SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549



                                    FORM 10-Q

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                      FOR THE QUARTER ENDED March 31, 1998

                         Commission File Number 2-76003

                               BAY AREA BANCSHARES


                             California #94-2779021

                   900 Veterans Blvd., Redwood City, CA 94063
                            Telephone (650) 562-3238


         Theregistrant  (1) has filed all  reports  required  by  Section  13 or
            15(d) of the Securities Exchange Act during the preceding 12 months,
            and

                                x  Yes           No

               (2)  has been subject to such filing requirements for the past 
                    90 days.
                                x  Yes           No


982,528 Shares of Common Stock Outstanding as of March 31, 1998


<PAGE>


Part 1 Item 1


<TABLE>
<CAPTION>

                       BAY AREA BANCSHARES & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                            (UNAUDITED, IN THOUSANDS)






ASSETS                                                              3/31/98                                12/31/97
                                                                                                                      
<S>                                                                 <C>                                     <C>    
Cash and due from banks                                             $12,007                                 $11,464
Federal Funds Sold                                                    9,400                                   7,500
     
     Cash and cash equivalents                                       21,407                                  18,964
Investment securities available for sale
  (market value approximates book value)                              1,105                                   1,106
Investment securities held to maturity
  (market value of $14,209 in 1998 and $14,683 in 1997)              14,055                                  14,482
Loans, net of reserve for possible loan losses
    of $1,732 in 1998 and $1,638 in 1997                             87,500                                  84,374
Premises and equipment,net                                              585                                     653
Real estate owned                                                         0                                       0
Interest receivable and other assets                                  2,592                                   2,506
                                                 
     Total assets                                                  $127,244                                $122,085
                                                                                                                                   =





LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits
   Demand                                                           $28,449                                 $28,248
   Interest-bearing transaction                                      44,014                                  41,758
   Savings                                                            7,182                                   6,399
   Time                                                              32,484                                  31,021
                                
Total Deposits                                                      112,129                                 107,426
Interest payable and other liabilities                                1,720                                   1,671
Federal funds purchased                                                   0                                       0
Federal Home Loan Bank advances                                       1,000                                   1,000
                                                                                                         
     Total liabilities                                              114,849                                 110,097
                                                                                                        
Shareholders' equity:

   Common stock, no par value:
     Authorized - 20,000,000 shares; issued & outstanding             4,756                                   4,736
      982,528  in 1998 and 977,035 in 1997
   Unrealized (loss) gain on securities held for sale                     0                                      (2)
   Additonal paid in capital                                            640                                       0
   Retained earnings                                                  6,999                                   7,254
                                                                                                                                  
     Total shareholders' equity                                      12,395                                  11,988
                                                                     
     Total liabilities and shareholders' equity                    $127,244                                $122,085
                                                                                                                      
</TABLE>




                                                         (1)
<PAGE>

Part 1 Item 1


<TABLE>
<CAPTION>

                       BAY AREA BANCSHARES & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (UNAUDITED, DOLLARS IN THOUSANDS)
                                                                                   Three Months                        Three Months
                                                                                     Ended                                Ended
                                                                                    3/31/98                               3/31/97
<S>                                                                               <C>                                   <C>    
Interest Income: 
     Interest and fees on loans                                                      $2,248                              $1,856
     Interest on investment securities                                                  232                                 227
     Interest on federal funds sold                                                     135                                 111
     Interest on time deposits with other financial institutions                          0                                   1
                                                                                                     
             Total Interest Income                                                    2,615                               2,195
Interest Expense:                                                                                                  
     Interest on interest-bearing transaction amounts                                   299                                 339
     Interest on savings deposits                                                        70                                  58
     Interest on time deposits                                                          438                                 264
     Interest on short-term borrowing                                                    16                                   0
     Interest on notes payable and redeemable debentures                                  0                                   0
                                                                                          
             Total Interest Expense                                                     823                                 661
                                                                                                              
   Net interest income                                                                1,792                               1,534
Provision for possible loan losses                                                       40                                  40
                                                                                                                  
    Net interest income after provision for possible loan losses                      1,752                               1,494
Noninterest income:                        
     Service charges on deposit accounts                                                 60                                  48
     Net loss on sales of securities                                                      0                                   0
     Net gain on disposal of assets                                                       0                                   0
     Net gain on sale of loans held for sale                                              0                                  12
     Other  Mortgage Banking Revenue                                                     49                                  24
     ATM network revenue                                                                451                                 481
     Other                                                                               35                                  21
                                                                              
             Total noninterest income                                                   595                                 586
Noninterest expense:                                                         
     Salaries and related benefits                                                      672                                 637
     Occupancy                                                                          124                                 110
     Equipment                                                                          125                                 131
     Professional fees                                                                   77                                  46
     Stationery and supplies                                                             25                                  28
     Other                                                                              519                                 447
                                                                                                                        
