U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                   FORM 10-QSB
(Mark One)
[X]                     QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

[ ]                     TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the transition period from____________to____________


                         Commission File Number: 0-12231

                             BAY COMMERCIAL SERVICES
        (Exact name of small business issuer as specified in its charter)

            California                                             94-2760444
(State or other jurisdiction of                                  (I.R.S.Employer
incorporation or organization)                               Identification No.)

                              1495 EAST 14TH STREET
                          SAN LEANDRO, CALIFORNIA 94577
                    (Address of principal executive offices)

                                 (510) 357-2265
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  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.

YES    X          NO _____

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

Class                                              Outstanding at April 30, 1999

Common stock, no par value                                      1,322,110 shares


Transitional Small Business Disclosure Format

YES              NO __X_


This report contains a total of 29 pages.
<TABLE>
<CAPTION>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
                      CONSOLIDATED CONDENSED BALANCE SHEETS
           
                                                                     MARCH 31,  DECEMBER 31,
                                                                         1999          1998
     (DOLLARS IN THOUSANDS):                                       (UNAUDITED)
     ----------------------------------------------------------------------------------------

<S>                                                                  <C>            <C>     
     Cash and due from banks                                         $  8,262       $  9,077
     Federal funds sold and reverse repurchase agreements               5,000           ---
     ----------------------------------------------------------------------------------------
       Cash and cash equivalents                                       13,262          9,077
     ----------------------------------------------------------------------------------------
     Securities available for sale, stated at fair value
       (amortized cost of $27,669 for 1999; $31,969 for 1998)          27,589         32,033
     Securities held to maturity (fair values of $7,669 for 1999;
        $7,748 for 1998)                                                7,483          7,509
     Federal Home Loan Bank stock                                         364            359
     Loans held for sale                                                  661            939
     Loans held for investment                                         94,288         92,190
       Allowance for loan losses                                       (1,020)          (980)
     ----------------------------------------------------------------------------------------
       Net loans                                                       93,929         92,149
     ----------------------------------------------------------------------------------------
     Premises and equipment, net                                        1,905          1,949
     Interest and fees receivable                                         630            635
     Other assets                                                         760            491
     ----------------------------------------------------------------------------------------
       TOTAL ASSETS                                                  $145,922       $144,202
     ========================================================================================

     LIABILITIES AND SHAREHOLDERS' EQUITY
     Deposits:
       Noninterest-bearing demand                                    $ 38,163       $ 33,904
       Savings and interest-bearing demand                             42,328         37,571
       Time                                                            30,404         30,309
       Certificates of deposit, $100 and over                          22,256         21,611
     ----------------------------------------------------------------------------------------
       Total deposits                                                 133,151        123,395
     ----------------------------------------------------------------------------------------
     Securities sold under agreements to repurchase                       100          1,344
     Other short-term borrowing                                           ---          7,000
     Interest payable and other liabilities                               714          1,068
     ----------------------------------------------------------------------------------------
       Total liabilities                                              133,965        132,807
     ----------------------------------------------------------------------------------------
     Commitments and contingent liabilities                               ---            ---

     Shareholders' equity:
       Common stock - no par value: authorized 20,000,000 shares;
        issued and outstanding 1,194,435 in 1999; 1,080,670 in 1998     4,121          3,622
       Retained earnings                                                7,885          7,734
       Accumulated other comprehensive income (loss), net of tax          (49)            39
     ----------------------------------------------------------------------------------------
       Total shareholders' equity                                      11,957         11,395
     ----------------------------------------------------------------------------------------
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $145,922       $144,202
     ========================================================================================

     SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
             CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                                              THREE MONTHS ENDED
                                                                      MARCH 31,
     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):           1999       1998
     ----------------------------------------------------------------------------
     <S>                                                       <C>        <C>     
     Interest income:
   
