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, 2000
                                       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 8, 2000: 2,149,270 shares

<PAGE>

                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES

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

       PART I          FINANCIAL INFORMATION                                                              PAGE
       ------          ---------------------                                                              ----
<S>                 <C>                                                                                 <C>

       Item 1          Financial Statements

                       Consolidated Statements of Financial Condition at March 31, 2000
                       (unaudited) and September 30, 1999                                                   3

                       Consolidated Statements of Income for the three and six months ended
                       March 31, 2000 and 1999 (unaudited)                                                  4

                       Consolidated  Statements of Comprehensive  Income for The
                       three  and six  months  ended  March  31,  2000  and 1999
                       (unaudited)
                                                                                                            5

                       Consolidated Statements of Cash Flows for the six months ended March 31,
                       2000 and 1999 (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                                                                   14

       Item 2          Changes in Securities                                                               14

       Item 3          Defaults upon Senior Securities                                                     14

       Item 4          Submission of Matters to a Vote of Security Holders                                 14

       Item 5          Other Information                                                                   14

       Item 6          Exhibits and Reports on Form 8-K
                                                                                                           14

     SIGNATURES                                                                                            15
</TABLE>
                                       2

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 (Unaudited)
                                                                                   March 31          September 30
                                                                                     2000                1999
                                                                                  ---------          -----------
                                                                                          (In Thousands)
<S>                                                                              <C>                <C>
Assets
------
Cash and cash equivalents......................................................      $3,664              $2,744
Investment securities held to maturity (estimated market
value of $801 and $810..........................................................        808                 810
Marketable equity securities available for sale, at market value...............          37               4,628
Investment securities available for sale, at market value......................       5,723               5,830
Investment in Federal Home Loan Bank stock, at cost............................       1,600               1,500
Loans receivable, net..........................................................     163,646             147,689
Foreclosed real estate, net....................................................           0                   0
Property and equipment, net....................................................       1,153               1,105
Accrued interest receivable                                                             994                 924
Deferred income taxes..........................................................         267                 225
Other assets...................................................................         452                 282
                                                                                   --------            --------
    Total assets...............................................................    $178,344            $165,737
                                                                                   ========            ========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits.......................................................................    $123,696            $114,720
Advances from the Federal Home Loan Bank.......................................      32,000              28,000
Advances from borrowers for taxes and insurance................................         651                 605
Dividends payable..............................................................         215                 196
Other liabilities..............................................................         234               1,150
                                                                                   --------            --------
    Total liabilities..........................................................     156,796             144,671
                                                                                   --------            --------

Commitments and contingent liabilities

Stockholders' equity
--------------------
Preferred stock, par value $.10 per share, authorized 250,000; issued and                 0                   0
outstanding, none
Common stock, par value, $.10 per share, authorized 2,750,000 shares; issued
and outstanding 2,149,270 at March 31, 2000 and 2,173,050 at September
30, 1999......................................................................          215                 217
Additional paid in capital.....................................................      10,372              10,497
Retained earnings, substantially restricted....................................      11,752              11,223
Accumulated other comprehensive loss...........................................        (219)               (151)
Less stock acquired by ESOP and RRP............................................        (572)               (720)
                                                                                   --------            --------
    Total stockholders' equity.................................................      21,548              21,066
                                                                                   --------            --------
    Total liabilities and stockholders' equity.................................    $178,344            $165,737
                                                                                   ========            ========
</TABLE>

See notes to consolidated financial statements

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                          Three Months Ended                Six Months Ended
                                                                March 31                        March 31
                                                         2000              1999             2000          1999
                                                         ----              ----             -----         ----
                                                              (Dollars in Thousands, Except Per Share Data)
<S>                                                      <C>            <C>           <C>             <C>

