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 March 31, 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 May 9, 2002: 1,999,242


<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY

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

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

                  Consolidated Statements of Financial Condition at March 31, 2002(unaudited)
                  and September 30, 2001                                                                    3

                  Consolidated Statements of Income for the three and six months ended March 31,
                  2002 and 2001 (unaudited)                                                                 4

                  Consolidated Comprehensive Statements of Income for the three and six months
                  ended March 31, 2002 and 2001 (unaudited)                                                 5

                  Consolidated Statements of Cash Flows for the six months ended March 31, 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>
                                                                                        March 31         September 30
                                                                                           2002              2001
                                                                                         --------           -------
                                                                                               (In Thousands)
                                                                                       (Unaudited)
<S>                                                                                   <C>                 <C>
Assets
------
Cash and cash equivalents.......................................................         $13,440             $16,761
Investment securities held to maturity (estimated market value of
$508 and $506).................................................................              503                 504
Investment securities available for sale, at market value......................           14,981               7,132
Investment in Federal Home Loan Bank stock, at cost............................            2,600               2,300
Loans receivable, net..........................................................          204,867             184,405
Foreclosed real estate, net....................................................               26                  94
Property and equipment, net....................................................            1,260               1,273
Accrued interest receivable....................................................            1,390               1,093
Deferred income taxes..........................................................              410                 159
Other assets...................................................................              526                 584
                                                                                        --------            --------
    Total assets...............................................................         $240,003            $214,305
                                                                                        ========            ========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits.......................................................................         $163,303            $149,167
Advances from the Federal Home Loan Bank.......................................           52,000              40,000
Advances from borrowers for taxes and insurance................................              735                 717
Dividends payable..............................................................              242                 227
Other liabilities..............................................................              540                 891
                                                                                        --------            --------
    Total liabilities..........................................................          216,820             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 2,009,292 at March 31, 2002 and 2,063,453 at September 30, 2001
                                                                                             201                 206
Additional paid in capital.....................................................            9,978              10,171
Retained earnings, substantially restricted....................................           13,721              13,275
Accumulated other comprehensive income (loss)..................................             (349)                 60
Less stock acquired by ESOP and RRP............................................             (368)               (409)
                                                                                        --------            --------
    Total stockholders' equity.................................................           23,183              23,303
                                                                                        --------            --------
    Total liabilities and stockholders' equity.................................         $240,003            $214,305
                                                                                        ========            ========
</TABLE>

See notes to consolidated financial statements

                                       3

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                            Three Months Ended             Six Months Ended
                                                                 March 31                      March 31
                                                            2002           2001          2002            2001
                                                           ------         ------        ------          ------
                                                               (Dollars in Thousands, Except Per Share Data)
<S>                                                      <C>            <C>           <C>             <C>
Interest Income:
 Loans..............................................       $3,538         $3,555        $7,118          $6,946
 U.S. Government Obligations including agencies.....          231            119           521             242
 Other investments, including overnight deposits....          115             82           163             168
                                                           ------         ------        ------          ------
    Total interest income...........................        3,884          3,756         7,802           7,356
                                                           ------         ------        ------          ------
Interest Expense:
 Deposits...........................................        1,376          1,482         2,800           2,967
 Borrowed funds.....................................          615            590         1,212           1,125
                                                           ------         ------        ------          ------
    Total interest expense..........................        1,991          2,072         4,012           4,092
                                                           ------         ------        ------          ------
    Net interest income.............................        1,893          1,684         3,790           3,264
Provision for credit losses.........................          100             45           145              75
                                                           ------         ------        ------          ------
 Net interest income after provision for credit
 Losses.............................................        1,793          1,639         3,645           3,189
                                                           ------         ------        ------          ------
Noninterest income:
 Service charges and fees on loans..................          387            111           636             231
 Other customer service fees and
   commissions......................................          119             98           243             194
 Other..............................................           64             36            78              46
                                                           ------         ------        ------          ------
    Total noninterest income........................          570            245           957             471
                                                           ------         ------        ------          ------
oninterest expense:
 Personnel compensation and benefits................          580            493         1,265           1,010
 Occupancy and equipment............................          133            104           237             209
 Data Processing....................................          114            121           239             239
 Federal insurance of accounts......................            7              7            13              13
 Advertising........................................           31             27            62              63
 Professional fees..................................           64             71           144             153
 Other..............................................          165            116           281             214
                                                           ------         ------        ------          ------
    Total noninterest expense.......................        1,094            939         2,241           1,901
                                                           ------         ------        ------          ------
    Income before income taxes......................        1,269            945         2,361           1,759
 Provision for income taxes.........................          429            358           844             667
                                                           ------         ------        ------          ------
   Net income.......................................       $  840         $  587        $1,517          $1,092
                                                           ======         ======        ======          ======

