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: March 31, 2005


                        Commission File Number: 000-31929


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


              CALIFORNIA                                 68-0454068
        (State of Incorporation)           (I.R.S. Employer Identification No.)


 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 X 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 X

The number of shares outstanding of the registrant's Common Stock, no par value,
as of May 2, 2005 was 2,156,003.




                                     <PAGE>



INDEX

Part I   Financial Information                                       Page Number
                                                                     -----------

Item 1.  Financial Statements (Unaudited):

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

     Consolidated Statements of Operations for the
     three months ended March 31, 2005 and 2004...............................4

     Consolidated Statements of Changes in Shareholders Equity
     for the three months ended March 31, 2005,
     and the years ended December 31, 2004 and 2003...........................5

     Consolidated Statements of Cash Flows for the
     three months ended March 31, 2005 and 2004...............................7

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

     Average Balances, Yields and Rates Paid
     for the three months ended March 31, 2005 and 2004......................10

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations.......................11

Item 3.  Quantitative and Qualitative Disclosure About Market Risk...........23

Item 4.  Controls and Procedures.............................................23


Part II  Other Information

Item 1.  Legal Proceedings...................................................23

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.........24

Item 3.  Defaults Upon Senior Securities.....................................24

Item 4.  Submission of Matters to a Vote of Security Holders.................24

Item 5.  Other Information...................................................24

Item 6.  Exhibits............................................................24

Signatures...................................................................25

Certifications...............................................................26



                                     <PAGE>

                                     Part I

Item 1. 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
             March 31, 2005 (Unaudited), December 31, 2004 (Audited)
                         and March 31, 2004 (Unaudited)
<TABLE>
<S>                                                               <C>                 <C>              <C>
                                                            March 31,        December 31,        March 31,
                                                              2005              2004                2004
                                                            -----------      ------------        ------------

ASSETS
  Cash and due from banks                                   $  5,921,096     $  5,471,669        $  8,023,673
  Federal funds sold                                                   0        9,840,000        $ 13,135,000
  Interest-bearing due from banks                                 28,491           35,551             330,923
                                                            ------------     ------------        ------------
              Total cash and cash equivalents                  5,949,587       15,347,220          21,489,596
  Investment securities available-for-sale at fair value      34,893,820       20,253,490          22,217,390
  Investment securities held-to-maturity (fair value
     of $17,283,000, $17,842,000 and $17,917,000,
     respectively)                                            17,053,628       17,418,303          17,221,214
  Loans and lease financing receivables, net                 154,268,219      150,732,087         129,763,724
  Premises and equipment, net                                  1,299,879        1,364,879           1,345,083
  Accrued interest receivable                                  1,225,535        1,138,607           1,030,255
  Cash surrender value of life insurance                       8,989,359        8,913,136           7,816,322
  Other assets                                                 3,108,467        3,079,740           3,108,825
                                                            ------------     ------------        -------------

                                  Total Assets              $226,788,494     $218,247,462        $203,992,409
                                                            ============     ============        ============
LIABILITIES
  Noninterest-bearing demand deposits                       $ 43,438,855     $ 44,557,377        $ 37,163,893
  Interest-bearing transaction deposits                       33,489,731       34,912,205          32,104,881
  Savings and money market deposits                           72,910,910       70,254,926          64,391,506
  Time deposits, $100,000 and over                            26,442,251       25,307,661          25,950,385
  Other time deposits                                         18,621,134       18,630,846          18,646,061
                                                            ------------     ------------        ------------
                                Total deposits               194,902,881      193,663,015         178,256,726
  Other borrowings                                             7,150,000                0                   0
  Accrued interest payable and other liabilities               3,915,337        3,903,287           3,345,753
                                                            ------------     ------------        ------------
                             Total liabilities               205,968,218      197,566,302         181,602,479

SHAREHOLDERS' EQUITY
  Common stock, no par value; 10,000,00
   shares authorized; 2,151,370 shares at
   March 31, 2005, 2,142,104 shares at
   December 31, 2004 and 1,484,823 shares at
   March 31, 2004 issued and outstanding                      15,686,097       15,528,940          15,615,193
  Retained earnings                                            5,488,476        5,295,732           6,649,314
  Accumulated other comprehensive income (loss)                 (354,297)        (143,512)            125,423
                                                            ------------     ------------        ------------
                    Total shareholders' equity                20,820,276       20,681,160          22,389,930
                                                            ------------     ------------        ------------
    Total liabilities and shareholders' equity              $226,788,494     $218,247,462        $203,992,409
                                                            ============     ============        ============
</TABLE>

                                     Page 3
                                     <PAGE>


                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

               For the three months ended March 31, 2005 and 2004
<TABLE>
<S>                                                           <C>              <C>
                                                              2005             2004
                                                           ----------       ----------

