U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2004
Commission File Number: 000-31929
SONOMA VALLEY BANCORP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 68-0454068
(State of Incorporation) (I.R.S. Employer Identification No.)
202 West Napa Street Sonoma, California 95476
(Address of principal executive offices) (Zip Code)
(707)935-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes o No |_|
Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No o
The number of shares outstanding of the registrant's Common Stock, no par value,
as of May 1, 2004 was 1,484,823.
Page 1
INDEX
Part 1 Financial Information Page Number
-----------
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets at March 31, 2004,
December 31, 2003 and March 31, 2003....................................3
Consolidated Statements of Operations for the
three months ended March 31, 2004 and 2003..............................4
Consolidated Statements of Changes in Shareholders Equity
for the three months ended March 31, 2004,
and the years ended December 31, 2003 and 2002..........................5
Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003..............................7
Notes to Consolidated Financial Statements..............................8
Average Balances, Yields and Rates Paid
for the three months ended March 31, 2004 and 2003.....................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.....................11
Item 3. Quantitative and Qualitative Disclosure About Market Risk............23
Item 4. Controls and Procedures..............................................23
Part II Other Information
Item 1. Legal Proceedings....................................................23
Item 2. Changes in Securities and Use of Proceeds and Issuer Purchases
of Equity Securities.................................................23
Item 3. Default Upon Senior Securities.......................................24
Item 4. Submission of Matters to a Vote of Security Holders..................24
Item 5. Other Information....................................................24
Item 6. Exhibits and Reports on Form 8-K.....................................24
Signatures....................................................................25
Certifications................................................................26
The information furnished in these interim statements reflects all adjustments
and accruals which are, in the opinion of management, necessary for a fair
statement of the results for such periods. The results of operations in the
interim statements are not necessarily indicative of the results that may be
expected for the full year.
Page 2
Part I
Item 1. The information furnished in these interim statements reflects
all adjustments and accruals which are, in the opinion of management, necessary
for a fair statement of the results for such periods. The results of operations
in the interim statements are not necessarily indicative of the results that may
be expected for the full year.
FINANCIAL STATEMENTS
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2004 (Unaudited), December 31, 2003 (Audited)
and March 31, 2003 (Unaudited)
March 31, December 31, March 31,
2004 2003 2003
------------ ------------ ------------
ASSETS
Cash and due from banks $ 8,023,673 $ 9,803,272 $ 8,965,986
Federal funds sold 13,135,000 25,220,000 37,160,000
Interest-bearing due from banks 330,923 330,930 34,748
------------ ------------ ------------
Total cash and cash equivalents 21,489,596 35,354,202 46,160,734
Investment securities available-for-sale, at fair value 22,217,390 20,119,777 4,058,495
Investment securities held-to-maturity (fair value
of $17,917,000, 17,042,000 and $10,695,000,
respectively) 17,221,214 16,558,153 10,223,240
Loans and lease financing receivables, net 129,763,724 119,833,989 122,183,245
Premises and equipment, net 1,345,083 1,313,995 904,503
Accrued interest receivable 1,030,255 906,958 894,671
Cash surrender value of life insurance 7,816,322 7,730,600 7,473,434
Other assets 3,108,825 3,288,463 2,655,610
------------ ------------ ------------
Total assets $203,992,409 $205,106,137 $194,553,932
============ ============ ============
LIABILITIES
Noninterest-bearing demand deposits $ 37,163,893 $ 37,947,577 $ 40,078,981
Interest-bearing transaction deposits 32,104,881 32,467,678 29,887,026
Savings and money market deposits 64,391,506 63,680,697 57,029,834
Time deposits, $100,000 and over 25,950,385 26,565,347 24,745,449
Other time deposits 18,646,061 19,453,317 20,144,430
------------ ------------ ------------
Total deposits 178,256,726 180,114,616 171,885,720
Accrued interest payable and other liabilities 3,345,753 3,520,242 3,055,775
------------ ------------ ------------
Total liabilities 181,602,479 183,634,858 174,941,495
Commitments and contingencies (see accompanying notes)
SHAREHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized; 1,484,823 shares
at March 31, 2004 1,457,594 shares at December 31, 2003 and 1,392,138
shares at March 31, 2003 issued and
outstanding 15,615,193 15,061,636 12,895,500
Retained earnings 6,649,314 6,386,083 6,635,241
Accumulated other comprehensive income 125,423 23,560 81,696
------------ ------------ ------------
Total shareholders' equity 22,389,930 21,471,279 19,612,437
------------ ------------ ------------
Total liabilities and shareholders' equity $203,992,409 $205,106,137 $194,553,932
============ ============ ============
Page 3
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months ended March 31, 2004 and 2003
2004 2003
----------- -----------
INTEREST INCOME
Loans and leases $ 2,193,173 $ 2,442,703
Taxable securities 202,946 53,436
Tax-exempt securities 161,466 108,601
Federal funds sold 47,241 76,160
Dividends 0 0
----------- -----------
Total interest income 2,604,826 2,680,900
INTEREST EXPENSE
Interest-bearing transaction deposits 11,595 12,862
Savings and money market deposits 98,408 126,213
Time deposits, $100,000 and over 170,425 195,915
Other time deposits 101,845 130,402
----------- -----------
Total interest expense 382,273 465,392
----------- -----------
NET INTEREST INCOME 2,222,553 2,215,508
Provision for loan and lease losses 0 20,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND
LEASE LOSSES 2,222,553 2,195,508
NON-INTEREST INCOME 421,366 404,096
NON-INTEREST EXPENSE
Salaries and employee benefits 953,042 843,996
Premises and equipment 222,470 181,645
Other 540,438 535,856
----------- -----------
Total non-interest expense 1,715,950 1,561,497
----------- -----------
Income before provision
for income taxes 927,969 1,038,107
Provision for income taxes 282,399 344,378
----------- -----------
NET INCOME $ 645,570 $ 693,729
=========== ===========
NET INCOME PER SHARE $ .44 $ .47
=========== ===========
NET INCOME PER SHARE
ASSUMING DILUTION $ .40 $ .43
=========== ===========
Page 4
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended March 31, 2004 (Unaudited), and the years
ended December 31, 2003 (Audited) and 2002 (Audited)
Accumulated
Other
Comprehensive Common Stock Retained Comprehensive
Income Shares Amount Earnings Income Total
------------- ---------- ------------- ------------- ------------- -------------
BALANCE AT
JANUARY 1, 2002 1,333,504 $ 11,025,885 $ 5,483,779 $ 161,398 $ 16,671,062
5% stock dividend 65,742 1,775,026 (1,775,026)
Fractional shares (13,951) (13,951)
Redemption and retirement
of stock (14,596) (121,257) (223,345) (344,602)
Stock options exercised and
related tax benefits 16,496 256,571 256,571
Net income for the year $ 2,744,333 2,744,333 2,744,333
Other comprehensive loss,
net of tax:
Unrealized holding gains
on securities available-
for-sale arising during
the year, net of taxes
of $51,125 (73,103)
-------------
Other comprehensive loss,
net of taxes (73,103) (73,103) (73,103)
------------- --------- ------------- ------------- ------------ -------------
Total comprehensive income $ 2,671,230
=============
BALANCE AT
DECEMBER 31, 2002 1,401,146 $ 12,936,225 $ 6,215,790 $ 88,295 $ 19,240,310
5% stock dividend 68,665 1,997,422 (1,997,422)
Fractional shares (14,193) (14,193)
Redemption and retirement
of stock (38,987) (361,296) (729,099) (1,090,395)
Stock options exercised and
related tax benefits 26,770 489,285 489,285
Net income for the year $ 2,911,007 2,911,007 2,911,007
Other comprehensive income,
net of tax:
Unrealized holding losses
on securities available-
for-sale arising during
the year, net of taxes
of $45,274 (64,735)
-------------
Other comprehensive income,
net of taxes (64,735) (64,735) (64,735)
------------- --------- ------------- ------------- ----------- -------------
Total comprehensive income $ 2,846,272
=============
Page 5
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
For the three months ended March 31, 2004 (Unaudited), and the years
ended December 31, 2003 (Audited) and 2002 (Audited)
Accumulated
Other
Comprehensive Common Stock Retained Comprehensive
Income Shares Amount Earnings Income Total
-------------- ------------- --------------- ------------- -------------- ------------
BALANCE AT
DECEMBER 31, 2003 1,457,594 $ 15,061,636 $ 6,386,083 $ 23,560 $ 21,471,279
Redemption and retirement
of stock (572) (5,909) (11,133) (17,042)
Cash dividend of $.25 per share (371,206) (371,206)
Stock options granted 10,368 10,368
Stock options exercised and
related tax benefits 27,801 549,098 549,098
Net income for the period $ 645,570 645,570 645,570
Other comprehensive income,
net of tax:
Unrealized holding gains
on securities available-
for-sale arising during
the year, net of taxes
of $ 71,239 101,863
--------------
Other comprehensive income,
net of taxes 101,863 101,863 101,863
-------------- ------------- --------------- ------------- -------------- -------------
Total comprehensive income $ 747,433
==============
BALANCE AT
MARCH 31, 2004 1,484,823 $ 15,615,193 $ 6,649,314 $ 125,423 $ 22,389,930
============= =============== ============= ============== ============
Page 6
SONOMA VALLEY BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 2004 and 2003
2004 2003
-------------- --------------
OPERATING ACTIVITIES
Net income $ 645,570 $ 693,729
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan and lease losses 0 20,000
Depreciation 72,376 53,306
Amortization and other 34,715 13,287
Stock options granted 10,368
Net change in interest receivable (123,297) (95,390)
Net change in cash surrender value
of life insurance (85,722) (85,722)
Net change in other assets 108,399 355,265
Net change in interest payable and other liabilities (174,489) (318,390)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 487,920 636,085
INVESTING ACTIVITIES
Purchases of securities held-to-maturity (990,047) (778,009)
Purchases of securities available-for-sale (4,982,240) (1,001,231)
Proceeds from maturing securities held-to-maturity 300,000 470,000
Proceeds from maturing securities available-for-sale 3,050,000 750,000
Net change in loans and leases (9,929,735) 3,065,937
Purchases of premises and equipment (103,464) (82,112)
-------------- --------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (12,655,486) 2,424,585
FINANCING ACTIVITIES
Net change in demand, interest-bearing
transaction and savings deposits $ (435,672) $ 11,804,732
Net change in time deposits (1,422,218) 92,736
Cash dividend paid (371,206)
Stock repurchases (17,042) (411,731)
Stock options exercised 549,098 96,728
-------------- --------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (1,697,040) 11,582,465
-------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (13,864,606) 14,643,135
Cash and cash equivalents at beginning of period 35,354,202 31,517,599
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,489,596 $ 46,160,734
============== ==============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expense $ 382,539 $ 466,326
SUPPLEMENTAL DISCLOSURES OF
NONCASH ACTIVITIES:
Net change in unrealized gains and losses on securities $ 173,102 $ (11,213)
Net change in deferred income taxes on unrealized
gains and losses on securities $ (71,239) $ 4,614
Page 7
SONOMA VALLEY BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Unaudited)
Note 1 - Basis of Presentation
In the opinion of Management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature, which are
necessary to present fairly the financial condition of Sonoma Valley Bancorp and
Subsidiary (the "Company") at March 31, 2004 and results of operations for the
three months then ended.
