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 June 30, 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 August 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 June 30, 2000
                       (unaudited) and September 30, 1999                                                   3

                       Consolidated Statements of Income for the three and nine months ended
                       June 30, 2000 and 1999 (unaudited)                                                   4

                       Consolidated  Statements of Comprehensive  Income for The
                       three  and  nine  months  ended  June  30,  2000 and 1999
                       (unaudited)                                                                          5

                       Consolidated Statements of Cash Flows for the nine months ended June 30,
                       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)
                                                                                        June 30          September 30
                                                                                          2000                1999
                                                                                          ----                ----

                                                                                              (In Thousands)
<S>                                                                                    <C>                 <C>
Assets
------
Cash and cash equivalents.......................................................          $5,293              $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...............               28               4,628
Investment securities available for sale, at market value......................            6,717               5,830
Investment in Federal Home Loan Bank stock, at cost............................            1,900               1,500
Loans receivable, net..........................................................          168,284             147,689
Foreclosed real estate, net....................................................              314                   0
Property and equipment, net....................................................            1,196               1,105
Accrued interest receivable                                                                1,111                 924
Deferred income taxes..........................................................              311                 225
Other assets...................................................................              346                 282
                                                                                        --------            --------
    Total assets...............................................................         $186,308            $165,737
                                                                                        ========            ========

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits.......................................................................         $125,324            $114,720
Advances from the Federal Home Loan Bank.......................................           38,000              28,000
Advances from borrowers for taxes and insurance................................              452                 605
Dividends payable..............................................................              215                 196
Other liabilities..............................................................              268               1,150
                                                                                        --------            --------
    Total liabilities..........................................................          164,259             144,671
                                                                                        --------            --------

Commitments and contingent liabilities

Stockholders' equity
--------------------
Preferred stock, par value $.10 per share, authorized 250,000; issued and
outstanding, none                                                                              0                   0
Common stock, par value, $.10 per share, authorized 2,750,000 shares; issued
and outstanding 2,149,270 at June 30, 2000 and 2,173,050 at September 30, 1999.              215                 217
Additional paid in capital.....................................................           10,410              10,497
Retained earnings, substantially restricted....................................           12,156              11,223
Accumulated other comprehensive loss...........................................             (188)               (151)
Less stock acquired by ESOP and RRP............................................             (544)               (720)
                                                                                        --------            --------
    Total stockholders' equity.................................................           22,049              21,066
                                                                                        --------            --------
    Total liabilities and stockholders' equity.................................         $186,308            $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           Nine Months Ended
                                                                   June 30                       June 30
                                                             2000           1999         2000             1999
                                                             ----           ----         -----            ----
                                                              (Dollars in Thousands, Except Per Share Data)
<S>                                                       <C>            <C>           <C>             <C>
Interest Income:
 Loans..............................................       $3,237         $2,622        $9,123          $7,826
 U.S. Government Obligations including agencies.....          122            290           425             909
 Other investments, including overnight deposits....           71             49           207             154
                                                           ------         ------        ------          ------
    Total interest income...........................        3,430          2,961         9,755           8,889
                                                           ------         ------        ------          ------
Interest Expense:
 Deposits...........................................        1,304          1,098         3,666           3,326
 Borrowed funds.....................................          524            396         1,475           1,187
                                                           ------         ------        ------          ------
    Total interest expense..........................        1,828          1,494         5,141           4,513
                                                           ------         ------        ------          ------
    Net interest income.............................        1,602          1,467         4,614           4,376
Provision for credit losses.........................           30             22            90              67
                                                           ------         ------        ------          ------
 Net interest income after provision for credit
 losses.............................................        1,572          1,445         4,524           4,309
                                                           ------         ------        ------          ------
Noninterest income:
 Service charges and fees on loans..................          149            142           445             453
 Other customer service fees and
 commissions........................................           90             83           297             243
 Other..............................................           14             16            47              73
                                                           ------         ------        ------          ------
    Total noninterest income........................          253            241           789             769
                                                           ------         ------        ------          ------
Noninterest expense:
 Personnel compensation and benefits................          465            462         1,444           1,390
 Occupancy and equipment............................           79             79           226             234
 Data Processing....................................          112            101           319             291
 Federal insurance of accounts......................            6             16            32              47
 Advertising........................................           31             26           104              86
 Professional fees..................................           33             41           124             168
 Other..............................................          100             84           327             282
                                                           ------         ------        ------          ------
    Total noninterest expense.......................          826            809         2,576           2,498
                                                           ------         ------        ------          ------
    Income before income taxes......................          999            877         2,737           2,580
 Provision for income taxes.........................          381            333         1,063             979
                                                           ------         ------        ------          ------
   Net income.......................................       $  618         $  544        $1,674          $1,601
                                                           ======         ======        ======          ======

