SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                    For the quarter ended September 30, 2001.

                        Commission file number: 333-87781



                            Bay National Corporation
             (Exact name of Registrant as specified in its charter)

             Maryland                                     52-2176710
--------------------------------------        ----------------------------------
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                      Identification No.)

  2328 West Joppa Road, Lutherville, MD                      21093
------------------------------------------    ----------------------------------
(Address of principal executive offices)                  (Zip Code)

        Registrant's telephone number including area code: (410) 494-2580

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

               Yes       X                        No
                     ----------                      ----------


The number of shares  outstanding of the  registrant's  common stock on
November 9, 2001:

         $.01 Par Value - 1,242,020

<PAGE>

PART I  -     FINANCIAL INFORMATION

Item 1.       Financial Statements
-------       --------------------

                            BAY NATIONAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                 As of September 30, 2001 and December 31, 2000
<TABLE>
<CAPTION>

                                                                              September 30,         December 31,
                                                                                   2001                 2000
                                                                              --------------       --------------
ASSETS                                                                         (Unaudited)

<S>                                                                          <C>                  <C>
     Cash and due from banks                                                 $      272,638       $      561,237
     Federal funds sold and other overnight investments                          11,472,909           16,587,278
     Federal Reserve Bank stock                                                     275,940              275,940
     Loans held for sale                                                          1,056,800              -
     Loans, net of unearned fees                                                 24,223,162            5,648,321
                                                                              -------------        -------------
         Total loans                                                             25,279,962            5,648,321
         Less: Allowance for credit losses                                         (303,000)             (70,000)
                                                                              -------------        -------------
              Loans, net                                                         24,976,962            5,578,321
     Premises and equipment, net                                                    843,523              939,504
     Accrued interest receivable and other assets                                   224,519               83,545
                                                                              -------------        -------------

              Total Assets                                                   $   38,066,491       $   24,025,825
                                                                              =============        =============

LIABILITIES

     Non-interest-bearing deposits                                           $    3,390,855       $    2,515,089
     Interest-bearing deposits                                                   25,419,873           11,141,551
                                                                              -------------        -------------
         Total deposits                                                          28,810,728           13,656,640

     Accrued expenses and other liabilities                                         236,801              151,154
                                                                              -------------        -------------

              Total Liabilities                                                  29,047,529           13,807,794
                                                                              -------------        -------------


STOCKHOLDERS' EQUITY

     Common stock - $.01 par value, authorized:
         9,000,000 shares authorized, 1,242,020 issued and outstanding as
         of September 30, 2001 and December 31, 2000, respectively:                  12,420               12,420
     Surplus                                                                     12,407,780           12,407,780
     Accumulated Deficit                                                         (3,401,238)          (2,202,169)
                                                                              -------------        -------------

              Total Stockholders' Equity                                          9,018,962           10,218,031
                                                                              -------------        -------------

              Total Liabilities and Stockholders' Equity                     $   38,066,491       $   24,025,825
                                                                              =============        =============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

                            BAY NATIONAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
     For the three and nine month periods ended September 30, 2001 and 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ending                  Nine Months
                                                           September 30,                Ending September 30,
                                                      2001             2000             2001             2000
                                                   ------------     ------------    -------------     -----------
<S>                                               <C>              <C>             <C>               <C>
INTEREST INCOME:
   Interest and fees on loans                     $    452,320     $     10,143    $     948,964     $    10,613
   Interest on federal funds sold and other
   overnight investments                                68,191          194,002          388,289         405,958
   Taxable interest and dividends on investment
     securities                                         -                33,001            8,100          49,351
                                                   -----------      -----------     ------------      ----------
   Total interest income                               520,511          237,146        1,345,353         465,922
                                                   -----------      -----------     ------------      ----------

INTEREST EXPENSE ON DEPOSITS:                          194,875           63,120          491,382          66,937
                                                   -----------      -----------     ------------      ----------

Net interest income                                    325,636          174,026          853,971         398,985

Provision for credit losses                             59,000           23,000          233,000          23,000
                                                   -----------      -----------     ------------      ----------

Net interest income after provision for
   credit losses                                       266,636          151,026          620,971         375,985
                                                   -----------      -----------     ------------      ----------

NON-INTEREST INCOME:
   Service charges on deposit accounts                   6,844            1,108           16,519           1,128
   Gain on sale of mortgage loans                       61,876           -               139,512          -
   Other income                                         10,915            1,582           28,628           1,886
                                                   -----------      -----------     ------------      ----------
     Total non-interest income                          79,635            2,690          184,659           3,014
                                                   -----------      -----------     ------------      ----------

