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, 1997

[ ]             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, 1997

Common stock, no par value                                    1,076,720  shares

Transitional Small Business Disclosure Format

YES_____          NO  X

This report contains a total of 15 pages.
<PAGE>
<TABLE>

                      BAY COMMERCIAL SERVICES AND SUBSIDIARY
                       CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>

                                                          March 31,
                                                              1997 December 31,
(Dollars in thousands):                                 (unaudited)       1996
-------------------------------------------------------------------------------
<S>                                                       <C>         <C>   
ASSETS
Cash and due from banks                                   $  8,046    $  6,945
Federal funds sold                                           4,500           0
-------------------------------------------------------------------------------
  Cash and cash equivalents                                 12,546       6,945
-------------------------------------------------------------------------------
Securities available for sale, stated at market value
  (amortized cost of $9,267 for 1997; $9,364 for 1996)       9,171       9,339
Securities held to maturity (market values of $6,705
   for 1997; $6,743 for 1996)                                6,749       6,704
Loans held for sale                                          2,314       2,923
Loans held for investment                                   68,268      68,439
  Allowance for loan losses                                   (954)       (971)
-------------------------------------------------------------------------------
  Net loans                                                 69,628      70,391
-------------------------------------------------------------------------------
Premises and equipment, net                                  2,247       2,164
Interest and fees receivable                                   678         585
Other assets                                                   578         641
-------------------------------------------------------------------------------
  Total assets                                            $101,597    $ 96,769
===============================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Noninterest-bearing demand                              $ 27,152    $ 26,198
  Savings and interest-bearing demand                       23,926      23,250
  Time                                                      28,724      27,823
  Certificates of deposit, $100,000 and over                 9,165       6,020
------------------------------------------------------------------------------
  Total deposits                                            88,967      83,291
------------------------------------------------------------------------------
Securities sold under agreements to repurchase               2,206       2,304
Federal funds purchased                                          0         500
Interest payable and other liabilities                         868       1,256
------------------------------------------------------------------------------
  Total liabilities                                         92,041      87,351
------------------------------------------------------------------------------
Commitments and contingent liabilities                           0           0
Shareholders' equity:
  Common stock - no par value: authorized 20,000,000
    shares; issued & outstanding 1,076,720 in 1997
    and 1996                                                 3,662       3,662
  Retained earnings                                          5,953       5,771
  Net unrealized loss on securities available for sale         (59)        (15)
-------------------------------------------------------------------------------
  Total shareholders' equity                                 9,556       9,418
-------------------------------------------------------------------------------