INTEREST INCOME
  Loans and leases                                         $2,738,037       $2,193,173
  Taxable securities                                          227,682          202,946
  Tax-exempt securities                                       159,337          161,466
  Federal funds sold                                           45,460           47,241
                                                           ----------       ----------
                                 Total interest income      3,170,516        2,604,826

INTEREST EXPENSE
  Interest-bearing transaction deposits                        14,517           11,595
  Savings and money market deposits                           162,736           98,408
  Time deposits, $100,000 and over                            176,405          170,425
  Other time deposits                                         106,740          101,845
  Other borrowings                                              7,231                0
                                                           ----------       ----------
                                Total interest expense        467,629          382,273
                                                           ----------       ----------
        NET INTEREST INCOME                                 2,702,887        2,222,553
  Provision for loan and lease losses                          90,000                0
                                                           ----------       ----------
                             NET INTEREST INCOME AFTER
                                PROVISION FOR LOAN AND
                                          LEASE LOSSES      2,612,887        2,222,553
NON-INTEREST INCOME                                           459,097          421,366
NON-INTEREST EXPENSE
  Salaries and employee benefits                            1,107,431          953,042
  Premises and equipment                                      229,305          222,470
  Other                                                       636,622          540,438
                                                           ----------       ----------
                            Total non-interest expense      1,973,358        1,715,950
                               income before provision     ----------       ----------
                                      for income taxes      1,098,626          927,969
  Provision for income taxes                                  368,040          282,399
                                                           ----------       ----------
                                            NET INCOME     $  730,586       $  645,570
                                                           ==========       ==========
                                  NET INCOME PER SHARE     $      .34       $      .29
                                                           ==========       ==========

                                  NET INCOME PER SHARE
                                     ASSUMING DILUTION     $      .32       $      .27
                                                           ==========       ==========
</TABLE>
                                     Page 4
                                     <PAGE>


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

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

<TABLE>
<S>                                          <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 income, 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
  income, 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 (Continued)

      For the three months ended March 31, 2005 (Unaudited), and the years
              ended December 31, 2004 (Audited) and 2003 (Audited)
<TABLE>
<S>                                         <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

Cash dividend                                                                               (537,842)                     (537,842)
Stock options granted                                                          25,920                                       25,920
Stock options exercised and
  related tax benefits                                           9,266        131,237                                      131,237
Net income for the period                    $  730,586                                      730,586                       730,586
Other comprehensive income, net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $ 147,415                               (210,785)
                                            -----------
Other comprehensive loss,
  net of taxes                                 (210,785)                                                   (210,785)      (210,785)
                                            -----------    -----------    -----------    -----------    -----------    -----------
Total comprehensive income                   $  519,801
                                            ===========
BALANCE AT
  MARCH 31, 2005
                                                             2,151,370    $15,686,097    $ 5,488,476    $  (354,297)   $20,820,276
                                                           ===========    ===========    ===========    ===========    ===========
</TABLE>
                                     Page 6
                                     <PAGE>


                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

               For the three months ended March 31, 2005 and 2004
<TABLE>
<S>                                                                   <C>            <C>
                                                                      2005           2004
                                                                  -----------    -----------

OPERATING ACTIVITIES
    Net income                                                    $   730,586    $   645,570
    Adjustments to reconcile net income
     to net cash provided by operating activities:
            Provision for loan and lease losses                        90,000              0
            Depreciation                                               77,416         72,376
            Amortization and other                                     41,005         34,715
            Stock options granted                                      25,920         10,368
            Net change in interest receivable                         (86,928)      (123,297)
            Net change in cash surrender value
               of life insurance                                      (76,223)       (85,722)
            Net change in other assets                                118,688        108,399
            Net change in interest payable and other liabilities       12,050       (174,489)
                                                                  -----------     ----------
                       NET CASH PROVIDED BY OPERATING ACTIVITIES      932,514        487,920
INVESTING ACTIVITIES
    Purchases of securities held-to-maturity                                0       (990,047)
    Purchases of securities available-for-sale                    (15,014,860)    (4,982,240)
    Proceeds from maturing securities held-to-maturity                340,000        300,000
    Proceeds from maturing securities available-for-sale                    0      3,050,000
    Net change in loans and leases                                 (3,626,132)    (9,929,735)
    Purchases of premises and equipment                               (12,416)      (103,464)
                                                                  -----------    -----------
                          NET CASH USED FOR INVESTING ACTIVITIES  (18,313,408)   (12,655,486)
FINANCING ACTIVITIES
    Net change in demand, interest-bearing
        transaction and savings deposits                          $   114,988    $  (435,672)
    Net change in time deposits                                     1,124,878     (1,422,218)
    Cash dividend paid                                               (537,842)      (371,206)
    Net change in FHLB borrowings                                   7,150,000        (17,042)
    Stock options exercised                                           131,237        549,098
                                                                  -----------    -----------
                         PROVIDED (USED) BY FINANCING ACTIVITIES    7,983,261     (1,697,040)
                                                                  -----------    -----------
                         NET CHANGE IN CASH AND CASH EQUIVALENTS   (9,397,633)   (13,864,606)
    Cash and cash equivalents at beginning of period               15,347,220     35,354,202
                                                                  -----------    -----------
                      CASH AND CASH EQUIVALENTS AT END OF PERIOD  $ 5,949,587    $21,489,596
                                                                  ===========    ===========
SUPPLEMENTAL DISCLOSURES OF
    CASH FLOW INFORMATION:
Cash paid during the year for:
     Interest expense                                             $   462,501    $   382,539
     Income taxes                                                 $   140,000
SUPPLEMENTAL DISCLOSURES OF
     NONCASH ACTIVITIES:
Net change in unrealized gains and losses on securities           $  (358,200)   $   173,102
Net change in deferred income taxes on unrealized
     gains and losses on securities                               $   147,415    $   (71,239)
</TABLE>
                                     Page 7
                                <PAGE>
                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 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 and
Subsidiary  (the  "Company") at March 31, 2005 and results of operations for the
three 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 months ended March 31, 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 March 31, 2005
and March 31, 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 March 31, 2005 was  2,150,804
and for the period ending March 31, 2004 was 2,204,923.

