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 December 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 January 30, 2002:  2,042,454

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY

                              INDEX TO FORM 10-QSB


PART I    FINANCIAL INFORMATION                                             PAGE
------    ---------------------                                             ----

Item 1    Financial Statements

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

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

          Consolidated Statements of Comprehensive Income for the
          three months ended December 31, 2001 and 2000 (unaudited)            5

          Consolidated Statements of Cash Flows for the three months
          ended December 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                                                   12

Item 2    Changes in Securities                                               12

Item 3    Defaults upon Senior Securities                                     12

Item 4    Submission of Matters to a Vote of Security Holders                 12

Item 5    Other Information                                                   12

Item 6    Exhibits and Reports on Form 8-K                                    12

SIGNATURES                                                                    13


                                       2
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                 Consolidated Statements of Financial Condition
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            December 31 September 30
                                                                                 2001         2001
                                                                            ----------- ------------
                                                                                (In Thousands)
<S>                                                                       <C>          <C>
Assets
------
Cash and cash equivalents ...............................................   $   9,442    $  16,761
Investment securities held to maturity (estimated market value of
$518 and $528) ..........................................................         504          504
Investment securities available for sale, at market value ...............      14,963        7,132
Investment in Federal Home Loan Bank stock, at cost .....................       2,450        2,300
Loans receivable, net ...................................................     192,331      184,405
Foreclosed real estate, net .............................................          26           94
Property and equipment, net .............................................       1,256        1,273
Accrued interest receivable .............................................       1,271        1,093
Deferred income taxes ...................................................         225          159
Other assets ............................................................         574          584
                                                                            ---------    ---------
    Total assets ........................................................   $ 223,042    $ 214,305
                                                                            =========    =========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits ................................................................   $ 150,361    $ 149,167
Advances from the Federal Home Loan Bank ................................      48,000       40,000
Advances from borrowers for taxes and insurance .........................         447          717
Dividends payable .......................................................         225          227
Other liabilities .......................................................         698          891
                                                                            ---------    ---------
    Total liabilities....................................................     199,731      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 2,042,774 at December 31, 2001 and 2,063,453 at
September 30, 2001 ......................................................         204          206
Additional paid in capital ..............................................      10,104       10,171
Retained earnings, substantially restricted .............................      13,443       13,275
Accumulated other comprehensive income (loss) ...........................         (48)          60
Less stock acquired by ESOP and RRP .....................................        (392)        (409)
                                                                            ---------    ---------
    Total stockholders' equity...........................................      23,311       23,303
                                                                            ---------    ---------
    Total liabilities and stockholders' equity ..........................   $ 223,042    $ 214,305
                                                                            =========    =========
</TABLE>

See notes to consolidated financial statements

                                       3
<PAGE>

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

                                                             Three Months Ended
                                                                December 31
                                                             2001           2000
                                                           ------         ------
                                                          (Dollars in Thousands,
                                                          Except Per Share Data)
Interest Income:
 Loans..............................................       $3,580         $3,391
 U.S. Government Obligations including agencies.....          290            160
 Other investments, including overnight deposits..             48             49
                                                           ------         ------
    Total interest income...........................        3,918          3,600
                                                           ------         ------
Interest Expense:
 Deposits...........................................        1,424          1,485
 Borrowed funds.....................................          597            535
                                                           ------         ------
    Total interest expense..........................        2,021          2,020
                                                           ------         ------
    Net interest income.............................        1,897          1,580
Provision for credit losses.........................           45             30
                                                           ------         ------
 Net interest income after provision for credit
 Losses.............................................        1,852          1,550
                                                           ------         ------
Noninterest income:
 Service charges and fees on loans..................          249            120
 Other customer service fees and
 Commissions........................................          124             96
 Other..............................................           14             10
                                                           ------         ------
    Total noninterest income........................          387            226
                                                           ------         ------
Noninterest expense:
 Personnel compensation and benefits................          685            517
 Occupancy and equipment............................          104            105
 Data Processing....................................          125            118
 Federal insurance of accounts......................            6              6
 Advertising........................................           31             36
 Professional fees..................................           80             82
 Other..............................................          116             98
                                                           ------         ------
    Total noninterest expense.......................        1,147            962
                                                           ------         ------
    Income before income taxes......................        1,092            814
 Provision for income taxes.........................          415            309
                                                           ------         ------
   Net income.......................................       $  677         $  505
                                                           ======         ======

