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, 1999

                                       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 reports),  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 February 4, 2000: 2,153,050 shares


<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, 1999 (unaudited) and September 30, 1999             1

             Consolidated Statements of Income for the three months
             ended December 31, 1999 and 1998 (unaudited)                     2

             Consolidated Statements of Comprehensive Income for the three
             months ended December 31, 1999 and 1998 (unaudited)              3

             Consolidated Statements of Cash Flows for the three months ended
             December 31, 1999 and 1998 (unaudited)                           4

             Notes to Unaudited Interim Consolidated Financial Statements     5

     Item 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        6


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

     Item 1. Legal proceedings                                                11

     Item 2. Changes in Securities                                            11

     Item 3. Defaults upon Senior Securities                                  11

     Item 4. Submission of Matters to a Vote of Security Holders              11

     Item 5. Other Information                                                11

     Item 6. Exhibits and Reports on Form 8-K                                 11

SIGNATURES                                                                    12

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
                                                                                                December 31         September 30
                                                                                                    1999                 1999
                                                                                                    ----                 ----
                                                                                                (Unaudited)
                                                                                                         (In Thousands)
<S>                                                                                              <C>                 <C>
Assets
------
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $4,941              $2,744
Investment securities held to maturity (estimated market value of $808 and $810) . . . . . .           809                 810
Marketable equity securities available for sale, at market value . . . . . . . . . . . . . .         4,634               4,628
Investment securities available for sale, at market value . . . . . . . . . . . . . . . . .          5,719               5,830
Investment in Federal Home Loan Bank stock, at cost . . . . . . . . . . . . . . . . . . . .          2,000               1,500
Loans receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        155,675             147,689
Foreclosed real estate, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              -                   -
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,113               1,105
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            996                 924
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            269                 225
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             379                 282
                                                                                                  --------            --------
    Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $176,535            $165,737
                                                                                                  ========            ========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $116,448            $114,720
Advances from the Federal Home Loan Bank . . . . . . . . . . . . . . . . . . . . . . . . .          38,000              28,000
Advances from borrowers for taxes and insurance . . . . . . . . . . . . . . . . . . . . .              378                 605
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              195                 196
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              377               1,150
                                                                                                  --------            --------
     Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           155,398             144,671
                                                                                                  --------            --------

Commitments and contingent liabilities

Stockholders' equity
--------------------
Preferred stock, par value $.10 per share, authorized 250,000; issues and outstanding, none .            -                   -
Common stock, par value $.10 per share, authorized 2,750,000 shares; issued and outstanding
  2,153,050 and 2,173,050 at December 31, 1999 and September 30, 1999, respectively. . . . .           215                 217
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        10,420              10,497
Retained earnings, substantially restricted . . . . . . . . . . . . . . . . . . . . . . . .         11,431              11,223
Unrealized losses on securities available for sale . . . . . . . . . . . . . . . . . . . . .          (223)               (151)
Less stock acquired by ESOP and RRP . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (706)               (720)
                                                                                                  --------            --------
     Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         21,137              21,066
                                                                                                  --------            --------
     Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . .       $176,535            $165,737
                                                                                                  ========            ========
</TABLE>

See notes to consolidated financial statements.

                                       -1-

<PAGE>
                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                        Consolidated Statements of Income
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                        Three Months Ended
                                                                                                            December 31
                                                                                                         1999         1998
                                                                                                         ----         ----
                                                                                                      (Dollars in Thousands,
                                                                                                        Except Per Share Data)
<S>                                                                                                    <C>           <C>
Interest Income:
 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,868        2,610
 U.S. Government Obligations including agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . .    175          304
 Other investments, including overnight deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .    64           68
                                                                                                        ------        -----
  Total interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,107        2,982
                                                                                                        ------        -----
Interest Expense:
 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,137        1,135
 Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .   476          396
                                                                                                        ------        -----
  Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,613        1,531
                                                                                                        ------        -----
  Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,494        1,451
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   30           23
                                                                                                        ------        -----
  Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . . . .. . . . . 1,464        1,428
                                                                                                        ------        -----
Noninterest income:
 Service charges and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   169          158
 Other customer service fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   102           85
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    15           27
                                                                                                        ------        -----
  Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   286          270
                                                                                                        ------        -----
Noninterest expense:
 Personnel compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   503          474
 Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    73           80
 Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   102           96
 Federal insurance of accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16           15
 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    32           29
 Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    43           63
 Net cost of (gain on) operations of foreclosed real estate . . . . . . . . . . . . . . . .  . . . . . .     -            3
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   117           88
                                                                                                        ------        -----
  Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..   886          848
                                                                                                        ------        -----
   Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  864          850
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   353          323
                                                                                                        ------        -----
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $511         $527
                                                                                                        ======        =====

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

  Diluted  earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0.23        $0.23
                                                                                                         =====        =====
</TABLE>

See notes to consolidated financial statements.