Interest Income:
 Loans..............................................       $3,018         $2,594        $5,886          $5,204
 U.S. Government Obligations
including agencies..................................          128            315           303             619
 Other investments, including overnight
deposits............................................           72             37           136             105
                                                               --             --           ---             ---
    Total interest income...........................        3,218          2,946         6,325           5,928
                                                            -----          -----         -----           -----
Interest Expense:
 Deposits...........................................        1,225          1,093         2,362           2,228
 Borrowed funds.....................................          475            395           951             791
                                                              ---            ---           ---             ---
    Total interest expense..........................        1,700          1,488         3,313           3,019
                                                            -----          -----         -----           -----
    Net interest income.............................        1,518          1,458         3,012           2,909
Provision for credit losses.........................           30             22            60              45
                                                               --             --            --              --
 Net interest income after provision for credit
 losses.............................................        1,488          1,436         2,952           2,864
                                                            -----          -----         -----           -----
Noninterest income:
 Service charges and fees on loans..................          127            153           296             311
 Other customer service fees and
 commissions........................................          105             75           207             160
 Other..............................................           18             30            33              57
                                                               --             --            --              --
    Total noninterest income........................          250            258           536             528
                                                              ---            ---           ---             ---
Noninterest expense:
 Personnel compensation and benefits................          476            454           979             928
 Occupancy and equipment............................           74             75           147             155
 Data Processing....................................          105             94           207             190
 Federal insurance of accounts......................           10             16            26              31
 Advertising........................................           41             31            73              60
 Professional fees..................................           48             64            91             127
 Other..............................................          110            107           227             198
                                                              ---            ---           ---             ---
    Total noninterest expense.......................          864            841         1,750           1,689
                                                              ---            ---         -----           -----
    Income before income taxes......................          874            853         1,738           1,703
 Provision for income taxes.........................          329            323           682             646
                                                              ---            ---           ---             ---
   Net income.......................................         $545           $530        $1,056          $1,057
                                                             ====           ====        ======          ======

Basic earnings per share............................        $0.27          $0.24         $0.51           $0.48
                                                            =====          =====         =====           =====

Diluted earnings per share..........................        $0.26          $0.23         $0.49           $0.46
                                                            =====          =====         =====           =====
See notes to consolidated financial statements
</TABLE>
                                       4
<PAGE>

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


                                                            Three Months Ended             Six Months Ended
                                                                  March 31                      March 31
                                                             2000          1999            2000          1999
                                                             ----          ----            ----          ----
                                                                (Dollars in Thousands, Except Per Share Data)

<S>                                                       <C>            <C>         <C>            <C>
Net Income..............................................     $545           $530        $1,056         $1,057

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
   available for sale...................................        4            (44)          (68)           (88)
                                                               --            ----         ----           ----

Comprehensive income....................................     $549           $486          $988           $969
                                                             ====           ====         ====           ====
</TABLE>


                                       5
<PAGE>
                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                             Six Months Ended
                                                                           ------March 31-------
                                                                             2000         1999
                                                                             ----         ----
                                                                           (Dollars in Thousands)
<S>                                                                       <C>         <C>
Operating activities:
 Net Income ............................................................   $  1,056    $  1,057
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses .........................................         60          45
   Provision for depreciation and amortization .........................         70          69
   Amortization of investment security premiums and accretion of
   discounts, net ......................................................          2           4
   (Increase) decrease in deferred income taxes ........................        (42)        (55)
   (Gain) loss on sale of loans, investments and foreclosed real estate          --         (21)
   (Increase) decrease in accrued interest receivable ..................        (70)         41
   (Increase) decrease in other assets .................................       (170)         71
   Increase (decrease) in other liabilities ............................       (917)       (435)
                                                                           --------    --------
    Net cash provided by (used in) operating activities ................        (11)        776
                                                                           --------    --------
Investing activities:
   Proceeds from sale of marketable equity securities available for sale      4,664          --
   Proceeds from the maturities of investments .........................        509       6,800
   Purchases of investment securities ..................................       (560)     (7,099)
   Purchase of Federal Home Loan Bank stock ............................       (100)         --
   Net increase in loans to customers ..................................    (16,017)     (3,234)
   Principal collected on mortgage-backed securities ...................          1           1
   Purchases of premises, equipment and leasehold improvements .........       (118)        (12)
                                                                           --------    --------

