SECURITIES AND EXCHANGE COMMISSION

                                Washington, D.C.

                                   FORM 10-QSB

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

                  For the quarterly period ended June 30, 2002

                                       OR

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

          For the transition period from ____________ to ______________

                           Commission File No. 0-24330

                            Bedford Bancshares, Inc.
             (Exact name of registrant as specified in its charter)

      Virginia                                      54-1709924
-------------------------------------------------------------------------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                  Identification No.)

                  125 West Main Street, Bedford, Virginia 24523
                  ---------------------------------------------
                    (Address of principal executive offices)


                                 (540) 586-2590
                                 --------------
              (Registrant's telephone number, including area code)


         Check  whether  issuer (1) filed all  reports  required  to be filed by
Sections 13 or 15(d) of the  Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No


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

         Class:   Common Stock, par value $.10 per share
                  Outstanding at August 2, 2002: 2,008,452

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY

                              INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>


<S>          <C>                                                                               <C>
PART I          FINANCIAL INFORMATION                                                               PAGE
------          ---------------------                                                               ----
Item 1          Financial Statements

                2002(unaudited) Consolidated Statements of Financial Condition at June 30,
                and September 30, 2001                                                                    3

                Consolidated Statements of Income for the three and nine months ended June 30,
                2002 and 2001 (unaudited)                                                                 4

                Consolidated Comprehensive Statements of Income for the three and nine months
                ended June 30, 2002 and 2001 (unaudited)                                                  5

                Consolidated Statements of Cash Flows for the nine months ended June 30, 2002
                and 2001 (unaudited)                                                                      6

                Notes to Unaudited Interim Consolidated Financial Statements                              7

Item 2          Management's Discussion and Analysis of Financial Condition and Results of
                Operations                                                                                8


PART II         OTHER INFORMATION
-------         -----------------

Item 1          Legal Proceedings                                                                        13

Item 2          Changes in Securities                                                                    13

Item 3          Defaults upon Senior Securities                                                          13

Item 4          Submission of Matters to a Vote of Security Holders                                      13

Item 5          Other Information                                                                        13

Item 6          Exhibits and Reports on Form 8-K                                                         13

SIGNATURES                                                                                               14
</TABLE>

                                       2

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                                             June 30,     September 30,
                                                                               2002          2001
                                                                           -----------    ------------
                                                                                  (In Thousands)
                                                                                   (Unaudited)
<S>                                                                     <C>            <C>
Assets
------
Cash and cash equivalents.................................................. $  8,191       $ 16,761
Investment securities held to maturity (estimated market value of
$509 and $506).............................................................      503            504
Investment securities available for sale, at market value..................   15,978          7,132
Investment in Federal Home Loan Bank stock, at cost........................    2,600          2,300
Loans receivable, net......................................................  214,984        184,405
Foreclosed real estate, net................................................       26             94
Property and equipment, net................................................    1,279          1,273
Accrued interest receivable................................................    1,304          1,093
Deferred income taxes......................................................      223            159
Other assets...............................................................      424            584
                                                                            --------       --------
    Total assets........................................................... $245,512       $214,305
                                                                            ========       ========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits................................................................... $173,459       $149,167
Advances from the Federal Home Loan Bank...................................   47,000         40,000
Advances from borrowers for taxes and insurance............................      498            717
Dividends payable..........................................................      241            227
Other liabilities..........................................................      382            891
                                                                            --------       --------
    Total liabilities......................................................  221,580        191,002
                                                                            --------       --------

Commitments and contingent liabilities

Stockholders' equity
--------------------
Preferred stock, par value $.10 per share, authorized 250,000; issued and
outstanding, none                                                                 --             --
Common stock, par value, $.10 per share, authorized 2,750,000 shares;
issued and outstanding 2,008,452 at June 30, 2002 and 2,063,453
at September 30, 2001......................................................      201            206
Additional paid in capital.................................................   10,044         10,171
Retained earnings, substantially restricted................................   14,082         13,275
Accumulated other comprehensive income (loss)..............................      (44)            60
Less stock acquired by ESOP and RRP........................................     (351)          (409)
                                                                            --------       --------
    Total stockholders' equity.............................................   23,932         23,303
                                                                            --------       --------
    Total liabilities and stockholders' equity............................. $245,512       $214,305
                                                                            ========       ========