       Loans, including fees                                   $2,118     $1,935
       Federal funds sold and reverse repurchase agreements        26         55
       Securities:
         Taxable                                                  380        279
         Tax exempt                                                77         60
     ----------------------------------------------------------------------------
           Total interest income                                2,601      2,329
     ----------------------------------------------------------------------------
     Interest expense:
       Deposits:
         Savings and interest-bearing demand                      275        204
         Time                                                     342        386
         Certificates of deposit, $100 and over                   249        184
       Other borrowed funds                                        17         18
     ----------------------------------------------------------------------------
           Total interest expense                                 883        792
     ----------------------------------------------------------------------------
           Net interest income                                  1,718      1,537
     Provision for loan losses                                     41         10
     ----------------------------------------------------------------------------
           Net interest income after
             provision for loan losses                          1,677      1,527
     ----------------------------------------------------------------------------
     Noninterest income:
       Bankcard income                                            108         96
       Service charges and fees                                    78         68
       Gain on sale of loans                                       24         33
       Loan servicing                                              22         24
       Other                                                       10         27
     ----------------------------------------------------------------------------
           Total noninterest income                               242        248
     ----------------------------------------------------------------------------
     Noninterest expenses:
       Salaries and employee benefits                             828        793
       Occupancy                                                  174        170
       Data processing                                            100         85
       Bankcard processing expense                                 89         79
       Professional services                                       50         28
       Other                                                      242        232
     ----------------------------------------------------------------------------   
           Total noninterest expenses                           1,483      1,387
     ----------------------------------------------------------------------------
           Income before income tax expense                       436        388
     Income tax expense                                           152        134
     ----------------------------------------------------------------------------
           NET INCOME                                           $ 284      $ 254
     ============================================================================
           NET INCOME PER COMMON SHARE - BASIC                  $0.24      $0.24
           Weighted average common shares - basic           1,182,427  1,079,653
           NET INCOME PER COMMON SHARE - DILUTED                $0.22      $0.20
           Weighted average common shares - diluted         1,292,516  1,279,707
     ============================================================================
     SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                          BAY COMMERCIAL SERVICES AND SUBSIDIARY
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                                   
                                                                    THREE MONTHS ENDED
                                                                          MARCH 31,
(DOLLARS IN THOUSANDS):                                                1999       1998
---------------------------------------------------------------------------------------
<S>                                                                  <C>        <C>   
Cash flows from operating activities:
   Net income                                                        $  284     $  254
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation and amortization                                   (124)        (4)
       Provision for loan losses                                         41         10
       Unamortized deferred loan fees, net                               (7)       (62)
       Originations of SBA loans held for sale                         (458)      (158)
       Proceeds from the sale of SBA loans held for sale                622        734
       Change in interest and fees receivable and other assets          (52)       (48)
       Change in interest payable and other liabilities                (159)       (37)
----------------------------------------------------------------------------------------
     Net cash provided by operating activities                          147        689
---------------------------------------------------------------------------------------
Cash flows from investing activities:
   Proceeds from maturities of securities available for sale         40,920     17,244
   Proceeds from maturities of securities held to maturity               30         71
   Purchase of securities available for sale                        (36,433)    (3,975)
   Purchase of securities held to maturity                              ---       (144)
   Purchase of Federal Home Loan Bank stock                              (5)        ---
   Net change in loans                                               (1,984)    (6,113)
   Purchases of premises and equipment                                  (23)       (24)
----------------------------------------------------------------------------------------
     Net cash provided by investing activities                        2,505      7,059
---------------------------------------------------------------------------------------
Cash flows from financing activities:
   Net change in deposits                                             9,756     10,167
   Net change in securities sold under agreements to repurchase      (1,244)       (98)
   Net change in other short-term borrowing                          (7,000)    (2,500)
   Exercise of stock options                                            499          9
   Cash dividends paid                                                 (478)      (324)
----------------------------------------------------------------------------------------
     Net cash provided by financing activities                        1,533      7,254
---------------------------------------------------------------------------------------
     Net change in cash and cash equivalents                          4,185     15,002
Cash and cash equivalents at beginning of period                      9,077      7,548
---------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $ 13,262   $ 22,550
=======================================================================================
Supplemental  disclosure of cash flow  information:  
  Cash paid during the period for:
      Interest                                                        $864        $676
      Income taxes                                                      76         ---
   Noncash investing and financing activities during the period:
      Tax benefit from exercise of nonqualified stock options         $345         ---

SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
</TABLE>


<PAGE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

                 AS OF MARCH 31, 1999 AND DECEMBER 31, 1998 AND
                  FOR THE MONTHS ENDED MARCH 31, 1999 AND 1998

1)        All adjustments  (consisting only of normal recurring accruals) which,
          in the opinion of Management, are necessary for a fair presentation of
          the  Company's  financial  position at March 31, 1999 and December 31,
          1998 and the  results  of its  operations  and its cash  flows for the
          three month periods ended March 31, 1999 and 1998 have been  included.
          The results of operations and cash flows for the periods presented are
          not  necessarily  indicative of the results that may be expected for a
          full year. These unaudited consolidated condensed financial statements
          should  be  read  in  conjunction  with  the  consolidated   financial
          statements, and notes thereto, included in the Company's Annual Report
          on SEC Form 10KSB for the year ended December 31, 1998.

2)        Net income per common share - basic for the three month  periods ended
          March 31, 1999 and 1998 was  computed  by  dividing  net income by the
          weighted average number of outstanding  common shares.  Net income per
          common  share - diluted  for the three month  periods  ended March 31,
          1999 and 1998 is  computed  by  dividing  net  income by the  weighted
          average  number of  outstanding  common shares  including the dilutive
          effect of stock  options.  The weighted  average number of outstanding
          common  shares for the three  month  periods  ended March 31, 1999 and
          1998 was 1,182,427 and 1,079,653,  respectively.  The weighted average
          number of outstanding  common shares  including the dilutive effect of
          stock  options for the three months  periods  ended March 31, 1999 and
          1998 was 1,292,516 and 1,279,707, respectively.

3)        The provision for income taxes for the periods presented is based on a
          projected tax rate for the entire year.  The Company's effective tax 
          rate was 35% for the three month periods ended March 31, 1999 and 
          1998.

4)        Comprehensive  income  includes  net  income  and other  comprehensive
          income.  The Company's  only source of other  comprehensive  income is
          derived  from  unrealized  gains and losses on  investment  securities
          available for sale. Reclassification  adjustments resulting from gains
          or losses on investment  securities that were realized and included in
          net income of the current  period that also had been included in other
          comprehensive  income  as  unrealized  holding  gains or losses in the
          period in which they arose are excluded from  comprehensive  income of
          the current  period.  The  Company's  total  comprehensive  income was
          $196,000  and  $268,000  for the three months ended March 31, 1999 and
          1998, respectively.

5)        Subsequent  Event.  On April 30,  1999,  the Company  entered  into an
          Agreement and Plan of  Reorganization  ("Agreement")  with Greater Bay
          Bancorp  ("GBB").  Under the terms of the Agreement,  GBB will acquire
          all the outstanding common stock of the Company in exchange for 0.7134
          shares  of GBB  common  stock for each  share of  common  stock of the
          Company,  subject to  adjustment  as  provided in the  Agreement.  The
          merger,  which is expected to close in the third  quarter of 1999,  is
          subject  to  the  approval  of  the  Company's  shareholders,  various
          regulatory agencies and certain other conditions.

