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: June 30, 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 o No |_|

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

The number of shares outstanding of the registrant's Common Stock, no par value,
as of August 2, 2005 was 2,160,636.








<PAGE>



INDEX

Part 1  Financial Information                                       Page Number
                                                                    -----------

Item 1.   Financial Statements (Unaudited):

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

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

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

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

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

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operation.......................10

          Average Balances, Yields and Rates Paid
          for the six months ended June 30, 2005 and 2004....................12

          Average Balances, Yields and Rates Paid
          for the three months ended June 30, 2005 and 2004..................25

Item 3.   Quantitative and Qualitative Disclosure About Market Risk..........26

Item 4.   Controls and Procedures............................................26


Part II   Other Information

Item 1.   Legal Proceedings..................................................26

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds........26

Item 3.   Defaults Upon Senior Securities....................................26

Item 4.   Submission of Matters to a Vote of Security Holders................27

Item 5.   Other Information..................................................27

Item 6.   Exhibits ..........................................................27

Signatures...................................................................28

Certifications...............................................................29





                                     Page 2


<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
             June 30, 2005 (Unaudited), December 31, 2004 (Audited)
                          and June 30, 2004 (Unaudited)
<TABLE>
<S>                                                                                    <C>                  <C>              <C>
                                                                                  June 30,         December 31,         June 30,
                                                                                    2005               2004               2004
                                                                                --------------    --------------    --------------
ASSETS
    Cash and due from banks                                                     $    6,227,692    $    5,471,669    $   11,703,947
    Federal funds sold                                                                       0         9,840,000         2,850,000
    Interest-bearing due from banks                                                     30,543            35,551            35,234
                                                                                --------------    --------------      ------------
                                         Total cash and cash equivalents             6,258,235        15,347,220        14,589,181
    Investment securities available-for-sale, at fair value                         35,160,974        20,253,490        24,305,780
    Investment securities held-to-maturity (fair value
        of $17,481,000, $17,842,000 and $17,754,000,
        respectively)                                                               17,028,712        17,418,303        17,724,113
    Loans and lease financing receivables, net                                     158,250,210       150,732,087       139,468,818
    Premises and equipment, net                                                      1,283,598         1,364,879         1,365,588
    Accrued interest receivable                                                      1,318,879         1,138,607         1,116,202
    Cash surrender value of life insurance                                           9,070,168         8,913,136         7,891,610
    Other assets                                                                     3,365,893         3,079,740         3,681,787
                                                                                --------------    --------------    --------------
                                                            Total assets        $  231,736,669    $  218,247,462    $  210,143,079
                                                                                ==============    ==============    ==============
LIABILITIES
    Noninterest-bearing demand deposits                                         $   46,921,796    $   44,557,377    $   43,813,055
    Interest-bearing transaction deposits                                           32,399,866        34,912,205        32,377,851
    Savings and money market deposits                                               72,881,168        70,254,926        68,092,556
    Time deposits, $100,000 and over                                                27,637,667        25,307,661        24,840,625
    Other time deposits                                                             20,286,030        18,630,846        18,555,309
                                                                                --------------    --------------    --------------
                                                          Total deposits           200,126,527       193,663,015       187,679,396
    Other borrowings                                                                 5,500,000                 0                 0
    Accrued interest payable and other liabilities                                   4,203,772         3,903,287         3,495,595
                                                                                --------------    --------------    --------------
                                                       Total liabilities           209,830,299       197,566,302       191,174,991

SHAREHOLDERS' EQUITY
    Common stock, no par value; 10,000,000 shares
        authorized; 2,160,636 shares at June 30, 2005
        2,142,104 shares at December 31, 2004
        and 2,100,719 shares at June 30, 2004 issued and
        outstanding                                                                 15,834,326        15,528,940        14,916,010
    Retained earnings                                                                6,259,127         5,295,732         4,268,298
    Accumulated other comprehensive loss                                              (187,083)         (143,512)         (216,220)
                                                                                --------------    --------------    --------------
                                              Total shareholders' equity            21,906,370        20,681,160        18,968,088
                                                                                --------------    --------------    --------------
                              Total liabilities and shareholders' equity        $  231,736,669    $  218,247,462    $  210,143,079
                                                                                ==============    ==============    ==============
</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 Six Months
                                                                       Ended June 30,                       Ended June 30,
                                                                    2005              2004              2005              2004
                                                               --------------    --------------    --------------    --------------

INTEREST INCOME
  Loans and leases                                             $    2,928,221    $    2,438,882    $    5,666,258    $    4,632,055
  Taxable securities                                                  277,125           223,418           504,807           426,364
  Tax-exempt securities                                               157,531           164,568           316,868           326,034
  Federal funds sold                                                        0            17,327            45,460            64,568
  Dividends                                                            14,520             5,756            14,520             5,756
                                                               --------------    --------------    --------------    --------------
                                       Total interest income        3,377,397         2,849,951         6,547,913         5,454,777
INTEREST EXPENSE
  Interest-bearing transaction deposits                                14,299            12,362            28,816            23,957
  Savings and money market deposits                                   192,366           104,599           355,102           203,007
  Time deposits, $100,000 and over                                    202,991           163,004           379,396           333,429
  Other time deposits                                                 128,799            97,170           235,539           199,015
  Other borrowings                                                     54,571                 0            61,802                 0
                                                               --------------    --------------    --------------    --------------
                                      Total interest expense          593,026           377,135         1,060,655           759,408
                                                               --------------    --------------    --------------    --------------
NET INTEREST INCOME                                                 2,784,371         2,472,816         5,487,258         4,695,369
  Provision for loan and lease losses                                 160,000            30,000           250,000            30,000
                                                               --------------    --------------    --------------    --------------
                                         NET INTEREST INCOME
                                         AFTER PROVISION FOR
                                       LOAN AND LEASE LOSSES        2,624,371         2,442,816         5,237,258         4,665,369
NON-INTEREST INCOME                                                   486,592           390,746           945,689           812,112
NON-INTEREST EXPENSE
  Salaries and employee benefits                                    1,118,813         1,057,762         2,226,244         2,010,804
  Premises and equipment                                              247,719           209,639           477,024           432,109
  Other                                                               577,651           555,947         1,214,273         1,096,385
                                                               --------------    --------------    --------------    --------------
                                  Total non-interest expense        1,944,183         1,823,348         3,917,541         3,539,298
                                                               --------------    --------------    --------------    --------------
                                     Income before provision
                                            for income taxes        1,166,780         1,010,214         2,265,406         1,938,183
  Provision for income taxes                                          396,129           318,621           764,169           601,020
                                                               --------------    --------------    --------------    --------------

                                                  NET INCOME   $      770,651    $      691,593    $    1,501,237    $    1,337,163
                                                               ==============    ==============    ==============    ==============
NET INCOME PER SHARE                                           $          .36    $          .32    $          .70    $          .61
                                                               ==============    ==============    ==============    ==============
NET INCOME PER SHARE-
ASSUMING DILUTION                                              $          .34    $          .29    $          .65    $          .56
                                                               ==============    ==============    ==============    ==============
</TABLE>