Basic earnings per share............................        $0.30          $0.25         $0.81           $0.73
                                                            =====          =====         =====           =====

Diluted earnings per share..........................        $0.29          $0.24         $0.78           $0.69
                                                            =====          =====         =====           =====
</TABLE>

See notes to consolidated financial statements

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                              Three Months Ended         Nine Months Ended
                                                                   June 30                     June 30
                                                             2000           1999         2000           1999
                                                             ----           ----         ----           ----
                 .                                           (Dollars in Thousands, Except Per Share Data)

<S>                                                         <C>            <C>         <C>            <C>
Net Income..............................................     $618           $544        $1,674         $1,601

Other comprehensive income, net of tax effect:

   Unrealized gains (losses) on securities
   available for sale...................................      30            (98)          (37)          (186)
                                                             ----           ----        ------         ------

Comprehensive income....................................    $648            $446        $1,637         $1,415
                                                            ====            ====        ======         ======
</TABLE>

                                       5
<PAGE>


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

<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                           ------June 30-------
                                                                              2000        1999
                                                                             ------      ------
                                                                          (Dollars in Thousands)
<S>                                                                       <C>         <C>
Operating activities:
 Net Income ............................................................   $  1,674    $  1,601
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Provision for credit losses .........................................         90          67
   Provision for depreciation and amortization .........................        107         102
   Amortization of investment security premiums and accretion of
   discounts, net ......................................................          3           6
   (Increase) decrease in deferred income taxes ........................        (86)       (114)
   (Gain) loss on sale of loans, investments and foreclosed real estate          --         (21)
   (Increase) decrease in accrued interest receivable ..................       (187)         83
   (Increase) decrease in other assets .................................        (64)        170
   Increase (decrease) in other liabilities ............................       (882)       (327)
                                                                           --------    --------
    Net cash provided by (used in) operating activities ................        655       1,567
                                                                           --------    --------
Investing activities:
   Proceeds from sale of marketable equity securities available for sale      4,664          --
   Proceeds from the maturities of investments .........................        509      13,555
   Purchases of investment securities ..................................     (1,500)     (8,975)
   Purchase  of Federal Home Loan Bank stock ...........................       (400)        (50)
   Net increase in loans to customers ..................................    (20,595)     (9,172)
   Principal collected on mortgage-backed securities ...................          2           3
   Purchases of premises, equipment and leasehold improvements .........       (198)        (39)
   Purchase of foreclosed property, net ................................       (313)         --
                                                                           --------    --------
    Net cash provided by (used in) investing activities ................    (17,831)     (4,678)
                                                                           --------    --------
Financing activities:
   Exercise of stock options ...........................................         --          18
   Allocation of ESOP and RRP shares ...................................        134         201
   Dividends paid ......................................................       (605)       (573)
   Net increase (decrease) in customer deposits ........................     10,604       6,093
   Proceeds from (repayments of) advances and other borrowed money .....     10,000      (1,000)
   Repurchase of stock .................................................       (264)       (842)
   Net increase (decrease) in advance payments from borrower for taxes
   and insurance .......................................................       (153)       (148)
   Other, net ..........................................................          9          51
                                                                           --------    --------
    Net cash provided by financial activities ..........................     19,725       3,800
                                                                           --------    --------
    Increase (decrease) in cash and cash equivalents ...................      2,549         689
Cash and cash equivalents at beginning of period .......................      2,744       5,666
                                                                           --------    --------
Cash and cash equivalents at end of period .............................   $  5,293    $  6,355
                                                                           ========    ========
</TABLE>