Certain information and footnote disclosures presented in the Company's annual
financial statements are not included in these interim financial statements.
Accordingly, the accompanying unaudited interim consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 2003 Annual Report on Form 10-K. The results
of operations for the three months ended March 31, 2004 are not necessarily
indicative of the operating results through December 31, 2004.
Note 2 - Consolidation
The consolidated financial statements include the accounts of Sonoma Valley
Bancorp and its wholly owned subsidiary Sonoma Valley Bank. All material
intercompany accounts and transactions have been eliminated in consolidation.
Note 3 - Commitments
The Company has no outstanding performance letters of credit at March 31, 2004
and March 31, 2003.
Note 4 - Net Income Per Common Share
Net income per share is calculated by using the weighted average common shares
outstanding. The weighted average number of common shares used in computing the
net income per common share for the period ending March 31, 2004 was 1,479,930
and for the period ending March 31, 2003 was 1,465,661.
Net income per share (diluted) is calculated by using the weighted average
common shares (diluted) outstanding. The weighted average number of common
shares (diluted) used in computing the net income per common share (diluted) for
the period ending March 31, 2004 was 1,613,282 and for the period ending March
31, 2003 was 1,604,187.
Prior year shares have been adjusted to reflect the 5% stock dividend paid on
July 16, 2003.
Note 5 - Stock Option Accounting
The Company has two stock-based employee and director compensation plans. In
December 2002 the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation, an Amendment of SFAS No. 123 ("SFAS No.
123") in an effort to encourage the recognition of compensation expense for the
issuance of stock options. The Company adopted SFAS No. 148 effective January 1,
2003 using the prospective application method. Under this method, the
compensation expense and related tax benefit associated with stock option grants
issued on or after January 1, 2003 will be recognized in the income statement.
Prior to January 1, 2003, the Company accounted for those plans under the
recognition and measurement principles of APB
Page 8
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based compensation cost is reflected in net income for
stock options granted prior to January 1, 2003, as all options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based compensation on stock options granted prior to
January 1, 2003.
March 31, March 31,
2003 2004
------------- -------------
Net Income, as reported $ 693,729 $ 645,570
Deduct: Total stock-based compensation expense
determined under fair value based method for all
awards, net of related tax effects (44,975) (31,000)
------------- -------------
Pro forma net income $ 648,754 $ 614,570
============= =============
Net income per share:
Basic - As reported .47 .44
Basic - Pro forma .44 .42
Diluted - As reported .43 .40
Diluted - Pro forma .40 .38
Note 6 - Employee Benefit Plans
The Bancorp provides retirement plans to its key officers and directors. The
plans are unfunded and provide for the Bancorp to pay the officers and directors
specified amounts for specified periods after retirement. The amount of pension
expense related to this plan, and the components of pension expense for the
quarters ended March 31, 2004 and 2003 are as follows:
Directors Officers
-------------------------------- -------------------------------
2004 2003 2004 2003
-------------- ------------- ------------- -------------
Service cost $ 15,802 $ 17,847 $ 46,004 $ 54,555
Interest cost on projected benefit obligation 5,455 3,410 17,272 20,854
Amortization of unrecognized liability at
transition (7,534) (9,687)
-------------- ------------- ------------- -------------
Net periodic pension cost recognized $ 21,257 $ 21,257 $ 55,722 $ 65,722
============== ============ ============= =============
Page 9
SONOMA VALLEY BANCORP
AVERAGE BALANCES/YIELDS AND RATES PAID
For the three months ended March 31, 2004 and 2003
(dollars in thousands)
2004 2003
---- ----
ASSETS Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
--------- --------- ------ --------- --------- -----
Interest-earning assets:
Loans(2):
Commercial $ 88,158 $ 1,549 7.07% $ 85,981 $ 1,632 7.70%
Consumer 12,268 215 7.05% 12,410 238 7.78%
Real estate construction 17,141 334 7.84% 20,403 411 8.17%
Real estate mortgage 2,233 50 9.01% 5,290 110 8.43%
Tax exempt loans (1) 3,069 64 8.39% 3,184 66 8.41%
Leases 43 3 28.06% 97 6 25.09%
Tax exempt leases (1) 3 0 0.00% 63 3 19.31%
Unearned loan fees (414) (424)
--------- --------- --------- ---------
Total loans 122,501 2,215 7.27% 127,004 2,466 7.87%
Investment securities
Available for sale:
Taxable 23,190 200 3.47% 3,655 50 5.55%
Hold to maturity:
Taxable 398 3 3.03% 205 3 5.93%
Tax exempt (1) 16,751 245 5.88% 9,463 165 7.07%
--------- --------- --------- ---------
Total investment securities 40,339 448 4.47% 13,323 218 6.64%
Federal funds sold 20,520 47 .92% 26,425 76 1.17%
FHLB Stock 295 0 0.00% 282 0 0.00%
Total due from banks/Interest bearing 331 0 0.00% 34 0 0.00%
--------- --------- --------- ---------
Total interest earning assets 183,986 $ 2,710 5.92% 167,068 $ 2,760 6.70%
========= =========
Noninterest-bearing assets:
Reserve for loan losses (2,574) (2,798)
Cash and due from banks 9,214 8,660
Premises and equipment 1,331 903
Other assets 11,741 10,828
--------- ---------
Total assets $ 203,698 $ 184,661
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing deposits
Interest bearing transaction $ 32,127 $ 12 0.15% $ 26,862 $ 13 0.20%
Savings deposits 63,355 98 0.62% 54,092 126 0.94%
