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 March 31, 2002.

                        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 May 13,
2002:

         $.01 Par Value - 1,242,020




<PAGE>

PART I  -     FINANCIAL INFORMATION

Item 1.       Financial Statements

                                               BAY NATIONAL CORPORATION

                                             CONSOLIDATED BALANCE SHEETS
                                      As of March 31, 2002 and December 31, 2001

<TABLE>
<CAPTION>
                                                                                    March 31,         December 31,
                                                                                      2002                2001
                                                                                 ---------------      ---------------
ASSETS                                                                            (Unaudited)

<S>                                                                             <C>                  <C>
     Cash and due from banks                                                    $       252,110      $     3,065,479
     Federal funds sold and other overnight investments                               8,535,081            6,488,461
       Loans held for sale                                                              725,175              682,000
     Federal Reserve Bank stock                                                         275,940              275,940
     Loans, net of unearned fees                                                     40,352,194           35,862,055
         Less: Allowance for credit losses                                             (505,000)            (447,000)
                                                                                 ---------------      ---------------
              Loans, net                                                             39,847,194           35,415,055
     Premises and equipment, net                                                        790,632              830,626
     Accrued interest receivable and other assets                                       305,280              268,265
                                                                                 ---------------      ---------------

              Total Assets                                                      $    50,731,412      $    47,025,826
                                                                                 ===============      ===============


LIABILITIES

     Non-interest-bearing deposits                                              $     5,101,992      $     6,025,624
     Interest-bearing deposits                                                       37,159,177           32,113,503
                                                                                 ---------------      ---------------
         Total deposits                                                              42,261,169           38,139,127

     Accrued expenses and other liabilities                                             159,174              284,547
                                                                                 ---------------      ---------------

              Total Liabilities                                                      42,420,343           38,423,674
                                                                                 ---------------      ---------------


STOCKHOLDERS' EQUITY

     Common stock - $.01 par value,  authorized:
         9,000,000 shares authorized, 1,242,020 issued and
         outstanding as of March 31, 2002 and December 31, 2001,
         respectively:                                                                   12,420               12,420
     Surplus                                                                         12,407,780           12,407,780
     Accumulated deficit                                                             (4,109,131)          (3,818,048)
                                                                                 ---------------      ---------------

              Total stockholders' equity                                              8,311,069            8,602,152
                                                                                 ---------------      ---------------

              Total Liabilities and Stockholders' Equity                        $    50,731,412      $    47,025,826
                                                                                 ===============      ===============




                             See accompanying notes to consolidated financial statements.

</TABLE>

                                                          2
<PAGE>

<TABLE>
<CAPTION>
                                                BAY NATIONAL CORPORATION

                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                   For the three months ended March 31, 2002 and 2001
                                                       (Unaudited)

                                                                                       2002                 2001
                                                                                  ---------------      ---------------

INTEREST INCOME:
<S>                                                                             <C>                   <C>
   Interest and fees on loans                                                   $        624,789      $       151,615
   Interest on federal funds sold and other overnight
        investments                                                                       31,190              204,245
                                                                                  ---------------      ---------------
   Total interest income                                                                 655,979              355,860

INTEREST EXPENSE ON DEPOSITS:                                                            288,616              149,300
                                                                                  ---------------      ---------------

Net interest income                                                                      367,363              206,560

Provision for credit losses                                                               58,000               47,500
                                                                                  ---------------      ---------------

Net interest income after provision for credit losses                                    309,363              159,060
                                                                                  ---------------      ---------------

NON-INTEREST INCOME:
   Service charges on deposit accounts                                                    18,398                3,090
   Gain on sale of mortgage loans                                                        117,693               10,692
   Other income                                                                            8,206                3,014
                                                                                  ---------------      ---------------
     Total non-interest income                                                           144,297               16,796
                                                                                  ---------------      ---------------

NON-INTEREST EXPENSE:
   Salaries and employee benefits                                                        447,981              340,604
   Occupancy expenses                                                                     52,955               44,135
   Furniture and equipment expenses                                                       49,075               46,966
   Legal and professional fees                                                            29,100               35,474
   Data processing and other outside services                                             66,044               67,592
   Other expenses                                                                         99,588               63,742
                                                                                  ---------------      ---------------
     Total non-interest expenses                                                         744,743              598,513
                                                                                  ---------------      ---------------

