SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One):

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended September 30, 1999, OR

[_]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE  ACT OF 1934 For the  transition  period from        to       .
                                                            ------    ------

Commission File Number:  0-24330

                            BEDFORD BANCSHARES, INC.
                            ------------------------
             (Exact name of registrant as specified in its charter)

Virginia                                                          54-1709924
----------------------------------                                ----------
(State or other jurisdiction                                    I.R.S. Employer
 or organization) of incorporation                            Identification No.

125 West Main Street, Bedford, Virginia                             24523
---------------------------------------                             -----
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:              (540) 586-2590
                                                                 --------------

Securities registered pursuant to Section 12(b) of the Act:           None
                                                                      ----

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

         Check  whether  the issuer:  (1) has filed all  reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 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    .
                  ---      ---

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-B is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.  [X}

         State issuer's revenues for its most recent fiscal year $12,963,000.

         As of December 7, 1999,  there were  issued and  outstanding  2,163,050
shares of the registrant's Common Stock.

         The  registrant's  voting  stock is traded  over-the-counter  under the
symbol  "BFSB."  The  aggregate  market  value  of  the  voting  stock  held  by
non-affiliates of the registrant, based on the closing price of the registrant's
common stock as reported by the Nasdaq  National Market on December 1, 1999, was
$18,580,000.

Transition Small Business Disclosure Format (check one)
YES      NO  X
    ---     ---
                       DOCUMENTS INCORPORATED BY REFERENCE

     1.   Portions of Annual  Report to  Stockholders  for the Fiscal Year Ended
          September 30, 1999. (Part II)
     2.   Portions  of  Proxy   Statement   for  the  1999  Annual   Meeting  of
          stockholders. (Part III)
<PAGE>
                                     PART I

         Bedford Bancshares,  Inc. (the "Registrant" or "Company") may from time
to time make written or oral "forward-looking statements",  including statements
contained in the company's  filings with the Securities and Exchange  Commission
(including this annual report on Form 10-KSB and the exhibits  thereto),  in its
reports to stockholders and in other  communications  by the Company,  which are
made in good faith by the Company  pursuant to the "safe  harbor"  provisions of
the Private Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the board of  governors of the
Federal  Reserve  System,   inflation,   interest  rate,   market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes;  acquisitions;  changes in consumer spending
and savings habits;  and the success of the Company  managing the risks involved
in the foregoing.

         The Company  cautions that the foregoing  list of important  factors is
not  exclusive.  The Company does not  undertake  to update any  forward-looking
statement,  whether written or oral, that may be made from time to time by or on
behalf of the Company.

Item 1.  Business
-----------------

General

         The Company is a Virginia corporation organized in March of 1994 at the
direction of Bedford Federal  Savings Bank ("Bedford  Federal" or the "Bank") to
acquire all of the capital stock that the Bank issued in its conversion from the
mutual to stock form of ownership  (the  "Conversion").  On August 19, 1994, the
Bank  completed  the  Conversion  and became a wholly  owned  subsidiary  of the
Company.  The Company is a unitary savings and loan holding company which, under
existing laws,  generally is not restricted in the types of business  activities
in which it may engage provided that the Bank retains a specified  amount of its
assets in housing  related  investments.  The Company  conducts  no  significant
business  or  operations  other than  holding  all of the  outstanding  stock of
Bedford Federal.  As a result  references to the Registrant or Company generally
refer to the Bank unless the context indicates otherwise.

         Bedford   Federal  is  a  federally   chartered   stock   savings  bank
headquartered  in  Bedford,  Virginia  and has two other  offices  in Forest and
Moneta,   Virginia.  The  Bank  is  subject  to  examination  and

                                      -1-
<PAGE>

comprehensive  regulation  by the Office of Thrift  Supervision  ("OTS") and its
deposits  are  federally  insured  by the  Savings  Association  Insurance  Fund
("SAIF").  Bedford  Federal is a member of and owns capital stock in the FHLB of
Atlanta, which is one of the 12 regional banks in the FHLB System.

         The Bank  operates a  traditional  savings  bank  business,  attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in loans secured by single-family
residential real estate.

