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

                                   FORM 10-KSB

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


 For the fiscal year ended December 31, 2001   Commission File Number: 000-31929
                            -------------------------

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

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

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

Securities to be registered under section 12(b) of the Exchange Act:  None

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

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
[X] Yes [] No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment of this Form 10-KSB. |_|

The registrant's revenue for the year ended December 31, 2001 is $12,427,964.

Aggregate market value of Common Stock held by non-affiliates of Sonoma Valley
Bancorp as of December 1, 2001 based on the current market price of the stock:
$20,857,813.00

The number of shares of registrant's common stock outstanding as of December 1,
2001 was 1,336,105.

                       DOCUMENTS INCORPORATE BY REFERENCE

Part III incorporates information by reference from the definitive proxy
statement for the registrant's annual meeting of shareholders to be held on May
14, 2002.

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

                                     PART I
Item 1.        Business

General

Sonoma Valley Bancorp ("Company") was incorporated under California law on March
9, 2000 at the  direction  of Sonoma  Valley  Bank for the  purpose of forming a
single-bank holding company structure pursuant to a plan of reorganization.  The
reorganization  became effective  November 1, 2000, after obtaining all required
regulatory  approvals  and permits,  shares of the  Company's  common stock were
issued to shareholders of Sonoma Valley Bank in exchange for their Sonoma Valley
Bank  stock.  Previously,  Sonoma  Valley  Bank filed its  periodic  reports and
current  reports  under the  Securities  Exchange  Act of 1934 with the  Federal
Deposit  Insurance  Corporation.  Following  the  reorganization,  periodic  and
current reports are now filed with the Securities and Exchange Commission.

The business  operations  of the Company  continue to be  conducted  through its
wholly-owned  subsidiary,  Sonoma Valley Bank ("Bank"),  which began  commercial
lending  operations on June 3, 1988.  In addition to its main branch  located in
Sonoma,  California,  the Bank also  operates  a branch  office  located in Glen
Ellen, California. The following discussion,  therefore, although presented on a
consolidated  basis,  analyzes the financial condition and results of operations
of the Bank for the twelve month period ended December 31, 2001.

Primary Services

The Bank  emphasizes  the  banking  needs of  small to  medium-sized  commercial
businesses,  professionals  and upper  middle  to high  income  individuals  and
families in its primary  service area of Sonoma,  California  and the  immediate
surrounding area.

The Bank  offers  depository  and  lending  services  keyed to the  needs of its
business and professional clientele.  These services include a variety of demand
deposit, savings and time deposit account alternatives,  all insured by the FDIC
up to its applicable limits. Special merchant and business services,

                                     Page 2
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such as coin, night  depository,  courier,  on line cash management and merchant
teller  are  available.  The Bank  offers  bank by mail  service,  drive-up  ATM
service, extended hours including Saturday banking, drive-up windows,  telephone
voice  response and  bilingual  employees.  The Bank's  lending  activities  are
directed  primarily  towards  granting short and medium-term  commercial  loans,
augmented by customized lines of credit, for such purposes as operating capital,
business and professional start-ups,  inventory, equipment, accounts receivable,
credit cards, and interim construction financing.

The business of the Bank is not seasonal.  The Bank intends to continue with the
same basic  commercial  banking  activities it has operated with since beginning
operations June 3, 1988.

Competition

In general, the banking business in California and in the market areas which the
Bank serves, is highly competitive with respect to both loans and deposits,  and
is dominated by a relatively small number of major banks which have many offices
operating over a wide geographic  area. The Bank competes for loans and deposits
with these and other  regional  banks,  including  several which are much larger
than the  Bank,  as well as  savings  and  loan  associations,  thrift  and loan
associations,  finance companies,  credit unions, offerors of money market funds
and other financial institutions.

The  Bank's  primary  service  area is  currently  served  by four  other  banks
(including two major banks:  Bank of America and Wells Fargo Bank).  In order to
compete with the major  financial  institutions in its primary service area, the
Bank uses its  flexibility as an  independent  bank.  This includes  emphasis on
specialized services and personalized attention.

In the event there are customers  whose loan demands  exceed the Bank's  lending
limit,  the Bank seeks to arrange for such loans on a  participation  basis with
other financial institutions and intermediaries. The Bank also is able to assist
those  customers  requiring  other services not offered by the Bank by obtaining
those services through its correspondent banks.

Concentration of Credit Risk

The majority of the Bank's loan activity is with  customers  located  within the
county of Sonoma. While the Bank has a diversified loan portfolio, approximately
82% of these  loans  are  secured  by real  estate  in its  service  area.  This
concentration for the year ending December 31, 2001 is presented below:

(in thousands of dollars)
         Secured by real estate:
         Construction/land development                         $ 16,110
         Farmland                                                 4,398
         1-4 family residences                                   22,233
         Commercial/multi-family                                 44,841

Employees

As of December 31, 2001, the Company employed 37 full-time equivalent employees.




                                     Page 3


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Supervision and Regulation

The Company is a registered  bank holding company under the Bank Holding Company
Act, regulated, supervised and examined by the Federal Reserve Bank. As such, it
must file with the Federal Reserve Bank an annual report and additional  reports
as the  Federal  Reserve  Board may  require.  The  Company  is also  subject to
periodic examination by the Federal Reserve Board.

In addition,  both the Company and the Bank are extensively regulated under both
federal and state laws and regulations. These laws and regulations are primarily
intended  to  protect  depositors,  not  shareholders.  To the  extent  that the
following  information  describes  statutory  or  regulatory  provisions,  it is
qualified  in  its  entirety  by  reference  to  the  particular  statutory  and
regulatory provisions at issue.

As a  California  state-licensed  bank,  the  Bank  is  subject  to  regulation,
supervision and periodic  examination by the California  Department of Financial
Institutions. The Bank is also subject to regulation,  supervision, and periodic
examination by the Federal Deposit Insurance  Corporation (the "FDIC"). The Bank
is not a member of the Federal  Reserve System,  but is nevertheless  subject to
certain  regulations of the Board of Governors of the Federal Reserve System. As
a state bank, the Bank's  deposits are insured by the FDIC to the maximum amount
permitted by law, which is currently  $100,000 per depositor in most cases.  For
this protection, the Bank pays a semi-annual assessment.

The regulations of these state and federal bank regulatory  agencies govern most
aspects of the Company's and the Bank's business and  operations,  including but
not limited to,  requiring the maintenance of non-interest  bearing  reserves on
deposits,  limiting the nature and amount of investments  and loans which may be
made,  regulating  the  issuance  of  securities,  restricting  the  payment  of
dividends, regulating bank expansion and bank activities,  including real estate
development activities. The Federal Reserve Board, the Federal Deposit Insurance
Corporation,  and the California Department of Financial Institutions have broad
enforcement powers over depository institutions, including the power to prohibit
a bank from engaging in business  practices which are considered to be unsafe or
unsound, to impose substantial fines and other civil and criminal penalties,  to
terminate  deposit  insurance,  and to appoint a conservator or receiver under a
variety of  circumstances.  The Federal Reserve Board also has broad enforcement
powers over bank holding  companies,  including the power to impose  substantial
fines and other civil and criminal penalties.

Regulation of Bank Holding Companies

As a bank holding  company,  the Company's  activities  are subject to extensive
regulation by the Federal  Reserve Board.  The Bank Holding Company Act requires
us to obtain the prior approval of the Federal Reserve Board before (i) directly
or  indirectly  acquiring  ownership or control of any voting  shares of another
bank or bank holding company if, after such acquisition, we would own or control
more than 5% of the shares of the other bank or bank holding company (unless the
acquiring  company  already  owns or controls a majority of such  shares);  (ii)
acquiring all or substantially all of the assets of another bank or bank holding
company;  or (iii) merging or  consolidating  with another bank holding company.
The  Federal  Reserve  Board  will  not  approve  any  acquisition,   merger  or
consolidation that would have a substantially anticompetitive result, unless the
anticompetitive  effects of the proposed transaction are clearly outweighed by a
greater public interest in meeting the convenience and needs of the community to
be served.  The Federal Reserve Board also considers  capital adequacy and other
financial and managerial factors in its review of acquisitions and mergers.

With certain  exceptions,  the Bank Holding  Company Act also  prohibits us from
acquiring or retaining  direct or indirect  ownership or control of more than 5%
of the voting shares of any company that is not a bank or bank holding  company,
or from engaging directly or indirectly in activities other than those of

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banking,   managing  or  controlling   banks,  or  providing  services  for  its
subsidiaries.  The principal  exceptions to these  prohibitions  involve certain
non-bank  activities  that, by statute or by Federal Reserve Board regulation or
order, have been determined to be activities  closely related to the business of
banking or of managing or controlling banks.

Federal Deposit Insurance

The  FDIC  may  terminate  the  deposit  insurance  of  any  insured  depository
institution  if the FDIC  determines  that the  institution  has  engaged  or is
engaging in unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, order or any
condition  imposed in writing  by, or pursuant to written  agreement  with,  the
FDIC. The FDIC may also suspend deposit insurance temporarily during the hearing
process for a permanent  termination  of  insurance  if the  institution  has no
tangible capital.

Impact of Economic Conditions and Monetary Policies

The earnings and growth of the Bank are and will be affected by general economic
conditions,  both  domestic  and  international,  and by the monetary and fiscal
policies of the United  States  Government  and its agencies,  particularly  the
Federal  Reserve  Bank (FRB).  One  function of the FRB is to regulate the money
supply and the national supply of bank credit in order to mitigate  recessionary
and  inflationary  pressures.  Among the  instruments of monetary policy used to
implement these objects are open market transactions in United States Government
securities,  changes in the discount rate on member bank borrowings, and changes
in reserve requirement held by depository institutions. The monetary policies of
the FRB have had a  significant  effect on the  operating  results of commercial
banks in the past and are expected to continue to do so in the future.  However,
the effect of such  policies  on the future  business  and  earnings of the Bank
cannot be accurately predicted.

Recent and Proposed Legislation

From time to time, legislation is enacted which has the effect of increasing the
cost of  doing  business,  limiting  or  expanding  permissible  activities,  or
affecting  the   competitive   balance   between   banks  and  other   financial
institutions.  Proposals  to  change  the laws  and  regulations  governing  the
operations and taxation of banks and other financial institutions are frequently
made in Congress, in the California legislature,  and by various bank regulatory
agencies. No prediction can be made as to the likelihood of any major changes or
the impact such  changes  might have on the Bank.  Certain  changes of potential
significance  to the Bank which have been  enacted  recently or others which are
currently under  consideration by Congress or various regulatory or professional
agencies are discussed below.

The  Financial   Services   Modernization   Act  of  1999  (also  known  as  the
"Gramm-Leach-Bliley   Act"  after  its  Congressional   sponsors)  substantially
eliminates most of the separations between banks,  brokerage firms, and insurers
enacted  by the  Glass-Steagall  Act of 1933.  The  reform  legislation  permits
securities  firms and insurers to buy banks,  and banks to underwrite  insurance
and securities.  States retain regulatory authority over insurers.  The Treasury
Department's Office of the Comptroller of the Currency has authority to regulate
bank  subsidiaries  that  underwrite  securities  and the  Federal  Reserve  has
authority over bank affiliates for activities such as insurance underwriting and
real-estate development.

In 1997, California adopted the Environmental Responsibility Acceptance Act (the
"Act") (Cal.  Civil Code Sections  850-855) to facilitate  the  notification  of
government  agencies  and  potentially  responsible  parties (for  example,  for
cleanup) of the existence of contamination and the cleanup or other remediation

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of contamination by the potentially responsible parties. The Act requires, among
other things,  that owners of sites who have actual  awareness of a release of a
hazardous material that exceeds a specified  notification  threshold to take all
reasonable steps to identify the potentially  responsible  parties and to send a
notice of  potential  liability  to the  parties and the  appropriate  oversight
agency.

During 1996, new federal  legislation  amended the  Comprehensive  Environmental
Response, Compensation, and Liability Act ("CERCLA") and the underground storage
tank provisions of the Resource Conservation and Recovery Act to provide lenders
and fiduciaries with greater protections from environmental  liability.  In June
1997,  the U.S.  Environmental  Protection  Agency  ("EPA")  issued its official
policy with regard to the  liability of lenders  under CERCLA as a result of the
enactment of the Asset  Conservation,  Lender  Liability  and Deposit  Insurance
Protection  Act of 1996.  Although  numerous  exceptions  exist,  California law
provides  that a lender  acting in the  capacity  of a lender will not be liable
under  any state or local  statute,  regulation  or  ordinance,  other  than the
California  Hazardous  Waste  Control Law, to undertake a cleanup,  pay damages,
penalties or fines, or forfeit  property as a result of the release of hazardous
materials at or from the property.

Future Legislation and Regulations

From time to time, legislation is enacted which has the effect of increasing the
cost of  doing  business,  limiting  or  expanding  permissible  activities,  or
affecting  the   competitive   balance   between   banks  and  other   financial
institutions.  Proposals  to  change  the laws  and  regulations  governing  the
operations and taxation of banks and other financial institutions are frequently
made in Congress, in the California legislature,  and by various bank regulatory
agencies. No prediction can be made as to the likelihood of any major changes or
the impact legislative changes might have on the Bank.

Accounting Pronouncements

In June 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
(SFAS) No. 142, "Goodwill and Other Intangible Assets." This Statement addresses
financial  accounting and reporting for intangible assets acquired  individually
or with a group of assets  at  acquisition  and  goodwill  and other  intangible
assets subsequent to their acquisition.  SFAS No. 142 is effective starting with
fiscal years beginning after December 15, 2001.  There are two exceptions to the
December 15, 2001 date at which the Statement becomes effective:

     o Goodwill and intangible assets acquired after June 30, 2001 are effective
       immediately.
     o The provisions are not applicable to goodwill and other intangible assets
       arising from combinations between mutual enterprises or to not-for-profit
       organizations until the Board completes its deliberations with respect to
       application of the purchase method by those entities.

The  adoption of SFAS No. 142 is not  expected to have a material  impact on the
financial statement of Sonoma Valley Bancorp.

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations." This Statement  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement  costs.  SFAS No. 143 is effective  for  financial
statements  issued for fiscal years  beginning after June 15, 2002. The adoption
of SFAS No.  143 is not  expected  to have a  material  impact on the  financial
statements of Sonoma Valley Bancorp.

In August 2001, the FASB issued SFAS No. 144  "Accounting  for the Impairment or
Disposal of

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Long-Lived Assets." This Statement  supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed of."
However,  the Statement  retains the fundamental  provisions of SFAS No. 121 for
(a)  recognition  and  measurement of the impairment of long- lived assets to be
held and used and (b)  measurement  of  long-lived  assets to be  disposed of by
sale. SFAS No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal years
and its provisions are to be applied prospectively. The adoption of SFAS No. 144
is not expected to have a material impact on the financial  statements of Sonoma
Valley Bancorp.





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Statistical Data

The  following  information  is required by the Industry  Guide 3,  "Statistical
Disclosure by Bank Holding  Companies".  The averages shown have been calculated
using the average  daily  balance.                             Sequential Page
                                                                    Number
                                                                    ------
 I.     Distribution  of Assets, Liabilities and Stock-
        holders' Equity; Interest Rates and Differential

         A. Average balance sheets                                     15
         B. Analysis of net interest earnings                          15
         C. Rate/volume analysis                                       16

II.      Investment Portfolio

         A. Book value (Amortized Cost) of investments                 37
         B. Weighted average yield and maturity         15, 19, 23 and 38
         C. Securities of issuer exceeding
                  ten percent of equity:                             None

III.     Loan Portfolio

         A. Types of loans                                      15 and 39
         B. Maturities and sensitivities of loans
                   to change in interest rates                  23 and 40
         C. Risk elements

                  1. Non-accrual, past due,
                           and restructured loans           20, 39 and 40
                  2. Potential problem loans:                        None
                  3. Foreign outstandings:                           None
                  4. Loan concentrations                    19, 53 and 54

         D. Other Interest Bearing Assets:                           None

IV. Summary of Loan Loss Experience                         20, 21 and 40

V.  Deposits

         A. Average balances and average rates paid                    15
         B. Other categories of deposits                             None
         C. Foreign outstandings                                     None
         D. Maturity of time deposits greater than $100,000            23
         E. Maturity of foreign time deposits
                  greater than 100,000                               None

VI. Return on Equity and Assets                                        14

VII. Short-term Borrowings:                                          None

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Item 2.           Properties

The Company is  headquartered  in Sonoma,  California.  At the present  time the
Company's Bank has two branch offices. In 1995 the Bank leased additional office
space  adjacent to the Sonoma  Branch and in September  1997 the Bank  purchased
property across the street from the Sonoma Branch.  The Sonoma Branch is located
at 202 W. Napa Street,  Sonoma. The building contains  approximately 6800 square
feet and has been  subleased  on a long-term  basis (the initial term expires in
2009, with option to extend for two additional  five-year terms).  The office is
considered  by  management  to be well  maintained  and adequate for the purpose
intended.  Lease payments made in 2001 totaled $208,005 compared to the $200,005
paid in 2000.  The lease  provides  for future  annual  rents to be adjusted for
changes in the Consumer Price Index ("CPI"),  with a minimum annual  increase of
4%, effective each March 1st.