Loss before income taxes                                                                (291,083)            (422,657)
Income tax benefit                                                                             -                    -
                                                                                  ---------------      ---------------
Net Loss                                                                        $       (291,083)     $      (422,657)
                                                                                  ===============      ===============


Per Share Data:
   Net Loss (Basic and Diluted)                                                 $           (.23)     $          (.34)

   Average Shares Outstanding (Basic and Diluted)                                      1,242,020            1,242,020



                              See accompanying notes to consolidated financial statements.
</TABLE>

                                                           3
<PAGE>


<TABLE>
<CAPTION>
                                              BAY NATIONAL CORPORATION

                                        CONSOLIDATED STATEMENT OF CASH FLOWS
                                 For the three months ended March 31, 2002 and 2001
                                                    (Unaudited)

                                                                                  2002                  2001
                                                                             ----------------       --------------

Cash Flows From Operating Activities
<S>                                                                         <C>                    <C>
   Net loss                                                                 $       (291,083)      $     (422,657)
   Adjustments to reconcile net loss to net cash used by
     operating activities:
       Depreciation                                                                   46,344               45,217
       Provision for credit losses                                                    58,000               47,500
       Gain on sale of loans                                                        (117,693)             (10,692)
       Origination of loans held for sale                                         (6,202,016)          (1,867,550)
       Proceeds from sale of loans                                                 6,276,534              701,642
       Net increase in accrued interest receivable and other assets                  (37,015)             (39,789)
       Net decrease in accrued expenses and other liabilities                       (125,373)              (8,928)
                                                                             ----------------       --------------
            Net cash used by operating activities                                   (392,302)          (1,555,257)
                                                                             ----------------       --------------

Cash Flows From Investing Activities
   Net increase in loans                                                          (4,490,139)          (3,838,538)
   Capital expenditures                                                               (6,350)             (29,813)
                                                                             ----------------       --------------
            Net cash used by investing activities                                 (4,496,489)          (3,868,351)
                                                                             ----------------       --------------

Cash Flows From Financing Activities
   Net increase in deposits                                                        4,122,042            4,208,619
                                                                             ----------------       --------------
            Net cash provided by financing activities                              4,122,042            4,208,619
                                                                             ----------------       --------------

Net decrease in cash and cash equivalents                                           (766,749)          (1,214,989)
Cash and cash equivalents at beginning of year                                     9,553,940           17,148,515
                                                                             ----------------       --------------

Cash and cash equivalents at end of period                                  $      8,787,191       $   15,933,526
                                                                             ================       ==============



















                            See accompanying notes to consolidated financial statements.
</TABLE>



                                                         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  2001 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 2002.

         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 amounts previously reported
to conform to the current presentation. These reclassifications had no effect on
previously reported results of operations or retained earnings.

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
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.


                                       5
<PAGE>

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require the Bank to maintain  minimum  amounts and ratios.  Management
believes,  as of March  31,  2002,  that the Bank  meets  all  capital  adequacy
requirements to which it is subject.

         As  of  March  31,  2002,  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 March 31, 2002 and 2001 and for the three month periods
then ended.

General

         On May 12, 2000 the Parent became a bank holding  company by purchasing
all of the common stock of the 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 March 31, 2002,  total assets were  $50,731,412.  This represents
growth of $3,705,586 or 7.88% since  December 31, 2001. The growth in assets was
attributable  to deposit  growth of $4,122,042 or 10.81% during the three months
ended  March 31,  2002.  Deposits at March 31,  2002 were  $42,261,169.  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 will  continue  its  marketing  activities  to  generate  growth  in
deposits.

         While  the  Bank  does  not  rely  on  or  solicit  brokered  deposits,
regulatory  rules require that  approximately  $3.7 million of deposits at March
31,  2002,  and  $700,000  of deposits at  December  31, 2001 be  classified  as
brokered  deposits.   These  deposits  were  obtained  through  the  listing  of
certificate of deposit rates on Internet based listing services.  These deposits
were obtained at rates  competitive with 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 for deposits as of March 31, 2002.

