----

----

|   | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
|--------|---|-----------------------------------------------------------------------------|

|   |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
|--------|--------|------------------------------------------------------------------------------|

| 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)                           |

----

| Part I  Financial Information                                                                                                                                                    | Page Number |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                                                                                                                       |        |
| Item 1. Financial Statements (Unaudited):                                                                                                                                                  |        |
|                                                                                                                                                                                       |        |
|      Consolidated Balance Sheets at June 30, 2010, December 31, 2009 and June 30, 2009                                                                            | 3           |
|                                                                                                                                                                                       |        |
|      Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009                                                         | 4           |
|                                                                                                                                                                                       |        |
|      Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2010, and the years ended December 31, 2009 and 2008 | 5           |
|                                                                                                                                                                                       |        |
|      Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009                                                                   | 7           |
|                                                                                                                                                                                       |        |
|      Notes to Consolidated Financial Statements                                                                                                                   | 8           |
|                                                                                                                                                                                       |        |
|             Average Balances/Yields and Rates Paid for the six months ended June 30, 2010 and 2009                        | 15          |
|                                                                                                                                                                                       |        |
|  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                        | 16          |
|                                                                                                                                                                                       |        |
|             Average Balances/Yields and Rates Paid for the three months ended June 30, 2010 and 2009                      | 34          |
|                                                                                                                                                                                       |        |
|  Item 3. Quantitative and Qualitative Disclosure About Market Risk                                                                                                                    | 38          |
|                                                                                                                                                                                       |        |
|  Item 4. Controls and Procedures                                                                                                                                                      | 38          |
|                                                                                                                                                                                       |        |
|  Part II  Other Information                                                                                                                                                 |        |
|                                                                                                                                                                                       |        |
|  Item 1. Legal Proceedings                                                                                                                                                            | 39          |
|                                                                                                                                                                                       |        |
|  Item 1A. Risk Factors                                                                                                                                                                | 39          |
|                                                                                                                                                                                       |        |
|  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                  | 41          |
|                                                                                                                                                                                       |        |
|  Item 3. Defaults Upon Senior Securities                                                                                                                                              | 41          |
|                                                                                                                                                                                       |        |
|  Item 4. (Removed and Reserved)                                                                                                                                                       | 41          |
|                                                                                                                                                                                       |        |
|  Item 5. Other Information                                                                                                                                                            | 41          |
|                                                                                                                                                                                       |        |
|  Item 6. Exhibits                                                                                                                                                                     | 42          |
|                                                                                                                                                                                       |        |
|  Signatures                                                                                                                                                                           | 43          |
|                                                                                                                                                                                       |        |
| Certifications                                                                                                                                                                             | 44          |

----

FINANCIAL STATEMENTS

|                                                                                                                                                                                                                                 |   | June 30, 2010 |        |   | December 31, 2009 |   |             | June 30, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|------------------------|--------|------------------|--------------------|--------|
| ASSETS                                                                                                                                                                                                                               |   |               |        |   |                   |   |             |               |   |
| Cash and due from banks                                                                                                                                                                                                              |   | $                  | 4,268,625   |   |                   | $      | 4,709,249        |               |   | $ | 5,090,908 |   |
| Interest-bearing due from banks                                                                                                                                                                                                      |   |               | 44,049,071  |   |                   |   | 28,940,255       |               |   |   | 17,356,713 |   |
| Total cash and cash equivalents                                                                                                                                                                                                      |   |               | 48,317,696  |   |                   |   | 33,649,504       |               |   |   | 22,447,621 |   |
| Investment securities available-for-sale at fair value                                                                                                                                                                               |   |               | 15,894,976  |   |                   |   | 20,450,100       |               |   |   | 6,503,448 |   |
| Investment securities held-to-maturity (fair value of $5,198,108, $13,285,165 and $13,863,926 respectively)                                                                                                                          |   |               | 5,130,958   |   |                   |   | 12,899,779       |               |   |   | 13,569,659 |   |
| Loans and lease financing receivables, net                                                                                                                                                                                           |   |               | 240,660,682 |   |                   |   | 258,171,969      |               |   |   | 277,574,850 |   |
| Premises and equipment, net                                                                                                                                                                                                          |   |               | 530,980     |   |                   |   | 591,271          |               |   |   | 662,733 |   |
| Accrued interest receivable                                                                                                                                                                                                          |   |               | 1,256,484   |   |                   |   | 1,604,544        |               |   |   | 1,678,394 |   |
| Other real estate owned                                                                                                                                                                                                              |   |               | 2,308,171   |   |                   |   | 3,852,349        |               |   |   | 243,610 |   |
| Cash surrender value of life insurance                                                                                                                                                                                               |   |               | 11,352,678  |   |                   |   | 11,161,018       |               |   |   | 10,962,563 |   |
| Other assets                                                                                                                                                                                                                         |   |               | 11,728,397  |   |                   |   | 15,385,104       |               |   |   | 8,879,017 |   |
| Total assets                                                                                                                                                                                                                         |   | $                  | 337,181,022 |   |                   | $      | 357,765,638      |               |   | $ | 342,521,895 |   |
| LIABILITIES                                                                                                                                                                                                                          |   |               |        |   |                   |   |             |               |   |   |   |   |
| Noninterest-bearing demand deposits                                                                                                                                                                                                  |   | $                  | 54,198,323  |   |                   | $      | 51,902,932       |               |   | $ | 48,107,294 |   |
| Interest-bearing transaction deposits                                                                                                                                                                                                |   |               | 38,083,165  |   |                   |   | 33,110,822       |               |   |   | 28,164,005 |   |
| Savings and money market deposits                                                                                                                                                                                                    |   |               | 77,896,798  |   |                   |   | 96,053,335       |               |   |   | 92,803,924 |   |
| Time deposits, $100,000 and over                                                                                                                                                                                                     |   |               | 54,611,279  |   |                   |   | 75,730,229       |               |   |   | 56,469,137 |   |
| Other time deposits                                                                                                                                                                                                                  |   |               | 30,680,751  |   |                   |   | 34,911,841       |               |   |   | 36,449,080 |   |
| Total deposits                                                                                                                                                                                                                       |   |               | 255,470,316 |   |                   |   | 291,709,159      |               |   |   | 261,993,440 |   |
| Other borrowings                                                                                                                                                                                                                     |   |               | 60,000,000  |   |                   |   | 40,000,000       |               |   |   | 35,000,000 |   |
| Accrued interest payable and other liabilities                                                                                                                                                                                       |   |               | 3,478,344   |   |                   |   | 7,208,298        |               |   |   | 7,400,750 |   |
| Total liabilities                                                                                                                                                                                                                    |   |               | 318,948,660 |   |                   |   | 338,917,457      |               |   |   | 304,394,190 |   |
| SHAREHOLDERS' EQUITY                                                                                                                                                                                                                 |   |               |        |   |                   |   |             |               |   |   |   |   |
| Preferred stock, no par value; $1,000 per share liquidation  preference; 2,000,000 shares authorized; 8,653 Series A and 433 Series B shares at June 30, 2010 , December 31, 2009 and June 30, 2009 issued and outstanding |   |               | 8,756,389   |   |                   |   | 8,718,330        |               |   |   | 8,680,271 |   |
| Common stock, no par value; 20,000,000 shares authorized; 2,324,403 shares at June 30, 2010, 2,326,803 shares at December 31, 2009 and June 30, 2009 issued and outstanding                                                          |   |               | 16,852,765  |   |                   |   | 16,852,765       |               |   |   | 16,690,015 |   |
| Additional paid-in-capital                                                                                                                                                                                                           |   |               | 2,708,987   |   |                   |   | 2,630,473        |               |   |   | 2,731,467 |   |
| Retained earnings(accumulated deficit)                                                                                                                                                                                               |   |               | (10,240,606 | )      |                   |   | (9,245,376       | )                  |   |   | 10,052,017 |   |
| Accumulated other comprehensive (loss) income                                                                                                                                                                                        |   |               | 154,827     |   |                   |   | (108,011         | )                  |   |   | (26,065 | ) |
| Total shareholders' equity                                                                                                                                                                                                           |   |               | 18,232,362  |   |                   |   |  18,848,181 |               |   |   | 38,127,705 |   |
| Total liabilities and shareholders' equity                                                                                                                                                                                           |   | $                  | 337,181,022 |   |                   | $      | 357,765,638      |               |   | $ | 342,521,895 |   |