             Total noninterest expense                                                1,542                               1,399
                                                                                                         
Income before provision for income taxes                                                805                                 681
Provision for income taxes                                                              330                                 289
                                                                                                                     
Net Income                                                                             $475                                $392
                      
Earnings per share:
     Average common and equivalent shares outstanding- Primary                      981,695                             875,788
                                                                                                                               
                                 
     Average common and equivalent shares outstanding- Fully Diluted              1,009,460                             982,000
                                                                                                       
     Earnings Per Common Share                                                        $0.48                               $0.45
                                                                                                         
     Earnings Per Common Share - Assuming Dilution                                    $0.47                               $0.40
                                                              
</TABLE>

                                           (2)
<PAGE>


Part 1 Item 1
         
<TABLE>
<CAPTION>
      
                         BAY AREA BANCSHARES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                        (UNAUDITED, DOLLARS IN THOUSANDS)

                                                                              Three Months                           Three Months
                                                                               Ended                                   Ended
                                                                              3/31/98                                 3/31/97

<S>                                                                          <C>                                    <C>
Cash flows from operating activities:                                                               
    Net Income                                                                 $475                                    $392
    Adjustments to reconcile net income to net cash provided
    by operating activities:

      Depreciation of premises and equipment                                     90                                      97
      Provision for possible loan losses                                         40                                      40
      Net gain loss on sale of assets                                             0                                       0
      Funding of loans held for sale                                              0                                    (947)
      Proceeds from the sale of loans held for sale                               0                                   1,682
      Net gain on sale of loans held for sale                                     0                                     (12)
      Net loss on sale of investment securities                                   0                                       0
      Net ammortization and accretion of investment premiums and discount        30                                      40
      Net decrease in interest receivable and other assets                      (86)                                    (29)
      Net  increase in interest payable and other liabilities                    49                                     140
      Net  increase (decrease) in deferred loan fees                             31                                     (52)
                                                                                                        
         Total adjustments                                                      154                                     959
                                                                                        
          Net cash provided by operating activities                             629                                   1,351

Cash flows from investing activities:
    Proceeds from sale of investment securities                                   0                                       0
    Proceeds from the maturity of investment securities
        held for sale                                                             0                                       0
    Proceeds from the maturity of investment securities
        held to maturity                                                        500                                     500
    Mortgage backed securities principal payments                               316                                      95
    Purchase of investment securities held to maturity                         (440)                                   (754)
    Purchase of investment securities held for sale                               0                                       0
    Net increase in gross loans                                              (3,165)                                   (398)
    Proceeds from the sale of Real Estate Owned                                   0                                       0
    Capital expenditures                                                        (22)                                    (44)
                                                                               
         Net cash used in investing activities                               (2,811)                                   (601)

Cash flows from financing activities:
    Net  increase in demand deposits,transaction and savings                  3,240                                   2,498
    Net increase in time deposits                                             1,463                                   1,111
    Repayment of Federal Funds Purchased                                          0                                       0
    Net proceeds of Federal Home Loan Bank advances                               0                                       0
    Proceeds from stock warrants and options exercised                           20                                      34
    Cash Dividends paid                                                         (98)                                    (76)
    
    Net cash  provided by financing activities                                4,625                                   3,567
                                                                                                        
Net  increase in cash and cash equivalents                                    2,443                                   4,317

Cash and cash equivalents,beginning of period                                18,964                                  17,861
                                                          

Cash and cash equivalents,end of period                                     $21,407                                 $22,178
                                                                                                    
There were $0 and $499 in loans transferred to Real Estate Owned in 1998 and 
1997 respectively.
</TABLE>

                                              (3)
                                                 

<PAGE>


BAY AREA BANCSHARES & SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


All  adjustments,  which in the opinion of  management  are necessary for a fair
statement of the  Company's  financial  condition at March 31, 1998,  results of
operations  for the three month period ended March 31, 1998 and the statement of
cash flows for the three month period  ended March 31, 1998 have been  included.
These  adjustments  are  of a  normal  and  recurring  nature.  The  results  of
operations  and  statement of cash flows are not  necessarily  indicative of the
results for a full year's activity.

The accompanying  unaudited  financial  statements have been prepared on a basis
consistent  with  the  accounting  principles  and  policies  reflected  in  the
Company's Annual Report for the year ended December 31, 1997.


All references to the "Bank" are in reference to the Company's  sole, and wholly
owned, subsidiary Bay Area Bank.