  Total liabilities and shareholders' equity              $101,597    $ 96,769
===============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
         Consolidated Condensed Statements of Income (unaudited)
<CAPTION>
                                                   Three Months Ended
                                                          March 31,
(In thousands, except per share amounts):                1997    1996
---------------------------------------------------------------------
<S>                                                    <C>     <C>  
Interest income:
  Loans, including fees                                $1,731  $1,525
  Federal funds sold                                       48      35
  Investment securities:
    Taxable                                               197     262
    Nontaxable                                             45      36
---------------------------------------------------------------------
      Total interest income                             2,021   1,858
---------------------------------------------------------------------
Interest expense:
  Deposits:
    Savings and interest-bearing demand                   154     154
    Time                                                  365     319
    Certificates of deposit, $100,000 and over            118      72
  Other borrowed funds                                     28      25
---------------------------------------------------------------------
      Total interest expense                              665     570
---------------------------------------------------------------------
      Net interest income                               1,356   1,288
Provision for loan losses                                   0       0
---------------------------------------------------------------------
      Net interest income after
        provision for loan losses                       1,356   1,288
---------------------------------------------------------------------
Noninterest income:
  Service charges and fees                                 68      65
  Bankcard income                                          66      57
  Loan servicing                                           35      36
  Gain on sale of loans                                     0      63
  Gains (losses) on sales of investment securities          0       0
  Other                                                    25      41
---------------------------------------------------------------------
      Total noninterest income                            194     262
---------------------------------------------------------------------
Noninterest expenses:
  Salaries and employee benefits                          708     612
  Occupancy                                               174     146
  Data processing                                          77      74
  Bankcard processing expense                              52      44
  Professional services                                    36      47
  Other                                                   205     177
---------------------------------------------------------------------
      Total noninterest expenses                        1,252   1,100
---------------------------------------------------------------------
      Income before income tax expense                    298     450
Income tax expense                                        116     179
---------------------------------------------------------------------
      Net income                                       $  182  $  271
=====================================================================
      Net income per common and equivalent share       $ 0.15  $ 0.22
=====================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
                         BAY COMMERCIAL SERVICES AND SUBSIDIARY
                     CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                            Three Months Ended
                                                                   March 31,
(In thousands):                                                  1997     1996
-------------------------------------------------------------------------------
<S>                                                           <C>      <C>   
Cash flows from operating activities:
   Net income                                                 $   182  $   271
   Adjustments to reconcile net income to
     net cash provided by (used in) operating activities:
       Depreciation and amortization                               74       78
       Unamortized deferred loan fees, net                        (27)    (305)
       Originations of SBA loans held for sale                   (146)    (268)
       Proceeds from the sale of SBA loans held for sale            0    1,742
       Change in interest and fees receivable and other assets     (3)    (209)
       Change in interest payable and other liabilities           (65)    (268)
-------------------------------------------------------------------------------
     Net cash provided by operating activities                     15    1,041
-------------------------------------------------------------------------------
Cash flows from investing activities:
   Proceeds from maturities of securities available for sale       97      115
   Proceeds from maturities of securities held to maturity        160    1,131
   Purchase of securities held to maturity                       (205)    (541)
   Net change in loans                                            936     (459)
   Purchases of premises and equipment                           (157)     (14)
-------------------------------------------------------------------------------
     Net cash provided by investing activities                    831      232
-------------------------------------------------------------------------------
Cash flows from financing activities:
   Net change in deposits                                       5,676    1,296
   Net change in securities sold under
     agreements to repurchase                                     (98)      14
   Net change in federal funds purchased                         (500)       0
   Cash dividends paid                                           (323)    (323)
-------------------------------------------------------------------------------
     Net cash provided by financing activities                  4,755      987
-------------------------------------------------------------------------------
     Net change in cash and cash equivalents                    5,601    2,260
Cash and cash equivalents at beginning of period                6,945   11,757
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period                    $12,546  $14,017
===============================================================================
Supplemental  disclosure of cash flow information:  
  Cash paid during the period for:
      Interest                                                $   655  $   585
      Income taxes                                                  0      391
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>

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


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, 1997 and December 31, 1996 and
     the results of its operations and its cash flows for the three month
     periods ended March 31, 1997 and 1996 have been included. The results of
     operations and cash flows for the periods presented are not necessarily
     indicative of the results for a full year.

2)   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, 1996.

3)   Net income per share for the three month periods ended March 31, 1997 and
     1996 was computed by dividing net income by the weighted average number of
     shares of common stock outstanding during the periods, including the
     dilutive effects of stock options, if material. The weighted average
     number of common and equivalent shares outstanding for the three month
     periods ended March 31, 1997 and 1996 was 1,247,261 and 1,207,738,
     respectively. 

     In February 1997, The Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
     The Company is required to adopt SFAS 128 in the fourth quarter of 1997 and
     will restate at that time earnings per share (EPS) data for prior periods
     to conform with SFAS 128. Earlier application is not permitted. 

     SFAS 128 replaces current EPS reporting requirements and requires a dual
     presentation of basic and diluted EPS. Basic EPS excludes dilution and is
     computed by dividing net income by the weighted average number of common
     shares outstanding for the period. Diluted EPS reflects the potential
     dilution that could occur if securities or other contracts to issue common
     stock were exercised or converted into common stock. If SFAS 128 had been
     in effect during the current and prior year periods, basic EPS would have
     been $0.17 and $0.25 for the quarters ended March 31, 1997 and 1996,
     respectively. Diluted EPS under SFAS 128 would not have been significantly
     different than EPS currently reported for the periods.

