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 June 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 August 10,
2001:

         $.01 Par Value - 1,242,020

<PAGE>

PART I  -     FINANCIAL INFORMATION

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

                            BAY NATIONAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                    As of June 30, 2001 and December 31, 2000

<TABLE>
<CAPTION>
                                                                                   June 30,           December 31,
                                                                                     2001                 2000
                                                                                 ------------         ------------
ASSETS                                                                            (Unaudited)
<S>                                                                              <C>                  <C>
     Cash and due from banks                                                     $    791,682         $    561,237
     Federal funds sold and other overnight investments                             7,502,542           16,587,278
     Federal Reserve Bank stock                                                       275,940              275,940
     Loans held for sale                                                              620,800                   --
     Loans, net of unearned fees                                                   19,513,326            5,648,321
                                                                                 ------------         ------------
         Total loans                                                               20,134,126            5,648,321
         Less: Allowance for credit losses                                           (244,000)             (70,000)
                                                                                 ------------         ------------
              Loans, net                                                           19,890,126            5,578,321
     Premises and equipment, net                                                      883,727              939,504
     Accrued interest receivable and other assets                                     163,439               83,545
                                                                                 ------------         ------------

              Total Assets                                                       $ 29,507,456         $ 24,025,825
                                                                                 ============         ============

LIABILITIES

     Non-interest-bearing deposits                                               $  2,305,860         $  2,515,089
     Interest-bearing deposits                                                     17,645,281           11,141,551
                                                                                 ------------         ------------
         Total deposits                                                            19,951,141           13,656,640

     Accrued expenses and other liabilities                                           184,337              151,154
                                                                                 ------------         ------------

              Total Liabilities                                                    20,135,478           13,807,794
                                                                                 ------------         ------------


STOCKHOLDERS' EQUITY

     Common stock - $.01 par value, authorized:
         9,000,000 shares authorized, 1,242,020 issued and outstanding as
         of June 30, 2001 and December 31, 2000, respectively:                         12,420               12,420
     Surplus                                                                       12,407,780           12,407,780
     Accumulated Deficit                                                           (3,048,222)          (2,202,169)
                                                                                 ------------         ------------

              Total Stockholders' Equity                                            9,371,978           10,218,031
                                                                                 ------------         ------------

              Total Liabilities and Stockholders' Equity                         $ 29,507,456         $ 24,025,825
                                                                                 ============         ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

                            BAY NATIONAL CORPORATION

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

<TABLE>
<CAPTION>
                                                               Three Months Ending                         Six Months
                                                                     June 30,                            Ending June 30,
                                                             2001               2000                 2001               2000
                                                         -----------         -----------         -----------         -----------
<S>                                                      <C>                 <C>                 <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                            $   327,240         $       470         $   496,644         $       470
   Interest on federal funds sold and other
   overnight investments                                     115,853             203,376             320,098             211,956
   Taxable interest and dividends on investment
     securities                                                8,100              16,350               8,100              16,350
                                                         -----------         -----------         -----------         -----------
   Total interest income                                     451,193             220,196             824,842             228,776
                                                         -----------         -----------         -----------         -----------

INTEREST EXPENSE ON DEPOSITS:                                147,207               3,817             296,507               3,817
                                                         -----------         -----------         -----------         -----------

Net interest income                                          303,986             216,379             528,335             224,959

Provision for credit losses                                  126,500                  --             174,000                  --
                                                         -----------         -----------         -----------         -----------

Net interest income after provision for
   credit losses                                             177,486             216,379             354,335             224,959
                                                         -----------         -----------         -----------         -----------

OTHER OPERATING INCOME:
   Service charges on deposit accounts                         6,585                  20               9,675                  20
   Other income                                               81,643                 304              95,349                 304
                                                         -----------         -----------         -----------         -----------
     Total other operating income                             88,228                 324             105,024                 324
                                                         -----------         -----------         -----------         -----------

OTHER OPERATING EXPENSES:
   Salaries and employee benefits                            386,958             308,752             727,562             440,848
   Occupancy expenses                                         75,187              57,437             134,425              92,570
   Furniture and equipment expenses                           42,093              32,083              89,059              32,083
   Legal and professional fees                                32,216              36,967              67,690              46,967
   Outside services                                           53,670              66,238             106,803              66,238
   Other expenses                                             98,986              88,040             179,873             146,316
                                                         -----------         -----------         -----------         -----------
     Total other operating expenses                          689,110             589,517           1,305,412             825,022
                                                         -----------         -----------         -----------         -----------