                                       -2-
<PAGE>


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

                                                            Three Months Ended
                                                               December 31
                                                            1999       1998
                                                       (In Thousands of Dollars)

Net Income . . . . . . . . . . . . . . . . . . . . . . .  . $511       $527
Other comprehensive income, net of tax effect:

  Unrealized losses on securities  available for sale . .. . (72)       (44)
                                                            ----       ----
Comprehensive Income . . . . . . . . . . . . . . . . . .  . $439       $483
                                                            ====       ====


                                       -3-

<PAGE>

                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                 Three Months Ended
                                                                                                    December 31
                                                                                                  1999       1998
                                                                                                -------    --------
                                                                                                 (Dollars in Thousands)
<S>                                                                                           <C>      <C>
Operating activities:
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $511        $527
  Adjustments to reconcile net income to net cash provided by (used in) operating activities
    Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       30          23
    Provision for depreciation and amortization . . . . . . . . . . . . . . . . . . . .  . .        35          35
    Amortization of investment security premiums and accretion of discounts, net                    (2)         (2)
    (Increase) decrease in deferred income taxes . . . . . . . . . . . . . . . . . . . . . .       (44)        (28)
    Loans originated for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -        (852)
    Proceeds from sale of loans originated for sale . . . . . . . . . . . . . . . . . . . . .        -         943
    (Increase) decrease in accrued interest receivable . . . . . . . . . . . . . . . . . . .       (72)        120
    (Increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . .          (45)        291
    Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . .          (736)       (126)
                                                                                               -------     -------
      Net cash provided by (used in) operating activities . . . . . . . . . .                     (323)        931
                                                                                               -------     -------
Investing activities:
    Proceeds from the maturities of investments . . . . . . . . . . . . . . . . . . . . . . .      509       2,800
    Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . .      (560)     (2,000)
    Net increase in loans to customers . . . . . . . . . . . . . . . . . . . . . . . . . . .    (7,986)     (3,211)
    Principal collected on mortgage-backed securities . . . . . . . . . . . . . . . . . . . .        1           1
    Purchases of premises, equipment and leasehold improvements . . . . . . . . . . . . . . .      (42)         (9)
    Sale (purchase) of FHLB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (500)          -
    Net (increase) decrease in foreclosed real estate, net . . . . . . . . . . . . . . . . .         -         (83)
                                                                                               -------     -------
      Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . .   (8,578)     (2,502)
                                                                                               -------     -------
Financing activities:
    Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (179)       (184)
    Net increase (decrease) in customer deposits . . . . . . . . . . . . . . . . . . . . . .     1,727       1,830
Proceeds from (repayments of) advances and other borrowed money . . . . . . . . . . . . . . .   10,000      (1,000)
    Repurchase of stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (224)          -
    Net increase (decrease) in advance payments from borrowers for taxes and insurance . . .      (226)       (225)
                                                                                               -------     -------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .   11,098         421
                                                                                               -------     -------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .     2,197      (1,150)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . .     2,744       5,666
                                                                                               -------     -------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . .   $ 4,941     $ 4,516
                                                                                               =======     =======
</TABLE>


See notes to consolidated financial statements.

                                       -4-
<PAGE>
           Note to Unaudited Interim Consolidated Financial Statements

                                December 31, 1999

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 presentations have been
included.  The results of operations  for the interim  period ended December 31,
1999 is not necessarily  indicative of the results which may may be expected for
any future  period.  For futher  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 calculated in accordance with SFAS 128 is as follows:
<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                     December 31
                                                                 1999           1998
                                                               --------       --------
<S>                                                           <C>            <C>

Basic Earnings Per Share:
Net Income . . . . . . . . . . . . . . . . . . . . . . .       $511,000       $527,000
                                                               --------       --------
Average Shares Outstanding, Net of
  unallocated ESOP Shares (77,334 and 93,334
  at December 31, 1999 and 1998, respectively.) . . . .       2,090,662      2,204,566
                                                              =========      =========
Basic Earnings Per Share . . . . . . . . . . . . . . . .          $0.24          $0.24
                                                              =========      =========