In July,  1995,  the Bank  leased a building  at 463  Second  Street  West.  The
building contains  approximately  2400 square feet and has been leased on a long
term basis to coincide with the Sonoma Branch lease. The initial term expired in
2000,  with the first  option  exercised  to  expire in 2005,  with an option to
extend for three  additional  five year terms and one additional four year term.
At present  the Bank  utilizes  all of the units.  Lease  payments  made in 2001
totaled $40,720  compared with the $41,432 paid in 2000.  Sublease rental income
was $800 in 2000 and no sublease  income in 2001.  The lease provides for future
annual  rents to be adjusted  for changes in the  Consumer  Price Index  ("CPI")
effective each July 1st.

In  September,  1997 the Bank  purchased a building at 472 Second St. West.  The
building contains approximately 1013 square feet. The Bank paid $246,943 for the
property.  At present  the Bank is  utilizing  the parking  area for  additional
parking for Bank  employees  and the Bank is renting out the building  premises.
Rental income in 2001 was $15,576 compared to $15,526 in 2000.

The Glen Ellen Branch is located at 13751 Arnold Drive, Glen Ellen. The facility
is  approximately  600 square feet.  The facility is leased for a five year term
expiring  in 2003 with the  option to extend for an  additional  five year term.
Lease  payments made in 2001 totaled  $11,054  compared to $10,948 in 2000.  The
lease  provides  for future  annual rents to be adjusted for changes in the CPI,
with a minimum annual increase of 4% effective April 1st of each year.

 Item 3.          Legal Proceedings

The Company and/or its Bank are, from time to time, parties to claims arising in
the ordinary  course of business.  After taking into  consideration  information
furnished by legal  counsel to the Bank as to the current  status of any claims,
management is of the opinion that the ultimate liability represented thereby, if
any,  will not have a  material  adverse  effect on the  financial  position  or
results of operations of the Bank.

Item 4.           Submission of Matters to a Vote of Securities Holders

The Company did not submit any  matters to  security  holders  during the fourth
quarter of its last fiscal year ended December 31, 2001.



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                                     PART II

Item 5.           Market for the Company's Common Stock and Related Security
                  Holder Matters

Following the  reorganization  the  Company's  common stock began trading on the
Over the Counter  Bulletin Board under the symbol  "SBNK",  and the Bank's stock
ceased  to be  traded.  The  Company  is not  listed on any  exchange  or on the
National  Association of Securities Dealers Automated Quotation System (NASDAQ),
but is considering applying for the listing of its shares of common stock on the
Nasdaq SmallCap  Market.  However,  no determination in that regard has yet been
made by the Company.

Several brokers act as facilitators in the trades of Sonoma Valley Bancorp
stock. They are:

         A.G. Edwards                          Hoefer and Arnett
         703 2nd Street, Suite 100             353 Sacramento Street, 10th floor
         Santa Rosa, CA  95409                 San Francisco, CA  94111
         Denise Gilseth                        Lisa Gallo
         (800) 972-4800                        (800) 346-5544

         Paine Webber                          Raymond James Financial Services
         6570 Oakmont Drive                    777 Baywood Drive
         Santa Rosa, CA 95409                  Petaluma, CA  94954
         John Rector                           Moe Jacobson
         (707) 539-1500                        (707) 763-0354

         Edward Jones                          Smith Barney
         515 First Street East                 111 Santa Rosa Ave., Suite 303
         Sonoma, CA  95476                     Santa Rosa, CA 95404
         Gary Scott                            Kirk Aguer
         (707) 935-1856                        (707) 571-5702

         Edward  Jones                         Monroe Securities
         19485 Sonoma Hwy, Suite G             47 State Street
         Sonoma, CA  95476                     Rochester, NY 14614
         James Wandzilak                       Helen Rubeins
         (707) 935-0865                        (888) 995-5560

         Wedbush Morgan Securities             Sutro & Co.
         1300 S.W. Fifth Avenue, Suite 2000.   P.O. Box 2859
         Portland, OR  97201-5667              Big Bear Lake, CA 92315
         Joey Warmenhoven                      Troy Norlander
         (503) 224-0480                        (800)288-2811



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The table  below  summarizes  those  trades of the common  stock as  reported by
Nasdaq,  setting forth the high and low prices for the periods shown.  The stock
prices have been adjusted for stock dividends. Furthermore, the prices shown are
for shares of common  stock of the Bank for  periods  prior to November 1, 2000,
and for the Company following that date.

         Quarter Ended:                                  High            Low
                                                      ---------        --------

         March 31, 2000                               $  16.32         $ 15.42
         June 30, 2000                                   16.32           14.51
         September 30, 2000                              16.67           14.51
         December 31, 2000                               21.90           15.71

         March 31, 2001                               $  20.12         $ 17.74
         June 30, 2001                                   20.00           19.19
         September 30, 2001                              23.00           19.71
         December 31, 2001                               22.25           21.15


As of February 20, 2002, there were 1,079 holders of record of the Company's
common stock.

Payment of Dividends

Under state law, the Board of Directors of a California  state-licensed bank may
declare a cash dividend,  subject to the restriction  that the amount  available
for the payment of cash  dividends  shall be the lesser of retained  earnings of
the bank or the bank's net income  for its last  three  fiscal  years  (less the
amount of any distributions to shareholders made during such period).

However,  under the Financial  Institutions  Supervisory Act, the FDIC has broad
authority  to  prohibit  a bank from  engaging  in  banking  practices  which it
considers to be unsafe or unsound. It is possible,  depending upon the financial
condition  of the bank in question and other  factors,  that the FDIC may assert
that the  payment of  dividends  or other  payments by a bank is  considered  an
unsafe and unsound banking practice and therefore,  implement  corrective action
to address such a practice.

The Bank has never paid a cash dividend and the future payment of cash dividends
by the Company will not only depend on the Bank's future earnings, but will also
depend on the Bank and the Company  meeting  certain  capital  requirements  and
having an adequate allowance for loan losses.



                                     Page 11


<PAGE>



Historically,  the Bank has declared eight stock dividends of 5% each, two stock
dividends  of 10% in May 1996 and June 1997 and one 2 for 1 stock split in March
1998 as detailed below:



Date Declared               Record Date                  Date Paid

May 13, 1992                May 31, 1992                 June 15, 1992
June 26, 1993               July 15, 1993                July 31, 1993
July 20, 1994               August 1, 1994               August 15, 1994
January 18, 1995            February 5, 1995             February 20, 1995
August 16, 1995             September 11, 1995           September 29, 1995
May 22, 1996                June 14, 1996                June 28, 1996
June 18, 1997               July 15, 1997                August 1, 1997
March 18, 1998              April 15, 1998               April 30, 1998
July 21, 1999               August 16, 1999              August 31, 1999
August 16, 2000             September 8, 2000            September 25, 2000
July 18, 2001               August 3, 2001               August 17, 2001


Item 6.    Management's Discussion and Analysis of Consolidated Financial
           Condition and Results of Operations

The Year Ended December 31, 2001 versus December 31, 2000

The operations  for the fiscal year ended  December 31, 2001,  were those of the
Company.  The  operations  for the fiscal year ended  December  31,  2000,  were
principally  those of the  Bank,  since  the  reorganization  was  completed  on
November 1, 2000.  Accordingly  the  following  discussion  and  analysis of the
financial  condition and the results of operations should be read in conjunction
with the  financial  statements  and notes  included  elsewhere  in this  annual
report.  Per share  amounts  for prior years have been  adjusted  for the Bank's
prior 2 for 1 stock split declared March 18, 1998, 10% stock dividends  declared
June 18,  1997 and May 22,  1996 and 5% stock  dividends  declared in July 2001,
August 2000, July 1999, January and August,  1995, July 1994, June 1993 and May,
1992.

Overview

Net income was  $2,600,244  ($1.94 per share) for 2001 compared with earnings of
$2,206,710  ($1.64 per share) in 2000.  Return on average  shareholders'  equity
increased from 17.00% in 2000 to 17.19% in 2001.  Return on average total assets
for 2001, 2000 and 1999 were 1.76%, 1.62% and 1.47%, respectively.

At December 31, 2001 total assets were $157.4 million, a 12.1% increase over the
$140.4 million at December 31, 2000. The Company displayed loan growth to $107.4
million in 2001,  compared with $92.6 million at year-end 2000, a growth rate of
16.1%. Deposits also increased, growing 11.8%, from

                                     Page 12


<PAGE>



$123.1  million  at  year-end  2000 to $137.7  million  at  year-end  2001.  The
loan-to-deposit  ratio  increased  from  75.2%  in  2000 to  78.1%  in  2001,  a
reflection of stronger loan growth compared to the growth of deposits.

Net Interest Income

Net interest  income is the difference  between total interest  income and total
interest expense.  Net interest income,  adjusted to a fully taxable  equivalent
basis, increased $398,000 to $8.6 million, up 4.9% from 2000 net interest income
of $8.2 million.  Net interest  income on a fully taxable  equivalent  basis, as
shown on the table - Average  Balances,  Yields and Rates  Paid  (page  15),  is
higher than net  interest  income on the  statements  of  operations  because it
reflects adjustments applicable to tax-exempt income from certain securities and
loans ($364,000 in 2001 and $333,000 in 2000,  based on a 34% federal income tax
rate).

The increase in net interest income (stated on a fully taxable equivalent basis)
was the net  effect of a $265,000  increase  in  interest  income and a $133,000
decrease  in  interest  expense  which is a result of loan growth of 16.1% while
deposit growth was 11.8%.

Net interest income (stated on a fully taxable  equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's  net  interest  margin  declined 24 basis points to 6.25% in 2001 from
6.49% in 2000.

Interest Income

As previously  stated,  interest  income  (stated on a fully taxable  equivalent
basis)  increased  by  $265,000 to $11.5  million in 2001,  a 2.4% gain over the
$11.2 million realized in 2000.

The  $265,000  increase  was the effect of a 8.8%  increase  in average  earning
assets to $137.5 million offset by a 52 basis point decline in average yield for
the year.


                                     Page 13


<PAGE>



                              SONOMA VALLEY BANCORP
                      Selected Consolidated Financial Data
                       dollars in thousands, except share
                               and per share data
<TABLE>
<S>                                                <C>              <C>              <C>              <C>             <C>

                              For the years ended:



                                                        2001             2000             1999             1998            1997
                                                   --------------   --------------   --------------   --------------  --------------
RESULTS OF OPERATIONS:
       Net interest income                          $       8,236    $       7,870    $       6,699    $       5,987   $       5,282
       Provision for loan losses                              342              335              240              335             295
       Non-interest income                                  1,309              893              941              878             735
       Non-interest expense                                 5,224            5,061            4,614            4,100           3,519
       Provision for income tax                             1,379            1,160              976              843             789
       Extraordinary item                          --------------   --------------   --------------   --------------  --------------
                                                    $       2,600    $       2,207    $       1,810    $       1,587   $       1,414
                                                   ==============   ==============   ==============   ==============  ==============
SELECTED AVERAGE BALANCES:
       Assets                                       $     147,807    $     135,924    $     123,202    $     107,202   $      98,359
       Loans, net of unearned                             100,605           86,547           73,222           70,838          56,811
       Deposits                                           129,534          120,135          109,801           95,819          89,050
       Shareholders' equity                                15,121           12,984           11,490            9,976           8,377
PER SHARE DATA:
       Basic net income                                     $1.94            $1.64            $1.33            $1.16           $1.03
       Fully diluted net income                             $1.83            $1.59            $1.31            $1.15           $1.03
       Period end book value                               $12.50           $10.64            $8.90            $7.86           $6.68
       Weighted average shares
           outstanding                                  1,338,744        1,344,166        1,363,040        1,368,396       1,368,396
FINANCIAL RATIOS:
       Return on average assets                             1.76%            1.62%            1.47%            1.48%           1.44%
       Return on average
          shareholders' equity                             17.19%           17.00%           15.75%           15.91%          16.88%
       Net yield on earning
          assets                                            6.25%            6.49%            6.04%            6.22%           5.95%
       Cost Control ratio                                  52.72%           55.06%           58.52%           57.97%          57.01%
       Average shareholders'
          equity to average assets                         10.23%            9.55%            9.33%            9.31%           8.52%
CAPITAL RATIOS:
       Risk-based capital:
       Tier I                                              11.81%           12.78%           12.36%           12.57%          12.32%
       Total                                               13.07%           14.04%           13.62%           13.83%          13.57%
       Leverage ratio                                      10.38%           10.11%            9.54%            9.55%           8.65%
CREDIT QUALITY:
       Net charge-offs to
          average loans                                     0.05%           -0.04%            0.04%            0.09%           0.25%
       Allowance for possible
          loan losses to period
          end loans                                         2.25%            2.29%            2.19%            2.12%           2.01%





</TABLE>



                                     Page 14


<PAGE>
                              SONOMA VALLEY BANCORP
                     AVERAGE BALANCES/YIELDS AND RATES PAID
                                   Rate/Volume
<TABLE>
<S>                            <C>          <C>          <C>       <C>          <C>         <C>        <C>           <C>      <C>
                                            2001                                2000                                  1999
                                            ----                                ----                                  ----
ASSETS                         Average      Income/      Yield/    Average      Income/      Yield/    Average      Income/   Yield/
                               Balance      Expense       Rate     Balance      Expense       Rate     Balance      Expense   Rate
                              --------    --------      -------   --------      --------      ------    ---------   --------  -----
Interest-earning assets:
Loans(2):
  Commercial                  $ 61,888    $ 5,582         9.02%   $ 52,475      $  5,195       9.90%    $ 48,928    $  4,590   9.38%
  Consumer                      14,583      1,370         9.39%     11,889         1,179       9.92%      14,622       1,371   9.38%
  Real estate construction      12,393      1,279        10.32%     11,316         1,224      10.82%       7,176         822  11.45%
  Real estate mortgage           8,983        823         9.16%      8,763          830        9.47%       2,033         194   9.54%
  Tax exempt loans (1)           2,566        220         8.57%      1,798           149       8.29%         149          14   9.40%
  Leases                           409         42        10.27%        537            55      10.24%         466          39   8.37%
  Tax exempt leases (1)            165         15         9.09%        122            11       9.02%         145          11   7.59%
  Unearned loan fees              (382)                               (353)                                 (297)
                              --------    -------                 ---------     --------                --------
         Total loans           100,605      9,331         9.27%     86,547         8,643       9.99%      73,222       7,041   9.62%
Investment securities
  Available for sale:
         Taxable                16,681      1,016         6.09%     22,981         1,442       6.27%      13,915         855   6.14%
         Tax exempt(1)               0          0         0.00%        199            15       7.54%         455          32   7.03%
  Hold to maturity:
         Taxable                   203         13         6.40%        347            19       5.48%         661          40   6.05%
         Tax exempt (1)         11,779        837         7.11%     11,509           803       6.98%       9,744         664   6.81%
                              --------    -------                 --------      --------                --------    --------
         Total investment       28,663      1,866         6.51%     35,036         2,279       6.50%      24,775       1,591   6.42%
          securities
Federal funds sold               8,219        286         3.48%      4,802           294       6.12%      16,927         832   4.92%
Total due from banks/               11          0         2.73%         40             2       4.33%          15           1   4.33%
Interest bearing
                              --------    -------                ---------      --------                --------    --------   ----
  Total interest earning       137,498    $ 1,483         8.35%    126,425      $ 11,218       8.87%     114,939    $  9,465   8.23%
   assets                                 =======                               ========                            ========
Noninterest-bearing assets:
  Reserve for loan losses       (2,263)                             (1,916)                               (1,640)
  Cash and due from banks        6,620                               6,115                                 5,747
  Premises and equipment           620                                 619                                   572
  Other assets                   5,332                               4,681                                 3,584
                              --------                            --------                             ---------
         Total assets         $147,807                            $135,924                             $ 123,202
                              ========                            ========                             =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Interest bearing deposits
         Interest bearing     $ 21,940     $  149         0.68%   $ 20,875      $    204       0.98%   $  19,477    $    193    .99%
          transaction
         Savings deposits       42,074        997         2.37%     38,400         1,016       2.65%      35,628         881   2.47%
         Time deposits over     16,739        845         5.05%     15,177           831       5.48%      12,844         608   4.73%
          $100,000
         Other time deposits    18,913        885         4.68%     18,594           947       5.09%      18,624         839   4.50%
                              --------     ------                 --------      --------               ---------   ---------
         Total interest bearing
          Deposits               99,666     2,876         2.89%     93,046         2,998       3.22%      86,573       2,521   2.91%
  Federal Funds purchased             0         0         0.00%         69             5       7.25%           0           0   0.00%
  Other short term borrowings       174         7         4.02%        186            13       6.99%           0           0   0.00%
                              ---------    ------                 --------      --------               ---------   ---------
         Total interest bearing
          liabilities            99,840   $ 2,883         2.89%     93,301      $  3,016       3.23%      86,573    $  2,521   2.91%
                                          =======                               ========                           =========
Non interest bearing liabilities:
  Non interest bearing           29,868                             27,089                                23,228
  demand deposits
  Other liabilities               2,978                              2,550                                 1,911
  Shareholders' equity           15,121                             12,984                                11,490
                              ---------                           --------                            ----------
         Total liabilities and
          shareholders'       $ 147,807                           $135,924                            $  123,202
          equity              =========                           ========                            ==========
Interest rate spread                                      5.46%                                5.64%                           5.32%
                                                          ====                                 ====                            ====
Interest income                           $11,483         8.35%                 $ 11,218       8.87%                $  9,465   8.23%
Interest expense                            2,883         2.10%                    3,016       2.39%                   2,521   2.19%
                                         --------         ----                  --------       ----                ---------   ----
Net interest income/margin               $  8,600         6.25%                 $  8,202       6.49%                $  6,944   6.04%
                                         ========                               ========                           =========
</TABLE>
(1) Fully tax equivalent  adjustments  are based on a federal income tax rate of
34% in 2001,2000 and 1999.
(2) Non accrual loans have been included in loans for
the purposes of the above  presentation.  Loan fees of  approximately  $334,000,
$312,000 and $279,000 for the twelve  months ended  December 31,  2001,2000  and
1999,   respectively,   were  amortized  to  the  appropriate   interest  income
categories.
                                     Page 15
<PAGE>