                                     Page 4


<PAGE>



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

     For the six months ended June 30, 2005 (Unaudited), and the years ended
                  December 31, 2004 (Audited) and 2003(Audited)
<TABLE>
<S>                                  <C>            <C>             <C>                 <C>            <C>              <C>

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

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

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

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

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

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

                                                        Page 5

<page>

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

     For the six months ended June 30, 2005 (Unaudited), and the years ended
                 December 31, 2004 (Audited) and 2003 (Audited)
<TABLE>
<S>                               <C>             <C>              <C>                <C>             <C>             <C>

                                                                                                     Accumulated
                                                                                                         Other
                                 Comprehensive            Common Stock                Retained       Comprehensive
                                     Income          Shares            Amount         Earnings           Income         Total
                                 -------------    -------------    -------------    -------------    -------------    -------------
BALANCE AT
  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                                                     51,840                                             51,840
Stock options exercised and
  related tax benefits                                   18,532          253,546                                            253,546
Net income for the period        $   1,501,237                                          1,501,237                         1,501,237
Other comprehensive loss,
  net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $30,472                         (43,571)
                                 -------------
Other comprehensive loss,
  net of taxes                         (43,571)                                                            (43,571)         (43,571)
                                 -------------    -------------    -------------    -------------    -------------    -------------


Total comprehensive income       $   1,457,666
                                 =============


BALANCE AT
 June 30, 2005                                        2,160,636    $  15,834,326    $   6,259,127    $    (187,083)   $  21,906,370
                                                  =============    =============    =============    =============    =============
</TABLE>




                                                        Page 6


<PAGE>



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

                 For the six months ended June 30, 2005 and 2004
<TABLE>
<S>                                                                                      <C>               <C>
                                                                                         2005              2004
                                                                                    --------------    --------------
OPERATING ACTIVITIES
    Net income                                                                      $    1,501,237    $    1,337,163
    Adjustments to reconcile net income
        to net cash provided by operating activities:
            Provision for loan and lease losses                                            250,000            30,000
            Depreciation                                                                   182,149           148,763
            Gain on sale of premise and equipment                                                0               (45)
            Amortization and other                                                          82,924            64,861
            Stock options granted                                                           51,840            41,472
            Net change in interest receivable                                             (180,272)         (209,244)
            Net change in cash surrender value
               of life insurance                                                          (157,032)         (161,010)
            Net change in other assets                                                    (255,681)         (225,631)
            Net change in interest payable and other liabilities                           300,485           (24,647)
                                                                                    --------------    --------------
                                       NET CASH PROVIDED BY OPERATING ACTIVITIES         1,775,650         1,001,682
INVESTING ACTIVITIES
    Purchases of securities held-to-maturity                                                     0        (1,984,960)
    Purchases of securities available-for-sale                                         (15,014,860)       (8,154,337)
    Proceeds from maturing securities held-to-maturity                                     340,000           765,000
    Proceeds from maturing securities available-for-sale                                         0         3,550,000
    Net change in loans and leases                                                      (7,768,123)      (19,664,829)
    Purchases of premises and equipment                                                   (100,868)         (200,311)
                                                                                    --------------    --------------
                                           NET CASH USED BY INVESTING ACTIVITIES       (22,543,851)      (25,689,437)

FINANCING ACTIVITIES
    Net change in demand, interest-bearing
        transaction and savings deposits                                            $    2,478,322    $   10,187,510
    Net change in time deposits                                                          3,985,190        (2,622,730)
    Cash dividend paid                                                                    (537,842)         (371,206)
    Net change in FHLB borrowings                                                        5,500,000                 0
    Stock repurchases                                                                            0        (4,506,183)
    Stock options exercised                                                                253,546         1,235,343
                                                                                    --------------    --------------
                                       NET CASH PROVIDED BY FINANCING ACTIVITIES        11,679,216         3,922,734
                                                                                    --------------    --------------
                                         NET CHANGE IN CASH AND CASH EQUIVALENTS        (9,088,985)      (20,765,021)
    Cash and cash equivalents at beginning of period                                    15,347,220        35,354,202
                                                                                    --------------    --------------
                                      CASH AND CASH EQUIVALENTS AT END OF PERIOD    $    6,258,235    $   14,589,181
                                                                                    ==============    ==============

SUPPLEMENTAL DISCLOSURES OF
    CASH FLOW INFORMATION:

Cash paid during the year for:
    Interest expense                                                                $    1,049,089    $      765,148
    Income taxes                                                                    $      715,000    $      115,000

SUPPLEMENTAL DISCLOSURES OF
     NONCASH ACTIVITIES:
Net change in unrealized gains and losses on securities available for sale          $      (74,043)   $     (407,473)
Net change in deferred income taxes on unrealized
     gains and losses on securities                                                 $       30,472    $      167,693
</TABLE>



                                     Page 7


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2005
                                   (Unaudited)
Note 1 - Basis of Presentation

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

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

Note 2 - Consolidation

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

Note 3 - Commitments

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

Note 4 - Net Income Per Common Share

Net income per share is calculated by using the weighted  average  common shares
outstanding.  The weighted average number of common shares used in computing the
net income per common  share for the period  ending June 30, 2005 was  2,153,533
and for the period ending June 30, 2004 was 2,176,164.

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 June 30, 2005 was 2,295,942 and for the period ending June 30,
2004 was 2,374,364.

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


                                     Page 8


<PAGE>



after  January  1, 2003.  No options  were  granted  in 2003.  Awards  under the
Company's plan vest over five years.  The cost related to  stock-based  employee
compensation included in the determination of net income is less than that which
would have been  recognized  if the fair value based  method had been applied to
all awards since the original  effective date SFAS No. 123. The following  table
illustrates  the effect on net income and  earnings  per share if the fair value
based method had been  applied to all  outstanding  and unvested  awards in each
period.

<TABLE>
<S>                                                                 <C>               <C>               <C>               <C>
                                                                      For the Three Months                For the Six Months
                                                                         Ended June 30,                      Ended June 30,
                                                                    2005              2004              2005              2004
                                                               --------------    --------------    --------------    --------------
Net Income, as reported                                        $      770,651    $      691,593    $    1,501,237    $    1,337,163
    Deduct: Total stock-based
       compensation expense determined
       under fair value based method for all
       awards, net of related tax effects                                   0           (31,000)                0           (62,000)
                                                               --------------    --------------    --------------    --------------
    Pro forma net income                                       $      770,651    $      660,593    $    1,501,237    $    1,275,163
                                                               ==============    ==============    ==============    ==============
Net income per share:
    Basic - As reported                                                   .36               .32               .70               .61
    Basic - Pro forma                                                     .36               .30               .70               .59
    Diluted - As reported                                                 .34               .29               .65               .56
    Diluted - Pro forma                                                   .34               .28               .65               .54
</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 six
months ended June 30, 2005 and 2004 are as follows:
<TABLE>
<S>                                                                  <C>               <C>               <C>               <C>
                                                                           Directors                          Officers
                                                                        --------------                     --------------
                                                                    2005              2004              2005              2004
                                                               --------------    --------------    --------------    --------------
Service cost                                                   $       18,182    $       31,604    $       57,621    $       92,140
Interest cost on projected benefit obligation                          21,221            10,909             7,566            34,552
Amortization of unrecognized liability at
 transition                                                            (4,751)                             38,449           (15,089)
                                                               --------------    --------------    --------------    --------------

Net periodic pension cost recognized                           $       34,652    $       42,513    $      103,636    $      111,603
                                                               ==============    ==============    ==============    ==============
</TABLE>


Note 7 - Subsequent Event

The Board of Directors declared a $.25 per share cash dividend to be distributed
on August 15, 2005, to holders of record on August 1, 2005.