<PAGE>
<TABLE>
<CAPTION>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY

                     The Table Below Illustrates Changes in
 Major Categories of the Average Balance Sheets and Statements of Income and in
                     Certain Performance Ratios (Unaudited)

                                                         THREE MONTHS ENDED       INCREASE
                                                                MARCH 31,        (DECREASE)
(DOLLARS IN THOUSANDS):                                      1999      1998       $      %
---------------------------------------------------------------------------------------------
<S>                                                      <C>       <C>        <C>       <C>   
Average Balances:
  Assets (1)                                             $139,119  $114,300   $24,819   21.7 %
  Securities - taxable (1)                                 27,852    18,359     9,493   51.7
  Securities - tax exempt                                   6,125     4,671     1,454   31.1
  Federal funds sold and reverse repurchase agreements      2,203     4,013    (1,810) (45.1)
  Total loans                                              92,967    77,355    15,612   20.2
  Nonaccrual loans                                             29       433      (404) (93.3)
  Deposits                                                124,876   101,547    23,329   23.0
  Shareholders' equity (1)                                 11,683    10,340     1,343   13.0

  Interest-earning assets (1)                             129,118   103,965    25,153   24.2
  Interest-bearing liabilities                             91,349    74,057    17,292   23.3

Income Statements:
  Interest income (2)                                      $2,637    $2,357      $280   11.9 %
  Interest expense                                            883       792        91   11.5
---------------------------------------------------------------------------------------------
    Net interest income (2)                                 1,754     1,565       189   12.1
  Taxable equivalent adjustment                                36        28         8   28.6
---------------------------------------------------------------------------------------------
    Net interest income                                     1,718     1,537       181   11.8
  Provision for loan losses                                    41        10        31  310.0
---------------------------------------------------------------------------------------------
    Net interest income after provision
      for loan losses                                       1,677     1,527       150    9.8
---------------------------------------------------------------------------------------------
  Noninterest income                                          242       248        (6)  (2.4)
  Noninterest expenses                                      1,483     1,387        96    6.9
  Income tax expense                                          152       134        18   13.4
---------------------------------------------------------------------------------------------
    NET INCOME                                               $284      $254      $ 30   11.8 %
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Performance Ratios: (3)                                                          Change
                                                                                 ------
<S>                                                         <C>       <C>        <C>    
  Yield on average interest-earning assets                  8.17%     9.09%      (0.92)%
  Yield on average interest-earning assets (2)              8.28%     9.19%      (0.91)%
  Interest rate on average interest-bearing
      liabilities                                           3.92%     4.34%      (0.42)%
  Interest expense as a percent of average
      interest-earning assets                               2.77%     3.09%      (0.32)%

  Net yield on average interest-earning assets              5.40%     6.00%      (0.60)%
  Net yield on average interest-earning assets (2)          5.51%     6.10%      (0.59)%

(1) Before unrealized gain or loss on securities  available for sale 
(2) Federal taxable equivalent basis.
(3) Ratios have been  annualized and are not  necessarily  indicative of results
that may be expected for a full year.
</TABLE>

<PAGE>
                                                                         -19-
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                  THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO
                        THREE MONTHS ENDED MARCH 31, 1998

OVERVIEW

Certain  matters  discussed  in this  Management's  Discussion  and Analysis are
forward-looking  statements  that are  subject to risks and  uncertainties  that
could cause  actual  results to differ  materially  from those  projected in the
forward-looking  statements. Such risks and uncertainties include, among others,
(1) significant  increases in competitive pressure in the banking industry;  (2)
changes in the interest rate environment which could reduce margins; (3) general
economic  conditions,  either nationally or regionally,  are less favorable than
expected,  resulting in, among other things,  a deterioration in credit quality;
(4) changes in the regulatory  environment;  (5) changes in business  conditions
and inflation; and (6) changes in securities markets. Therefore, the information
set forth in such forward-looking statements should be carefully considered when
evaluating the business prospects of Bay Commercial Services (the "Company") and
Bay Bank of Commerce (the "Bank").

Net income of the Company was $284,000 for the first quarter of 1999 compared to
$254,000 for the first quarter of 1998.  Net income per common share - basic was
$0.24 for the first  quarter of 1999 and 1998.  Net  income  per common  share -
diluted  was  $0.22  and  $0.20  for  the  first   quarter  of  1999  and  1998,
respectively.

The $30,000 or 12% growth in net income for the first  quarter of 1999  compared
to the first quarter of 1998 reflected  higher net interest  income for the 1999
quarter, which was partially offset by increases in noninterest expenses, income
tax expense  and the  provision  for loan losses as well as reduced  noninterest
income  compared to the 1998 quarter.  Net interest  income for the 1999 quarter
increased  $181,000 or 12% compared to the 1998 quarter due to strong  growth in
average  interest-earning  assets which more than offset a drop in the net yield
on average  interest-earning  assets.  A $96,000 or 7% increase  in  noninterest
expenses in the 1999  quarter  largely  reflected  higher  salaries and employee
expenses and  increased  consulting  expenses  related to Year 2000  compliance.
Income tax expense  increased  $18,000 or 13% and the  provision for loan losses
increased  $31,000  or 310% in the 1999  quarter.  Noninterest  income  declined
$6,000 or 2% in the 1999 quarter as  increases  in bankcard  income and services
charges  and fees were more than  offset by  decreases  in gain on sale of loans
guaranteed  by  the  Small  Business  Administration  ("SBA  loans")  and  other
noninterest income.

Total assets were  $145,922,000 at March 31, 1999,  representing a $1,720,000 or
1% increase from December 31, 1998.  Total deposits of $133,151,000 at March 31,
1999 grew  $9,756,000  or 8% from  year-end  1998  while  securities  sold under
agreements  to  repurchase  declined  $1,244,000  or 93%  and  other  short-term
borrowing decreased $7,000,000 or 100%. Funds from the deposit growth net of the
reductions in repurchase  agreements and short-term  borrowing combined with the
$4,470,000  received  in cash as  securities  matured  during the  quarter  were
principally  invested in federal  funds sold and  repurchase  agreements  and in
loans. Cash and cash equivalents increased $4,185,000 or 46% and loans increased
$1,820,000 or 2% during the first quarter of 1999.

RESULTS OF OPERATIONS

NET INTEREST INCOME
Net interest  income,  the principal  source of the Company's  earnings,  is the
amount by which interest and fees generated by interest  earning  assets,  loans
and investments, exceed the interest cost of deposits and other interest-bearing
liabilities.  Net  interest  income is affected by changes in interest  rates as
well  as  the   composition   and   volume  of   interest-earning   assets   and
interest-bearing liabilities.