                              SONOMA VALLEY BANCORP

                              Rate/Volume Analysis

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

                                                  2001 over 2000                                        2000 over 1999
                                                  --------------                                        --------------
                                  Volume        Rate       Vol/Rate     Total          Volume     Rate      Vol/Rate      Total
ASSETS
Interest-earning assets:
Loans:
  Commercial                         932        (462)         (83)        387           333        254          18          605
  Consumer                           267         (62)         (14)        191          (256)        79         (15)        (192)
  Real estate construction           116         (56)          (5)         55           474        (46)        (26)         402
  Real estate mortgage                21         (27)          (1)         (7)          642         (1)         (5)         636
  Tax exempt loans                    64           5            2          71           155         (2)        (18)         135
  Leases                             (13)          0            0         (13)            6          9           1           16
  Tax exempt leases                    4           0            0           4            (2)         2           0            0
  Unearned fee income                  0           0            0           0             0          0           0            0
                                 ---------    ---------   ----------   ----------   ---------   ---------   ---------   ----------
      Total loans                  1,391        (602)        (101)        688         1,352        295         (45)       1,602

Investment securities:
  Available for sale:
    Taxable                         (396)        (42)          12        (426)          557         18          12          587
    Tax-exempt                       (15)        (15)          15         (15)          (18)         2          (1)         (17)
  Held to maturity:
    Taxable                           (8)          3           (1)         (6)          (19)        (4)          2          (21)
    Tax-exempt                        19          15            0          34           120         16           3          139
                                 ---------    ---------   ---------    ---------    ---------   ---------   ----------   ---------
      Total investment
         securities                 (400)        (39)          26        (413)          640         32          16          688
Federal funds sold                   209        (127)         (90)         (8)         (596)       204        (146)        (538)
Due from banks-int bearing            (1)         (1)           0          (2)            1          0           0            1
                                 ---------    ---------   ---------    ---------    ---------   ---------   ---------   ----------
      Total interest-earning
         assets                    1,199        (769)        (165)        265         1,397        531        (175)       1,753
                                 =========    =========   =========    =========    =========   =========    =========   =========

LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits:
  Savings deposits                    10         (62)          (3)        (55)           14         (3)          0           11
  Interest-bearing demand
   deposits                           97        (106)         (10)        (19)           69         62           4          135
  Time less than $100,000             16         (77)          (1)        (62)           (1)       110           0          109
  Time $100,000 and over              86         (65)          (7)         14           110         95          17          222
                                 ---------    ---------   ---------    ---------    ---------   ---------   ---------   ---------
      Total interest-bearing
       deposits                      209        (310)         (21)       (122)          192        264          21          477
Federal funds purchased               (5)         (5)           5          (5)            0          0           5            5
Other borrowings                       0          (6)           0          (6)            0          0          13           13
                                 ---------    ---------   ---------    ---------    ---------   ---------   ---------   ---------
      Total interest-bearing
         liabilities                 204        (321)         (16)       (133)          192        264          39          495
  Interest differential              995        (448)        (149)        398         1,205        267        (214)       1,258
                                 =========    =========   =========    =========    =========   =========   =========   =========
</TABLE>

Volume/Rate  variances  were  allocated  in the  following  manner:
  a.  Changes affected  by volume  (change in volume  times old rate)
  b.  Changes  affected by rates  (change in rates times old  volume)
  c.  Changes  affected by  rate/volume(change in volume times change in rates)
      The total for each category was arrived at by totaling the individual
      items in their respective categories


                                     Page 16


<PAGE>



Interest Expense

Total interest  expense  declined by $133,000 to $2.9 million.  The average rate
paid on all interest- bearing liabilities was 2.89%,  compared to 3.23% in 2000.
Average balances increased from $93.3 million to $99.8 million, a 7.0% gain.

The gain in volume of average  balances was responsible for a $188,000  increase
in interest  expense  offset by a $321,000  decrease  related to lower  interest
rates  paid  for  a  net  decrease  of   $133,000.   The  lower  rates  paid  on
interest-bearing   liabilities  is  a  result  of  a  declining   interest  rate
environment.

Individual  components of interest  income and interest  expense are provided in
the table - Average Balances, Yields and Rates Paid on page 15.

Provision for Loan Losses

The  provision  for loan  losses  charged to  operations  is based on the Bank's
monthly  evaluations of the loan portfolio and the adequacy of the allowance for
loan  losses in  relation  to total loans  outstanding.  The  provisions  to the
allowance for loan losses amounted to $342,000 in 2001 and $335,000 in 2000. The
increase in the provision is the result  management's  evaluation and assessment
of the loan portfolio.

Loans  charged-off,  net of recoveries,  resulted in losses totaling  $47,000 in
2001 and  recoveries  of $32,000 in 2000.  The increase in charge offs  reflects
current economic conditions and management's efforts to identify problems early.

Non-interest Income

Non-interest  income of $1.3  million  increased  46.6% in  comparison  with the
$893,000 recorded in 2000. The increase was primarily due to a $237,000 increase
in service charge on deposit accounts.

Non-interest Expense

Total  non-interest  expense  increased  3.2% to $5.2  million in 2001 from $5.1
million in 2000. Non- interest expense  represented 3.6% of average total assets
in 2001  and 3.7% in  2000.  The  expense/asset  ratio  is a  standard  industry
measurement of a bank's ability to control its overhead or  non-interest  costs.
During 2002, the Company will continue to emphasize cost controls. Certain costs
are not  controllable  by  management.  Refer to Note I,  page 43 and 44,  for a
detailed description of Non-Interest Income and Non-Interest Expense.

Salaries and Benefits

Salaries and benefits  increased 19.2% from $2.6 million in 2000 to $3.1 million
in 2001.  The  2001  increase  reflects  normal  merit  increases  and  employee
incentives  paid  as  a  result  of  the  Company's  strong  earnings  in  2001.
Additionally,  there were  significant  increases  in workers  compensation  and
employee  medical  benefits.  At  December  31,  2001 and 2000  total  full-time
equivalent  employees were 37. Year-end assets per employee were $4.3 million in
2001 compared to $3.8 million in 2000 and $3.6 million in 1999.


                                     Page 17


<PAGE>



Premises and Equipment

Expenses related to premises and equipment  declined by 3.3% to $586,000 in 2001
from $606,000 in 2000.  Building  lease  expense on three  locations and storage
units  increased to $268,000 in 2001 from $260,000 in 2000.  Sublease income for
2000 totaled $800 compared to no sublease  income in 2001.  The  elimination  of
sublease  income in 2001 is due to the Company  assuming the entire  building at
463 Second Street West for it's own use.

Other Non-interest Expense

Other  non-interest  expense declined by 17.8% to $1.5 million in 2001 from $1.8
million in 2000.  The decrease was primarily  the result of a 22.3%  decrease in
professional   fees.   Professional  fees  is  the  largest  category  of  other
non-interest  expense,  primarily comprised of data processing,  item processing
and ATM services,  as well as  accounting,  legal and other  professional  fees.
These services  decreased by $217,000 to $757,000 in 2001 from $973,000 in 2000.
Increases  in other  categories  reflect  the  increased  growth  and  volume of
business in general.

Provision for Income Taxes

The provision  for income taxes  increased to an effective tax rate of 34.66% in
2001 compared with 34.45% in 2000.

Balance Sheet Analysis

Investment Securities

Securities are classified as held to maturity if the Company has both the intent
and the ability to hold these  securities to maturity.  As of December 31, 2001,
the Company had  securities  totaling $11.8 million with a market value of $12.1
million  categorized  as  held  to  maturity.  Decisions  to  acquire  municipal
securities,  which  are  generally  placed  in this  category,  are based on tax
planning needs and pledge requirements.

Securities are  classified as available for sale if the Company  intends to hold
these debt  securities for an indefinite  period of time, but not necessarily to
maturity.  Investment securities which are categorized as available for sale are
acquired as part of the overall  asset and  liability  management  function  and
serve as a primary  source of  liquidity.  Decisions  to  acquire  or dispose of
different  investments  are  based on an  assessment  of  various  economic  and
financial factors,  including, but not limited to, interest rate risk, liquidity
and capital  adequacy.  Securities  held in the  available for sale category are
recorded at market value,  which is $10.9 million  compared to an amortized cost
of $10.7 million as of December 31, 2001.

At year end 2001  the  overall  portfolio  had a market  value of $23.1  million
compared  with  an  amortized  cost  of  $22.5  million.  Investment  securities
decreased  32.2% to $22.7  million  from  $33.5  million  in 2000.  The  Company
maintains an investment  portfolio of  securities  rated A or higher by Standard
and Poor's and/or Moody's Investors  Service.  Tax-exempt bonds are occasionally
purchased  without  an A rating.  In the  opinion  of  management,  there was no
investment in  securities at December 31, 2001 that would  constitute a material
credit risk to the Company.

                                     Page 18


<PAGE>



The table below shows the  components  of the  investment  portfolio and average
yields.  For further  information  concerning  the  Company's  total  securities
portfolio,  including  market values and unrealized  gains and losses,  refer to
Note C of the Notes to Consolidated Financial Statements on pages 37, 38 and 39.
 <TABLE>
<S>                                           <C>             <C>                   <C>             <C>
                                              Twelve months ended 12/31/01          Twelve months ended 12/31/00


                                                Average       Average         Average        Average
                                                Balance        Yield          Balance         Yield
                                              ----------     ----------     ----------     ----------

U.S. Treasury securities                      $   12,280           6.1%     $   14,898           6.2%
U.S. federal agency issues                         2,019           6.2%          2,958           6.5%
State, county and municipal issues                11,982           7.1%         12,055           6.9%
Corporate securities                               2,121           6.2%          4,840           6.4%
Equity securities                                    261           6.1%            285           7.7%
                                              ----------                    ----------
Total investment securities                   $   28,663           6.5%     $   35,036           6.5%
                                              ==========                    ==========
</TABLE>

Loans

A  comparative  schedule of average  loan  balances is presented in the table on
page 15; year-end balances are presented in Note D to the Consolidated Financial
Statements pages 39 and 40.

Loan  balances,  net of deferred  loan fees at December  31,  2001,  were $107.4
million, an increase of 16.1% over 2000.  Commercial loans,  comprising 66.9% of
the  portfolio,  increased  $16.1  million,  or 28.7% over 2000.  This  increase
represented the primary reason for the overall growth in the portfolio. Included
in commercial  loans are loans made for commercial  purposes and secured by real
estate.

Real  Estate  Construction  loans  increased  $1.3  million,  or 10.3% over 2000
balances. Consumer loans, including home equity loans, increased $108,000 or .8%
over 2000 balances while real estate  mortgage  loans declined $2.1 million.  In
1997 the  Company  offered  leasing  opportunities  to small  businesses.  Lease
financing receivables for year end 2001 decreased $454,000 or 57.1%.

Risk Elements

The majority of the Company's  loan activity is with  customers  located  within
Sonoma County.  Approximately 82% of the total loan portfolio is secured by real
estate  located in the Company's  service area (see Note P, on page 53 and 54 of
the Consolidated Financial Statements, Concentration of Credit Risk).

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

Commitments and Letters of Credit

Loan  commitments  are written  agreements  to lend to  customers at agreed upon
terms  provided  there are no  violations of any  condition  established  in the
contract. Commitments generally have fixed expiration dates or other termination
clauses. Loan commitments may have variable interest rates and

                                     Page 19


<PAGE>



terms that reflect current market conditions at the date of commitment.  Because
many of the  commitments  are expected to expire  without being drawn upon,  the
amount  of  total  commitments  does not  necessarily  represent  the  Company's
anticipated  future funding  requirements.  Unfunded loan commitments were $41.9
million at December 31, 2001 and $35.3 million at December 31, 2000.

Standby  letters of credit  commit the  Company  to make  payments  on behalf of
customers when certain  specified  events occur.  Standby  letters of credit are
primarily issued to support customers'  financing  requirements of twelve months
or less and must meet the Company's normal policies and collateral requirements.
Standby  letters of credit  outstanding  were  $953,000 at December 31, 2001 and
$493,000 at December 31, 2000.

Nonperforming Assets

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

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

The Company had $747,000 in non-accrual status at December 31, 2001 and $294,000
at December 31,  2000.  There were no loans 90 days or more past due at December
31, 2001 and 2000.

Allowance for Loan Losses

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

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

Worsening  conditions in certain  economic  sectors and  geographic  areas could
adversely affect the loan portfolio,  necessitating  larger  provisions for loan
losses than currently  estimated.  However, as of December 31, 2001, the Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.

                                     Page 20


<PAGE>



At December 31, 2001, the allowance for loan losses was $2.4 million, or 2.2% of
year end loans, compared with $2.1 million or 2.3% of year end loans at December
31, 2000.  Net  charge-offs  to average loans  increased  when compared with the
prior year.  The  Company  recorded  net losses of .05% in 2001  compared to net
recoveries  of .04% in 2000.  The  continued  low level of  charge-offs  in 2001
reflects the Company's  attention and effort in managing and collecting past due
loans by  encouraging  the customer to bring them to a current  status or to pay
them off.

Deposits

A comparative  schedule of average deposit balances is presented in the table on
page 15; year-end deposit balances are presented in the table below.

Total  deposits  increased  $14.6 million  (11.8%) in 2001,  to $137.7  million.
Demand  deposits  increased  $1.2  million,  or 3.9% in 2001.  Savings  deposits
increased by $10.0 million,  or 28.0% and interest  bearing  checking  increased
$2.5  million or 11.7% during 2001.  Other time  deposits of less than  $100,000
declined  $666,000,  or 3.5% and time  deposits  over  $100,000  increased  $1.5
million, for an increase of 9.4% over 2000 balances.

