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, 2001

                                       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 7, 2001: 2,107,660

<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

                       Consolidated Statements of Financial Condition at March 31, 2001
                       (unaudited) and September 30, 2000                                                   3

                       Consolidated Statements of Income for the three and six months ended
                       March 31, 2001 and 2000 (unaudited)                                                  4

                       Comprehensive Statement of Income for the three and six months ended
                       March 31, 2001 and 2000 (unaudited)                                                  5

                       Consolidated Statements of Cash Flows for the six months ended March 31,
                       2001 and 2000 (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
                                                                                           2001              2000
                                                                                         --------          --------
                                                                                              (In Thousands)
                                                                                               (Unaudited)
<S>                                                                                   <C>                 <C>
Assets
------
Cash and cash equivalents......................................................         $  5,538            $  5,512
Investment securities held to maturity (estimated market value of
$513 and $506).................................................................              506                 507
Marketable equity securities available for sale, at market value...............               50                  50
Investment securities available for sale, at market value......................            7,082               6,855
Investment in Federal Home Loan Bank stock, at cost............................            2,100               1,900
Loans receivable, net..........................................................          180,750             169,592
Foreclosed real estate, net....................................................               26                  --
Property and equipment, net....................................................            1,349               1,365
Accrued interest receivable....................................................            1,126               1,133
Deferred income taxes..........................................................              183                 270
Other assets...................................................................              594                 357
                                                                                        --------            --------
    Total assets...............................................................         $199,304            $187,541
                                                                                        ========            ========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits.......................................................................         $134,813            $129,770
Advances from the Federal Home Loan Bank.......................................           40,000              34,000
Advances from borrowers for taxes and insurance................................              642                 694
Dividends payable..............................................................              234                 215
Other liabilities..............................................................              331                 306
                                                                                        --------            --------
    Total liabilities..........................................................          176,020             164,985
                                                                                        --------            --------

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 2,130,560 at March 31, 2001 and 2,149,270 at September 30, 2000
                                                                                             213                 215
Additional paid in capital.....................................................           10,411              10,466
Retained earnings, substantially restricted....................................           13,099              12,503
Accumulated other comprehensive income (loss)..................................               20                (122)
Less stock acquired by ESOP and RRP............................................             (459)               (506)
                                                                                        --------            --------
    Total stockholders' equity.................................................           23,284              22,556
                                                                                        --------            --------
    Total liabilities and stockholders' equity.................................         $199,304            $187,541
                                                                                        ========            ========
</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
        .                                             2001     2000         2001     2000
                                                      ----     ----         ----     ----
                                                 (Dollars in Thousands, Except Per Share Data)
<S>                                              <C>      <C>          <C>      <C>
Interest Income:
 Loans ...........................................   $3,555   $3,018       $6,946   $5,886
 U.S. Government Obligations including agencies...      119      128          242      303
 Other investments, including overnight deposits..       82       72          168      136
                                                     ------   ------       ------   ------
    Total interest income ........................    3,756    3,218        7,356    6,325
                                                     ------   ------       ------   ------
Interest Expense:
 Deposits ........................................    1,482    1,225        2,967    2,362
 Borrowed funds ..................................      590      475        1,125      951
                                                     ------   ------       ------   ------
    Total interest expense .......................    2,072    1,700        4,092    3,313
                                                     ------   ------       ------   ------
    Net interest income ..........................    1,684    1,518        3,264    3,012
Provision for credit losses ......................       45       30           75       60
                                                     ------   ------       ------   ------
 Net interest income after provision for credit
 Losses ..........................................    1,639    1,488        3,189    2,952
                                                     ------   ------       ------   ------
Noninterest income:
 Service charges and fees on loans ...............      111      127          231      296
 Other customer service fees and commissions .....       98      105          194      207
 Other ...........................................       36       18           46       33
                                                     ------   ------       ------   ------
    Total noninterest income .....................      245      250          471      536
                                                     ------   ------       ------   ------
Noninterest expense:
 Personnel compensation and benefits .............      493      476        1,010      979
 Occupancy and equipment .........................      104       74          209      147
 Data Processing .................................      121      105          239      207
 Federal insurance of accounts ...................        7       10           13       26
 Advertising .....................................       27       41           63       73
 Professional fees ...............................       71       48          153       91
 Other ...........................................      116      110          214      227
                                                     ------   ------       ------   ------
    Total noninterest expense ....................      939      864        1,901    1,750
                                                     ------   ------       ------   ------
    Income before income taxes ...................      945      874        1,759    1,738
 Provision for income taxes ......................      358      329          667      682
                                                     ------   ------       ------   ------
   Net income ....................................   $  587   $  545       $1,092   $1,056
                                                     ======   ======       ======   ======