Net  interest  income of  $1,718,000  for the first  quarter  of 1999  increased
$181,000 or 12% compared to the first quarter of 1998. The increase  reflected a
$25,153,000 or 24% growth in average  interest-earning  assets. The net yield on
average earning assets declined to 5.40% for the 1999 quarter from 6.00% for the
1998 quarter.

The  increase  in  average  interest-earning  assets  between  the 1999 and 1998
quarters was  principally due to growth of $16,016,000 or 21% in average earning
loans and $10,947,000 or 48% in average total  securities.  The average yield on
interest-earning assets for the first quarter of 1999 declined to 8.17% compared
to 9.09% for the 1998  quarter  reflecting  the lower level of money  market and
lending rates in the first quarter of 1999 compared to the first quarter of 1998
as well as an increase in the percentage of the earning asset portfolio invested
in lower yielding short-term securities.  The average yield on earning loans for
the 1999  quarter  declined  to 9.24% from  10.20% for the 1998  quarter and the
ratio of loans to  interest-earning  assets for the 1999 quarter  dropped to 72%
from 74% for the 1998 quarter.

Average  interest-bearing  liabilities  increased $17,292,000 or 23% between the
1999 and 1998 quarters.  The average rate paid for interest-bearing  liabilities
declined to 3.92% for the 1999 quarter  compared to 4.34% for the 1998  quarter,
reflecting  a decrease in overall  money  market and deposit  rates  between the
quarters  and a shift in the deposit  portfolio.  The ratio of time  deposits to
average  total  interest-bearing  liabilities  fell to 56% for the 1999  quarter
compared to 59% for the 1998 quarter.

INTEREST RATE SENSITIVITY
Interest rate sensitivity is the relationship  between market interest rates and
net  interest  income  due  to  the  repricing  characteristics  of  assets  and
liabilities. If more assets than liabilities reprice in a given period (an asset
sensitive position), interest rate changes will have a greater effect on earning
assets. If interest rates decline,  an asset sensitive  position could adversely
affect net interest  income.  Alternatively,  when more  liabilities than assets
reprice in a given period (a liability sensitive position) a decline in interest
rates could benefit net interest  income.  The results would reverse if interest
rates were to increase.

The  following  table  presents the  Company's  interest  rate  sensitivity  gap
position at March 31, 1999. For any given period,  the repricing is matched when
an equal amount of assets and liabilities reprice. The repricing of a fixed rate
asset or liability is  considered to occur at its  contractual  maturity or, for
those assets which are held for sale,  within the time period  during which sale
may  reasonably  be  expected  to  be  accomplished.  Floating  rate  assets  or
liabilities  are  considered  to reprice in the period during which the rate can
contractually  change.  Any excess of either assets or  liabilities  in a period
results in a gap, or  mismatch,  shown in the table.  A positive  gap  indicates
asset sensitivity and a negative gap indicates liability sensitivity.
<TABLE>
<CAPTION>
                                                  INTEREST SENSITIVITY PERIOD                                
                                               3        OVER     OVER 1            
AS OF MARCH 31, 1999:                        MONTHS   3 MONTHS   YEAR TO    OVER 5
(DOLLARS IN THOUSANDS)                      OR LESS  TO 1 YEAR   5 YEARS     YEARS     TOTAL
------------------------------------------------------------------------- -------------------
<S>                                         <C>        <C>       <C>       <C>       <C>    
Interest rate sensitive assets:
  Loans (excluding nonaccrual and
     deferred fees)                         $59,060    $ 7,395   $14,155   $14,829   $95,439
  Securities (before unrealized
    loss on securities available for sale)   16,265        665    10,849     7,373    35,152
  Federal funds sold and reverse
    repurchase agreements                     5,000        ---       ---       ---     5,000
------------------------------------------------------------------------- -------------------
    Total                                    80,325      8,060    25,004    22,202   135,591
------------------------------------------------------------------------- -------------------
Interest rate sensitive liabilities:
  Interest-bearing transaction accounts      35,016        ---       ---       ---    35,016
  Savings deposits                            7,312        ---       ---       ---     7,312
  Time deposits, $100 and over               27,816      4,712     1,137       ---    33,665
  Other time deposits                        12,213      5,512     1,269         1    18,995
  Other borrowed funds                          100        ---       ---       ---       100
------------------------------------------------------------------------- -------------------
    Total                                    82,457     10,224     2,406         1    95,088
------------------------------------------------------------------------- -------------------
Interest rate sensitivity gap                (2,132)    (2,164)   22,598    22,201   $40,503
------------------------------------------------------------------------- -------------------
Cumulative interest rate
  sensitivity gap                           $(2,132)   $(4,296)  $18,302   $40,503
------------------------------------------------------------------------- -------------------
Cumulative interest rate
 sensitivity gap to total assets              (1.5)%     (3.0)%    12.5%     27.8%
</TABLE>

This table  presents a static gap,  which is a position  at a point in time.  It
does not address the interest rate  sensitivity of assets or  liabilities  which
would be added through  growth,  nor does it anticipate the future interest rate
sensitivity of assets and  liabilities  once they have repriced,  and it assumes
equivalent  elasticity of assets and liabilities.  The interest rate sensitivity
analysis at March 31,  1999,  indicates  that the Company,  on a cumulative  gap
basis,  is  liability  sensitive  in the  periods "3 months or less" and "Over 3
months to 1 year" and asset sensitive over the remaining time periods.

PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Bank provides for possible loan losses by a charge to operating income based
upon the composition of the loan portfolio,  past loan loss experience,  current
economic conditions and other factors which, in management's  judgment,  deserve
recognition in estimating loan losses.  Management will charge off loans when it
determines there has been a permanent impairment of the related carrying values.