Basic earnings per share............................        $0.43          $0.29         $0.76           $0.53
                                                            =====          =====         =====           =====

Diluted earnings per share..........................        $0.41          $0.28         $0.73           $0.51
                                                            =====          =====         =====           =====
</TABLE>

See notes to consolidated financial statements

                                       4
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                       Comprehensive Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended             Six Months Ended
                                                                  March 31                    March 31
                                                             2002           2001          2002           2001
                                                             ----           ----         -----           ----
                                                              (Dollars in Thousands, Except Per Share Data)

<S>                                                       <C>            <C>         <C>            <C>
Net Income..............................................     $840           $587        $1,517         $1,092

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
   available for sale...................................     (301)            36          (409)           142
                                                             ----           ----        ------         ------

Comprehensive income....................................     $539           $623        $1,108         $1,234
                                                             ====           ====        ======         ======
</TABLE>


                                       5
<PAGE>


                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                  March 31
                                                                              2002         2001
                                                                              ----         ----

                                                                           (Dollars in Thousands)
<S>                                                                     <C>         <C>
Operating activities:
 Net Income ...........................................................   $  1,517    $  1,092
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses ........................................        145          75
   Provision for depreciation and amortization ........................         93          90
   Amortization of investment security premiums and accretion of
   discounts, net .....................................................          9           4
   (Increase) decrease in deferred income taxes .......................         23          87
   (Gain) loss on sale of loans, investments and foreclosed real estate        (41)         (3)
   (Increase) decrease in accrued interest receivable .................       (297)          7
   (Increase) decrease in other assets ................................         58        (237)
   Increase (decrease) in other liabilities ...........................       (351)         25
                                                                          --------    --------
    Net cash provided by (used in) operating activities ...............      1,156       1,140
                                                                          --------    --------
Investing activities:
   Proceeds from the sale of available for sale investment securities .      2,051       2,500
   Proceeds from maturities of available for sale investment securities         --       2,500
   Purchases of available for sale investment securities ..............    (10,500)     (5,000)
   Purchase of Federal Home Loan Bank stock ...........................       (300)       (200)
   Net increase in loans to customers .................................    (20,593)    (11,233)
   Principal collected on mortgage-backed securities ..................          1           1
   Purchases of premises, equipment and leasehold improvements ........        (80)        (74)
   Net (increase) decrease in foreclosed real estate ..................         68         (26)
                                                                          --------    --------
    Net cash provided by (used in) investing activities ...............    (29,353)    (11,532)
                                                                          --------    --------
Financing activities:
   Dividends paid .....................................................       (437)       (430)
   Net increase (decrease) in customer deposits .......................     14,136       5,043
   Proceeds from (repayments of) FHLB advances ........................     12,000       6,000
   Vesting of RRP shares ..............................................         42          18
   Repurchase of stock ................................................     (1,008)       (170)
   Stock options exercised ............................................        102          --
   Net increase (decrease) in advance payments from borrower for taxes
   and insurance ......................................................         18         (52)
   Other, net .........................................................         23           9
                                                                          --------    --------
    Net cash provided by financing activities .........................     24,876      10,418
                                                                          --------    --------
    Increase (decrease) in cash and cash equivalents ..................     (3,321)         26
Cash and cash equivalents at beginning of period ......................     16,761       5,512
                                                                          --------    --------
Cash and cash equivalents at end of period ............................   $ 13,440    $  5,538
                                                                          ========    ========
</TABLE>


                                       6
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
          Notes to Unaudited Interim Consolidated Financial Statements
                                 March 31, 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 March 31, 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              Six Months Ended
                                                                   March 31                     March 31
                                                              ------------------              ----------------
                                                              2002          2001             2002          2001
                                                              ----          ----             ----          ----
<S>                                                      <C>           <C>            <C>             <C>
Basic Earnings Per Share:
Net Income............................................       $840,000      $587,000     $1,517,000      $1,092,000
                                                             ========      ========     ==========      ==========
Average Shares Outstanding, Net of
Unallocated ESOP Shares (45,334 and    61,334 at
March 31, 2002 and 2001, respectively)................
                                                            1,984,527     2,070,618      2,006,532       2,078,465
                                                            =========     =========      =========       =========
Basic Earnings Per Share..............................          $0.43         $0.29          $0.76           $0.53
                                                                =====         =====          =====           =====