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 March 31, 2005 was  2,300,299 and for the period ending March
31, 2004 was 2,404,950.

Prior year shares have been adjusted to reflect the three for two stock split in
August 2004.

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

                                     Page 7

<page>

employee  compensation  included in the  determination of net income for 2004 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 of 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>
                                                                         March 31,           March 31,
                                                                           2005                2004
                                                                       -----------          ----------


Net income, as reported                                                $   730,586          $  645,570
   Add:  Stock-based employee compensation expense
      included in reported net income, net of related
      tax effects                                                                               15,253
   Deduct: Total stock-based compensation expense
      determined under fair value based method for all
      awards, net of related tax effects                                                       (46,253)
                                                                       -----------          ----------
   Pro forma net income                                                $   730,586          $  614,570
                                                                       ===========          ==========

Net income per share:

   Basic - as reported                                                         .34                 .29
                                                                     =============          ==========
   Basic - pro forma                                                           .34                 .28
                                                                     =============          ==========
   Diluted - as reported                                                       .32                 .27
                                                                     =============          ==========
   Diluted - pro forma                                                         .32                 .26
                                                                     =============          ==========
</TABLE>

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
three months ended March 31, 2005 and 2004 are as follows:

<TABLE>
<S>                                                        <C>           <C>        <C>          <C>
                                                                 Directors        Officers

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

Service cost                                              $ 9,091     $15,802     $33,666     $46,004

Interest cost on projected benefit obligation              10,610       5,455       8,058      17,252

Amortization of unrecognized liability at                  (2,375)                 10,094      (7,534)
                                                          -------     -------     -------     -------
transition

Net periodic pension cost recognized                      $17,326     $21,257     $51,818     $55,722
                                                          =======     =======     =======     =======
</TABLE>

                                     Page 9




                                     <PAGE>


                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
               For the three months ended March 31, 2005 and 2004
                             (dollars in thousands)
<TABLE>
<S>                                                           <C>                                         <C>
                                                              2005                                        2004
                                                              ----                                        ----
ASSETS                                     Average        Income/          Yield/      Average        Income/         Yield/
                                           Balance        Expense           Rate       Balance        Expense          Rate
                                           -------        -------         --------     -------        -------         ------