Basic earnings per share .........................   $ 0.29   $ 0.27       $ 0.53   $ 0.51
                                                     ======   ======       ======   ======

Diluted earnings per share .......................   $ 0.28   $ 0.26       $ 0.51   $ 0.49
                                                     ======   ======       ======   ======
</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
                                                   2001      2000          2001      2000
                                                 -------   -------       -------   -------
                                               (Dollars in Thousands, Except Per Share Data)
<S>                                             <C>       <C>           <C>       <C>
Net Income ...................................   $   587   $   545       $ 1,092   $ 1,056

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
   available for sale ........................        36         4           142       (68)
                                                 -------   -------       -------   -------
Comprehensive income .........................   $   623   $   549       $ 1,234   $   988
                                                 =======   =======       =======   =======
</TABLE>

                                       5
<PAGE>


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

<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                   March 31
                                                                              2001       2000
                                                                              ----       ----
                                                                         (Dollars in Thousands)

<S>                                                                     <C>         <C>
Operating activities:
 Net Income ...........................................................   $  1,092    $  1,056
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses ........................................         75          60
   Provision for depreciation and amortization ........................         90          70
   Amortization of investment security premiums and accretion of
   discounts, net .....................................................          4           2
   (Increase) decrease in deferred income taxes .......................         87         (42)
   (Gain) loss on sale of loans, investments and foreclosed real estate         (3)         --
   (Increase) decrease in accrued interest receivable .................          7         (70)
   (Increase) decrease in other assets ................................       (237)       (170)
   Increase (decrease) in other liabilities ...........................         25        (917)
                                                                          --------    --------
    Net cash provided by (used in) operating activities ...............      1,140         (11)
                                                                          --------    --------
Investing activities:
   Proceeds from the sale of available for sale investment securities .      2,500       4,664
   Proceeds from maturities of available for sale investment securities      2,500         509
   Purchases of available for sale investment securities ..............     (5,000)       (560)
   Purchase of Federal Home Loan Bank stock ...........................       (200)       (100)
   Net increase in loans to customers .................................    (11,233)    (16,017)
   Principal collected on mortgage-backed securities ..................          1           1
   Purchases of premises, equipment and leasehold improvements ........        (74)       (118)
   Proceeds from the sale of REO ......................................         --          --
                                                                          --------    --------
    Net cash provided by (used in) investing activities ...............    (11,506)    (11,621)
                                                                          --------    --------
Financing activities:
   Exercise of stock options ..........................................         --          --
   Allocation of ESOP and RRP shares ..................................         18         134
   Dividends paid .....................................................       (430)       (390)
   Net increase (decrease) in customer deposits .......................      5,043       8,976
   Proceeds from (repayments of) advances and other borrowed money ....      6,000       4,000
   Repurchase of stock ................................................       (170)       (264)
   Purchase of stock by ESOP and RRP ..................................         --          --
   Net increase (decrease) in advance payments from borrower for taxes
   and insurance ......................................................        (52)         46
   Other, net .........................................................        (17)         50
                                                                          --------    --------
    Net cash provided by financing activities .........................     10,392      12,552
                                                                          --------    --------
    Increase (decrease) in cash and cash equivalents ..................         26         920
Cash and cash equivalents at beginning of period ......................      5,512       2,744
                                                                          --------    --------
Cash and cash equivalents at end of period ............................   $  5,538    $  3,664
                                                                          ========    ========
</TABLE>

                                       6
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
          Notes to Unaudited Interim Consolidated Financial Statements
                                 March 31, 2001


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, 2001
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, 2000.