Diluted Earnings Per Share;
Net Income............................................       $840,000      $587,000     $1,517,000      $1,092,000
                                                             ========      ========     ==========      ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (45,334 and
61,334 at March 31, 2001 and 2000,  respectively).....      1,984,527     2,070,618      2,006,532       2,078,465
  Dilutive effect of RRP Plan shares..................             --           505             --             499
  Dilutive effect of Stock Options....................         82,084        73,029         81,993          71,717
                                                            ---------     ---------      ---------       ---------
Average Shares Outstanding............................      2,066,611     2,144,152      2,088,525       2,150,681
                                                            =========     =========      =========       =========
Diluted Earnings Per Share............................          $0.41         $0.28          $0.73           $0.51
                                                                =====         =====          =====           =====
</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,  risks  associated  with the
effect of opening a new branch,  the ability to control costs and expenses,  and
general economic conditions.

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

         At March 31, 2002,  consolidated  assets  totaled  $240.0  million,  an
increase of $25.7 million from September 30, 2001.  Assets  increased  primarily
due to the growth in the loan  portfolio,  which totaled $204.9 million at March
31, 2002, an increase of $20.5 million from September 30, 2001.  Funding for the
loan growth was provided by a $14.1 million rise in deposits and a $12.0 million
increase in FHLB advances.

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

         General. Net income for the three months ended March 31, 2002 increased
$253,000,  or 43.1%,  to $840,000 from $587,000 for the comparable 2001 period..
Net income for the six months ended March 31, 2002, was $1,517,000,  an increase
of $425,000 or 38.9% from the $1,092,000  earned in the comparable  2001 period.
The  increase in net income for the three and six months  ended March 31,  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 March 31, 2002, a $128,000  increase  from the $3.8 million for the
comparable  2001  period.  An  $8.9  million  increase  in  average   investment
securities,  partially  offset by a decline of 38 basis  points in their  yield,
accounted  for the most of the  increase in interest  income.  Although  average
loans receivable increased $20.2 million, an 83 basis point decline in the yield
on the loan portfolio offset most of the volume gain.

         For the six months ended March 31, 2002,  interest  income totaled $7.8
million,  a $446,000  increase  from the $7.4  million for the  comparable  2001
period.  An increase of $18.0  million in average loans  receivable  for the six
months ended March 31, 2002 compared to the

                                       8
<PAGE>

same six  months of 2001  combined  with an $8.4  million  increase  in  average
investment securities were the primary factors in the higher interest income.

         Interest  Expense.  Interest expense totaled $2.0 million for the three
months ended March 31, 2002,  an $81,000  decrease from the $2.1 million for the
comparable 2001 period.  Although average interest bearing liabilities of $191.2
million in the second quarter of fiscal 2002 reflected an increase of 18.5% from
the average for the comparable  quarter of fiscal 2001, a 98 basis point decline
in their cost more than  offset the growth and  resulted  in the lower  interest
expense.

         For the six months ended March 31, 2002,  interest expense totaled $4.0
million,  an $80,000  decrease  from the $4.1  million for the  comparable  2001
period.  An 81 basis  point  decline  in the cost of  average  interest  bearing
liabilities more than offset an increase of 16.5% in average bearing liabilities
when  comparing  the six months  ended  March 31, 2002 to the same six months of
fiscal 2001.

         Net Interest  Income.  For the three  months ended March 31, 2002,  net
interest  income was $1.9  million,  up $209,000  from the net  interest  income
earned in the same period of 2001. A 17.2% 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 March 31,  2002,  the net interest  spread and margin
were 2.77% and 3.41%,  respectively,  compared to 2.79% and 3.56%, respectively,
for the same period of 2001.

         For the six months ended March 31, 2002,  net interest  income was $3.8
million,  up $526,000 from the net interest  income earned in the same period of
2001.  For the six months  ended March 31,  2002,  average  earning  assets were
$216.1  million,  up 16.0% from the average for the same period of 2001. For the
six months ended March 31, 2002,  the net interest  spread and margin were 2.86%
and  3.51%,  respectively,  compared  to 2.71% and 3.50% for the same  period of
2001.