Loss before income taxes                                    (423,396)           (372,814)           (846,053)           (599,739)
Income tax benefit                                                --                  --                  --                  --
                                                         -----------         -----------         -----------         -----------
NET LOSS                                                 $  (423,396)        $  (372,814)        $  (846,053)        $  (599,739)
                                                         ===========         ===========         ===========         ===========

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

   Net Loss (Basic and diluted)                          $     (0.34)        $     (0.51)        $     (0.68)        $     (1.42)
   Average Shares Outstanding (Basic and diluted)          1,242,020             733,165           1,242,020             422,833
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            BAY NATIONAL CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      ------------------------------------
             For the six-month periods ended June 30, 2001 and 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     2001                 2000
                                                                                ------------         ------------

<S>                                                                             <C>                  <C>
Cash Flows From Operating Activities
   Net loss                                                                     $   (846,053)        $   (599,739)
   Adjustments to reconcile net loss to net cash used by
     operating activities:
       Depreciation                                                                   90,991               21,200
       Provision for credit losses                                                   174,000                 --
       Gain on sale of loans                                                         (77,636)                --
       Origination of loans held for sale                                         (5,847,450)                --
       Proceeds from sale of loans                                                 5,304,286                 --
       Net (increase) decrease in accrued interest receivable and
          other assets                                                               (79,894)              17,602
       Net increase (decrease) in accrued expenses and other liabilities              33,183              (34,364)
                                                                                ------------         ------------

            Net cash used by operating activities                                 (1,248,573)            (595,301)
                                                                                ------------         ------------

Cash Flows From Investing Activities
    Purchases of investment securities - AFS                                            --             (3,220,790)
   Net increase in loans                                                         (13,865,005)            (117,423)
   Capital expenditures                                                              (35,214)            (805,238)
                                                                                ------------         ------------
            Net cash used by investing activities                                (13,900,219)          (4,143,451)
                                                                                ------------         ------------

Cash Flows From Financing Activities
   Net increase in deposits                                                        6,294,501            1,276,676
    Issuance of common stock                                                            --             11,295,200
                                                                                ------------         ------------
            Net cash provided by financing activities                              6,294,501           12,571,876
                                                                                ------------         ------------

Net (decrease) increase in cash and cash equivalents                              (8,854,291)           7,833,124
Cash and cash equivalents at beginning of period                                  17,148,515              763,957
                                                                                ------------         ------------

Cash and cash equivalents at end of period                                      $  8,294,224         $  8,597,081
                                                                                ============         ============
</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  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 Bay National  Corporation (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 June 30,  2001,  that  the  Bank  meets  all  capital  adequacy
requirements to which it is subject.

         As  of  June  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 June 30,  2001 and for the three  and six month  periods
ended June 30, 2001. Comparative discussion of the results of operations for the
three and six month periods ended June 30, 2001 and June 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 June 30, 2001, assets were $29,507,456. This represents growth of
$5,481,631 or 22.8% since  December 31, 2000. The growth in assets was funded by
deposit growth of $6,294,501 or 46.1% during the six months ended June 30, 2001.
Deposits at June 30, 2001 were  $19,951,141.  Deposit  growth  resulted from the
marketing  efforts of officers and  directors.  Management  has set the interest
rates paid on deposits to be  competitive  in the market and intends to increase
its marketing activities to generate additional growth in deposits.  The Company
has no brokered funds as of June 30, 2001.

         As of June 30,  2001,  loans  (net of a $244,000  allowance  for credit
losses) totaled  $19,890,126.  This  represents  growth of $14,311,805 or 256.6%
since December 31, 2000.  Loans  comprised  68.2% of total assets as of June 30,
2001,  compared  to 23.5% of total  assets  as of  December  31,  2000.  As with
deposits,  loan growth  resulted  from the  marketing  efforts of  officers  and
directors.  The  loan  portfolio  includes  mortgage  loans  held  for  sale  of
approximately $621,000, commercial loans of approximately $13,423,000,  consumer
loans of  approximately  $5,226,000,  and  construction  loans of  approximately
$864,000. 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 a premium over the original loan amount.