                                     Page 9


<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,  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 Six Month Periods
Ended June 30, 2005 and 2004

Overview

The Company  continues to be profitable,  net income  increased by $164,074 from
$1,337,163  for the six months  ended June 30,  2004 to  $1,501,237  for the six
months  ended June 30,  2005.  On a per share  basis,  net income  equaled  $.70
compared with $.61 per share during the same period in 2004.

Return on average total assets on an annualized  basis for the six-month  period
was 1.33% in 2005 and 1.31% in 2004. Return on average  shareholders'  equity on
an  annualized  basis for the same periods was 14.22% and 12.45%,  respectively.
The increase in the return on average assets is the result of a 12.27%  increase
in net income.  Average  earning  assets  increased  from $185.8 million for the
first six  months of 2004 to $209.9  for the  comparable  period of 2005.  Lower
yielding Fed Funds were invested in higher  yielding loans and  securities.  The
higher  return on equity is the result of a $301,131  decline in average  equity
for the first six months of 2005 to $21.3  million  from $21.6  million  for the
same period of 2004.  This decline is a result of the tender offer closed on May
21, 2004 and the cash dividend paid in March, 2005.

The  increase  in net income is largely a result of the  $782,492  growth in net
interest  income from $4.9  million to $5.7  million,  a 15.9%  increase and the
$133,577 increase in non interest income from $812,112 to $945,689, which offset
the  expenses  associated  with the new branch,  Banco de Sonoma,  which  opened
during the first quarter of 2004.

The Company  continues  to  experience  loan and deposit  growth at the Banco de
Sonoma Office from $6.2 million in deposits and $653,462 in loans as of December
31, 2004 to $9.6  million in deposits  and $1.4  million in loans as of June 30,
2005. For the first three or four years the costs  associated with opening a new
office  will  have a  negative  effect  on  the  Company's  Consolidated  Income
Statement. For the year 2005, it is anticipated


                                     Page 10


<PAGE>



that the  additional  expense will  approximate  $200,000.  The Bank's branch is
offering  services  to the  Latino  community  in our market  place.  Management
identified  this as a niche market which was  underserved and an opportunity for
potential future growth and  profitability.  Most of the employees at the branch
are bilingual and the Bank offers full service  banking.  An additional  product
which has been  added is the  ability  for  customers  to  effect  an  immediate
transfer  of funds to  Mexico.  Management  anticipates  that the  growth in the
branch will be slow and steady and profitable within three or four years.

Total  shareholders'  equity increased by $1.2 million or 5.92% during the first
six months of 2005.  At June 30, 2005,  the Company  reported net income of $1.5
million.  In March the Company paid out $537,842 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 $51,840 year to date. The net income
figure of $1.5  million  reflects an expense  for the stock  options of $51,840,
therefore the net effect of the stock option transaction  relative to equity was
zero.  Directors  exercised  18,532  options which added $147,015 to the capital
accounts.  The tax benefit of these options was $106,531,  which also  increased
equity.  The net effect of this activity was capital of  $21,906,370  as of June
30, 2005, compared to capital of $20,681,160 as of December 31, 2004. See page 6
for detail of "Changes in Shareholder Equity."

Section 404 of the  Sarbanes-Oxley  Act of 2002  requires  the SEC to  prescribe
rules  requiring  the  evaluation of an issuer's  internal  control of financial
reporting.  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  that  the  Company's
auditors will be able to attest to the  effectiveness  of our internal  controls
over financial reporting.

The following  table sets forth the average  balances/yields  and rates paid for
the six months ended June 30, 2005 and 2004.


                                     Page 11


<PAGE>
                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
                 For the six months ended June 30, 2005 and 2004
                             (dollars in thousands)
<TABLE>
<S>                                    <C>             <C>            <C>              <C>              <C>             <C>
                                                           2005                                            2004
                                                       ------------                                    ------------

ASSETS                                    Average         Income/         Yield/          Average         Income/         Yield/
                                          Balance         Expense          Rate           Balance         Expense          Rate
                                       ------------    ------------    ------------    ------------    ------------    ------------
Interest-earning assets:
Loans(2):
  Commercial                           $    105,752    $      3,873           7.39%    $     92,696    $      3,267           7.09%
  Consumer                                   18,246             643           7.11%          13,307             458           6.92%
  Real estate construction                   21,629             805           7.51%          18,038             686           7.65%
  Real estate mortgage                        7,896             268           6.84%           3,353             132           7.92%
  Tax exempt loans (1)                        2,770             114           8.30%           3,067             128           8.39%
  Leases                                         43               2           9.38%              37               5          27.18%
  Tax exempt leases (1)                           0               0           0.00%               2               0           0.00%
  Unearned loan fees                           (478)                                           (440)
                                       ------------    ------------                    ------------    ------------
         Total loans                        155,858           5,705           7.38%         130,060           4,676           7.23%
Investment securities
  Available for sale:
         Taxable                             32,213             500           3.13%          23,574             417           3.56%
  Hold to maturity:
         Taxable                                376               5           2.68%             396               5           2.54%
         Tax exempt (1)                      16,761             480           5.78%          16,943             494           5.86%
                                       ------------    ------------                    ------------    ------------
         Total investment securities         49,350             985           4.02%          40,913             916           4.50%
Federal funds sold                            3,885              45           2.34%          14,032              64           0.92%
                FHLB Stock                      765              15           3.95%             495               6           2.44%
Total due from banks/Interest bearing            31               0           0.00%             274               4           2.94%
                                       ------------    ------------                    ------------    ------------
  Total interest earning assets             209,889    $      6,750           6.49%         185,774    $      5,666           6.13%
                                                       ============                                    ============
Noninterest-earning assets:
  Reserve for loan losses                    (2,573)                                         (2,475)
  Cash and due from banks                     6,817                                           9,530
  Premises and equipment                      1,317                                           1,355
  Other assets                               12,534                                          11,863
                                       ------------                                    ------------
           Total assets                $    227,984                                    $    206,047
                                       ============                                    ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing deposits
         Interest bearing transaction  $     34,262    $         29           0.17%    $     32,935    $         24           0.15%
         Savings deposits                    73,315             355           0.98%          65,316             203           0.63%
         Time deposits over $100,000         26,539             379           2.88%          25,747             333           2.60%
         Other time deposits                 19,233             236           2.47%          18,904             199           2.12%
                                       ------------    ------------                    ------------    ------------
           Total interest bearing
                    deposits                153,349             999           1.31%         142,902             759           1.07%
Federal funds purchased                           0               0           0.00%               0               0           0.00%
  Other short term borrowings                 4,171              62           3.00%               0               0           0.00%
                                       ------------    ------------                    ------------    ------------
           Total interest bearing
                     liabilities            157,520    $      1,061           1.36%         142,902    $        759           1.07%
                                                       ============                                    ============
Non interest bearing liabilities:
  Non interest bearing demand deposits       45,199                                          38,154
  Other liabilities                           3,972                                           3,397
  Shareholders' equity                       21,293                                          21,594
                                       ------------                                    ------------
         Total liabilities and
         shareholders' equity          $    227,984                                    $    206,047
                                       ============                                    ============
Interest rate spread                                                          5.13%                                           5.06%
                                                                              =====                                           =====
Interest income                                        $      6,750           6.49%                    $      5,666           6.13%
Interest expense                                              1,061           1.02%                             759           0.82%
                                                       ------------           -----                    ------------           -----
Net interest income/margin                             $      5,689           5.47%                    $      4,907           5.31%
                                                       ============           =====                    ============           =====
</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 $165,379 and $139,809 for the six
     months ended June 30, 2005 and 2004,  respectively,  were  amortized to the
     appropriate interest income categories.