NON-INTEREST EXPENSES:
   Salaries and employee benefits                      381,126          397,902        1,108,688         838,750
   Occupancy expenses                                   49,561           54,042          148,483         146,612
   Furniture and equipment expenses                     43,759           37,673          132,818          69,756
   Legal and professional fees                          25,616            7,987           93,306          54,954
   Outside services                                    101,084           78,316          275,076         144,554
   Other expenses                                       98,141           61,539          246,328         207,854
                                                   -----------      -----------     ------------      ----------
     Total non-interest expenses                       699,287          637,459        2,004,699       1,462,480
                                                   -----------      -----------     ------------      ----------

Loss before income taxes                              (353,016)        (483,743)      (1,199,069)     (1,083,481)
Income tax benefit                                      -                -               -                -
                                                   -----------      -----------     ------------      ----------
NET LOSS                                          $   (353,016)    $   (483,743)   $  (1,199,069)    $(1,083,481)
                                                   ===========      ===========     ============      ==========

Per Share Data:
   Cash Dividend Paid                             $         --     $         --    $          --     $        --

   Net Loss (Basic and diluted)                   $      (0.28)    $      (0.39)   $       (0.97)    $     (1.45)
   Average Shares Outstanding (Basic and diluted)
                                                     1,242,020        1,242,020        1,242,020         747,340
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            BAY NATIONAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
          For the nine-month periods ended September 30, 2001 and 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 2001                  2000
                                                                             -------------          ------------
<S>                                                                         <C>                    <C>
Cash Flows From Operating Activities
   Net loss                                                                 $  (1,199,069)         $ (1,083,481)
   Adjustments to reconcile net loss to net cash used by
     operating activities:
       Depreciation                                                               136,763                51,397
       Amortization of investment (discounts)/premiums, net                       -                     (55,069)
       Provision for credit losses                                                233,000                23,000
       Gain on sale of loans                                                     (139,512)               -
       Origination of loans held for sale                                      (9,726,850)               -
       Proceeds from sale of loans                                              8,809,562                -
       Net increase in accrued interest receivable and other assets              (140,974)               (8,402)
       Net increase (decrease) in accrued expenses and other liabilities           85,647                (2,118)
                                                                             ------------           -----------

            Net cash used by operating activities                              (1,941,433)           (1,074,673)
                                                                             ------------           -----------

Cash Flows From Investing Activities
    Purchases of investment securities - AFS                                      -                  (3,212,540)
   Maturities of investment securities - AFS                                      -                   1,000,000
   Net increase in loans                                                      (18,574,841)           (1,521,622)
   Capital expenditures                                                           (40,782)             (971,138)
                                                                             ------------           -----------
            Net cash used by investing activities                             (18,615,623)           (4,705,300)
                                                                             ------------           -----------

Cash Flows From Financing Activities
   Net increase in deposits                                                    15,154,088             8,926,247
    Issuance of common stock                                                      -                  11,295,200
                                                                             ------------           -----------
            Net cash provided by financing activities                          15,154,088            20,221,447
                                                                             ------------           -----------

Net (decrease) increase in cash and cash equivalents                           (5,402,968)           14,441,474
Cash and cash equivalents at beginning of period                               17,148,515               763,957
                                                                             ------------           -----------

Cash and cash equivalents at end of period                                  $  11,745,547          $ 15,205,431
                                                                             ============           ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                            BAY NATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   GENERAL

         Organization

         Bay National  Corporation  (the "Company") was  incorporated on June 3,
1999  under the laws of the  State of  Maryland  to  operate  as a bank  holding
company of a national bank with the name Bay National Bank (the "Bank").  On May
12,  2000,  the Company  purchased  all the shares of common stock issued by the
Bank.  The  Company's  operations  through  that date were limited to taking the
necessary  actions to organize and capitalize the Company and the Bank. The Bank
commenced  operations on May 12, 2000 after successfully  meeting the conditions
of the Office of the  Comptroller  of the  Currency  (the  "OCC") to receive its
charter  authorizing it to commence operations as a national bank, and obtaining
the approval of the Federal Deposit Insurance  Corporation to insure its deposit
accounts, and meeting certain other regulatory requirements.

         Basis of Presentation

         The accompanying consolidated financial statements include the activity
of Bay National Corporation and its wholly owned subsidiary,  Bay National Bank.
All significant  intercompany  transactions and balances have been eliminated in
consolidation.

         The foregoing consolidated financial statements are unaudited; however,
in the opinion of management,  all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of the results of the interim period
have been included.  These  statements  should be read in  conjunction  with the
financial   statements   and   accompanying   notes  included  in  Bay  National
Corporation's  2000 Annual  Report on Form  10-KSB.  The  results  shown in this
interim report are not necessarily  indicative of results to be expected for the
full year 2001.

         The  accounting  and  reporting  policies  of the  Company  conform  to
accounting principles generally accepted in the United States.