Diluted Earnings Per Share:
Net Income . . . . . . . . . . . . . . . . . . . . . . .       $511,000       $527,000
                                                              =========      =========
Average Shares Outstanding, Net of
  unallocated ESOP Shares (77,334 and 93,334
  at December 31, 1999 and 1998, respectively.) . . . .       2,090,662      2,204,566
    Dilutive effect of RRP Plan shares . . . . . . . .           10,406         19,704
    Dilutive effect of Stock Options . . . . . . . . .           92,557        106,250
                                                              ---------      ---------
Average Diluted Shares Outstanding . . . . . . . . . .        2,193,625      2,330,520
                                                              =========      =========
Diluted Earnings Per Share . . . . . . . . . . . . . .            $0.23          $0.23
                                                              =========      =========
</TABLE>

                                       -5-
<PAGE>
         MANAGEMENT'S 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,  Year
2000 issues,  and general  economic  conditions.  We undertake no  obligation to
publicly  release  the  results  of  any  revisions  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
-------------------

           Consolidated  assets  totaled $176.5 million at December 31, 1999, an
increase of $10.8  million from  September  30, 1999.  The asset  expansion  was
reflected in growth of the loan portfolio which  increased  $8.0.  million and a
$2.2 million rise in cash and cash equivalents.  Funding for the asset expansion
was  provided by a $10.0  million  increase in FHLB  advances and a $1.7 million
rise in deposits.

           At December 31, 1999, nonperforming assets were $1.7 million, or .94%
of total assets,  compared to $1.1 million, or .66% of total assets at September
30, 1999.  During the quarter  ended  December 31, 1999,  five  mortgage  loans,
totaling $102,000, were classified as nonperforming.  These loans are secured by
residential  property  with  appraised  values  exceeding  the  respective  loan
balances, and as such no material loss is anticipated.  In addition, $511,000 of
consumer and commercial loans were added to the  nonperforming  category.  These
loans are well  collateralized  and as such no material loss is anticipated.  At
December 31, 1999, the allowance for credit losses was $832,000, up $28,000 from
the level at September 30, 1999.

         At December 31, 1999, accumulated other comprehensive loss increased to
$66,000 to a loss of $223,000 from a loss of $152,000 at September 30, 1999. The
increase in loss resulted from the fluctuation in market value of our investment
in  available  for  sale  securities.   Because  of  interest  rate  volatility,
accumulated other  comprehensive loss and stockholders'  equity could materially
fluctuate for each interim  period and year-end  period.  The decrease in market
value of the investment securities available for sale is considered temporary in
nature and will not affect our net income until the securities are sold. We plan
to hold these  securities  until  maturity  or until the market  values of these
securities  increase.  Accordingly,  we  do  not  expect,  though  there  is  no
assurance,  that the  investment in these  securities  will affect net income in
future periods.

         During the first quarter of fiscal 2000, we  repurchased  20,000 shares
of our common stock in open market transactions.  These shares were purchased at
an average price of $11.20 per share and will be used for general  corporate and
other purposes.


                                       -6-
<PAGE>

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

         General.  Net income  for the three  months  ended  December  31,  1999
decreased  $16,000,  or 3%, to $511,000  from $527,000 for the  comparable  1998
period.  Such decrease in net income was  primarily  caused by our effective tax
rates.  For the three months ended  December 31, 1999,  net income before income
taxes  increased  $14,000 to $864,000  from  $848,000  for the  comparable  1998
period.

         Interest  Income.  Total interest income was $3.1 million for the three
months  ended  December  31,  1999,  compared  to  $3.0  million  earned  in the
comparable  quarter  of fiscal  1999.  Although  the  average  balance  of loans
receivable  increased $20.7 million from the first quarter of fiscal 1999 to the
first  quarter of fiscal  2000, a decline of 40 basis points in the yield on the
loan portfolio offset the impact of the higher average volume.

         Interest  Expense.  For the three months ended December 31, 1999, total
interest expense was $1.6 million, up 5.4% from the level for the same period of
fiscal  1999.  The increase was  primarily  due to the $5.3 million  increase in
average FHLB  advances in the first quarter of fiscal 2000 over the same quarter
of  fiscal  1999,  combined  with a 10  basis  point  rise in the  cost of those
advances.  Although average  interest bearing  liabilities of $106.7 million for
the three months  ended  December 31, 1999 were up $5.2 million from the average
balance for the same  quarter of fiscal  1999,  the cost of deposits was down 21
basis points which offset the higher volume.