The composition of deposits for the years ending December 31, 2001 and 2000 are
as follows:

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


                                           December 31,      Percentage     December 31,       Percentage
                                               2001           of Total           2000          of Total
                                           -------------   ------------     -------------     -----------

Interest bearing transaction deposits      $  23,865,954         17.3%      $  21,369,905         17.4%
Savings deposits                              45,523,306         33.1%         35,551,104         28.9%
Time deposits, $100,000 and over              17,809,990         12.9%         16,278,342         13.2%
Other time deposits                           18,159,339         13.2%         18,824,403         15.3%
                                           -------------         ----       -------------         ----
Total interest bearing deposits              105,358,589         76.5%         92,023,754         74.8%
Demand deposits                               32,296,390         23.5%         31,072,318         25.2%
                                           -------------         ----       -------------         ----
Total deposits                             $ 137,654,979        100.0%      $ 123,096,072        100.0%
                                           =============        =====       =============        =====
</TABLE>



Capital

The Bank is subject to FDIC regulations governing capital adequacy. The FDIC has
adopted  risk-based  capital  guidelines  which establish a risk-adjusted  ratio
relating  capital  to  different  categories  of assets  and  off-balance  sheet
exposures.  Under the current guidelines,  as of December 31, 2001, the Bank was
required to have minimum Tier I and total risk-based capital ratios of 4% and 8%
respectively.  To be well capitalized  under Prompt Corrective Action Provisions
requires minimum Tier I and total risk-based capital ratios should be 6% and 10%
respectively.

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

                                     Page 21


<PAGE>



Based on the FDIC's  guidelines,  the Bank's total  risk-based  capital ratio at
December 31, 2001 was 13.07% and its Tier 1 risk-based capital ratio was 11.81%.
The  Bank's  leverage  ratio was  10.38%.  All the  ratios  exceed  the  minimum
guidelines of 8.00%, 4.00% and 4.00%,  respectively.  The ratios at December 31,
2000 were 14.04%, 12.78% and 10.11%, respectively.

In January  2001,  the Company  approved a program to  repurchase  Sonoma Valley
Bancorp stock up to $1 million.  As of December 31, 2001,  $571,08 was purchased
and retired. The Company is continuing to repurchase Sonoma Valley Bancorp stock
up to the authorized amount.

Management  believes that the Bank's  current  capital  position,  which exceeds
guidelines  established  by  industry  regulators,  is  adequate  to support its
business.

Liquidity Management

The  Company's  liquidity  is  determined  by the level of assets (such as cash,
federal  funds  sold  and   available-for-sale   securities)  that  are  readily
convertible  to cash to meet customer  withdrawal and borrowing  needs.  Deposit
growth  also  contributes  to  the  Company's  liquidity  needs.  The  Company's
liquidity  position is reviewed by  management on a regular basis to verify that
it is adequate  to meet  projected  loan  funding and  potential  withdrawal  of
deposits.  The Company has a comprehensive  Asset and Liability  Policy which it
uses to monitor and determine  adequate  levels of liquidity.  At year end 2001,
the Company's liquidity ratio (adjusted liquid assets to deposits and short term
liabilities) was 21.08% compared to 24.27% and 28.98% at year end 2000 and 1999,
respectively.  Management expects that liquidity will remain adequate throughout
2001, as loans are not expected to grow  significantly  more than deposits,  and
excess funds will continue to be invested in quality liquid assets.

Asset/Liability Management

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

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

The Company has more  liabilities  than assets  repricing  during the next year.
However,  because the Company's asset rates change more than deposit rates,  the
Company's interest income will change more than cost of funds when rates change.
Its net interest margin should therefore  increase  somewhat when rates increase
and shrink somewhat when rates fall. The current estimate is a $206,000 increase
for a 1% increase in the Fed Funds rate and a $224,000 decrease for a 1% decline
in the Fed Funds rate.



                                     Page 22


<PAGE>



The Company controls its long term interest rate risk by keeping long term fixed
rate assets  (longer  than 5 years) less than its long term fixed rate  funding,
primarily  demand deposit  accounts and capital.  The following table sets forth
cumulative  maturity  distributions  as of December  31, 2001 for the  Company's
interest-bearing  assets and  interest-bearing  liabilities,  and the  Company's
interest rate sensitivity gap as a percentage of total interest-earning  assets.
The table shows $39.9  million in fixed rate loans over 5 years.  Many  variable
rate credit lines reached  floors in 2001,  and were reclassed to the fixed rate
category.  As soon as interest  rates  increase,  the loans will no longer be at
floors and will reclass back to the floating rate category.



( dollars in thousands)
<TABLE>
<S>                                    <C>        <C>         <C>        <C>       <C>       <C>          <C>


    December 31, 2001                  3 months   12 months   3 years    5 years   15 years  >15 years    Totals
                                       --------   ---------   -------    -------   --------  ---------   --------

    ASSETS:
      Fixed rate investments           $  3,116   $   5,591   $  8,336   $   759   $  3,474  $   1,189   $ 22,465
      Variable rate investments                                                                    267        267
      Fixed rate loans                    3,499      10,822      8,268     7,599     39,987      2,848     73,023
      Variable rate loans                31,611         352      1,303       893          0          0     34,159
      Interest-bearing balances               8                                                                 8
      Fed funds sold                     13,250                                                            13,250
                                       --------    --------   --------   -------   --------  ---------   --------

         Interest bearing assets         51,484      16,765     17,907     9,251     43,461      4,304    143,172
                                       ========    ========   ========   =======   ========  =========   ========

    LIABILITIES:
      Interest bearing transaction       23,866                                                            23,866
      deposits
      Savings deposits                   45,523                                                            45,523
      Time deposits
         Fixed rate >100m                 6,607       9,645      1,054       504                           17,810
         Fixed rate <100m                 7,566       8,441      1,720       381                           18,108
         Floating rate >100m                                                                                    0
         Floating rate <100m                 51                                                                51
      Borrowings                              0                                                                 0
                                       --------   ---------   --------   -------   --------  ---------   --------

         Interest Bearing Liabilities  $ 83,613   $  18,086   $  2,774   $   885   $      0  $       0   $105,358
                                       ========   =========   ========   =======   ========  =========   ========


    Rate Sensitivity Gap                (32,129)     (1,321)    15,133     8,366     43,461      4,304

    Cumulative Rate Sensitivity Gap     (32,129)    (33,450)   (18,317)   (9,951)    33,510     37,814

    Cumulative Position to Total Assets (20.42%)    (21.26%)   (11.64%)    (6.32%)    21.29%     24.03%

</TABLE>


Inflation

Assets and liabilities of a financial  institution  are principally  monetary in
nature.  Accordingly,  interest  rates,  which  generally  move with the rate of
inflation,  have  potentially the most  significant  effect on the Company's net
interest income.  The Company attempts to limit inflation's  impact on rates and
net income margins by minimizing its effect on these margins through  continuing
asset/liability management programs.




                                     Page 23


<PAGE>



Management's Discussion and Analysis
The Year Ended December 31, 2000 versus December 31, 1999

Summary

Net  earnings  for 2000 were $2.2  million  compared  with $1.8 million in 1999.
Earnings per share for 2000 were $1.64  compared  with $1.33 in 1999.  Return on
average  assets was 1.62% in 2000 compared with 1.47% the previous  year,  while
return on average equity was 17.00% in 2000 and 15.75% for the previous year.

Total assets  reached  $140.4  million in 2000, an 8.3% increase over the $129.6
million at December 31, 1999.  Loans increased 15.6% to $92.6 million,  compared
with $80.1 million at year-end 1999. Deposits also increased,  growing 6.9% from
$115.2  million  at  year-end  1999 to $123.1  million  at  year-end  2000.  The
loan-to-deposit ratio increased from 69.6% to 75.2%.

Net Interest Income

Net interest income on a fully tax equivalent basis increased by $1.3 million to
$8.2 million in 2000,  up 18.1% from 1999 net interest  income of $6.9  million.
The net interest  margin for 2000 increased to 6.49% from 6.04% for the previous
year. Individual components of interest income and interest expense are provided
in the table - Average Balances, Yields and Rates Paid on page 15.

Interest Income

Interest  income  increased by $1.8  million to $11.2  million for an 18.5% gain
over the $9.5 million  realized in 1999. The volume of earning assets  increased
by 10.0% to $126.4  million  from  $114.9  million  in 1999,  while the yield on
average earning assets increased by 64 basis points.

Interest Expense

Interest expense increased by $495,000 to $3.0 million in 2000 from $2.5 million
in 1999.  The average rate paid on all  interest-bearing  liabilities  increased
from 2.91% in 1999 to 3.23% in 2000 while average balances  increased from $86.6
million to $93.3  million,  a 7.8% gain over 1999. The gain in volume of average
balances was responsible for a $231,000  increase in interest expense and higher
interest  rates paid  resulted in an  additional  $264,000  increase for a total
increase of $495,000.  The higher rates paid on interest bearing  liabilities is
the result of a raising rate environment.

Provision for Loan Losses

The  provision  for loan losses was $335,000 in 2000 and  $240,000 in 1999.  The
increase  in  the   provision  is  primarily  the  result  of  loan  growth  and
management's evaluation and assessment of the loan portfolio. Loans charged off,
net of recoveries, resulted in recoveries totaling $32,000 in 2000 and losses of
$29,000 in 1999. The decline in charge-offs reflects current economic conditions
and managements efforts to identify problems early.



                                     Page 24


<PAGE>



Non-interest Income

Non-interest  income  decreased by 5.1% to $893,000  from  $941,000 the previous
year.  The decrease was  primarily due to a $97,000 loss recorded on the sale of
investment securities.

Non-interest Expense

Non-interest  expenses  increased 9.7% to $5.1 million in 2000 from $4.6 million
in 1999.  Non-interest  expense  represented  3.7% of  average  total  assets at
December 31, 2000 and 1999.

Salaries  and  benefits  increased  by 19.6%  from $2.2  million in 1999 to $2.6
million in 2000. The 2000 increase reflects normal merit increases incetives and
other  increases in employee  benefits.  At December 31, 2000,  total  full-time
equivalent  employees  were 37  compared to 36 at December  31,  1999.  Year end
assets per employee were $3.8 million in 2000 compared to $3.6 million in 1999.

Expenses  related to premises  and  equipment  increased  by 9.0% to $606,000 in
2000,  from  $556,000 in 1999.  Building  lease  expense on three  locations and
storage  units  increased  to $252,000 in 2000 from  $249,000 in 1999.  Sublease
income  for 2000  decreased  to $800 from  $3,000 in 1999.  The 2000  decline in
sublease  income is due to the Bank  assuming the entire  building at 463 Second
Street West in Sonoma for it's own use.

Other non-interest  expenses decreased by 1.9% to $1.8 million in 2000 from $1.9
million in 1999.  The decrease was  primarily  the result of a 9.3%  decrease in
professional   fees.   Professional  fees  is  the  largest  category  of  other
non-interest  expense,  primarily comprised of data processing,  item processing
and ATM services,  as well as  accounting,  legal and other  professional  fees.
These  services  decreased  by $100,000 to $973,000 in 2000 from $1.1 million in
1999.  In 1999  consultants  were  hired to  assist  with  Year  2000  readiness
resulting in a decease in professional fees in 2000. Other increases reflect the
increased growth and volume of business in general.

Provision for Income Taxes

The provision  for income taxes  decreased to an effective tax rate of 34.45% in
2000 compared with 35.03% in 1999.

Item 7.           Financial Statements and Supplementary Data

For consolidated  financial  statements of the Bancorp, see consolidated balance
sheets as of December 31, 2001 and 2000,  consolidated statements of operations,
consolidated  statements  of changes in  shareholders'  equity and  consolidated
statements  of cash flows for the three years ended  December 31, 2001 and notes
to  consolidated  financial  statements  at pages 27 through  59 of this  annual
report.

Item 8.           Changes On and Disagreement With Accountants on Accounting
                  and Financial Disclosure

None

                                     Page 25


<PAGE>






                         REPORT OF RICHARDSON & COMPANY
                              INDEPENDENT AUDITORS


Board of Directors and Shareholders
Sonoma Valley Bancorp and Subsidiary
Sonoma, California


We have audited the  accompanying  consolidated  balance sheets of Sonoma Valley
Bancorp  and  Subsidiary  as of  December  31,  2001 and 2000,  and the  related
consolidated  statements of operations,  changes in the shareholders' equity and
cash flows for each of the three years in the period  ended  December  31, 2001.
These financial  statements are the responsibility of the Bancorp's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of Sonoma Valley
Bancorp and  Subsidiary as of December 31, 2001 and 2000,  and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.



                                                       /s/ Richardson & Company


January 31, 2002

                                     Page 26


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2001 and 2000
<TABLE>
<S>                                                                             <C>                   <C>



                                                                                    2001                  2000
                                                                                --------------        --------------
ASSETS
    Cash and due from banks                                                     $    7,150,662        $    7,262,394
    Federal funds sold                                                              13,250,000             2,920,000
                                                                                --------------        --------------
                                              Total cash and cash equivalents       20,400,662            10,182,394
    Investment securities available-for-sale, at fair value                         10,936,270            21,358,387
    Investment securities held-to-maturity ( fair value
        of $12,142,652 and $12,414,261, respectively)                               11,795,980            12,182,311
    Loans and lease financing receivables, net                                     105,032,209            90,464,005
    Premises and equipment, net                                                        620,652               607,298
    Accrued interest receivable                                                        952,061             1,151,924
    Cash surrender value of life insurance                                           5,030,531             1,917,304
    Other assets                                                                     2,581,839             2,492,353
                                                                                --------------        --------------

                                                                 Total assets   $  157,350,204        $  140,355,976
                                                                                ==============        ==============
LIABILITIES
    Noninterest-bearing demand deposits                                         $   32,296,390         $  31,072,318
    Interest-bearing transaction deposits                                           23,865,954            21,369,905
    Savings and money market deposits                                               45,523,306            35,551,104
    Time deposits, $100,000 and over                                                17,809,990            16,278,342
    Other time deposits                                                             18,159,339            18,824,403
                                                                                --------------        --------------
                                                               Total deposits      137,654,979           123,096,072
    Accrued interest payable
        and other liabilities                                                        3,024,163             2,954,658
                                                                                ---------------       --------------
                                                            Total liabilities      140,679,142           126,050,730
    Commitments and contingencies ( see accompanying notes )

SHAREHOLDERS' EQUITY
    Common stock, no par value; 10,000,000 shares
        authorized;  1,333,504 shares in 2001 and 1,281,680 in
        2000 issued and outstanding                                                 11,025,885             9,585,003
    Retained earnings                                                                5,483,779             4,641,551
    Accumulated other comprehensive income                                             161,398                78,692
                                                                                --------------        --------------
                                                   Total shareholders' equity       16,671,062            14,305,246
                                                                                --------------        --------------
                                   Total liabilities and shareholders' equity     $157,350,204          $140,355,976
                                                                                ==============        ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                     Page 27


<PAGE>




                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              For the years ended December 31, 2001, 2000 and 1999

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


                                                                                 2001                  2000                 1999
                                                                            ------------          ------------         ------------
INTEREST INCOME
    Loans and leases                                                        $  9,251,314          $  8,588,054         $  7,032,537
    Taxable securities                                                         1,013,330             1,441,452              878,336
    Tax-exempt securities                                                        552,110               539,863              459,345
    Federal funds sold                                                           286,083               294,165              831,763
    Dividends                                                                     15,812                21,682               17,798
                                                                            ------------          ------------         ------------
                                      Total interest income                   11,118,649            10,885,216            9,219,779
INTEREST EXPENSE
    Interest-bearing transaction deposits                                        149,078               203,767              193,078
    Savings and money market deposits                                            996,864             1,016,445              881,292
    Time deposits, $100,000 and over                                             844,351               830,920              607,425
    Other time deposits                                                          885,322               946,805              839,090
    Other                                                                          7,221                17,579
                                                                            ------------          ------------
                                     Total interest expense                    2,882,836             3,015,516            2,520,885
                                                                            ------------          ------------         ------------
           NET INTEREST INCOME                                                 8,235,813             7,869,700            6,698,894
    Provision for loan and lease losses                                          342,000               335,000              240,000
                                                                            ------------          ------------         ------------
                       NET INTEREST INCOME AFTER
                         PROVISION FOR LOAN AND
                                    LEASE LOSSES                               7,893,813             7,534,700            6,458,894
NON-INTEREST INCOME                                                            1,309,315               892,701              941,585
NON-INTEREST EXPENSE
  Salaries and employee benefits                                               3,143,911             2,636,374            2,205,483
  Premises and equipment                                                         585,748               606,044              555,691
  Other                                                                        1,494,285             1,818,221            1,853,205
                                                                            ------------          ------------         ------------
                                 Total non-interest expense                    5,223,944             5,060,639            4,614,379
                                                                            ------------          ------------         ------------
                                    Income before provision
                                           for income taxes                    3,979,184             3,366,762            2,786,100
  Provision for income taxes                                                   1,378,940             1,160,052              975,729
                                                                              ----------          ------------         ------------