         Reclassifications

         Certain  reclassifications have been made to the prior year's financial
statements to conform to the current year presentation.  These reclassifications
had no effect on previously reported results of operations or retained earnings.

         Costs Associated with Start-Up Activities

         The  Company  expensed  costs  incurred  during the  start-up  phase of
organization  in  accordance  with the American  Institute  of Certified  Public
Accountants'  Statement  of  Position  98-5  Reporting  on the Costs of Start-Up
Activities, which requires such costs to be expensed in the period incurred.

2.   REGULATORY MATTERS

         The  Bank  is  subject  to  various  regulatory  capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate  certain   mandatory  -  and  possibly   additional
discretionary - actions by regulators  that, if undertaken,  could have a direct
material effect on the Company's financial statements. Under capital action, the
Bank must meet specific capital guidelines that involve quantitative measures of
the Bank's assets, liabilities and certain off-balance sheet items as calculated

                                       5

<PAGE>

under  regulatory   accounting   practices.   The  Bank's  capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components, risk weighting and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require the Bank to maintain  minimum  amounts and ratios.  Management
believes,  as of September  30, 2001,  that the Bank meets all capital  adequacy
requirements to which it is subject.

         As of  September  30,  2001,  the Bank has  been  categorized  as "Well
Capitalized"  by the OCC under the  regulatory  framework for prompt  corrective
action.  To be categorized as well  capitalized,  the Bank must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios.

3.   INCOME TAXES

         The Company uses the liability method of accounting for income taxes as
required by SFAS No. 109,  "Accounting  for Income  Taxes".  Under the liability
method,  deferred-tax assets and liabilities are determined based on differences
between the financial  statement  carrying amounts and the tax bases of existing
assets and liabilities  (i.e.,  temporary  differences)  and are measured at the
enacted rates that will be in effect when these  differences  reverse.  Deferred
income taxes will be recognized  when it is deemed more likely than not that the
benefits  of such  deferred  income  taxes  will be  realized,  accordingly,  no
deferred income taxes or income tax benefits have been recorded by the Company.

4.   EARNINGS PER SHARE

            The Company's  common stock  equivalents  were not considered in the
computation  of diluted  earnings  per share  because the result would have been
anti-dilutive.



                                       6
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

         This  discussion  and  analysis  provides an overview of the  financial
condition and results of operations of Bay National  Corporation  (the "Parent")
and its national bank subsidiary,  Bay National Bank (the "Bank"),  collectively
(the  "Company")  as of  September  30,  2001 and for the three  and  nine-month
periods  ended  September  30, 2001.  Comparative  discussion  of the results of
operations  for the three and  nine-month  periods ended  September 30, 2001 and
September  30, 2000 is limited,  as the  Company  had no  operations  other than
organizational activity until May 2000, and as such, comparisons provide limited
value regarding the Company's financial position or results of operations.

General

         Bay National Corporation is a bank holding company,  which on April 30,
2000, completed its efforts to raise capital and closed with $11,295,200.

         On May 12, 2000 the Company became a bank holding company by purchasing
all of the common stock of Bay National  Bank.  The Bank opened its first office
on May 12, 2000, and a second office on May 26, 2000.

         The  Bank  was  formed  to  serve  the  business  communities  of North
Baltimore and Salisbury, Maryland.

Financial Condition

         As  of  September  30,  2001,  total  assets  were  $38,066,491.   This
represents growth of $14,040,666 or 58.4% since December 31, 2000, and growth of
$8,559,035  or 29.0%  since  June 30,  2001.  The growth in assets was funded by
deposit growth of $15,154,088 or 111.0% during the  nine-months  ended September
30,  2001,  and growth of  $8,859,587  or 44.4%  during the  three-months  ended
September  30, 2001.  Deposits at September 30, 2001 were  $28,810,728.  Deposit
growth resulted from various  marketing  efforts  including  direct marketing by
officers and directors,  direct mail campaigns,  and listing of money market and
certificate  of  deposit  rates  in  print  publications  and on  the  Internet.
Management  has set the interest rates paid on deposits to be competitive in the
market  and  significantly  increased  its  marketing  activities  in August and
September of 2001 to generate  additional  growth in deposits.  During the three
months ended September 30, 2001, the Company obtained approximately $2.7 million
in new funds from the  listing of  certificate  of deposit  rates on an Internet
based   listing   service.   These  funds  were  obtained  at  rates  that  were
approximately 10 to 15 basis points below the prevailing market rate for similar
deposits  in the  Company's  local  markets.  Management  expects  that  it will
continue  to use this  service as a  complimentary  source of readily  available
funds  whenever the rates are  competitive  with local  sources of funding.  The
Company has not paid broker fees and has no brokered  funds as of September  30,
2001.