The allowance for loan losses is reviewed by management  monthly and approved by
the  Board  of  Directors  at least  quarterly.  Management  attributes  general
reserves  to  different  types of loans using  percentages  which are based upon
perceived  risk  associated  with  the  portfolio  and  underlying   collateral,
historical loss experience,  and vulnerability to changing  economic  conditions
which may  affect  the  collectibility  of the loans.  Specific  allowances  are
allocated  for impaired  loans,  for loans which have  experienced  a decline in
internal loan grading,  and when  management  believes  additional loss exposure
exists. Although the allowance for loan losses is allocated to various portfolio
segments, it is general in nature and is available for the loan portfolio in its
entirety.  While  management uses available  information to recognize  losses on
loans,  future  additions to the allowance may be necessary  based on changes in
economic conditions.  In addition,  various regulatory agencies,  as an integral
part of their examination  process,  periodically review the Company's allowance
for  losses on loans.  Such  agencies  may  require  the  Company  to  recognize
additions to the allowance  based on their analysis of information  available to
them at the time of their examination.

The Senior Loan Officer  assesses the loan portfolio  monthly to determine which
loans are  specifically  identifiable  problem  credits  in order to update  the
Bank's internal watch list,  which tracks all such credits.  The Bank's internal
Loan Review Examiner  grades all new commercial  loans and all credits where the
total liability equals or exceeds certain thresholds  established by management.
If either the Senior  Loan  Officer or the Loan  Review  Examiner  identifies  a
serious  deficiency,  the loan is  placed  on the  next  quarterly  watch  list.
Management  provides a specific reserve allowance for the effects of the problem
applicable to each watchlisted credit. When management  identifies a generalized
risk not evidenced by a specially  identifiable  loan or portfolio segment as of
the  evaluation  date,  management's  evaluation  of the probable  loss exposure
concerning this condition will be provided for by adjusting the level of general
reserve for this exposure.

The  provision  for loan  losses  reflects  an amount  necessary  to adjust  the
allowance for loan losses to a level which, in management's opinion, is adequate
to  absorb  potential   credit  losses  inherent  in  loans,   outstanding  loan
commitments and standby  letters of credit.  As of March 31, 1999, the allowance
for loan losses was  $1,020,000  compared to $980,000 at December 31, 1998.  The
increased  allowance is a result of the $41,000  provision for loan losses.  The
provision  for loan  losses was $10,000 in the first  quarter of 1998.  Although
nonperforming loans dropped slightly from March 31, 1998, additional credit risk
inherent in the strong loan growth was reflected in the provision.  The ratio of
the  allowance  for loan losses to total loans was 1.1% at March 31, 1999 and at
December  31,  1998.  Based upon  information  currently  available,  management
believes  that the  allowance  for loan losses at March 31, 1999, is adequate to
absorb  future  possible  losses.  However,  no assurance  can be given that the
Company  may not  sustain  charge-offs  which  are in  excess of the size of the
allowance in any given period.

At March 31, 1999 and December 31, 1998, the Bank also held  California  Capital
Access Program ("CalCAP") deposits of $208,000 and $203,000, respectively, which
CalCAP  has  pledged  to offset  any  losses on any loans in the  Bank's  CalCAP
portfolio.  The Bank had a total of $1,486,000 and $1,584,000 in CalCAP loans as
of March 31,  1999 and  December  31,  1998,  respectively.  CalCAP is a program
authorized  by the  California  Legislature  to encourage  California  financial
institutions  to make  loans to small  businesses  whose  operations  affect the
state's environment and which may not meet the normal underwriting  standards of
the financial institution.

Information  on  nonperforming  loans for the quarters  ended March 31, 1999 and
1998 and the year ended December 31, 1998 is summarized in the following table.
<TABLE>
<CAPTION>
                                                          MARCH 31,  DECEMBER 31,   MARCH 31,
(DOLLARS IN THOUSANDS)                                        1999          1998        1998
---------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>       <C> 
Net loan charge-offs                                           $(1)        $(154)       $(5)

Ratio of net loan charge-offs to average loans                 ---          (0.2)%      ---

Nonperforming loans:
  Nonaccrual                                                  $ 27          $ 30     $  395
  Accruing loans past due 90 days or more                                    ---        299
  Restructured                                                 469           469        469
--------------------------------------------------------------------------------------------
   Total nonperforming loans                                  $496          $499     $1,163
--------------------------------------------------------------------------------------------

Ratio of nonperforming loans to total loans                    0.5%          0.5%       1.5%
Ratio of allowance for loan losses to nonperforming loans    205.6%        196.4%        86%
</TABLE>

The  nonaccrual  balance  represents  one loan which is  guaranteed by the Small
Business  Administration.  The restructured balance represents one loan which is
paying as agreed according to the terms of the renegotiated loan agreement.

NONINTEREST INCOME
Comparing  the first  quarters of 1999 and 1998,  noninterest  income was nearly
unchanged.  Reductions of $17,000 or 63% in other noninterest income,  $9,000 or
27% in gain on sale of SBA loans and $2,000 or 8% in loan servicing  income were
slightly in excess of increases of $12,000 or 13% in bankcard income and $10,000
or 15% in  servicing  charges and fees.  The  increases  in bankcard  income and
servicing  charges and fees reflected  increased  merchant  activity and deposit
growth. The decline in other noninterest income was attributable to the recovery
during the 1998 quarter of income and expenses related to previously charged-off
or paid-off loans, which was not repeated in the first quarter of 1999.

NONINTEREST EXPENSES
Total noninterest expenses of $1,483,000 for the first quarter of 1999 increased
$96,000 or 7%  compared  to the first  quarter of 1998.  Salaries  and  employee
benefits  rose $35,000 or 4%,  principally  due to salary  increases  and higher
bonuses associated with loan growth. Professional services expense for the first
quarter of 1999 were $22,000 or 79% above the 1998 quarter, reflecting increased
accounting  firm  fees and  legal  services  expense.  Data  processing  expense
increased  $15,000 or 18% principally  due to asset growth and costs  associated
with Year 2000 remediation.