Interest-earning assets:
Loans(2):
 Commercial                                $103,846       $  1,873         7.31%        $ 88,158       $  1,549          7.07%
 Consumer                                    17,207            291         6.86%          12,268            215          7.05%
 Real estate construction                    22,389            408         7.39%          17,141            334          7.84%
 Real estate mortgage                         7,292            125         6.95%           2,233             50          9.01%
 Tax exempt loans (1)                         2,965             61         8.34%           3,069             64          8.39%
 Leases                                          46              1         8.82%              43              3         28.06%
 Tax exempt leases (1)                            0              0         0 00%               3              0          0.00%
 Unearned loan fees                            (481)                                        (414)
                                           --------       --------                      --------       --------
     Total loans                            153,264          2,759         7.30%         122,501          2,215          7.27%
Investment securities
 Available for sale:
             Taxable                         29,358            225         3.11%          23,190            200          3.47%
 Hold to maturity:
             Taxable                            378              3         3.22%             398              3          3.03%
             Tax exempt (1)                  16,852            241         5.80%          16,751            245          5.88%
                                           --------       --------                      --------       --------
             Total investment securities     46,588            469         4.08%          40,339            448          4.47%
Federal funds sold                            7,814             45         2.34%          20,520             47          0.92%
FHLB Stock                                      711              0         0.00%             295              0          0.00%
Total due from banks/interest-bearing            35              0         0.00%             331              0          0.00%
                                           --------       --------                      --------       --------
 Total interest-earning assets              208,412       $  3,273         6.37%         183,986       $  2,710          5.92%
                                                          ========                                     ========
Noninterest-bearing assets:
 Reserve for loan losses                     (2,518)                                      (2,574)
 Cash and due from banks                      6,124                                        9,214
 Premises and equipment                       1,341                                        1,331
 Other assets                                12,388                                       11,741
                                           --------                                     --------
             Total assets                  $225,747                                     $203,698
                                           ========                                     ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
 Interest-bearing deposits
         Interest-bearing transaction      $ 34,687       $     15         0.18%        $ 32,127       $     12          0.15%
         Savings deposits                    75,711            163         0.87%          63,355             98          0.62%
         Time deposits over $100,000         25,878            176         2.76%          26,344            170          2.60%
         Other time deposits                 18,646            107         2.33%          19,094            102          2.15%
                                           --------       --------                      --------       --------
 Total interest-bearing deposits            154,922            461         1.21%         140,920            382          1.09%
 Other short term borrowings                  1,106              7         2.57%               0              0          0.00%
                                           --------       --------                      --------       --------
         Total interest-bearing
           liabilities                      156,028       $    468         1.22%         140,920       $    382          1.09%
                                                          ========                                     ========
Non interest-bearing liabilities:
 Non interest-bearing demand deposits        44,761                                       37,165
 Other liabilities                            3,829                                        3,373
 Shareholders' equity                        21,129                                       22,240
                                           --------                                     --------
    Total liabilities and
     Shareholders' equity                  $225,747                                     $203,698
                                           ========                                     ========
Interest rate spread                                                       5.15%                                         4.83%
                                                                           ====                                          ====
Interest income                                           $  3,273         6.37%                       $  2,710          5.92%
Interest expense                                               468         0.91%                            382          0.84%
                                                          --------         ----                        --------          ----
Net interest income/margin                                $  2,805         5.46%                       $  2,328          5.08%
                                                          ========                                     ========
</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 approximately $76,108 and $70,344 for
          the three  months  ended March 31, 2005 and 2004,  respectively,  were
          amortized to the appropriate interest income categories.

                                     Page 10
                                     <PAGE>


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 Three Month Periods
Ended March 31, 2005 and 2004

Overview

The Company  reported  net income of $730,586 for the first three months of 2005
compared with $645,570 for the first three months of 2004. On a per share basis,
net income  equaled $.34  compared with $.29 per share during the same period in
2004.  The March 2004 per share  amount has been  adjusted for the three for two
stock split in August 2004.

Return on average total assets on an annualized basis for the three-month period
was  1.31%  in  2005  and  1.28%  in  2004,  respectively.   Return  on  average
shareholders'  equity on an annualized basis for the same periods was 14.03% and
11.68%, respectively. The increase in the return on average assets is the result
of an increase in average earning assets from $184.0 million for the first three
months of 2004 to $208.4 for the comparable period of 2005. Additionally,  $13.1
million in fed funds was  invested  in higher  yielding  securities.  The higher
return on equity is the result of a $1.1 million  decline in average  equity for
the three  months of 2005 to $21.1  million  from  $22.2  million  for the three
months of 2004.  This  decline is a result of the tender offer closed on May 21,
2004. See page 6 for detail of "Changes in Shareholder Equity."

Income  during the first quarter of 2005 is higher than 2004 due to the increase
in the net interest income from $2.2 million in 2004 to $2.7 million in 2005, an
increase of $480,000 or 21.6%.

                                     Page 11
                                     <page>


Additionally,  with the 175 basis point  increase in the prime rate in 2004 from
4.00% at the beginning of the year to 5.75% as of March 22, 2005,  many variable
rate  loans  have  moved off  floors  and the loan  yield is  increasing  as the
interest rate increases.

The Company  continues  to  experience  loan and deposit  growth at the Banco de
Sonoma Office from $6.2 million in deposits and $653,000 in loans as of December
31, 2004 to $7.3 million in deposits and $969,000 in loans as of March 31, 2005.
For the first three or four years the costs associated with opening a new office
will have a negative effect on the Consolidated  Income Statement creating about
$200,000 in additional  expense for the Company in 2005.  The office is offering
services to the Latino community in our market place. Management identified this
as a niche  which was  underserved  and an  opportunity  for  future  growth and
profitability.  All employees at the branch are bilingual and able to offer full
service banking.  An additional  product which has been added is the ability for
the  customer 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 $139,116 or .67% during the quarter. At
March 31,  2005,  the  Company  reported  net income of  $730,586.  In March the
Company paid out $538,000 for cash dividends declared in February, 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 $25,920  year to date.  The net income  figure of  $730,586
reflects an expense for the stock  options of $25,920,  therefore the net effect
of the stock option transaction relative to equity was zero. Directors exercised
9,266 options which added  $73,810 to the capital  accounts.  The tax benefit of
these options was $57,427,  which also increased equity.  The net effect of this
activity was capital of $20,820,276 as of March 31, 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  inclusion  of an internal  control  report in each annual
report. Accordingly, in the annual report for December 31, 2006, management will
be required to include a report on the  effectiveness of the Company's  internal
controls.  The  Company's  independent  auditors  are  required to attest to and
report on management's  assessment of internal control. 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. 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 the Company's  auditors will be able to
attest to the effectiveness of our internal controls over financial reporting.