                                     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  Balance,  Yields and Rates Paid, on page
12, 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 ($202,030 in 2005 and $211,427 in 2004,  based on a 34% federal income tax
rate).

The  improvement  in net interest  income for the six months ended June 30, 2005
(stated on a fully taxable  equivalent basis) is a result of the net effect of a
$1.1  million  increase  in  interest  income  offset by a $301,247  increase in
interest  expense,  resulting in net interest income of $782,492.  The 225 basis
point  increase  in the Fed Funds and Prime  lending  rates  contributed  to the
increase in net interest  income.  The Fed Funds rate increased from 1.00% as of
January  1,  2004 to 3.25%  as of June  30,  2005  and the  Prime  lending  rate
increased  from 4.00% in January  2004 to 6.25% as of June 30,  2005.  Fed Funds
were invested in higher  yielding loans and  investments  and many variable rate
loans moved off floors,  which allowed their yield to increase as interest rates
increased.

Net interest income (stated on a fully taxable  equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's  net  interest  margin for 2005  increased to 5.47% from 5.31% for the
same period in 2004.

Interest Income

As previously  stated,  interest  income  (stated on a fully taxable  equivalent
basis)  increased  by $1.1  million to $6.7 million in the six months of 2005, a
19.1% increase over the $5.7 million realized during the same period in 2004.

The $1.1 million  increase was the result of the 36 basis point  increase in the
yield on  earning  assets to 6.49% for the six months  ended June 30,  2005 from
6.13% for the same time period of 2004.  Contributing  to this  increase was the
$24.1 million or 12.98% increase in average earning assets to $209.9 million for
the first six months of 2005.

Interest Expense

Total  interest  expense  increased by $301,247 to $1.1 million from $759,408 an
increase of 39.7%.  The average  rate paid on all  interest-bearing  liabilities
increased  from 1.07% in 2004 to 1.36% in 2005.  Average  balances  of  interest
bearing  liabilities  increased from $142.9 million to $157.5  million,  a 10.2%
gain  in  earning  liabilities.  Of the  increase  in  average  interest-bearing
liabilities  $4.2  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 than  anticipated,  so the Company is continuing to
satisfy liquidity needs by borrowing at the Federal Home Loan Bank.

The gain in volume of average balances was responsible for a $39,000 increase in
interest  expense  and the higher  interest  rates paid were  responsible  for a
$262,000 increase in interest expense for a total increase of $301,000.

Individual  components of interest  income and interest  expense are provided in
the table-Average Balances, Yields and Rates Paid on page 12.


                                     Page 13


<PAGE>



Provision for Loan Losses

The provision for loan losses charged as of June 30, 2005 was $250,000  compared
to $30,000 for the same period of 2004. The provision for loan losses charged to
operations is based on the Company's  monthly  evaluation of the loan  portfolio
and the  adequacy  of the  allowance  for loan losses in relation to total loans
outstanding.  The Company  experienced  strong loan growth  during the first six
months of 2005 and  management  anticipates  that  loan  growth  will  continue,
requiring that additional provisions may be made for loan losses.  Additionally,
there are regulatory  concerns about  concentrations  of commercial  real estate
loans among many financial  institutions.  The Company does have a concentration
of  commercial   real  estate  loans  and  although  the  loans  are  adequately
collateralized,  management  determined that it would be prudent to increase the
provision.

The economic climate continues to improve and the non-performing assets to total
loans  ratio  continues  to be below 1%.  Loans  charged-off  were  $36,936  and
recoveries  were $48,109 for the six months of 2005  compared  with  $290,604 in
charge-offs and $12,041 in recoveries for the same period in 2004.

Non-interest Income

Non-interest  income of $945,689  increased 16.45% from the $812,112 recorded in
the comparable period in 2004. The most significant  increase was in the service
charges on deposit accounts which grew $105,809 from $513,939 for the six months
ended June 30, 2004  compared to $619,748 for June 2005,  an increase of 20.59%.
Other fee income also showed strong growth of $31,609 from $130,131 to $161,740,
an  increase  of 24.29%.  Credit  card  merchant  processing  fees were  largely
responsible for the increase.

Non-interest Expense

Total non-interest  expense increased 10.7% to $3.9 million during the first six
months of 2005 from $3.5  million  for the same  period in 2004,  an increase of
$378,242.  Non-interest  expense on an  annualized  basis  represented  3.47% of
average  total assets in 2005 compared  with 3.45% in the  comparable  period in
2004. The increase in the 2005 expense ratio largely  reflects  ongoing expenses
incurred relative to our new branch, Banco de Sonoma and the expenses associated
with the implementation of Section 404 of the Sarbanes-Oxley Act of 2002.

Salaries and benefits  increased 10.7% from $2.0 million in 2004 to $2.2 million
in 2005. The 2004 increase  reflects normal merit increases and benefit costs as
well as the staffing and benefit  costs  required for the Banco de Sonoma branch
which opened during the first quarter of 2004. At June 30, 2005, total full time
equivalent employees were 52 compared to 56 in 2004.

Expense related to premises and equipment  increased  10.39% to $477,024 in 2005
from  $432,110  in 2004.  The  increase  in  expense  in 2005 is a result of the
addition  of  the  Finance  Center  and  the  remodeling  required  to  make  it
serviceable.  The  Company  continues  to  emphasize  security  in its  computer
operations  and equipment and software are monitored and upgraded as appropriate
to ensure  confidentiality  of customer and Company data and also emphasized the
utilization of technology to generate efficiencies  throughout the organization.
In 2005 the Company no longer  receives  rental income for the property owned at
472 Second  Street West,  Sonoma,  California  and the Company in the process of
evaluating how to best utilize the property.

