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

                                   FORM 10-QSB


                Quarterly Report Pursuant to Section 13 or 15(d)of the
                         Securities Exchange Act of 1934

For the Quarter ended September 30, 2001       Commission File Number: 000-31929

                           -------------------------


                              SONOMA VALLEY BANCORP
                 (Name of small business issuer in its charter)

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

                              202 West Napa Street
                            Sonoma, California 95476
                                 (707) 935-3200
               (Address, including zip code, and telephone number,
              including area code, of principal executive offices)

                            ------------------------



Securities to be registered under section 12(g) of the Exchange Act:

                                                      Name of each exchange
   Title of each class                                on which registered
--------------------------                       -------------------------------
Common Stock, No Par Value                       Over the Counter Bulletin Board


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 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.
[X] Yes [ ] No


The number of shares of registrant's  common stock outstanding as of November 6,
2001 was 1,338,518.

Transitional small business disclosure format.
(Check one) [ ] Yes  [X] No

                                     Page 1

<PAGE>

                                   FORM 10-QSB

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>

                                   Part I                                   Page

Item 1.        Financial Statements

               Consolidated Balance Sheets                                     3
               Consolidated Statements of Operations                           4
               Consolidated Statements of Changes in Shareholders'Equity       5
               Consolidated Statements of Cash Flows                           7
               Average Balances/Yields and Rates Paid                          8
               Notes to Consolidated Financial Statements                      9

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

               Forward Looking Statements                                     10
               Overview-Nine Month Periods                                    10
               Results of Operations                                          10
               Balance Sheet Analysis                                         12
               Overview-Three Month Periods                                   18

                                     Part II
Item 1.        Legal Proceedings                                              22

Item 2.        Changes in Securities                                          22

Item 3.        Defaults Upon Senior Securities                                22

Item 4.        Submission of Matters to a Vote of Security Holders            22

Item 5.        Other Information                                              22

Item 6.        Exhibits and Reports on Form 8-K                               22


Signatures                                                                    23

</TABLE>



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

Item 1.
                              FINANCIAL STATEMENTS
                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

         September 30, 2001 (Unaudited) and December 31, 2000 (Audited)
                       and September 30, 2000 (Unaudited)

<TABLE>
<S>                                                                         <C>             <C>           <C>
                                                                            September 30    December 31   September 30
ASSETS                                                                          2001           2000          2000
                                                                            ------------   ------------   ------------

Cash and due from banks                                                      $ 6,454,381    $ 7,262,394   $  6,141,897
Federal funds sold                                                             6,670,000      2,920,000              0
                                                                            ------------   ------------   ------------
                                         Total cash and cash equivalents      13,124,381     10,182,394      6,141,897
Investment securities held-to-maturity (fair
  value of $12,236,000, $12,414,000 and
  $13,210,000, respectively)                                                  11,703,598     12,182,311     13,171,264
Investment securities available-for-sale at fair value                        15,532,810     21,358,387     22,819,891
Loans and lease financing receivables, net                                   103,245,l05     90,464,005     89,908,253
Premises and equipment, net                                                      625,939        607,298        633,661
Accrued interest receivable                                                    1,119,479      1,151,924      1,140,131
Cash surrender value of life insurance                                         2,005,236      1,917,304      1,896,550
Other assets                                                                   2,385,809      2,492,353      2,257,944
                                                                            ------------   ------------   ------------
                                                            Total assets    $149,742,357   $140,355,976   $137,969,591
LIABILITIES                                                                 ------------   ------------   ------------

Noninterest-bearing demand deposits                                         $ 28,571,555   $ 31,072,318   $ 26,279,790
Interest-bearing transaction deposits                                         21,501,813     21,369,905     21,321,508
Savings and money market deposits                                             43,180,278     35,551,104     37,180,024
Time deposits, $100,000 and over                                              18,425,622     16,278,342     15,390,061
Other time deposits                                                           18,858,432     18,824,403     18,706,377
                                                                            ------------   ------------   ------------
                                                          Total deposits     130,537,700    123,096,072    118,877,760
Other Borrowing                                                                        0              0      2,800,000
Accrued interest payable and other liabilities                                 3,072,706      2,954,658      2,715,883
                                                                            ------------   ------------   ------------
                                                       Total liabilities     133,610,406    126,050,730    124,393,643
SHAREHOLDERS' EQUITY

Common stock, no par value; 10,000,000 shares
  authorized; 1,338,532 shares at
  September 30, 2001, 1,281,680 shares at December 31, 2000
  and 1,281,680 shares at September 30, 2000
  issued & outstanding.                                                       11,056,002      9,585,003      9,585,003
Retained earnings                                                              4,859,714      4,641,551      4,063,880
Accumulated other comprehensive income                                           216,235         78,692        (72,935)
                                                                            ------------   ------------   ------------
                                              Total shareholders' equity      16,131,951     14,305,246     13,575,948
                                                                            ------------   ------------   ------------