                                     Page 12
                                     <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  Balances,  Yields and Rates Paid, on page
10, 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 ($102,000 in 2005 and $105,000 in 2004,  based on a 34% federal income tax
rate).

The improvement in net interest income for the three months ended March 31, 2005
(stated on a fully taxable  equivalent basis) is a result of the net effect of a
$563,000  increase in interest  income offset by a smaller  increase in interest
expense of $86,000,  showing an increase of $477,000.  This increase is a result
of the 175 basis point  increase in the fed funds and prime lending  rates.  The
Fed Funds rate  increased from 1.00% as of January 1, 2004, to 2.75% as of March
31, 2005 and prime lending rate increased from 4.00% in January 2004 to 5.75% as
of March 31, 2005. Additionally, $13.1 million was invested in securities rather
than Fed Funds and many variable rate loans moved off floors, which allows their
yield to increases as interest rates increase.

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 38 basis points to 5.46%,  from
5.08% for the same period in 2004.

Interest Income

As previously  stated,  interest  income  (stated on a fully taxable  equivalent
basis)  increased  by $563,000 to $3.3  million in the three  months of 2005,  a
20.78% increase over the $2.7 million realized during the same period in 2004.

The $563,000 increase was the result of the 45 basis point increase in the yield
on earning  assets to 6.37% for the three  month ended March 31, 2005 from 5.92%
for the same time period of 2004.  Contributing  to this  increase was the $24.4
million or 13.28%  increase in average  earning assets to $208.4 million for the
first quarter of 2005.

Interest Expense

Total interest expense  increased by $86,000 to $468,000.  The average rate paid
on all  interest-bearing  liabilities  increased  from 1.09% in 2004 to 1.22% in
2005.  Average balances of  interest-bearing  liabilities  increased from $140.9
million to $156.0 million, a 10.72% gain in interest-bearing liabilities. Of the
increase in  interest-bearing  liabilities  $1.1 million was  borrowings  at the
Federal Home Loan Bank. The Company has  experienced  stronger loan than deposit
growth,  and  anticipated  loan payoffs have occurred  later,  so the company is
temporarily meeting liquidity needs by borrowing at the Federal Home Loan Bank.

The gain in volume of average balances was responsible for a $14,000 increase in
interest  expense  and the higher  interest  rates paid were  responsible  for a
$72,000 increase in interest expense for a total increase of $86,000.

                                     Page 13
                                     <page>


Individual  components of interest  income and interest  expense are provided in
the table-Average Balances, Yields and Rates Paid on page 10.

Provision for Loan Losses

The  provision  for loan losses  charged as of March 31, 2005 was $90,000 and no
provision  was made in the same time  period  in 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 experienced strong loan growth in the first
quarter of 2005 and  management  anticipates  that loan  growth  will  continue,
requiring additional provisions to be made for loan losses.

The economic climate  continues to slowly improve and the non-accrual  portfolio
dropped to .71% during the three months  ended March 31, 2005,  compared to .92%
of loans  during the first three months of 2004.  Loans  charged off were $5,683
and  recoveries  were $47,909 as of March 31, 2005,  compared  with  $270,412 in
charge offs and $9,846 in recoveries for the same period in 2004.

Non-interest Income

Non-interest  income of $459,000  increased 9.03% over the $421,000  recorded in
the  comparable  period in 2004.  Services  charges were up $42,000,  due to the
growth in customer activity. Credit card merchant activity showed an increase of
$19,000,  while  loan  referral  income  showed a decline  of  $15,000  and life
insurance proceeds showed a decline of $9,500; a result of the lower rates paid.

Non-interest Expense

Total  non-interest  expense  increased  15.0% to $1.97 million during the three
months of 2005 from  $1.72  million  for the same  period in 2004.  Non-interest
expense on an annualized basis represented 3.55% of average total assets in 2005
compared with 3.39% in the comparable period in 2004.

Salaries and benefits  increased  16.2% from $953,000 in 2004 to $1.1 million in
2005.  The 2005  increase is the result of an accrual of $100,000 for  potential
incentive/  bonus expense and expensing  $26,000 for stock options,  neither was
included in the  salaries and  benefits  expense for the first  quarter of 2004.
Additionally  staff  salaries  show an increase when compared to 2004 due to the
implementation  of focal  point  reviews  and the  addition  to  staff.  Medical
benefits  showed a  significant  increase in 2005 and although the Company has a
cap for the amount they will pay, most employees were not at the cap.

