensitivity  Analysis.  Interest rate sensitivity is a function of
the repricing characteristics of the portfolio of assets and liabilities.  These
repricing  characteristics are the time frames within which the interest-bearing
assets  and  liabilities  are  subject  to change in  interest  rates  either at
replacement, repricing or maturity. Interest rate sensitivity management focuses
on the maturity of assets and liabilities and their repricing  during periods of
changes in market interest rates.  Interest rate  sensitivity is measured as the
difference  between  the  volumes  of  assets  and  liabilities  in the  current
portfolio  that  are  subject  to  repricing  at  various  time  horizons.   The
differences are known as interest sensitivity gaps.

A positive  cumulative  gap may be equated to an asset  sensitive  position.  An
asset  sensitive  position in a rising  interest rate  environment  will cause a
bank's interest rate margin to expand. This results as floating or variable rate
loans reprice more rapidly than fixed rate  certificates of deposit that reprice
as they mature over time. Conversely, a declining interest rate environment will
cause the  opposite  effect.  A  negative  cumulative  gap may be  equated  to a
liability  sensitive  position.  A  liability  sensitive  position  in a  rising
interest rate  environment will cause a bank's interest rate margin to contract,
while a declining  interest rate environment will have the opposite effect.  The
table above shows net interest  income  declining  both when rates  increase and
when rates  decline.  Although the Bank is usually asset  sensitive  which would
cause the  Bank's net  interest  margin to expand,  the  negative  change in net
interest  income  shows  both in rising and  declining  rate  environments.  The
decline in the rising rate environment is a result of management's  conservative
evaluation  of the  pressure to increase  rates on deposits,  which  temporarily
causes the decline in the net interest margin.

The following table sets forth the dollar amounts of maturing  and/or  repricing
assets and liabilities for various periods.  This does not include the impact of
prepayments  or other  forms of  convexity  caused by changing  interest  rates.
Historically, this has been immaterial and estimates for them are not included.

The Company has more  liabilities  than assets  repricing  during the next year.
Usually  because the Company's  asset rates change more than deposit rates,  the
Company's  interest  income  will  change more than the cost of funds when rates
change.  For the  current  quarter,  the  Company is making a more  conservative
assumption.  Historically, the Company has been able to raise deposit rates with
a lag to loan rate  increases,  however loan rates have remained flat and market
demands are creating pressure to raise interest rates. Therefore for a period of
time the Company has chosen to use the  simulation  to forecast  deposits  rates
rising  quite  rapidly.  This causes the net  interest  margin to shrink and net
interest income to decline in both a rising and falling rate environment.

The Company controls its long term interest rate risk by keeping long term fixed
rate assets  (longer  than 5 years) less than its long term fixed rate  funding,
primarily  demand deposit  accounts and capital.  The following table sets forth
cumulative  maturity  distributions  as of September  30, 2005 for the Company's
interest-bearing  assets and  interest-bearing  liabilities,  and the  Company's
interest rate sensitivity gap as a percentage of total interest-earning  assets.
The table  shows  $138.6  million in the over  twelve  month  category,  of that
amount, only $42.3 million has a maturity or repricing of over 5 years, compared
to demand deposits and capital of $70.1 million.





                                     Page 23

<PAGE>




<TABLE>
<S>                                      <C>            <C>             <C>            <C>              <C>            <C>
September 30, 2005                Immediate        Up to 3         4 to 6          7 to 12        Over 12          Totals
                                   Reprice         Months          Months          Months         Months
(in thousands)                   ----------       ----------     ----------      ----------      ----------      ----------

Fed Funds Sold                   $       55       $        0     $        0      $        0      $        0      $       55
Securities + IBB                          0            2,262          3,119           6,237          40,148          51,766
Loans                                37,187            6,023          6,084          11,568          98,482         159,344
                                 ----------       ----------     ----------      ----------      ----------      ----------
     Total RSA                   $   37,242       $    8,285     $    9,203      $   17,805      $  138,630      $  211,165


MMDA/NOW/SAV                     $  108,608       $        0     $        0      $        0      $        0      $  108,608
CDs < $100k                               0            4,028          6,540           6,540           4,684          21,792
CDs > $100k                               0            5,454         13,198           3,300           4,939          26,891
Borrowings                                0              650              0               0               0             650
                                 ----------       ----------     ----------      ----------      ----------      ----------
     Total RSL                   $  108,608       $   10,132     $   19,738      $    9,840      $    9,623      $  157,941