         As of September 30, 2001, loans (net of a $303,000 allowance for credit
losses) totaled  $24,976,962.  This  represents  growth of $19,398,641 or 347.8%
since  December 31, 2000, and growth of $5,086,836 or 25.6% since June 30, 2001.
Net loans comprised 65.6% of total assets as of September 30, 2001,  compared to
23.2% of total  assets as of December 31,  2000.  Loan growth  continues to be a
result of the marketing  efforts of officers and  directors.  The loan portfolio
includes residential  mortgage loans held for sale of approximately  $1,057,000,
commercial   loans  of   approximately   $18,508,000,   and  consumer  loans  of
approximately  $5,715,000.  The  mortgage  loans held for sale  represent  loans
originated and funded by the Company,  which are in the process of being sold in
the secondary market.  The sale of these loans is typically  completed within 30
days of original  settlement.  Upon completion of the sale, the Company receives
interest  for the  period  that the loan is held,  and often a premium  over the
original loan amount.

          At September  30, 2001,  the Company had federal  funds sold and other
overnight  investments  totaling  $11,472,909.  This  represents  a decrease  of
$5,114,369  or 30.8% since  December 31, 2000,  and an increase of $3,970,367 or

                                       7

<PAGE>

52.9%  since  June  30,  2001.  The  fluctuation  in  these  balances  is due to
short-term  mismatches  in the timing of raising  deposits  and  funding  loans.
Management  attempts to maximize interest margins by matching deposit generation
with the need to fund loans, and the need to maintain adequate liquidity.

         The Company has chosen to invest its  available  funds in federal funds
sold and other  overnight  investments,  and Federal  Reserve  Bank stock.  As a
result,  investment  securities consist only of $275,940 of Federal Reserve Bank
stock.  Management  has made the  decision to maintain  its  available  funds in
highly  liquid  assets to ensure that funds were  readily  available to fund the
growth  of the loan  portfolio.  Additionally,  the  yields  available  on other
longer-term  securities were not substantially better than those currently being
earned on short-term  investments.  Management  believes that this strategy will
continue  to allow  growth in the loan  portfolio  with  limited use of borrowed
funds, or more aggressive pricing of deposit products.

         Federal funds sold and other overnight  investments  comprised 30.1% of
total assets as of September  30, 2001,  compared to 69.0% of total assets as of
December 31, 2000. This decrease is primarily a result of the growth of the loan
portfolio.

         Total capital at September 30, 2001 was $9,018,962  representing  23.7%
of total assets.  Management  believes this capital will be adequate to fund the
Company and Bank's operations for at least the next 12 months.

Results of Operations

         On a consolidated  basis,  the Company  recorded a net loss of $353,016
and $1,199,069 for the  three-month  and nine-month  periods ended September 30,
2001, this compares to a net loss of $483,743 and $1,083,481 for the three-month
and nine-month  periods ended September 30, 2000. The improvement in results for
the  three-month  period as  compared  to the same  period in 2000,  is a direct
result of the overall growth in the loan portfolio from  $1,498,622 at September
30,  2000 to  $24,976,962  at  September  30,  2001.  Operating  results for the
nine-month  periods  are not  comparable  due to the fact  that the Bank did not
commence operations until May 12, 2000. Operating results for subsequent periods
in 2001 and for the year ending  December 31, 2001 are also projected to reflect
losses as loan and  deposit  levels  have not yet  reached a level at which they
would produce net interest income sufficient to cover non-interest expenses.

Net Interest Income

         Net interest income is the difference  between income on assets and the
cost of funds supporting those assets.  Earning assets are composed primarily of
loans,  investments,  and federal funds sold;  interest-bearing deposits make up
the cost of funds.  Non-interest  bearing  deposits and capital are also funding
sources.  Changes in the volume and mix of earning  assets and  funding  sources
along  with  changes  in  associated  interest  rates  determine  changes in net
interest income.

         Interest income from loans and  investments for the three-month  period
ended September 30, 2001 was $520,511,  compared to $237,146 for the same period
in 2000.  Interest income for the nine-month period ended September 30, 2001 was
$1,345,353,  compared  to $465,922  for the same period in 2000.  The 119.5% and
188.8% increases for the three and nine-month periods is directly related to the
increase in average  interest earning assets from $9,985,695 for the nine-months
ended September 30, 2000 to $27,820,384 for the nine-months  ended September 30,
2001. The yields on these assets were 6.22% for the nine-months  ended September
30, 2000 and 6.45% for the nine-months ended September 30, 2001.