                              Total liabilities and shareholders' equity    $149,742,357   $140,355,976   $137,969,591
                                                                            ------------   ------------   ------------
</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,
                                                                    2001              2000                2001              2000
                                                                 ------------      ------------      ------------       ------------
INTEREST INCOME
  Loans and leases                                               $  2,369,655      $  2,224,267      $  6,930,307       $  6,263,346
  Taxable securities                                                  246,845           364,493           816,595          1,104,795
  Tax-exempt securities                                               136,967           148,830           418,064            392,024
  Federal funds sold                                                   84,858            66,469           219,399            273,485
  Dividends                                                             3,811             5,047            12,292             17,567
                                                                 ------------      ------------      ------------       ------------
                                      Total interest income         2,842,136         2,809,106         8,396,657          8,051,217
INTEREST EXPENSE
  Interest-bearing transaction deposits                                35,025            50,860           120,228            152,149
  Savings and money market deposits                                   228,934           265,146           787,935            766,837
  Time deposits, $100,000 and over                                    207,547           216,271           642,680            601,943
  Other time deposits                                                 214,528           245,250           706,629            691,757
  Federal funds purchased                                                   0             4,378                 0              4,378
  Other borrowings                                                          0            10,121             7,221             10,121
                                                                 ------------      ------------      ------------       ------------
                                     Total interest expense           686,034           792,026         2,264,693          2,227,185
                                                                 ------------      ------------      ------------       ------------
                                        NET INTEREST INCOME         2,156,102         2,017,080         6,131,964          5,824,032
  Provision for loan and lease losses                                  80,000           115,000           227,000            255,000
                                                                 ------------      ------------      ------------       ------------
                                        NET INTEREST INCOME
                                        AFTER PROVISION FOR
                                             LOAN AND LEASE
                                                     LOSSES         2,076,102         1,902,080         5,904,964          5,569,032

NON-INTEREST INCOME                                                   334,541           272,386           958,461            732,297
NON-INTEREST EXPENSE
  Salaries and employee benefits                                    1,001,885           632,197         2,363,332          1,886,288
  Premises and equipment                                              141,787           163,046           441,944            448,345
  Other                                                               249,304           517,199         1,151,488          1,474,505
                                                                 ------------      ------------      ------------       ------------
                                 Total non-interest expense         1,392,976         1,312,442         3,956,764          3,809,138
                                                                 ------------      ------------      ------------       ------------
                                    Income before provision
                                           for income taxes         1,017,667           862,024         2,906,661          2,492,191
  Provision for income taxes                                          356,285           293,205         1,001,045            863,152
                                                                 ------------      ------------      ------------       ------------
                                                 NET INCOME      $    661,382      $    568,819       $ 1,905,616       $  1,629,039
                                                                 ============      ============      ============       ============
NET INCOME PER SHARE                                             $        .49      $        .42       $      1.42       $       1.21
                                                                 ============      ============      ============       ============
NET INCOME PER SHARE-
ASSUMING DILUTION                                                $        .47      $        .41       $      1.34       $       1.18
                                                                 ============      ============      ============       ============
</TABLE>


                                     Page 4

<PAGE>

                      SONOMA VALLEY BANCORP AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

  For the nine months ended September 30, 2001 (Unaudited), and the years ended
                 December 31, 2000 (Audited) and 1999 (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, 1999                       1,186,240   $  7,678,967   $  2,971,766   $    107,777   $ 10,758,510
5% stock dividend                                    58,447        949,760       (949,760)
Fractional shares                                                                  (7,181)                       (7,181)
Redemption & retirement
 of stock                                           (14,526)       (93,983)      (153,618)                     (247,601)
Net income for the year         $  1,810,371                                    1,810,371                     1,810,371
Other comprehensive income,
  net of tax:
   Unrealized losses on
    securities
    available-for-sale:
   Unrealized holding losses
    arising during the year,
    net of taxes of
    $181,430                        (259,421)
                                ------------
Other comprehensive income
  net of taxes                      (259,421)                                                   (259,421)      (259,421)
                                ------------   ------------   ------------   ------------   ------------   ------------
Total comprehensive income      $  1,550,950
                                ============


BALANCE AT DECEMBER 31, 1999                      1,230,161      8,534,744      3,671,578       (151,644)    12,054,678
5% stock dividend                                    60,605      1,068,160     (1,068,160)
Fractional shares                                                                  (7,912)                       (7,912)
Redemption & retirement                             (14,168)       (91,667)      (160,665)                     (252,332)
of stock
Stock options exercised &
  related tax benefits                                5,082         73,766                                       73,766
Net income for the year         $  2,206,710                                    2,206,710                     2,206,710
Other comprehensive income,
  net of tax:
   Unrealized losses on
   securities available-for-sale:
   Unrealized holding gains
    arising during the year,
    net of taxes
    of $161,088
                                     230,336
                               -------------
Other comprehensive income,
  net of taxes                       230,336                                                     230,336        230,336
                               -------------   ------------   ------------   ------------   ------------   ------------
Total comprehensive income        $2,437,046
                               =============
</TABLE>


                                     Page 5

<PAGE>

                              SONOMA VALLEY BANCORP

      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(Continued)

  For the nine months ended September 30, 2001 (Unaudited) and the years ended
                 December 31, 2000 (Audited) and 1999 (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, 2000                    1,281,680     $  9,585,003   $  4,641,551   $     78,692   $ 14,305,246
Stock dividend                                     63,104        1,381,975     (1,381,975)

Fractional shares                                                                 (11,955)                      (11,955)
Redemption & retirement of stock                  (22,689)        (169,714)      (293,523)                     (463,237)
Exercise of Stock option &
related tax benefit                                16,437          258,738                                      258,738
Net income for the per          $  1,905,616                                    1,905,616                     1,905,616
Other comprehensive income,
net of tax:
   Unrealized gains on securities
   available-for-sale:
   Unrealized holding gains arising
     during the year, net of taxes
     $96,193                         137,543
                                ------------