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


Earnings per share are calculated as follows:

<TABLE>
<CAPTION>
                                                        Three Months Ended         Six Months Ended
                                                              March 31                  March 31
                                                      -----------------------   -----------------------
                                                          2001         2000         2001         2000
                                                      ----------   ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>          <C>
Basic Earnings Per Share:
-------------------------
Net Income ........................................   $  587,000   $  545,000   $1,092,000   $1,056,000
                                                      ==========   ==========   ==========   ==========
Average Shares Outstanding, Net of
Unallocated ESOP Shares (61,334 and 77,334
at March 31, 2001 and 2000, respectively)..........    2,070,618    2,072,975    2,078,465    2,081,867
                                                      ==========   ==========   ==========   ==========
Basic Earnings Per Share ..........................   $     0.29   $     0.27   $     0.53   $     0.51
                                                      ==========   ==========   ==========   ==========

Diluted Earnings Per Share;
---------------------------
Net Income ........................................   $  587,000   $  545,000   $1,092,000   $1,056,000
                                                      ==========   ==========   ==========   ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (61,334 and 77,334
at March 31, 2001 and 2000,  respectively) ........    2,070,618    2,072,975    2,078,465    2,081,867
  Dilutive effect of RRP Plan shares ..............          505        1,087          499        1,245
  Dilutive effect of Stock Options ................       73,029       74,071       71,717       84,122
                                                      ----------   ----------   ----------   ----------
Average Shares Outstanding ........................    2,144,152    2,148,133    2,150,681    2,167,234
                                                      ==========   ==========   ==========   ==========
Diluted Earnings Per Share ........................   $     0.28   $     0.26   $     0.51   $     0.49
                                                      ==========   ==========   ==========   ==========
</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.  We undertake no obligation to publicly release the
results of any revision to those forward-looking statements which may be made to
reflect  events  or  circumstances  after  the date  hereof  or to  reflect  the
occurrence of unanticipated events.

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

         At March 31, 2001,  consolidated  assets  totaled  $199.3  million,  an
increase of $11.8 million from September 30, 2000. Asset increased primarily due
to the growth in the loan portfolio,  which increased $11.2 million. Funding for
the loan growth was provided by a $5.0 million rise in deposits and a $6 million
increase in FHLB advances.

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

         General. Net income for the three months ended March 31, 2001 increased
$42,000, or 7.7%, to $587,000 from $545,000 for the comparable 2000 period.. Net
income for the six months ended March 31, 2001, was  $1,092,000,  an increase of
$36,000 or 3.4% from the $1,056,000  earned in the comparable  2000 period.  The
increase in net income for the three and six months  ended March 31,  2001,  was
primarily caused by the rise in net interest income.

         Interest  Income.  Interest  income  totaled $3.8 million for the three
months ended March 31, 2001, a $538,000  increase  from the $3.2 million for the
comparable  2000 period.  A $20.3 million  increase in average loans  receivable
combined  with a 34 basis  point rise in the yield on average  loans  receivable
were the primary reasons for the increase.

         For the six months ended March 31, 2001,  interest  income totaled $7.4
million,  a $1.1 million  increase from the $6.3 million for the comparable 2000
period.  An increase of $20.4  million in average loans  receivable  for the six
months  ended  March 31, 2001  compared to the same six months of 2000  combined
with a 33 basis  improvement in the yield on average loans  receivable  were the
primary  factors  for the higher  interest  income.

                                       8
<PAGE>

         Interest  Expense.  Interest expense totaled $2.1 million for the three
months ended March 31, 2001, a $372,000  increase  from the $1.7 million for the
comparable  2000 period.  A 49 basis point rise in the cost of average  interest
bearing  deposits  plus an  increase  of $9.9  million  in the  average  volume,
combined with a $7.8 million  increase in average FHLB advances were the primary
reasons for the increase.

         For the six months ended March 31, 2001,  interest expense totaled $4.1
million,  a $779,000  increase  from the $3.3  million for the  comparable  2000
period.  Interest on deposits reflected a $605,000 increase,  due to both higher
average  volume and higher  average  cost,  and interest on FHLB advances was up
$174,000 due primarily due an increase in average borrowings.