Basic earnings per share............................        $0.33          $0.24
                                                            =====          =====

Diluted earnings per share..........................        $0.32          $0.23
                                                            =====          =====

See notes to consolidated financial statements

                                       4
<PAGE>

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


                                                              Three Months Ended
                                                                 December 31
                                                             2001           2000
                                                             ----           ----
                 .                                        (Dollars in Thousands,
                                                          Except Per Share Data)

Net Income..............................................     $677           $505

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
    available for sale.................................      (108)           106
                                                             ----           ----
Comprehensive income....................................     $569           $611
                                                             ====           ====


                                       5
<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                         ------December 31------
                                                                              2001        2000
                                                                              ----        ----
                                                                          (Dollars in Thousands)
<S>                                                                     <C>         <C>
Operating activities:
 Net Income ...........................................................   $    677    $    505
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses ........................................         45          30
   Provision for depreciation and amortization ........................         42          45
   Amortization of investment security premiums and accretion of
   discounts, net .....................................................         (5)         (2)
   (Gain) loss on sale of loans, investments and foreclosed
      real estate......................................................         (8)          -
   (Increase) decrease in accrued interest receivable .................       (178)        (98)
   (Increase) decrease in other assets ................................         10        (465)
   Increase (decrease) in other liabilities ...........................       (193)        869
                                                                          --------    --------
    Net cash provided by (used in) operating activities ...............        390         884
                                                                          --------    --------

Investing activities:
   Proceeds from the maturities of investments available for sale .....      1,014       1,000
   Purchases of investment securities available for sale ..............     (9,000)     (1,500)
   Purchase of Federal Home Loan Bank stock ...........................       (150)        (50)
   Net increase in loans to customers .................................     (7,926)     (6,068)
   Principal collected on mortgage-backed securities ..................          1           1
   Purchases of premises, equipment and leasehold improvements ........        (25)        (27)
   Net (increase) decrease in foreclosed real estate ..................         68         (26)
                                                                          --------    --------
    Net cash provided by (used in) investing activities ...............    (16,018)     (6,670)
                                                                          --------    --------
Financing activities:
   Dividends paid .....................................................       (227)       (215)
   Net increase (decrease) in customer deposits .......................      1,194         (14)
   Proceeds from (repayments of) advances and other borrowed money ....      8,000       5,000
   Repurchase of stock ................................................       (462)       (116)
   Stock options exercised ............................................         74           -
   Net increase (decrease) in advance payments from borrower
     for taxes and insurance ..........................................       (270)       (316)
                                                                          --------    --------
    Net cash provided by financing activities .........................      8,309       4,339
                                                                          --------    --------
    Increase (decrease) in cash and cash equivalents ..................     (7,319)     (1,447)
Cash and cash equivalents at beginning of period ......................     16,761       5,512
                                                                          --------    --------
Cash and cash equivalents at end of period ............................   $  9,442    $  4,065
                                                                          ========    ========
</TABLE>
See notes to consolidated financial statements

                                       6
<PAGE>

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

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


Earnings per share is calculated as follows:

                                                  Three Months Ended
                                                      December 31
                                                   2001         2000
                                                ----------   ----------
Basic Earnings Per Share:
-------------------------
Net Income ..................................   $  677,000   $  505,000
                                                ==========   ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (45,334 and 61,334 at
December 31, 2001 and 2000, respectively) ...    2,028,059    2,086,141
                                                ==========   ==========

Basic Earnings Per Share ....................   $     0.33   $     0.24
                                                ==========   ==========