         Net Interest Income.  For the three months ended December 31, 1999, net
interest  income was $1.5  million,  up slightly  from the net  interest  income
earned in the same period of 1998. For the three months ended December 31, 1999,
our interest rate spread and net interest  margin  decreased to 2.93% and 3.62%,
respectively,  compared to 2.96% and 3.75%, respectively, for the same period of
1998.  The  increased  use of FHLB  advances  was  the  primary  reason  for the
declines,  since the average rate paid on advances is higher than the  composite
rate paid on interest bearing deposits.

         Provision for Credit Losses.  The provision for credit losses increased
$7,000, to $30,000 for the three months ended December 31, 1999 from $23,000 for
the same 1998 period.  Although  nonperforming  assets  increased  $574,000 from
September  30, 1999,  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 levels 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  subjective  judgment  regarding  future  events,  and  there can be no
assurance that  additional  provisions for credit losses will not be required in
future periods.

         Total Noninterest Income. For the three months ended December 31, 1999,
non- interest income increased  $16,000,  or 5.9%, to $286,000 from $270,000 for
the comparable 1998 period.  Service charges and fees on loans increased $11,000
and other customer  service charges and fees increased  $17,000.  Such increases
were primarily due to the increased volume of loan originations.  However, other
noninterest  income  decreased  $12,000 for the three months ended  December 31,
1999. In the 1998 comparable period, we recognized a

                                       -7-
<PAGE>

gain of $14,000 on the sale of mortgage loans. We had no sales of mortgage loans
for the quarter ended December 31, 1999.

         Total Noninterest  Expense.  Total noninterest expense was $886,000 for
the  three  months  ended  December  31,  1999,  up 4.4%  from the  level in the
comparable   quarter  of  fiscal   1999.   Increases  of  $29,000  in  personnel
compensation  and benefits due to increased  staffing and merit  increases,  and
$29,000  in other  noninterest  expenses  due to higher  costs  associated  with
transaction accounts, additional ATM expense and increased postage.

         Provision for Income Taxes. The provision for income taxes was $353,000
for the three months ended  December  31,  1999,  up slightly  from the $323,000
provision recorded in the same three months of fiscal 1999. Higher profitability
combined with a slight increase in the effective tax rate were the major reasons
for the increase.

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

The following  table presents our  compliance  with current  regulatory  capital
requirements as of December 31, 1999. (Dollar amounts in thousands).

                                                 December 31, 1999
                                             -------------------------
                                                             Percentage
                                                             of assets
                                                             ---------

GAAP Capital . . . . . . . . . . . . . . . .  $19,344           10.97%
                                              =======           =====

Tangible capital . . . . . . . . . . . . . .  $19,560           11.03%
Tangible capital requirement . . . . . . . .    2,659            1.50
                                              -------           -----
Excess . . . . . . . . . . . . . . . . . . .  $16,901            9.53%
                                              =======           =====

Core capital . . . . . . . . . . . . . . . .  $19,560           11.03%
Core capital requirement . . . . . . . . . .    7,090            4.00
                                              -------           -----
Excess . . . . . . . . . . . . . . . . . . .  $12,470            7.03%
                                              =======           =====

Total risk-based capital (1). . . . . . . .   $20,299           18.53%
Total risk-based capital requirement (1). .     8,764            8.00
                                              -------           -----
Excess . . . . . . . . . . . . . . . . . . .  $11,535           10.53%
                                              =======           =====

--------------------------------------
        (1)  Based on risk-weighted assets of $109,550


         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  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.

                                       -8-
<PAGE>

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.  During the past several years,  we have used such funds  primarily to
fund maturing time deposits, pay savings withdrawals,  fund lending commitments,
purchase  new  investments,  and  increase  liquidity.  We fund  our  operations
internally  but also borrow  funds from the Federal  Home Loan Bank  ("FHLB") of
Atlanta.  As of December 31, 1999,  such borrowed  funds totaled $38.0  million.
Loan  payments  and  maturing  investments  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 December 31, 1999, our regulatory liquidity was 10.8%.

         The amount of certificate accounts which are scheduled to mature during
the next twelve months ending December 31, 2000, is approximately $44.0 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,  excess  liquidity,
FHLB  advances,  or  other  borrowings.  It  has  been  our  experience  that  a
substantial portion of such maturing deposits remain with us.

         At December  31, 1999,  we had loan  commitments  outstanding  of $20.2
million.  These  commitments are funded primarily from current excess liquidity,
deposit inflows, borrowings or loan and investment repayments.