See notes to consolidated financial statements

                                       6
<PAGE>

                    BEDFORD BANCSHARES, INC. AND SUBSIDIARIES
          Notes to Unaudited Interim Consolidated Financial Statements
                                  June 30, 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 June 30, 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        Nine Months Ended
                                                              June 30                  June 30
                                                         2000         1999         2000         1999
                                                      ----------   ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>          <C>
Basic Earnings Per Share:
Net Income ........................................   $  618,000   $  544,000   $1,674,000   $1,601,000
                                                      ==========   ==========   ==========   ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (77,334 and 93,334 at June
30, 2000 and 1999, respectively) ..................    2,071,937    2,164,391    2,078,569    2,187,429
                                                      ==========   ==========   ==========   ==========
Basic Earnings Per Share ..........................   $     0.30   $     0.25   $     0.81   $     0.73
                                                      ==========   ==========   ==========   ==========

Diluted Earnings Per Share;
Net Income ........................................   $  618,000   $  544,000   $1,674,000   $1,601,000
                                                      ==========   ==========   ==========   ==========
Average Shares Outstanding, Net of unallocated ESOP
Shares (77,334 and 93,334
at June 30, 2000 and 1999, respectively) ..........    2,071,937    2,164,391    2,078,569    2,187,429
  Dilutive effect of RRP Plan shares ..............          793       23,412        1,117       23,383
  Dilutive effect of Stock Options ................       55,378      103,107       59,167      102,870
                                                      ----------   ----------   ----------   ----------
Average Shares Outstanding ........................    2,128,108    2,290,910    2,138,853    2,313,682
                                                      ==========   ==========   ==========   ==========
Diluted Earnings Per Share ........................   $     0.29   $     0.24   $     0.78   $     0.69
                                                      ==========   ==========   ==========   ==========
</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 June 30, 2000,  consolidated  assets totaled $186.3 million, an increase
of $20.6 million from September 30, 1999.  The asset  expansion was reflected in
growth of the loan portfolio which increased $20.6 million. Funding for the loan
growth  was  provided  by a $10.6  million  rise in  deposits,  a $10.0  million
increase in FHLB  advances,  and the sale of $4.6 million of  marketable  equity
securities available for sale. During fiscal 2000, we have focused on increasing
our deposit base by marketing specific deposit products, especially certificates
of deposit that pay attractive  rates of return and enhance our  asset/liability
position.  At June 30, 2000  certificates of deposit  totaled $82.4 million,  up
12.9% from the $73.0 million at September 30, 1999.


RESULTS OF OPERATIONS

         General.  Net income for the three months ended June 30, 2000 increased
$74,000, or 13.6%, to $618,000 from $544,000 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 nine months ended June 30, 2000 was  $1,674,000,  up
4.6% from the $1,601,000 earned in the same nine months of 1999.

         Interest  Income.  Interest  income  totaled $3.4 million for the three
months  ended June 30,  2000,  a $469,000  increase  from $3.0  million  for the
comparable  1999  period.  The increase for the three months ended June 30, 2000
was  primarily  attributable  to an increase of $29.3  million in average  loans
receivable from the third quarter of fiscal 1999, combined with a 14 basis point
improvement in the yield on average loans. The improvement in yield is primarily

                                       8
<PAGE>

the  result  of the  recognition  of  interest  income  on a loan  that had been
classified as nonaccrual  but was  reclassified  current during the three months
ended June 30, 2000.

         For the nine months ended June 30, 2000,  interest  income totaled $9.8
million,  an $866,000  increase  from the $8.9 million for the  comparable  1999
period.  An increase of $25.1 million in average loans  receivable  for the nine
months  ended June 30,  2000  compared  to the same nine  months of 1999 was the
primary  reason for the rise in  interest  income.  Offsetting  the  increase in
interest  income for the nine months ended June 30,  2000,  was a 14 basis point
decline in the yield on average loans.