         Growth in the percentage of interest-earning  assets represented by the
loan  portfolio  would  normally be expected to result in an increase in average
yields on interest-earning  assets. This would occur because the yields on loans
are normally 3% to 4% higher than yields on investment securities.  However, the

                                       8

<PAGE>

shift in interest-earning assets was partially offset by a reduction in loan and
investment  yields as a result of actions taken by the Federal Reserve to reduce
its target for the federal  funds rate from 6.50% at December  31, 2000 to 3.00%
at September 30, 2001. At September 30, 2001, the weighted  average yield on the
loan portfolio,  excluding loans held for sale, was 7.57%;  the weighted average
yield on  federal  funds sold and other  overnight  investments  was  3.17%.  At
December 31, 2000,  the weighted  average yield on the loan portfolio was 9.75%;
the weighted average yield on federal funds sold and other overnight investments
was 6.28%.

         The market in which the Company operates is very  competitive,  and the
rates  of  interest  paid on  deposits  are  affected  by  rates  paid by  other
depository  institutions.  Management  closely  monitors  rates offered by other
institutions,  and seeks to be  competitive  within the market.  The Company has
chosen to selectively  compete for jumbo certificates of deposits.  This Company
will choose to pursue such  deposits  when  expected  loan growth  provides  for
adequate  spreads to support the cost of those  funds.  During the  three-months
ended September 30, 2001, the Company obtained approximately $2.7 million in new
funds from the listing of  certificate  of deposit  rates on an  Internet  based
listing service. These certificates of deposit were issued with an average yield
of 4.40% and a term of 1 year.  In  addition,  the  Company  embarked on a money
market campaign,  which offered a competitive rate structure as an inducement to
attract  deposits.  The impact of these  programs was to increase the  Company's
weighted average cost of interest-bearing deposits to 3.74% and weighted average
cost of total  deposits to 3.30% at September  30, 2001, as compared to weighted
average cost of interest-bearing  deposits of 3.39% and weighted average cost of
total  deposits of 2.94% at June 30, 2001. As of December 31, 2000, the weighted
average cost of interest-bearing deposits was 5.62% and weighted average cost of
total deposits was 4.68%. It is anticipated that both the volume of deposits and
the interest  expense  will  continue to increase  during the next  twelve-month
period based upon increased marketing activities.

                                       9
<PAGE>

         The following tables set forth, for the periods indicated,  information
regarding the average balances of interest-earning  assets and  interest-bearing
liabilities,  the  amount  of  interest  income  and  interest  expense  and the
resulting  yields on average  interest-earning  assets and rates paid on average
interest-bearing   liabilities.   Average   balances   are  also   provided  for
non-interest-earning assets and non-interest-bearing liabilities.


                      Nine Months Ended September 30, 2001

<TABLE>
<CAPTION>
                                                                       Average         Interest         Yield/
                                                                       Balance         and fees          Rate
                                                                       -------         --------         ------
<S>                                                                 <C>              <C>             <C>
ASSETS
Loans:
    Real Estate - Home Equity Line of Credit                        $   3,051,055    $    171,164            7.48%
    Real Estate - Construction                                            506,117          27,042            7.12
    Commercial                                                          9,820,505         638,332            8.67
    Consumer                                                            1,280,338          75,611            7.87
    Loans held for sale                                                   540,845          36,815            9.08
                                                                     ------------     -----------
         Total Loans                                                   15,198,860         948,964            8.33
Investment Securities                                                     275,940           8,100            3.91
Federal funds sold and other overnight investments                     12,345,584         388,289            4.19
                                                                     ------------     -----------
         Total Earning Assets                                          27,820,384       1,345,353            6.45%
                                                                                      -----------
Less: Allowance for credit losses                                        (173,872)
Cash and due from banks                                                   661,273
Premises and equipment, net                                               906,343
Accrued interest receivable and other assets                              128,874
                                                                     ------------
         Total Assets                                               $  29,343,002
                                                                     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $  12,495,859         350,838            3.74%
Regular savings deposits                                                2,308,171          40,115            2.32
Time deposits                                                           2,574,797         100,429            5.20
                                                                     ------------     -----------
         Total interest-bearing liabilities                            17,378,827         491,382            3.77%
                                                                                      -----------     -----------
         Net interest income and spread                                              $    853,971            2.68%
                                                                                      ===========     ===========
Non-interest-bearing demand deposits                                    2,359,090
Accrued expenses and other liabilities                                    138,681
Stockholders' equity                                                    9,466,404
                                                                     ------------
         Total Liabilities and Stockholders' Equity                 $  29,343,002
                                                                     ============

Interest and fee income/earning assets                                       6.45 %
Interest expense/earning assets                                              2.36
                                                                     ------------
Net interest margin                                                          4.09 %
                                                                     ============
</TABLE>