         Net Interest  Income.  For the three  months ended March 31, 2001,  net
interest  income was $1.7  million,  up $166,000  from the net  interest  income
earned  in the same  period  of  2000.  An 11.8%  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, 2001, the net interest  spread and
margin remained relatively constant at 2.79% and 3.55%,  respectively,  compared
to 2.79% and 3.56%, respectively for the same period of 2000.

         For the six months ended March 31, 2001,  net interest  income was $3.3
million,  up $252,000 from the net interest  income earned in the same period of
2000.  For the six months  ended March 31,  2001,  average  earning  assets were
$189.7  million,  up 11.3% from the average for the same period of 2000. For the
six months ended March 31, 2001,  the net interest  spread and margin were 2.71%
and  3.50%,  respectively,  compared  to 2.84% and 3.58% for the same  period of
2000.

         Provision  for Loan Losses.  The  provision for loan losses was $45,000
for the three months ended March 31, 2001, compared to $30,000 for the same 2000
period.  For the six months ended March 31, 2001 the  provision  for loan losses
was $75,000  compared to $60,000 for the same period of 2000.  The allowance for
loan losses at March 31, 2001 was $911,000 compared to $850,000 at September 30,
2000. This increase combined with a decline in the level of nonperforming  loans
raised the ratio of the  allowance  for loan losses to  nonperforming  assets to
121.40% at March 31, 2001from 88.55% at September 30, 2000.  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 regarding future events, and there can be no
assurance  that  additional  provisions  for loan losses will not be required in
future periods.

         Noninterest  Income.  For  the  three  months  ended  March  31,  2001,
noninterest  income was $245,000,  down 2% from the $250,000 for the  comparable
2000 period. Service charges and fees on loans were down $16,000 to $111,000 for
the second  quarter of fiscal 2001 from  $127,000 for the  comparable  period of
fiscal 2000 due  primarily  to a lower  number and dollar  amount of loans being
closed.  Other  noninterest  income  increased  $18,000 to $36,000 for the three
months ended March 31, 2001 from $18,000 for the  comparable  2000 period due to

                                       9
<PAGE>

increased  commissions  on the sale of mortgage life insurance and a $8,000 gain
on the sale of available for sale securities.

         For the six  months  ended  March  31,  2001,  noninterest  income  was
$471,000  compared to $536,000 for the same period of 2000.  Service charges and
fees on loans was down  $65,000  due to the lower  number and  dollar  amount of
loans closed.  Other customer service fees and commissions were down $13,000 due
to lower charges on transaction accounts,  while other noninterest income was up
$13,000 due to increased  commissions on the sale of mortgage  insurance and the
gain on the sale of available for sale securities.

         Noninterest Expense. Noninterest expense totaled $939,000 for the three
months ended March 31,  2001,  compared to $864,000 for the same three months of
fiscal 2000.  Occupancy  and  equipment  expense was up $30,000 due primarily to
expenses  associated  with the  operation  of the New London  branch,  which was
opened  in  September  of 2000.  Data  processing  expense  was up  $16,000  due
primarily to increases in transaction volume.  Professional fees were up $23,000
due to higher legal expenses.

         For the six months  ended March 31,  2001,  noninterest  expenses  were
$1,901,000,  compared to $1,750,000 for the comparable period of 2000. Occupancy
and equipment  expense was up $62,000 due primarily to expenses  associated with
the New London office.  Data processing expenses were up $32,000 to increases in
volume and professional fees were up $62,000 due to higher legal expenses.

         Provision for Income Taxes. The provision for income taxes was $358,000
for the three  months  ended  March  31,  2001,  up  $29,000  from the  $329,000
provision  recorded in the same three months of fiscal 2000.  The primary reason
for the increase was the higher level of taxable income.

         For the six months ended March 31, 2001, the provision for income taxes
was  $667,000,  down 2.2% from the  $682,000  provision  for the same  period of
fiscal  2000.  A lower  level of taxable  income is the  primary  reason for the
decline.

                                       10
<PAGE>



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

The following table presents the Bank's  compliance with its regulatory  capital
requirements of March 31, 2001. (Dollar amounts in thousands).