          At June 30,  2001,  the  Company  had  federal  funds  sold and  other
overnight  investments  totaling  $7,502,542.  This  represents  a  decrease  of
$9,084,736  or 54.8%  since  December  31,  2000.  Federal  funds sold and other
overnight  investments  comprised  25.4% of total  assets  as of June 30,  2001,
compared to 69.0% of total  assets as of December  31,  2000.  This  decrease is
primarily a result of the use of these liquid  investments to fund growth of the
loan portfolio.  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
allow initial growth in the loan  portfolio with limited use of borrowed  funds,
or more aggressive pricing of deposit products.

                                       7
<PAGE>

         Total  capital at June 30, 2001 was  $9,371,978  representing  31.8% of
total  assets.  Management  believes  this  capital will be adequate to fund the
Company's 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 $423,396
and $846,053 for the  three-month  and  six-month  periods  ended June 30, 2001.
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
growth  initially  will not  produce net  interest  income  sufficient  to cover
operating 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 June 30, 2001 was  $451,193,  compared to $220,196  for the same period in
2000. Interest income for the six-month period ended June 30, 2001 was $824,842,
compared  to  $228,776  for the same  period  in 2000.  The  104.9%  and  260.5%
increases  for the  three and  six-month  periods  is  directly  related  to the
increase in average  interest  earning assets from $7,021,811 for the six-months
ended June 30, 2000 to $25,238,552  for the six-months  ended June 30, 2001. The
yields on these  assets  were 6.52% for the  six-months  ended June 30, 2000 and
6.54% for the six-months ended June 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
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 3.75%
at June 30, 2001.  At June 30,  2001,  the  weighted  average  yield on the loan
portfolio,  excluding loans held for sale, was 7.82%; the weighted average yield
on federal funds sold and other overnight investments was 3.75%. 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 not to aggressively compete for jumbo certificates of deposits, which are
highly rate sensitive,  and are not normally perceived to be as stable as demand
deposits or money market  accounts.  At June 30, 2001,  the  Company's  weighted
average cost of interest-bearing deposits was 3.39% and weighted average cost of
total   deposits  was  2.94%.   This  compares  to  weighted   average  cost  of
interest-bearing  deposits of 5.62% and weighted  average cost of total deposits
of 4.68% at  December  31,  2000.  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.

                                       8
<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.


<TABLE>
<CAPTION>
                         Six Months Ended June 30, 2001

                                                                       Average         Interest         Yield/
                                                                       Balance          and fees         Rate
                                                                       -------          --------         ----
<S>                                                                 <C>               <C>             <C>
ASSETS
Loans:
    Real Estate - Home Equity Line of Credit                        $   2,635,672     $   105,779            8.03%
    Real Estate - Construction                                            264,748          10,130            7.65
    Commercial                                                          7,122,970         324,765            9.12
    Consumer                                                            1,138,731          45,621            8.01
    Loans held for sale                                                   273,170          10,349            7.58
                                                                     ------------      ----------
         Total Loans                                                   11,435,291         496,644            8.69
Investment Securities                                                     275,940           8,100            5.87
Federal funds sold and other overnight investments                     13,527,321         320,098            4.73
                                                                     ------------      ----------
         Total Earning Assets                                          25,238,552         824,842            6.54%
                                                                                       ----------
Less: Allowance for credit losses                                        (126,022)
Cash and due from banks                                                   880,757
Premises and equipment, net                                               956,277
Accrued interest receivable and other assets                               71,104
                                                                     ------------
         Total Assets                                               $  27,020,668
                                                                     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $  11,550,005         227,083            3.93%
Regular savings deposits                                                1,929,353          22,805            2.36
Time deposits                                                           1,596,978          46,619            5.84
                                                                     ------------      ----------
         Total interest-bearing liabilities                            15,076,336         296,507            3.93%
                                                                                       ----------     -----------
         Net interest income and spread                                               $   528,335            2.61%
                                                                                       ==========     ===========
Non-interest-bearing demand deposits                                    2,029,059
Accrued expenses and other liabilities                                    142,819
Stockholders' equity                                                    9,772,454
                                                                     ------------
         Total Liabilities and Stockholders' Equity                 $  27,020,668
                                                                     ============

Interest and fee income/earning assets                                       6.54 %
Interest expense/earning assets                                              2.35
                                                                     ------------
Net interest margin                                                          4.19 %
                                                                     ============
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>
                         Six Months Ended June 30, 2000