Expense  related to premises and equipment  increased  2.69% to $229,000 in 2005
from $223,000 in 2004.  The slight  increase of $6,835 in expense in 2005 is the
result of the amortization of expenses for the remodel of the Glen Ellen Branch.
The  Company  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.

                                     Page 14
                                     <page>


Other operating  expenses  increased 17.96% in 2005 to $637,000 from $540,000 in
2004 an increase of $97,000. The area of expense responsible for the increase is
professional fees, showing an increase over 2004 of $102,000. This is the result
of  additional  accruals  for expenses  associated  with the  implementation  of
Sarbanes Oxley, Rule 404, regarding internal controls over financial reporting.

Provision for Income Taxes

The provision  for income taxes  increased to an effective tax rate of 33.5% for
the three months of 2005 compared with 30.43% for the three months of 2004.  The
higher  effective  tax rate is a  reflection  of the  lower  ratio of  municipal
securities in the investment  portfolio.  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 $52.0  million at March 31, 2005, a 37.9%  increase
from the $37.7  million at  December  31, 2004 and a 31.7%  increase  from $39.4
million  at March  31,  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  will  usually  maintain an
investment  portfolio of securities rated A or higher by Standard and Poor's and
or Moody's Investors Service.  Local tax-exempt bonds are occasionally purchased
without an A rating.

Securities are classified as held to maturity if the Company has both the intent
and the ability to hold these securities to maturity.  As of March 31, 2005, the
Company had  securities  totaling  $17.1  million  with a market  value of $17.3
million  categorized  as  held  to  maturity.  Decisions  to  acquire  municipal
securities,  which  are  generally  placed  in this  category,  are based on tax
planning needs and pledge requirements.

Securities are  classified as available for sale 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,  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 $34.9 million  compared to an amortized cost
of $35.5 million as of March 31, 2005.

There were thirty Federal Farm Credit Bank, Federal Home Loan Bank, Federal Home
Loan Mortgage Corporation or Federal National Mortgage Association securities of
$29.5  million  and six U.S.  Treasury  securities  of $5.4  million  in the AFS
portfolio  and twenty  seven  municipal  securities  of $8.3  million in the HTM
portfolio  that are  temporarily  impaired as of March 31,  2005.  Of the above,
there were sixteen  Federal Farm Credit  Bank,  Federal Home Loan Bank,  Federal
Home  Loan  Mortgage   Corporation  or  Federal  National  Mortgage  Association
securities of $15.6 million in the AFS portfolio and six municipal securities of
$1.9 million in the HTM

                                     Page 15
                                     <page>


portfolio that have been in a continuous  loss position for 12 months or more as
of March 31, 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  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 to the income statement are
recognized 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 March 31, 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 $156.8 million at March 31, 2005, or 80.5% of
total deposits.  This compares with $153.2 million,  or 79.1% of total deposits,
at December 31, 2004 and $132.1 million,  or 74.1% of total  deposits,  at March
31, 2004. A  comparative  schedule of average loan  balances is presented in the
table  on page  10;  period  end and  year-end  balances  are  presented  in the
following table.

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



Commercial                         $108,068,054      68.7%     $109,324,569     71.2%     $ 98,282,959      74.1%
Consumer                             18,253,222      11.6%       16,249,913     10.6%       13,289,577      10.0%
Real estate construction             23,081,948      14.7%       20,291,506     13.2%       18,280,825      13.8%
Real estate mortgage                  7,872,218       5.0%        7,732,177      5.0%        2,703,348       2.0%
Leases                                   42,243       0.0%           47,717      0.0%           35,476       0.1%
                                   ------------     -----      ------------    -----      ------------     -----
                                    157,317,685     100.0%      153,645,882    100.0%      132,592,185     100.0%
                                                    =====                      =====                       =====
Deferred loan fees
 and costs, net                        (488,668)                   (485,223)                  (454,402)

Allowance for loan
 and lease losses                    (2,560,798)                 (2,428,572)                (2,374,059)
                                   ------------                ------------               ------------
                                   $154,268,219                $150,732,087               $129,763,724
                                   ============                ============               ============

</TABLE>

                                     Page 16

                                     <PAGE>


Risk Elements

The majority of the Company's  loan activity is with  customers  located  within
Sonoma  County.  Approximately  87.3% 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.

Based  on its  risk  management  review  and a  review  of its  loan  portfolio,
management  believes that its  allowance for loan losses for the quarter  ending
March 31, 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,  but is subject to periodic review,
and could be susceptible to significant change in future periods.

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 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.

There were $1.0 million  nonaccrual  loans and no loans 90 days or more past due
and still accruing at March 31, 2005 down from $1.2 million nonaccrual loans and
no loans 90 days or more past due and still accruing at March 31, 2004.

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

                                     Page 17

                                     <page>


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.

Worsening  conditions in certain  economic  sectors and  geographic  areas could
adversely affect the loan portfolio,  necessitating  larger  provisions for loan
losses  than  currently  estimated.  However,  as of March 31,  2005 the Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.