----

SONOMA VALLEY BANCORP AND SUBSIDIARY

|                                                                                           |   | For the Three Months |       |   | For the Six Months |    |
|------------------------------------------------------------------------------------------------|--------|----------------------|------------|--------|--------------------|---------|
|                                                                                           |   | Ended June 30,       |       |   | Ended June 30,     |    |
|                                                                                           |   | 2010                 |       |   | 2009               |    |   | 2010 |   |   | 2009 |   |
|  INTEREST INCOME                                                                          |   |                 |       |   |               |    |   |   |   |   |   |   |
|      Loans and leases                                                 |   | $                    | 3,497,208  |   |               | $       | 4,437,219 |   |   | $ | 7,374,959 |   |   |  $ | 8,884,806 |   |
|      Taxable securities                                                    |   |                 | 92,727     |   |               |    | 28,615 |   |   |   | 197,430 |   |   |   | 81,478 |   |
|      Tax-exempt securities                                                 |   |                 | 107,707    |   |               |    | 133,518 |   |   |   | 233,830 |   |   |   | 268,294 |   |
|      Federal funds sold and other                                          |   |                 | 18,037     |   |               |    | 6,298 |   |   |   | 41,041 |   |   |   | 13,164 |   |
|      Dividends                                                             |   |                 | 4          |   |               |    | 45 |   |   |   | 37 |   |   |   | 97 |   |
| Total interest income                                                                          |   |                 | 3,715,683  |   |               |    | 4,605,695 |   |   |   | 7,847,297 |   |   |   | 9,247,839 |   |
|   INTEREST EXPENSE                                                                   |   |                 |       |   |               |    |   |   |   |   |   |   |   |   |   |   |
|     Interest-bearing transaction deposits                                  |   |                 | 9,839      |   |               |    | 8,789 |   |   |   | 20,230 |   |   |   | 17,430 |   |
|     Savings and money market deposits                                      |   |                 | 119,965    |   |               |    | 221,050 |   |   |   | 260,583 |   |   |   | 449,584 |   |
|     Time deposits, $100,000 and over                                       |   |                 | 238,847    |   |               |    | 370,076 |   |   |   | 519,215 |   |   |   | 755,970 |   |
|     Other time deposits                                                    |   |                 | 126,946    |   |               |    | 203,921 |   |   |   | 260,917 |   |   |   | 427,991 |   |
|     Other borrowings                                                       |   |                 | 324,982    |   |               |    | 177,183 |   |   |   | 630,196 |   |   |   | 413,345 |   |
| Total interest expense                                                                         |   |                 | 820,579    |   |               |    | 981,019 |   |   |   | 1,691,141 |   |   |   | 2,064,320 |   |
|   NET INTEREST INCOME                                                                |   |                 | 2,895,104  |   |               |    | 3,624,676 |   |   |   | 6,156,156 |   |   |   | 7,183,519 |   |
|     Provision for loan and lease losses                                    |   |                 | 2,300,000  |   |               |    | 4,250,000 |   |   |   | 4,200,000 |   |   |   | 4,880,000 |   |
| NET INTEREST INCOME AFTERPROVISION FOR LOAN ANDLEASE LOSSES                                    |   |                 | 595,104    |   |               |    | (625,324 | )  |   |   | 1,956,156 |   |   |   | 2,303,519 |   |
|   NON-INTEREST INCOME                                                                |   |                 | 706,026    |   |               |    | 502,447 |   |   |   | 1,151,576 |   |   |   | 981,611 |   |
|   NON-INTEREST EXPENSE                                                               |   |                 |       |   |               |    |   |   |   |   |   |   |   |   |   |   |
|     Salaries and employee benefits                                         |   |                 | 1,021,706  |   |               |    | 1,231,013 |   |   |   | 2,366,802 |   |   |   | 2,588,229 |   |
|     Premises and equipment                                                 |   |                 | 246,617    |   |               |    | 250,609 |   |   |   | 500,032 |   |   |   | 494,343 |   |
|     Other                                                                  |   |                 | 1,301,488  |   |               |    | 1,086,877 |   |   |   | 4,462,167 |   |   |   | 2,131,279 |   |
|     Director and Employee retirement plan termination                      |   |                 | (3,499,908 | )      |               |    | 0 |   |   |   | (3,499,908 | )  |   |   | 0 |   |
| Total non-interest expense                                                                     |   |                 | (930,097   | )      |               |    | 2,568,499 |   |   |   | 3,829,093 |   |   |   | 5,213,851 |   |
|     Income before provision for income taxes                               |   |                 | 2,231,227  |   |               |    | (2,691,376 | )  |   |   | (721,361 | )  |   |   | (1,928,721 | )  |
|     Provision for income taxes                                             |   |                 | 0          |   |               |    | (1,213,543 | )  |   |   | 0 | )  |   |   | (1,008,774 | )  |
| NET INCOME(LOSS)                                                                               |   |  $              | 2,231,227  |   |               |  $ | (1,477,833 | )  |   |  $ | (721,361 | ) |   |  $ | (919,947 | )  |
|     Preferred stock dividends and amortization of preferred stock discount |   |                 | (136,935   | )      |               |    | (136,852 | ) |   |   | (273,869 | ) |   |   | (197,578 | ) |
| NET INCOME(LOSS) AVAILABLE TO COMMON SHAREHOLDERS                                         |   |                 | 2,094,292  |   |               |    | (1,614,685 | ) |   |   | (995,230 | ) |   |   | (1,117,525 | ) |
| EARNINGS(LOSS) PER SHARE AVAILABLE TO COMMON SHAREHOLDERS                                      |   |                 |       |   |               |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                          |   | $                    | .90        |   |               | $       | (0.70 | )  |   | $ | (.43 | ) |   | $ | (.49 | )  |
| Diluted                                                                                        |   | $                    | .90        |   |               | $       | (0.70 | ) |   | $ | (.43 | ) |   | $ | (.49 | ) |
| Dividends declared per common share                                                            |   | $                    | .00        |   |               | $       | .00 |   |   | $ | .00 |   |   | $ | .30 |   |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                                  |   |                 |       |   |               |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                          |   |                 | 2,316,403  |   |               |    | 2,295,633 |   |   |   | 2,316,403 |   |   |   | 2,295,633 |   |
| Diluted                                                                                        |   |                 | 2,316,403  |   |               |    | 2,295,633 |   |   |   | 2,316,403 |   |   |   | 2,295,633 |   |