Time deposits over $100,000 26,344 170 2.60% 25,351 196 3.14%
Other time deposits 19,094 102 2.15% 19,974 130 2.64%
--------- --------- --------- ---------
Total interest bearing
deposits 140,920 382 1.09% 126,279 465 1.49%
Federal funds purchased 0 0 0.00% 0 0 0.00%
Other short term borrowings 0 0 0.00% 0 0 0.00%
--------- --------- --------- ---------
Total interest bearing
liabilities 140,920 $ 382 1.09% 126,279 $ 465 1.49%
========= =========
Non interest bearing liabilities:
Non interest bearing demand deposits 37,165 35,645
Other liabilities 3,373 3,176
Shareholders' equity 22,240 19,561
--------- ---------
Total liabilities and
shareholders' equity $ 203,698 $ 184,661
========= =========
Interest rate spread 4.83% 5.21%
===== =====
Interest income $ 2,710 5.92% $ 2,760 6.70%
Interest expense 382 .84% 465 1.13%
--------- ----- --------- -----
Net interest income/margin $ 2,328 5.08% $ 2,295 5.57%
========= =========
(1) Fully tax equivalent adjustments are based on a federal income tax rate of
34% in 2004 and 2003.
(2) Non accrual loans have been included in loans for the purposes of the above
presentation. Loan fees of approximately $70,344 and $100,981 for the three
months ended March 31, 2004 and 2003, respectively, were amortized to the
appropriate interest income categories.
Page 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the Three Month Periods
Ended March 31, 2004 and 2003
Forward Looking Statements
With the exception of historical facts stated herein, the matters discussed in
this Form 10-Q are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to statements regarding anticipated levels of future
revenues and earnings from the operation of Sonoma Valley Bancorp's wholly owned
subsidiary, Sonoma Valley Bank (the "Bank"), projected costs and expenses
related to operations of the bank's liquidity, capital resources, and the
availability of future equity capital on commercially reasonable terms. Factors
that could cause actual results to differ materially include, in addition to the
other factors identified in this Form 10-Q, the following; (i) increased
competition from other banks, savings and loan associations, thrift and loan
associations, finance companies, credit unions, offerors of money market funds,
and other financial institutions; (ii) the risks and uncertainties relating to
general economic and political conditions, both domestically and
internationally, including, but not limited to, inflation, or natural disasters
affecting the primary service area of the Bank or its major industries; or (iii)
changes in the laws and regulations governing the Bank's activities at either
the state or federal level. Readers of this Form 10-Q are cautioned not to put
undue reliance on "forward looking" statements which, by their nature, are
uncertain as reliable indicators of future performance. Sonoma Valley Bancorp
disclaims any obligation to publicly update these "forward looking" statements,
whether as a result of new information, future events, or otherwise.
Overview
The Company continues to be profitable, however, net income decreased by $48,
159 from $693,729 in 2003 to $645,570 in 2004. The decrease in net income is a
result of the 49 basis point decline in the net interest margin from 5.57% in
2003 to 5.08% in 2004. Additionally the bank opened a new branch, Banco de
Sonoma, during the first quarter and expenses associated with that combined to
lower net income. On a per share basis, net income equaled $.44 compared with
$.47 per share during the same period in 2003. The March 2003 per share amount
has been adjusted for the 5% stock dividend declared in June 2003.
Return on average total assets on an annualized basis for the three-month
periods was 1.28% and 1.52% respectively. Return on average shareholders' equity
on an annualized basis for the same periods was 11.68% and 14.39%, respectively.
The decline in the return on average assets in 2004 is the result of the
increase in average assets and lower income during the period and the lower
return on equity is the result of the growth in equity through earnings and the
decrease in income for the three month period of 2004.
Page 11
Income during the first quarter of 2004 is lower than 2003 due to the decline in
the net interest margin which is a result of the lower fed funds target rate and
the prime rate which follows the fed funds rate. The most recent decline was mid
year 2003 and the full impact of the decline is now evident. The Company has
experienced pressure to refinance loans for customers and many of the loans are
tied to the prime lending rate and have repriced accordingly.
The most significant event affecting the Company's growth is the opening of the
Banco de Sonoma branch in Boyes Hot Springs. Initially, this will have a
negative effect on the Income Statement creating about $200,000 in additional
expense for the Company. The branch is offering services to the Latino community
in our market place. Management identified this as a niche which was underserved
and a opportunity for future growth and profitability. All employees at the
branch are bilingual and able to offer full service banking. An additional
product which has been added is the ability for the customer to effect an
immediate transfer of funds to Mexico. Management anticipates that the growth in
the branch will be slow and steady and profitable within three years.
Total shareholders' equity increased by $918,651 or 4.2% during the quarter. The
Company reported net income of $646,000, paid out $371,000 for cash dividends
declared in February, 2004 and paid in March, 2004, the bank repurchased shares
and paid out $17,000 and the directors exercised options and paid in $328,000.