Other  operating  expenses  increased by 10.8% in 2005 to $1.2 million from $1.1
million in 2004.  The  category  of expense  showing a  significant  increase is
professional  fees which shows growth of $147,523 over 2004.  This is the result
of  additional  accruals  for expenses  associated  with the  implementation  of
Sarbanes-Oxley, Rule 404, regarding internal controls over financial reporting.


                                     Page 14


<PAGE>



Provision for Income Taxes

The provision  for income taxes  declined to an effective tax rate of 33.73% for
the six months of 2005  compared  with  31.01%  for the six months of 2004.  The
higher effective tax rate is a reflection of the increase in taxable income when
compared with income derived from tax exempt investments.  Income taxes reported
in the  financial  statements  include  deferred  taxes  resulting  from  timing
differences  in the  recognition  of  items  for  tax  and  financial  reporting
purposes.


BALANCE SHEET ANALYSIS

Investments

Investment securities were $52.2 million at June 30, 2005, a 38.5% increase from
the $37.7  million at December 31, 2004 and a 24.2%  increase from $42.0 million
at June 30, 2004.  The  significant  increase in the  portfolio is  management's
attempt  to  generate  higher  earnings  by moving  funds from Fed Funds Sold to
higher  yielding  investments.  The Company 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 June 30,
2005, the Company had  securities  totaling $17.0 million with a market value of
$17.5 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 $35.2 million  compared to an amortized cost
of $35.5 million as of June 30, 2005.

There were twenty nine Federal Farm Credit Bank, Federal Home Loan Bank, Federal
Home  Loan  Mortgage   Corporation  or  Federal  National  Mortgage  Association
securities of $28.7 million and six U.S. Treasury  securities of $5.4 million in
the AFS  portfolio and sixteen  municipal  securities of $5.2 million in the HTM
portfolio that are temporarily impaired as of June 30, 2005. Of the above, there
were seventeen  Federal Farm Credit Bank,  Federal Home Loan Bank,  Federal Home
Loan Mortgage Corporation or Federal National Mortgage Association securities of
$16.7 million in the AFS portfolio and six municipal  securities of $2.0 million
in the HTM portfolio that have been in a continuous  loss position for 12 months
or more as of June  30,  2005.  The  primary  cause of the  impairment  of these
securities is interest  rate  volatility  inherent in a rising rate  environment
which causes the market value of the security to decline.  Management understood
the potential market risks at the time of acquisition and determined the benefit
to the  Company of the  higher  interest  rates  received  more than  offset the
potential  deterioration  in  value.  It is the  Company's  intent  to carry the
securities  to maturity  date, at which time the Company will receive face value
for the securities at no loss.

Although the quoted market values fluctuate, investment securities are generally
held to  maturity,  and  accordingly,  gains and  losses are  recognized  in the
accounts upon sale, or at such time as  management  determines  that a permanent
decline in value exists.  In the opinion of management,  there was no investment
in


                                     Page 15


<PAGE>



securities  at June 30,  2005 that  constituted  a material  credit  risk to the
Company.  The lower market value to amortized costs was a result of the increase
in market interest rates and not an indication of lower credit quality.

As of June 30, 2005,  investment securities with a carrying amount of $6,589,448
and an approximate  fair value of $6,906,348  were pledged,  in accordance  with
federal and state  requirements,  as collateral for public deposits.  Investment
securities  with a carrying amount of $5,428,611 and fair value of $5,362,593 at
June 30, 2005 were pledged to meet the  requirements  of the Federal Reserve and
the U.S. Department of Justice.

Loans

The Company's  loan  portfolio was $160.9  million at June 30, 2005, or 80.4% of
total deposits.  This compares with $153.2 million,  or 79.1% of total deposits,
at December 31, 2004 and $141.9 million, or 75.6% of total deposits, at June 30,
2004. A comparative  schedule of average loan balances is presented in the table
on page 12;  period-end  and year-end  balances are  presented in the  following
table.

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

Commercial                        $   110,303,513       68.3%    $   109,324,569       71.2%    $   101,715,639       71.4%
Consumer                               19,621,946       12.2%         16,249,913       10.6%         14,327,942       10.1%
Real estate construction               19,696,683       12.2%         20,291,506       13.2%         20,742,197       14.6%
Real estate mortgage                   11,761,509        7.3%          7,732,177        5.0%          5,526,690        3.9%
Leases                                     37,694        0.0%             47,717        0.0%             27,790        0.0%
                                  ---------------    --------    ---------------    --------    ---------------    --------
                                      161,421,345      100.0%        153,645,882      100.0%        142,340,258      100.0%
                                                     ========                       ========                       ========
Deferred loan fees
 and costs, net                          (481,390)                      (485,223)                      (485,378)
Allowance for loan
 and lease losses                      (2,689,745)                    (2,428,572)                    (2,386,062)
                                  ---------------                ---------------                ---------------

                                  $   158,250,210                $   150,732,087                $   139,468,818
                                  ===============                ===============                ===============
</TABLE>


As of March 31,  2005,  $104,455,000  in loans were  pledged at the Federal Home
Loan Bank as collateral  for $5,500,000 in  borrowings.  In September,  2005 the
Company should receive an updated report based on June 30, 2005 numbers.

Risk Elements

The majority of the Company's  loan activity is with  customers  located  within
Sonoma County.  Approximately 88% of the total loan portfolio is secured by real
estate located in the Company's service area.

Significant  concentrations  of  credit  risk  may  exist  if a  number  of loan
customers  are  engaged  in  similar   activities  and  have  similar   economic
characteristics.  The  Company  believes  it has  policies  in place to identify
problem loans and to monitor concentrations of credits.

Non Performing Assets

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



                                     Page 16


<PAGE>



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  non-accrual loans and no loans 90 days or more past due
and still accruing at June 30, 2005 down slightly from $1.1 million  non-accrual
loans and no loans 90 days or more past due and still accruing at June 30, 2004.
As of June 30, 2005,  there were $89,552 in loans classified as restructured and
as of June 30, 2004 there were $18,102 in loans classified as restructured.

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 June 30,  2005 the  Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.

At June 30, 2005,  the allowance  for loan losses was $2.7 million,  or 1.67% of
period-end loans,  compared with $2.4 million, or 1.59% at December 31, 2004 and
$2.4 million, or 2.68% at June 30, 2004.