                                                                       Average                          Yield/
                                                                       Balance          Interest         Rate
                                                                       -------          --------         ----
<S>                                                                 <C>               <C>            <C>
ASSETS
Loans:
    Real Estate - Home Equity Line of Credit                        $                 $                    -     %
    Real Estate - Construction                                                                             -
    Commercial                                                              5,663             269            9.50
    Consumer                                                                4,729             201            8.50
    Loans held for sale                                                   -                -                -
                                                                     ------------      ----------
         Total Loans                                                       10,392             470            9.05
Investment Securities                                                     334,021          16,350            9.79
Federal funds sold and other overnight investments                      6,677,398         211,956            6.35
                                                                     ------------      ----------
         Total Earning Assets                                           7,021,811         228,776            6.52%
                                                                                       ----------
Less: Allowance for credit losses                                         -
Cash and due from banks                                                    96,620
Premises and equipment, net                                               177,680
Accrued interest receivable and other assets                               10,609
                                                                     ------------
         Total Assets                                               $   7,306,720
                                                                     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $      92,142           2,602            5.65%
Regular savings deposits                                                    4,693              57            2.43
Time deposits                                                              40,015           1,158            5.79
                                                                     ------------      ----------
         Total interest-bearing liabilities                               136,850           3,817            5.58%
                                                                                       ----------     -----------
         Net interest income and spread                                               $   224,959             .94%
                                                                                       ==========     ===========
Non-interest-bearing demand deposits                                       30,689
Accrued expenses and other liabilities                                     63,202
Stockholders' equity                                                    7,075,979
                                                                     ------------
         Total Liabilities and Stockholders' Equity                 $   7,306,720
                                                                     ============

Interest and fee income/earning assets                                       6.52 %
Interest expense/earning assets                                               .11
                                                                     ------------
Net interest margin                                                          6.41 %
                                                                     ============
</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 June 30,
2001,  management  allocated an amount of $244,000 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 June 30,  2001,  the  Company  does  not have any  non-performing
loans, and has not charged off any loans since the Bank opened.

                                       10
<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 six-month  periods ended June 30, 2001,
the Company realized  non-interest income in the amount of $88,228 and $105,024,
respectively.  These  amounts  compare  to $324  for both  the  three-month  and
six-month periods ended June 30, 2000. For the three-month and six-month periods
ended June 30, 2001,  gains on the sale of mortgage  loans  totaled  $66,944 and
$77,636,  deposit  related fees totaled $6,585 and $9,675,  cash management fees
totaled  $6,303 and $10,084,  and mortgage  origination  fees totaled $5,000 for
both periods, respectively.

         The Company is working to expand its sources of non-interest  income by
entering into fee  arrangements  with strategic  partners that offer mutual fund
investment products, investment advisory services, and insurance products. As of
June 30, 2001, the Company has  identified  prospective  partners,  entered into
negotiations  for  fee  arrangements,  and  commenced  the  process  of  seeking
regulatory approval, when necessary, for contemplated  activities.  No assurance
can be given that such fee arrangements will be obtained or maintained.

Non-Interest Expense

         Non-interest  expense for the three-month  and six-month  periods ended
June 30, 2001, totaled $689,110 and $1,305,412,  respectively.  This compares to
non-interest  expense for the three-month  and six-month  periods ended June 30,
2000, totaling $589,517 and $825,022, respectively. The increase of $480,390 for
the  six-month  period  resulted  from an increase in salaries  and  benefits of
$286,714  related to  increasing  staff levels upon opening the Bank,  increased
occupancy,  furniture and equipment costs of $98,831  resulting from opening and
operation  of  branch  offices,  and  increases  in other  expenses  of  $94,845
primarily  related to the development and servicing of the Bank's customer base.
Management  expects that these items will  continue to  represent a  significant
portion of  non-interest  expense,  however,  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 June 30, 2001,  the Company had $791,682 in cash and due
from  banks,   and  $7,502,542  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
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.