----

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

|                                                                                                                                                               |   | Comprehensive |         | Preferred |                                        | Common Stock                   |      |         | Additional Paid-in |   |       | RetainedEarnings(Accumulated |   |   | Accumulated Other Comprehensive |      |   |         |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------------|-----------|---------------------------------------------|--------------------------------|-----------|--------------|--------------------|--------|------------|------------------------------|--------|--------|---------------------------------|-----------|--------|--------------|------------|
|                                                                                                                                                               |   | Income(Loss)  |         | Stock     |                                        | Shares                         |      |         | Amount             |   |       | Capital                      |   |   | Deficit)                        |      |   | Income(Loss) |       |   | Total |   |
| BALANCE AT JANUARY 1, 2008                                                                                                                                         |   |          |         |      |                                        |                           | 2,242,809 |         |               | $      | 15,578,903 |                         |   | $      | 2,455,409                       |      |   | $            | 9,934,967  |   |   | $ | (34,999 | ) |   | $ | 27,934,280 |   |
| Redemption and retirement  of stock                                                                                                                      |   |          |         |      |                                        |                           | (1,190    | )            |               |   | (8,526     | )                            |   |   |                            |      |   |         | (13,414    | ) |   |   |   |   |   |   | (21,940 | ) |
| Stock options exercised and related tax benefits                                                                                                                   |   |          |         |      |                                        |                           | 49,038    |         |               |   | 668,957    |                         |   |   | 72,318                          |      |   |         |       |   |   |   |   |   |   |   | 741,275 |   |
| Cash dividend of $.60 per share                                                                                                                                    |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         | (1,373,226 | ) |   |   |   |   |   |   | (1,373,226 | ) |
| Stock options vested                                                                                                                                               |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   | 64,805                          |      |   |         |       |   |   |   |   |   |   |   | 64,805 |   |
| Restricted stock vested and related tax benefits                                                                                                                   |   |          |         |      |                                        |                           |      |         |               |   | 162,750    |                         |   |   | (14,677)                        |      |   |         |       |   |   |   |   |   |   |   | 148,073 |   |
| Net income for the year                                                                                                                                            |   | $             | 3,315,361    |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | 3,315,361 |   |   |   |   |   |   |   | 3,315,361 |   |
| Other comprehensive income, net of tax: Unrealized holding gains on securities available- for-sale arising during the year, net of taxes of $35,994                |   |          | 51,468       |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, net of taxes                                                                                                                           |   |          | 51,468       |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | 51,468 |   |   |   | 51,468 |   |
| Total comprehensive income                                                                                                                                         |   | $             | 3,366,829    |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                               |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT  DECEMBER 31, 2008                                                                                                                            |   |          |         |      |                                        |                           |      | 2,290,657    |               |   |       | 16,402,084                   |   |   |                            | 2,577,855 |   |         |       | 11,863,688 |   |   |   | 16,469 |   |   |   | 30,860,096 |   |
| Issuance of preferred stock                                                                                                                                        |   |          |         |      |   8,653,000                            |                           |      |    |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   | 8,653,000 |   |
| Dividends on preferred    stock                                                                                                                     |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | (406,117)  |   |   |   |   |   |   |   | (406,117)  |   |
| Amortization/Accretion of preferred stock, net                                                                                                                     |   |          |         |      |        65,330 |       |      |         |               |   |       |                         |   |   |                            |      |   |         |       | (65,330)  |   |   |   |   |   |   |   | 0  |   |
| Stock options exercised and related tax benefits                                                                                                                   |   |          |         |      |                                        |                           |      | 36,146       |               |   |       | 287,931                      |   |   |                            | 38,618    |   |         |       |   |   |   |   |   |   |   |   | 326,549 |   |
| Cash dividend of $.30 per share                                                                                                                                    |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | (694,146 | ) |   |   |   |   |   |   | (694,146 | ) |
| Stock options vested                                                                                                                                               |   |          |         |      |                                        |                           |      |         |               |   |       |                         |   |   |                            | 67,312    |   |         |       |   |   |   |   |   |   |   |   | 67,312 |   |
| Restricted stock vested and related tax benefit                                                                                                                    |   |          |         |      |                                        |                           |      |         |               |   |       | 162,750                      |   |   |                            | (53,312   | )      |         |       |   |   |   |   |   |   |   |   | 109,438 |   |
| Net loss for the year                                                                                                                                         |   | $             | (19,943,471) |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | (19,943,471) |   |   |   |   |   |   |   | (19,943,471) |   |
| Other comprehensive  loss, net of tax: Unrealized holding losses on securities available- for-sale arising during the year, net of taxes of $87,056 |   |          | (124,480)    |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive  1oss, net of taxes                                                                                                                  |   |          | (124,480)    |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       | (124,480) |   |   |   | (124,480) |   |
| Total comprehensive income                                                                                                                                         |   | $             | (20,067,951) |      |                                        |                           |      |         |               |   |       |                         |   |   |                            |      |   |         |       |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                   |   | Comprehensive |     |    | Preferred                                                       |   |      | Common Stock |      |   | Additional Paid-in |   |       | Retained Earnings (Accumulated |       |   | Accumulated Other Comprehensive |   |      |         |             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|----------|---------|-----------------------------------------------------------------|--------|-----------|--------------|-----------|--------|--------------------|--------|------------|--------------------------------|------------|--------|---------------------------------|--------|-----------|--------------|------------------|
|                                                                                                                                                   |   | Income(Loss)  |     |    | Stock                                                           |   |      | Shares       |      |   | Amount             |   |       | Capital                        |       |   | Deficit)                        |   |      | Income(Loss) |             |   | Total |   |
| BALANCE AT DECEMBER 31, 2009                                                                                                                           |   |          |     |  $ |          8,718,330 |   |      |         | 2,326,803 |   |               | $      | 16,852,765 |                           |       | $      | 2,630,473                       |   |      | $            |  (9,245,376 | ) |   | $ | (108,011) |   |   | $ | 18,848,181 |   |
| Dividends on preferred stock                                                                                                                           |   |          |     |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             | (235,810 | ) |   |   |   |   |   |   | (235,810 | ) |
| Amortization/ Accretion of preferred stock,net                                                                                                         |   |          |     |    |                                                            | 38,059 |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             | (38,059 | ) |   |   |   |   |   |   | 0  |   |
| Stock options vested                                                                                                                                   |   |          |     |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            | 26,014 |      |         |             |   |   |   |   |   |   |   |   | 26,014 |   |
| Restricted stock vested                                                                                                                                |   |          |     |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   | 52,500    |         |             |   |   |   |   |   |   |   |   |   | 52,500 |   |
| Restricted stock forfeited                                                                                                                             |   |          |     |    |                                                            |   |      |         |      |   | (2,400)       |   |       |                           |       |   |                            |   |      |         |             |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year                                                                                                                                  |   | $             | (721,361 | )       |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             |   | (721,361 | ) |   |   |   |   |   |   | (721,361 | ) |
| Other comprehensive loss, net of tax: Unrealized holding gain on securities available- for-sale arising during the year, net of taxes of $183,819 |   |          | 262,838  |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss, net of taxes                                                                                                                 |   |          | 262,838  |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             | 262,838 |   |   |   | 262,838 |   |
| Total comprehensive loss                                                                                                                               |   | $             | (458,523 | )       |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                   |   |          |     |    |                                                            |   |      |         |      |   |               |   |       |                           |       |   |                            |   |      |         |             |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE AT JUNE 30, 2010                                                                                                                          |   |          |     |    |                                                            | $      | 8,756,389 |         |      |   | 2,324,403          |   |       | $                              | 16,852,765 |   |                            | $      | 2,708,987 |         |             | $ | (10,240,606 | ) |   | $ | 154,827 |   |   | $ | 18,232,362 |   |