                                                 NET INCOME                 $  2,600,244          $  2,206,710         $  1,810,371
                                                                            ============          ============         ------------

                                       NET INCOME PER SHARE                       $ 1.94                $ 1.64               $ 1.33
                                                                                  ======                ======               ======
                                       NET INCOME PER SHARE
                                          ASSUMING DILUTION                       $ 1.83                $ 1.59               $ 1.31
                                                                                  ======                ======               ======
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                     Page 28


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

              For the years ended December 31, 2001, 2000 and 1999


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


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

BALANCE AT
   JANUARY 1, 1999                              1,186,240  $ 7,678,967   $ 2,971,766    $    107,777         $  10,758,510

5% stock dividend                                  58,447      949,760      (949,760)
Fractional shares                                                             (7,181)                               (7,181)
Redemption and retirement
  of stock                                        (14,526)     (93,983)     (153,618)                             (247,601)
Net income for the year       $   1,810,371                                1,810,371                             1,810,371
Other comprehensive loss,
  net of tax:
  Unrealized holding losses
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $181,430                    (259,421)
                              -------------
Other comprehensive loss,
  net of taxes                     (259,421)                                                (259,421)             (259,421)
                              -------------     ---------  -----------   -----------    ------------         -------------

Total comprehensive income    $   1,550,950
                              =============

BALANCE AT
  DECEMBER 31, 1999                             1,230,161  $ 8,534,744   $ 3,671,578    $   (151,644)        $  12,054,678

5% stock dividend                                  60,605    1,068,160    (1,068,160)
Fractional shares                                                             (7,912)                               (7,912)
Redemption and retirement
  of stock                                        (14,168)     (91,667)     (160,665)                             (252,332)
Stock options exercised and
  related tax benefits                              5,082       73,766                    `                         73,766
Net income for the year       $   2,206,710                                2,206,710                             2,206,710
Other comprehensive income,
  net of tax:
  Unrealized holding gains
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $161,088                     230,336
                              -------------
Other comprehensive income,
  net of taxes                      230,336                                                  230,336               230,336
                              -------------    ---------   -----------   -----------    ------------         -------------

Total comprehensive income    $   2,437,046
                              =============
</TABLE>

                                                                   (Continued)


                                     Page 29


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)

              For the years ended December 31, 2001, 2000 and 1999

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

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

BALANCE AT
  DECEMBER 31, 2000                             1,281,680        $    9,585,003   $   4,641,551        $     78,692    $ 14,305,246

5% stock dividend                                  63,104             1,381,976      (1,381,976)
Fractional shares                                                                       (11,955)                            (11,955)
Redemption and retirement
  of stock                                        (27,717)             (207,323)       (364,085)                           (571,408)
Stock options exercised and
  related tax benefits                             16,437               266,229                                             266,229
Net income for the year     $    2,600,244                                            2,600,244                           2,600,244
Other comprehensive income,
  net of tax:
  Unrealized holding gains
    on securities available-
    for-sale arising during
    the year, net of taxes
    of $57,842                      82,706
                            --------------
Other comprehensive income,
  net of taxes                      82,706                                                                   82,706          82,706
                            --------------      ---------        --------------   -------------        ------------    ------------

Total comprehensive income  $    2,682,950
                            ==============


BALANCE AT
  DECEMBER 31, 2001                             1,333,504        $   11,025,885   $   5,483,779        $    161,398    $ 16,671,062
                                                =========        ==============   =============        ============    ============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                     Page 30


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              For the years ended December 31, 2001, 2000 and 1999

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



                                                                               2001              2000             1999
                                                                            -----------       -----------      -----------
OPERATING ACTIVITIES
    Net income                                                              $ 2,600,244       $ 2,206,710      $ 1,810,371
    Adjustments to reconcile net income
        to net cash provided by operating activities:
            Provision for loan and lease losses                                 342,000           335,000          240,000
            Depreciation                                                        142,683           150,492          147,943
            Loss on sale of equipment                                                              12,029
            Amortization and other                                               71,782            93,539          102,787
            Net change in interest receivable                                   199,863          (116,331)        (172,070)
            Net change in cash surrender value
               of life insurance                                               (113,227)          (73,567)         (68,732)
            Net change in other assets                                          (95,957)         (811,450)        (399,699)
            Net change in interest payable
               and other liabilities                                             69,505           616,358          709,903
                                                                            -----------       -----------      -----------
                                                  NET CASH PROVIDED BY
                                                  OPERATING ACTIVITIES        3,216,893         2,412,780        2,370,503
INVESTING ACTIVITIES
    Purchases of securities held-to-maturity                                 (1,129,886)       (3,179,416)      (1,997,672)
    Purchases of securities available-for-sale                                  (15,600)       (3,240,876)     (17,579,197)
    Proceeds from maturing securities held-to-
        maturity                                                              1,472,700         1,832,000          895,000
    Proceeds from maturing securities available-
        for-sale                                                             10,550,000         1,215,000        8,864,131
    Proceeds from sales of securities available-
        for-sale                                                                                2,915,968
    Net increase in loans and leases                                        (14,910,204)      (12,432,526)      (7,224,067)
    Purchases of premises and equipment                                        (156,037)         (226,378)        (116,229)
    Purchases of life insurance                                              (3,000,000)         (450,000)
    Proceeds from disposal of equipment                                                            19,700
                                                                            -----------       -----------      -----------
                                                     NET CASH USED FOR
                                                  INVESTING ACTIVITIES       (7,189,027)      (13,546,528)     (17,158,034)
</TABLE>


                                                        (Continued)






                                     Page 31


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

              For the years ended December 31, 2001, 2000 and 1999
<TABLE>
<S>                                                                         <C>              <C>               <C>


                                                                              2001              2000             1999
                                                                            -----------       -----------      -----------
FINANCING ACTIVITIES
    Net change in demand, interest-bearing
        transaction and savings deposits                                    $13,692,323       $ 6,043,892      $ 7,941,356
    Net change in time deposits                                                 866,584         1,864,642        2,254,262
    Stock repurchases                                                          (571,408)         (252,332)        (247,601)
    Stock options exercised                                                     214,858            61,602
    Fractional shares purchased                                                 (11,955)           (7,912)          (7,181)
                                                                            -----------       -----------      -----------
                                                  NET CASH PROVIDED BY
                                                  FINANCING ACTIVITIES       14,190,402         7,709,892        9,940,836
                                                                            -----------       -----------      -----------

                                                NET CHANGE IN CASH AND
                                                      CASH EQUIVALENTS       10,218,268       (3,423,856)      (4,846,695)
    Cash and cash equivalents
        at beginning of year                                                 10,182,394        13,606,250       18,452,945
                                                                            -----------        ----------       ----------
                                             CASH AND CASH EQUIVALENTS
                                                        AT END OF YEAR      $20,400,662       $10,182,394      $13,606,250
                                                                            ===========       ===========      ===========

SUPPLEMENTAL DISCLOSURES OF
    CASH FLOW INFORMATION:

Cash paid during the year for:
     Interest expense                                                       $ 2,920,348       $ 2,994,750      $ 2,517,610
     Income taxes                                                           $ 1,556,000       $ 1,849,000      $ 1,346,000

SUPPLEMENTAL DISCLOSURES OF
     NONCASH ACTIVITIES:

Stock dividend                                                              $ 1,381,976       $ 1,068,160      $   949,760
Net change in unrealized gains and
     losses on securities                                                   $   140,548       $   391,425      $  (440,851)
Net change in deferred income taxes
     on unrealized gains and losses on
     securities                                                             $   (57,842)      $  (161,089)     $   181,430

</TABLE>


The accompanying notes are an integral part of these financial statements.


                                     Page 32


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

NOTE A--SIGNIFICANT ACCOUNTING POLICIES

Business:  During  2000,  the  shareholders  of Sonoma  Valley  Bank (the  Bank)
approved a Plan of Reorganization  and Merger Agreement,  which provided for the
formation of Sonoma Valley  Bancorp (the  Bancorp) (a bank holding  company) and
the conversion of each share of outstanding  Bank common stock into one share of
no par value  Bancorp  common  stock.  Effective  November 1, 2000,  the Bancorp
issued  1,281,680  shares of its common stock for all of the outstanding  common
stock of the Bank  through a merger  which has been  accounted  for similar to a
pooling  of  interests  in that the  historical  cost basis of the Bank has been
carried  forward.  As a result of the merger,  the Bank became the wholly  owned
subsidiary of the Bancorp.

Sonoma  Valley Bank was  organized in 1987 and  commenced  operations on June 3,
1988 as a California  state-  chartered bank. The Bank is subject to regulation,
supervision  and  regular  examination  by the  State  Department  of  Financial
Institutions and Federal Deposit Insurance Corporation. The regulations of these
agencies govern most aspects of the Bank's business.

Principles of Consolidation:  The consolidated  financial statements include the
accounts of the Bancorp andthe Bank. All material intercompany accounts and
transactions have been eliminated.

Nature of  Operations:  The Bank provides a variety of banking  services to
individuals and businesses in its primary service area of Sonoma, California and
the immediate  surrounding area. The Bank offers depository and lending services
primarily to meet the needs of its business and  professional  clientele.  These
services  include a variety of demand deposit,  savings and time deposit account
alternatives,  and special  merchant and business  services.  The Bank's lending
activities  are  directed  primarily  towards  granting  short and medium-  term
commercial  loans,  customized  lines of credit,  for such purposes as operating
capital, business and professional start-ups,  inventory, equipment and accounts
receivable,  and interim  construction  financing.  The Bank also targets  Small
Business Administration guaranteed loans to qualified small business borrowers.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash  Equivalents:  For the purposes of reporting cash flows,  cash and
cash  equivalents  are defined as those  amounts  included in the balance  sheet
captions "Cash and due from banks" and "Federal funds sold." Generally,  federal
funds are sold or purchased for one-day periods.

Investment  Securities:  Securities  are classified as  held-to-maturity  if the
Bancorp  has both the intent  and  ability  to hold  those  debt  securities  to
maturity regardless of changes in market conditions,  liquidity needs or changes
in general  economic  conditions.  These securities are carried at cost adjusted
for amortization of premium and accretion of discount,  computed by the interest
method over their contractual lives.

                                     Page 33


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities are classified as  available-for-sale  if the Bancorp intends to hold
those debt  securities for an indefinite  period of time, but not necessarily to
maturity. Any decision to sell a security classified as available-for-sale would
be based on various factors,  including significant movements in interest rates,
changes in the maturity mix of the Bancorp's assets and  liabilities,  liquidity
needs,  regulatory capital considerations and other similar factors.  Securities
available-for-sale are carried at fair value. Unrealized holding gains or losses
are  reported as increases or  decreases  in  shareholders'  equity,  net of the
related deferred tax effect.  Realized gains or losses,  determined on the basis
of the cost of specific securities sold, are included in earnings.

Loans and Lease Financing Receivables:  Loans are stated at the amount of unpaid
principal,  less the  allowance  for loan  losses  and net  deferred  loan fees.
Interest  on loans is accrued  and  credited  to income  based on the  principal
amount  outstanding.  Loan  origination fees and certain direct loan origination
costs  are  capitalized  and  recognized  as an  adjustment  of the yield on the
related loan.  However,  loan origination  costs in excess of fees collected are
not  deferred  but this  treatment  has an  immaterial  impact on the  financial
statements. Amortization of net deferred loan fees is discontinued when the loan
is placed on nonaccrual status.

All of the Bancorp's leases are classified and accounted for as direct financing
leases.  Under the direct financing  method of accounting for leases,  the total
net rentals  receivable under the lease contracts,  net of unearned income,  are
recorded as a net investment in direct financing leases, and the unearned income
is  recognized  each month as it is earned so as to produce a constant  periodic
rate of return on the unrecovered investment.

Allowance  for Loan and Lease  Losses:  The  allowance is  maintained at a level
which,  in the opinion of  management,  is adequate  to absorb  probable  losses
inherent  in  the  loan  and  lease   portfolio.   Credit   losses   related  to
off-balance-sheet  instruments  are included in the allowance for loan and lease
losses  except if the loss meets the  criteria  for accrual  under  Statement of
Financial  Accounting  Standards  No. 5, in which case the amount is accrued and
reported  separately as a liability.  Management  determines the adequacy of the
allowance  based upon  reviews  of  individual  loans and  leases,  recent  loss
experience, current economic conditions, the risk characteristics of the various
categories  of loans and leases and other  pertinent  factors.  The allowance is
based on  estimates,  and ultimate  losses may vary from the current  estimates.
These estimates are reviewed monthly and, as adjustments become necessary,  they
are  reported in earnings in the periods in which they become  known.  Loans and
leases deemed  uncollectible  are charged to the allowance.  Provisions for loan
and lease losses and recoveries on loans previously charged off are added to the
allowance.

Commercial  loans are  considered  impaired,  based on current  information  and
events,  if it is  probable  that the  Bancorp  will be  unable to  collect  the
scheduled   payments  of  principal  or  interest  when  due  according  to  the
contractual  terms of the loan  agreement.  Allowances  on  impaired  loans  are
established based on the

                                     Page 34


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

present value of expected future cash flows discounted at the loan's  historical
effective interest rate or, for collateral-dependent loans, on the fair value of
the collateral. Cash receipts on impaired loans are used to reduce principal.

Income  Recognition  on Impaired  and  Nonaccrual  Loans and  Leases:  Loans and
leases, including impaired loans, are generally classified as nonaccrual if they
are past due as to maturity or payment of  principal or interest for a period of
more than 90 days,  unless  such loans are  well-secured  and in the  process of
collection.  If a loan or lease or a portion of a loan or lease is classified as
doubtful  or is  partially  charged  off,  the loan or lease  is  classified  as
nonaccrual.  Loans and leases that are on a current  payment  status or past due
less than 90 days may also be  classified  as nonaccrual if repayment in full of
principal and/or interest is in doubt.

Loans and leases  may be  returned  to accrual  status  when all  principal  and
interest amounts contractually due (including arrearages) are reasonably assured
of  repayment  within an  acceptable  period of time,  and there is a  sustained
period  of  repayment  performance  by the  borrower,  in  accordance  with  the
contractual terms of interest and principal.

While a loan or lease is classified as nonaccrual and the future  collectibility
of the recorded  balance is doubtful,  collections of interest and principal are
generally  applied as a  reduction  to  principal  outstanding.  When the future
collectibility  of the  recorded  balance is  expected,  interest  income may be
recognized  on a cash basis.  In the case where a  nonaccrual  loan or lease had
been partially  charged off,  recognition of interest on a cash basis is limited
to that  which  would  have  been  recognized  on the  recorded  balance  at the
contractual  interest rate. Cash interest  receipts in excess of that amount are
recorded as recoveries to the allowance for loan losses until prior  charge-offs
have been fully recovered.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at cost,  less
accumulated depreciation. The provision for depreciation is computed principally
by the  straight-line  method  over the  estimated  useful  lives of the related
assets.

Income Taxes:  Provisions for income taxes are based on amounts  reported in the
statements of operations (after exclusion of non-taxable income such as interest
on state and  municipal  securities)  and include  deferred  taxes on  temporary
differences  in the  recognition  of income and  expense  for tax and  financial
statement  purposes.  Deferred  taxes are computed using the asset and liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts  of assets and  liabilities  and their  respective  tax bases.
Deferred  tax  assets and  liabilities  are  measured  using  enacted  tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.  Deferred tax assets are recognized for
deductible  temporary  differences  and tax  credit  carryforwards,  and  then a
valuation  allowance is  established  to reduce that deferred tax asset if it is
"more likely than not" that the related tax benefits will not be realized.

                                     Page 35


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising:  Advertising costs are charged to operations in the year incurred.

Net Income Per Share of Common  Stock:  Net income per share of common  stock is
computed  by dividing  net income by the  weighted  average  number of shares of
common stock outstanding during the year, after giving retroactive effect to the
stock dividends and splits. Net income per share--assuming  dilution is computed
similar to net income per share  except that the  denominator  is  increased  to
include the number of additional  common shares that would have been outstanding
if the  dilutive  potential  common  shares  had been  issued.  Included  in the
denominator is the dilutive effect of stock options  computed under the treasury
method.