Gap                                 (71,366)          (1,847)       (10,535)          7,965         129,007          53,224
Cumulative                          (71,366)         (73,213)       (83,748)        (75,783)         53,224

% of Assets                          -30.70%          -31.50%        -36.00%         -32.60%         22.90%
</TABLE>


Market risk in securities. Market risk in securities shows the amount of gain or
loss  (before  tax)  in  the  securities  portfolio.  Portfolio  volume,  sector
distribution,  duration,  and quality all affect market valuation.  The adjusted
equity  ratio is tier 1 capital  adjusted  for the market  gain or loss less any
applicable  tax effect  divided by average  total  assets for  leverage  capital
purposes  for the most  recent  quarter.  The ratio is  designed  to show tier 1
capital  if the  securities  portfolio  had to be  liquidated  and all gains and
losses  recognized.  If the ratio remains  strong after a +2% or +3% rate shock,
market  risk is  reasonable  in  relation  to the level of  capital.  A bank has
flexibility  and strength when the  securities  portfolio can be liquidated  for
liquidity purposes without affecting capital adequacy.

The Bank has only  moderate  market  risk in  investments  because  the  average
maturity in the  portfolio is not very long,  except for  municipals,  which are
held to maturity.  The portfolio should decline in value only about 1.9% or $1.0
million  for a 1%  increase  in rates.  The gain in value if rates fall would be
somewhat  less,  because  there  are  some  callable  bonds.   Marking-to-market
available for sale securities when rates change would add only modest volatility
to a strong level of equity.  This market risk acts to offset the interest  rate
risk (i.e.  if rates  decline and NIM is  squeezed,  there would be a concurrent
gain in the value of securities).

For the Three Month Periods
Ended September 30, 2005 and 2004

Overview

The  Company  reported  net  income of  $847,551  for the third  quarter of 2005
compared with $744,728 for the third quarter of 2004. On a per share basis,  net
income for the three  months  ended  September  30, 2005  equaled $.39 per share
compared with $.35 per share during the same period in 2004.

Return on average total assets on an annualized basis for the three months ended
September 30, 2005 was 1.45%  compared to 1.40% for the same period of 2004. The
increase in the return on


                                     Page 24

<PAGE>



assets is because  earnings are growing  faster than  assets.  Return on average
shareholders' equity on an annualized basis for the three months ended September
30,  2005 and 2004 was 15.33% and  15.14%,  respectively.  The  increase  in the
return on equity is a result of the strong growth in earnings experienced in the
third  quarter of 2005 when  compared to 2004.  Net income showed an increase of
13.8% or $102,823 from $744,728 to $847,551.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income,  adjusted to a fully taxable  equivalent  basis,  increased
$251,000 to $3.0  million for the three months ended  September  30, 2005,  from
$2.7 million  during the  comparable  period of 2004.  Net interest  income on a
fully taxable equivalent basis, as shown on the table - Average Balances, Yields
and Rates Paid on page 27, is higher than net interest  income on the statements
of income because it reflects  adjustments  applicable to tax-exempt income from
certain  securities and loans ($98,000 in 2005 and $108,000 in 2004,  based on a
34% federal income tax rate).

Net interest income (stated on a fully taxable  equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's  net interest  margin for the third  quarter of 2005 declined to 5.44%
from 5.62% for the  comparable  period in 2004.  The decline in the net interest
margin is the result of the  pressure  to raise  interest  rates.  For the three
months ended  September  30,  2005,  the yield on interest  bearing  liabilities
increased 54 basis  points from 1.05% for the three  months of 2004  compared to
1.59% for the three months period ended  September 30, 2005.  Although the prime
lending rate has increased 200 basis points since  September 30, 2004,  the long
term rates in the marketplace  have remained flat which has caused  borrowers to
want to  refinance  into lower  yielding  longer term  loans.  This has had some
effect on the net interest  margin,  although the  refinancing was somewhat more
prevalent in earlier quarters of the year.

Interest Income

Interest  income for the three  months  ended  September  30, 2005  increased by
$505,000 to $3.6 million, a 16.3% increase over the $3.1 million realized during
the same period in 2004. The gain in volume of average  balances was responsible
for a $379,000 increase in interest income and a $126,000 increase in income was
related to lower  interest  rates,  resulting  in a total  increase  in interest
income of $505,000.