See notes to consolidated financial statements
</TABLE>
                                       3
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                     Three Months Ended            Nine Months Ended
                                                           June 30                      June 30
                                                     -------------------         ----------------------
                                                     2002           2001         2002              2001
                                                     ----           ----         ----              ----
                                                        (Dollars in Thousands, Except Per Share Data)
<S>                                              <C>            <C>          <C>             <C>
Interest Income:
 Loans............................................  $3,545         $3,560       $10,663         $10,506
 U.S. Government Obligations
including agencies................................     270            132           791             374
 Other investments, including overnight deposits..      80             90           243             259
                                                    ------         ------       -------         -------
    Total interest income.........................   3,895          3,782        11,697          11,139
                                                    ------         ------       -------         -------
Interest Expense:
 Deposits.........................................   1,366          1,507         4,166           4,474
 Borrowed funds...................................     594            568         1,806           1,693
                                                    ------         ------       -------         -------
    Total interest expense........................   1,960          2,075         5,972           6,167
                                                    ------         ------       -------         -------
    Net interest income...........................   1,935          1,707         5,725           4,972
Provision for credit losses.......................      75             45           220             120
                                                    ------         ------       -------         -------
 Net interest income after provision for credit
 Losses...........................................   1,860          1,662         5,505           4,852
                                                    ------         ------       -------         -------
Noninterest income:
 Service charges and fees on loans................     334            159           969             390
 Other customer service fees and commissions......     134            112           377             306
 Gain on sale of available for sale securities....      --             11            29              19
 Other............................................      12              9            61              47
                                                    ------         ------       -------         -------
    Total noninterest income......................     480            291         1,436             762
                                                    ------         ------       -------         -------
Noninterest expense:
 Personnel compensation and benefits..............     682            562         1,946           1,572
 Occupancy and equipment..........................     141            135           378             344
 Data Processing..................................     138            122           377             362
 Federal insurance of accounts....................       7              6            20              19
 Advertising......................................      36             40            98             103
 Professional fees................................      50             72           194             225
 Other............................................     117            107           398             320
                                                    ------         ------       -------         -------
    Total noninterest expense.....................   1,171          1,044         3,411           2,945
                                                    ------         ------       -------         -------
    Income before income taxes....................   1,169            909         3,530           2,669
 Provision for income taxes.......................     444            345         1,288           1,013
                                                    ------         ------       -------         -------
   Net income.....................................  $  725         $  564       $ 2,242         $ 1,656
                                                    ======         ======       =======         =======

Basic earnings per share..........................  $ 0.37         $ 0.27       $  1.13         $  0.80
                                                    ======         ======       =======         =======

Diluted earnings per share........................  $ 0.36         $ 0.26       $  1.09         $  0.77
                                                    ======         ======       =======         =======
</TABLE>

See notes to consolidated financial statements

                                       4
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                 Consolidated Comprehensive Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                   Three Months Ended         Nine Months Ended
                                                        June 30                    June 30
                                                   ------------------         ------------------
                                                   2002          2001         2002         2001
                                                   ----          ----         ----         ----
                                               (Dollars in Thousands, Except Per Share Data)

<S>                                              <C>          <C>         <C>          <C>
Net Income.......................................   $725         $564        $2,242       $1,656

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
   available for sale............................    305          (52)         (104)          90
                                                  ------         ----        ------       ------

Comprehensive income............................. $1,030         $512        $2,138       $1,746
                                                  ======         ====        ======       ======
</TABLE>