                                                        (4)

<PAGE>




BAY AREA BANCSHARES & SUBSIDIARIES

ITEM 2

Management's Discussion and Analysis of Financial Condition and Results of 
Operations

Item 2A  Financial Condition

Liquidity

Liquid assets (Cash, Federal Funds Sold and Investments)  increased $2.0 million
or 5.8% to $36.6  million over the three month period from  December 31, 1997 to
March 31, 1998. At year-end, total liquid assets as a percentage of total assets
was 28.3%, whereas on March 31, 1998 it had increased slightly to 28.8%.

Cash & due from banks increased  $543,000 over the first three months of 1998 to
$12.0 million at March 31, 1998.  During the first three months of 1998 cash and
due from banks averaged $10.2 million.  The portion of the total cash & due from
banks  representing ATM ("Automatic  Teller Machine") network cash inventory has
averaged  approximately $2.6 million during 1998 and averaged approximately $3.7
in the first quarter of 1997.

The increase in total liquid assets,  during the first three months of 1998, was
primarily a result of an increase in deposits  and  advances of $4.7  million or
4.4%,  offset in part by an  increase  in gross  loans of $3.2  million or 3.7%.
Deposits  have averaged  $108.7  million in the first quarter of 1998 while they
averaged  $94.9  million  during the three month  period  ending March 31, 1997.
Gross loans outstanding have averaged $86.5 million in the first quarter of 1998
as compared to $69.3 million averaged in the first quarter of 1997.

Management believes current liquid assets and current available credit lines are
adequate  to cover the  working  capital  requirements  of the  Company  and any
reasonable needs arising from deposit withdrawals.


Capital

Consolidated  equity capital plus reserves increased $501,000 in the first three
months of 1998 from $13.6  million or 11.16% of total  gross  assets at December
31, 1997 to $14.1 million or 11.1% of total gross assets at March 31, 1998.

Bank capital plus reserves  totaled $12.9 million on March 31, 1998 or 10.07% of
total  adjusted  assets as compared to capital plus reserves of $12.3 million or
10.03% of total adjusted assets at December 31, 1997. At March 31, 1998 the Bank
maintained  a tier one capital  ratio of 11.7% and a tier two  capital  ratio of
12.9% the same levels maintained at December 31, 1997.


                                                      (5)


<PAGE>




The Bank's capital level continues to exceed State and Federal Deposit Insurance
Corporation  requirements  and satisfies  the Federal  Reserve  Board's  current
risk-based capital Guidelines.

The Bank  declared  no in  dividends  to the Parent  company in the first  three
months of 1998 and the Company declared cash dividends to common shareholders of
$.10 per share in March of 1998. The first quarter  dividend  represents  twenty
six  consecutive  quarterly  cash  dividends  declared by the Parent  company to
shareholders.


Item 2B  Results of Operations

Results of Operations

Consolidated  operating  profits were $475,000  ($.47 per common share  assuming
dilution vs. $.40 in the prior year) for the first quarter of 1998,  the highest
first quarter  earnings in the Company's  history.  This represents a $83,000 or
21.2% increase over the first quarter of 1997 when net income was $392,000.

The increase in first quarter  earnings in 1998 versus the first quarter of 1997
is a result of an increase in pretax  earnings of $124,000 which is comprised of
an increase in net  interest  income of $258,000  and a increase in other income
$9,000, offset in part by a increase in noninterest expense of $143,000.

The  growth in net  interest  income of 16.8% in the  first  quarter  of 1998 is
primarily  a result  of  growth  in total  earning  assets  offset  in part by a
decrease in net interest margin.  Average earning assets in the first quarter of
1998 were  $111.4  million,  a $18.7  million or 20.1%  increase  over the first
quarter of 1997 when earning assets averaged $92.7 million.  Net interest margin
in the first quarter of 1998 was approximately 6.43% as compared to 6.62% in the
first quarter of 1997.

The  decline  in net  interest  margin was a result of a decline in the yield on
earning  assets and an increase in the cost of deposits and advances.  The yield
on earning assets  declined in the first quarter of 1998 to 9.39% as compared to
9.47% in the first quarter of 1997. The cost of the Bank's deposits and advances
(including  demand deposits ) which averaged $109.7 million in the first quarter
of 1998 rose to 3.00% as compared to 2.79% in the first quarter of 1997 when the
deposits and advances averaged $94.9 million.

Loan loss  provisions  were $40,000 in the first  quarter of 1998 and 1997.  Non
performing  assets at March 31, 1998 were  $173,000 or .14% of total  assets and
10% of loan loss  reserves.  Non  performing  assets at  December  31, 1997 were
$373,000 or .31% of total assets and 22% of loan loss reserves.  There have been
$33,000 in loans  charged  off during  the three  months of 1998 and  $86,000 in
recoveries of loans  previously  charged off as compared to no loans charged off
and $7,000 in  recoveries  in the first  quarter of 1997.  Loan loss reserves of
$1.73  million  at March  31,  1998  represent  a ratio of 1.94% of gross  loans
outstanding  as  compared  to a loan loss  reserve of $1.64  million or 1.90% of
gross loans at December 31, 1997.