         Provision  for Loan Losses.  The provision for loan losses was $100,000
for the three months ended March 31, 2002, compared to $45,000 for the same 2001
period.  For the six months ended March 31, 2002 the  provision  for loan losses
was $145,000  compared to $75,000 for the same period of 2001. During the second
quarter  of  fiscal  2002,  $79,000  of  classified  assets,   previously  rated
substandard was  reclassified as doubtful.  This change 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  March  31,  2002,
noninterest  income  was  $570,000,  up  $325,000  from  the  $245,000  for  the
comparable  2001 period.  Service  charges and fees on loans were up $276,000 to
$387,000 for the second  quarter of fiscal 2002 from $111,000 for the comparable
period of fiscal  2001,  due  primarily  to the strong  level of mortgage  loans
originated  during the quarter.  In the second  quarter of fiscal 2002, the bank
originated 172

                                       9
<PAGE>

mortgage loans with an aggregate  value of $22.6  million,  compared to 71 loans
with an aggregate value of $8.4 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 increase volume.
Other customer service fees and commissions increased $21,000 to $119,000 in the
second  quarter of fiscal 2002 from  $98,000 for the same quarter of fiscal 2001
due primarily to the increase number of transaction accounts.  Other noninterest
income  increased  $28,000 to $64,000 for the three  months ended March 31, 2002
from  $36,000 for the  comparable  2001 period due  primarily  to an increase of
$21,000 in the gain realized on the sale of available for sale securities.

         For the six  months  ended  March  31,  2002,  noninterest  income  was
$957,000  compared to $471,000 for the same period of 2001.  Service charges and
fees on loans were up $405,000 due to the much higher  number and dollar  amount
of loans closed. Other customer service fees and commissions were up $49,000 due
to a higher number of transaction  accounts,  while other noninterest income was
up $32,000 due  primarily to gains  realized on the sale of  available  for sale
securities.

Noninterest Expense. Noninterest expense totaled $1,094,000 for the three months
ended March 31,  2002,  compared to $939,000 for the same three months of fiscal
2001.  Personnel  compensation  and  benefits  was up $87,000 due  primarily  to
expenses   associated  with  the  employee  incentive  plan  and  general  merit
increases.  Occupancy  and  equipment  expense was up $29,000 due to  furniture,
fixture and equipment related expenses. Other noninterest expense was up $49,000
due  primarily  to  the  write-off  of  $33,000  of  uncollectible  NOW  account
overdrafts   following  an  annual  analysis  of  accounts  in  the  process  of
collection.

         For the six  months  ended  March 31,  2002,  noninterest  expense  was
$2,241,000,  compared to $1,901,000 for the comparable period of 2001. Personnel
compensation  and  benefits was up $255,000  due  expenses  associated  with the
employee  incentive  plan and general merit  increases.  Occupancy and equipment
expense was up $28,000 due primarily to expenses  related to furniture,  fixture
and  equipment.  Other  noninterest  expense was up $67,000 due  primarily  to a
$33,000  write-off of NOW accounts,  a $13,000  increase in payroll taxes and an
increase of $9,000 in equity line related expenses.

         Provision for Income Taxes. The provision for income taxes was $429,000
for the three  months  ended  March  31,  2002,  up  $71,000  from the  $358,000
provision  recorded in the same three months of fiscal 2001.  The primary reason
for the increase was the higher level of taxable income.

         For the six months ended March 31, 2002, the provision for income taxes
was $844,000, up 26.5% from the $667,000 provision for the same period of fiscal
2001. A higher level of taxable income is the primary reason for the increase.

                                       10

<PAGE>


CAPITAL COMPLIANCE
------------------

The following table presents the Bank's  compliance with its regulatory  capital
requirements of March 31, 2002. (Dollar amounts in thousands).