----

SONOMA VALLEY BANCORP AND SUBSIDIARY

|                                                                              |   | 2010   |        |   | 2009   |   |
|-----------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| OPERATING ACTIVITIES                                                              |   |   |        |   |   |   |
| Net loss                                                                          |   | $      | (721,361    | )      |   | $      | (919,947 | ) |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |   |        |   |   |   |   |   |
| Provision for loan and lease losses                                               |   |   | 4,200,000   |   |   |   | 4,880,000 |   |
| Depreciation                                                                      |   |   | 94,084      |   |   |   | 115,788 |   |
| Amortization and other                                                            |   |   | 37,119      |   |   |   | 30,475 |   |
| Stock-based compensation expense                                                  |   |   | 78,514      |   |   |   | 114,994 |   |
| Provision for foreclosed real estate                                              |   |   | 1,751,178   |   |   |   | 42,055 |   |
| Net change in interest receivable                                                 |   |   | 348,060     |   |   |   | 153 |   |
| Net change in cash surrender value of life insurance                              |   |   | (191,660    | )      |   |   | (185,081 | ) |
| Net change in other assets                                                        |   |   | 3,472,888   |   |   |   | (1,390,031 | ) |
| Net change in interest payable and other liabilities                              |   |   | (3,965,764  | )      |   |   | 87,959 |   |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |   |   | 5,103,058   |   |   |   | 2,776,365 |   |
| INVESTING ACTIVITIES                                                              |   |   |        |   |   |   |   |   |
| Purchases of securities available-for-sale                                        |   |   | (4,512,969  | )      |   |   | (5,499,027 | ) |
| Proceeds from maturing securities held-to-maturity                                |   |   | 670,000     |   |   |   | 265,000 |   |
| Proceeds from sale of securities held-to-maturity                                 |   |   | 7,076,452   |   |   |   | 0 |   |
| Proceeds from maturing securities available-for-sale                              |   |   | 9,500,000   |   |   |   | 5,500,000 |   |
| Proceeds from sale of OREO                                                        |   |   | 567,000     |   |   |   | 0 |   |
| Net change in loans and leases                                                    |   |   | 12,537,287  |   |   |   | (20,078,066 | ) |
| Purchases of premises and equipment                                               |   |   | (33,793     | )      |   |   | (44,430 | ) |
| NET CASH PROVIDED(USED) FOR INVESTING ACTIVITIES                                  |   |   | 25,803,977  |   |   |   | (19,856,523 | ) |
| FINANCING ACTIVITIES                                                              |   |   |        |   |   |   |   |   |
| Net change in demand, interest-bearing transaction and savings deposits           |   |   | (10,888,803 | )      |   |   | 1,415,470 |   |
| Net change in time deposits                                                       |   |   | (25,350,040 | )      |   |   | 6,632,469 |   |
| Proceeds from issuance of Preferred stock                                         |   |   | 0           |   |   |   | 8,653,000 |   |
| Cash dividend paid                                                                |   |   | 0           |   |   |   | (694,146 | ) |
| Proceeds from FHLB borrowings                                                     |   |   | 20,000,000  |   |   |   | 5,000,000 |   |
| Repayments of FHLB borrowings                                                     |   |   | 0           |   |   |   | 0 |   |
| Stock options exercised                                                           |   |   | 0           |   |   |   | 287,931 |   |
| NET CASH (USED)PROVIDED BY FINANCING ACTIVITIES                                   |   |   | (16,238,843 | )      |   |   | 21,294,724 |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                           |   |   | 14,668,192  |   |   |   | 4,214,566 |   |
| Cash and cash equivalents at beginning of period                                  |   |   | 33,649,504  |   |   |   | 18,233,055 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |   | $      | 48,317,696  |   |   | $      | 22,447,621 |   |
|                                                                              |   |   |        |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |   |   |        |   |   |   |   |   |
| Cash paid during the year for:                                                    |   |   |        |   |   |   |   |   |
| Interest expense                                                                  |   | $      | 1,762,592   |   |   | $      | 2,088,781 |   |
| Income taxes                                                                      |   | $      | 0           |   |   | $      | 465,570 |   |
| SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:                                   |   |   |        |   |   |   |   |   |
| Loans transferred to other real estate owned                                      |   | $      | 774,000     |   |   |   | 0 |   |
| Net change in unrealized gains and losses on securities                           |   | $      | 446,657     |   |   | $      | (72,280 | ) |
| Net change in deferred income taxes on unrealized gains on securities             |   | $      | (183,819    | )      |   | $      | 29,746 |   |
| Accrued preferred stock dividends                                                 |   | $      | (235,810    | )      |   | $      | (170,307 | ) |
| Amortization/Accretion of preferred stock discount/premium, net                   |   | $      | (38,059     | )      |   | $      | (27,271 | ) |

----

SONOMA VALLEY BANCORP AND SUBSIDIARY

----

|                             |   | Amortized Cost |       |   | UnrealizedGain |   |    | Unrealized Losses |   |   | Fair Value |   |
|----------------------------------|--------|----------------|------------|--------|----------------|--------|---------|-------------------|--------|--------|------------|--------|
| June 30, 2010:                   |   |           |       |   |           |   |    |              |   |   |       |   |
| Securities Available-For-Sale    |   |           |       |   |           |   |    |              |   |   |       |   |
| U.S. Treasury securities         |   | $              | 10,600,575 |   |           | $      | 173,331 |              |   |   |       |   | $ | 10,773,906 |   |
| U.S. Government agencysecurities |   |           | 4,983,853  |   |           |   | 123,492 |              |   |   |       |   |   | 5,107,345 |   |
| Equity securities                |   |           | 47,440     |   |           |   |    |              |   | $      | (33,715    | )      |   |   | 13,725 |   |
|                             |   | $              | 15,631,868 |   |           | $      | 296,823 |              |   | $      | (33,715    | )      |   | $ | 15,894,976 |   |
| Securities Held-to-Maturity      |   |           |       |   |           |   |    |              |   |   |       |   |   |   |   |   |
| Municipal securities             |   | $              | 5,130,958  |   |           | $      | 68,289  |              |   | $      | (1,139     | )      |   | $ | 5,198,108 |   |
|                             |   |           |       |   |           |   |    |              |   |   |       |   |   |   |   |   |

|                                   |   | Securities Available-For-Sale |       |   | Securities Held-To-Maturity |   |
|----------------------------------------|--------|-------------------------------|------------|--------|-----------------------------|--------|
|                                   |   | Amortized Cost                |       |   | Fair Value                  |   |   | Amortized Cost |   |   | Fair Value |   |
|                                   |   |                          |       |   |                        |   |   |   |   |   |   |   |
| Due in one year or less                |   | $                             | 509,589    |   |                        | $      | 509,844 |   |   | $ | 946,375 |   |   | $ | 951,345 |   |
| Due after one year through five years  |   |                          | 15,074,839 |   |                        |   | 15,371,407 |   |   |   | 3,144,562 |   |   |   | 3,201,529 |   |
| Due after five years through ten years |   |                          | 0          |   |                        |   | 0 |   |   |   | 1,040,021 |   |   |   | 1,045,234 |   |
| Equity securities                      |   |                          | 47,440     |   |                        |   | 13,725 |   |   |   | 0 |   |   |   | 0 |   |
|                                   |   |                          |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   | $                             | 15,631,868 |   |                        | $      | 15,894,976 |   |   | $ | 5,130,958 |   |   | $ | 5,198,108 |   |

----

|                                  |   | 2010                |   |
|---------------------------------------|--------|---------------------|--------|
|                                  |   | Less Than 12 Months |   |   | 12 Months or Greater |   |
|                                  |   | Fair                |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Description of Securities             |   | Value               |   |   | Losses |   |   | Value |   |   | Losses |   |
|                                  |   |                |   |   |   |   |   |   |   |   |   |   |
| Municipal securities                  |   | $                   | 0      |   |   | $ | 0 |   |   | $ | 390,434 |   |   | $ | 1,139 |   |
| Equity securities                     |   |                |   |   |   |   |   |   |   |   | 10,526 |   |   |   | 33,715 |   |
| Total temporarily impaired securities |   | $                   | 0      |   |   | $ | 0 |   |   | $ | 400,960 |   |   | $ | 34,854 |   |

----

|                                                 |   | Directors |     |   | Officers |   |
|------------------------------------------------------|--------|-----------|----------|--------|----------|--------|
|                                                 |   | 2010      |     |   | 2009     |   |   | 2010 |   |   | 2009 |   |
| Service cost                                         |   | $         | 0        |   |     | $      | 24,077 |   |   | $ | 0 |   |   | $ | 52,457 |   |
| Interest cost on projected benefit obligation        |   |      | 5,853    |   |     |   | 18,563 |   |   |   | 8,004 |   |   |   | 110,080 |   |
| Amortization of unrecognized liability at transition |   |      | 0        |   |     |   | (5,277 | ) |   |   | 0 |   |   |   | 11,511 |   |
| Terminations                                         |   |      | (415,342 | )      |     |   | 0 |   |   |   | (3,084,566 | ) |   |   | 0 |   |
| Net periodic pension cost recognized                 |   | $         | (409,489 | )      |     | $      | 37,363 |   |   | $ | (3,076,562 | ) |   | $ | 174,048 |   |

|                                      |   | 2010            |        |
|-------------------------------------------|--------|-----------------|-------------|
|                                      |   | Carrying Amount |        |   | Estimated Fair Value |   |
| Financial assets:                         |   |            |        |   |   |   |
| Cash and due from banks                   |   | $               | 4,268,625   |   |   | $ | 4,268,625 |   |
| Interest-bearing due from banks           |   |            | 44,049,071  |   |   |   | 44,049,071 |   |
| Investment securities available-for-sale  |   |            | 15,894,976  |   |   |   | 15,894,976 |   |
| Investment securities held- to-maturity   |   |            | 5,130,958   |   |   |   | 5,198,108 |   |
| Loans and lease financing receivable, net |   |            | 240,660,682 |   |   |   | 239,620,000 |   |
| Accrued interest receivable               |   |            | 1,256,484   |   |   |   | 1,256,484 |   |
| Cash surrender value of life insurance    |   |            | 11,352,678  |   |   |   | 11,352,678 |   |
|                                      |   |            |        |   |   |   |   |   |
| Financial liabilities:                    |   |            |        |   |   |   |   |   |
| Deposits                                  |   |            | 255,470,316 |   |   |   | 256,401,000 |   |
| Accrued interest payable                  |   |            | 55,059      |   |   |   | 55,059 |   |
| Federal Home Loan Bank Borrowings         |   |            | 60,000,000  |   |   |   | 60,896,000 |   |