At March 31, 2005,  the allowance for loan losses was $2.6 million,  or 1.63% of
period-end loans,  compared with $2.4 million, or 1.59% at December 31, 2004 and
$2.4 million, or 1.80% at March 31, 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 Three          For the Year         For the Three
                                                  Months Ended              Ended              Months Ended
                                                    3/31/05               12/31/04               3/31/04
                                                  -------------         -------------         -------------
Balance beginning of year                         $   2,428,572         $   2,634,625         $   2,634,625

Charge-offs:
  Commercial                                                  0              (290,000)             (270,000)
  Consumer                                               (5,683)              (63,007)                 (412)
                                                  -------------         -------------         -------------
                      Total charge-offs                  (5,683)             (353,007)             (270,412)

Recoveries:
  Commercial                                             47,909                15,416                 8,500
  Consumer                                                    0                 1,538                 1,346
                                                  -------------         -------------         -------------
                       Total recoveries                  47,909                16,954                 9,846


Net recoveries (charge-offs)                             42,226              (336,053)             (260,566)

Provision charged to operations                          90,000               130,000                     0
                                                  -------------         -------------           -----------

Balance end of period                             $   2,560,798         $   2,428,572           $ 2,374,059
                                                  =============         =============           ===========
Ratio of net charge-offs
 annualized to average loans                              -0.11%                 0.24%                 0.86%

Balance in allowance as a percentage
  of loans outstanding at period end                       1.63%                 1.59%                 1.80%
</TABLE>

                                     Page 18

                                     <PAGE>


Deposits

A comparative  schedule of average deposit balances is presented in the table on
page 10; period end and year-end deposit balances are presented in the following
table.
<TABLE>
<S>                                 <C>                                 <C>                           <C>
                              March 31,       Percentage       December 31,     Percentage      March 31,         Percentage
                                2005           of Total           2004           of Total         2004             of Total
                             ------------     ----------      ------------      ----------      ------------      ----------

Interest-bearing
 transaction deposits        $ 33,489,731           17.2%     $ 34,912,205            18.0%     $ 32,104,881            18.0%

Savings deposits               72,910,910           37.4%       70,254,926            36.3%       64,391,506            36.1%

Time deposits, $100,000
and over                       26,442,251           13.6%       25,307,661            13.1%       25,950,385            14.6%

Other time deposits            18,621,134            9.5%       18,630,846             9.6%       18,646,061            10.5%
                             ------------          -----      ------------           -----      ------------           -----
Total interest-bearing
  deposits                    151,464,026           77.7%      149,105,638            77.0%      141,092,833            79.2%

Demand deposits                43,438,855           22.3%       44,557,377            23.0%       37,163,893            20.8%
                             ------------          -----      ------------           -----      ------------           -----

Total deposits               $194,902,881          100.0%     $193,663,015           100.0%     $178,256,726           100.0%
                             ============                     ============           =====      ============           =====
</TABLE>


Total  deposits  increased by $1.2 million,  during the three months of 2005, to
$194.9  million from $193.7  million at December 31, 2004, and $178.3 million as
of March 31, 2004. As of March 31, 2005,  non interest  demand was $43.4 million
compared to $44.6 million as of December 31, 2004, interest bearing checking was
$33.5  million  compared  to $34.9  million and other time  deposits  were $18.5
million compared to $18.6 million,  all showing decreases of $1.1 million,  $1.4
million and $90,000,  respectively.  Savings  showed the  strongest  growth from
$70.3  million as of December  31, 2004 to $72.9  million as of March 31,  2005,
growth of $2.7 million.  Time deposits  greater than $100,000 also showed growth
of $1.2 million,  from $25.3 million as of December 31, 2004 to $26.5 million as
of March 31, 2005.

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 March 31,  2005,  the Bank 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  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.

                                     Page 19

                                     <PAGE>


The table below presents Tier 1 capital,  total capital and total  risk-weighted
assets at March 31, 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
         ------------      --------       -----       -------      -----     --------
             $197,202      $ 19,865       10.07%      $22,331      11.32%       8.79%
</TABLE>


Off Balance Sheet Commitments

The Company's off balance sheet  commitments  consist of  commitments  to extend
credit  and  standby  letters of  credit.  These  commitments  are  extended  to
customers in the normal course of business. Unfunded loan commitments were $35.2
million at March 31, 2005 and $32.1 million at March 31, 2004.  Standby  letters
of credit  outstanding were $340,000 at March 31, 2005 and $475,000 at March 31,
2004.  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.

The following table summarizes the Company's contractual obligations as of March
31, 2005.