Other comprehensive income,          137,543                                                     137,543        137,543
net of taxes                    ------------   ------------   ------------   ------------   ------------   ------------

Total comprehensive income      $  2,043,159
                                ------------


BALANCE AT SEPTEMBER 30, 2001                   1,338,532     $ 11,056,002   $  4,859,714   $    216,235   $ 16,131,951
                                               =============  ============   ============   ============   ============

</TABLE>


                                     Page 6

<PAGE>

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

              For the nine months ended September 30, 2001 and 2000

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

                                                   2001            2000
OPERATING ACTIVITIES                           -----------     -----------

    Net income                                 $ 1,905,616     $ 1,629,039
    Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Provision for loan losses                    227,000         255,000
      Depreciation                                 106,472         111,678
      Loss on sale of securities                         0          44,825
      Loss on sale of equipment                          0          15,175
      Amortization and other                        56,835          77,048
      Net change in interest receivable             32,445        (104,538)
      Net change in other assets                    10,351        (483,162)
      Net change in life insurance                 (87,932)       (502,813)
      Net change in interest payable
       and other liabilities                       118,048         377,583
                                              ------------     -----------
                NET CASH PROVIDED BY
                OPERATING ACTIVITIES             2,368,835       1,419,835


   Securities held-to-maturity:
      Investment purchases                        (304,409)     (3,179,415)
      Proceeds from maturing investments           747,700         855,000
    Securities available-for-sale:
      Investment purchases                         (12,100)     (3,105,476)
      Proceeds from maturing investments         6,050,000       1,000,000
      Proceeds from sale of investments                  0       1,236,106
   Net change in loans                         (13,008,100)    (11,796,774)
   Purchases of premises and equipment            (125,113)       (197,373)
                                              ------------     -----------

                NET CASH USED FOR
                INVESTING ACTIVITIES            (6,652,022)    (15,187,932)

FINANCING ACTIVITIES
   Net change in demand, interest-bearing
    transaction and savings deposits             5,260,319       2,831,887
   Net change in time deposits                   2,181,309         858,335
    Net change in other borrowing                        0       2,800,000
   Exercise of stock options                       258,738          73,765
   Stock repurchases                              (463,237)       (252,331)
    Fraction shares purchased                      (11,955)         (7,912)
                                              ------------     -----------
               NET CASH PROVIDED BY
               FINANCING ACTIVITIES              7,225,174       6,303,744
                                              ------------     -----------

               NET CHANGE IN CASH
               AND CASH EQUIVALENTS              2,941,987      (7,464,353)

   Cash and cash equivalents
   at beginning of period                       10,182,394      13,606,250
                                              ------------     -----------

               CASH AND CASH EQUIVALENTS
               AT END OF PERIOD               $ 13,124,381     $ 6,141,897
                                              ------------     -----------
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
   Interest                                    $ 2,436,463     $ 2,214,060
   Income taxes                                  1,056,000       1,266,164
 Stock dividend                                  1,381,975       1,068,160
Change in unrealized gains and losses
 on securities available-for-sale                  233,736         133,755
Change in deferred income taxes on
  unrealized holding gains
  and losses on securities                         (96,193)        (55,046)

</TABLE>

                                     Page 7

<PAGE>

                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
              For the nine months ended September 30, 2001 and 2000
                             (dollars in thousands)
<TABLE>
<S>                                               <C>        <C>         <C>        <C>        <C>          <C>

                                                               2001                                    2000
                                                  ------------------------------    ------------------------------
                                                  Average     Income/     Yield/    Average     Income/     Yield/
ASSETS                                            Balance     Expense     Rate      Balance     Expense     Rate