         As of March 31,  2002,  loans  excluding  loans held for sale (net of a
$505,000  allowance for credit losses) totaled  $39,847,194.  This represents an
increase of $4,432,139 or 12.51% from December 31, 2001. The  composition of the
loan  portfolio  as of  March  31,  2002  was  approximately  $27.5  million  of
commercial  loans,  $1.5 million of consumer  loans,  and $11.4  million of real
estate loans.  The composition of the loan portfolio as of December 31, 2001 was
approximately $23.5 million of commercial loans, $2.1 million of consumer loans,
and $10.3  million of real estate  loans.  There were  $725,175  and $682,000 of
mortgage  loans  held for sale as of March  31,  2002  and  December  31,  2001,
respectively.  Funds not  extended in loans are held in cash and due from banks,
federal funds sold and other  overnight  investments,  and Federal  Reserve Bank
stock. At March 31, 2002, the Company had federal funds sold and other overnight
investments,  and investments in Federal Reserve Bank stock totaling  $8,811,021
as compared to $6,764,401 as of December 31, 2001.  Growth in the loan portfolio
is a direct result of the marketing efforts of bank employees as well as members
of the Board of Directors,  and the Baltimore and Salisbury Advisory Boards. The
mix of loans is consistent with the initial plans for the business.



                                       7
<PAGE>

         Total  capital  at  March  31,  2002  was  $8,311,069  as  compared  to
$8,602,152  at December  31,  2001.  The  decrease in capital is a result of the
losses  incurred  in 2002 and is  consistent  with the initial  expectations  of
management.  Management  believes that this capital is adequate to support asset
growth and losses in 2002 similar to those  achieved in the year ended  December
31, 2001. However, management expects that additional capital may be required in
the future to support  growth.  Management and the Board of Directors  regularly
monitor capital levels, and will proactively  evaluate various  alternatives for
raising  capital  in  advance  of the  actual  need.  Any such  capital  raising
alternatives, if available at all, may be on terms which are not as favorable to
the Company as desired by management and may result in dilution to the Company's
shareholders.  If adequate capital is not available, the Company may be required
to curtail significantly its expected growth strategy.

Results of Operations

         On a consolidated  basis,  the Company  recorded a net loss of $291,083
for the  three-month  period  ended  March  31,  2002 as  compared  to a loss of
$422,657 for the three-month period ended March 31, 2001.  Operating results for
subsequent  periods in 2002 and for the year ending  December  31, 2002 are also
projected to reflect losses. The losses for the periods ended March 31, 2002 and
2001 were expected since loan and deposit growth  initially were not expected to
produce net interest income sufficient to cover operating expenses.  On average,
community  banks do not achieve  profitability  for the first 24 to 36 months of
operation.

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.

         Net interest income for the three-month period ended March 31, 2002 was
$367,363,  compared to $206,560 for the same period in 2001. The 77.85% increase
from the prior year is  directly  related  to the  100.62%  increase  in average
earning assets from  $24,036,671  for the  three-months  ended March 31, 2001 to
$48,221,773 for the  three-months  ended March 31, 2002. The increase in average
earning  assets was  somewhat  offset by a decline  in  average  yields due to a
declining interest rate environment. The average yields on these assets declined
from  5.92%  for  the  three-months  ended  March  31,  2001  to  5.44%  for the
three-months ended March 31, 2002.

         The percentage of average earning assets represented by loans increased
from 31.12% for the  three-month  period ended March 31, 2001, to 79.32% for the
three-month   period  ended  March  31,  2002.   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 earning  assets.  This
would  occur  because  the yields on loans are  normally  higher  than yields on
investment securities. However, the Bank's significant loan growth was partially
offset by a reduction in  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 5.00% at March 31, 2001 to 1.75% at March 31, 2002.

         For the  three-month  period ended March 31, 2002, the average yield on
the loan  portfolio  decreased  to 6.53% from 8.11% for the same period in 2001.
The decrease in average yield was the result of the declining  rate  environment
discussed  above.  The  decline  of 1.58% is  significantly  less than the 3.25%
reduction  in the  target for the  federal  funds  rate  since  March 31,  2001.
Management  was able to manage this decline by  maintaining  pricing  discipline
throughout 2001, as well as increasing the percentage of fixed rate loans in the
loan portfolio.  The average yield on the investment portfolio was 1.29% for the



                                       8
<PAGE>

three-months ended March 31, 2002 as compared to 5.02% for the comparable period
in 2001. The reduction in investment yields is entirely related to the declining
rate environment.