                                       5

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                 Nine Months Ended
                                                                               --------------------
                                                                                      June 30
                                                                               --------------------
                                                                               2002           2001
                                                                               ----           ----
                                                                             (Dollars in Thousands)
<S>                                                                      <C>            <C>
 Operating activities:
Net Income.................................................................   $2,242         $1,656
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses.............................................      220            120
   Provision for depreciation and amortization.............................      148            154
   Amortization of investment security premiums and accretion of
   discounts, net..........................................................       14              4
   (Increase) decrease in deferred income taxes............................      (64)           238
   (Gain) loss on sale of loans, investments and foreclosed real estate....      (45)           (26)
   (Increase) decrease in accrued interest receivable......................     (211)            98
   (Increase) decrease in other assets.....................................      160           (753)
   Increase (decrease) in other liabilities................................     (509)           (36)
                                                                              ------         ------
   Net cash provided by (used in) operating activities.....................    1,955          1,455
                                                                              ------         ------
Investing activities:
   Proceeds from the sale of available for sale investment securities......    2,051          2,500
   Proceeds from the sale of marketable equity securities..................                      59
   Proceeds from maturities of available for sale investment securities....    1,500          2,500
   Purchases of available for sale investment securities...................  (12,500)        (5,000)
   Purchase of Federal Home Loan Bank stock................................     (300)          (400)
   Net increase in loans to customers......................................  (30,579)       (14,382)
   Principal collected on mortgage-backed securities.......................        1              2
   Purchases of premises, equipment and leasehold improvements.............     (154)          (156)
   Net (increase) decrease in foreclosed real estate.......................       68             --
                                                                              ------         ------
   Net cash provided by (used in) investing activities.....................  (39,913)       (14,877)
                                                                              ------         ------
Financing activities:
   Dividends paid..........................................................     (680)          (664)
   Net increase (decrease) in customer deposits............................   24,292         10,751
   Proceeds from (repayments of) FHLB advances.............................    7,000          6,000
   Vesting of RRP shares...................................................       42             91
   Repurchase of stock.....................................................   (1,239)          (414)
   Stock options exercised.................................................      186             22
   Net increase (decrease) in advance payments from borrower for taxes
   and insurance...........................................................     (219)          (276)
   Other, net..............................................................        6             17
                                                                              ------         ------
   Net cash provided by financing activities...............................   29,388         15,527
                                                                              ------         ------
   Increase (decrease) in cash and cash equivalents........................   (8,570)         2,105
Cash and cash equivalents at beginning of period...........................   16,761          5,512
                                                                              ------         ------
Cash and cash equivalents at end of period.................................   $8,191         $7,617
                                                                              ======         ======
</TABLE>

                                       6
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
          Notes to Unaudited Interim Consolidated Financial Statements
                                  June 30, 2002


NOTE 1:  BASIS OF PRESENTATION
------------------------------

         The accompanying  unaudited interim  consolidated  financial statements
have been prepared in accordance with generally accepted  accounting  principles
("GAAP") for interim financial information. Accordingly, they do not include all
of the  information  and  footnotes  required by generally  accepted  accounting
principles  for  complete  financial   statements.

         The accompanying  unaudited interim  consolidated  financial statements
include the accounts of Bedford  Bancshares,  Inc., Bedford Federal Savings Bank
and CVFS its wholly-owned  subsidiaries.  All significant  intercompany balances
and transactions have been eliminated in consolidation.

         In the opinion of  management,  all  adjustments  (consisting of normal
recurring  accruals)  considered  necessary for the fair  presentation have been
included.  The results of operations  for the interim period ended June 30, 2002
is not  necessarily  indicative  of the results  which may be  expected  for any
future  period.  For  further  information,   refer  to  consolidated  financial
statements and footnotes thereto included in the Corporation's  Annual Report on
Form 10-KSB for the year ended September 30, 2001.