Interest-earning assets:
Loans(2):
  Commercial                                      59,762      4,146       9.28%     51,996      3,834        9.85%
  Consumer                                        14,701      1,059       9.63%     11,402        845        9.90%
  Real estate construction                        12,193        947      10.38%     10,745        866       10.77%
  Real estate mortgage                             9,199        637       9.26%      8,555        606        9.46%
  Tax exempt loans (1)                             2,361        151       8.55%      1,692        105        8.29%
  Leases                                             468         35      10.00%        496         38       10.23%
  Tax exempt leases (1)                              171         11       8.60%        127          8        8.41%
  Unearned loan fees                                (354)                             (352)
                                                 -------     ------               --------     ------
         Total loans                              98,501      6,986       9.48%     84,661      6,302        9.94%
Investment securities
  Available for sale:
         Taxable                                  17,911        819       6.11%     23,464      1,104        6.28%
         Tax exempt(1)                                 0          0       0.00%        217         12        7.39%
  Hold to maturity:
         Taxable                                     203         10       6.59%        395         16        5.41%
         Tax exempt (1)                           11,897        633       7.11%     11,187        582        6.95%
                                                --------     ------               --------     ------
         Total investment securities              30,011      1,462       6.51%     35,263      1,714        6.49%
Federal funds sold                                 6,678        219       4.38%      5,958        274        6.14%
Total due from banks/Interest bearing                 13          0       0.00%         53          2        5.04%
                                                 -------     ------               --------     ------
  Total interest earning assets                  135,203      8,667       8.57%    125,935      8,292        8.80%
                                                             ======                            ======
Noninterest-bearing assets:
  Reserve for loan losses                         (2,231)                           (1,868)
  Cash and due from banks                          6,476                             6,063
  Premises and equipment                             619                               616
  Other assets                                     5,234                             4,497
                                                --------                          --------
    Total assets                                $145,301                          $135,243
                                                ========                          ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing deposits
         Interest bearing transaction             21,968        120       0.73%     20,810        152        0.98%
         Savings deposits                         41,032        788       2.57%     38,940        767        2.63%
         Time deposits over $100,000              16,204        643       5.31%     14,945        602        5.38%
         Other time deposits                      19,089        707       4.95%     18,536        692        4.99%
                                                --------     ------               --------     ------
          Total interest bearing Deposits         98,293      2,258       3.07%     93,231      2,213        3.17%
  Federal Funds purchased                              0          0       0.00%         79          4        6.76%
  Other short term borrowings                        232          7       4.03%        224         10        5.96%
                                                --------     ------               --------     ------
    Total interest bearing liabilities            98,525     $2,265       3.07%     93,534     $2,227        3.18%
                                                             ======                            ======
Non interest bearing liabilities:
  Non interest bearing demand deposits            29,044                            26,614
  Other liabilities                                2,903                             2,430
  Shareholders' equity                            14,829                            12,665
                                                --------                          --------
         Total liabilities and shareholders'
         equity                                 $145,301                          $135,243
                                                ========                          ========
Interest rate spread                                                      5.50%                              5.63%
                                                                          =====                              =====
Interest income                                              $8,667       8.57%                $8,292        8.80%
Interest expense                                              2,265       2.24%                 2,227        2.36%
                                                             ------       -----                ------        -----
Net interest income/margin                                   $6,402       6.33%                $6,065        6.44%
                                                             ======       =====                ======        =====
</TABLE>

(1) Fully tax equivalent  adjustments  are based on a federal income tax rate of
    34% in 2001 and 2000.
(2) Non accrual loans have been included in loans for the purposes of the above
    presentation.  Loan fees of approximately $232,655 and $231,890 for the
    nine months ended September 30, 2001 and September 30, 2000, respectively,
    were amortized to the appropriate interest income categories.

                                     Page 8

<PAGE>

                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (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  at September  30, 2001 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  2000 Annual Report on
Form 10- KSB. The results of operations for the three and nine months  ended
September  30, 2001 are not  necessarily  indicative  of the  operating  results
through December 31, 2001.

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,
2001 and September 30, 2000.

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,  2001 was
1,339,467 and for the period ending September 30, 2000 was 1,343,959.

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, 2001 was  1,421,716 and for the period ending
September 30, 2000 was 1,384,188.

Prior year shares have been  adjusted to reflect the 5% stock  dividend  paid on
August 17, 2001.

                                     Page 9

<PAGE>

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

        For the Nine Month Periods
        Ended September 30, 2001 and 2000

FORWARD LOOKING STATEMENT

With the exception of historical facts stated herein,  the matters  discussed in
this Form  10-QSB  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 wholly owned
subsidiary,  Sonoma  Valley  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
identified in this Form 10-QSB,  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-QSB  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.

OVERVIEW

Sonoma Valley Bancorp (the "Company")  reported net income of $1,905,616 for the
first nine months of 2001 compared with  $1,629,039 for the first nine months of
2000. On a per share basis,  net income  equaled  $1.42  compared with $1.21 per
share during the same period in 2000.

Return on average total assets on an annualized basis for the nine-month periods
was 1.75% and 1.61% respectively.  Return on average  shareholders' equity on an
annualized basis for the same periods was 17.36% and 17.18%, respectively.

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 8,
is higher than net interest income on the statement of

                                     Page 10

<PAGE>

income  because it reflects  adjustments  applicable to  tax-exempt  income from
certain  securities and loans ($270,000 in 2001 and $240,000 in 2000, based on a
34% federal income tax rate).

The  improvement in net interest  income  (stated on a fully taxable  equivalent
basis)  is a result of a  $375,000  increase  in  interest  income  offset by an
increase in interest expense of $38,000.

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 2001  decreased to 6.33% from 6.44% for the
same  period in 2000.  This  variance  is the  result of a decline  of 350 basis
points in the prime lending rate when compared to September 30, 2000.


INTEREST INCOME

As previously  stated,  interest  income  (stated on a fully taxable  equivalent
basis) increased by $375,000 to $8.7 million in the nine months of 2001, a 4.53%
increase  over the $8.3  million  realized  during the same period in 2000.  The
$375,000  increase was a result of a 7.36% increase in average earning assets to
$135.2 million for the period from $125.9 million in 2000.

INTEREST EXPENSE

Total interest  expense  increased by $38,000 to $2.3 million.  The average rate
paid on all interest-bearing  liabilities  decreased from 3.18% in 2000 to 3.07%
in 2001. Average balances increased from $93.5 million to $98.5 million, a 5.34%
gain in deposits. The increase in volume of average balances was responsible for
a $121,000  increase in interest expense offset by a $83,000 decrease in expense
related to lower interest rates resulting in higher interest expense of $38,000.

Individual  components of interest  income and interest  expense are provided in
the table-Average Balances, Yields and Rates Paid on page 8.

PROVISION FOR LOAN LOSSES

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  provision  to the
allowance  for loan losses  amounted to $227,000  during the nine months of 2001
and $255,000 in the same period in 2000. The decrease in the provision is due to
managements evaluation and assessment of the loan portfolio.