Off-Balance-Sheet  Financial Instruments: In the ordinary course of business the
Bancorp has entered into  off-balance-sheet  financial instruments consisting of
commitments  to extend  credit and  standby  letters of credit.  Such  financial
instruments are recorded in the financial statements when they become payable.

Operating  Segments:  Reportable  segments are based on products  and  services,
geography,  legal structure,  management structure and any other manner in which
management  desegregates a company for making operating  decisions and assessing
performance.  The Bancorp has  determined  that its  business is  comprised of a
single operating segment.

Reclassifications: Certain reclassifications have been made to the 2000 balances
to conform to the current presentation.

NOTE B--RESTRICTIONS ON CASH AND DUE FROM BANKS

Cash and due from banks include amounts the Bank is required to maintain to meet
certain average  reserve and  compensating  balance  requirements of the Federal
Reserve.  The total requirement at December 31, 2001 and 2000 was $2,337,000 and
$1,729,000, respectively.


                                     Page 36


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE C--INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities are
summarized as follows:

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



                                                       Amortized            Unrealized           Unrealized              Fair
                                                         Cost                 Gains                Losses                Value
                                                    --------------        -------------        -------------        --------------
December 31, 2001:

Securities Available-For-Sale
    U.S. Treasury securities                         $   7,005,118       $      110,842                             $    7,115,960
    U.S. Government agency
         securities                                      1,495,960               96,070                                  1,592,030
    Corporate securities                                 1,893,618               67,362                                  1,960,980
    Equity securities                                      267,300                                                         267,300
                                                     -------------       --------------        -------------        --------------

                                                     $  10,661,996       $      274,274        $                    $   10,936,270
                                                     =============       --------------        =============        ==============
Securities Held-to-Maturity
    Municipal securities                             $  11,795,980       $      375,773        $     (29,101)       $   12,142,652
                                                     -------------       --------------        -------------        --------------

                                                     $  11,795,980       $      375,773        $     (29,101)       $   12,142,652
                                                     =============       ==============        =============        ==============

December 31, 2000:

Securities Available-for-Sale
    U.S. Treasury securities                         $  15,031,209       $      101,111                             $   15,132,320
    U.S. Government agency
        securities                                       2,993,693               44,134        $        (109)            3,037,718
    Corporate securities                                 2,948,059                6,357              (17,767)            2,936,649
    Equity securities                                      251,700                                                         251,700
                                                     -------------       --------------        -------------        --------------

                                                     $  21,224,661       $      151,602        $     (17,876)       $   21,358,387
                                                     =============       ==============        =============        ==============

Securities Held-to-Maturity
    Municipal securities                             $  12,182,311       $      248,627        $     (16,677)       $   12,414,261
                                                     -------------       --------------        -------------        --------------

                                                     $  12,182,311       $      248,627        $     (16,677)       $   12,414,261
                                                     =============       ==============        =============        ==============


</TABLE>
                                     Page 37


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999
<TABLE>
<S>                                       <C>                    <C>                 <C>                       <C>


NOTE C--INVESTMENT SECURITIES (Continued)

Contractual maturities of investment securities at December 31, 2001 were as
follows:

                                           Securities Available-For-Sale             Securities Held-To-Maturity
                                          ----------------------------------------  --------------------------------------------

                                               Amortized                Fair               Amortized               Fair
                                                  Cost                  Value                Cost                 Value
                                          -------------------    -----------------   -------------------       ------------------

Due in one year or less                   $         7,005,118    $       7,115,960   $         1,591,185       $        1,619,752
Due after one year through
   five years                                       3,389,578            3,553,010             5,541,876                5,698,636
Due after five years through
   ten years                                                                                   1,214,144                1,266,645
Due after ten years                                                                            3,448,775                3,557,619
Equity securities                                     267,300              267,300
                                          -------------------    -----------------   -------------------       ------------------

                                          $        10,661,996    $      10,936,270   $        11,795,980       $       12,142,652
                                          ===================    =================   ===================       ==================
</TABLE>

During   2001   and   1999,   the   Bancorp   did  not   sell   any   securities
available-for-sale.  During 2000, the Bancorp sold securities available-for-sale
for total  proceeds of  approximately  $2,687,482  resulting  in gross  realized
losses of approximately $97,186 and no gross realized gains.

As of  December  31,  2001,  investment  securities  with a  carrying  amount of
$6,228,089  and an  approximate  fair  value  of  $6,497,135  were  pledged,  in
accordance  with  federal  and state  requirements,  as  collateral  for  public
deposits.  Investment  securities  with a  carrying  amount  and  fair  value of
$4,665,160  at December  31, 2001 were pledged to meet the  requirements  of the
Federal Reserve and the U.S. Department of Justice.

                                     Page 38


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE D--LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The composition of the loan and lease portfolio was as follows at December 31:
<TABLE>
<S>                                                          <C>                <C>       <C>                    <C>

                                                                        2001                          2000
                                                             ---------------------------  -------------------------------

Commercial                                                   $  72,239,607      66.9%     $  56,119,346          60.4%
Consumer                                                        14,246,442      13.2%        14,137,455          15.2%
Real estate mortgage                                             7,237,000       6.7%         9,296,451          10.0%
Real estate construction                                        13,864,265      12.9%        12,570,660          13.5%
Lease financing receivables, net of
   unearned income of $70,764
   in 2001 and $152,768 in 2000                                    340,714       0.3%           794,784           0.9%
                                                             -------------     -----      -------------          ----

                                                               107,928,028     100.0%        92,918,696         100.0%
                                                             -------------     =====      -------------         =====

Deferred loan fees and costs, net                                 (480,264)                    (334,174)
Allowance for loan and lease losses                             (2,415,555)                  (2,120,517)
                                                             -------------                -------------

                                                             $ 105,032,209                $  90,464,005
                                                             =============                =============
</TABLE>

At December 31, 2001, the recorded  investment in loans for which impairment has
been recognized in accordance with Statement of Financial  Accounting  Standards
(Statement) No. 114 totaled $178,000,  with a corresponding  valuation allowance
of $25,000.  At December 31, 2000,  the recorded  investment  in loans for which
impairment  has been  recognized  in accordance  with  Statement No. 114 totaled
$241,000,  with a corresponding  valuation  allowance of $43,000.  For the years
ended  December 31, 2001,  2000 and 1999,  the average  recorded  investment  in
impaired loans was approximately $192,000, $220,000 and $209,000,  respectively.
No interest was recognized on impaired loans during 2001, 2000 or 1999.

In  addition,  at December 31, 2001 and 2000,  the Bancorp had other  nonaccrual
loans of approximately $624,200 and $100,700, respectively, for which impairment
had not been recognized.

The Bancorp has no  commitments  to loan  additional  funds to the  borrowers of
impaired or nonaccrual loans.


                                     Page 39


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE D--LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES (Continued)

The maturity and repricing distribution of the loan and lease portfolio at
December 31:
<TABLE>
<S>                                                         <C>                    <C>



                                                                  2001                  2000
                                                            ---------------        ---------------
Fixed rate loan maturities
    Three months or less                                    $     4,331,247        $     7,882,290
    Over three months to twelve months                           12,442,102              9,482,600
    Over one year to five years                                  16,285,410             16,908,269
    Over five years                                              26,357,034             19,630,840
Floating rate loans repricing
    Quarterly or more frequently                                 45,082,138             35,047,776
    Quarterly to annual frequency                                   685,182              1,353,849
    One to five years frequency                                   1,998,052              2,319,505
                                                            ---------------        ---------------
                                                                107,181,165             92,625,129
Nonaccrual loans                                                    746,863                293,567
                                                            ---------------        ---------------

                                                            $   107,928,028        $    92,918,696
                                                            ===============        ===============
</TABLE>

An  analysis  of the changes in the  allowance  for loan and lease  losses is as
follows for the years ended December 31:
<TABLE>
<S>                                                         <C>                    <C>                     <C>


                                                                  2001                   2000                   1999
                                                            ---------------        ---------------         -------------

Beginning balance                                           $     2,120,517        $     1,753,894         $   1,543,155
Provision for loan and lease losses                                 342,000                335,000               240,000
Loans charged off:
     Commercial                                                     (44,345)                                     (38,875)
     Consumer                                                       (31,680)               (19,440)              (22,687)
                                                            ---------------        ---------------         -------------
                                                                    (76,025)               (19,440)              (61,562)
Recoveries:
     Commercial                                                      10,363                 38,181                26,227
     Consumer                                                        18,700                 12,882                 6,074
                                                            ---------------        ---------------         -------------
                                                                     29,063                 51,063                32,301
                                                            ---------------        ---------------         -------------

Ending balance                                              $     2,415,555        $     2,120,517         $   1,753,894
                                                            ===============        ===============         =============

</TABLE>

                                     Page 40


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE E--PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31:


                                               2001               2000
                                         ---------------     ---------------

Land                                     $       175,000     $       175,000
Building                                          71,943              71,943
Leasehold improvements                           199,512             188,856
Furniture, fixtures and equipment              1,125,811             980,430
                                         ---------------     ---------------
                                               1,572,266           1,416,229
Less: Accumulated depreciation                  (951,614)           (808,931)
                                         ---------------     ---------------

                                         $       620,652     $       607,298
                                         ===============     ===============


NOTE F--TIME DEPOSITS

The maturities of time deposits at December 31, 2001 are as follows:

Maturing within one year                                     $    32,311,000
Maturing in one year to two years                                  2,185,000
Maturing two years through five years                                835,000
Maturing after five years                                            638,000
                                                             ---------------
                                                             $    35,969,000
                                                             ===============


NOTE G--FEDERAL FUNDS CREDIT LINES

The Bancorp has uncommitted  federal funds lines of credit agreements with other
banks. The maximum borrowings available under these lines totaled $14,500,000 at
December 31, 2001. The Bancorp pledged loans totaling  $25,158,620 as collateral
to secure advances from the Federal Home Loan Bank of up to  $12,920,491.  There
were no borrowings outstanding under the agreements at December 31, 2001.




                                     Page 41


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE H--EMPLOYEE BENEFIT PLANS

The Bancorp has a 401(k)  Employee  Savings Plan (the Plan) in which the Bancorp
matches a portion of the employee's  contribution each payday. All employees are
eligible for  participation  the first day of the month  following six months of
employment. Bancorp contributions are 100% vested at all times. The Bancorp made
contributions totaling $60,845 in 2001, $64,019 in 2000 and $59,146 in 1999.

The Bancorp purchased single premium life insurance  policies in connection with
the  implementation  of  retirement  plans for four key  officers.  The policies
provide protection against the adverse financial effects from the death of a key
officer and provide income to offset  expenses  associated  with the plans.  The
officers  are  insured  under the  policies,  but the  Bancorp  is the owner and
beneficiary.  At December 31, 2001 and 2000, the cash  surrender  value of these
policies totaled $5,030,531 and $1,917,304, respectively.

The  retirement  plans are  unfunded  and  provide  for the  Bancorp  to pay the
officers  specified amounts for specified periods after retirement and allow the
officers and  directors to defer a portion of current  compensation  in exchange
for the Bancorp's  commitment to pay a deferred benefit at retirement.  If death
occurs  prior to or  during  retirement,  the  Bancorp  will  pay the  officer's
beneficiary or estate the benefits set forth in the plans. Deferred compensation
is vested as to the amounts deferred. Liabilities are recorded for the estimated
present  value  of  future  salary  continuation  benefits  and for the  amounts
deferred by the  officers  and  directors.  At December  31, 2001 and 2000,  the
liability  recorded for the  supplemental  retirement plan totaled  $898,205 and
$665,081  respectively.  The amount of pension  expense related to this plan for
2001 and 2000 was $233,124 and $274,519  respectively.  At December 31, 2001 and
2000, the liability recorded for the deferred compensation plan totaled $696,000
and $567,000,  respectively. The amount of expense related to this plan for 2001
and 2000 was $60,300 and $47,600, respectively. The following are the components
of the accumulated  benefit  obligation  related to the supplemental  retirement
plan as of December 31:

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

                                                                  2001              2000
                                                                --------           --------

    Projected benefit obligation                                $609,162           $303,884
    Unamortized net transition obligation                        289,043            361,197
                                                                --------           --------
           Pension liability included in other liabilities      $898,205           $665,081
                                                                ========           ========

</TABLE>


The  weighted-average  discount rate used in determining  the actuarial  present
value of the projected benefit obligation was 7.5% for 2001 and 2000. The entire
accumulated benefit obligation was fully vested at December 31, 2001 and 2000.


                                     Page 42


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE H--EMPLOYEE BENEFIT PLANS (Continued)

The following is a  reconciliation  of the beginning and ending  balances of the
pension  liability and the components of net pension expense for the years ended
December 31:
<TABLE>
<S>                                                               <C>               <C>



                                                                    2001              2000
                                                                  --------          --------
    Pension liability at beginning of year                        $665,081          $390,562
    Net periodic pension expense:
        Service cost                                               238,323           302,468
        Interest cost on projected benefit obligation               42,517            19,767
        Amortization of unrecognized liability at transition       (47,716)          (47,716)
                                                                  --------          --------
                                                                   233,124           274,519
                                                                  --------          --------

                           Pension liability at end of year       $898,205          $665,081
                                                                  ========          ========

</TABLE>

NOTE I--NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSE

Non-interest  income is comprised of the following for the years ended  December
31:

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


                                                    2001             2000              1999
                                                 ----------       ----------       ----------

Service charges on deposit accounts              $  930,171       $  692,639       $  654,889
Other fee income                                    251,042          209,418          203,441
Investment securities gains (losses)                                 (97,186)
Other ( none exceeding 1% of revenues )             128,102           87,830           83,255
                                                 ----------       ----------       ----------

                                                 $1,309,315       $  892,701       $  941,585
                                                 ==========       ==========       ==========
</TABLE>


                                     Page 43


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE I--NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSE (Continued)

Other non-interest expense is comprised of the following for the years ended
December 31:

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

                                                    2001              2000            1999
                                                 ----------       ----------       ----------

Professional and consulting fees                 $  287,471       $  513,706       $  662,379
Data processing                                     469,750          459,559          410,728
Stationary and supplies                             158,335          159,886          142,472
Staff related                                       104,092          148,724          136,018
Advertising and business development                105,614          139,926          112,148
Postage and telephone                               116,879          110,093          105,882
Assessments and insurance                            79,042           79,972           72,627
Other ( none exceeding 1% of revenues)              173,102          206,355          210,951
                                                 ----------       ----------       ----------
                                                 $1,494,285       $1,818,221       $1,853,205
                                                 ==========       ==========       ==========
</TABLE>

 NOTE J--INCOME TAXES

The provision for income taxes is comprised of the following:
<TABLE>
<S>                                              <C>              <C>              <C>
                                                   2001              2000            1999
                                                 ----------       ----------       ----------
Current
     Federal                                     $1,007,904       $1,112,326       $  965,997
     State                                          406,548          449,287          385,662
                                                 ----------       ----------       ----------
                                                  1,414,452        1,561,613        1,351,659
Deferred
    Federal                                         (50,148)        (311,409)        (285,933)
    State                                            14,636          (90,152)         (89,997)
                                                 ----------       ----------       ----------
                                                    (35,512)        (401,561)        (375,930)
                                                 ----------       ----------       ----------
                                                 $1,378,940       $1,160,052       $  975,729
                                                 ==========       ==========       ==========

</TABLE>


                                     Page 44


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE J--INCOME TAXES (Continued)

The  following  is a  reconciliation  of income  taxes  computed  at the Federal
statutory  income tax rate of 34% to the effective  income tax rate used for the
provision for income taxes:

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

                                                                    2001             2000             1999
                                                                 ----------       ----------       ----------

  Income tax at Federal statutory rate                           $1,361,524       $1,144,699       $  947,274
      State franchise tax, less Federal
            income tax benefit                                      286,497          240,872          199,328
      Interest on municipal obligations exempt
            from Federal tax                                       (221,086)        (198,144)        (146,773)
      Life insurance earnings                                       (46,598)         (30,276)         (28,286)
      Meals and entertainment                                         7,393            5,191            4,186
      Other differences                                              (8,790)          (2,290)
                                                                 ----------       ----------       ----------

  Provision for income taxes                                     $1,378,940       $1,160,052       $  975,729
                                                                 ==========       ==========       ==========

The tax effects of temporary differences that give rise to the components of the
net deferred tax asset recorded as an other asset as of December 31 were as
follows:


                                                                    2001             2000             1999
                                                                 ----------       ----------       ----------
Deferred tax assets:
    Allowance for loan losses                                    $  873,005       $  753,634       $  619,700
    Nonqualified benefit plans                                      683,529          526,215          397,105
    Accrued liabilities                                             292,618          474,744          393,383
    State franchise taxes                                           138,226          152,758          131,125
    Unrealized securities holding losses                                                              106,054
    Other                                                            34,728           28,984           12,952
                                                                 ----------       ----------       ----------
                                     Total deferred tax assets    2,022,106        1,936,335        1,660,319

Deferred tax liabilities:
    Unrealized securities holding gains                             112,876           55,034
    Depreciation                                                     10,924            9,666           23,587
    Other                                                            29,392           24,820           25,457
                                                                 ----------       ----------       ----------
                                Total deferred tax liabilities      153,192           89,520           49,044
                                                                 ----------       ----------       ----------

                                        Net deferred tax asset   $1,868,914       $1,846,815       $1,611,275
                                                                 ==========       ==========       ==========
</TABLE>



                                     Page 45


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE J--INCOME TAXES (Continued)

Amounts  presented for the tax effects of temporary  differences  are based upon
estimates and  assumptions and could vary from amounts  ultimately  reflected on
the Bancorp's tax returns.  Accordingly, the variances from amounts reported for
prior  years are  primarily  the  result of  adjustments  to  conform to the tax
returns as filed.