The tax benefit on these options exercised was $221,000, which also increases
equity. The company repurchased 572 shares and issued 27,801 shares for options
exercised. On April 6, 2004, the Company began a tender offer to purchase up to
100,000 shares of stock at $35.00 per share set to expire May 14, 2004. See page
6 for detail of "Changes in Shareholder Equity."
RESULTS OF OPERATIONS
Net interest Income
Net interest income is the difference between total interest income and total
interest expense. Net interest income, adjusted to a fully taxable equivalent
basis, as shown on the table- Average Balance, Yields and Rates Paid, on page
10, is higher than net interest income on the statement of income because it
reflects adjustments applicable to tax-exempt income from certain securities and
loans ($105,000 in 2004 and $79,000 in 2003, based on a 34% federal income tax
rate).
The improvement in net interest income for the three months ended March 31, 2004
(stated on a fully taxable equivalent basis) is a result of the net effect of a
$50,000 decrease in interest income offset by a larger decline in interest
expense of $83,000, showing a increase of $33,000. The decrease in interest
income is a result of the decline in the fed funds rate and the prime lending
rate in June 2003.
Net interest income (stated on a fully taxable equivalent basis) expressed as a
percentage of average earning assets, is referred to as net interest margin. The
Company's net interest margin for 2004 declined to 5.08% from 5.57% for the same
period in 2003.
Page 12
Interest Income
As previously stated, interest income (stated on a fully taxable equivalent
basis) decreased by $50,000 to $2.7 million in the three months of 2004, a 1.81%
decrease over the $2.8 million realized during the same period in 2003.
The $50,000 decrease was a result of the 25 basis point decline in the prime
lending rate in June, 2003 and higher yielding loans refinancing at lower
interest rates. The decrease in interest income occurred in spite of an increase
in average earning assets of $16.9 million or 10.13% from $167.1 million in 2003
to $184.0 million in 2004.
Interest Expense
Total interest expense declined by $83,000 to $382,000. The average rate paid on
all interest- bearing liabilities declined from 1.49% in 2003 to 1.09% in 2004.
Average balances of earning liabilities increased from $126.3 million to $140.9
million, an 11.6% gain in deposits. The increase in volume of average balances
was responsible for a $26,000 increase in interest expense together with a
$109,000 decrease in expense related to lower interest rates resulting in lower
interest expense of $83,000.
Individual components of interest income and interest expense are provided in
the table-Average Balances, Yields and Rates Paid on page 10.
Provision for Loan Losses
The provision for loan losses charged to operations is based on the Company's
monthly evaluation of the loan portfolio and the adequacy of the allowance for
loan losses in relation to total loans outstanding. Due to managements'
evaluation and assessment of the loan portfolio there was no provision for loan
losses during the first quarter. Management anticipates that loan growth will
increase in the second quarter which could necessitate an additional provision
to the reserve for loan losses. The provision for loan losses in 2003 was
$20,000.
The economic climate continues to slowly improve and the non-accrual portfolio
dropped to below 1% of total loans during the first three months of 2004, down
over half from the level in the first three months of 2003. Loans charged-off
were $270,412, one loan represented over 99.9% of this figure and recoveries
were $9,846 for the three months of 2004 compared with $32,850 in charge-offs
and $1,680 in recoveries for the same period in 2003.
Page 13
Non-interest Income
Non-interest income of $421,000 increased 4.21% over the $404,000 recorded in
the comparable period in 2003. Services Charges were up due to growth in
customer activity offset by a decline in loan referral income which is a result
of the decline in loan refinancings and new purchase loans.
Non-interest Expense
Total non-interest expense increased 9.9% to $1.72 million during the three
months of 2004 from $1.56 million for the same period in 2003. Non-interest
expense on an annualized basis represented 3.39% of average total assets in 2004
compared with 3.43% in the comparable period in 2003. The slight decrease in the
2004 expense ratio reflects managements' efforts to control the increase in
expense as average assets showed an increase of 10.31% or $19.0 million to
$203.7 million in 2004 from $184.7 million in 2003.
Salaries and benefits increased 12.92% from $844,000 in 2003 to $953,000 in
2004. The 2004 increase is the result of the additional staffing and benefits
required for the Banco de Sonoma branch which opened first quarter and the
effect of a 64.9% increase in the cost of Workers Compensation insurance when
comparing first quarter 2004 with first quarter 2003.
Expense related to premises and equipment increased 23.2% to $223,000 in 2004
from $181,000 in 2003. The increase in expense in 2004 is a result of a remodel
of the Sonoma Branch and the opening of the Banco de Sonoma branch. The bank
continues to emphasize security in its computer operations and equipment and
software are monitored and upgraded as appropriate to ensure confidentiality of
customer and company data.
Other operating expenses increased by only 0.7% in 2004 to $540,000 from
$536,000 in 2003. The bank continues to utilize professional assistance where
appropriate and will be imaging many of the documents held within the bank to
enable employees to access information more quickly.
Provision for Income Taxes
The provision for income taxes declined to an effective tax rate of 30.43% for
the three months of 2004 compared with 33.17% for the three months of 2003. The
lower effective tax rate is a reflection of the increase of municipal securities
in the investment portfolio. Income taxes reported in the financial statements
include deferred taxes resulting from timing differences in the recognition of
items for tax and financial reporting purposes.
Page 14
BALANCE SHEET ANALYSIS
Investments
Investment securities were $39.4 million at March 31, 2004, a 7.5% increase from
the $36.7 million at December 31, 2003 and a 176.1% increase from $14.3 million
at March 31, 2003. The significant increase in the portfolio is management's
attempt to generate higher earnings by moving funds from Fed Funds Sold to
higher yielding investments. The Company will usually maintain an investment
portfolio of securities rated A or higher by Standard and Poor's and or Moody's
Investors Service. Local tax-exempt bonds are occasionally purchased without an
A rating.