    Net cash provided by (used in) investing activities ................    (11,621)     (3,544)
                                                                           --------    --------
Financing activities:
   Exercise of stock options ...........................................         --          18
   Allocation of ESOP and RRP shares ...................................        134         201
   Dividends paid ......................................................       (390)       (368)
   Net increase (decrease) in customer deposits ........................      8,976       3,375
   Proceeds from (repayments of) advances and other borrowed money .....      4,000      (1,000)
   Repurchase of stock .................................................       (264)       (272)
   Net increase (decrease) in advance payments from borrower for taxes
   and insurance .......................................................         46         (24)
   Other, net ..........................................................         50          33
                                                                           --------    --------
    Net cash provided by financial activities ..........................     12,552       1,963
                                                                           --------    --------
    Increase (decrease) in cash and cash equivalents ...................        920        (805)
Cash and cash equivalents at beginning of period .......................      2,744       5,666
                                                                           --------    --------
Cash and cash equivalents at end of period .............................   $  3,664    $  4,861
                                                                           ========    ========
</TABLE>

See notes to consolidated financial statements

                                      6
<PAGE>
                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES
          Notes to Unaudited Interim Consolidated Financial Statements
                                 March 31, 2000

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, 2000
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, 1999.

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

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

                                                               Three Months Ended             Six Months Ended
                                                                   March 31                       March 31
                                                               2000          1999         2000             1999
                                                               ----          ----         ----             ----
<S>                                                     <C>           <C>          <C>              <C>
Basic Earnings Per Share:
-------------------------
Net Income............................................       $545,000      $530,000     $1,056,000       $1,057,000
                                                             ========      ========     ==========       ==========
Average Shares Outstanding, Net of
Unallocated ESOP Shares (77,334 and 93,334 at March
31, 2000 and 1999, respectively)......................
                                                            2,072,975     2,193,205      2,081,867        2,198,948
                                                            =========     =========      =========        =========
Basic Earnings Per Share..............................          $0.27         $0.24          $0.51            $0.48
                                                            =========     =========      =========        =========

Diluted Earnings Per Share:
---------------------------
Net Income............................................       $545,000      $530,000     $1,056,000       $1,057,000
                                                             ========      ========     ==========       ==========
Average Shares Outstanding, Net of unallocated ESOP
Shares (77,334 and 93,334
At March 31, 2000 and 1999, respectively).............      2,072,975     2,193,205      2,081,867        2,198,948
  Dilutive effect of RRP Plan shares..................          1,087        21,464          1,245           21,464
  Dilutive effect of Stock Options....................         74,071       103,186         84,122          103,186
                                                            ---------     ---------      ---------        ---------
Average Shares Outstanding............................      2,148,133     2,317,855      2,167,234        2,323,598
                                                            =========     =========      =========        =========
Diluted Earnings Per Share............................          $0.26         $0.23          $0.49            $0.46
                                                            =========     =========      =========        =========
</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, 2000,  consolidated  assets  totaled  $178.3  million,  an
increase of $12.6  million from  September  30, 1999.  The asset  expansion  was
reflected in growth of the loan portfolio which increased $16.0 million. Funding
for the loan growth was  provided by a $9.0  million  rise in  deposits,  a $4.0
million  increase in FHLB  advances,  and the sale of $4.7 million of marketable
equity  securities  available for sale. During fiscal 2000, the bank has focused
on  increasing  its  deposit  base  by  marketing   specific  deposit  products,
especially  certificates  of  deposit  that pay  attractive  rates of return and
enhance our asset/liability  position. At March 31, 2000 certificates of deposit
totaled $80.7 million, up 10.6% from the $73.0 million at September 30, 1999.