         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.  The 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-month
period ended March 31, 2002, the Company obtained  approximately $3.7 million in
new funds from the listing of  certificate  of deposit  rates on Internet  based
listing  services.  These  certificates  of deposit  were issued with an average
interest rate of 3.06% and an average term of 13.22 months.

         The  average  rate on  interest  bearing  deposits  was  3.19%  for the
three-month  period  ended  March 31,  2002,  as  compared to 4.50% for the same
period in 2001.  The decrease in average  yield was the result of the  declining
rate  environment  discussed  above.  It is anticipated  that both the volume of
deposits and the interest expense will continue to increase during the remainder
of 2002 based upon increased marketing activities.

         Comparing the  three-month  periods ended March 31, 2002 and 2001,  the
net interest margin  decreased by 39 basis points,  to 3.05% in 2002, from 3.44%
in 2001,  reflecting  the impact of declining  yields in the loan and investment
portfolios  which were not completely  offset by  corresponding  declines in the
rates paid on deposits.






                                       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.


<TABLE>
<CAPTION>
                                                 Three Months Ended March 31, 2002

                                                                       Average         Interest         Yield/
                                                                       Balance         and fees          Rate
ASSETS
Loans:
<S>                                                                 <C>              <C>                     <C>
    Real Estate - Home Equity Line of Credit                        $   5,699,539    $     57,026            4.00%
    Real Estate - Construction                                          1,335,313          19,117            5.73
    Commercial                                                         28,666,865         494,718            6.90
    Consumer                                                            1,603,258          29,595            7.38
    Loans held for sale                                                   943,653          24,333           10.31
                                                                     -------------    ------------
         Total Loans                                                   38,248,628         624,789            6.53
Investment Securities                                                     275,940               -               -
Federal funds sold and other overnight investments                      9,697,205          31,190            1.29
                                                                     -------------    ------------
         Total Earning Assets                                          48,221,773         655,979            5.44%
                                                                                      ------------
Less: Allowance for credit losses                                        (457,311)
Cash and due from banks                                                   748,164
Premises and equipment, net                                               813,740
Accrued interest receivable and other assets                              242,819
                                                                     -------------
         Total Assets                                               $  49,569,185
                                                                     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $  19,877,308         152,200            3.06%
Regular savings deposits                                                2,463,448           7,585            1.23
Time deposits                                                          13,821,505         128,831            3.73
                                                                     -------------    ------------
         Total interest-bearing liabilities                            36,162,261         288,616            3.19%
                                                                                      ------------    ------------
         Net interest income and spread                                              $    367,363            2.25%
                                                                                      ============    ============
Non-interest-bearing demand deposits                                    4,694,911
Accrued expenses and other liabilities                                    227,241
Stockholders' equity                                                    8,484,772
                                                                     -------------
         Total Liabilities and Stockholders' Equity                 $  49,569,185
                                                                     =============

Interest and fee income/earning assets                                       5.44 %
Interest expense/earning assets                                              2.39
                                                                     -------------
Net interest margin                                                          3.05 %
                                                                     =============





                                       10
<PAGE>



                                         Three Months Ended March 31, 2001

                                                                       Average                          Yield/
                                                                       Balance          Interest         Rate
ASSETS
Loans:
    Real Estate - Home Equity Line of Credit                        $   2,347,288     $    32,842            5.60%
    Real Estate - Construction                                             83,307           1,789            8.59
    Commercial                                                          4,288,465          98,458            9.18
    Consumer                                                              586,522          13,377            9.12
    Loans held for sale                                                   174,017           5,149           11.84
                                                                     -------------     -----------
         Total Loans                                                    7,479,599         151,615            8.11
Investment Securities                                                     275,940               -               -
Federal funds sold and other overnight investments                     16,281,132         204,245            5.02
                                                                     -------------     -----------
         Total Earning Assets                                          24,036,671         355,860            5.92%
                                                                                       -----------
Less: Allowance for credit losses                                         (86,222)
Cash and due from banks                                                   317,070
Premises and equipment, net                                               941,449
Accrued interest receivable and other assets                               88,415
                                                                     -------------
         Total Assets                                               $  25,297,383
                                                                     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand deposits                                    $  10,517,378         120,202            4.57%
Regular savings deposits                                                1,345,554           8,202            2.44
Time deposits                                                           1,411,162          20,896            5.92
                                                                     -------------     -----------
         Total interest-bearing liabilities                            13,274,094         149,300            4.50%
                                                                                       -----------    ------------
         Net interest income and spread                                               $   206,560            1.42%
                                                                                       ===========    ============
Non-interest-bearing demand deposits                                    2,013,208
Accrued expenses and other liabilities                                     64,350
Stockholders' equity                                                    9,945,731
                                                                     -------------
         Total Liabilities and Stockholders' Equity                 $  25,297,383
                                                                     =============