Interest Expense

Total interest  expense for the three months ended  September 30, 2005 increased
by $254,000 to $639,000  compared with $385,000 in the same period of 2004.  The
average rate paid on all  interest-bearing  liabilities for the third quarter of
2005  increased  to 1.59% from 1.05% in the third  quarter of 2004,  and average
balances for the third quarter of 2005  increased to $159.2  million from $144.7
million in the same period of 2004, a 10.0% gain.

The gain in volume of  average  balances  accounted  for a $41,000  increase  in
interest expense while a $213,000  increase was related to higher interest rates
paid, resulting in a $254,000 increase in interest expense for the third quarter
of 2005.


                                     Page 25

<PAGE>



Individual  components of interest  income and interest  expense are provided in
the table - Average Balances, Yields and Rates Paid on page 27.

Provision for Loan Losses

The  provision  for loan  losses was  $95,000  during the third  quarter of 2005
compared to the $40,000 provision for the third quarter of 2004. The increase in
the provision is the result of  managements'  evaluation  and  assessment of the
loan portfolio and the loan growth the Company has experienced.

Non-interest Income

Non-interest  income of $498,000 for the third  quarter of 2005  represented  an
increase of $46,000,  or 10.1%,  from the $452,000 for the comparable  period in
2004.  Income from service charges on deposit  accounts and credit card merchant
income were major contributors to the growth in income over 2004.

Non-interest Expense

For the third quarter of 2005,  non-interest  expense was $2.0 million  compared
with $1.9  million  for the same  period in 2004,  representing  an  increase of
$100,741, or 5.4%. The largest increase of non interest expense was premises and
equipment,  which increased  $38,000,  or 16.4%,  compared with the three months
ended  September  30,  2004.  The  increase  in  expense  in 2005 is a result of
additional  lease  expense for the new  Finance  Center and  remodeling  expense
required to make it serviceable,  increased  expenses related to maintenance and
repairs  both for  buildings  and fixed  assets,  increases  in property tax and
increases in utility costs.

Other non  interest  expense  for the three  months  ended  September  30,  2005
increased 8.4% to $578,000  compared to $533,000 in the same period in 2004. All
categories of other operating  expense remained level or declined from the prior
year  except  for  professional  fees.  This  is  predominately  the  result  of
additional   accruals  for  expenses   associated  with  the  implementation  of
Sarbanes-Oxley, Rule 404, regarding internal controls over financial reporting.

The expenses for salaries and benefits increased 1.7% from $1.10 million in 2004
to $1.12 million in 2005. The $18,000  increase in 2005 is largely the result of
normal merit and  incentive  increases and  increases in employee  benefits.  At
September 30, 2005, total full time equivalent  employees were 49 compared to 56
in 2004.

Provision for Income Taxes

The  provision  for income taxes  decreased to an effective tax rate of 34.8% in
the third quarter of 2005 compared with 35.2% for the comparable period in 2004.
Income  taxes  reported  in the  financial  statements  include  deferred  taxes
resulting  from  timing  differences  in the  recognition  of items  for tax and
financial reporting purposes.



                                     Page 26

<PAGE>



                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
             For the three months ended September 30, 2005 and 2004
<TABLE>
<S>                                                        <C>              <C>         <C>          <C>              <C>        <C>