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

         General. Net income for the three months ended March 31, 2000 increased
$15,000,  or 2.8%, to $545,000 from $530,000 for the comparable 1999 period. The
increase  in our net income  was  primarily  caused by the rise in net  interest
income.  Net income  for the six months  ended  March 31,  2000 was  $1,056,000,
relatively unchanged from the $1,057,000 earned in the same six months of 1999.

         Interest  Income.  Interest  income  totaled $3.2 million for the three
months  ended March 31,  2000,  a $272,000  increase  from $2.9  million for the
comparable  1999 period.  The increase for the three months ended March 31, 2000
was  primarily  attributable  to an increase of $25.1  million in average  loans
receivable  from the second  quarter of fiscal 1999.  Partially  offsetting  the
volume increase was a 16 basis point decline in the yield on average loans.

                                       8
<PAGE>

        For the six months ended March 31, 2000,  interest  income totaled $6.3
million,  a $397,000  increase  from the $5.9  million for the  comparable  1999
period.  An increase of $22.9  million in average loans  receivable  for the six
months  ended  March 31,  2000  compared  to the same six months of 1999 was the
primary  reason for the rise in  interest  income.  Offsetting  the  increase in
interest  income for the six months ended March 31,  2000,  was a 28 basis point
decline in the yield on average loans.

         Interest  Expense.  Interest expense totaled $1.7 million for the three
months  ended March 31,  2000,  a $212,000  increase  from $1.5  million for the
comparable 1999 period.  The increase was due to a $132,000 increase in interest
on deposits,  due to a $9.4 million  increase in average volume,  and a 21 basis
point rise in average cost.  Additionally,  interest on borrowed funds increased
$80,000 increase due to the higher volume and cost of FHLB advances.

         For the six months ended March 31, 2000,  interest expense totaled $3.3
million,  a $294,000  increase  from the $3.0  million for the  comparable  1999
period.  Interest on deposits reflected a $134,000 increase and interest on FHLB
advances was up $160,000.  The increased interest expense in both categories was
due to both increases in average volume and higher average cost of funds paid.

         Net Interest  Income.  For the three  months ended March 31, 2000,  net
interest income was $1.5 million, up $60,000 from the net interest income earned
in the same  period of 1999.  For the three  months  ended March 31,  2000,  our
interest  rate  spread and net  interest  margin  decreased  to 2.83% and 3.56%,
respectively,  compared to 3.04% and 3.72%, respectively, for the same period of
1999. The decrease was primarily due to the increased  cost of interest  bearing
liabilities.

         Our net interest income was $3.0 million for the six months ended March
31, 2000, up $103,000 from the $2.9 million for the comparable  period of fiscal
1999.  For the six months ended March 31, 2000, our interest rate spread and net
interest margin were 2.86% and 3.59%, respectively, compared to 3.01% and 3.75%,
respectively for the same six months of fiscal 1999. A 28 basis point decline in
the yield on average loans  receivable  and a 34 basis point rise in the cost of
FHLB advances were the primary reasons for the declines.


         Provision for Credit Losses.  The provision for credit losses increased
$8,000,  to $30,000 for the three  months  ended March 31, 2000 from $22,000 for
the same 1999 period. For the six months ended March 31, 2000, the provision for
credit losses was $60,000,  compared to $45,000 for the comparable six months of
fiscal 1999. Although  nonperforming assets increased $496,000 during the second
quarter of fiscal 2000 and $1.1  million  during the six months  ended March 31,
2000,  management  believes the allowance for credit losses is sufficient  since
these loans are adequately  secured.  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 credit losses involves

                                       9


<PAGE>

subjective  judgment regarding future events, and there can be no assurance that
additional provisions for credit losses will not be required in future periods.