Diluted Earnings Per Share;
---------------------------
Net Income ..................................   $  677,000   $  505,000
                                                ==========   ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (45,334 and 61,334
At December 31, 2001 and 2000, respectively)     2,028,059    2,086,141
  Dilutive effect of RRP Plan shares ........          370          444
  Dilutive effect of Stock Options ..........       86,810       64,938
                                                ----------   ----------
Average Shares Outstanding ..................    2,115,239    2,151,523
                                                ==========   ==========

Diluted Earnings Per Share ..................   $     0.32   $     0.23
                                                ==========   ==========


                                       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 December 31, 2001,  consolidated  assets totaled $223.0 million,  an
increase of $8.7  million  from  September  30, 2001.  The asset  expansion  was
reflected in growth of the loan portfolio which increased $7.9 million.  Funding
for the asset growth was provided by an $8.0 million  increase in FHLB  advances
and a $1.2 million increase in deposits.

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

         General.  Net income  for the three  months  ended  December  31,  2001
increased  $172,000 to $677,000  from  $505,000  for the  comparable  quarter of
fiscal 2001. A 20.1% increase in net interest income and an increase of 71.2% in
noninterest revenues,  partially offset by a 19.3% rise in noninterest expenses,
resulted in the higher level of earnings.

         Interest  Income.  Interest  income  totaled $3.9 million for the three
months ended  December 31,  2001,  compared to $3.6 million  earned in the three
months ended December 31, 2000.  Interest income on loans increased $189,000 due
to a 9.2%  increase  in average  volume,  partially  offset by a 26 basis  point
decline  in the  yield,  primarily  due  to  lower  market  rates.  Interest  on
investments  increased  $129,000 due  primarily  to a $10.8  million rise in the
level of average investment securities.

         Interest  Expense.  Interest expense totaled $2.0 million for the three
months ended December 31, 2001,  relatively  unchanged from the interest expense
for the three months ended December 31, 2000. An increase of $62,000 in interest
on FHLB advances,  due to a higher average outstanding,  was offset by a $61,000
decline in interest on deposits.  The  reduction in interest on deposits was due
to a 79 basis  point  decline  in the  average  rate  paid on  interest  bearing
liabilities, partially offset by a 13.9% rise in the average balance of interest
bearing liabilities.

                                       8
<PAGE>

         Net Interest Income.  For the three months ended December 31, 2001, net
interest  income was $1.9  million,  up $317,000  from the net  interest  income
earned in the same three months of 2000. For the three months ended December 31,
2001,  our net interest rate spread and net interest  margin  increased to 2.94%
and 3.61%, respectively,  compared to 2.64% and 3.46%, respectively for the same
period of 2000.

         Provision  for Loan Losses.  The  provision for loan losses was $45,000
for the three months ended  December  31,  2001,  up $15,000 from the  provision
recorded in the comparable  quarter of fiscal 2001.  Increases in the commercial
and consumer loan portfolios precipitated the increase in the provision for loan
losses for the three months ended  December 31, 2001.  Based upon the quality of
the Bank's loan portfolio,  the relatively stable local economy and the level of
nonperforming  assets,  management  believes  the  allowance  for loan losses is
adequate to absorb any anticipated credit losses at December 31, 2001.  However,
assessment of the adequacy of the allowance for loan losses involves  subjective
judgments and thus there can be no assurance that additional provisions for loan
losses will not be required.

         Noninterest  income.  For the three  months  ended  December  31, 2001,
noninterest  income was $387,000,  up 70.8% from the $226,000 for the comparable
2000 period.  Service charges and fees on loans were up $129,000 to $249,000 for
the first  quarter of fiscal 2002 from  $120,000  for the  comparable  period of
fiscal 2001 due  primarily  to a 55.7%  increase in the number of loans  closed.
Other fees and commissions  were up 29.4% to $124,000 for the three months ended
December 31, 2001 from $96,000 for the  comparable  period of 2000 due primarily
to a $19,000 increase in income from checking.