----

----

| At June 30, 2010              |   |
|-------------------------------|--------|
|                          |   | Total |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Available-for-sale securities |   | $ | 15,894,976 |   |   | $ | 13,725 |   |   | $ | 15,881,251 |   |   | $ | 0 |   |

| June 30, 2010           |   |
|-------------------------|--------|
|                    |   | Total |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
| Impaired Loans          |   | $ | 39,937,213 |   |   | $ | 0 |   |   | $ | 39,937,213 |   |   | $ | 0 |   |
| Other Real Estate Owned |   | $ | 2,308,171 |   |   | $ | 0 |   |   | $ | 2,308,171 |   |   | $ | 0 |   |

----

----

SONOMA VALLEY BANCORP

|                                       |   | 2010                 |        |   | 2009                 |   |
|--------------------------------------------|--------|----------------------|-------------|--------|----------------------|--------|
| ASSETS                                     |   | Average Balance |        |   | Income/ Expense |   |   | Yield/ Rate  |   |   | Average Balance |   |   | Income/ Expense |   |   | Yield/ Rate |   |
| Interest-earning assets:                   |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans(2):                                  |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                 |   | $                    | 184,026,899 |   |                 | $      | 5,115,798 |   |   |   | 5.61 | % |   | $ | 190,081,736 |   |   | $ | 6,154,371 |   |   |   | 6.53 | % |
| Consumer                                   |   |                 | 36,422,598  |   |                 |   | 1,102,697 |   |   |   | 6.11 | % |   |   | 38,288,114 |   |   |   | 1,198,394 |   |   |   | 6.31 | % |
| Real estate construction                   |   |                 | 20,208,327  |   |                 |   | 371,362 |   |   |   | 3.71 | % |   |   | 27,646,991 |   |   |   | 788,448 |   |   |   | 5.75 | % |
| Real estate mortgage                       |   |                 | 21,621,072  |   |                 |   | 731,575 |   |   |   | 6.82 | % |   |   | 20,448,342 |   |   |   | 686,999 |   |   |   | 6.78 | % |
| Tax exempt loans (1)                       |   |                 | 1,982,833   |   |                 |   | 81,100 |   |   |   | 8.25 | % |   |   | 2,099,035 |   |   |   | 85,747 |   |   |   | 8.24 | % |
| Leases                                     |   |                 | 0           |   |                 |   | 0 |   |   |   | 0.00 | % |   |   | 17,435 |   |   |   | 0 |   |   |   | 0.00 | % |
| Unearned loan fees                         |   |                 | (208,679    | )      |                 |   |   |   |   |   |   |   |   |   | (234,449 | ) |   |   |   |   |   |   |   |   |
| Total loans                                |   |                 | 264,053,050 |   |                 |   | 7,402,532 |   |   |   | 5.65 | % |   |   | 278,347,204 |   |   |   | 8,913,959 |   |   |   | 6.46 | % |
| Investment securities                      |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:                        |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                 | 19,542,334  |   |                 |   | 194,538 |   |   |   | 2.01 | % |   |   | 6,024,074 |   |   |   | 81,575 |   |   |   | 2.73 | % |
| Hold to maturity:                          |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax exempt (1)                             |   |                 | 11,723,413  |   |                 |   | 354,288 |   |   |   | 6.09 | % |   |   | 13,760,854 |   |   |   | 406,508 |   |   |   | 5.96 | % |
| Total investment securities                |   |                 | 31,265,747  |   |                 |   | 548,826 |   |   |   | 3.54 | % |   |   | 19,784,928 |   |   |   | 488,083 |   |   |   | 4.97 | % |
| FHLB stock                                 |   |                 | 2,770,663   |   |                 |   | 2,891 |   |   |   | .0.21 | % |   |   | 1,565,640 |   |   |   | 0 |   |   |   | 0.00 | % |
| CA Warrants                                |   |                 | 4,084       |   |                 |   | 37 |   |   |   | 1.83 | % |   |   | 0 |   |   |   | 0 |   |   |   | 0.00 | % |
| Total due from banks/interest-bearing      |   |                 | 39,550,233  |   |                 |   | 41,041 |   |   |   | 0.21 | % |   |   | 10,337,671 |   |   |   | 13,164 |   |   |   | 0.26 | % |
| Total interest-earning assets         |   |                 | 337,643,777 |   |                 | $      | 7,995,327 |   |   |   | 4.78 | % |   |   | 310,035,443 |   |   | $ | 9,415,206 |   |   |   | 6.12 | % |
| Noninterest-bearing assets:                |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserve for loan losses                    |   |                 | (12,324,666 | )      |                 |   |   |   |   |   |   |   |   |   | (5,173,482 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                    |   |                 | 4,760,358   |   |                 |   |   |   |   |   |   |   |   |   | 5,083,747 |   |   |   |   |   |   |   |   |   |
| Premises and equipment                     |   |                 | 568,061     |   |                 |   |   |   |   |   |   |   |   |   | 702,937 |   |   |   |   |   |   |   |   |   |
| Other real estate owned                    |   |                 | 3,106,636   |   |                 |   |   |   |   |   |   |   |   |   | 264,056 |   |   |   |   |   |   |   |   |   |
| Other assets                               |   |                 | 24,612,691  |   |                 |   |   |   |   |   |   |   |   |   | 18,446,556 |   |   |   |   |   |   |   |   |   |
| Total assets                               |   | $                    | 358,366,857 |   |                 |   |   |   |   |   |   |   |   | $ | 329,359,257 |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY       |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:              |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest- bearing deposits                 |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing transaction               |   | $                    | 41,515,266  |   |                 | $      | 20,230 |   |   |   | 0.10 | % |   | $ | 29,765,430 |   |   | $ | 17,430 |   |   |   | 0.12 | % |
| Savings deposits                           |   |                 | 89,715,459  |   |                 |   | 260,583 |   |   |   | .0.59 | % |   |   | 89,672,842 |   |   |   | 449,584 |   |   |   | 1.01 | % |
| Time deposits over $100,000                |   |                 | 58,639,254  |   |                 |   | 532,386 |   |   |   | 1.83 | % |   |   | 55,780,541 |   |   |   | 755,970 |   |   |   | 2.73 | % |
| Other time deposits                        |   |                 | 32,731,730  |   |                 |   | 247,746 |   |   |   | 1.53 | % |   |   | 35,457,461 |   |   |   | 427,991 |   |   |   | 2.43 | % |
| Total interest-bearing deposits            |   |                 | 222,601,709 |   |                 |   | 1,060,945 |   |   |   | 0.96 | % |   |   | 210,676,274 |   |   |   | 1,650,975 |   |   |   | 1.58 | % |
| Other borrowings                           |   |                 | 59,005,525  |   |                 |   | 630,196 |   |   |   | 2.15 | % |   |   | 25,503,867 |   |   |   | 413,345 |   |   |   | 3.27 | % |
| Total interest-bearing liabilities         |   |                 | 281,607,233 |   |                 | $      | 1,691,141 |   |   |   | 1.21 | % |   |   | 236,180,141 |   |   | $ | 2,064,320 |   |   |   | 1.76 | % |
| Non-interest-bearing liabilities:          |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing demand deposits       |   |                 | 51,891,750  |   |                 |   |   |   |   |   |   |   |   |   | 48,437,993 |   |   |   |   |   |   |   |   |   |
| Other liabilities                          |   |                 | 7,270,165   |   |                 |   |   |   |   |   |   |   |   |   | 7,513,323 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                       |   |                 | 17,597,708  |   |                 |   |   |   |   |   |   |   |   |   | 37,227,800 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders' equity |   | $                    | 358,366,857 |   |                 |   |   |   |   |   |   |   |   | $ | 329,359,257 |   |   |   |   |   |   |   |   |   |
| Interest rate spread                       |   |                 |        |   |                 |   |   |   |   |   | 3.56 | % |   |   |   |   |   |   |   |   |   |   | 4.36 | % |
| Interest income                            |   |                 |        |   |                 | $      | 7,995,327 |   |   |   | 4.78 | % |   |   |   |   |   | $ | 9,415,206 |   |   |   | 6.12 | % |
| Interest expense                           |   |                 |        |   |                 |   | 1,691,141 |   |   |   | 1.01 | % |   |   |   |   |   |   | 2,064,320 |   |   |   | 1.34 | % |
| Net interest income/margin                 |   |                 |        |   |                 | $      | 6,304,186 |   |   |   | 3.77 | % |   |   |   |   |   | $ | 7,350,886 |   |   |   | 4.78 | % |

|   | (1)  Fully tax equivalent adjustments are based on a federal income tax rate of 34% in 2010 and 2009. |
|--------|-----------------------------------------------------------------------------------------------------------------|

|   | (2)  Non accrual loans have been included in loans for the purposes of the above presentation.  Loan fees of approximately $96,715 and $135,944 for the six months ended June 30, 2010 and 2009, respectively, were amortized to the appropriate interest income categories. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 2.