4)   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 39% and 40% for the three month periods ended March 31, 1997 and 1996,
     respectively.
<PAGE>
<TABLE>
                      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)
<CAPTION>
                                         Three Months Ended        Increase
                                               March 31,          (Decrease)
(Dollars in thousands):                      1997      1996        $       %
-------------------------------------------------------------------------------
<S>                                       <C>       <C>        <C>      <C>   
Average Balances:
  Assets *                                $99,507   $90,400    $ 9,107    10.1%
  Securities - taxable*                    12,565    16,763     (4,198)  (25.0)
  Securities - nontaxable                   3,426     2,976        450    15.1
  Total loans                              70,234    59,110     11,124    18.8
  Nonaccrual loans                            261        62        199   321.0
  Other real estate owned                       0       359       (359) (100.0)
  Deposits                                 86,735    78,180      8,555    10.9
  Shareholders' equity *                    9,561     8,839        722     8.2

  Interest-earning assets                  89,821    81,531      8,290    10.2
  Interest-bearing liabilities             63,259    56,166      7,093    12.6


Income Statements:
  Interest income (1)                     $ 2,042   $ 1,875    $   167    8.9%
  Interest expense                            665       570         95   16.7
-------------------------------------------------------------------------------
    Net interest income (1)                 1,377     1,305         72    5.5
  Taxable equivalent adjustment                21        17          4   26.4
-------------------------------------------------------------------------------
    Net interest income                     1,356     1,288         68    5.3
  Provision for loan losses                     0         0          0      0
-------------------------------------------------------------------------------
    Net interest income after provision
      for loan losses                       1,356     1,288         68    5.3
-------------------------------------------------------------------------------
  Noninterest income                          194       262        (68) (26.0)
  Noninterest expenses                      1,252     1,100        152   13.8
  Income tax expense                          116       179        (63) (35.2)
-------------------------------------------------------------------------------
    Net income                            $   182   $   271    $   (89) (32.8)%
===============================================================================
<FN>
 * before unrealized gain or loss on securities available for sale
</FN>
</TABLE>
<TABLE>
<CAPTION>
                                                                 Change
<S>                                         <C>        <C>       <C> 
Performance Ratios: (2)                        
  Yield on average earning assets           9.13%      9.14%     (0.01)%
  Yield on average earning assets (1)       9.22%      9.22%     (0.00)%
  Interest rate on average
     interest-bearing liabilities           4.26%      4.07%      0.19 %
  Interest expense as a percent of
      average earning assets                3.00%      2.80%      0.20 %

  Net yield on average earning assets       6.13%      6.34%     (0.21)%
  Net yield on average earning assets (1)   6.22%      6.42%     (0.20)%
<FN>
(1) Federal taxable equivalent basis 
(2) Ratios have been annualized and are not necessarily indicative of results
      for a full year.
</FN>
</TABLE>

<PAGE>

                   BAY COMMERCIAL SERVICES AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
                          AND RESULTS OF  OPERATIONS

                THREE MONTHS ENDED MARCH 31, 1997  COMPARED TO
                      THREE MONTHS ENDED MARCH 31, 1996

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  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 Company (the
"Company") and Bay Bank of Commerce (the "Bank").

Net income of the Company was $182,000 for the first  quarter of 1997  compared
to $271,000 for the first  quarter of 1996.  Net income per share was $0.15 for
the 1997 quarter compared to $0.22 for the 1996 quarter.

The  $89,000  or 33%  decrease  in net  income  for the first  quarter  of 1997
compared to the first quarter of 1996 was  principally due to a $152,000 or 14%
increase in  noninterest  expenses and a $68,000 or 26% decrease in noninterest
income.  A  significant  portion of the  increase in  noninterest  expenses was
attributable to the San Ramon branch of the Bank which opened in December 1996.
The  decrease  in  noninterest  income for the 1997  quarter  compared  to 1996
quarter  principally  reflected  a 1996 gain of $63,000  from the sale of loans
guaranteed by the Small  Business  Administration  ("SBA").  There were no loan
sales in the first  quarter  of 1997.  The  changes in  noninterest  income and
noninterest  expense were  partially  offset by a $68,000 or 5% increase in net
interest  income and a $63,000 or 35%  reduction  in income tax expense for the
1997 quarter compared to the 1996 quarter.