         Noninterest  expense.  Noninterest expense was $1,147,000 for the three
months December 31, 2001, up 19.3% from $962,000 for the comparable 2000 period.
Compensation and benefits totaled  $685,000,  up 32.5% from the $517,000 for the
three months ended December 31, 2000,  primarily due to payments  related to the
Bank's employee incentive plan,  additional  staffing and merit increases.  Data
processing  expense was $125,000,  up 6.1% from the comparable 2000 period,  due
primarily to an increased  volume of transactions.  Advertising  expense totaled
$31,000  for the three  months  ended  December  31,  2001,  down 15.0% from the
comparable  period of 2000 which  included  promotions for the New London branch
opening.

         Provision for Income Taxes. The provision for income taxes was $415,000
for the three  months  ended  December  31,  2001,  up 34.1%  from the  $309,000
provision  recorded in the same three months of fiscal 2001.  The primary reason
for the increase was the increased level of taxable income.

                                       9
<PAGE>

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

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

                                                        December 31, 2001
                                                        ------------------
                                                                  Percentage
                                                                   of assets
                                                                ------------

GAAP Capital..................................       $21,799            9.78%
                                                     =======           =====

Tangible capital..............................       $21,847            9.80%
Tangible capital requirement..................         3,343            1.50%
                                                     -------           -----
Excess........................................       $18,504            8.30%
                                                     =======           =====

Core capital..................................       $21,847            9.80%
Core capital requirement......................         8,916            4.00%
                                                     -------           -----
Excess........................................       $12,931            5.80%
                                                     =======           =====

Total risk-based capital (1)..................       $22,814           16.45%
Total risk-based capital requirement (1)......        11,093            8.00%
                                                     -------           -----
Excess........................................       $11,721            8.45%
                                                     =======           =====

-----------------------------
(1)      Based on risk-weighted assets of $138,667

         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 increased  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 December 31, 2001,  such
borrowed funds totaled $48 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  December 31, 2002,  is  approximately  $71
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 remains with us.

         At December  31, 2001,  we had loan  commitments  outstanding  of $26.9
million.  These commitments will be funded from deposit inflows, loan repayments
and borrowings.

                                       10
<PAGE>


                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                              Key Operating Ratios

                                                        Three Months Ended
                                                            December 31
                                                      -----------------------
                                                          2001(1)    2000(1)
                                                          -------    -------
                                                              (Unaudited)

Basic earnings per share ..........................   $     0.33 $     0.24
Diluted earnings per share ........................   $     0.32 $     0.23
Return on average assets ..........................         1.25%      1.07%
Return on average equity ..........................        11.57%      8.88%
Interest rate spread ..............................         2.94%      2.64%
Net interest margin ...............................         3.61%      3.46%
Noninterest expense to average assets .............         2.12%      2.03%
Net charge-offs to average outstanding loans.......          .02%       .01%



                                                      December 31   September 30
                                                         2001           2001
                                                      --------      ------------
                                                        (DOLLARS IN THOUSANDS)
                                                             (Unaudited)

Nonaccrual loans ..................................   $   888        $   514
Repossessed real estate ...........................        26             94
                                                      -------        -------
Total nonperforming assets ........................   $   914        $   608
                                                      =======        =======


Allowance for credit losses to nonperforming assets    111.51%        161.35%
Nonperforming loans to total loans ................      0.46%          0.28%
Nonperforming assets to total assets ..............      0.41%          0.28%


Book value per share ..............................   $ 11.41        $ 11.29
                                                      =======        =======

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

                                       11
<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 December 31, 2001. From time
               to time, the  Corporation is a party to legal  proceedings in the
               ordinary  course of  business  wherein it enforces  its  security
               interest in loans.

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

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

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


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

Item 6.        Exhibits and Reports on Form 8-K
               --------------------------------
               (a)     List of Exhibits:
<TABLE>
<CAPTION>
                   <S>      <C>
                        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 Harold K. Neal*
</TABLE>

               (b)     Reports on Form 8-K
                         Not applicable.


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


                                       12
<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:    February 4, 2002                   By:  /s/ Harold K. Neal
                                                 ------------------
                                                 Harold K. Neal
                                                 President and
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)


Date:    February 4, 2002                   By:  /s/ James W. Smith
                                                 ------------------
                                                 James W. Smith
                                                 Vice President and Treasurer
                                                 (Principal Accounting and
                                                    Financial Officer)



                                       13