NOTE 2:  EARNINGS PER SHARE
---------------------------

Earnings per share are calculated as follows:
<TABLE>
<CAPTION>

                                                               Three Months Ended            Nine Months Ended
                                                                    June 30                      June 30
                                                              -------------------          ------------------
                                                              2002          2001           2002          2001
                                                              ----          ----           ----          ----
<S>                                                       <C>          <C>            <C>             <C>
Basic Earnings Per Share:
-------------------------
Net Income............................................      $ 725,000    $  564,000     $2,242,000      $1,656,000
                                                            =========    ==========     ==========      ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (45,334 and
61,334 at June 30, 2002 and 2001, respectively).......      1,958,838     2,050,367      1,983,267       2,069,099
                                                            =========    ==========     ==========      ==========
Basic Earnings Per Share..............................          $0.37    $     0.27     $     1.13      $     0.80
                                                            =========    ==========     ==========      ==========

Diluted Earnings Per Share;
---------------------------
Net Income............................................      $ 725,000      $564,000     $2,242,000      $1,656,000
                                                            =========    ==========     ==========      ==========
Average Shares Outstanding,
Net of unallocated ESOP Shares (45,334 and 61,334 at
June 30, 2002 and 2001, respectively).................      1,958,838     2,050,367      1,983,267       2,069,099
  Dilutive effect of RRP oPlan shares.................             --           782             --             782
  Dilutive effect of Stock Options....................         84,434        85,902         77,863          85,902
                                                            ---------    ----------     ----------      ----------
Average Shares Outstanding............................      2,043,272     2,137,051      2,061,130       2,155,783
                                                            =========    ==========     ==========      ==========
Diluted Earnings Per Share............................      $    0.36    $     0.26     $     1.09      $     0.77
                                                            =========    ==========     ==========      ==========
</TABLE>

                                       7
<PAGE>

         MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS



FORWARD-LOOKING STATEMENTS
--------------------------

         The Private  Securities  Litigation  Reform Act of 1995  contains  safe
harbor  provisions  regarding  forward-looking  statements.  When  used  in this
discussion, the words, "believes", "anticipates", "contemplates", "expects", and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties  which could cause
actual  results to differ  materially  from  those  projected.  Those  risks and
uncertainties  include changes in interest  rates,  the ability to control costs
and expenses, and general economic conditions.

FINANCIAL CONDITION
-------------------

         At June 30,  2002,  consolidated  assets  totaled  $245.5  million,  an
increase of $31.2 million from September 30, 2001.  Assets  increased  primarily
due to the growth in the loan  portfolio,  which totaled  $215.0 million at June
30, 2002, an increase of $30.6 million from September 30, 2001.  Funding for the
loan growth was provided by a $24.3  million rise in deposits and a $7.0 million
increase in FHLB advances.

RESULTS OF OPERATIONS
---------------------

         General.  Net income for the three months ended June 30, 2002 increased
$161,000,  or 28.5%,  to $725,000 from $564,000 for the comparable  2001 period.
Net income for the nine months ended June 30, 2002, was $2,242,000,  an increase
of $586,000 or 35.4% from the $1,656,000  earned in the comparable  2001 period.
The  increase in net income for the three and nine months  ended June 30,  2002,
was primarily caused by both higher net interest income and noninterest income.

         Interest  Income.  Interest  income  totaled $3.9 million for the three
months ended June 30, 2002,  a $113,000  increase  from the $3.8 million for the
comparable  2001  period.  An  $8.3  million  increase  in  average   investment
securities,  partially  offset by a decline of 58 basis  points in their  yield,
primarily accounted for the increase in interest income.  Although average loans
receivable  increased  $27.4 million,  a 105 basis point decline in the yield on
the loan portfolio more than offset the volume gain.

         For the nine months ended June 30, 2002,  interest income totaled $11.7
million,  a $558,000  increase  from the $11.1 million for the  comparable  2001
period.  An increase of $21.2 million in average loans  receivable  for the nine
months  ended June 30, 2002  compared  to the same nine months of 2001  combined
with an $8.3 million increase in average investment  securities were the primary
factors in the higher interest income.


                                       8
<PAGE>

         Interest  Expense.  Interest expense totaled $2.0 million for the three
months ended June 30, 2002,  a $115,000  decrease  from the $2.1 million for the
comparable 2001 period.  Although average interest bearing liabilities of $200.8
million in the third quarter of fiscal 2002  reflected an increase of 21.1% from
the average for the comparable quarter of fiscal 2001, a 110 basis point decline
in their cost more than  offset the growth and  resulted  in the lower  interest
expense.