PROVISION FOR INCOME TAXES
The  provision for income tax expense was $152,000 for the first quarter of 1999
compared to $134,000 for the first quarter of 1998.  The $18,000 or 13% increase
in income tax expense reflected higher taxable income for the 1999 quarter.  The
effective income tax rate was 35% for both the 1999 and 1998 quarters.

FINANCIAL CONDITION

CASH AND CASH EQUIVALENTS, INVESTMENTS AND LOANS
Cash and cash equivalents of $13,262,000 at March 31, 1999 increased  $4,185,000
or 46% from year-end 1998,  reflecting  both the deposit growth and a $4,470,000
or 11% decline in securities  outstanding  as of March 31, 1999.  Total loans of
$94,949,000 at March 31, 1999 increased $1,820,000 or 2% from December 31, 1998.

DEPOSITS AND OTHER BORROWED FUNDS
Reflecting a continuation  of the Bank's strong growth trend,  total deposits of
$133,151,000  at March 31, 1999 increased  $9,756,000 or 8% compared to December
31, 1998. Noninterest-bearing demand deposits grew $4,259,000 or 13% and savings
and interest-bearing  demand increased $4,757,000 or 13% from December 31, 1998.
Part of the deposit  growth was used to reduce by  $7,000,000  other  short-term
borrowing as of March 31, 1999.  Securities sold under  agreements to repurchase
declined $1,244,000 or 93% during the first three months of 1999.

OTHER ASSETS AND OTHER LIABILITIES
While interest and fees receivable at March 31, 1999 were  relatively  unchanged
from  year-end  1998,  other assets  increased  $269,000 or 55%. The increase in
other assets was  principally  due to the exercise  during the first  quarter of
1999 of nonqualified stock options, resulting in a $186,000 increase in deferred
tax  assets,  and an  increase of  approximately  $100,000 in prepaid  expenses.
Interest payable and other  liabilities at March 31, 1999,  declined $354,000 or
33% from  year-end  1998  principally  due to the  payment  of income  taxes and
$159,000 in tax benefits  related to the exercise of nonqualified  stock options
during the first quarter of 1999.

LIQUIDITY
Liquidity  is defined as the ability of the  Company to meet  present and future
obligations  either through the sale or maturity of existing  assets,  or by the
acquisition  of funds  through  liability  management.  The Company  manages its
liquidity to provide  adequate funds to support both the borrowing  needs of its
customers and  fluctuations in deposit flows.  The Company defines liquid assets
to include cash and cash equivalents,  all marketable securities with maturities
of one year or less,  securities  available for sale with maturities  beyond one
year, and loans held for sale, less any reserve requirements being met by any of
the above. Net deposits and short-term liabilities include all deposits, federal
funds purchased,  repurchase agreements and other borrowings and debt due in one
year or less. The liquidity  ratio is calculated by dividing total liquid assets
by net deposits and short term  liabilities.  The Company's  liquidity  ratio by
this measure was 30% at March 31, 1999 and December 31, 1998.  It is the opinion
of  management  that  the  Company's  and the  Bank's  liquidity  positions  are
sufficient to meet their respective needs.

In addition,  to meet unforeseen  outflows,  the Bank has informal,  non-binding
borrowing arrangements with two correspondent banks, which include federal funds
borrowing lines totaling $8,500,000 and a repurchase facility, as well as access
to  a  collaterized   credit  line  with  an  available  borrowing  capacity  of
approximately  $12,000,000 with the Federal Home Loan Bank of San Francisco.  As
of March 31,  1999,  no  borrowed  funds  were  outstanding  from  these  credit
facilities.

CAPITAL
The following  tables  present the Company's and the Bank's  regulatory  capital
positions and  risk-weighted  assets at March 31, 1999,  and average assets over
the three month period ended March 31, 1999:
<TABLE>
<CAPTION>
                                                             RISK BASED CAPITAL RATIO
                                                              COMPANY                BANK
(DOLLARS IN THOUSANDS)                                    AMOUNT   RATIO       AMOUNT   RATIO
---------------------------------------------------------------------------------------------
<S>                                                      <C>        <C>       <C>        <C> 
Tier 1 Capital                                           $12,006    9.6%      $11,774    9.5%
Tier 1 Capital regulatory minimum requirement              4,988    4.0         4,983    4.0
---------------------------------------------------------------------------------------------
Capital held in excess of regulatory minimum              $7,018    5.6%       $6,791    5.5%

Total Capital                                            $13,026   10.4%      $12,794   10.3%
Total Capital regulatory minimum requirement               9,976    8.0         9,966    8.0
---------------------------------------------------------------------------------------------
Capital held in excess of regulatory minimum             $ 3,050    2.4%      $ 2,828    2.3%
Risk weighted assets                                     $124,702             $124,580
</TABLE>
<TABLE>
<CAPTION>
                                                                     LEVERAGE RATIO
                                                              COMPANY               BANK
(DOLLARS IN THOUSANDS)                                    AMOUNT   RATIO       AMOUNT   RATIO
---------------------------------------------------------------------------------------------
<S>                                                      <C>        <C>       <C>        <C> 
Tier 1 Capital to average total assets                   $12,006    8.6%      $11,774    8.5%
Range of regulatory minimum leverage                       4,174-   3.0-        4,170-   3.0-
  requirement                                              6,956    5.0%        6,950    5.0%
----------------------------------------------------------------- ---------- ----------------
Range of regulatory excess                                 5,050-   3.6-        4,824-   3.5-
                                                         $ 7,832    5.6%      $ 7,604    5.5%

Average total assets for first quarter*                  $139,119             $139,005

(* Average  total assets do not include  unrealized  gains/losses  on securities
available for sale.)
</TABLE>

The  Company  currently  does not  have any  material  commitments  for  capital
expenditures,  and in the opinion of  management,  the  Company's and the Bank's
capital positions are sufficient to meet their respective needs.