Loans  charged-off  were $56,000 and recoveries were $26,000 for the nine months
of 2001 compared with $8,000 in  charge-offs  and $18,000 in recoveries  for the
same period in 2000.



                                     Page 11

<PAGE>

NON-INTEREST INCOME

Non-interest  income of $958,000  increased 30.9% over the $732,000  recorded in
the  comparable  period  in  2000.  Services  Charges  were up due to  customers
carrying lower balances and deposit growth. In addition, life insurance proceeds
increased due to the purchase of an additional life insurance policy.

NON-INTEREST EXPENSE

Total  non-interest  expense  increased  3.88% to $4.0  million  during the nine
months of 2001  from  $3.8  million  for the same  period in 2000.  Non-interest
expense on an annualized basis represented 3.64% of average total assets in 2001
compared with 3.76% in the comparable period in 2000.

Salaries and benefits increased 25.29% from $1.9 million in 2000 to $2.4 million
in 2001. The 2001 increase  reflects higher salaries due to market pressures and
merit  increases.  At  September  30,  2001 and 2000 total full time  equivalent
employees were 37.

Expense  related to premises and  equipment  declined  1.43% to $442,000 in 2001
from  $448,000  in 2000.  The  Company  continues  to  emphasize  investment  in
technology in order to better utilize  employees'  time and offer a higher level
of customer service.

Other  operating  expenses  declined by 21.91% to $1.2 million in 2001 from $1.5
million  in  2000.  The  largest   category  of  other   non-interest   expense,
professional  fees, is primarily  comprised of data processing,  item processing
and ATM services, as well as accounting, legal and other professional fees.

PROVISION FOR INCOME TAXES

The provision  for income taxes  declined to an effective tax rate of 34.44% for
the nine months of 2001 compared with 34.63% for the nine months of 2000. 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 $27.2 million at September 30, 2001, an 18.8% decline
from the $33.5  million at  December  31,  2000 and a 24.3%  decline  from $36.0
million at September 30, 2000. The decline in investment  securities has allowed
the Company to fund loan opportunities which has allowed the Company to maintain
a higher net interest margin. 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.


                                     Page 12

<PAGE>

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 September 30,
2001, the Company had  securities  totaling $11.7 million with a market value of
$12.2 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 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 $15.5 million  compared to an amortized cost
of $15.2 million as of September 30, 2001.

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.

LOANS

The Company's  loan portfolio was $105.6 million at September 30, 2001, or 80.9%
of total deposits. This compares with $92.6 million, or 75.2% of total deposits,
at December 31, 2000 and $91.9 million, or 77.3% of total deposits, at September
30, 2000. A  comparative  schedule of average loan  balances is presented in the
table on page 8; 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
                                      2001          of Total         2000       of Total          2001         of Total
                                ------------       ---------    -----------     ----------     -----------     ----------
Commercial                       $69,319,468         65.4%      $56,119,346      60.4%         $56,015,009        60.6%
Consumer                          13,948,190         13.2%       14,137,455      15.2%          13,101,867        14.2%
Real estate construction          13,076,822         12.3%       12,570,660      13.5%          13,342,553        14.5%
Real estate mortgage               9,265,258          8.7%        9,296,451      10.0%           9,055,980         9.8%
Leases                               396,245          0.4%          794,784       0.9%             796,824         0.9%
                                ------------                    -----------
                                 106,005,983        100.0%       92,918,696     100.0%          92,312,233       100.0%
Deferred loan fees                                  ======                      ======                           ======
 and costs, net                     (444,116)                      (334,174)                      (384,810)
Allowance for loan
 and lease losses                 (2,316,762)                    (2,120,517)                    (2,019,170)
                                ------------                    -----------                    -----------
                                $103,245,105                    $90,464,005                    $89,908,253
                                ============                    ===========                    ===========
</TABLE>

RISK ELEMENTS

The majority of the Company's  loan activity is with  customers  located  within
Sonoma County.  Approximately 80% of the total loan portfolio is secured by real
estate located in the Company's service area.


                                     Page 13

<PAGE>

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.

During the fourth quarter of 2000 and continuing  during the first half of 2001,
the State of California was subject to a  deterioration  of the ability of major
utility  companies  to  provide  energy  for  the  state's  needs.  In  northern
California,  in general, and in Sonoma County,  where the Company operates,  the
crisis resulted in occasional  "rolling  black-outs" where certain areas are not
provided with any  electricity for periods of up to two hours. To date, the most
significant impact has been a significant increase in electricity rates for most
commercial and residential users,  including the Company. In addition, the major
utility companies have purchased  electricity on a "spot" basis, at prices which
can exceed  their  ability to pass on costs to customers  and, as a result,  one
major utility company has filed for bankruptcy protection. However, since May of
2001, the severity of the energy shortage has subsided due to conservation,  the
opening of three new power  facilities  and the increase in  production at other
facilities. The cost of electricity and gas has also decreased in recent months.

The long-term  impact of the energy crisis is not known,  but could result in an
economic  slowdown in California  as companies  relocate or shift current or new
production  and  facilities to locations in other states where energy prices are
more  affordable  and stable.  This and the direct impact of higher  electricity
rates could have an adverse  effect on the demand for new loans,  the ability of
borrowers to repay existing loans, the value of real estate and other collateral
securing loans and the Company's  financial  condition and results of operations
in general. As a result, the market value of the Company's common stock could be
adversely impacted.