                                                         Payments due by period

Contractual Obligations
<TABLE>
<S>                                     <C>          <C>          <C>            <C>           <C>
                                                  Less than                                 More than
                                       Total        1 year      1-3 years     3-5 years      5 years
                                     ---------    ---------     ---------     ---------     ---------
Operating Lease Obligations          1,243,847      286,593       875,494        81,760             0

Executive Officer and Director
Supplemental Retirement              1,960,380       14,115        30,778       105,664     1,809,823

Deferred Compensation                1,170,681       14,048        29,501        40,506     1,086,626
</TABLE>


Market Risk Management

Overview.  Market risk is the risk of loss from adverse changes in market prices
and rates.  The Bank's  market risk arises  primarily  from  interest  rate risk
inherent in its loan and deposit functions. The goal for managing the assets and
liabilities  of the Bank is to maximize  shareholder  value and  earnings  while
maintaining  a high quality  balance  sheet  without  exposing the Bank 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.

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

                                     Page 20

                                     <page>

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. 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 Bank 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 Bank
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 four
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 Bank's 2005 net interest income,  as forecast below,
was modeled  utilizing a forecast  balance sheet  projected  from March 31, 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 March 31, 2005 (In
thousands)

Variation from a constant rate scenario      $ Change in NII
                  +200bp                               ($494)
                  +100bp                                (247)
                  -100bp                                (333)
                  -200bp                                (428)

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.

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
change 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

                                     Page 21

                                     <page>


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 a rising and  declining  rate  environment.  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 market.

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.

The Bank has more  liabilities  than  assets  repricing  during  the next  year.
Usually  because the Bank's  asset rates  change more than  deposit  rates,  the
Bank's  interest  income  will  change  more than the cost of funds  when  rates
change.  For the  current  quarter,  the  Bank  is  making  a more  conservative
assumption.  Historically,  the Bank 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 Bank 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.

The Bank  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  March  31,  2005  for  the  Bank's
interest-bearing  assets  and  interest-bearing   liabilities,  and  the  Bank's
interest rate sensitivity gap as a percentage of total interest-earning  assets.
The table below shows $84.2 million in loans in the over twelve month  category;
of that amount, only $30.7 million has a maturity or repricing of over 5 years.

<TABLE>
<S>                             <C>           <C>            <C>           <C>          <C>          <C>
    MARCH 31, 2005           Immediate      Up to 3       4 to 6        7 to 12        Over
                              Reprice       Months        Months         Months      12 Months      Total
                             ---------     ---------     ---------     ---------     ---------     ---------
FFS + overnight IBB          $      28                                                             $      28
Securities + Other IBB               0     $     999     $   2,147     $   4,293     $  44,509        51,948
Loans                           45,962         6,304         6,197        11,645        84,160       154,268
                             ---------     ---------     ---------     ---------     ---------     ---------
Total RSA                    $  45,990     $   7,303     $   8,344     $  15,938     $ 128,669     $ 206,244
                             ---------     ---------     ---------     ---------     ---------     ---------

MMDA/NOW/SAV                 $ 106,400                                                             $ 106,400
CD's<$100k                           0     $   5,722     $   4,006     $   4,006     $   4,887        18,621
CD's>$100k                           0         7,371         9,387         2,347         7,337        24,442
Borrowings                           0         7,150             0             0             0         7,150
                             ---------     ---------     ---------     ---------     ---------     ---------
Total RSL                    $ 106,400     $  20,243     $  13,393     $   6,353     $  12,224     $ 158,613
                             ---------     ---------     ---------     ---------     ---------     ---------

GAP                          $ (60,410)    $ (12,940)    $  (5,049)    $   9,585     $ 116,445     $  47,631
Cumulative                   $ (60,410)    $ (73,350)    $ (78,399)    $ (68,814)    $  47,631
% Assets                         -26.6%        -32.3%        -34.6%        -30.3%         21.0%
</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

                                     Page 22

                                     <page>

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  (see page 15 for  discussion  of  investments).  The portfolio
should  decline in value only about 2.3% or $1.2  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).

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information regarding Quantitative and Qualitative Disclosures about Market Risk
appears on page 20 through 23 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

The  Company  carried  out an  evaluation,  under the  supervision  and with the
participation  of  the  Company's  management,  including  the  Company's  Chief
Executive  Officer  along with the Company's  Chief  Financial  Officer,  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's Chief  Executive  Officer along with the Company's Chief Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective  in timely  alerting  them to  material  information  relating  to the
Company, required to be included in this Form 10-Q.

                                     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 23

                                     <PAGE>


Item 2.       UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

None

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

     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 24

                                     <PAGE>


                                   SIGNATURES

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


                                    SONOMA VALLEY BANCORP
                                    (Registrant)



Date:  May 4, 2005                  /s/ Mel Switzer, Jr.
     --------------                 ----------------------------------------
                                    Mel Switzer, Jr.
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)




Date:  May 4, 2005                  /s/ Mary Dieter Smith
     -------------                  ----------------------------------------
                                    Mary Dieter Smith
                                    Executive Vice President and
                                    Chief Operating Officer and
                                    Chief Financial Officer
                                    (Principal and Financial Accounting Officer)


                                     Page 25