----

----

----

----

----

----

|                                     |   | June 30, |        |   | Percentage |   |   | December 31, |   |   | Percentage  |   |   | June 30, |   |   | Percentage |   |
|------------------------------------------|--------|----------|-------------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|----------|--------|--------|------------|--------|
|                                     |   | 2010     |        |   | of Total   |   |   | 2009         |   |   | of Total    |   |   | 2009     |   |   | of Total   |   |
|                                     |   |     |        |   |       |   |   |         |   |   |        |   |   |     |   |   |       |   |
| One to four family residential           |   | $        | 58,577,180  |   |       |   | 23.1   | %            |   | $      | 63,852,298  |   |   |     | 23.5   | %      |       | $      | 61,492,880 |   |   |   | 21.4 | % |
| Multifamily residential                  |   |     | 20,673,011  |   |       |   | 8.2    | %            |   |   | 21,860,559  |   |   |     | 8.1    | %      |       |   | 28,870,783 |   |   |   | 10.1 | % |
| Farmland                                 |   |     | 8,912,662   |   |       |   | 3.5    | %            |   |   | 8,923,453   |   |   |     | 3.3    | %      |       |   | 8,520,039 |   |   |   | 3.0 | % |
| Commercial real estate                   |   |     | 108,478,306 |   |       |   | 42.9   | %            |   |   | 109,146,997 |   |   |     | 40.2   | %      |       |   | 116,528,633 |   |   |   | 40.7 | % |
| Construction/Land Development 1-4 family |   |     | 18,490,756  |   |       |   | 7.3    | %            |   |   | 27,604,056  |   |   |     | 10.2   | %      |       |   | 27,204,748 |   |   |   | 9.5 | % |
| Other construction/land development      |   |     | 14,849,305  |   |       |   | 5.9    | %            |   |   | 16,007,666  |   |   |     | 5.9    | %      |       |   | 18,996,596 |   |   |   | 6.6 | % |
| Consumer loans                           |   |     | 2,657,679   |   |       |   | 1.1    | %            |   |   | 3,273,139   |   |   |     | 1.2    | %      |       |   | 3,922,398 |   |   |   | 1.4 | % |
| Other loans to farmers                   |   |     | 3,811,829   |   |       |   | 1.5    | %            |   |   | 3,934,468   |   |   |     | 1.4    | %      |       |   | 3,954,221 |   |   |   | 1.4 | % |
| Commercial, non real estate              |   |     | 14,646,975  |   |       |   | 5.8    | %            |   |   | 14,881,960  |   |   |     | 5.5    | %      |       |   | 14,848,196 |   |   |   | 5.2 | % |
| Municipalities                           |   |     | 1,982,833   |   |       |   | 0.7    | %            |   |   | 1,982,833   |   |   |     | 0.7    | %      |       |   | 2,099,035 |   |   |   | 0.7 | % |
| Total gross loans                        |   |     | 253,080,536 |   |       |   | 100.0  | %            |   |   | 271,467,429 |   |   |     | 100.0  | %      |       |   | 286,437,529 |   |   |   | 100.0 | % |
| Deferred loan fees                       |   |     | (180,364    | )      |       |   |   |         |   |   | (229,407    | )      |   |     |   |   |       |   | (232,293 | ) |   |   |   |   |
| Loans net of deferred loan fees          |   | $        | 252,900,172 |   |       |   |   |         |   | $      | 271,238,022 |   |   |     |   |   |       | $      | 286,205,236 |   |   |   |   |   |

----

----

----

|                                                                        |   | June 30, 2010 |       |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------|--------|---------------|------------|--------|-------------------|--------|
| Non-accrual loans                                                           |   | $             | 39,402,452 |   |              | $      | 22,197,070 |   |
| Loans 90 days past due                                                      |   |          | 0          |   |              |   | 0 |   |
| Other real estate owned                                                     |   |          | 2,308,171  |   |              |   | 3,852,349 |   |
| Restructured loans                                                          |   |          | 5,704,401  |   |              |   | 7,315,444 |   |
| Total non performing assets                                                 |   | $             | 47,415,024 |   |              | $      | 33,364,863 |   |
|                                                                        |   |          |       |   |              |   |   |   |
| Nonperforming assets as a percent of loans, net of unearned fees, plus OREO |   |          | 18.58      | %      |              |   | 12.13 | % |
| Nonperforming assets as a percent of total assets                           |   |          | 14.06      | %      |              |   | 9.31 | % |

----

|                                                        |   | For the SixMonths Ended6/30/10 |       |   | For the YearEnded12/31/09 |   |        | For the SixMonths Ended6/30/09 |   |
|-------------------------------------------------------------|--------|--------------------------------|------------|--------|---------------------------|--------|-------------|--------------------------------|--------|
|                                                        |   |                           |       |   |                      |   |        |                           |   |
| Beginning balance                                           |   | $                              | 13,066,053 |   |                      | $      | 5,032,500   |                           |   | $ | 5,032,500 |   |
| Provision for loan and lease losses                         |   |                           | 4,200,000  |   |                      |   | 31,130,000  |                           |   |   | 4,880,000 |   |
| Loans charged off:                                          |   |                           |       |   |                      |   |        |                           |   |   |   |   |
| Commercial                                                  |   |                           | (3,669,265 | )      |                      |   | (18,890,415 | )                              |   |   | (769,937 | ) |
| Consumer                                                    |   |                           | (740,798   | )      |                      |   | (1,013,025  | )                              |   |   | (85,099 | ) |
| Real Estate Construction                                    |   |                           | (954,959   | )      |                      |   | (2,368,456  | )                              |   |   | 0 |   |
| Real Estate Loans                                           |   |                           | (24,920    | )      |                      |   | (961,920    | )                              |   |   | (466,439 | ) |
| Leases                                                      |   |                           | 0          |   |                      |   | (17,634     | )                              |   |   | 0 |   |
| Overdrafts                                                  |   |                           | (43,607    | )      |                      |   | (144,164    | )                              |   |   | (20,070 | ) |
| Total charge-offs                                           |   |                           | (5,433,549 | )      |                      |   | (23,395,614 | )                              |   |   | (1,341,545 | ) |
| Recoveries:                                                 |   |                           |       |   |                      |   |        |                           |   |   |   |   |
| Commercial                                                  |   |                           | 191,977    |   |                      |   | 266,497     |                           |   |   | 55,729 |   |
| Consumer                                                    |   |                           | 48,678     |   |                      |   | 12,074      |                           |   |   | 3,229 |   |
|        Real Estate Loans |   |                           | 122,202    |   |                      |   | 0           |                           |   |   | 0 |   |
| Leases                                                      |   |                           | 0          |   |                      |   | 17,634      |                           |   |   | 0 |   |
| Overdrafts                                                  |   |                           | 44,129     |   |                      |   | 2,962       |                           |   |   | 473 |   |
| Total recoveries                                            |   |                           | 406,986    |   |                      |   | 299,167     |                           |   |   | 59,431 |   |
| Net recoveries (charge-offs)                                |   |                           | (5,026,563 | )      |                      |   | (23,096,447 | )                              |   |   | (1,282,114 | ) |
| Ending balance                                              |   | $                              | 12,239,490 |   |                      | $      | 13,066,053  |                           |   | $ | 8,630,386 |   |