         Noninterest  Income.  For  the  three  months  ended  March  31,  2000.
Noninterest income was $250,000,  down 3.1% from the $258,000 for the comparable
1999 period. Service charges and fees on loans were down $26,000 to $127,000 for
the second  quarter of fiscal 2000 from  $153,000 for the  comparable  period of
fiscal 1999 due primarily to a lower dollar amount of loans being closed.  Other
customer  service fees and  commissions  were up 40.0% to $105,000 for the three
months  ended  March 31,  2000  compared  to the same  three  months of 1999 due
primarily to the increased number of transaction accounts.

         For the six  months  ended  March  31,  2000,  noninterest  income  was
$536,000, up slightly from the $528,000 earned in the six months ended March 31,
1999. A $47,000  increase in other  customer  service fees and  commissions  was
offset by a lower  level of service  charges and fees on loans and a decrease in
the income derived from the sale of mortgage insurance.

         Noninterest  expense.  Noninterest  expense was  $864,000 for the three
months  ended March 31, 2000,  up 2.7% from  $841,000  for the  comparable  1999
period.  Personnel  compensation  and benefits rose 4.8%, or $22,000,  due to an
increase in staffing.  Data  processing  expense was up $11,000 due to increased
pricing from our primary service  provider.  Advertising,  primarily  focused on
increasing  deposits which rose $7.2 million in the quarter,  was up $10,000, or
32.3%,  due  to  increased  marketing  and an  increase  in the  cost  of  media
advertising.  Professional fees were down $16,000,  or 25.0%, due to lower legal
expenses.

         For the six months ended March 31, 2000,  noninterest  expense was $1.7
million,  up 3.6% from the level for the same period of fiscal  1999.  Personnel
compensation  and benefits  were up 5.5% to $979,000  from  $928,000 for the six
months ended March 31, 1999 due to increased  staffing.  Data processing expense
was $207,000,  up 8.9% from the level for the same six months of fiscal 1999 due
to increased  pricing by our primary service provider.  Advertising  reflected a
21.7% rise to $73,000 due to increase  marketing  efforts  primarily  to attract
deposits.

         Provision for Income Taxes. The provision for income taxes was $329,000
for the three  months  ended  March 31,  2000,  up  slightly  from the  $323,000
provision  recorded in the same three months of fiscal 1999.  For the six months
ended March 31, 2000,  the provision  for income taxes was $682,000,  up $36,000
from the provision for the comparable  period of fiscal 1999. The primary reason
for the increase was the higher level of taxable income.

                                       10
<PAGE>

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

The following table presents the Bank's  compliance with its regulatory  capital
requirements of March 31, 2000. (Dollar amounts in thousands).


                                                             March 31, 2000
                                                             --------------
                                                               Percentage
                                                                of assets
                                                             ---------------

GAAP Capital.........................................  $19,901           11.16%
                                                       =======           ======

Tangible capital.....................................  $20,114           11.26%
Tangible capital requirement.........................    2,674            1.50%
                                                        ------            -----
Excess...............................................  $17,440            9.76%
                                                       =======            =====

Core capital.........................................  $20,114           11.26%
Core capital requirement.............................    7,143            4.00%
                                                         -----            -----
Excess...............................................  $12,971            7.26%
                                                       =======            =====

Total risk-based capital (1).........................  $20,876           18.38%
Total risk-based capital requirement (1).............    9,088            8.00%
                                                         -----            -----
Excess...............................................  $11,788           10.38%
                                                       =======           ======
-----------------------------
(1)  Based on risk-weighted assets of $113,597


           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
withdrawal,  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,  2000,  such
borrowed funds totaled $32 million. Loan payments and prepayments,  deposits and
borrowings are greatly influenced by general interest rates, economic conditions
and competition.

         We are required under Federal regulations to maintain certain specified
levels of "liquid  assets,"  which  include  certain  United  States  government
obligations and other approved  investments.  Current  regulations require us to
maintain liquid assets of not less than 4% of net  withdrawable  accounts,  plus
short-term borrowings. At March 31, 2000, our regulatory liquidity was 8.98%.