                                     Page 17


<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 Six Months    For the Year   For the Six Months
                                                Ended              Ended             Ended
                                               6/30/05           12/31/04           6/30/04
Balance beginning of year                   $    2,428,572    $    2,634,625    $    2,634,625
Charge-offs:
 Commercial                                        (20,198)         (290,000)         (290,000)
 Consumer                                          (16,738)          (63,007)             (604)
                                            --------------    --------------    --------------
                      Total charge-offs            (36,936)         (353,007)         (290,604)
                                            --------------    --------------    --------------
Recoveries:
 Commercial                                         48,109            15,416            10,695
 Consumer                                                0             1,538             1,346
                                            --------------    --------------    --------------
                       Total recoveries             48,109            16,954            12,041
                                            --------------    --------------    --------------
Net recoveries (charge-offs)                        11,173          (336,053)         (278,563)
                                            --------------    --------------    --------------
Provision charged to operations                    250,000           130,000            30,000
                                            --------------    --------------    --------------
Balance end of period                       $    2,689,745    $    2,428,572    $    2,386,062
                                            ==============    ==============    ==============
Ratio of net charge-offs/(recoveries)
 annualized to average loans                         -0.01%             0.24%             0.43%
Balance in allowance as a percentage
  of loans outstanding at period end                  1.67%             1.59%             1.68%
</TABLE>



Deposits

A comparative  schedule of average deposit balances is presented in the table on
page 12;  period  end and  year-  end  deposit  balances  are  presented  in the
following table.
<TABLE>
<S>                          <C>                <C>         <C>                <C>        <C>                <C>
                                 June 30,      Percentage    December 31,    Percentage     June 30,       Percentage
                                   2005         of Total         2004         of Total        2004          of Total
                             ---------------    -------    ---------------    -------    ---------------    -------

Interest bearing
 transaction deposits        $    32,399,866      16.2%    $    34,912,205      18.0%    $    32,377,851      17.3%
Savings deposits                  72,881,168      36.4%         70,254,926      36.3%         68,092,556      36.3%
Time deposits,
 $100,000 and over                27,637,667      13.8%         25,307,661      13.1%         24,840,625      13.2%
Other time deposits               20,286,030      10.2%         18,630,846       9.6%         18,555,309       9.9%
                             ---------------    -------    ---------------    -------    ---------------    -------
Total interest bearing
  deposits                       153,204,731      76.6%        149,105,638      77.0%        143,866,341      76.7%
Demand deposits                   46,921,796      23.4%         44,557,377      23.0%         43,813,055      23.3%
                             ---------------    -------    ---------------    -------    ---------------    -------
Total deposits               $   200,126,527     100.0%    $   193,663,015     100.0%    $   187,679,396     100.0%
                             ===============    =======    ===============    =======    ===============    =======
</TABLE>


Total deposits  increased by $6.5 million,  during the first six months of 2005,
to $200.1  million from $193.7  million at December 31, 2004, and $187.7 million
as of June 30, 2004. As of June 30, 2005, non interest  demand was $46.9 million
compared to $44.6 million as of December 31, 2004 showing growth of $2.4 million


                                     Page 18


<PAGE>



or 5.3% and savings  deposits  (including money market savings) showed growth of
$2.6  million or 3.7% to $72.9  million  from $70.3  million as of  December  31
,2004. Time deposits greater than $100,000 showed growth of $2.3 million or 9.2%
from $25.3  million as of December 31, 2004 to $27.6 million as of June 30, 2005
and other time deposits were $20.3 million compared to $18.6 million an increase
of 8.9% or 1.7  million.  Interest  bearing  checking  was the only  category of
deposits  which showed a decrease  from $34.9 million as of December 31, 2004 to
$32.4 million as of June 30, 2005, a 7.2% decline or $2.5 million.  This decline
in interest  bearing  checking could be the result of customers  moving funds to
higher yielding deposit accounts.

With the future of  interest  rates  uncertain  the Company  cannot  predict how
quickly rates may change on deposit  accounts which could cause the net interest
margin to decline,  resulting in lower net income.  Already the Company has seen
an increase in the yield on deposits  from 1.07% as of June 30, 2004 to 1.31% as
of June 30, 2005, a 24 basis point increase.

Although  the Company has  experienced  strong  deposit  growth this year,  loan
demand  has far out  paced  deposit  growth,  therefore  the  Company  has taken
advantage  of its  ability  of  borrow at the  Federal  Home  Loan  Bank.  These
short-term  borrowings are responsible for a 5 basis point increase in the yield
of interest bearing liabilities or 29 basis points over the prior year, as shown
on the  table-Average  Balance,  Yields and Rates Paid, on page 12. The decision
was made by  management  that it was more cost  effective  to borrow  instead of
paying higher rates of interest on deposits.

Risk-Based Capital

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

The FDIC has also adopted  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 June 30,  2005 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
------------    -----------     --------    ----------    --------    ---------

$    198,317    $    20,724      10.45%     $   23,206       11.70%       8.99%

Off Balance Sheet Commitments

The Company's off balance sheet  commitments  consist of  commitments  to extend
credit of $32.9  million  and  standby  letters  of credit  of  $290,000.  These
commitments  are  extended to customers  in the normal  course of business.  The
Company also has  contractual  obligations  consisting  of operating  leases for
various facilities and


                                     Page 19


<PAGE>



payments to participants under the Company's  supplemental  executive retirement
plan and deferred compensation plan.

There have been no significant  changes in these  contractual  obligations since
December 31,  2004,  other than the exercise of a 5 year option on the lease for
the  operations  center  building,  which  increases  the annual  obligation  by
approximately $42,000.

Market Risk Management

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

Asset/Liability  Management.  Activities involved in asset/liability  management
include but are not  limited to lending,  accepting  and  placing  deposits  and
investing  in  securities.  Interest  rate  risk  is  the  primary  market  risk
associated with asset/liability management.  Sensitivity of earnings to interest
rate changes  arises when yields on assets change in a different  time period or
in a different  amount from that of interest costs on  liabilities.  To mitigate
interest rate risk,  the structure of the balance sheet is managed with the goal
that  movements of interest rates on assets and  liabilities  are correlated and
contribute to earnings even in periods of volatile interest rates. When interest
rates increase,  the market value of securities held in the investment portfolio
declines.  Generally,  this decline is offset by an increase in  earnings.  When
interest rates decline,  the market value of securities increases while earnings
decrease due to the bank's asset sensitivity  caused by the variable rate loans.
Usually the Company is able to mitigate its risk from changes in interest  rates
with  this  balance  sheet  structure.  At  the  present  time,  the  market  is
experiencing  an anomaly  from  historical  norms.  While  short term rates have
increased  over the past year as a result of the Federal  Open Market  Committee
increasing the Fed Funds target rate from 1.00% to 3.25%, the long term interest
rates have actually  declined from June,  2004. The  asset/liability  management
policy sets limits on the acceptable  amount of variance in net interest  margin
and market value of equity under  changing  interest  environments.  The Company
uses  simulation  models to forecast  earnings,  net interest  margin and market
value of equity.

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




                                     Page 20


<PAGE>



Interest  Rate Risk  Simulation  of Net Interest  Income as of June 30, 2005
(In thousands)

Variation from a constant rate scenario            $ Change in NII
                  +200bp                                   $  (690)
                  +100bp                                      (345)
                  -100bp                                      (211)
                  -200bp                                      (277)

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.