                                                                   2005                                       2004
                                                     Average          Income/       Yield/     Average        Income/         Yield/
ASSETS                                               Balance          Expense       Rate       Balance        Expense         Rate
                                                  -------------     ------------    -----   -------------   ------------      -----
Interest-earning assets:
Loans(2):
  Commercial                                      $ 109,771,367     $  2,083,419    7.53%   $ 101,190,073   $  1,811,078      7.10%
  Consumer                                           19,459,206          349,958    7.14%      14,382,185        234,110      6.46%
  Real estate construction                           18,689,755          361,262    7.67%      20,158,437        398,449      7.84%
  Real estate mortgage                               13,227,184          231,628    6.95%       6,592,958        113,383      6.82%
  Tax exempt loans (1)                                2,470,126           51,142    8.21%       3,031,016         63,895      8.36%
  Leases                                                 34,831              920   10.48%          25,010          1,337     21.21%
  Tax exempt leases (1)                                       0                0    0.00%               0              0      0.00%
  Unearned loan fees                                   (475,465)                                 (461,205)
                                                  -------------     ------------            -------------   ------------
         Total loans                                163,177,004        3,078,329    7.48%     144,918,474      2,622,252      7.18%
Investment securities
  Available for sale:
         Taxable                                     35,032,300          274,973    3.11%      23,727,566        197,141      3.30%
         Tax exempt(1)                                        0                0    0.00%               0              0      0.00%
  Hold to maturity:
         Taxable                                        368,083            2,496    2.69%         388,086          2,496      2.55%
         Tax exempt (1)                              16,571,431          236,188    5.65%      17,571,913        253,442      5.72%
                                                  -------------     ------------            -------------   ------------
         Total investment securities                 51,971,814          513,657    3.92%      41,687,565        453,079      4.31%
Federal funds sold                                       39,570              332    3.33%       3,908,302         12,662      1.29%
Federal Home Loan Bank stock                            857,852            8,609    3.98%         700,341          8,093      4.58%
Total due from banks/Interest bearing                   105,109              392    1.48%          35,320             78       .88%
                                                  -------------     ------------            -------------   ------------
  Total interest-earning assets                     216,151,349     $  3,601,319    6.61%     191,250,002   $  3,096,164      6.42%
                                                                    ============                            ============
Noninterest-bearing assets:
  Reserve for loan losses                            (2,755,188)                               (2,383,996)
  Cash and due from banks                             6,419,048                                 9,889,631
  Premises and equipment                              1,274,906                                 1,382,084
  Other assets                                       12,947,311                                12,388,286
                                                  -------------                             -------------
                                 Total assets     $ 234,037,426                             $ 212,526,007
                                                  =============                             =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing deposits
         Interest-bearing transaction             $  33,360,612     $     14,183    0.17%   $  32,898,017   $     13,398      0.16%
         Savings deposits                            75,362,401          231,020    1.22%      68,513,150        109,154      0.63%
         Time deposits over $100,000                 27,346,281          221,459    3.21%      24,853,002        164,582      2.63%
         Other time deposits                         21,009,015          151,829    2.87%      18,446,769         97,424      2.10%
                                                  -------------     ------------            -------------   ------------
           Total interest-bearing deposits          157,078,309          618,491    1.56%     144,710,938        384,558      1.05%
  Federal Funds purchased                                     0                0    0.00%               0              0      0.00%
  Other short term borrowings                         2,118,002           20,020    3.75%               0              0      0.00%
                                                  -------------     ------------            -------------   ------------
           Total interest-bearing liabilities       159,196,311     $    638,511    1.59%     144,710,938   $    384,558      1.05%
                                                                    ============                            ============
Non interest-bearing liabilities:
  Non interest-bearing demand deposits               48,347,004                                44,528,840
  Other liabilities                                   4,375,790                                 3,608,892
                         Shareholders' equity        22,118,321                                19,677,337
                                                  -------------                             -------------
   Total liabilities and shareholders' equity     $ 234,037,426                             $ 212,526,007
                                                  =============                             =============
Interest rate spread                                                                5.02%                                     5.37%
                                                                                   =====                                     =====
Interest income                                                     $  3,601,318    6.61%                    $  3,096,164     6.42%
Interest expense                                                         638,511    1.17%                         384,558     0.80%
                                                                    ------------   -----                     ------------    -----
Net interest income/margin                                          $  2,962,807    5.44%                    $  2,711,606     5.62%
                                                                    ============   =====                     ============    =====
</TABLE>



(1)  Fully tax equivalent  adjustments are based on a federal income tax rate of
     34% in 2005 and 2004
(2)  Non-accrual loans have been included in loans for the purposes of the above
     presentation.  Loan fees of $93,883 and $84,700 for the three  months ended
     September 30, 2005 and September 30, 2004, respectively,  were amortized to
     the appropriate interest income categories.

                                     Page 27





Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information regarding Quantitative and Qualitative Disclosures about Market Risk
appears on page 21 through 24 under the  caption  "Management's  Discussion  and
Analysis of Consolidated  Financial Condition and Results of Operations - Market
Risk Management" and is incorporated herein by reference.