YEAR 2000
---------

         Like many financial  institutions,  we rely on computers to conduct our
business and information  systems  processing.  Industry  experts were concerned
that on January 1, 2000,  some computers  might not be able to interpret the new
year properly,  causing  computer  malfunctions.  Some banking  industry experts
remain  concerned  that some  computers may not be able to interpret  additional
dates in the year 2000  properly.  We have  operated and  evaluated our computer
operating  systems  following January 1, 2000 and have not identified any errors
or experienced any computer system malfunctions. We will continue to monitor our
information systems to assess whether our systems are at risk of misinterpreting
any future dates.  We have not been informed of any such problem  experienced by
our vendors or our customers,  nor by any of the municipal agencies that provide
service to us.

         Nevertheless,  it is too soon to  conclude  that  there will not be any
problems  arising from the Year 2000  problem.  We will  continue to monitor our
significant  vendors of goods and services,  and customers  with respect to Year
2000  problems  they might  encounter  as those issues may effect our ability to
continue operations,  or might adversely affect our financial position,  results
of  operations  and cash  flows.  We do not  believe  at this  time  that  these
potential   problems  will  materially   impact  our  ability  to  continue  our
operations. However, no assurance can be given that this will be the case.

                                       -9-
<PAGE>

RECENT DEVELOPMENTS
-------------------

         We recently  announced our intent to establish a branch facility in the
Poplar  Forest  Center  located in Eastern  Bedford  County.  The branch will be
leased at an initial annual cost of $30,000 and will be a full service  facility
providing our full array of loan and deposit services,  and will also include an
ATM, drive thru,  and night  depository.  In addition to the lease  expense,  we
estimate that costs  incurred in connection  with  renovating  and equipping the
building to be  approximately  $350,000.  It is anticipated that the branch will
open in the late spring of 2000.  We expect  noninterest  expense to increase in
fiscal 2000 due to costs associated with opening and maintaining this additional
branch office.


                                      -10-

<PAGE>
                     BEDFORD BANCSHARES, INC. AND SUBSIDIARY
                              Key Operating Ratios
                                   (Unaudited)

                                                       For the
                                                   Three Months Ended
                                                       December 31
                                                     1999(1)  1998(1)
                                                       (Unaudited)


Basic earnings per common share  . . . . . . . .      0.24     $0.24
                                                      ====     =====
Diluted earnings per common share  . . . . . . .      0.23     $0.23
                                                      ====     =====
Return on average assets . . . . . . . . . . . .      1.19%     1.32%
Return on average equity . . . . . . . . . . . .      9.63%     9.82%
Interest rate spread . . . . . . . . . . . . . .      2.93%     2.96%
Net interest margin . . . . . . . . . . . . . .       3.62%     3.75%
Noninterest expense to average assets . . . . .       2.07%     2.19%
Net charge-offs to average outstanding loans . .         -         -

                                                          At            At
                                                     December 31    September 30
                                                         1999          1999
                                                         ----          ----
                                                          (Dollars in Thousands)

Nonaccrual and 90 days past due loans . . . . . . . .   $1,663         $1,089
Foreclosed real estate . . . . . . . . . . . . . . .         -              -
               --                                       ------         ------
Total nonperforming assets . . . . . . . . . . . . .    $1,663         $1,089
                                                        ======         ======


Allowance for credit losses to nonperforming assets .    50.07%        73.83%
Nonperforming loans to total loans . . . . . . . . .      1.07%         0.74%
Nonperforming assets to total assets . . . . . . . .      0.94%         0.66%

Book value per share . . . . . . . . . .. . . . . . .     9.82         $9.69
                                                        ======         ======

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

                                      -11-
<PAGE>
  PART II - OTHER INFORMATION


Item 1.   Legal Proceeedings
          ------------------

              Neither the Corporation nor the Bank  was  engaged  in  any  legal
          proceedings  of a material nature at December 31, 1999.  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)     Exhibit
                  Exhibit 27: Financial Data Schedule (electronic filing only)

          (b)     Reports on Form 8-K

                  Not applicable.

                                      -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 10, 2000                  By: /s/ Harold K. Neal
                                             -----------------------------------
                                              Harold K. Neal
                                               President and
                                             Chief Executive Officer
                                             (Principal Executive Officer)


Date: February 10, 2000                  By: /s/ James W. Smith
                                             -----------------------------------
                                              James W. Smith
                                             Vice President and Treasurer
                                             (Principal Accounting and
                                             Financial officer)




                                      -13-