INFLATION
It is  management's  opinion that the effects of  inflation on the  consolidated
financial statements for the periods ended March 31, 1999 and 1998 have not been
material.

YEAR 2000 READINESS DISCLOSURE
The following  discussion of the  implications  of the Year 2000 problem for the
Company  contains  numerous  forward-looking   statements  based  on  inherently
uncertain information. The cost of the project and the date on which the Company
plans to complete the internal Year 2000 modifications are based on management's
best estimates,  which were derived  utilizing a number of assumptions of future
events including the continued  availability of internal and external resources,
third party modifications and other factors.  However, there can be no guarantee
that these estimates will be achieved and actual results could differ. Moreover,
although management believes it will be able to make the necessary modifications
in advance,  there can be no guarantee  that failure to modify the systems would
not have a material adverse affect on the Company.

In addition, the Company places a high degree of reliance on computer systems of
third  parties,   such  as  customers,   suppliers,   and  other  financial  and
governmental  institutions.   Although  the  Company  continues  to  assess  the
readiness of these third parties and is preparing  contingency  plans, there can
be no  guarantees  that the failure of any one of these third  parties to modify
their systems in advance of December 31, 1999 would not have a material  adverse
affect on the Company.

Many computer hardware systems and software programs in use today were developed
using a two digit date code to specify the year.  As a result  many  systems and
programs  that are date  sensitive  will treat  "00" as the year  1900,  and not
properly  recognize the date transition at the year 2000. An additional issue is
that  1900 was not a leap  year,  whereas  the year  2000  is.  Therefore,  some
programs may not properly provide for February 29, 2000.

The  Company  initiated  its  Year  2000  planning  in 1997 and has  prepared  a
comprehensive  written plan which addresses both internal and external Year 2000
exposure  and  includes  the  following   phases  -  Inventory  and  Assessment,
Renovation, Testing and Implementation, and Contingency Planning.

INVENTORY & ASSESSMENT
The Company  completed its inventory and  assessment  phase during 1997.  During
this process the Company made a physical  inventory  of  information  technology
("IT") systems and non-IT  systems at each office  location.  Additionally,  all
vendor  supplied  services  were  reviewed  to  identify IT and non-IT Year 2000
issues. The systems examined included hardware and software platforms associated
with  customer  account  processing,  computer  networks and  workstations,  and
telecommunications systems.

Although the assessment  determined  that there was no  significant  reliance on
non-IT technology (that is, equipment with embedded microprocessor controls such
as elevators,  climate control systems,  etc.), it did identify mission critical
IT systems, both internal and external that were not Year 2000 compliant.

These  noncompliant  systems included data processing  applications  provided by
third party  suppliers,  the teller  platform at two branch offices of the Bank,
and some of the hardware  and software  elements of the Bank's Wide Area Network
("WAN") computer network.  The WAN is a centralized,  server based,  system that
interconnects employees' desktop PC workstations at each location.

One additional  element of Year 2000 concern has been the Bank's customers.  The
Bank is reliant on its customers to make the necessary preparations for the Year
2000 so that their business operations will not be interrupted, thus threatening
their ability to honor financial commitments.

In an ongoing  effort to ensure that its customer base is aware of the Year 2000
issue,  during the second  quarter  of 1998 the Bank  mailed to each  commercial
account,  and  included in each  commercial  account  loan and  deposit  account
statement,  a letter  addressing Year 2000 issues and encouraging the assessment
of Year 2000  risk.  Year 2000  reference  resources  for  businesses  were also
provided.

As part of its customer Year 2000 assessment, the Bank identified all commercial
account  borrowing  relationships in excess of $100,000.  These represented over
200 relationships  and approximately 95% of the total borrowings  outstanding as
of June 30, 1998.  Each of these business  relationships  was analyzed as to its
potential  for Year 2000 risk and  approximately  20% were selected to receive a
detailed  Year 2000  questionnaire.  The  questionnaire,  requesting  additional
information  on Year 2000  status,  was  delivered to these  selected  customers
during the third quarter of 1998. The completed questionnaires were analyzed for
risk and each borrower was assigned a Year 2000 risk rating. As a result of this
analysis,  the Bank  modified  its credit  review  process and its  underwriting
criteria to include consideration of Year 2000 issues.

RENOVATION, TESTING & IMPLEMENTATION
The  correction  and testing phase of the Company's  Year 2000 Plan includes the
renovation and/or replacement of all mission critical IT hardware,  software and
equipment  identified as not compliant  with the Year 2000.  The majority of the
internal mission critical  renovation  centered around the upgrade to the Bank's
WAN and teller  systems.  The  installation  of the Year 2000  compliant  teller
system was completed by December 31, 1998.

To ensure Year 2000 compliance of its WAN and reduce the administrative overhead
of its IT systems,  management  determined that a complete renovation of the WAN
would  provide the most cost  effective  solution.  Most of the  elements of the
Bank's WAN upgrade  were  completed  by December  31,  1998.  Due to the overall
complexity of this project, however, only a few of the desktop workstations were
operational  on the new system at that  time.  Current  projections  are for all
users to be  converted  over to the new Year 2000  compliant  system  during the
second quarter of 1999.

The Bank relies on two primary off-site data processing  vendors for the mission
critical  processing of the Bank's customer accounting system and general ledger
applications.  These vendors  identified certain Year 2000 compliance issues and
the renovations to these systems were completed by December 31, 1998. Testing of
these systems was completed during the first quarter of 1999.

Although  no  vendors  were  identified  where  the  inability  to be Year  2000
compliant would cause the Company to seek alternative suppliers, the Company has
no viable  alternatives for some vendors,  such as power  distribution and local
telephone  companies.  The Year 2000 efforts of these  companies  continue to be
monitored and are part of the Company's  contingency plan. As with all financial
institutions,  the Company  places a high degree of reliance on systems of other
institutions, including governmental agencies, to settle transactions.