Total assets were $101,597,000 at March 31, 1997,  representing a $4,828,000 or
5% increase  from  December 31,  1996.  At March 31,  1997,  total  deposits of
$88,967,000 grew $5,676,000 or 7% from year-end 1996. Cash and cash equivalents
increased  $5,601,000 or 81% and total loans decreased  $780,000 or 1% compared
to December 31, 1996. The decline in total loans reflected greater loan payoffs
than fundings during the 1997 quarter.
<PAGE>

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  $1,356,000  for the first  quarter of 1997  increased
$68,000 or 5% compared to the first quarter of 1996.  The increase  reflected a
$8,290,000 or 10% growth in average earning assets. The net interest margin for
the 1997 quarter  declined,  however,  to 6.13%  compared to 6.34% for the 1996
quarter due to a slight drop in the yield on earning  assets and an increase in
the cost of interest-bearing liabilities between the quarters.

The  increase  in average  interest-earning  assets  between  the 1997 and 1996
quarters was principally due to growth of $10,925,000 or 19% in average earning
loans and $1,113,000 or 41% in average federal funds sold. These increases were
partially  offset by a net  $3,748,000  or 19%  decrease in average  investment
securities.  The yield on average  earning assets for the first quarter of 1997
declined  to  9.13%  compared  to  9.14%  for the 1996  quarter.  The  decrease
reflected  the decline in yield  earned on loans to 10.03% for the 1997 quarter
from 10.36% for the 1996 quarter,  which was  attributable  to a higher average
prime lending rate during the 1996 quarter.

Average  interest-bearing  liabilities  increased $7,093,000 or 13% between the
1997 and 1996 quarters. The average rate paid for interest-bearing  liabilities
increased to 4.26% for the 1997 quarter compared to 4.07% for the 1996 quarter.
The higher  average rate paid during the 1996 quarter  principally  reflected a
shift in the deposit mix. The proportion of total interest-bearing  liabilities
that were  higher  cost time  deposits  increased  to 59% for the 1997  quarter
compared to 53% for the 1996 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 be reflected more quickly
in rates on earning  assets.  If interest  rates  decline,  an asset  sensitive
position  could  adversely  affect net interest  income.  Alternatively,  where
liabilities  reprice  more  quickly  than assets in a given period (a liability
sensitive  position)  a decline in market  rates  could  benefit  net  interest
income.  The  results  would  reverse  if market  rates were to  increase.  The
following table presents the Company's  interest rate  sensitivity gap position
at March 31, 1997. 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
                                          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 (net of nonaccrual)              $ 46,592   $ 4,209   $ 8,216  $11,707  $70,724
Securities (before unrealized loss on
  securities available for sale)            2,000     2,109     6,350    5,558   16,017
Federal funds sold                          4,500         0         0        0    4,500
---------------------------------------------------------------------------------------
    Total                                  53,092     6,318    14,566   17,265   91,241
---------------------------------------------------------------------------------------
Interest rate sensitive liabilities:
  Interest-bearing transaction accounts     6,228         0         0        0    6,228
  Savings deposits                         17,698         0         0        0   17,698
  Time deposits >$100,000                  16,848     3,249       818      100   21,015
  Other time deposits                      11,211     4,156     1,507        0   16,874
  Other borrowed funds                      2,206         0         0        0    2,206
---------------------------------------------------------------------------------------
    Total                                  54,191     7,405     2,325      100   64,021
---------------------------------------------------------------------------------------
Interest rate sensitivity gap            $ (1,099)  $(1,087)  $12,241  $17,165  $27,220
---------------------------------------------------------------------------------------
Cumulative interest rate
  sensitivity gap                        $ (1,099)  $(2,186)  $10,055  $27,220
---------------------------------------------------------------------------------------
Cumulative interest rate
 sensitivity gap to total assets            (1.1%)    (2.2%)     9.9%    26.8%
</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, 1997,  indicates that the
Company  is  liability  sensitive  in time  periods of a year or less and asset
sensitive over the remaining time periods.

PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company  provides for potential loan losses by a charge to operating income
based  upon the  current  composition  of the loan  portfolio,  past  loan loss
experience,  current and projected  economic  conditions,  an evaluation of the
risk elements in the loan  portfolio  and other  factors that, in  Management's
judgment,  deserve recognition in estimating loan losses. In addition,  various
regulatory  agencies,  as  an  integral  part  of  their  examination  process,
periodically  review the Company's allowance for loan losses. Such agencies may
require  the  Company  to  make  additions  to the  allowance  based  on  their
evaluations of information  available to them at the time of their examination.
Management will charge off loans to the allowance when it determines  there has
been a permanent impairment of the related carrying values.
<PAGE>

The provision for loan losses reflects an amount  sufficient to cover estimated
loan losses and to maintain the allowance for loan losses at 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, 1997,  the allowance  for loan losses was $954,000  compared to
$971,000  at  December  31,  1996.  The reduced  allowance  reflected  net loan
chargeoffs of $17,000  during 1997.  The ratio of the allowance for loan losses
to total loans was 1.4% at March 31, 1997 and  December  31,  1996.  Due to the
level of the allowance in relation to both  nonperforming and total outstanding
loans, no provision for loan losses was made during the first quarter of either
1997 or 1996. While Management uses available information to provide for losses
on loans,  future  additions to the allowance may be necessary based on changes
in economic conditions. Based upon information currently available,  Management
believes  that the  allowance  for loan losses at March 31, 1997 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.

Information on nonperforming loans and other real estate owned for the quarters
ended  March  31,  1997  and  1996  and the year  ended  December  31,  1996 is
summarized in the following table.
<TABLE>
<CAPTION>
                                               March 31, December 31, March 31,
(Dollars in thousand)s                             1997         1996      1996
------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>    
Net loan charge-offs                                $17         $11        $13

Ratio of net loan charge-offs to average loans        0           0          0

Nonperforming loans:
  Nonaccrual                                       $384        $208       $110
  Accruing loans past due
   90 days or more                                  224         227        449
------------------------------------------------------------------------------
   Total nonperforming loans                       $608        $435       $559
------------------------------------------------------------------------------

Ratio of nonperforming loans to total loans        0.9%        0.6%       1.0%
Ratio of allowance for loan losses to
  nonperforming loans                              157%        223%       173%

Other real estate owned                              0           0        $359
</TABLE>

Because 43% of total  nonperforming  loans at March 31, 1997 are  guaranteed by
the SBA,  any  potential  loss  would be  proportionately  reduced.  Management
believes that the increases in nonperforming loans as of March 31, 1997 are not
representative of any specific trend within the loan portfolio.
<PAGE>

NONINTEREST  INCOME
Total noninterest income of $194,000 for the first quarter of 1997 decreased
$68,000 or 26% compared to the first quarter of 1996. Noninterest income during
the 1996 quarter benefited from a $63,000 gain on sale of SBA loans, while
there were no loan sales during the 1997 quarter. Other noninterest income
declined $16,000 or 39% principally due to larger recoveries during the 1996
quarter of prior years' expenses related to problem loans.

NONINTEREST  EXPENSE 
Total noninterest expenses of $1,252,000 for the first quarter of 1997
increased $152,000 or 14% compared to the first quarter of 1996. The most
significant change was a $96,000 or 16% increase in salaries and employee
benefits, which principally reflected additional staff and salary increases in
the Bank's headquarters office in San Leandro and additional staff associated
with the Bank's newly opened San Ramon branch. The opening of the Bank's San
Ramon branch was also the principal source of a $28,000 or 19% increase in
occupancy expense and a $28,000 or 16% increase in other noninterest expenses
for the 1997 quarter compared to the 1996 quarter.

PROVISION  FOR INCOME TAXES 
The provision for income tax expense was $116,000 for the first quarter of 1997
compared to $179,000 for the first quarter of 1996. The $63,000 or 35% decrease
in income tax expense reflected reduced taxable income for the 1997 quarter.
The effective income tax rates were 39% and 40% for the 1997 and 1996 quarters,
respectively.

FINANCIAL   CONDITION

LOANS  AND  INVESTMENTS
Total  loans of  $70,582,000  at March 31,  1997  declined  $780,000 or 1% from
December 31, 1996,  principally due to loan payoffs.  Total securities declined
$123,000 or 1% due to maturities.  The funds provided by deposit  growth,  loan
payoffs and  securities  maturities  were  principally  invested  in  overnight
federal  funds  sold  which were  $4,500,000  higher at March 31,  1997 than at
December 31, 1996.