                                                           March 31, 2001
                                                          ----------------
                                                                   Percentage
                                                                    of assets
                                                                  ------------

GAAP Capital....................................     $22,470           11.29%
                                                     =======           ======

Tangible capital................................     $22,452           11.28%
Tangible capital requirement....................      $2,985            1.50%
                                                      ------            -----
Excess..........................................     $19,467            9.78%
                                                     =======            =====

Core capital....................................     $22,452           11.28%
Core capital requirement........................       7,959            4.00%
                                                       -----            -----
Excess..........................................     $14,493            7.28%
                                                     =======            =====

Total risk-based capital (1)....................     $23,290           18.51%
Total risk-based capital requirement (1)........      10,068            8.00%
                                                      ------            -----
Excess..........................................     $13,222           10.51%
                                                     =======           ======

-----------------------------
(1)      Based on risk-weighted assets of $125,850

     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,  2001,  such
borrowed funds totaled $40 million. Loan payments and prepayments,  deposits and
borrowings are greatly influenced by general interest rates, economic conditions
and competition.

         The amount of certificate accounts which are scheduled to mature during
the next twelve months ending March 31, 2001, is approximately $49.3 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,  2001,  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
                                                                           --------          --------
                                                                       2001(1)   2000(1)  2001(1)   2000(1)
                                                                       -------   -------  -------   -------
                                                                                    (Unaudited)

<S>                                                                   <C>       <C>      <C>      <C>
Basic earnings per share ........................................      $ 0.29    $ 0.27   $ 0.53   $ 0.51
Diluted earnings per share ......................................      $ 0.28    $ 0.26   $ 0.51   $ 0.49
Return on average assets ........................................        1.19%     1.24%    1.13%    1.22%
Return on average equity ........................................       10.14%    10.17%    9.52%    9.91%
Interest rate spread ............................................        2.79%     2.79%    2.71%    2.84%
Net interest margin .............................................        3.55%     3.56%    3.50%    3.58%
Noninterest expense to average assets ...........................        1.91%     1.97%    1.97%    2.02%
Net charge-offs to average outstanding loans.....................          --%     0.03%      --%    0.02%

</TABLE>

<TABLE>
<CAPTION>
                                                                                    March 31       September 30
                                                                                      2001             2000
                                                                                    --------         --------
                                                                                    (Dollars in thousands)
                                                                                          (Unaudited)
<S>                                                                                 <C>              <C>
Nonaccrual loans............................................................           $708             $960
Repossessed real estate...................................................               26               --
                                                                                         --               --
Total nonperforming assets................................................             $734             $960
                                                                                       ====             ====

Allowance for credit losses to nonperforming assets.......................            124.1%           88.55%
Nonperforming loans to total loans........................................             0.39%            0.57%
Nonperforming assets to total assets......................................             0.37%            0.51%


Book value per share .....................................................           $10.93           $10.49
                                                                                     ======           ======
</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, 2001.
                    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  24,  2001 and the  following  items  were
                     acted upon:
                          Election of Director Jenny T. Allman for a term of two
                          years and Hugh H. Bond,  William T. Powell  and  Macon
                          C. Putney for terms of three years.  All were  elected
                          as indicated below:
                                                             Votes       Votes
                                                              For       Withheld
                                                              ---       --------
                                    Jenny T. Allman        1,724,234     48,396
                                    Hugh H. Bond           1,730,448     42,182
                                    William T. Powell      1,726,290     46,340
                                    Macon C. Putney        1,730,917     41,893

                           Ratification of the appointment of BDO Seidman,  LLP,
                           as the  Corporation's  auditors  for the 2001  fiscal
                           year. BDO Seidman, LLP, was ratified as follows:
                                                Votes          Votes
                                                 For          Against    Abstain
                                                 ---          -------    -------
                                               1,753,107        2,413    17,110

Item 5.           Other Information
                  -----------------
                     Not applicable.
Item 6.           Exhibits and Reports on Form 8-K
                  --------------------------------
<TABLE>
<CAPTION>
               <S>    <C>
                  (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.
</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:    May 11, 2001                   By:      /s/ Harold K. Neal
                                                 -------------------------------
                                                 Harold K. Neal
                                                 President and
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)


Date:    May 11, 2001                    By:     /s/ James W. Smith
                                                 -------------------------------
                                                 James W. Smith
                                                 Vice President and Treasurer
                                                 (Principal Accounting and
                                                    Financial Officer)


                                       14