                                       11
<PAGE>

         The amount of certificate accounts which are scheduled to mature during
the next twelve months ending March 31, 2001, is approximately $53.6 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. We have been very  successful  in  retaining
these maturing deposits in fiscal 2000, due to our effective  marketing campaign
designed to both attract new deposits and retain maturing deposits.

         At  March  31,  2000,  we had  loan  commitments  outstanding  of $22.2
million.  These commitments will be funded from deposit inflows, loan repayments
and borrowings.


                                       12


<PAGE>

                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES
                              Key Operating Ratios
<TABLE>
<CAPTION>

                                                       Three Months Ended           Six Months Ended
                                                             March 31                   March 31
                                                             --------                   --------
                                                     2000(1)        1999(1)       2000(1)        1999(1)
                                                     -------        -------       -------        -------
                                                                         (Unaudited)


<S>                                               <C>            <C>           <C>            <C>
Basic earnings per share .......................      $0.27          $0.24         $0.51          $0.48
Diluted earnings per share......................      $0.26          $0.23         $0.49          $0.46
Return on average assets........................      1.24%          1.32%         1.22%          1.32%
Return on average equity........................     10.17%          9.75%         9.91%          9.78%
Interest rate spread............................      2.79%          3.04%         2.84%          3.01%
Net interest margin.............................      3.56%          3.75%         3.58%          3.75%
Noninterest expense to average assets...........      1.97%          2.10%         2.02%          2.11%
Net charge-offs to average outstanding loans....      0.03%            --%         0.02%            --%
</TABLE>


                                                       March 31     September 30
                                                        2000            1999
                                                      -----------   ------------
                                                        (DOLLARS IN THOUSANDS)
                                                       (Unaudited)
Nonaccrual loans......................................   $2,158       $1,089
Foreclosed real estate................................       --           --
                                                         ------       ------
Total nonperforming assets............................   $2,158       $1,089
                                                         ======       ======


Allowance for credit losses to nonperforming assets...   39.49%       73.83%
Nonperforming loans to total loans....................    1.32%        0.74%
Nonperforming assets to total assets..................    1.21%        0.66%


Book value per share .................................   $10.03        $9.69
                                                         ======        =====
------------------------
(1)  The ratios for the three- and six-month periods are annualized.



                                       13
<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, 2000. 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 26, 2000 and the following items were acted upon:

               Election of Directors  Harry W. Garrett,  Jr., and Harold K. Neal
               for terms of three  years  ending in 2003.  All were  elected  as
               indicated  below:

                                          Votes             Votes
                                           For             Withheld
                                           ---             --------

George  N.  Cooper                      1,832,858           7,870
William  P.  Pickett                    1,832,758           7,970
W. Henry Walton, Jr.                    1,832,458           8,270

               Ratification  of the  appointment  of BDO  Seidman,  LLP,  as the
               Corporation's  auditors  for the 2000 fiscal  year.  BDO SEIDMAN,
               LLP, was ratified as follows:

                                         Votes        Votes
                                          For        Against     Abstain
                                          ---        -------     -------
                                        1,816,636     13,797      10,295

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

Item 6. Exhibits and Reports on Form 8-K
        --------------------------------

        (a)     Exhibit
                Exhibit 27: Financial Data Schedule (electronic filing only)

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

                                       14
<PAGE>

                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES

                                   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, 2000               By:      /s/ Harold K. Neal
                                             ------------------
                                             Harold K. Neal
                                             President and
                                             Chief Executive Officer
                                             (Principal Executive Officer)


Date:    May 11, 2000               By:      /s/ James W. Smith
                                             ------------------
                                             James W. Smith
                                             Vice President and Treasurer
                                             (Principal Accounting and
                                                Financial Officer)