----

|                                       |   | June 30, 2010 |        |   | Percentage  of Total |   |   | December 31, 2009 |   |   | Percentage  of Total |   |   | June 30, 2009 |   |   | Percentage  of Total |   |
|--------------------------------------------|--------|--------------------|-------------|--------|---------------------------|--------|--------|------------------------|--------|--------|--------------------------------|--------|--------|--------------------|--------|--------|---------------------------|--------|
|                                       |   |               |        |   |                      |   |   |                   |   |   |                           |   |   |               |   |   |                      |   |
| Interest-bearing transaction deposits      |   | $                  | 38,083,165  |   |                      |   | 14.9   | %                      |   | $      | 33,110,822                     |   |   |               | 11.3   | %      |                      | $      | 28,164,005 |   |   |   | 10.7 | % |
| Savings deposits                           |   |               | 77,896,798  |   |                      |   | 30.6   | %                      |   |   | 96,053,335                     |   |   |               | 32.9   | %      |                      |   | 92,803,924 |   |   |   | 35.4 | % |
| Time deposits, $100,000 and over           |   |               | 54,611,279  |   |                      |   | 21.3   | %                      |   |   | 75,730,229                     |   |   |               | 26.0   | %      |                      |   | 56,469,137 |   |   |   | 21.6 | % |
| Other time deposits                        |   |               | 30,680,751  |   |                      |   | 12.0   | %                      |   |   | 34,911,841                     |   |   |               | 12.0   | %      |                      |   | 36,449,080 |   |   |   | 13.9 | % |
| Total interest-bearing  deposits |   |               | 201,271,993 |   |                      |   | 78.8   | %                      |   |   | 239,806,227                    |   |   |               | 82.2   | %      |                      |   | 213,886,146 |   |   |   | 81.6 | % |
| Demand deposits                            |   |               | 54,198,323  |   |                      |   | 21.2   | %                      |   |   | 51,902,932                     |   |   |               | 17.8   | %      |                      |   | 48,107,294 |   |   |   | 18.4 | % |
| Total deposits                             |   | $                  | 255,470,316 |   |                      |   | 100.0  | %                      |   | $      | 291,709,159                    |   |   |               | 100.0  | %      |                      | $      | 261,993,440 |   |   |   | 100.0 | % |

----

----

----

----

| Variation from a constant rate scenario |   | $ Change in NII                |
|-----------------------------------------|--------|--------------------------------|
| +400bp                                  |   | $ 2,354                        |
| +300bp                                  |   | $ 1,613                        |
| +200bp                                  |   | $    948   |
| +100bp                                  |   | $    389   |
| -25bp                                   |   |  ($   147) |

----

----

|  June 30, 2010   (dollars in thousands) |   | Immediate Reprice |    |   | Up to 3 Months |   |    | 4 to 6 Months |   |   | 7 to 12 Months |   |   | Over 12 Months |    |   | Total  |   |
|-------------------------------------------------------------|--------|------------------------|---------|--------|---------------------|--------|---------|--------------------|--------|--------|---------------------|--------|--------|---------------------|---------|--------|--------|--------|
| FFS + overnight IBB                                         |   | $                      | 44,049  |   |                | $      | 0       |               |   | $      | 0                   |   |   | $                   | 0       |   |   | $      | 0 |   |   | $ | 44,049 |   |
| Securities + Other IBB                                      |   |                   | 0       |   |                |   | 590     |               |   |   | 334                 |   |   |                | 667     |   |   |   | 19,435 |   |   |   | 21,026 |   |
| Loans                                                       |   |                   | 34,583  |   |                |   | 7,064   |               |   |   | 18,365              |   |   |                | 34,277  |   |   |   | 146,372 |   |   |   | 240,661 |   |
| Total RSA                                                   |   | $                      | 78,632  |   |                | $      | 7,654   |               |   | $      | 18,699              |   |   | $                   | 34,944  |   |   | $      | 165,807 |   |   | $ | 305,736 |   |
|                                                        |   |                   |    |   |                |   |    |               |   |   |                |   |   |                |    |   |   |   |   |   |   |   |   |   |
| MMDA/NOW/SAV                                                |   | $                      | 115,979 |   |                | $      | 0       |               |   | $      | 0                   |   |   | $                   | 0       |   |   | $      | 0 |   |   | $ | 115,979 |   |
| CD’s <$100k                                        |   |                   | 0       |   |                |   | 7,608   |               |   |   | 8,463               |   |   |                | 8,463   |   |   |   | 6,147 |   |   |   | 30,681 |   |
| CD’s >$100k                                        |   |                   | 0       |   |                |   | 9,209   |               |   |   | 20,106              |   |   |                | 5,027   |   |   |   | 20,270 |   |   |   | 54,612 |   |
| Borrowings                                                  |   |                   | 0       |   |                |   | 5,000   |               |   |   | 5,000               |   |   |                | 5,000   |   |   |   | 45,000 |   |   |   | 60,000 |   |
| Total RSL                                                   |   | $                      | 115,979 |   |                | $      | 21,817  |               |   | $      | 33,569              |   |   | $                   | 18,490  |   |   | $      | 71,417 |   |   | $ | 261,272 |   |
|                                                        |   |                   |    |   |                |   |    |               |   |   |                |   |   |                |    |   |   |   |   |   |   |   |   |   |
| GAP                                                         |   | $                      | (37,347 | )      |                | $      | (14,163 | )                  |   | $      | (14,870             | )      |   | $                   | 16,454  |   |   | $      | 94,390 |   |   | $ | 44,464 |   |
| Cumulative                                                  |   | $                      | (37,347 | )      |                | $      | (51,510 | )                  |   | $      | (66,380             | )      |   | $                   | (49,926 | )      |   | $      | 44,464 |   |   |   |   |   |
| % Assets                                                    |   |                   | -11.1   | %      |                |   | -15.3   | %                  |   |   | -19.7               | %      |   |                | -14.8   | %      |   |   | 13.2 | % |   |   |   |   |