Competition

         Competition   for   deposits   comes  from  other   insured   financial
institutions such as commercial banks, thrift  institutions,  credit unions, and
multi-state  regional  banks  in our  market  areas.  Deposit  competition  also
includes a number of  insurance  products  sold by local  agents and  investment
products  such as mutual funds and other  securities  sold by local and regional
brokers. Loan competition varies depending upon market conditions and comes from
commercial  banks,  thrift  institutions,  credit unions,  mortgage  bankers and
finance companies.

Lending Activities

Analysis of Portfolio.  The following  table sets forth the  composition  of the
Registrant's  loan  portfolio in dollar amounts and in percent of the respective
portfolios at the dates indicated.
<TABLE>
<CAPTION>
                                                               September 30,
                                     ------------------------------------------------------------
                                                 1999                          1998
                                     -----------------------------     --------------------------
                                                      Percent of                     Percent of
                                         Amount         Total           Amount         Total
                                                      (Dollars in Thousands)
<S>                                  <C>              <C>            <C>             <C>
Real estate:
Residential:
  One- to four-family                  $ 97,212         62.19%         $95,620         70.46%
  Multi-family.....................       2,405          1.54              854           .63
Commercial.........................       7,623          4.88            4,181          3.08
Construction.......................      18,232         11.66            8,450          6.23
Land...............................       5,254          3.36           11,769          8.67
Consumer and commercial business...      25,595         16.37           14,830         10.93
                                         ------         -----           ------         -----
      Total loans..................     156,321        100.00%         135,704        100.00%
                                                       ======                         ======

Less:
  Unearned discounts, premium,
    deferred loan fees, net........         272                            290
  Loans-in-process.................       7,556                          4,906
  Allowance for credit losses......         804                            764
                                        -------                       --------
      Total loans, net.............    $147,689                      $ 129,744
                                        =======                       ========
</TABLE>

                                      -2-

<PAGE>
Loan Maturity Tables

The following table sets forth the maturity of the  Registrant's  loan portfolio
at  September  30,  1999.  The table does not include  prepayments  or scheduled
principal  repayments.  Prepayments and scheduled principal  repayments on loans
totaled  $53.6 million for the year ended  September  30, 1999.  Adjustable-rate
mortgage loans are shown as maturing based on contractual maturities.
<TABLE>
<CAPTION>
                                                             Due after
                                               Due within    1 through     Due after
                                                 1 year       5 years       5 years         Total
                                                 ------       -------       -------         -----
                                                                   (In Thousands)

<S>                                          <C>            <C>          <C>             <C>
One- to four-family residential real estate..  $    31        $ 1,135      $ 96,046        $ 97,212
Multi-family residential real estate.........       --             57         2,348           2,405
Commercial real estate.......................       12            299         7,312           7,623
Construction.................................   10,282            394            --          10,676
Land.........................................       40            165         5,049           5,254
Consumer and commercial business.............    3,350         11,143        11,102          25,595
                                                ------         ------        ------          ------
Total........................................  $13,715        $13,193      $121,857        $148,765
                                                ======         ======       =======         =======
</TABLE>

         The following table sets forth the dollar amount of all loans due after
September 30, 2000,  which have fixed  interest rates and floating or adjustable
interest rates.
<TABLE>
<CAPTION>
                                                              Floating or
                                        Fixed Rates         Adjustable Rates       Total
                                        -----------         ----------------       -----
<S>                                       <C>                   <C>             <C>
Real estate loans:                                           (In Thousands)
   One- to four-family............         $20,452               $76,729         $ 97,181
   Multi-family...................              57                 2,348            2,405
   Commercial real estate.........           1,958                 5,653            7,611
   Construction...................              91                   303              394
   Land...........................           3,813                 1,401            5,214
Consumer and commercial
  business........................          15,954                 6,291           22,245
                                            ------                ------          -------
  Total...........................         $42,325               $92,725         $135,050
                                            ======                ======          =======
</TABLE>

         One- to Four-Family Residential Loans. The Registrant's primary lending
activity consists of the origination of one- to four-family residential mortgage
loans secured by property located in the Registrant's  primary market areas. The
Registrant generally originates  owner-occupied one- to four-family  residential
mortgage  loans in  amounts up to 80% of the  lesser of the  appraised  value or
selling price of the mortgaged  property without requiring  mortgage  insurance.
The  Registrant  will  originate  a mortgage  loan in an amount up to 95% of the
lesser of the appraised value or selling price of a mortgaged property, however,
mortgage  insurance  is required  for the amount in excess of 80% of such value.
Adjustable-rate  mortgage  loans may be  originated  at up to 95% of the loan to
value ratio.