Refundable  income  taxes were  $389,855  and  $248,307 at December 31, 2001 and
2000, respectively.  The income tax benefit related to net investment losses was
$39,996 during 2000.  There were no net  investment  gains or losses in 1999 and
2001.


NOTE K--STOCK REPURCHASE

The Bancorp has in effect a program to repurchase Sonoma Valley  Bancorp  stock
up to $1 million.  As of December 31, 2001,  $571,408 was repurchased.


NOTE L--EARNINGS PER SHARE

The following is the computation of basic and diluted earnings per share for the
years ended December 31:

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


                                                                    2001             2000             1999
                                                                 ----------       ----------       ----------
Basic:
Net income                                                       $2,600,244       $2,206,710       $1,810,371
                                                                 ==========       ==========       ==========
Weighted-average common shares outstanding                        1,338,744        1,344,166        1,363,040
                                                                 ==========       ==========       ==========
Earnings per share                                               $     1.94       $     1.64       $     1.33
                                                                 ==========       ==========       ==========
</TABLE>



                                     Page 46


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE L--EARNINGS PER SHARE (Continued)

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

                                                                    2001             2000             1999
                                                                 ----------       ----------       ----------
Diluted:
Net income                                                       $2,600,244       $2,206,710       $1,810,371
                                                                 ==========       ==========       ==========
Weighted-average common shares outstanding                        1,338,744        1,344,166        1,363,040
Net effect of dilutive stock options - based on the
    treasury stock method using average market
    price                                                            85,945           43,714           23,752
                                                                 ----------       ----------       ----------
Weighted-average common shares outstanding
    and common stock equivalents                                  1,424,689        1,387,880        1,386,792
                                                                 ==========       ==========       ==========
Earnings per share- assuming dilution                            $     1.83       $     1.59       $     1.31
                                                                 ==========       ==========       ==========
</TABLE>

NOTE M--STOCK OPTION PLAN

The Bancorp has a  stock-based  compensation  plan  consisting  of a fixed stock
option plan which is described below. The Bancorp applies Accounting  Principles
Board Opinion No. 25 and related  interpretations  in  accounting  for its plan.
Accordingly, no compensation cost has been recognized for its stock option plan.
Had compensation  cost for the Bancorp's stock option plan been determined based
on the fair value at the grant dates for awards under this plan  consistent with
the method of Statement of Financial Accounting Standards No. 123, the Bancorp's
net income and net income per share  would have been  adjusted  to the pro forma
amount indicated below for the years ended December 31:

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

                                                                    2001             2000             1999
                                                                 ----------       ----------       ----------
Net income
    As reported                                                  $2,600,244       $2,206,710       $1,810,371
    Pro forma                                                     2,420,321        2,026,787        1,631,106

Net income per share
    As reported                                                        1.94             1.64             1.33
    Pro forma                                                          1.81             1.51             1.20

Net income per share-assuming dilution
    As reported                                                        1.83             1.59             1.31
    Pro forma                                                          1.70             1.46             1.18

</TABLE>


                                     Page 47


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE M--STOCK OPTION PLAN (Continued)

The Bancorp  approved a stock option plan (the Plan),  effective  March 31, 1996
and terminating  March 31, 2006,  under which incentive and  nonstatutory  stock
options, as defined under the Internal Revenue Code, may be granted. The Plan is
administered by a committee appointed by the Board. Options representing 411,814
shares of the  Bancorp's  authorized  and  unissued  common stock may be granted
under the Plan by the committee to directors,  full-time officers, and full-time
employees of the Bancorp at a price to be  determined by the  Committee,  but in
the case of  incentive  stock  options  shall  not be less than 100% of the fair
market value of the shares on the date the incentive stock option is granted. In
addition,  the Bancorp  shall grant  options to purchase  2,801 shares of common
stock to each Board member on March 1st of each year,  provided the person was a
member of the Board for the entire  preceding  year ending  December 31st, at an
option  price equal to the fair market  value as of the grant date.  The options
may have an  exercise  period  of no more  than 10  years  and are  vested  upon
granting,  except for 83,470 of  incentive  options and 134,448 of  nonstatutory
options granted in April 1999, which are subject to a graded vesting schedule of
20% per year. No options were granted in 2001 or 2000.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 1999; dividend yield of zero; expected volatility
of 26.94  percent;  risk-free  interest  rates of 5.57 and 5.76  percent for the
incentive  options and 5.57 and 5.76 percent for the nonstatutory  options;  and
expected lives of 10 years for both the incentive and nonstatutory options.

A summary of stock option  activity,  adjusted to give effect to stock dividends
and stock splits follows for the years ended December 31:

<TABLE>
<S>                            <C>                  <C>           <C>                 <C>          <C>                <C>
                                                                  Incentive Stock Options
                               ----------------------------------------------------------------------------------------------
                                           2001                             2000                            1999
                               -----------------------------      --------------------------   ----------------------------

                                   Weighted-                        Weighted-                        Weighted-
                                    Average                          Average                          Average
                                Exercise Price       Shares       Exercise Price       Shares      Exercise Price     Shares
                               ---------------      ---------     --------------      ---------     --------------    -------
Shares under option at
     beginning of year                $  13.54        122,618           $  13.54        122,618          $  14.42      36,342
Options granted                                                                                             13.17      86,276
Options exercised                        14.14         (2,437)
                                                    ---------                         ---------                      --------
Shares under option at
     end of year                         13.53        120,181              13.54        122,618             13.54     122,618
                                                    =========                         =========                      ========

</TABLE>



                                     Page 48


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE M--STOCK OPTION PLAN (Continued)
<TABLE>
<S>                            <C>                 <C>       <C>                 <C>       <C>                 <C>

                                                             Incentive Stock Options
                               ---------------------------------------------------------------------------------------
                                           2001                         2000                             1999
                               ----------------------------  ----------------------------  ---------------------------

                                   Weighted-                    Weighted-                    Weighted-
                                    Average                      Average                      Average
                               Exercise Price       Shares   Exercise Price       Shares   Exercise Price      Shares
                               --------------      --------  --------------      --------  --------------      -------
Options exercisable at
     end of year                                    83,992                        69,732                       53,037
Weighted-average fair value
     of options granted during
     the year                                                                                       $7.18

                                                             Nonstatutory Stock Options
                               ---------------------------------------------------------------------------------------
                                                     2001                2000                         1999
                               ------------------------------  ---------------------------   -------------------------

                                   Weighted-                    Weighted-                    Weighted-
                                    Average                      Average                      Average
                               Exercise Price       Shares   Exercise Price       Shares   Exercise Price      Shares
                               --------------      --------  --------------      --------  --------------      -------
Shares under option at
     beginning of year               $  13.05       218,509        $  13.00       224,112        $  12.56       56,028
Options granted                                                                                     13.14      168,084
Options exercised                       12.89       (14,005)          11.00        (5,603)
                                                    -------                      --------                     --------
Shares under option at
     end of year                        13.06       204,504           13.05       218,509           13.00      244,112
                                                    =======                      ========                     ========

Options exercisable at
     end of year                                    120,443                       106,453                       84,042
Weighted-average fair value
     of options granted during
     the year                                                                                        7.18

</TABLE>



                                     Page 49


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE M--STOCK OPTION PLAN (Continued)

The following table summarizes information about fixed stock options outstanding
at December 31, 2001:
<TABLE>
<S>                    <C>               <C>               <C>

                                            Options Outstanding
                       ---------------------------------------------------------
                                             Weighted-Average

   Range of                Number       Remaining          Weighted-Average
Exercise Prices         Outstanding     Contractual Life   Exercise Price
---------------         -----------     ----------------   --------------
$9.03 to $10.80              37,309           5.27 years          $   9.60
$12.96 to $13.18            243,158           7.29 years             13.15
$16.09 to $17.81             44,218           6.18 years             16.72
                        -----------

$9.03 to $17.81             324,685           6.93 years             13.23
                        ===========
</TABLE>

                                           Options Exercisable
                                ------------------------------------------

   Range of                         Number                Weighted-Average
Exercise Prices                  Exercisable               Exercise Price

$9.03 to $10.80                       37,309                 $   9.60
$12.96 to $13.18                     122,908                    13.13
$16.09 to $17.81                      44,218                    16.72
                                ------------

$9.03 to $17.81                      204,435                    13.27
                                ============

NOTE N--RELATED PARTY TRANSACTIONS

The Bancorp has entered into transactions with its directors, executive officers
and their  affiliates  (related  parties).  Such  transactions  were made in the
ordinary  course of business  on  substantially  the same terms and  conditions,
including  interest rates and collateral,  as those  prevailing at the same time
for comparable transactions with other customers, and did not, in the opinion of
management,  involve more than normal credit risk or present  other  unfavorable
features. The following is a summary of the aggregate activity involving related
party borrowers at December 31, 2001 and 2000:



                                     Page 50


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE N--RELATED PARTY TRANSACTIONS (Continued)


                                                  2001              2000
                                              -----------       -----------

Loans outstanding at beginning of year        $ 2,423,000       $ 2,035,000
Loans disbursements                               768,000           952,000
Loan repayments                                  (955,000)         (564,000)
                                              -----------       -----------

Loans outstanding at end of year              $ 2,236,000       $ 2,423,000
                                              ===========       ===========


At December 31, 2001,  commitments to related parties of approximately  $891,000
were  undisbursed.   Deposits  received  from  directors  and  officers  totaled
$4,277,000 and $4,221,300 at December 31, 2001 and 2000, respectively.

The Bancorp  leases its Glen Ellen office from a director of the Bancorp under a
noncancellable  operating lease.  Lease expense for the years ended December 31,
2001 and  2000 was  $11,054  and  $10,900,  respectively.  The  remaining  lease
commitment  is  approximately  $14,260  through  March 2003  including a minimum
inflationary  increase  of 4% per  year.  The  monthly  lease  payments  will be
increased  annually  based upon the Consumer  Price Index,  but not less than 4%
annually.  The term of the lease is 5 years  with an option to extend  the lease
term for an additional 5 years at the same Consumer Price Index limitations.

NOTE O--COMMITMENTS AND CONTINGENT LIABILITIES

Lease  Commitments:  The  Bancorp  leases its two Sonoma  offices and Glen Ellen
office  under   noncancelable   operating   leases  with   remaining   terms  of
approximately  eight years, four years and two years,  respectively.  Two of the
leases require  adjustments to the base rent for changing price indices and have
a minimum annual  increase of four percent.  The Sonoma main office lease has an
option to renew for two consecutive  five-year terms and the Sonoma annex office
has an option to renew for two five-year periods and one four-year  period.  The
Glen  Ellen  office  lease has an option to renew for one  additional  five-year
term.  The following  table  summarizes  future  minimum  commitments  under the
noncancelable operating leases.

          Year ended December 31:
            2002                                                   $     269,956
            2003                                                         270,097
            2004                                                         276,222
            2005                                                         264,459
            2006                                                         253,071
            Thereafter                                                   678,332
                                                                   -------------

                                                                   $   2,012,137
                                                                   =============
                                     Page 51


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE O--COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

Rental  expense  was  $268,000 in 2001,  $260,000 in 2000 and  $249,000 in 1999.
Sublease  rental income was $800 and $3,100 in 2000 and 1999. The Bancorp had no
sublease rental income in 2001.

Financial  Instruments  with  Off-Balance-Sheet  Risk:  The Bancorp's  financial
statements do not reflect various  commitments and contingent  liabilities which
arise in the normal  course of  business  and which  involve  elements of credit
risk,  interest rate risk and liquidity risk.  These  commitments and contingent
liabilities are  commitments to extend credit and standby  letters of credit.  A
summary of the Bancorp's commitments and contingent  liabilities at December 31,
is as follows:

                                                    Contractual Amounts
                                                     2001              2000
                                              ---------------    ---------------

          Commitments to extend credit        $     41,920,000   $    35,284,000
          Standby letters of credit                    952,500           493,000

Commitments to extend credit and standby  letters of credit include  exposure to
some credit loss in the event of nonperformance  of the customer.  The Bancorp's
credit policies and procedures for credit  commitments and financial  guarantees
are the same as those for  extension  of credit that are recorded on the balance
sheet.  Because these instruments have fixed maturity dates, and because many of
them  expire  without  being  drawn  upon,  they do not  generally  present  any
significant liquidity risk to the Bancorp.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment  of  a  fee.  The  Bancorp  evaluates  each  customer's  credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bancorp  upon  extension  of credit,  is based on  management's
credit  evaluation  of the  customer.  Collateral  held  varies but may  include
accounts receivable,  inventory, property, plant, and equipment, certificates of
deposits and income-producing commercial properties.

Standby letters of credit are conditional  commitments  issued by the Bancorp to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements.  The
credit risk  involved in issuing  letters of credit is  essentially  the same as
that involved in extending facilities to customers.

The Bancorp has not  incurred  any losses on its  commitments  in 2001,  2000 or
1999.



                                     Page 52


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE O--COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

As  a  guarantor  of  its  customer's  credit  card  accounts,  the  Bancorp  is
contingently  liable  for  credit  card  receivable  balances  held  by  another
financial  institution should the customers default. The total amount guaranteed
as of December 31, 2001 and 2000 was $34,000 and $274,500, respectively.


NOTE P--CONCENTRATIONS OF CREDIT RISK

Most of the Bancorp's  business  activity is with  customers  located within the
State of California,  primarily in Sonoma  County.  The economy of the Bancorp's
primary service area is heavily  dependent on the area's major  industries which
are tourism and agriculture,  especially wineries, dairies, cheese producers and
turkey breeders.  General economic conditions or natural disasters affecting the
primary  service  area or its major  industries  could  affect  the  ability  of
customers  to repay  loans and the value of real  property  used as  collateral.
While the Bancorp has a diversified loan portfolio,  approximately  82% of these
loans are secured by real estate in its service area.

The  concentrations  of  credit  by type of loan  are set  forth  in Note D. The
distribution of commitments to extend credit  approximates  the  distribution of
loans  outstanding.  In addition,  the Bancorp has loan  commitments in the wine
industry,  tourism industry and construction loans, representing 8%, 6% and 15%,
of  outstanding  loans,  respectively.  Standby  letters of credit were  granted
primarily to commercial borrowers.  The Bancorp, as a matter of policy, does not
extend credit to any single borrower or group of related  borrowers on a secured
basis in excess of 25% of its unimpaired capital  (shareholders' equity plus the
allowance for credit  losses) and on an unsecured  basis in excess of 15% of its
unimpaired capital.

The  concentrations  of investments  are set forth in Note C. The Bancorp places
its investments primarily in financial instruments backed by the U.S. Government
and its agencies or by high quality  financial  institutions,  municipalities or
corporations.   The  Bancorp  has   significant   funds   deposited   with  four
correspondent  banks. At December 31, 2001 the Bancorp had on deposit $6,500,000
and  $5,000,000  in  federal  funds  sold to two of  these  institutions,  which
represented 40% and 30% of the Bancorp's net worth,  respectively.  In addition,
deposits  with one  correspondent  bank was in excess of the  federally  insured
limit by $505,709 at December 31, 2001. While management recognizes the inherent
risks involved in such concentrations,  this concentration  provides the Bancorp
with an effective and cost  efficient  means of managing its liquidity  position
and item processing needs.  Management closely monitors the financial  condition
of their

                                     Page 53


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE P--CONCENTRATIONS OF CREDIT RISK (Continued)

correspondent banks on a continuous basis. The Bancorp also maintains additional
deposit accounts with other correspondent banks should management determine that
a change in its correspondent banking relationship would be appropriate.