Item 4.  CONTROLS AND PROCEDURES

Our management,  with the  participation  and under the supervision of our Chief
Executive  Officer and our Chief Financial  Officer,  reviewed and evaluated the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures,  as of the end of the  fiscal  quarter  covered by this  report,  as
required  by  Securities  Exchange  Act  Rule  13a-15,  and  concluded  that our
disclosure  controls and  procedures  are  effective to ensure that  information
required to be disclosed in our reports filed with the  Securities  and Exchange
Commission  pursuant to the Securities  Exchange Act of 1934 is accumulated  and
communicated  to  management,  including our Chief  Executive  Officer and Chief
Financial  Officer.  Based on this evaluation,  our Chief Executive  Officer and
Chief  Financial  Officer have concluded that as of the end of such period,  our
disclosure  controls  and  procedures  are  effective  to ensure that we record,
process,  summarize  and report  information  required  to be  disclosed  in the
reports  we filed  under the  Securities  Exchange  Act of 1934  within the time
periods  specified  by  the  Securities  and  Exchange  Commission's  rules  and
regulations.

During the quarter ended  September 30, 2005,  there have been no changes in our
internal  control  over  financial  reporting,  or to our  knowledge,  in  other
factors,  that have materially  affected or, are reasonably likely to materially
affect our internal controls over financial reporting.

                                     Part II

Item 1.  LEGAL PROCEEDINGS

From time to time the Company may be a party to legal proceedings arising in the
ordinary course of business. The Company is not currently a party to, nor is any
of its properties the subject of, any material pending legal proceedings.



                                     Page 28

<PAGE>



Item 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following chart  summarizes the Company  repurchases of the Company's common
shares as part of the Company's publicly announced repurchase plan.

<TABLE>
<S>                                      <C>                       <C>                   <C>                          <C>

                              (a)                    (b)                      (c)                           (d)
                                                                                                     Maximum Number (or
                                                                            Total Number of          Approximate Dollar
                                                                            Shares (or Units)        Value) of Shares (or
                           Total Number of                                  Purchased as Part        Units) that May Yet be
                           Shares (or Units        Average Price Paid       of Publicly Announced    Purchased Under the Plans
Period                     Purchased               per Share (or Unit)      Plans or Programs        or Programs
----------------           -----------------       -------------------      ----------------------   -------------------------
Month #7:                                  0       $                 0                           0   $                       0
7/1/05 - 7/31/05

Month #8:                                  0       $                 0                           0   $                       0
8/1/05 - 8/31/05

Month #9:                              5,616       $             20.24                      87,517   $                 419,837
9/1/05 - 9/30/05

Total                                  5,616       $             20.24                      87,517   $                 419,837
                           -----------------       -------------------      ----------------------   -------------------------
</TABLE>



Item 3.  DEFAULTS UPON SENIOR SECURITIES

None

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

Item 5.  OTHER INFORMATION

None

Item 6.  EXHIBITS

          Exhibits

     3.1  Sonoma Valley Bancorp Articles of Incorporation,  filed as Exhibit 3.1
          to the Registrant's  Registration  Statement on Form S-8 filed on June
          5, 2001.

     3.2  Sonoma  Valley   Bancorp   By-laws,   filed  as  Exhibit  3.2  to  the
          Registrant's Registration Statement on Form S-8 filed on June 5, 2001.

     4.2  Agreement for the sale of Sonoma Valley Bank Stock dated September 23,
          1992, filed as Exhibit 4.2 (formerly A-1) to the Form F-2 for the year
          ended December 31, 1992.

     31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act

     31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act

     32   Certification   of  CEO  and  CFO  pursuant  to  Section  906  of  the
          Sarbanes-Oxley Act


                                     Page 29

<PAGE>




                                   SIGNATURES

     Under the requirements of the Securities  Exchange Act of 1934, the Company
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized.


                                          SONOMA VALLEY BANCORP
                                          Registrant



Date:   November 10, 2005                 /s/ Mel Switzer, Jr.
     ---------------------------          -------------------------------------
                                          Mel Switzer, Jr.
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)




Date:   November 10, 2005                 /s/ Mary Dieter Smith
     ---------------------------          -------------------------------------
                                          Mary Dieter Smith
                                          Executive Vice President,
                                          Chief Operating Officer and Chief
                                          Financial Officer
                                          (Principal Financial and Accounting
                                          Officer)


                                     Page 30