The Bank's ATM revenues  were down $35,000 or 5.5% in the first  quarter of 1998
as compared to the first quarter of 1997.  The decrease in revenues in the first
quarter can be  attributed  to a reduction  in machines in  operation.  However,
average  revenue per machine was up from $9,400 per machine in the first quarter
of 1997 to $9,600 per machine in the first quarter of 1998. There was an average
of 51 machines in operation in the first quarter of 1997 and 48 operating in the
first  quarter  of 1998.  The  reduction  in  machine  was a result  of  certain
contracts  that expired and certain  unprofitable  sites that were closed during
1997. The Bank hopes to find  acceptable  machines sites to redeploy some of the
excess  machines in the coming  months.  The department  contributed  $71,000 to
pretax  profits in the first three  months of 1998 as compared to $96,000 in the
first three months of 1997.
                                      (6)
<PAGE>
                                        

Non  interest  expense was up $143,000 or 10.2% in the first  quarter of 1998 as
compared to the first quarter of 1997. This increase was comprised  primarily of
an increase of $35,000 in salaries and benefits, $31,000 in Professional (legal)
fees and $72,000 in other expenses.


PART II--OTHER INFORMATION

Item 5.
Other Information

Reference is made to the  disclosure in the  Company's  Form 10-K for its fiscal
year  ended  December  31,  1997 at Part III,  Item 11. The  following  provides
additional information concerning option grants in 1997:

         Subject to the approval of the  shareholders  of Amendment No. 1 to the
Plan and other  conditions,  the Board granted  options to employees on November
18, 1997. The following table shows the options granted to those officers of the
Bank listed in the Summary  Compensation  Table. All of the options listed below
were granted subject to a further  condition that the officer agree to amend his
Salary  Continuation  Agreement to cap the appreciation  under that agreement at
$24.00 per share.


<TABLE>
<CAPTION>
                        OPTION GRANTS IN LAST FISCAL YEAR
                                Individual Grants

                                 Number            % of Total Options
                              of Securities            Granted to
                               Underlying             Employees in            Exercise Price          Expiration
Name                         Option Granted1           Fiscal Year               ($/Share)               Date
----                         --------------            -----------               ---------               ----

<S>                              <C>                      <C>                     <C>                  <C>   
Frank M. Bartaldo                20,000                   28.0%                   $24.00               11/18/07
Anthony J. Gould                 15,000                   21.3%                   $24.00               11/18/07
Mark V. Schoenstein              12,500                   17.7%                   $24.00               11/18/07
William A. Peterson              10,000                   14.2%                   $24.00               11/18/07
---------------------
</TABLE>

1     Under the terms of the 1993 Stock  Option Plan,  as amended,  terms of the
      incentive  stock  options  granted are as follows.  The full amount of the
      options  granted to Mr. Bartaldo and Mr. Gould were 40% vested at the date
      of the grant,  and will vest 20% per year on each  October 1st  thereafter
      until fully vested on October 1, 2000. An option to purchase 10,000 shares
      granted  to Mr.  Schoenstein  was 40%  vested on the date of the grant and
      will vest 20% per year on each June 30th thereafter  until fully vested on
      June  30,  2000.  An  option  to  purchase  2,500  shares  granted  to Mr.
      Schoenstein  and the full  amount of the options  granted to Mr.  Peterson
      vests 20% per year on the  anniversary  date of the  grant of the  option,
      starting on the 1st year  anniversary  date, to be fully vested on the 5th
      anniversary date. Each option has a term of 10 years.  Additional terms of
      the option are described below in the description of the 1993 Stock Option
      Plan and Amendment No. 1 to the Plan.


                                                        (7)

<PAGE>



ITEM 6
(a)  Exhibits.

3.1 Restated Articles of Incorporation of the Company (incorporated by reference
to Exhibit 3.1 of the  Company's  Annual Report on Form 10-K for the fiscal year
ended December 31, 1988).

3.2 Amendment to Restated  Articles of  Incorporation
(incorporated by reference to Exhibit 3.2 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989).

3.3 Bylaws of the Company, as
amended (incorporated by reference to Exhibit 3.2 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987).

3.4  Amendment to
Bylaws of Company  (incorporated  by reference  to Exhibit 3.3 of the  Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1987).

27 Financial Data Schedule (filed herewith)


                                                        (8)


<PAGE>




                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





BAY AREA BANCSHARES
Registrant

Dated:  May 11, 1998



/s/Robert R. Haight
Robert R. Haight
President and Chief Executive Officer


/s/Anthony J.Gould                                
Anthony J. Gould
Chief Accounting Officer