         For the nine months ended June 30, 2002,  interest expense totaled $6.0
million,  a $195,000  decrease  from the $6.2  million for the  comparable  2001
period.  An 94 basis  point  decline  in the cost of  average  interest  bearing
liabilities  more than offset an increase of 18.6% in average  interest  bearing
liabilities  when comparing the nine months ended June 30, 2002 to the same nine
months of fiscal 2001.

         Net Interest  Income.  For the three  months  ended June 30, 2002,  net
interest  income was $1.9  million,  up $228,000  from the net  interest  income
earned in the same period of 2001. A 20.0% rise in the level of average interest
earning assets was the primary  reason for the increase in net interest  income.
For the three  months ended June 30,  2002,  the net interest  spread and margin
were 2.77% and 3.31%,  respectively,  compared to 2.77% and 3.51%, respectively,
for the same period of 2001.

         For the nine months ended June 30, 2002,  net interest  income was $5.7
million,  up $753,000 from the net interest  income earned in the same period of
2001.  For the nine months  ended June 30,  2002,  average  earning  assets were
$222.0  million,  up 17.4% from the average for the same period of 2001. For the
nine months ended June 30, 2002,  the net interest  spread and margin were 2.84%
and  3.44%,  respectively,  compared  to 2.73% and 3.51% for the same  period of
2001.

         Provision  for Loan Losses.  The  provision for loan losses was $75,000
for the three months ended June 30, 2002,  compared to $45,000 for the same 2001
period.  For the nine months ended June 30, 2002 the  provision  for loan losses
was $220,000  compared to $120,000 for the same period of 2001. During the third
quarter of fiscal 2002, $41,000 of classified assets,  previously rated doubtful
were charged-off.  These charge-offs combined with the strong growth of the loan
portfolio  were the primary  reasons  for the  increased  loan loss  provisions.
Management performs regular assessments of the credit risk in the loan portfolio
based  on  information  available  at such  times,  including  the  level of our
nonperforming  loans and  assets,  trends in the local real estate  market,  and
current  and  potential  charge-offs.  The  assessment  of the  adequacy  of the
allowance  for loan losses  involves  subjective  judgment,  and there can be no
assurance that additional provisions for loan losses will not be required.

         Noninterest   Income.  For  the  three  months  ended  June  30,  2002,
noninterest  income  was  $480,000,  up  $189,000  from  the  $291,000  for  the
comparable  2001 period.  Service  charges and fees on loans were up $175,000 to
$334,000 for the third quarter of fiscal 2002 from  $159,000 for the  comparable
period of fiscal 2001, due primarily to the level of mortgage  loans  originated
during the quarter. In the third quarter of fiscal 2002, the bank originated 157
mortgage loans with an aggregate  value of $20.4  million,  compared to 91 loans
with an aggregate value of $12.5 million for the comparable quarter of 2001. The
lower interest rate environment  allowed the Bank to offer very attractive rates
on its  adjustable  rate  mortgage  products,  which  resulted in the

                                       9
<PAGE>

increased volume. Other customer service fees and commissions  increased $22,000
to  $134,000  in the third  quarter of fiscal  2002 from  $112,000  for the same
quarter of fiscal 2001 due  primarily  to the  increased  number of  transaction
accounts.  Other  noninterest  income  decreased $8,000 to $12,000 for the three
months ended June 30, 2002 from $20,000 for the comparable 2001.

         For the  nine  months  ended  June  30,  2002  noninterest  income  was
$1,436,000 compared to $762,000 for the same period of 2001. Service charges and
fees on loans were up $579,000 due to the much higher  number and dollar  amount
of loans closed. Other customer service fees and commissions were up $71,000 due
to a higher number of transaction  accounts,  while other noninterest income was
up $24,000 due  primarily to gains  realized on the sale of  available  for sale
securities.