Although the Company has no direct credit risk  exposure to  California  utility
companies, during the third quarter of 2001 the Company continues to monitor the
impact of energy price increases on current and prospective borrowers.

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,  2001,  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,  including the impact of California
energy  prices  discussed  above,  the  perceived  ability of  borrowers to pass
increased energy bills onto their customers and predicted future energy needs of
borrowers.  Accordingly,  the  adequacy  of the  loan  loss  reserve  cannot  be
determined  with precision 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 6 months and when other  criteria  are met 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

                                    Page 14

<PAGE>

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 bank
because of the  inability  of the  borrower to repay the loan under the original
terms.

There were  $347,000 of non accrual  loans and no loans 90 days or more past due
and still  accruing at September  30, 2001.  There were  $214,000 of non accrual
loans and no loans 90 days or more past due and still  accruing at September 30,
2000.

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.

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 September 30, 2001 the Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.

At September 30, 2001, the allowance for loan losses was $2.3 million,  or 2.19%
of period-end loans,  compared with $2.1 million,  or 2.29% at December 31, 2000
and $2.0 million, or 2.20% at September 30, 2000.


                                     Page 15

<PAGE>


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
                                    9/30/01          12/31/00         9/30/00

Balance beginning of year        $ 2,120,517       $ 1,753,894      $ 1,753,894
Charge-offs:
  Commercial                         (44,345)                0                0
  Consumer                           (12,013)          (19,440)          (8,346)
                                 -----------       -----------      -----------
               Total charge-offs     (56,358)          (19,440)          (8,346)
Recoveries:

  Commercial                           7,958            38,181           12,795
  Consumer                            17,645            12,882            5,827
                                 -----------       -----------      -----------
                Total recoveries      25,603            51,063           18,622

Net recoveries / (charge-offs)       (30,755)           31,623           10,276
Provision charged to operations      227,000           335,000          255,000
                                 -----------       -----------      -----------
Balance end of period            $ 2,316,762       $ 2,120,517      $ 2,019,170
                                 ===========       ===========      ===========
Ratio of net charge-offs
 annualized to average loans           0.04%            -0.04%           -0.02%
Balance in allowance as a
  percentage of loans                  2.19%             2.29%            2.20%
  outstanding at period end

</TABLE>

Deposits

A comparative  schedule of average deposit balances is presented in the table on
page 8; 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
                             2001       of Total     2000         of Total      2000       of Total
                        ------------  ----------- ------------  ----------- ------------  -----------
Interest bearing
 transaction deposits    $21,501,813       16.5%  $ 21,369,905       17.4%  $ 21,321,508       17.9%
Savings deposits          43,180,278       33.1%    35,551,104       28.9%    37,180,024       31.3%
Time deposits,
$100,000
 and over                 18,425,622       14.1%    16,278,342       13.2%    15,390,061       12.9%
Other time deposits       18,858,432       14.4%    18,824,403       15.3%    18,706,377       15.8%
                        ------------     ------    -----------     ------   ------------     ------
Total interest bearing
  deposits               101,966,145       78.1%     92,023,754      74.8%    92,597,970       77.9%
Demand deposits           28,571,555       21.9%     31,072,318      25.2%    26,279,790       22.1%
                        ------------     ------    ------------    ------   ------------     ------
Total deposits          $130,537,700      100.0%   $123,096,072     100.0%  $118,877,760      100.0%
                        ============     ======    ============    ======   ============     ======
</TABLE>

                                     Page 16

<PAGE>

Total  deposits  increased by $7.4  million,  during the nine months of 2001, to
$130.5  million from $123.1 million at December 31, 2000.  Savings  deposits and
time deposits over $100,000 showed the largest increase of $7.6 million and $2.1
million  respectively,  over year end balances.  Interest-bearing and other time
deposits   also   increased   $132,000  and  $34,000,   respectively.   However,
non-interest bearing demand deposits declined $2.5 million.

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,  2001,  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 should be 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, 2001,  along with the related  risk-based  capital ratio
and leverage ratio.


(dollars in thousands)


      Total
      Risked-based   TIER 1                   TOTAL               Leverage
        Assets       Capital    Ratio        Capital     Ratio      Ratio
       --------     --------   --------     --------    -------   --------
       $127,787     $15,593     12.20%      $17,199      13.46%    10.41%

Asset/Liability Management

The  principal  objectives  of  asset/liability  management  are to  manage  the
sensitivity  of net  interest  rate  spreads to changes in  interest  rates.  In
addition, management attempts to balance risk with profitability.  Interest rate
sensitivity  measures the  differences in the timing at which certain assets and
liabilities are repriced.

The following table sets forth the dollar amounts of maturing  and/or  repricing
assets and  liabilities for various  periods.  Prepayments and runoff can impact
the  scheduled   repricing.   However,   because  they  have  historically  been
immaterial, estimates for them are not included.

The Company has more  liabilities  than assets  repricing  during the next year.
However,  because the Company's asset rates change more than deposit rates,  the
Company's interest income will change more than cost of funds when rates change.
Its net interest margin should therefore  increase  somewhat when rates increase
and shrink somewhat when rates fall. The current

                                     Page 17

<PAGE>

estimate a $107,000  increase  in income for a 1% increase in the Fed Funds rate
and a $126,000  decline in income for a 1% decline in the fed funds  rate.  This
exposure to declining rates is currently  exaggerated by an assumption that with
lower  interest,  fixed rate loans will refinance and current  deposit rates are
static.