DEPOSITS AND OTHER BORROWED FUNDS
Total deposits of $88,967,000 at March 31, 1997 increased $5,676,000 or 7% from
December 31, 1996. The greatest growth was experienced in time  certificates of
deposit of $100,000 or more which grew  $3,145,000  or 52% compared to year-end
1996.  Growth  in  other  deposit   categories   included  $954,000  or  4%  in
noninterest-bearing  demand,  $676,000  or 3% in savings  and  interest-bearing
demand  and  $901,000  or 3% in other time  deposits.  The  deposit  growth was
generated  principally  through  the Bank's San Ramon  branch and a  $2,000,000
certificate of deposit sold to the State of California.  Securities  sold under
agreements to repurchase remained  relatively  unchanged at $2,206,000 at March
31, 1997 compared to $2,304,000 at December 31, 1996.

OTHER ASSETS AND OTHER LIABILITIES
Interest and fees receivable  increased $93,000 or 16% during the first quarter
of 1997,  reflecting the increased  volume of earning assets.  Interest payable
and other  liabilities at March 31, 1997 declined $388,000 or 31% from year-end
1996 principally due to the payment in 1997 of a cash dividend of $323,000.

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 noninterest-bearing  deposit balances,  federal funds sold,
all  marketable  securities  less  liabilities  that are  secured by any of the
securities, 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 27% at March 31, 1997 and 28% at December
31, 1996.  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,  the Bank has  informal,  non-binding,  federal  funds  borrowing
arrangements  totaling  $5,000,000  with a  correspondent  bank  and  also  has
repurchase  facilities to meet  unforeseen  outflows.  As of March 31, 1997, no
borrowed funds were outstanding from these credit  facilities.  As of March 31,
1997, the Bank did not carry any brokered deposit balances.

CAPITAL
The following  tables present the Company's and the Bank's  regulatory  capital
positions  at March 31,  1997,  and average  assets over the three month period
ended March 31, 1997:
<TABLE>
<CAPTION>
                                                RISK BASED CAPITAL RATIO
                                                Company              Bank
(Dollars in thousands)                      Amount   Ratio      Amount   Ratio
------------------------------------------------------------------------------
<S>                                        <C>       <C>       <C>       <C>  
Tier 1 Capital.                            $ 9,615   12.5%     $ 9,456   12.3%
Tier 1 Capital minimum requirement           3,088    4.0        3,083    4.0
------------------------------------------------------------------------------
Excess                                     $ 6,527    8.5%     $ 6,373    8.3%

Total Capital                              $10,569   13.7%     $10,410   13.5%
Total Capital minimum requirement            6,176    8.0        6,166    8.0
------------------------------------------------------------------------------
Excess                                     $ 4,393    5.7%     $ 4,244    5.5%

     Risk weighted assets                  $77,204             $77,075
</TABLE>

<PAGE>
<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     $9,615     9.7%     $9,456     9.5%
Range of minimum leverage                   2,985-    3.0-      2,981-    3.0-
  requirement                               4,975     5.0%      4,969     5.0%
------------------------------------------------------------------------------
Range of excess                             4,640-    4.7-      4,487-    4.5-
                                           $6,630     6.7%     $6,475     6.5%

     Average total assets                  $99,507             $99,376
</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, 1997 and 1996 have not
been material.
<PAGE>

                          PART II - OTHER INFORMATION


Item 5.    Other Information:  None

Item 6.    Exhibits and Reports on Form 8-K.
       (a) Exhibits:  None.
       (b) Reports on Form 8-K:
           No  reports on Form 8-K were filed by the  Company  for the  quarter
           ended March 31, 1997.

<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 2, 1997        /s/ R. M. Kahler
                          R. M. Kahler
                          President and
                          Chief Executive Officer
                          (Principal Executive Officer)



Date: May 2, 1997         /s/ R. D. Greenfield
                          R. D. Greenfield
                          Chief Financial Officer
                          (Principal Accounting Officer)