The primary tool used by management to measure and manage interest rate exposure
is a  simulation  model.  Use of the  model to  perform  simulations  reflecting
changes in interest rates over a twelve month horizon has enabled  management to
develop and initiate  strategies  for managing  exposure to interest rate risks.
Management  believes  that both  individually  and in the aggregate its modeling
assumptions  are  reasonable,  but the  complexity  of the  simulation  modeling
process  results  in  a  sophisticated   estimate,  not  an  absolutely  precise
calculation of exposure.

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

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

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

The Company has more  liabilities  than assets  repricing  during the next year.
Usually  because the Company's  asset rates change more than deposit rates,  the
Company's  interest  income  will  change more than the cost of funds when rates
change.  For the  current  quarter,  the  Company is making a more  conservative
assumption.  Historically, the Company has been able to raise deposit rates with
a lag to loan rate  increases,  however loan rates have remained flat and market
demands are creating pressure to raise interest rates. Therefore for a period


                                     Page 21


<PAGE>



of time the Company has chosen to use the simulation to forecast  deposits rates
rising  quite  rapidly.  This causes the net  interest  margin to shrink and net
interest income to decline.

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  June  30,  2005  for  the  Company's
interest-bearing  assets and  interest-bearing  liabilities,  and the  Company's
interest rate sensitivity gap as a percentage of total interest- earning assets.
The table  shows  $137.0  million in the over  twelve  month  category,  of that
amount, only $43.7 million has a maturity or repricing of over 5 years, compared
to demand deposits and capital of $67.5 million.

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

Fed Funds Sold                        $       0   $       0   $       0   $       0   $       0   $       0
 Securities + IBB                             0       1,195       3,022       6,043      41,960      52,220
Loans                                    39,404       4,613       6,731      12,500      95,002     158,250
                                      ---------   ---------   ---------   ---------   ---------   ---------
     Total RSA                        $  39,404   $   5,808   $   9,753   $  18,543   $ 136,962   $ 210,470


MMDA/NOW/SAV                          $ 105,281   $       0   $       0   $       0   $       0   $ 105,281
CDs < $100k                                   0       5,542       5,476       5,476       3,793      20,287
CDs > $100k                                   0       9,793       8,283       2,071       7,491      27,638
Borrowings                                5,500           0           0           0           0       5,500
                                      ---------   ---------   ---------   ---------   ---------   ---------
     Total RSL                        $ 110,781   $  15,335   $  13,759   $   7,547   $  11,284   $ 158,706

Gap                                     (71,377)     (9,527)     (4,006)     10,996     125,678      51,764
Cumulative                              (71,377)    (80,904)    (84,910)    (73,914)     51,764

% of Assets                              -30.80%     -34.90%     -36.70%     -31.90%      22.40%
</TABLE>


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

The Bank has only  moderate  market  risk in  investments  because  the  average
maturity in the  portfolio is not very long,  except for  municipals,  which are
held to maturity.  The portfolio should decline in value only about 2.1% or $1.1
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).





                                     Page 22


<PAGE>



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

Overview

The  Company  reported  net income of  $770,651  for the second  quarter of 2005
compared with $691,593 for the second quarter of 2004. On a per share basis, net
income for the three months ended June 30, 2005 equaled $.36 per share  compared
with $.32 per share during the same period in 2004.

Return on average total assets on an annualized basis for the three months ended
June 30,  2005 and 2004 was 1.34% and  1.33%,  respectively.  Return on  average
shareholders'  equity on an annualized basis for the three months ended June 30,
2005 and 2004 was 14.4% and 13.2%, respectively.  The increases in the return on
assets and the return on equity are a result of the strong earnings in 2005 when
compared to 2004.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income,  adjusted to a fully taxable  equivalent  basis,  increased
$304,213 to $2.9 million for the three months ended June 30, 2005, up 11.8% from
the $2.6 million in the  comparable  period of 2004.  Net  interest  income on a
fully taxable  equivalent basis, as shown on the table Average Balances,  Yields
and Rates Paid on page 25, 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 ($99,154 in 2005 and $106,496 in 2004,  based on a
34% federal income tax rate).

Net interest income (stated on a fully taxable  equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's net interest  margin for the second quarter of 2005 decreased to 5.47%
from  5.53% for the  comparable  period in 2004.  This  variance  is caused by a
greater increase in interest  expense on interest  bearing  liabilities than the
increase in interest income on interest earning assets.

Interest Income

Interest  income for the three months ended June 30, 2005  increased by $520,104
to $3.5 million, a 17.6% increase from the $3.0 million realized during the same
period in 2004.

The $520,104 increase was the result of the 26 basis point increase in the yield
on earning  assets to 6.60% for the three  months ended June 30, 2005 from 6.34%
for the same period of 2004. Contributing to this increase was the $23.8 million
or 12.7%  increase in average  earning  assets to $211.4  million for the second
quarter of 2005.

Interest Expense

Total  interest  expense for the three months  ended June 30, 2005  increased by
$215,891  to $593,026  compared  with  $377,135 in the same period of 2004.  The
average rate paid on all interest-bearing  liabilities for the second quarter of
2005  increased to 1.50% from 1.05% in the second  quarter of 2004,  and average
balances for the second  quarter of 2005 increased to $159.0 million from $144.9
million in the same period of 2004, a 9.7% gain.



                                     Page 23


<PAGE>



The gain in volume of average balances was responsible for a $25,000 increase in
interest  expense  compounded by a $191,000  increase related to higher interest
rates paid for a total increase of $216,000.

Individual  components of interest  income and interest  expense are provided in
the table Average Balances, Yields and Rates Paid on page 25.

Provision for Loan Losses

The provision for loan losses was $160,000 during the second quarter of 2005 and
there was a provision of $30,000 for the second quarter of 2004. The increase in
the provision is the result of  managements'  evaluation  and  assessment of the
loan portfolio as a result of the growth in loans.

Non-interest Income

Non-interest  income of $486,592 for the second  quarter of 2005  represented an
increase of $95,846,  or 24.5%,  from the $390,746 for the comparable  period in
2004. Income from service charges on deposit accounts was a major contributor to
the growth in income over 2004.

Non-interest Expense

For the second quarter of 2005,  non-interest  expense was $1.9 million compared
with $1.8  million  for the same  period in 2004,  representing  an  increase of
$120,834,  or 6.6%. The largest  increase of non interest expense was salary and
benefits  expense,  which increased  $61,051 or 5.8% to $1.12 million,  compared
with $1.06  million for the three months  ended June 30,  2004.  The increase is
largely a result of normal merit increases and increases in benefits costs.  The
full time equivalent  employees at June 30, 2005 was 52 compared with 56 at June
30, 2004.

Premises and equipment expense grew 18.2% or $38,079, to $247,719 for the second
quarter of 2005 from $209,640 for the second  quarter of 2004. The increase is a
result of the  additional  costs  associated  with the lease of the new  Finance
Center location.

Other non interest expense for the three months ended June 30, 2005 increased by
3.9% to $577,651  compared  to $555,947 in the same period in 2004.  The largest
increase is in professional  fees and accruals for expense  relative to Sarbanes
Oxley, Section 404.