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, 2001 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.
<TABLE>
<S>                                  <C>         <C>         <C>         <C>         <C>         <C>         <C>


SEPTEMBER 30, 2001                    3 months   12 months    3 years     5 years    15 years    >15 years      Totals
(in thousands)                       ---------   ---------   ---------   ---------   ---------   ---------   ---------

ASSETS:
  Fixed rate investments              $  4,245    $  7,829   $   7,338    $  2,532    $  2,636    $  1,393   $  25,973
  Variable rate investments                  0           0           0           0           0         264         264
  Fixed rate loans                       7,582      10,410       7,366      10,170      21,893       2,880      60,301
  Variable rate loans                   42,259       1,394       1,705           0           0           0      45,358
  Interest-bearing balances due              7                                                                       7
  from banks

  Fed funds sold                         6,670                                                                   6,670
                                     ---------   ---------   ---------   ---------   ---------   ---------   ---------
     Interest bearing assets            60,763      19,633      16,409      12,702      24,529       4,537     138,573
                                     =========   =========   =========   =========   =========   =========   =========
LIABILITIES:
  Interest bearing transaction          21,502                                                                  21,502
  deposits
  Savings deposits                      43,180                                                                  43,180
  Time Deposits                                                                                                      0
     Fixed rate >100m                    7,714       9,345       1,432         316                              18,807
     Fixed rate <100m                    5,705      10,639       1,569         513                              18,477
     Floating rate >100m                                                                                             0
     Floating rate <100m                    51                                                                      51
  Borrowings                                 0                                                                       0
                                     ---------   ---------   ---------   ---------   ---------   ---------   ---------
    Interest Bearing Liabilities     $  78,152   $  19,984   $   3,001   $     829   $       0   $       0   $ 101,966
                                     =========   =========   =========   =========   =========   =========   =========
Rate Sensitivity Gap                   (17,389)       (351)     13,408      11,873      24,529       4,537
                                     ---------   ---------   ---------   ---------   ---------   ---------
Cumulative Rate Sensitivity Gap        (17,389)    (17,740)     (4,332)      7,541      32,070      36,607
                                     ---------   ---------   ---------   ---------   ---------   ---------
Cumulative Position to Total Assets     -11.61%     -11.85%      -2.89%       5.04%      21.42%      24.45%
                                     ---------   ---------   ---------   ---------   ---------   ---------
</TABLE>

FOR THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 2001 and 2000

OVERVIEW

The  Company  reported  net  income of  $661,000  for the third  quarter of 2001
compared with $569,000 for the third quarter of 2000. On a per share basis,  net
income for the three  months  ended  September  30, 2001  equaled $.49 per share
compared with $.42 per share during the same period in 2000.

Return on average total assets on an annualized basis for the three months ended
September 30, 2001 and 2000 was 1.76% and 1.64%, respectively. Return on average
shareholders'equity  on an annualized basis for the three months ended September
30, 2001 and 2000 was 17.3% and 17.2%, respectively.

                                     Page 18


<PAGE>


RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income,  adjusted to a fully taxable  equivalent  basis,  increased
$137,000 to $2.2 million for the three months ended September 30, 2001, up 6.49%
from the $2.1 million in the comparable period of 2000. Net interest income on a
fully taxable equivalent basis, as shown on the table -Average Balances,  Yields
and Rates Paid on page 21, 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  ($90,000 in 2001 and $92,000 in 2000,  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 2001 declined to 6.36%
from 6.50% for the comparable  period in 2000.  This variance is the result of a
decline of 350 basis points in the prime lending rate when compared to September
30, 2000.

INTEREST INCOME

Interest  income for the three  months  ended  September  30, 2001  increased by
$31,000 to $2.93 million,  a 1.06% gain over the $2.90 million  realized  during
the same period in 2000.

INTEREST EXPENSE

Total interest expense for the three months ended September 30, 2001 declined by
$106,000  to $686,000  compared  with  $792,000 in the same period of 2000.  The
average rate paid on all  interest-bearing  liabilities for the third quarter of
2001  declined  to 2.69% from 3.32% in the third  quarter of 2000,  and  average
balances for the third  quarter of 2001  increased to $101.3  million from $95.0
million in the same period of 2000, a 6.63% gain.

The gain in volume of  average  balances  accounted  for a $42,000  increase  in
interest  expense offset by a $148,000  decline  related to lower interest rates
paid resulting in a $106,000  decrease in interest expense for the third quarter
of 2001.

Individual  components of interest  income and interest  expense are provided in
the table - Average Balances, Yields and Rates Paid on page 21.



                                     Page 19

<PAGE>

PROVISION FOR LOAN LOSSES

The  provision  for loan  losses  during the third  quarter of 2001 was  $80,000
compared  to  $115,000  for the  third  quarter  of 2000.  The  decrease  in the
provision is the result of  managements'  evaluation  and assessment of the loan
portfolio.

NON-INTEREST INCOME

Non-interest  income of $335,000 for the third  quarter of 2001  represented  an
increase of $62,000,  or 22.82%,  from the $273,000 for the comparable period in
2000.

NON-INTEREST EXPENSE

For the third quarter of 2001,  non-interest  expense was $1.4 million  compared
with $1.3  million  for the same  period in 2000,  representing  an  increase of
$125,000,  or 9.89%. The largest  increase of non-interest  expense was salaries
and  benefits,  which  increased  $252,000,  or 39.92%,  compared with the three
months ended September 30, 2000.