         Noninterest  Expense.  Noninterest  expense totaled  $1,171,000 for the
three  months  ended June 30, 2002,  compared to  $1,044,000  for the same three
months of fiscal 2001.  Personnel  compensation and benefits was up $120,000 due
primarily to expenses  associated  with the employee  incentive plan and general
merit  increases.  Data  processing  expense was up $16,000 due primarily to the
increased number of accounts being processed. Professional fees declined $22,000
due to reduced legal expense.

         For the nine  months  ended  June 30,  2002,  noninterest  expense  was
$3,411,000,  compared to $2,945,000 for the comparable period of 2001. Personnel
compensation  and benefits was up $374,000 due primarily to expenses  associated
with the employee  incentive  plan and general  merit  increases.  Occupancy and
equipment expense was up $34,000 due primarily to expenses related to furniture,
fixture and  equipment.  Professional  fees were down $31,000 due to lower legal
expense.  Other  noninterest  expense was up $78,000 due  primarily to a $37,000
write-off of NOW accounts, and an increase of $50,000 in loan related expenses.

         Provision for Income Taxes. The provision for income taxes was $444,000
for the three months ended June 30, 2002, up $99,000 from the $345,000 provision
recorded in the same three months of fiscal 2001. For the nine months ended June
30, 2002,  the provision for income taxes was  $1,288,000,  up $275,000 from the
$1,013,000  provision for the same period of fiscal 2001. The primary reason for
the increases in the current 2002 periods was due to the higher level of taxable
income.

                                       10
<PAGE>

CAPITAL COMPLIANCE

The following table presents the Bank's  compliance with its regulatory  capital
requirements of June 30, 2002. (Dollar amounts in thousands).


                                                        June 30, 2002
                                                        -------------
                                                                   Percentage
                                                     Amount        of assets
                                                     ------       ------------

GAAP Capital...................................     $20,878            8.51%
                                                    =======            ====

Tangible capital...............................     $20,922            8.52%
Tangible capital requirement...................      $3,681            1.50%
                                                    -------            ----
Excess.........................................     $17,241            7.02%
                                                    =======            ====

Core capital...................................     $20,922            8.52%
Core capital requirement.......................       9,815            4.00%
                                                    -------            ----
Excess.........................................     $11,107            4.52%
                                                    =======            ====

Total risk-based capital (1)...................     $22,049           14.11%
Total risk-based capital requirement (1).......      12,504            8.00%
                                                    -------           -----
Excess.........................................     $ 9,545            6.11%
                                                    =======           =====

-----------------------------

(1)  Based on risk-weighted assets of $156,311

     Management  believes  that under current  regulations,  we will continue to
     meet our minimum capital  requirements in the  foreseeable  future.  Events
     beyond our control,  such as changes in interest rates or a downturn in the
     economy in areas in which we operate could adversely affect future earnings
     and  as  a  result,   our  ability  to  meet  our  future  minimum  capital
     requirements.

LIQUIDITY
---------

         Liquidity is a measure of the Bank's ability to fund loans, pay deposit
withdrawals and other cash outflows in an efficient,  cost effective manner. Its
primary sources of funds are deposits, and scheduled amortization and prepayment
of loans.  In addition,  the Bank we supplements  its funding needs by borrowing
funds from the Federal Home Loan Bank ("FHLB") of Atlanta.  As of June 30, 2002,
such borrowed funds totaled $47 million. Loan payments and prepayments, deposits
and  borrowings  are greatly  influenced  by general  interest  rates,  economic
conditions and competition.

         The amount of certificate  accounts scheduled to mature during the next
twelve months  ending June 30, 2003,  is  approximately  $69.8  million.  To the
extent  that  these  deposits  do not  remain  with us upon  maturity,  the Bank
believes it is able to replace these funds with other deposits, FHLB advances or
other borrowings.  It has been the Bank's experience that a substantial  portion
of such maturing deposits remain with the Bank.

         At June 30, 2002,  the Bank had loan  commitments  outstanding of $34.3
million.  These commitments will be funded from deposit inflows, loan repayments
and borrowings.