Securities are classified as held to maturity, if the Company has both the
intent and the ability to hold these securities to maturity. As of March 31,
2004, the Company had securities totaling $17.2 million with a market value of
$17.9 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 $22.2 million compared to an amortized cost
of $23.0 million as of March 31, 2004.
Although the quoted market values fluctuate, investment securities are generally
held to maturity, and accordingly, gains and losses are recognized in the
accounts upon sale, or at such time as management determines that a permanent
decline in value exists.
Page 15
Loans
The Company's loan portfolio was $132.1 million at March 31, 2004, or 74.1% of
total deposits. This compares with $122.5 million, or 68.0% of total deposits,
at December 31, 2003 and $125.0 million, or 72.7% of total deposits, at March
31, 2003. A comparative schedule of average loan balances is presented in the
table on page 10; period end and year-end balances are presented in the
following table.
March 31, Percentage December 31, Percentage March 31, Percentage
2004 of Total 2003 of Total 2003 of Total
------------ ---------- ------------ ---------- ------------ --------
Commercial $ 98,282,959 74.1% $ 92,197,984 75.0% $ 85,802,958 68.4%
Consumer 13,289,577 10.0% 11,750,131 9.6% 11,868,556 9.5%
Real estate construction 18,280,825 13.8% 16,646,907 13.5% 23,458,920 18.7%
Real estate mortgage 2,703,348 2.0% 2,231,244 1.8% 4,092,951 3.3%
Leases 35,476 0.1% 79,884 0.1% 149,976 0.1%
------------ ---------- ------------ ---------- ------------ --------
132,592,185 100.0% 122,906,150 100.0% 125,373,361 100.0%
========== ========== ========
Deferred loan fees
and costs, net (454,402) (437,536) (419,324)
Allowance for loan
and lease losses (2,374,059) (2,634,625) (2,770,792)
------------ ------------ ------------
$129,763,724 100.0% $119,833,989 100.0% $122,183,245 100.0%
============ ========= ============ ========== ============ ========
Risk Elements
The majority of the Company's loan activity is with customers located within
Sonoma County. Approximately 86% of the total loan portfolio is secured by real
estate located in the Company's service area.
Significant concentrations of credit risk may exist if a number of loan
customers are engaged in similar activities and have similar economic
characteristics. The Company believes it has policies in place to identify
problem loans and to monitor concentrations of credits.
Non Performing Assets
There were $1.2 million nonaccrual loans and no loans 90 days or more past due
and still accruing at March 31, 2004 down from $2.3 million nonaccrual loans and
no loans 90 days or more past due and still accruing at March 31, 2003.
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.
Page 16
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 March 31, 2004 the Company
believes its overall allowance for loan losses is adequate based on its analysis
of conditions at that time.
At March 31, 2004, the allowance for loan losses was $2.4 million, or 1.80% of
period-end loans, compared with $2.6 million, or 2.15% at December 31, 2003 and
$2.8 million, or 2.22% at March 31, 2003.
Page 17
An analysis of the changes in the allowance for loan losses, including
charge-offs and recoveries by loan categories, is presented below.
For the Three For the Year For the Three
Months Ended Ended Months Ended
3/31/04 12/31/03 3/31/03
Balance beginning of year $ 2,634,625 $ 2,781,962 $ 2,781,962
Charge-offs:
Commercial (270,000) (142,572) 0
Consumer (412) (41,161) (32,850)
--------------- --------------- ---------------
Total charge-offs (270,412) (183,733) (32,850)
Recoveries:
Commercial 8,500 8,320 640
Consumer 1,346 8,076 1,040
--------------- --------------- ---------------
Total recoveries 9,846 16,396 1,680
Net charge-offs (260,566) (167,337) (31,170)
Provision charged to operations 0 20,000 20,000
--------------- --------------- ---------------
Balance end of period $ 2,274,059 $ 2,634,625 $ 2,770,792
=============== =============== ===============
Ratio of net charge-offs
annualized to average loans 0.86% 0.14% 0.10%
Balance in allowance as a percentage 1.80% 2.15% 2.22%
of loans outstanding at period end
Deposits
A comparative schedule of average deposit balances is presented in the table on
page 10; period end and year-end deposit balances are presented in the following
table.
March 31, Percentage December 31, Percentage March 31, Percentage
2004 of Total 2003 of Total 2003 of Total
------------ ---------- ------------ ---------- ------------ ---------
Interest bearing
transaction deposits $ 32,104,881 18.0% $ 32,467,678 18.0% $ 29,887,026 17.4%
Savings deposits 64,391,506 36.1% 63,680,697 35.4% 57,029,834 33.2%
Time deposits,
$100,000 and over 25,950,385 14.6% 26,565,347 14.7% 24,745,449 14.4%
Other time deposits 18,646,061 10.5% 19,453,317 10.8% 20,144,430 11.7%
------------ ---------- ------------ ---------- ------------ ----------
Total interest bearing
deposits 141,092,833 79.2% 142,167,039 78.9% 131,806,739 76.7%
Demand deposits 37,163,893 20.8% 37,947,577 21.1% 40,078,981 23.3%
------------ ---------- ------------ ---------- ------------ ----------
Total deposits $178,256,726 100.0% $180,114,616 100.0% $171,885,720 100.0%
============ ========== ============ ========== ============ ==========
Total deposits decreased by $1.9 million, during the three months of 2004, to
$178.3 million from $180.1 million at December 31, 2003. Other time deposits
showed the largest decrease of $807,000 or 4.15% to $26.0 million as of March
31, 2003 from $26.6 million at December 31, 2003. Non interest bearing demand
declined by $784,000 or 2.07% from $37.9 million at December 31, 2003 to $37.2
million as of March 31, 2004. Interest bearing checking accounts and time
deposits greater than $100,000 declined by 1.12% and 2.31% to $32.1 million and
$26.0 respectively in March, 2003. Savings deposits increased $711,000 or 1.12%
to $64.4 million from December 31, 2003. With the future of interest rates
uncertain the Company cannot predict how quickly rates may change on deposit
accounts which could cause the net interest margin to decline which could lower
net income.