         Interest  Expense.  Interest expense totaled $1.8 million for the three
months  ended June 30,  2000,  a $334,000  increase  from $1.5  million  for the
comparable 1999 period.  The increase was due to a $206,000 increase in interest
on deposits,  due to a $9.7 million  increase in average volume,  and a 36 basis
point rise in average cost.  Additionally,  interest on borrowed funds increased
$128,000 increase due to the higher volume and cost of FHLB advances.

         For the nine months ended June 30, 2000,  interest expense totaled $5.1
million,  a $628,000  increase  from the $4.5  million for the  comparable  1999
period.  Interest on deposits reflected a $340,000 increase and interest on FHLB
advances was up $288,000.  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 June 30, 2000,  net
interest  income was $1.6  million,  up $135,000  from the net  interest  income
earned in the same period of 1999. For the three months ended June 30, 2000, our
interest  rate  spread and net  interest  margin  decreased  to 2.85% and 3.63%,
respectively,  compared to 2.96% and 3.70%, 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 $4.6 million for the nine months ended June
30, 2000, up $238,000 from the $4.4 million for the comparable  period of fiscal
1999.  For the nine months ended June 30, 2000, our interest rate spread and net
interest margin were 2.87% and 3.60%, respectively, compared to 2.99% and 3.73%,
respectively  for the same nine months of fiscal 1999. A 14 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 June 30, 2000 from $22,000 for the
same 1999 period.  For the nine months ended June 30, 2000,  the  provision  for
credit losses was $90,000, compared to $67,000 for the comparable nine months of
fiscal 1999.  Although  nonperforming  assets increased $616 thousand during the
nine months  ended June 30,  2000,  they were down $453  thousand  for the three
months ended June 30, 2000.  These loans are adequately  secured and as a result
management  believes the allowance for credit losses is  sufficient.  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,

                                       9
<PAGE>

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.

         Noninterest   Income.  For  the  three  months  ended  June  30,  2000,
noninterest  income was $253,000,  up 5.0% from the $241,000 for the  comparable
1999  period.  Service  charges and fees on loans were up $7,000 to $149,000 for
the third  quarter of fiscal 2000 from  $142,000  for the  comparable  period of
fiscal 1999. Other customer service fees and commissions were up 8.4% to $90,000
for the three  months  ended June 30, 2000  compared to the same three months of
1999 due primarily to the increased number of transaction accounts.

         For the  nine  months  ended  June 30,  2000,  noninterest  income  was
$789,000, up slightly from the $769,000 earned in the nine months ended June 30,
1999. A $54,000  increase in other  customer  service fees and  commissions  was
offset by a decrease  $27,000  decline in the income derived from the presale of
mortgage loans.

         Noninterest  expense.  Noninterest  expense was  $826,000 for the three
months  ended June 30,  2000,  up 2.1% from  $809,000  for the  comparable  1999
period. Data processing expense was up $11,000 due to increased pricing from our
primary service provider. Advertising, primarily focused on increasing deposits,
was up $5,000, or 19.2%, due to increased  marketing and an increase in the cost
of media advertising. For the three months ended June 30, 2000 there were no Y2K
expenses, compared to expenses of $10,000 in the comparable quarter of 1999.

         For the nine months ended June 30, 2000,  noninterest  expense was $2.6
million,  up 3.1% from the level for the same period of fiscal  1999.  Personnel
compensation  and  benefits  were  up  3.9% to  $1.4  million  due to  increased
staffing.  Data processing expense was $319,000,  up 9.6% from the level for the
same nine months of fiscal 1999 due to increased  pricing by our primary service
provider.  Advertising  reflected  a 20.9%  rise  to  $104,000  due to  increase
marketing  efforts  primarily to attract  deposits.  Professional fees were down
26.2% to $124,000  from  $168,000 for the same nine months of fiscal 1999 due to
lower  legal  expenses  and a  reduction  of $7,000  in  outside  services,  due
primarily to consulting expenses incurred in fiscal 1999.