                                       10
<PAGE>


                       Six Months Ended September 30, 2000

<TABLE>
<CAPTION>
                                                                       Average                          Yield/
                                                                       Balance          Interest         Rate
                                                                       -------          --------         ----
<S>                                                                 <C>               <C>              <C>
ASSETS
Loans:
    Real Estate - Home Equity Line of Credit                        $      17,196     $     1,299           10.07%
    Real Estate - Construction                                            -                -               -
    Commercial                                                             75,462           5,741           10.14
    Consumer                                                               49,682           3,573            9.59
    Loans held for sale                                                   -                -               -
                                                                     ------------      ----------
         Total Loans                                                      142,340          10,613            9.94
Investment Securities                                                   1,306,174          49,351            5.04
Federal funds sold and other overnight investments                      8,537,181         405,958            6.34
                                                                     ------------      ----------
         Total Earning Assets                                           9,985,695         465,922            6.22%
                                                                                       ----------
Less: Allowance for credit losses                                             (84)
Cash and due from banks                                                   240,902
Premises and equipment, net                                               413,673
Accrued interest receivable and other assets                               22,573
                                                                     ------------
         Total Assets                                               $  10,662,759
                                                                     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $   1,482,199          52,925            4.76%
Regular savings deposits                                                   15,613             282            2.41
Time deposits                                                             303,229          13,730            6.04
                                                                     ------------      ----------
         Total interest-bearing liabilities                             1,801,041          66,937            4.96%
                                                                                       ----------     -----------
         Net interest income and spread                                               $   398,985            1.26%
                                                                                       ==========     ===========
Non-interest-bearing demand deposits                                      314,841
Accrued expenses and other liabilities                                    127,542
Stockholders' equity                                                    8,419,335
                                                                     ------------
         Total Liabilities and Stockholders' Equity                 $  10,662,759
                                                                     ============

Interest and fee income/earning assets                                       6.22 %
Interest expense/earning assets                                               .89
                                                                     ------------
Net interest margin                                                          5.33 %
                                                                     ============
</TABLE>


Allowance and Provision for Credit Losses

         The  provision  for  credit  losses  represents  an expense to fund the
allowance for credit  losses.  This  allowance is  established  to absorb credit
losses in the current loan  portfolio.  The amount of the  allowance is based on
many  factors,  which are  considered  in  management's  assessment  of the loan
portfolio.  These factors include economic  conditions and trends, the value and
adequacy  of  collateral,  the  volume  and  mix  of  the  loan  portfolio,  the
performance of the portfolio, and internal loan processes.

         Based upon management's  analysis of the loan portfolio as of September
30, 2001, management allocated an amount of $303,000 to the allowance for credit
losses. This allocation is an estimate based on current information,  and may be
revised  over time for  changes  in  economic  conditions,  experience  with the
portfolio, and other factors, which may arise.

         As of September 30, 2001, the Company does not have any  non-performing
loans, and has not charged off any loans since the Bank opened.

                                       11
<PAGE>


Non-Interest Income

         Non-interest income consists primarily of gains on the sale of mortgage
loans,  mortgage  origination  fees,  deposit account service charges,  and cash
management fees. For the three-month and nine-month  periods ended September 30,
2001,  the  Company  realized  non-interest  income in the amount of $79,635 and
$184,659,  respectively.  Gain  on the  sale  of  mortgage  loans  is  the  most
significant  element of non-interest  income,  comprising 77.7% and 75.6% of the
total for the  three-month  and nine month  periods  ended  September  30, 2001,
respectively. Mortgage origination fees totaled $5,000 for the nine-month period
ended September 30, 2001. There were no mortgage  origination fees earned during
the  three-month  period ended  September 30, 2001.  The Bank began  originating
mortgages for sale to investors in February  2001.  The declining  interest rate
environment  of  2001,   combined  with  a  strong  housing  market  created  an
exceptional  market for mortgage  products.  An increase in interest  rates or a
slow down in the housing  market could  negatively  impact the Bank's ability to
maintain the same level of income associated with mortgage production.

Non-Interest Expense

         Non-interest  expense for the three-month and nine-month  periods ended
September 30, 2001, totaled $699,287 and $2,004,699, respectively. This compares
to  non-interest  expense  for the  three-month  and  nine-month  periods  ended
September 30, 2000, totaling $637,459 and $1,462,480, respectively. The increase
of $542,219 for the nine-month  period resulted from an increase in salaries and
benefits of $269,938  related to increasing  staff levels upon opening the Bank,
increased occupancy, furniture and equipment costs of $64,933 resulting from the
opening  and  operation  of  two  branch  offices,  increased  outside  services
(primarily  loan  underwriting,  and  data  and  item  processing)  of  $130,522
primarily  related to the development and servicing of the Bank's customer base,
and increases in other  expenses of $76,826  related to the  increased  size and
complexity of the Bank's operations.