Risk-Based Capital
The Federal Deposit Insurance Corporation (FDIC) has adopted risk-based capital
guidelines which establish a risk-adjusted ratio relating capital to different
categories of assets and off- balance sheet exposures. Under current guidelines,
as of March 31, 2004, the Company was required to have minimum Tier I and total
risk-based capital ratios of 4% and 8% respectively. To be well capitalized
under Prompt Corrective Action Provisions requires minimum Tier I and total
risk-based capital ratios should be 6% and 10% respectively.
The FDIC has also adopted minimum leverage ratio guidelines for compliance by
banking organizations. The guidelines require a minimum leverage ratio of 4% of
Tier 1 capital to total average assets. Banks experiencing high growth rates are
expected to maintain capital positions well above the minimum levels. The
leverage ratio in conjunction with the risk-based capital ratio constitute the
basis for determining the capital adequacy of banking organizations.
The table below presents Tier 1 capital, total capital and total risk-weighted
assets at March 31, 2004, along with the related risk-based capital ratio and
leverage ratio.
(dollars in thousands)
Total
Risked-based TIER 1 TOTAL Leverage
Assets Capital Ratio Capital Ratio Ratio
------------ -------- ----- ------- ----- --------
$173,286 $ 20,979 12.11% $23,148 13.36% 10.32%
Page 18
Off Balance Sheet Commitments
The Company's off balance sheet commitments consist of commitments to extend
credit of $32.1 million and standby letters of credit of $465,000. These
commitments are extended to customers in the normal course of business. The
Company also has contractual obligations consisting of operating leases for
various facilities and payments to participants under the Company's supplemental
executive retirement plan and deferred compensation plan.
The following table summarizes the Company's contractual obligations as of March
31, 2004.
Payments due by period
Contractual Obligations
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
Operating Lease Obligations 1,550,371 302,802 871,413 376,156 -
Executive Officer and
Director Supplemental
Retirement 1,806,480 5,239 30,710 194,377 1,576,154
Deferred Compensation 1,032,586 13,424 17,554 111,106 890,502
Market Risk Management
Overview. Market risk is the risk of loss from adverse changes in market
prices and rates. The Company's market risk arises primarily from interest rate
risk inherent in its loan and deposit functions. The goal for managing the
assets and liabilities of the Company is to maximize shareholder value and
earnings while maintaining a high quality balance sheet without exposing the
Company to undue interest rate risk. The Board of Directors has overall
responsibility for the interest rate risk management policies. Sonoma Valley
Bank has an Asset and Liability Management Committee (ALCO) that establishes and
monitors guidelines to control the sensitivity of earnings to changes in
interest rates.
Asset/Liability Management. Activities involved in asset/liability
management include but are not limited to lending, accepting and placing
deposits and investing in securities. Interest rate risk is the primary market
risk associated with asset/liability management. Sensitivity of earnings to
interest rate changes arises when yields on assets change in a different time
period or in a different amount from that of interest costs on liabilities. To
mitigate interest rate risk, the structure of the balance sheet is managed with
the goal that movements of interest rates on assets and liabilities are
correlated and contribute to earnings even in periods of volatile interest
rates. The asset/liability management policy sets limits on the acceptable
amount of variance in net interest margin and market value of equity under
changing interest environments. The Company uses simulation models to forecast
earnings, net interest margin and market value of equity.
Simulation of earnings is the primary tool used to measure the sensitivity
of earnings to interest rate changes. Using computer-modeling techniques, the
Company is able to estimate the
Page 19
potential impact of changing interest rates on earnings. A balance sheet
forecast is prepared quarterly using inputs of actual loans, securities and
interest bearing liabilities (i.e. depositis/borrowings) positions as the
beginning base. The forecast balance sheet is processed against four interest
rate scenarios. The scenarios include a 100 and 200 basis point rising rate
forecasts, a flat rate forecast and a 100 basis point falling rate forecast
which take place within a one year time frame. The net interest income is
measured during the year assuming a gradual change in rates over the
twelve-month horizon. The Company's 2004 net interest income, as forecast below,
was modeled utilizing a forecast balance sheet projected from year-end 2003
balances. The following table summarizes the effect on net interest income (NII)
of a +/-100 and +200 basis point change in interest rates as measured against a
constant rate (no change) scenario.
Interest Rate Risk Simulation of Net Interest Income as of March 31, 2004 (In
thousands)
Variation from a constant rate scenario $ Change in NII
+200bp $ 696
+100bp 300
-100bp (217)
The simulations of earnings do not incorporate any management actions,
which might moderate the negative consequences of interest rate deviations.
Therefore, they do not reflect likely actual results, but serve as conservative
estimates of interest rate risk.