Interest and fee income/earning assets                                       5.92 %
Interest expense/earning assets                                              2.48
                                                                     -------------
Net interest margin                                                          3.44 %
                                                                     =============
</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 determined
by management based on many factors  including  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 of the Company.

         Management  uses a loan grading system where all loans are graded based
on  management's  evaluation  of the risk  associated  with each loan. A factor,
based on the loan  grading,  is  applied  to the loan  balance  to  reserve  for
potential  losses.   Management  also  judgmentally  establishes  an  additional
unallocated  reserve  based upon the belief that the loan  portfolio  is not yet
large and diversified  enough to fully validate the assumptions used in the loan
grading system.

         Based upon management's  analysis of the loan portfolio as of March 31,
2002,  management  allocated  $505,000  to the  allowance  for credit  losses as
compared  to  $447,000  at December  31,  2001.  The amount  equates to 1.25% of
outstanding  loans, net of loans held for sale as of March 31, 2002 and December


                                       11
<PAGE>

31,  2001.  This   allocation  is  an  estimate  based  on  limited   historical
information, management's analysis, and the results of a third-party independent
loan review,  and may be revised  over time for changes in economic  conditions,
experience with the portfolio, and other factors which may arise.

         Management  considers the allowance  appropriate  and adequate to cover
possible losses inherent in the loan portfolio;  however,  management's judgment
is based upon a number of assumptions about future events, which are believed to
be  reasonable,  but  which may or may not prove  valid.  Thus,  there can be no
assurance  that  charge-offs in future periods will not exceed the allowance for
credit loss or that additional increases in the allowance will not be required.

Non-Interest Income

         Non-interest income consists primarily of gains on the sale of mortgage
loans and deposit account service charges.  For the three-months ended March 31,
2002,  the  Company  realized  non-interest  income in the amount of $144,297 as
compared to $16,796 for the three-months  ended March 31, 2001. Gain on the sale
of mortgage loans of $117,693 is the most  significant  element of  non-interest
income,  comprising  81.56% of the total for the  three-months  ended  March 31,
2002.  This compares to gain on the sale of mortgage  loans of $10,692 or 63.66%
of total  non-interest  income for the three-month  period ended March 31, 2001.
The increase in gains on the sale of mortgage  loans is due to the fact that the
Company  began  originating  mortgages  in  February  2001  and,  as  a  result,
production was limited for the  three-months  ended March 31, 2001. In addition,
the current low interest rate environment, combined with a strong housing market
creating an exceptional market for mortgage products, has aided 2002 production.
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 loan production.

         Service   charges  on  deposit   accounts   totaled   $18,398  for  the
three-months  ended March 31,  2002 as  compared to $3,090 for the  three-months
ended March 31, 2001. This increase as well as the increase in other income from
$3,014 to $8,206, a 172.26% increase,  can be directly  attributed to the growth
in the Company's loan and deposit portfolios.

         The  Company  will  continue  to seek ways to  expand  its  sources  of
non-interest  income.  The Company is currently  expanding  its ability to offer
cash management services to commercial customers in order to generate additional
deposits or increase cash management fee income. In the future,  the Company may
also enter into fee arrangements with strategic  partners that offer mutual fund
investment products,  investment advisory services,  and insurance products.  No
assurance  can  be  given  that  such  fee  arrangements  will  be  obtained  or
maintained.