         Provision for Income Taxes. The provision for income taxes was $381,000
for the three months ended June 30, 2000,  up 14.4% from the $333,000  provision
recorded in the same three months of fiscal 1999. For the nine months ended June
30, 2000,  the provision for income taxes was $1.1 million,  up $84,000 from the
provision for the  comparable  period of fiscal 1999. The primary reason for the
increases 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 June 30, 2000. (Dollar amounts in thousands).


                                                         June 30, 2000
                                                        ----------------
                                                                   Percentage
                                                                   of assets
                                                                   ------------

GAAP Capital................................        $20,558           11.16%
                                                    =======           =====

Tangible capital..........................          $20,734           11.26%
Tangible capital requirement..............           $2,798            1.50%
                                                     ------           -----
Excess....................................          $17,936            9.76%
                                                    =======           =====

Core capital..............................          $20,734           11.26%
Core capital requirement..................            7,462            4.00%
                                                      -----           -----
Excess....................................          $13,272            7.26%
                                                    =======           =====

Total risk-based capital (1)..............          $21,452           18.38%
Total risk-based capital requirement (1)..            9,300            8.00%
                                                      -----           -----
Excess....................................          $12,152           10.38%
                                                    =======           =====
-----------------------------
(1)      Based on risk-weighted assets of $116,246


     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 June 30,  2000,  such
borrowed funds totaled $38 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 June 30, 2000, our regulatory liquidity was 10.81%.

                                       11

<PAGE>

     The amount of certificate accounts which are scheduled to mature during the
next twelve months ending June 30, 2001, is approximately  $53.5 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 June 30, 2000,  we had loan  commitments  outstanding  of  $20.8million.
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          Nine Months Ended
                                                                  June 30                     June 30
                                                           ---------------------      -----------------------
                                                           2000(1)       1999(1)      2000(1)         1999(1)
                                                           -------       -------      -------         -------
                                                                                         (Unaudited)


<S>                                                      <C>            <C>           <C>            <C>
Basic earnings per share .......................           $0.30          $0.25         $0.81          $0.73
Diluted earnings per share......................           $0.29          $0.24         $0.78          $0.70
Return on average assets........................            1.35%          1.31%         1.27%          1.32%
Return on average equity........................           11.34%          9.88%        10.40%          9.81%
Interest rate spread............................            2.85%          3.96%         2.87%          2.99%
Net interest margin.............................            3.63%          3.70%         3.60%          3.73%
Noninterest expense to average assets...........            1.81%          2.10%         1.95%          2.11%
Net charge-offs to average outstanding loans....
                                                            0.04%            --%         0.05%            --%
</TABLE>

<TABLE>
<CAPTION>

                                                                                    June 30       September 30
                                                                                      2000            1999
                                                                                  -----------    ---------------
                                                                                     (DOLLARS IN THOUSANDS)
                                                                                  (Unaudited)
<S>                                                                                <C>              <C>
Nonaccrual loans..........................................................           $1,391           $1,089
Foreclosed real estate....................................................              314               --
                                                                                     ------           ------
Total nonperforming assets................................................           $1,705           $1,089
                                                                                     ======           ======


Allowance for credit losses to nonperforming assets.......................           48.22%           73.83%
Nonperforming loans to total loans........................................             .83%            0.74%
Nonperforming assets to total assets......................................             .91%            0.66%


Book value per share .....................................................          $10.26             $9.69
                                                                                    ======             =====

</TABLE>

------------------------
(1)      The ratios for the three- and nine-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 June 30,  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
                  ---------------------------------------------------
                     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.


                                       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:    August 9, 2000               By:      /s/Harold K. Neal
                                               ---------------------------------
                                               Harold K. Neal
                                               President and
                                               Chief Executive Officer
                                               (Principal Executive Officer)


Date:    August 9, 2000               By:      /s/James W. Smith
                                               ---------------------------------
                                               James W. Smith
                                               Vice President and Treasurer
                                               (Principal Accounting and
                                                  Financial Officer)




                                       15