At  December  31,  2001,  the  Bancorp  had life  insurance  policies  with cash
surrender  values of $1,688,500  and  $1,550,000  with two insurance  companies,
which  represented  10%  and  9%,  respectively,  of the  Bancorp's  net  worth.
Management closely monitors the financial condition and rating of this insurance
company on a regular basis.


NOTE Q--REGULATORY MATTERS

Banking  regulations limit the amount of cash dividends that may be paid without
prior approval of the Bank's  regulatory  agency.  Cash dividends are limited to
the lesser of retained earnings, if any, or net income for the last three years,
net of the amount of any other  distributions  made to shareholders  during such
periods.  As of December 31, 2001,  $3,829,772  was  available for cash dividend
distribution without prior approval.

The Bank is subject to various regulatory capital  requirements  administered by
its primary federal regulator, the Federal Deposit Insurance Corporation (FDIC).
Failure   to  meet   minimum   capital   requirements   can   initiate   certain
mandatory---and possibly additional  discretionary---actions by regulators that,
if  undertaken,  could have a direct  material  effect on the  Bank's  financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt corrective  action,  the Bank must meet specific capital  guidelines that
involve  quantitative  measures of the Bank's assets,  liabilities,  and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's  capital  amounts  and  classification  are also  subject to  qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 2001, that the Bank
meets all capital adequacy requirements to which it is subject.


                                     Page 54


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE Q--REGULATORY MATTERS (Continued)

As of December 31, 2001, the most recent  notification from the FDIC categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action. To be categorized as well capitalized the Bank must maintain
minimum total  risk-based,  Tier I risk-based and Tier I leverage  ratios as set
forth in the table.  There are no conditions  or events since that  notification
that management  believes have changed the  institution's  category.  The Bank's
actual capital amounts and ratios are also presented in the table.

<TABLE>
<S>                                                  <C>           <C>       <C>          <C>            <C>         <C>
                                                                                                          To Be Well
                                                                                                        Capitalized Under
                                                                                For Capital             Prompt Corrective
                                                            Actual           Adequacy Purposes          Action Provisions
                                                     ---------------------   -------------------        ---------------------
                                                     Amount         Ratio    Amount        Ratio         Amount        Ratio
                                                     -------       -------   -------      -------        -------      ------
                                                                                (in thousands)
As of December 31, 2001:

Total Capital
      (to Risk Weighted Assets)                      $17,781       13.1%     > $10,884    >8.0%         >$13,605       >10.0%
                                                                             -            -             -              -
   Tier I Capital
      (to Risk Weighted Assets)                      $16,072       11.8%     >$  5,442    >4.0%         >$ 8,163       > 6.0%
                                                                             -            -             -              -
   Tier I Capital
      (to Average Assets)                            $16,072       10.4%     >$  6,195    >4.0%         >$ 7,743       > 5.0%
                                                                             -            -             -              -

As of December 31, 2000:

   Total Capital
        (to Risk Weighted Assets)                    $15,326       14.0%     >$  8,731    >8.0%         >$10,914       >10.0%
                                                                             -            -             -              -
   Tier I Capital
        (to Risk Weighted Assets)                    $13,952       12.8%     >$  4,366    >4.0%         >$ 6,549       > 6.0%
                                                                             -            -             -              -
   Tier I Capital
        (to Average Assets)                          $13,952       10.1%     >$  5,520    >4.0%         >$ 6,900       > 5.0%
                                                                             -            -             -              -

</TABLE>

NOTE R--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

A  condensed  balance  sheet as of  December  31,  2001 and 2000 and the related
condensed statement of operations and cash flows for the year ended December 31,
2001 and two months ended  December 31, 2000 for Sonoma Valley  Bancorp  (parent
company only) are  presented as follows  (there was no parent  company  activity
during 1999):



                                     Page 55


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE R--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

                            Condensed Balance Sheets
                           December 31, 2001 and 2000


<TABLE>
<S>                                                         <C>                       <C>
                                                                2001                   2000
                                                            ------------       ------------
Assets
    Cash                                                    $    349,706       $    255,630
    Other assets                                                  87,699             19,110
    Investment in common stock of subsidiary                  16,233,657         14,030,506
                                                            ------------       ------------

                                                            $ 16,671,062       $ 14,305,246
                                                            ============       ============

Shareholders' equity
    Common stock                                            $ 11,025,885       $  9,585,003
    Retained earnings                                          5,645,177          4,720,243
                                                            ------------       ------------
                                                            $ 16,671,062       $ 14,305,246
                                                            ============       ============
</TABLE>


                       Condensed Statements of Operations
 For the year ended December 31, 2001 and the two months ended December 31, 2000

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

Dividend from subsidiary                                    $    500,000       $    300,000
Expenses                                                          36,620             44,370
                                                            ------------       ------------
Income before income taxes and equity in undistributed
    income of subsidiary                                         463,380            255,630
Income tax benefit                                                16,419             19,110
                                                            ------------       ------------
                                                                 479,799            274,740
Equity in undistributed net income of subsidiary               2,120,445            111,750
                                                            ------------       ------------

Net income                                                  $  2,600,244       $    386,490
                                                            ============       ============
</TABLE>








                                     Page 56


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE R--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

                       Condensed Statements of Cash Flows
 For the year ended December 31, 2001 and the two months ended December 31, 2000

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

                                                                          2001              2000
                                                                      ------------       ------------
Operating activities:
    Net income                                                        $  2,600,244       $    386,490
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Equity in undistributed net income of subsidiary                (2,120,445)          (111,750)
        Increase in other assets                                           (17,218)           (19,110)
                                                                      ------------       ------------
                        Net cash provided by operating activities          462,581            255,630
                                                                      ------------       ------------
Financing activities:
    Stock repurchases                                                     (571,408)
    Stock options exercised                                                214,858
    Fractional shares purchased                                            (11,955)
                                                                      ------------       ------------
                            Net cash used by financing activities         (368,505)

                          Net change in cash and cash equivalents           94,076            255,630

                   Cash and cash equivalents at beginning of year          255,630
                                                                      ------------       ------------
                         Cash and cash equivalents at end of year     $    349,706       $    255,630
                                                                      ============       ============

Supplemental Disclosures of Noncash Activities:
    Stock Dividend                                                    $  1,381,976
</TABLE>

NOTE S--FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107,  Disclosures  about Fair
Value of Financial  Instruments,  requires  disclosure of fair value information
about financial instruments,  whether or not recognized in the balance sheet. In
cases where quoted  market  prices are not  available,  fair values are based on
estimates using present value or other valuation  techniques.  Those  techniques
are significantly  affected by the assumptions used, including the discount rate
and  estimates  of future cash flows.  In that  regard,  the derived  fair value
estimates cannot be  substantiated by comparison to independent  markets and, in
many cases,  could not be realized in immediate  settlement of the  instruments.
Statement No. 107 excludes  certain  financial  instruments and all nonfinancial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
value amounts  presented do not represent the underlying value of the Bancorp as
a whole.


                                     Page 57


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE S--FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values of the Bancorp and Subsidiary's  financial instruments
are as follows at December 31:
<TABLE>
<S>                                                  <C>             <C>            <C>           <C>



                                                                 2001                          2000
                                                     -----------------------------  -------------------------

                                                                      Estimated                   Estimated
                                                         Carrying        Fair         Carrying       Fair
                                                         Amount         Value          Amount       Value
                                                     --------------  ------------  ------------  ------------
Financial assets:
     Cash and due from banks                         $    7,150,662  $  7,150,662  $  7,262,394  $  7,262,394
     Federal funds sold                                  13,250,000    13,250,000     2,920,000     2,920,000
     Investment securities
        available- for-sale                              10,936,270    10,936,270    21,358,387    21,358,387
     Investment securities held-
        to-maturity                                      11,795,980    12,142,652    12,182,311    12,414,261
     Loans and lease financing
        receivables, net                                105,032,209   105,660,396    90,464,005    89,512,884
     Accrued interest receivable                            952,061       952,061     1,151,924     1,151,924
     Cash surrender value of life
        insurance                                         5,030,531     5,030,531     1,917,304     1,917,304
Financial liabilities:
     Deposits                                           137,654,979   137,977,557   123,096,072   123,157,508
     Accrued interest payable                                64,423        64,423       101,935       101,935
</TABLE>


The carrying  amounts in the  preceding  table are included in the balance sheet
under the applicable captions.

The following methods and assumptions were used by the Bancorp in estimating its
fair value disclosures for financial instruments:

        Cash, due from banks and federal funds sold: The carrying amount is a
        reasonable estimate of fair value.

     Investment  securities:  Fair values for investment securities are based on
     quoted  market  prices,  where  available.  If quoted market prices are not
     available,  fair  values are based on quoted  market  prices of  comparable
     instruments.   The   carrying   amount  of  accrued   interest   receivable
     approximates its fair value.



                                     Page 58


<PAGE>



                      SONOMA VALLEY BANCORP AND SUBSIDIARY

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE S--FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Loans and lease financing  receivables,  net: For variable-rate loans and leases
that reprice  frequently and fixed rate loans and leases that mature in the near
future,  with no  significant  change in credit  risk,  fair values are based on
carrying  amounts.  The fair  values  for other  fixed rate loans and leases are
estimated using discounted cash flow analysis, based on interest rates currently
being  offered for loans or leases with  similar  terms to  borrowers of similar
credit quality.  Loan and lease fair value estimates include judgments regarding
future  expected loss experience and risk  characteristics  and are adjusted for
the allowance for loan and lease losses. The carrying amount of accrued interest
receivable approximates its fair value.

Cash surrender value of life insurance:  The carrying  amount  approximates  its
fair value.

Deposits:   The  fair  values   disclosed  for  demand  deposits  (for  example,
interest-bearing  checking  accounts and passbook  accounts) are, by definition,
equal to the amount  payable  on demand at the  reporting  date (that is,  their
carrying  amounts).  The fair values for  certificates  of deposit are estimated
using a discounted cash flow  calculation  that applies interest rates currently
being offered on certificates to a schedule of aggregated contractual maturities
on  such  time  deposits.  The  carrying  amount  of  accrued  interest  payable
approximates fair value.

Off-balance  sheet  instruments:   Off-balance  sheet  commitments   consist  of
commitments  to extend  credit and standby  letters of credit.  The  contract or
notional amounts of the Bancorp's financial  instruments with off- balance-sheet
risk are  disclosed  in Note O.  Estimating  the fair  value of these  financial
instruments  is not  considered  practicable  due to  the  immateriality  of the
amounts of fees  collected,  which are used as a basis for  calculating the fair
value, on such instruments.




                                     Page 59


<PAGE>



                                    PART III

Item 9.  Directors and Executive Officers of the Company.

The  information  called for in Item 9 of Part III is  incorporated by reference
from  the  definitive  proxy  statement  of the  Company  to be  filed  with the
Securities and Exchange Commission within 180 days from fiscal year end.

Item 10. Executive Compensation.

The  information  called for in Item 10 of Part III is incorporated by reference
from  the  definitive  proxy  statement  of the  Company  to be  filed  with the
Securities and Exchange Commission within 180 days from fiscal year end.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The  information  called for in Item 11 of Part III is incorporated by reference
from  the  definitive  proxy  statement  of the  Company  to be  filed  with the
Securities and Exchange Commission within 180 days from fiscal year end.

Item 12. Certain Relationships and Related Transactions.

The  information  called for in Item 12 of Part III is incorporated by reference
from  the  definitive  proxy  statement  of the  Company  to be  filed  with the
Securities and Exchange Commission within 180 days from fiscal year end.

Item 13. Financial Statements, Exhibits and Reports on Form 8-K.

Financial Statements

The  following  financial  statements  of the  Company are filed as part of this
Annual Report:

     Number                                                                Page

     1.  Independent Auditor's Report ...................................... 26


     2.  Consolidated Balance Sheets as of December 31, 2001 and 2000 .......27

     3.  Consolidated Statements of Operations for the three years ended
         December 31, 2001 ..................................................28


     4.  Consolidated Statements of Changes in Shareholders' Equity
         for the three years ended December 31, 2001 ........................29

     5.  Consolidated Statements of Cash Flows for the three years ended
         December 31, 2001...................................................31

     6.  Notes to Consolidated Financial Statements .........................33

Financial Statement Schedules

All other  schedules  have been omitted  since the required  information  is not
present or is not present in  sufficient  amounts to require  submission  of the
schedules or because the information is included in the financial  statements or
the notes thereto.





                                     Page 60


<PAGE>



Exhibits

        The following Exhibits are attached or incorporated herein by reference:

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

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

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

10.1     Lease for Sonoma branch office, filed as Exhibit 10.1 (formerly 7.1) to
         the Registrant's Registration Statement on Form F-1 filed on May 1,
         1989.

10.2     Sonoma Valley Bank Chief Executive Officer Severance Agreement dated
         January 4, 1995, filed as Exhibit 10.2 to the Form 10-KSB for the year
         ended December 31, 1997.

10.3     Sonoma Valley Bank Supplemental Executive Retirement Plan, as amended
         on March 20, 1996, filed as Exhibit 10.3 to the Form 10-KSB for the
         year ended December 31, 1997.

10.4     Sonoma Valley Bank Deferred Compensation Plan, filed as Exhibit 10.4 to
         the Form 10-KSB for the year ended December 31, 1997.

10.5     Sonoma Valley Bank Master Trust Agreement for Executive Deferral Plans,
         filed as Exhibit 10.5 to the Form 10-KSB for the year ended December
         31, 1997.

10.6     Sonoma Valley Bank 1996 Stock Option Plan, filed as Exhibit 10.6 to the
         Form 10-KSB for the year ended December 31, 1997.

10.7     Sonoma Valley Bank Severance Agreement with Mel Switzer, Jr.
         dated October 21, 1998.

10.8     Sonoma Valley Bank Severance Agreement with Mary Dieter dated
         October 21, 1998.

10.10    Sonoma Valley Bancorp Assumption of Severance Agreement [Form of]

23.1     Consent of Richardson and Co., Independent Auditors

                                     Page 61


<PAGE>



In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                                    SONOMA VALLEY BANCORP




Date:    March 20, 2002            By:/s/ Mel Switzer, Jr.
                                      -----------------------------------------
                                      Mel Switzer, Jr.
                                      President and
                                      Chief Executive Officer
                                      (Principal Executive Officer)






Date:    March 20, 2002            By:/s/ Mary Quade Dieter
                                      -----------------------------------------
                                      Mary Quade Dieter
                                      Executive Vice President and
                                      Chief Operating Officer
                                      (Principal Finance and Accounting Officer)

                                     Page 62


<PAGE>


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

/s/ Suzanne Brangham                                        Date: March 20, 2002
--------------------------------------------------------
Suzanne Brangham, Secretary
of the Board and Director

/s/ Dale T. Downing                                         Date: March 20, 2002
--------------------------------------------------------
Dale T. Downing, Director


/s/ Frederick H. Harland                                    Date: March 20, 2002
--------------------------------------------------------
Frederick H. Harland, Director


/s/ Robert B. Hitchcock                                     Date: March 20, 2002
-------------------------------------------------------
Robert B. Hitchcock, Director


/s/ Gerald J. Marino                                        Date: March 20, 2002
--------------------------------------------------------
Gerald J. Marino, Director


/s/ Gary D. Nelson                                          Date: March 20, 2002
--------------------------------------------------------
Gary D. Nelson, Director


/s/ Robert J. Nicholas                                      Date: March 20, 2002
--------------------------------------------------------
Robert J. Nicholas, Chairman
of the Board and Director


/s/ Angelo C. Sangiacomo                                    Date: March 20, 2002
--------------------------------------------------------
Angelo C. Sangiacomo, Director


/s/ Jesse R. Stone                                          Date: March 20, 2002
--------------------------------------------------------
Jesse R. Stone, Director


/s/ Mel Switzer, Jr.                                        Date: March 20, 2002
--------------------------------------------------------
Mel Switzer, Jr., Director


/s/ Harry Weise                                             Date: March 20, 2002
--------------------------------------------------------
Harry Weise, Director


                                     Page 63