                                       11

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                              Key Operating Ratios

<TABLE>
<CAPTION>
                                                 Three Months Ended             Nine Months Ended
                                                      June 30                       June 30
                                               ------------------------       -------------------
                                               2002(1)         2001(1)        2002(1)     2001(1)
                                               -------         --------       -------     -------
                                                                     (Unaudited)


<S>                                          <C>            <C>           <C>            <C>
Basic earnings per share ....................  $  0.37        $  0.27       $  1.13        $  0.80
Diluted earnings per share...................  $  0.36        $  0.26       $  1.09        $  0.77
Return on average assets.....................     1.20%          1.12%         1.30%          1.13%
Return on average equity.....................    12.29%          9.67%        12.73%          9.57%
Interest rate spread.........................     2.77%          2.77%         2.84%          2.73%
Net interest margin..........................     3.31%          3.51%         3.44%          3.51%
Noninterest expense to average assets........     1.94%          2.08%         2.01%          2.01%
Net charge-offs to average outstanding loans.      .08%           .04%          .06%           .02%

</TABLE>

<TABLE>
<CAPTION>

                                                               June 30         September 30
                                                                2002               2001
                                                               -------         ------------
                                                                  (Dollars in thousands)
                                                                        (Unaudited)
<S>                                                          <C>              <C>
Nonaccrual loans.......................................         $  875           $  514
Repossessed real estate................................             26               94
                                                                ------           ------
Total nonperforming assets.............................         $  901           $  608
                                                                ======           ======


Allowance for credit losses to nonperforming assets....          124.5%          161.35%
Nonperforming loans to total loans.....................           0.41%            0.28%
Nonperforming assets to total assets...................           0.37%            0.28%


Book value per share ..................................         $11.92           $11.29
                                                                ======           ======
</TABLE>

------------------------
(1)    The ratios for the three- and nine-month periods are annualized


                                       12

<PAGE>
<TABLE>
<CAPTION>

                           PART II - OTHER INFORMATION
                           ---------------------------

<S>              <C>       <C>
Item 1.           Legal Proceedings
                  -----------------
                    Neither  the  Corporation  nor the Bank was  engaged  in any
                    legal  proceedings  of a material  nature at June 30,  2002.
                    From  time to  time,  the  Corporation  is a part  to  legal
                    proceedings  in the ordinary  course of business  wherein it
                    enforces its security interest in loans.

Item 2.           Changes in Securities
                  ---------------------
                    Not applicable.

Item 3.           Defaults upon Senior Securities
                  -------------------------------
                    Not applicable.

Item 4.           Submission of Matters to a Vote of Security Holders
                  ---------------------------------------------------
                    Not applicable.

Item 5.           Other Information
                  -----------------
                    Not applicable.

Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------
                  (a)      List of Exhibits:
                           3(i)  Restated Articles of Incorporation of Bedford Bancshares, Inc.*
                           3(ii) Bylaws of Bedford Bancshares, Inc.*
                           4     Specimen of Stock Certificate*
                           10.1  1994 Stock Option Plan*
                           10.2  Recognition and Retention Plan and Trust Agreement*
                           10.3  Employment Agreement between the Registrant and H. K. Neal*
                           99.0  Certification
                  (b)      Reports on Form 8-K
                           Not applicable.

                  ---------------------------------
                  *        Incorporated  by  reference  to  the  registrant's  Form
                           10-KSB filed with the SEC on December 9, 1994.

</TABLE>


                                       13
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY

                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                      BEDFORD BANCSHARES, INC.

Date:    August 6, 2002               By:     /s/ Harold K. Neal
                                              ------------------
                                              Harold K. Neal
                                              President and
                                              Chief Executive Officer
                                              (Principal Executive Officer)


Date:    August 6, 2002                By:    /s/ James W. Smith
                                              ------------------
                                              James W. Smith
                                              Vice President and Treasurer
                                              (Principal Accounting and
                                              Financial Officer)





                                       14