----

SONOMA VALLEY BANCORP

|                                       |   | 2010                 |        |   | 2009                 |   |
|--------------------------------------------|--------|----------------------|-------------|--------|----------------------|--------|
| ASSETS                                     |   | Average Balance |        |   | Income/ Expense |   |   | Yield/ Rate  |   |   | Average Balance |   |   | Income/ Expense |   |   | Yield/ Rate |   |
| Interest-earning assets:                   |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans(2):                                  |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                                 |   | $                    | 183,059,408 |   |                 | $      | 2,412,048 |   |   |   | 5.29 | % |   | $ | 196,916,177 |   |   | $ | 3,130,449 |   |   |   | 6.38 | % |
| Consumer                                   |   |                 | 36,389,075  |   |                 |   | 556,711 |   |   |   | 6.14 | % |   |   | 38,517,309 |   |   |   | 603,681 |   |   |   | 6.29 | % |
| Real estate construction                   |   |                 | 18,516,959  |   |                 |   | 176,758 |   |   |   | 3.83 | % |   |   | 26,255,488 |   |   |   | 331,938 |   |   |   | 5.07 | % |
| Real estate mortgage                       |   |                 | 20,346,507  |   |                 |   | 324,779 |   |   |   | 6.40 | % |   |   | 20,696,128 |   |   |   | 342,699 |   |   |   | 6.64 | % |
| Tax exempt loans (1)                       |   |                 | 1,982,833   |   |                 |   | 40,773 |   |   |   | 8.25 | % |   |   | 2,099,035 |   |   |   | 43,111 |   |   |   | 8.24 | % |
| Leases                                     |   |                 | 0           |   |                 |   | 0 |   |   |   | 0.00 | % |   |   | 17,233 |   |   |   | 0 |   |   |   | 0.00 | % |
| Unearned loan fees                         |   |                 | (195,685    | )      |                 |   |   |   |   |   |   |   |   |   | (241,457 | ) |   |   |   |   |   |   |   |   |
| Total loans                                |   |                 | 260,099,097 |   |                 |   | 3,511,069 |   |   |   | 5.41 | % |   |   | 284,259,913 |   |   |   | 4,451,878 |   |   |   | 6.28 | % |
| Investment securities                      |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale:                        |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                 | 18,552,919  |   |                 |   | 89,834 |   |   |   | 1.94 | % |   |   | 5,479,879 |   |   |   | 28,660 |   |   |   | 2.10 | % |
| Hold to maturity:                          |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax exempt (1)                             |   |                 | 10,705,697  |   |                 |   | 163,193 |   |   |   | 6.11 | % |   |   | 13,666,281 |   |   |   | 202,302 |   |   |   | 5.94 | % |
| Total investment securities                |   |                 | 29,258,616  |   |                 |   | 253,027 |   |   |   | 3.47 | % |   |   | 19,146,160 |   |   |   | 230,962 |   |   |   | 4.84 | % |
| Federal funds sold                         |   |                 | 0           |   |                 |   | 0 |   |   |   | 0.00 | % |   |   | 0 |   |   |   | 0 |   |   |   | 0.00 | % |
| FHLB stock                                 |   |                 | 2,820,000   |   |                 |   | 2,882 |   |   |   | 0.41 | % |   |   | 1,566,087 |   |   |   | 0 |   |   |   | 0.00 | % |
| CA Warrants                                |   |                 | 102         |   |                 |   | 5 |   |   |   | 19.66 | % |   |   |   |   |   |   |   |   |   |   |   |   |
| Total due from banks/interest-bearing      |   |                 | 37,715,072  |   |                 |   | 18,042 |   |   |   | 0.19 | % |   |   | 9,972,716 |   |   |   | 6,296 |   |   |   | 0.25 | % |
| Total interest-earning assets              |   |                 | 329,892,887 |   |                 | $      | 3,785,029 |   |   |   | 4.60 | % |   |   | 314,944,876 |   |   | $ | 4,689,136 |   |   |   | 5.97 | % |
| Noninterest-bearing assets:                |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserve for loan losses                    |   |                 | (12,683,541 | )      |                 |   |   |   |   |   |   |   |   |   | (5,298,571 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                    |   |                 | 4,523,750   |   |                 |   |   |   |   |   |   |   |   |   | 5,152,617 |   |   |   |   |   |   |   |   |   |
| Premises and equipment                     |   |                 | 552,996     |   |                 |   |   |   |   |   |   |   |   |   | 686,732 |   |   |   |   |   |   |   |   |   |
| Other real estate owned                    |   |                 | 2,332,718   |   |                 |   |   |   |   |   |   |   |   |   | 243,610 |   |   |   |   |   |   |   |   |   |
| Other assets                               |   |                 | 22,946,532  |   |                 |   |   |   |   |   |   |   |   |   | 18,576,458 |   |   |   |   |   |   |   |   |   |
| Total assets                               |   | $                    | 347,565,342 |   |                 |   |   |   |   |   |   |   |   | $ | 334,305,722 |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY       |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:              |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest- bearing deposits                 |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing transaction               |   | $                    | 39,409,124  |   |                 | $      | 9,839 |   |   |   | 0.10 | % |   | $ | 29,976,842 |   |   | $ | 8,789 |   |   |   | 0.12 | % |
| Savings deposits                           |   |                 | 84,175,512  |   |                 |   | 119,965 |   |   |   | 0.57 | % |   |   | 91,565,310 |   |   |   | 221,050 |   |   |   | 0.97 | % |
| Time deposits over $100,000                |   |                 | 55,759,854  |   |                 |   | 252,018 |   |   |   | 1.81 | % |   |   | 56,386,663 |   |   |   | 370,076 |   |   |   | 2.63 | % |
| Other time deposits                        |   |                 | 31,761,822  |   |                 |   | 113,775 |   |   |   | 1.44 | % |   |   | 36,274,216 |   |   |   | 203,921 |   |   |   | 2.25 | % |
| Total interest-bearing deposits            |   |                 | 211,106,312 |   |                 |   | 495,597 |   |   |   | 0.94 | % |   |   | 214,203,031 |   |   |   | 803,836 |   |   |   | 1.51 | % |
| Other borrowings                           |   |                 | 60,000,000  |   |                 |   | 324,982 |   |   |   | 2.17 | % |   |   | 23,394,265 |   |   |   | 177,183 |   |   |   | 3.04 | % |
| Total interest-bearing liabilities         |   |                 | 271,106,312 |   |                 | $      | 820,579 |   |   |   | 1.21 | % |   |   | 237,597,296 |   |   | $ | 981,019 |   |   |   | 1.66 | % |
| Non-interest-bearing liabilities:          |   |                 |        |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing demand deposits       |   |                 | 53,071,944  |   |                 |   |   |   |   |   |   |   |   |   | 49,439,454 |   |   |   |   |   |   |   |   |   |
| Other liabilities                          |   |                 | 7,257,799   |   |                 |   |   |   |   |   |   |   |   |   | 7,298,080 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                       |   |                 | 16,129,287  |   |                 |   |   |   |   |   |   |   |   |   | 39,970,892 |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders' equity |   | $                    | 347,565,342 |   |                 |   |   |   |   |   |   |   |   | $ | 334,305,722 |   |   |   |   |   |   |   |   |   |
| Interest rate spread                       |   |                 |        |   |                 |   |   |   |   |   | 3.39 | % |   |   |   |   |   |   |   |   |   |   | 4.32 | % |
| Interest income                            |   |                 |        |   |                 | $      | 3,785,029 |   |   |   | 4.60 | % |   |   |   |   |   | $ | 4,689,136 |   |   |   | 5.97 | % |
| Interest expense                           |   |                 |        |   |                 |   | 820,579 |   |   |   | 1.00 | % |   |   |   |   |   |   | 981,019 |   |   |   | 1.25 | % |
| Net interest income/margin                 |   |                 |        |   |                 | $      | 2,964,450 |   |   |   | 3.60 | % |   |   |   |   |   | $ | 3,708,117 |   |   |   | 4.72 | % |

|   | (1) | Fully tax equivalent adjustments are based on a federal income tax rate of 34% in 2010 and 2009. |
|--------|-----|--------------------------------------------------------------------------------------------------|

|   | (2) | Non accrual loans have been included in loans for the purposes of the above presentation.  Loan fees of approximately $49,042 and $75,093 for the three months ended June 30, 2010 and 2009, respectively, were amortized to the appropriate interest income categories. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

Item 3.

Item 4. 

----

Item 1.

Item 1A

----

| • | a decrease in the demand for loans or other products and services offered by us;                                                                                                                                                                                                                                                                  |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                                                                                                                                                                              |
| • | a decrease in the value of our loans or other assets secured by consumer or commercial real estate;                                                                                                                                                                                                                                          |
| • | a decrease to deposit balances due to overall reductions in the accounts of customers;                                                                                                                                                                                                                                                            |
|    |                                                                                                                                                                                                                                                                                                                                              |
| • | an impairment of certain intangible assets or investment securities;                                                                                                                                                                                                                                                                         |
| • | an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net charge-offs and provision for credit losses.  |

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Item 2.

Item 3.

Item 4.

Item 5.

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Item 6.

|   | 10.1 | Stipulation to the Issuance of a Consent Order dated May17, 2010 filed as exhibit 10.1 on the Form 8-K filed on May 24, 2010. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Consent Order dated May 18, 2010 filed as exhibit 10.2 on the Form 8-K filed on May 24, 2010. |
|--------|------|-----------------------------------------------------------------------------------------------|

|   | 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|--------|------|------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification of Principal Financial Officer and Principal Accounting Officer  pursuant to Section 302 of the Sarbanes-Oxley Act |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------|

32

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SIGNATURES

|   |                                                |   | SONOMA VALLEY BANCORP                                          |   |
|--------|-----------------------------------------------------|--------|----------------------------------------------------------------|--------|
|   |                                                |   | (Registrant)                                                   |   |
|   |                                                |   |                                                           |   |
|   |                                                |   |                                                           |   |
| Date:  |       August 11, 2010 |   |  /s/Sean C. Cutting                                       |   |
|   |                                                |   | Sean C. Cutting                                                |   |
|   |                                                |   | President and Chief Executive Officer                          |   |
|   |                                                |   | (Principal Executive Officer)                                  |   |
|   |                                                |   |                                                           |   |
|   |                                                |   |                                                           |   |
| Date:  |     August 11, 2010             |   | /s/Mary Dieter Smith                                           |   |
|   |                                                |   | Mary Dieter Smith                                              |   |
|   |                                                |   | Executive Vice President and Chief Financial Officer           |   |
|   |                                                |   | (Principal Financial Officer and Principal Accounting Officer) |   |