                                       11
<PAGE>

 The  following  table sets forth the amount of the Company 's  interest-earning
assets and interest-bearing  liabilities as of June 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               $ 7,502,542         27.48%  $ 7,502,542      $      --         $      --         $      --
      Loans - Variable rate         12,498,178         45.78    12,498,178             --                --                --
      Loans - Fixed rate             7,025,096         25.73       187,963          726,587         5,616,345           494,201
      Other earning assets             275,940          1.01          --               --                --             275,940
                                   -----------       -------   -----------      -----------       -----------       -----------
       Total interest-earning
          assets                   $27,301,756        100.00%  $20,188,683      $   726,587       $ 5,616,345       $   770,141
                                   -----------       -------   -----------      -----------       -----------       -----------

Interest-bearing liabilities
   Deposits - Variable rate        $15,430,963         87.45%  $15,430,963      $      --         $      --         $      --
   Deposits - Fixed rate             2,214,318         12.55       736,000        1,253,441           224,877              --
                                   -----------       -------   -----------      -----------       -----------       -----------
      Total interest-bearing
         liabilities               $17,645,281        100.00%  $16,166,963      $ 1,253,441       $   224,877       $      --
                                   -----------       -------   -----------      -----------       -----------       -----------

Periodic repricing differences
   Periodic gap                                                $ 4,021,720      $   (526,854)     $  5,391,468      $   770,141
                                                               ===========       ===========      ============      ===========
   Cumulative gap                                              $ 4,021,720      $  3,464,866      $  8,856,334      $ 9,656,475
                                                               ===========      ============      ============      ===========

Ratio of rate sensitive assets
    to rate sensitive
    liabilities                                                     124.88%            57.97%         2,497.52%            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 $9,656,475 is concentrated in the categories of items maturing or
repricing  within three months and items  maturing or repricing in 1 to 5 years.
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
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,

                                       12

<PAGE>

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 June 30, 2001 was $9,371,978.  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.

                                       13
<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.

         At the Company's Annual Meeting of Stockholders  held May 21, 2001, the
following directors were elected to serve a one-year term expiring upon the date
of the Company's  2002 Annual Meeting or until their  respective  successors are
duly elected and qualified.

                                                   Votes Cast
                                  For               Withheld              Total
                                  ---               --------              -----
James C. Alban, Jr.             774,070               3,000              777,070
Carroll A. Bodie                774,070               3,000              777,070
Charles E. Bounds               774,070               3,000              777,070
John R. Lerch                   774,070               3,000              777,070


         At the Company's Annual Meeting of Stockholders  held May 21, 2001, the
following directors were elected to serve a two-year term expiring upon the date
of the Company's  2003 Annual Meeting or until their  respective  successors are
duly elected and qualified.

                                                     Votes Cast
                                      For             Withheld            Total
                                      ---             --------            -----
Donald G. McClure, Jr.              774,070             3,000            777,070
Hugh W. Mohler                      769,070             8,000            777,070
Robert L. Moore                     774,070             3,000            777,070
H. Victor Rieger, Jr.               774,070             3,000            777,070
Margaret K. Riehl                   774,070             3,000            777,070

         At the Company's Annual Meeting of Stockholders  held May 21, 2001, the
following  directors  were elected to serve a three-year  term expiring upon the
date of the Company's 2004 Annual Meeting or until their  respective  successors
are duly elected and qualified.

                                                      Votes Cast
                                       For             Withheld           Total
                                       ---             --------           -----
William B. Rinnier                   774,070             3,000           777,070
Edwin A. Rommel III                  774,070             3,000           777,070
Henry H. Stansbury                   774,070             3,000           777,070
Kenneth H. Trout                     774,070             3,000           777,070
Eugene M. Waldron, Jr.               774,070             3,000           777,070


                                       14
<PAGE>

           At the Company's  Annual Meeting of  Stockholders  held May 21, 2001,
the selection of Stegman & Company to serve as independent auditors for the 2001
fiscal year was ratified by a unanimous vote of 777,070 votes.

           At the Company's  Annual Meeting of  Stockholders  held May 21, 2001,
the establishment of the Bay National Corporation Stock Option Plan was approved
by the following vote.


                                     Votes
                                     -----
For Approval                        740,570
Against Approval                     27,500
Abstained                             9,000
                                   --------
         Total                      777,070
                                   ========


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: August 10, 2001                     By: /s/ Hugh W. Mohler
                                              ----------------------------------
                                              Hugh W. Mohler, President
                                              (Principal Executive Officer)


Date: August 10, 2001                     By: /s/ Mark A. Semanie
                                              ----------------------------------
                                              Mark A. Semanie, Treasurer
                                              (Principal Accounting and
                                              Financial Officer)






                                       16