Non-Interest Expense

        Non-interest  expense for the three-months ended March 31, 2002, totaled
$744,743 as compared to  non-interest  expense of $598,513 for the  three-months
ended March 31, 2001. The increase of $146,230 for the period resulted primarily
from an increase  in salaries  and  benefits  of $107,377  related to  increased
commissions  in the  mortgage  operation,  and  increased  staffing for business
development  and operations  functions.  Other expenses  increased by $35,846 or
56.24% due mostly to a $21,521  increase  in  advertising  and public  relations
expenses  incurred in an effort to attract  new  customers,  with the  remaining
increase related to the costs of managing and servicing a larger customer base.

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 March 31, 2002,  the Company had $252,110 in cash and due



                                       12
<PAGE>

from  banks,   and  $8,535,081  in  federal  funds  sold  and  other   overnight
investments. This is relatively consistent with the liquid assets as of December
31, 2001,  which was  comprised of  $3,065,479  in cash and due from banks,  and
$6,488,461 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.

 The  following  table sets forth the amount of the  Company's  interest-earning
assets and interest-bearing liabilities as of March 31, 2002, which are expected
to mature or reprice in each of the time periods shown:

<TABLE>
<CAPTION>
                                                                             Maturity or repricing within
                                                  Percent         0 to 3      4 to 12       1 to 5          Over 5
                                    Amount       of Total         Months      Months         Years           Years
<S>                                <C>                <C>        <C>               <C>          <C>          <C>
Interest-earning assets
   Federal funds sold and other
   overnight investments           $8,535,081         17.36%     $8,535,081        $    -       $    -       $    -
     Loans - Variable rate         23,311,488         47.42      23,311,488             -            -            -
     Loans - Fixed rate            17,040,706         34.66         932,801     2,796,888   12,557,661      753,356
   Other earning assets               275,940           .56               -             -            -      275,940
                                   ----------    -----------     ----------    ----------   ----------   ----------
      Total interest-earning
         assets                   $49,163,215        100.00%    $32,779,370    $2,796,888  $12,557,661   $1,029,296
                                   ==========    ===========     ==========    ==========   ==========   ==========

Interest-bearing liabilities
   Deposits - Variable rate       $21,677,215         58.34%    $21,677,215        $    -       $    -       $    -
   Deposits - Fixed rate           15,481,962         41.66       1,917,679     9,153,610    4,410,673            -
                                   ----------    -----------     ----------    ----------   ----------   ----------
      Total interest-bearing
         liabilities              $37,159,177        100.00%    $23,594,894    $9,153,610   $4,410,673       $    -
                                   ==========    ===========     ==========    ==========   ==========   ==========

Periodic repricing differences
   Periodic gap                                                 $ 9,184,476    $(6,356,72)  $8,146,988   $1,029,296
                                                                 ==========    ==========   ==========   ==========
   Cumulative gap                                               $ 9,184,476    $2,827,754  $10,974,742  $12,004,038
                                                                 ==========    ==========   ==========   ==========

Ratio of rate sensitive assets
    to rate sensitive
    liabilities                                                      138.93%        30.56%      284.71%      N/A

</TABLE>

         As indicated by the table, the excess of  interest-earning  assets over
interest-bearing liabilities of $12,004,038 is concentrated in the categories of
items maturing or repricing within three months, and items maturing or repricing
in  1  to  5  years.  These  items  are  offset  by  a  large  concentration  of
interest-bearing liabilities maturing or repricing in 4 to 12 months. These gaps
exist as a result of mismatches in the demand for  maturities on fixed rate loan
products  as  compared  to the  demand  for  maturities  on fixed  rate  deposit



                                       13
<PAGE>

products.   The  excess  of  interest   earning  assets  over   interest-bearing
liabilities  maturing or repricing in the next 12 months would indicate that the
Company  should  benefit from  increases  in interest  rates during that period.
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,  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 March 31, 2002 was $8,311,069.  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



                                       14
<PAGE>

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.

















                                       15
<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.

           Not applicable.

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.






                                       16
<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: May 13, 2002            By: /s/ Hugh W. Mohler
                                  --------------------------------------------
                                  Hugh W. Mohler, President
                                  (Principal Executive Officer)


Date: May 13, 2002            By: /s/ Mark A. Semanie
                                  --------------------------------------------
                                  Mark A. Semanie, Treasurer
                                  (Principal Accounting and Financial Officer)







                                       17