                                                         March 31, 2002
                                                         --------------
                                                            Percentage
                                                            of assets
                                                            ---------

GAAP Capital.....................................    $22,349           11.29%
                                                     =======           ======

Tangible capital.................................    $22,698            9.45%
Tangible capital requirement.....................     $3,603            1.50%
                                                      ------            -----
Excess...........................................    $19,095            7.95%
                                                     =======            =====

Core capital.....................................    $22,698            9.45%
Core capital requirement.........................      9,609            4.00%
                                                       -----            -----
Excess...........................................    $13,089            5.45%
                                                     =======            =====

Total risk-based capital (1).....................    $23,718           15.70%
Total risk-based capital requirement (1).........     12,085            8.00%
                                                      ------            -----
Excess...........................................    $11,633            7.70%
                                                     =======            =====
-----------------------------
(1)  Based on risk-weighted assets of $151,059

     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
---------

         Our  liquidity  is a measure of our ability to fund loans,  pay deposit
withdrawals and other cash outflows in an efficient,  cost effective manner. Our
primary sources of funds are deposits, and scheduled amortization and prepayment
of loans.  In addition,  we supplement our funding needs by borrowing funds from
the  Federal  Home Loan Bank  ("FHLB") of Atlanta.  As of March 31,  2002,  such
borrowed funds totaled $52 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 March 31, 2003, is  approximately  $77.4  million.  To the
extent that these deposits do not remain with us upon maturity,  we believe that
we can  replace  these  funds  with  other  deposits,  FHLB  advances  or  other
borrowings.  It has been  our  experience  that a  substantial  portion  of such
maturing deposits remain with us.

         At  March  31,  2002,  we had  loan  commitments  outstanding  of $20.7
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       Six Months Ended
                                                          March 31                 March 31
                                                          --------                 --------
                                                     2002(1)     2001(1)      2002(1)    2001(1)
                                                     -------     -------      -------    -------
                                                                     (Unaudited)
<S>                                                <C>        <C>            <C>       <C>
Basic earnings per share .......................      $0.43      $0.29          $0.76     $0.53
Diluted earnings per share......................      $0.41      $0.28          $0.73     $0.51
Return on average assets........................      1.46%      1.19%          1.36%     1.13%
Return on average equity........................     14.32%     10.14%         12.93%     9.52%
Interest rate spread............................      2.77%      2.79%          2.86%     2.71%
Net interest margin.............................      3.41%      3.55%          3.51%     3.50%
Noninterest expense to average assets...........      1.90%      1.91%          2.01%     1.97%
Net charge-offs to average outstanding loans....
                                                       .05%        --%           .03%       --%
</TABLE>

<TABLE>
<CAPTION>

                                                            March 31        September 30
                                                              2002             2001
                                                              ----             ----
                                                               (Dollars in thousands)
                                                                    (Unaudited)
<S>                                                          <C>              <C>
Nonaccrual loans.......................................        $839             $514
Repossessed real estate................................          26               94
                                                                 --               --
Total nonperforming assets.............................        $865             $608
                                                               ====             ====


Allowance for credit losses to nonperforming assets....      126.2%          161.35%
Nonperforming loans to total loans.....................       0.41%            0.28%
Nonperforming assets to total assets...................       0.36%            0.28%


Book value per share ..................................      $11.54           $11.29
                                                             ======           ======
</TABLE>

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

                                       12
<PAGE>

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

Item 1.           Legal Proceedings
                  -----------------
                    Neither  the  Corporation  nor the Bank was  engaged  in any
                    legal  proceedings  of a material  nature at March 31, 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
                  ----------------------------------------------------
                      The annual meeting of  shareholders of the Corporation was
                      held on  January  23,  2002 and the  following  items were
                      acted upon:
                           Election of Directors Harry W. Garrett and Harold K.
                           Neal for terms of three years.  They were elected  as
                           indicated below:
                                                      Votes        Votes
                                                       For        Withheld
                                                       ---        --------
                              Harry W. Garrett       1,665,483     10,766
                              Harold K. Neal         1,655,974     20,275

                           Ratification of the appointment of BDO Seidman,  LLP,
                           as the  Corporation's  auditors  for the 2002  fiscal
                           year. BDO Seidman, LLP, was ratified as follows:
                                            Votes         Votes
                                             For         Against    Abstain
                                             ---         -------    -------
                                           1,668,893       200        200

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*

                   (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.

                                       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:    May 9, 2002                      By:      /s/Harold K. Neal
                                                   -----------------------------
                                                   Harold K. Neal
                                                   President and
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)


Date:    May 9, 2002                      By:     /s/James W. Smith
                                                   -----------------------------
                                                   James W. Smith
                                                   Vice President and Treasurer
                                                   (Principal Accounting and
                                                      Financial Officer)


                                       14