Interest Rate Sensitivity Analysis. Interest rate sensitivity is a function
of the repricing characteristics of the portfolio of assets and liabilities.
These repricing characteristics are the time frames within which the
interest-bearing assets and liabilities are subject to change in interest rates
either at replacement, repricing or maturity. Interest rate sensitivity
management focuses on the maturity of assets and liabilities and their repricing
during periods of changes in market interest rates. Interest rate sensitivity is
measured as the difference between the volumes of assets and liabilities in the
current portfolio that are subject to repricing at various time horizons. The
differences are known as interest sensitivity gaps.
A positive cumulative gap may be equated to an asset sensitive position. An
asset sensitive position in a rising interest rate environment will cause a
bank's interest rate margin to expand. This results as floating or variable rate
loans reprice more rapidly than fixed rate certificates of deposit that reprice
as they mature over time. Conversely, a declining interest rate environment will
cause the opposite effect. A negative cumulative gap may be equated to a
liability sensitive position. A liability sensitive position in a rising
interest rate environment will cause a bank's interest rate margin to contract,
while a declining interest rate environment will have the opposite effect.
The 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.
Page 20
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 the cost of funds when rates
change. Its net interest margin should therefore increase somewhat when rates
increase and shrink somewhat when rates fall.
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 March 31, 2004 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 $77.6 million in fixed rate loans over 5 years. Many variable
rate credit lines reached floors in 2003, and were reclassified 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.
MARCH 31, 2004 3 months 12 months 3 years 5 years 15 years >15 years Totals
-------- --------- --------- --------- --------- --------- ---------
(in thousands)
ASSETS:
Fixed rate investments $ 894 $ 3,392 $ 13,023 $ 4,842 $ 16,311 $ 977 $ 39,439
Variable rate investments 0 0 0 0 0 295 295
Fixed rate loans 11,958 15,256 14,351 30,332 44,570 2,695 119,162
Variable rate loans 11,055 1,180 0 0 0 0 12,235
Interest-bearing balances due from banks 35 35
Fed funds sold 13,135 13,135
--------- --------- --------- --------- --------- --------- ---------
Interest bearing assets 37,077 19,828 27,374 35,174 60,881 3,967 184,301
--------- --------- --------- --------- --------- --------- ---------
LIABILITIES:
Interest bearing transaction deposits 32,105 32,105
Savings deposits 64,391 64,391
Time Deposits 0
Fixed rate >100m 8,305 9,988 5,584 2,055 25,932
Fixed rate <100m 5,926 7,609 3,968 1,118 18,621
Floating rate >100m 0
Floating rate <100m 44 44
Borrowings 0 0
--------- --------- --------- --------- --------- --------- ---------
Interest Bearing Liabilities $ 110,771 $ 17,597 $ 9,552 $ 3,173 $ 0 $ 0 $ 141,093
--------- --------- --------- -------- --------- --------- ---------
Rate Sensitivity Gap (73,694) 2,231 17,822 32,001 60,881 3,967
--------- --------- --------- --------- --------- --------- ---------
Cumulative Rate Sensitivity Gap (73,694) (71,463) (53,641) (21,640) 39,241 43,208
--------- --------- --------- --------- --------- --------- ---------
Cumulative Position to Total Assets -36.13% -35.03% -26.30% -10.61% 19.24% 21.18%
--------- --------- --------- -------- --------- --------- ---------
Page 21
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
Information regarding Quantitative and Qualitative Disclosures about Market Risk
appears on page 20 through 22 under the caption "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations - Market
Risk Management" and is incorporated herein by reference.
Item 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer along with the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's Chief Executive Officer along with the Company's Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company required to be included in this Form 10-Q.
Part II
Item 1. LEGAL PROCEEDINGS
From time to time the Company may be a party to legal proceedings arising in the
ordinary course of business. The Company is not currently a party to, nor is any
of its properties the subject of , any material pending legal proceedings.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The following chart summarizes the Company repurchases of the Company's common
shares as part of the Company's repurchase plan.
(a) (b) (c) (d)
Maximum
Number
(or Approximate
Total Number of Dollar Value) of
Shares (or Units) Shares (or Units)
Purchased as Part that May Yet be
Total Number of of Publicly Purchased Under
Shares (or Units) Average PricePaid Announced Plans or the Plans or
Period Purchased per Share (or Unit) Programs Programs
Month #1: 189 $29.375
1/1/04 - 1/31/04
Month #2: 383 $30.00
2/1/04 - 2/29/04
Month #3: 0 0
3/1/04 - 3/31/04
Total 572 $29.79
Page 22
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of CEO pursuant to Section 302 of the
Sarbanes-Oxley Act
31.2 Certification of CFO pursuant to Section 302 of the
Sarbanes-Oxley Act
32 Certification of CEO and CFO pursuant to Section 906 of
the Sarbanes- Oxley Act
(b) Reports on Form 8-K
Date of Report Date of Event Item Reported
-------------- ------------- -------------
January 22, 2004 January 15, 2004 Press Release
announcing year
end results
February 24, 2004 February 18, 2004 Declaration of
cash dividend
April 16, 2004 April 15, 2004 Press Release
announcing results
of first quarter
Page 23
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
SONOMA VALLEY BANCORP
Date: May 13, 2004 /s/ Mel Switzer Jr.
---------------------- --------------------------------------------
Mel Switzer, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 2004 /s/ Mary Quade Dieter
--------------------- --------------------------------------------
Mary Quade Dieter
Executive Vice President
Chief Operating Officer and Chief
Financial Officer
(Principal Financial Accounting Officer)
Page 24