         Non-interest  expense for the  three-month  period ended  September 30,
2001 increased by $61,828 as compared to the same period for the prior year. The
increase of 9.7% is  significantly  less than the 87.1% increase in net interest
income for the comparable  periods,  and the 90.6% increase in total assets from
September  30, 2000 to September  30,  2001.  Management  believes  that further
growth in the Company's  customer base can be accommodated  without  significant
increases in these costs.

Liquidity And Interest Rate Sensitivity

         The Company's  principal  sources of liquidity are cash and assets that
can be readily converted into cash,  including  investment  securities  maturing
within one year. As of September 30, 2001,  the Company had $272,638 in cash and
due from  banks,  and  $11,472,909  in federal  funds  sold and other  overnight
investments.  Growth in the  Company's  loan  portfolio,  without  corresponding
growth in deposits would reduce  liquidity,  as would reductions in the level of
customer deposits.

         The primary  objective of  asset/liability  management is to ensure the
steady growth of the Company's primary earnings component,  net interest income.
Net interest income can fluctuate with significant  interest rate movements.  To
minimize  the risk  associated  with  these  rate  swings,  management  works to
structure  the  Company's  balance  sheet so that the  ability  exists to adjust
pricing on interest-earning  assets and interest-bearing  liabilities in roughly
equivalent amounts at approximately the same time intervals. Imbalances in these
repricing   opportunities  at  any  point  in  time  constitute   interest  rate
sensitivity.

         The measurement of the Company's  interest rate sensitivity,  or "gap,"
is one of the  principal  techniques  used in  asset/liability  management.  The
interest  sensitive gap is the dollar difference  between assets and liabilities

                                       12

<PAGE>

which are subject to interest rate pricing within a given time period, including
both floating rate or adjustable  rate  instruments  and  instruments  which are
approaching maturity.

 The  following  table sets forth the amount of the  Company's  interest-earning
assets and  interest-bearing  liabilities  as of September  30, 2001,  which are
expected to mature or reprice in each of the time periods shown:

<TABLE>
<CAPTION>
                                                                            Maturity or repricing within
                                                    Percent
                                                      of          0 to 3         4 to 12         1 to 5      Over 5
                                        Amount       Total         Months         Months          Years       Years
                                        ------       -----         ------         ------          -----       -----
<S>                                 <C>               <C>      <C>             <C>           <C>          <C>
  Interest-earning assets
        Federal funds sold and
           other overnight
           investments              $  11,472,909     31.88%   $  11,472,909   $    -        $      -     $     -
        Loans - Variable rate          13,211,397     36.71       13,211,397        -               -           -
        Loans - Fixed rate             11,030,499     30.65          352,424     1,558,161     8,378,675       741,239
        Other earning assets              275,940       .76           -             -               -          275,940
                                       ----------   -------       ----------    -----------    ---------    ----------
         Total interest-earning
            assets                  $  35,990,745    100.00%   $  25,036,730   $  1,558,161  $ 8,378,675  $  1,017,179
                                       ==========   =======       ==========    ===========    =========    ==========

  Interest-bearing liabilities
     Deposits - Variable rate       $  19,115,362     75.20%   $   3,317,050   $ 15,798,312  $      -     $     -
     Deposits - Fixed rate              6,304,511     24.80          353,032      5,112,419      839,060        -
                                       ----------   -------       ----------    -----------    ---------    ----------
        Total interest-bearing
           liabilities              $  25,419,873    100.00%   $   3,670,082   $ 20,910,731  $   839,060  $     -
                                       ==========   =======       ==========    ===========    =========    ==========

  Periodic repricing differences
     Periodic gap                                              $  21,366,648   $(19,352,570) $ 7,539,615  $  1,017,179
                                                                  ==========   ============   ==========   ===========
     Cumulative gap                                            $  21,366,648   $  2,014,078  $ 9,553,693  $ 10,570,872
                                                                  ==========   ============   ==========   ===========

  Ratio of rate sensitive assets
      to rate sensitive
      liabilities                                                     682.18%          7.42%      998.58%          N/A
</TABLE>

         As indicated by the table, the Company has a high  concentration of its
interest-earning  assets,  and  interest-bearing  liabilities  in variable  rate
balances.   The  excess  of   interest-earning   assets  over   interest-bearing
liabilities of $10,570,872 is  concentrated  in the categories of items maturing
or repricing  within  three  months,  and items  maturing or repricing in 1 to 5
years, this is offset by a large concentration of  interest-bearing  liabilities
items maturing or repricing in 4 to 12 months. However, since all interest rates
and yields do not adjust at the same pace,  the gap is only a general  indicator
of interest rate  sensitivity.  The analysis of the  Company's  interest-earning
assets  and  interest-bearing  liabilities  presents  only a static  view of the
timing  of  maturities   and  repricing   opportunities,   without  taking  into
consideration  the fact that changes in interest  rates do not affect all assets
and  liabilities   equally.  Net  interest  income  may  be  affected  by  other
significant  factors in a given interest rate environment,  including changes in
the volume and mix of interest-earning assets and interest-bearing liabilities.