In  compliance  with  FFIEC   guidelines,   the  Company  has  met  all  testing
requirements  at or prior to the time such  requirements  were  required to have
been met and the present schedule  reflects  completion of all remaining testing
by June 30, 1999. The remaining  scheduled  testing  includes only  non-critical
applications or is a result of software upgrades.

The Company will perform  additional  testing through the remainder of 1999 when
appropriate  or when  changes  are made in hardware or  software,  however,  few
changes are anticipated.

COSTS
The majority of the costs  associated  with the Company's  Year 2000 project are
for the  installation and testing of the components to upgrade the Bank's teller
systems  and  WAN.   Included  in  this  project  were  improved   communication
connections  between  offices,   higher  capacity  computer  file  servers,  and
operating system upgrades for the entire network.  While these  investments were
not specifically accelerated due to the Company's Year 2000 project, these costs
have been included.

The  Company  invested  approximately  $78,000 in the first  quarter of 1999 for
capital  improvements to the WAN. As of March 31, 1999, total investment in this
project was $ 153,000  with an  estimated  additional  $82,000  remaining  to be
incurred..  The capital cost to upgrade the Bank's  teller  system for Year 2000
compliance,  which was  completed in the first  quarter of 1999,  was $60,000 of
which $42,000 was paid in the first quarter of 1999. Other costs incurred by the
Company as of March 31, 1999  include  staff time devoted to the issue at a cost
of approximately  $6,000 and outside consulting of $28,000 for the first quarter
of 1999.  Costs to-date at March 31, 1999 for staff time and outside  consulting
were $21,000 and $35,000,  respectively.  Current  estimates of additional costs
for staff and outside consultants in 1999 and the year 2000 are $29,000.

While  management  believes it has  identified and planned for the resolution of
the mission critical issues relevant to the Year 2000, no assurance can be given
that the Company may not be required to expend  significant  additional  amounts
related to the Year 2000 issue.


RISKS
The principal risks  associated  with the Year 2000 problem  primarily fall into
three  categories.  The first risk is that the Company is unable to successfully
renovate and/or migrate to Year 2000 compliant  systems.  The second risk is the
disruption of operations due to the failure of third  parties.  The third is the
risk of business  interruption among fund providers and fund users which affects
their ability to contractually perform.

The only risk largely under the  Company's  control for the Year 2000 project is
the  identification,  renovation and implementation of its internal  operations.
The Company,  like other financial  institutions,  is heavily dependent upon its
computer systems.  Reliance on readily available PC-based systems and technology
for WAN and desktop workstations has simplified this process to some extent, and
management  believes it will be able to make the  necessary  renovations  of its
internal systems for Year 2000 compliance.

Because of the  reliance on outside  vendors  for  processing  mission  critical
customer  accounting systems, a computer failure of a third party may jeopardize
Company operations. How serious this would be depends on the nature and duration
of such failures. Because of the complexity, integration and dependence of these
outside  systems to the  Company's  operations,  switching to another  vendor on
short  notice  does not  represent  a viable  option.  At this time,  management
believes  that the  necessary  renovations  to these third party systems will be
completed on schedule.

Another serious impact to Company  operations would occur if basic services such
as  telecommunications,  electric power supplies and services  provided by other
governmental  agencies were disrupted.  To date definitive  public disclosure of
the  state  of  readiness  among  basic  infrastructure  suppliers  has not been
generally available.  Although inquiries continue, the Company does not yet have
the  information  to estimate the likelihood of  significant  disruptions  among
these suppliers.

CONTINGENCY PLANNING
The Company has developed  contingency plans for the Year 2000 in the event that
remediation  is not  completed in time,  or if systems fail for reasons that are
not presently foreseen. In the event of a failure, these plans outline the steps
that  will be taken  to deal  with the  situation  to  minimize  the  effect  on
customers and losses to the Company. As the Company's identified Year 2000 risks
are largely  concentrated  with the ability of third parties to provide services
after  the  year  2000,   contingency   plans  being  developed  will  primarily
concentrate  on the  inability of these  suppliers  to complete  their Year 2000
projects.  Based upon currently known information,  management believes that its
primary  vendors  have the  resources  to  complete  their  Year  2000  projects
successfully and on time.

Apart from the  Company's  Year 2000 project,  federal  banking  regulators  are
conducting special examinations of FDIC-insured financial institutions and third
party data processors,  including suppliers to the Company, to determine whether
they are taking  necessary  steps to prepare for the Year 2000. They are closely
monitoring  the progress  made by these  institutions  in  completing  key steps
required by their individual Year 2000 plans.

The  Company's  disclosure  and  announcement  herein  concerning  its Year 2000
planning  and  programs  are  intended  to  constitute   "year  2000   readiness
disclosures"  as  defined  in the  recently-enacted  Year 2000  Information  and
Readiness  Disclosure Act (the "Act").  The Act provided certain protection from
liability for certain public and private statements  concerning an entity's Year
2000 readiness and the Year 2000 readiness of its products and services.

<PAGE>



                           PART II - OTHER INFORMATION


Item 5.           Other Information:  None

Item 6.           Exhibits and Reports on Form 8-K.

          (a)  Exhibits:  
               Exhibit 10.2.1  Amendment to Employee Stock  Ownership Plan, 
               dated January 22, 1997; 

               Exhibit  10.9.1  Amendments  to  401(k)  Profit  Sharing  Plan,  
               dated December 12, 1994, and December 30, 1993.

          (b)  Reports  on Form 8-K:  
               No  reports  on Form 8-K were filed by the Company for the 
               quarter ended March 31, 1999.


<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 COMMERCIAL SERVICES
                        (Registrant)




Date: May 13, 1999      /s/ R. M. Kahler    
                        --------------------
                        R. M. Kahler
                        President and
                        Chief Executive Officer
                        (Principal Executive Officer)



Date: May 13, 1999      /s/ R. D. Greenfield                              
                        ---------------------
                        R. D. Greenfield
                        Chief Financial Officer
                        (Principal Accounting Officer)