Premises and equipment expense declined $21,000,  or 13.04%, to $142,000 for the
third quarter of 2001 from $163,000 for the third quarter of 2000.

Other operating  expenses for the three months ended September 30, 2001 declined
22.39% to $367,000 from $472,000 in the same period in 2000.

PROVISION FOR INCOME TAXES

The provision  for income taxes  increased to an effective tax rate of 35.01% in
the third  quarter of 2001  compared  with 35.42% for the  comparable  period in
2000. 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 20

<PAGE>

                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
             For the three months ended September 30, 2001 and 2000
                             (dollars in thousands)

<TABLE>
<S>                                     <C>       <C>       <C>         <C>         <C>       <C>
                                                    2001                             2000
                                        ---------------------------     ----------------------------------
                                         Average   Income/   Yield/      Average    Income/   Yield/
ASSETS                                   Balance   Expense    Rate       Balance    Expense    Rate

Interest-earning assets:
Loans(2):
  Commercial                              64,889    1,448     8.85%       52,309     1,314     9.99%
  Consumer                                14,180      363    10.16%       12,499       310     9.87%
  Real estate construction                11,591      308    10.54%       12,768       349    10.87%
  Real estate mortgage                     9,099      207     9.03%        8,760       206     9.36%
  Tax exempt loans (1)                     2,424       53     8.67%        2,025        42     8.25%
  Leases                                     259        7    10.72%          629        16    10.12%
  Tax exempt leases (1)                      156        4    10.17%          119         3    10.03%
  Unearned loan fees                        (430)                           (360)
                                        --------   ------               --------    ------
          Total loans                    102,168    2,390     9.28%       88,749     2,240    10.04%
Investment securities
  Available for sale:
         Taxable                          16,276      247     6.02%       23,272       365     6.24%
         Tax exempt(1)                         0        0     0.00%          217         4     7.33%
  Hold to maturity:
         Taxable                             203        4     7.82%          277         3     4.31%
         Tax exempt (1)                   11,709      207     7.01%       12,511       222     7.06%
                                        --------   ------               --------    ------
         Total investment securities      28,188      458     6.45%       36,277       594     6.51%
Federal funds sold                         9,798       84     3.40%        3,985        67     6.69%
Total due from banks/Interest bearing          7        0     0.00%           11         0     0.00%
                                        --------   ------               --------    ------
  Total interest earning assets          140,161    2,932     8.30%      129,022     2,901     8.94%
Noninterest-bearing assets:                        ======                                     =====
  Reserve for loan losses                 (2,304)                         (1,961)
  Cash and due from banks                  6,588                           5,883
  Premises and equipment                     628                             625
  Other assets                             5,026                           4,932
                                        --------                        --------
                     Total assets       $150,099                        $138,501
                                        ========                        ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing deposits
         Interest bearing transaction     23,067   $   35     0.60%       20,731        51     0.98%
         Savings deposits                 41,960      229     2.17%       39,530       265     2.67%
         Time deposits over $100,000      17,082      207     4.81%       15,362       216     5.59%
         Other time deposits              19,187      215     4.45%       18,467       246     5.30%
          Total interest bearing        --------   ------               --------    ------
          Deposits                       101,296      686     2.69%       94,090       778     3.29%

  Federal funds purchased                      0        0     0.00%          230         4     6.92%
  Other short term borrowings                  0        0     0.00%          679        10     5.86%
           Total interest bearing       --------   ------               --------    ------
           liabilities                   101,296   $  686     2.69%       94,999     $ 792     3.32%
Non interest bearing liabilities:       ========   ======               ========    ======
  Non interest bearing demand deposits    30,508                          27,624
  Other liabilities                        3,007                           2,612
  Shareholders' equity                    15,288                          13,266
         Total liabilities and          --------                        --------
         shareholders' equity           $150,099                        $138,501
Interest rate spread                    ========              5.61%     ========               5.62%
                                                              =====                            =====
Interest income                                     2,932     8.30%                 $2,901     8.94%
Interest expense                                      686     1.94%                    792     2.44%
                                                   ------     -----                 ------     -----
Net interest income/margin                         $2,246     6.36%                 $2,109     6.50%
                                                   ======     =====                 ======     =====

</TABLE>

(1) Fully tax equivalent  adjustments  are based on a federal income tax rate of
34% in 2001 and 2000.
(2) Non accrual loans have been included in loans for the
purposes  of the above  presentation.  Loan fees of  approximately  $97,734  and
$76,748 for the nine months ended  September  30, 2001 and  September  30, 2000,
respectively, were amortized to the appropriate interest income categories.

                                     Page 21

<PAGE>

                                     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.

Item 2.           CHANGES IN SECURITIES

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 AND REPORTS ON FORM 8-K

         (a)      Exhibits
                  None
         (b)      Reports on Form 8-K
                  None

                                     Page 22

<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



Date:   August 13, 2001                /s/ Mel Switzer, Jr.
     --------------------              -----------------------------------------
                                       Mel Switzer, Jr.
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)




Date:   August 13, 2001                /s/ Mary Quade Dieter
     --------------------              -----------------------------------------
                                       Mary Quade Dieter
                                       Executive Vice President and
                                       Chief Operating Officer
                                       (Principal Accounting Officer)


                                     Page 23