Provision for Income Taxes

The  provision  for income taxes  increased to an effective tax rate of 34.0% in
the second  quarter of 2005  compared  with 31.5% for the  comparable  period in
2004.  Income taxes reported in the financial  statement  include deferred taxes
resulting  from  timing  differences  in the  recognition  of items  for tax and
financial reporting purposes.



                                     Page 24


<PAGE>
                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
                For the three months ended June 30, 2005 and 2004
                             (dollars in thousands)
<TABLE>
<S>                                    <C>              <C>           <C>              <C>              <C>            <C>
                                                           2005                                             2004
                                                       ------------                                    ------------

ASSETS                                    Average         Income/         Yield/          Average         Income/         Yield/
                                          Balance         Expense          Rate           Balance         Expense          Rate
                                       ------------    ------------    ------------    ------------    ------------    ------------
Interest-earning assets:
Loans(2):
  Commercial                           $    107,638    $      2,000           7.45%    $     97,231    $      1,718           7.11%
  Consumer                                   19,274             352           7.33%          14,341             243           6.82%
  Real estate construction                   20,873             397           7.63%          18,944             352           7.47%
  Real estate mortgage                        8,502             143           6.75%           4,474              82           7.37%
  Tax exempt loans (1)                        2,579              53           8.24%           3,065              64           8.40%
  Leases                                         40               1          10.03%              32               2          25.15%
  Unearned loan fees                           (476)                                           (466)
                                       ------------    ------------                    ------------    ------------
         Total loans                        158,430           2,946           7.46%         137,621           2,461           7.19%
Investment securities
  Available for sale:
         Taxable                             35,037             275           3.15%          23,951             217           3.64%
  Hold to maturity:
         Taxable                                373               2           2.15%             393               2           2.05%
         Tax exempt (1)                      16,671             239           5.75%          17,133             249           5.85%
                                       ------------    ------------                    ------------    ------------
         Total investment securities         52,081             516           3.97%          41,477             468           4.54%
Federal funds sold                                0               0           0.00%           7,566              17           0.90%
FHLB Stock                                      819              15           7.35%             695               6           3.47%
Total due from banks/interest bearing            27               0           0.00%             216               4           7.45%
                                       ------------    ------------                    ------------    ------------
  Total interest-earning assets             211,357           3,477           6.60%         187,575           2,956           6.34%
                                                       ============                                    ============
Non interest-earning assets:
  Reserve for loan losses                    (2,627)                                         (2,375)
  Cash and due from banks                     7,508                                           9,841
  Premises and equipment                      1,293                                           1,379
  Other assets                               12,679                                          11,984
                                       ------------                                    ------------
                         Total assets      $230,210                                        $208,404
                                       ============                                    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest-bearing deposits
    Interest-bearing transaction       $     33,849    $         14           0.17%    $     33,745    $         12           0.14%
    Savings deposits                         70,952             192           1.09%          67,280             105           0.63%
    Time deposits over $100,000              27,190             203           2.99%          25,153             163           2.61%
    Other time deposits                      19,812             129           2.61%          18,714              97           2.08%
                                       ------------    ------------                    ------------    ------------
      Total interest-bearing deposits       151,803             538           1.42%         144,892             377           1.05%
  Other short-term borrowings                 7,196              55           3.07%               0               0           0.00%
                                       ------------    ------------                    ------------    ------------
      Total interest-bearing liabilities    158,999    $        593           1.50%         144,892    $        377           1.05%
                                                       ============                                    ============
Non interest-bearing liabilities:
  Non interest-bearing demand deposits       45,642                                          39,151
  Other liabilities                           4,113                                           3,420
                 Shareholders' equity        21,456                                          20,941
                                       ------------                                    ------------
                Total liabilities and
                 shareholders' equity  $    230,210                                    $    208,404
                                       ============                                    ============
Interest rate spread                                                          5.10%                                           5.29%
                                                                              =====                                           =====
Interest income                                        $      3,477           6.60%                    $      2,956           6.34%
Interest expense                                                593           1.13%                             377           0.81%
                                                       ------------           -----                    ------------           -----
Net interest income/margin                             $      2,884           5.47%                    $      2,579           5.53%
                                                       ============           =====                    ============           =====
</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 $89,271 and $69,465 for the three
     months ended June 30, 2005 and June 30, 2004, respectively,  were amortized
     to the appropriate interest income categories.


                                     Page 25
<PAGE>



Item 3.  QUANTITATIVE  AND QUALITATIVE  DISCLOSURE ABOUT MARKET RISK Information
regarding Quantitative and Qualitative  Disclosures about Market Risk appears on
page 15 under  "Investments"  and on  pages 20  through  22  under  the  caption
"Management's  Discussion and Analysis of Consolidated  Financial  Condition and
Results of Operations - Market Risk  Management" and is  incorporated  herein by
reference.

Item 4.  CONTROLS AND PROCEDURES

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

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

                                     Part II

Item 1.  LEGAL PROCEEDINGS

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

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

None

Item 3.  DEFAULTS UPON SENIOR SECURITIES

None




                                     Page 26


<PAGE>



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

The  Company  held the  annual  meeting of  shareholders  on May 18,  2005.  The
following table sets forth the proposals and outcome from the voting.

Proposal Number 1         Election of Directors; and

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

Nominees                  Shares Voted For              Shares Withholding
                                                      Authority/Voted Against
Suzanne Brangham             1,715,038                        13,572
Dale T. Downing              1,684,924                        43,686
Fred H. Harland              1,669,286                        59,324
Robert B. Hitchcock          1,723,436                         5,174
Gerald J. Marino             1,537,419                       191,191
Gary D. Nelson               1,655,342                        73,268
Robert J. Nicholas           1,650,019                        78,591
Angelo C. Sangiacomo         1,723,436                         5,174
J. Robert Stone              1,721,959                         6,651
Mel Switzer, Jr.             1,651,526                        77,084
Harry Weise                  1,652,412                        76,198
</TABLE>



Proposal Number 2         Ratification of Richardson and Company

Total shares voted:       For          Against       Abstain/Broker Non-Votes
                      ----------       --------      ------------------------
                       1,636,304        71,787                20,519

Item 5.  OTHER INFORMATION

None

Item 6.  EXHIBITS

(a)  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

(b)  Reports on Form 8-K

          (i)  Form 8-K  filed on April  15,  2005  announcing  March  31,  2005
               quarter ended results.
          (ii) Form 8-K filed on July 11, 2005  announcing June 30, 2005 quarter
               ended results.


                                     Page 27

<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




Date:   August 5, 2005       /s/ Mel Switzer, Jr.
     -----------------       ---------------------------------------------------
                             Mel Switzer, Jr.
                             President and Chief Executive Officer
                             (Principal Executive Officer)




Date:  August 5, 2005        /s/ Mary Dieter Smith
     ----------------        ---------------------------------------------------
                             Mary Dieter Smith
                             Executive Vice President and
                             Chief Operating Officer and Chief Financial Officer
                             (Principal Financial and Accounting Officer)



                                     Page 28