         Management  will  constantly  monitor and manage the  structure  of the
Company's  balance sheet,  control interest rate exposure,  and evaluate pricing
strategies. Strategies to better match maturities of interest-earning assets and
interest-bearing  liabilities  could include  structuring loans with rate floors
and ceilings on variable rate notes and by providing for repricing opportunities
on fixed rate notes.  Management  believes that a lending  strategy  focusing on
variable rate loans will best  facilitate  the goal of minimizing  interest rate
risk  through  the  origination  of  variable  rate and short  term  fixed  rate
products. However, management will opportunistically enter into fixed rate loans
and/or investments when, in management's  judgment,  rates adequately compensate
the  Company  for the  interest  rate risk.  The  Company's  current  investment
concentration in federal funds sold and other overnight investments provides the
most  flexibility  and control over rate  sensitivity  since it generally can be
restructured  more  quickly  than the loan  portfolio.  On the  liability  side,
deposit  products can be  restructured  so as to offer  incentives to attain the

                                       13

<PAGE>

maturity  distribution  desired  although  competitive  factors  sometimes  make
control over deposits difficult.

         In theory, maintaining a nominal level of interest rate sensitivity can
diminish interest rate risk. In practice,  this is made difficult by a number of
factors,  including  cyclical  variation  in loan demand,  different  impacts on
interest  sensitive assets and liabilities  when interest rates change,  and the
availability of funding sources. Management generally will attempt to maintain a
balance between  rate-sensitive assets and liabilities as the exposure period is
lengthened to minimize the overall interest rate risk to the Company.

Capital Resources

         Stockholders' equity at September 30, 2001 was $9,018,962.  The Company
has declared no cash dividends since its inception.

         Banking   regulatory   authorities  have  implemented   strict  capital
guidelines  directly related to the credit risk associated with an institution's
assets. Banks and bank holding companies are required to maintain capital levels
based on their "risk  adjusted"  assets so that categories of assets with higher
"defined"  credit risks will require more capital support than assets with lower
risks. The Bank has exceeded its capital adequacy requirements to date.

         IN ADDITION TO THE HISTORICAL  INFORMATION  CONTAINED IN PART I OF THIS
QUARTERLY  REPORT ON FORM 10-QSB,  THE  DISCUSSION  IN PART I OF THIS  QUARTERLY
REPORT  ON FORM  10-QSB  CONTAINS  CERTAIN  FORWARD-LOOKING  STATEMENTS  SUCH AS
STATEMENTS OF BAY NATIONAL  CORPORATION'S  PLANS,  OBJECTIVES,  EXPECTATIONS AND
INTENTIONS THAT INVOLVE RISKS AND  UNCERTAINTIES.  THESE RISKS AND UNCERTAINTIES
INCLUDE, AMONG OTHERS, THOSE DISCUSSED IN BAY NATIONAL CORPORATION'S FORM 10-KSB
UNDER THE CAPTION  "FACTORS  AFFECTING  FUTURE  RESULTS"  SUCH AS THE  COMPANY'S
LIMITED  OPERATING  HISTORY  AND  EXPECTATION  OF  LOSSES;   DEPENDENCE  ON  KEY
PERSONNEL;  RISKS RELATED TO BAY NATIONAL BANK'S CHOICE OF LOAN PORTFOLIO; RISKS
RELATED TO BAY NATIONAL  BANK'S  LENDING LIMIT;  RISKS OF A COMPETITIVE  MARKET;
IMPACT OF GOVERNMENT REGULATION ON OPERATING RESULTS; AND EFFECT OF DEVELOPMENTS
IN TECHNOLOGY. BAY NATIONAL CORPORATION'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE DISCUSSED HEREIN.

                                       14
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

           None.

Item 2.    Changes in Securities.

           None.

Item 3.    Defaults Upon Senior Securities.

           Not applicable.

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

           None.

Item 5.    Other Information.

           Not applicable.

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

           (a)        Exhibits.

           None.

           (b)        Reports on Form 8-K.

           None.


                                       15

<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                Bay National Corporation


Date: November 9, 2001          By: /s/ Hugh W. Mohler
                                    --------------------------------------------
                                    Hugh W. Mohler, President
                                    (Principal Executive Officer)


Date: November 9, 2001          By: /s/ Mark A. Semanie
                                    --------------------------------------------
                                    Mark A. Semanie, Treasurer
                                    (Principal Accounting and Financial Officer)






                                       16