                                      -3-
<PAGE>



         For all  adjustable-rate  mortgage loans,  the Registrant  requires the
borrower to qualify at the initial rate and such loans are indexed to the weekly
average of the one year U.S.  Treasury  bill. The  Registrant's  adjustable-rate
mortgage loans provide for periodic  interest rate  adjustments of plus or minus
1% to 2% with a maximum adjustment over the term of the loan as set forth in the
loan agreement and usually ranges from 3% to 6% above the initial  interest rate
depending on the terms of the loan. Adjustable-rate mortgage loans reprice every
one or two years, some have a fixed rate for three,  five, or seven years before
adjusting annually and have terms from 10 to 30 years. Interest rates charged on
mortgage  loans are  competitively  priced  based on market  conditions  and the
Registrant's cost of funds.  Generally,  the Registrant's  standard underwriting
guidelines  for  mortgage  loans  conform  to the  Federal  Home  Loan  Mortgage
Corporation ("FHLMC") guidelines.

         Adjustable-rate  mortgage  loans  decrease  the risks  associated  with
changes in interest rates by more closely reflecting these changes,  but involve
other risks because as interest rates increase,  the underlying  payments by the
borrower increase,  thus increasing the potential for default. At the same time,
the  marketability  of the underlying  collateral  may be adversely  affected by
higher interest  rates.  Upward  adjustment of the contractual  interest rate is
also limited by the adjustable-rate mortgage loan documents, thereby potentially
limiting their  effectiveness  during periods of rising  interest  rates.  These
risks have not had an adverse effect on the Registrant.

         The Registrant  also offers  fixed-rate  one- to  four-family  mortgage
loans  with  terms  from  10  to  30  years.   Fixed-rate  loans  are  generally
underwritten  according  to  the  FHLMC  guidelines,  utilizing  their  approved
documents so that the loans qualify for sale in the secondary  mortgage  market.
The  Registrant  originates and holds some  fixed-rate  mortgage loans as deemed
appropriate by the Asset Liability Management Committee.

         Construction  Lending.  The Registrant engages in construction  lending
involving loans to qualified  borrowers for  construction of one- to four-family
residential  properties  and,  on a  limited  basis,  involving  commercial  and
multi-family properties. These properties are located in the Registrant's market
area.

         Construction lending is generally considered to involve a higher degree
of  credit  risk  than  long-term  financing  of  residential  properties.   The
Registrant's  risk of loss on a construction  loan is dependent largely upon the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  or  development  and the estimated  cost of  construction.  If the
estimate  of  construction  cost  and the  marketability  of the  property  upon
completion  of  the  project  prove  to be  inaccurate,  the  Registrant  may be
compelled to advance additional funds to complete construction.  Furthermore, if
the estimate of value proves to be inaccurate,  the Registrant may be confronted
at or prior to the  maturity of the loan,  with a property  with a value that is
insufficient to assure full repayment.

         Multi-Family  and Commercial Real Estate Loans.  The Registrant  offers
multi-family  and commercial  real estate loans,  however,  this type of lending
represents a small portion of the Registrant's  lending  activities.  Commercial
real estate loans consist of permanent loans secured by small office  buildings,
churches,  shopping centers and other  non-residential  buildings on real estate
located in the west-central  Virginia area.  Substantially all of the properties
securing the  Registrant's  commercial  and  multi-family  real estate loans are
inspected by the  Registrant's  lending  personnel  before the loan is made. The
Registrant also obtains appraisals on each property.


                                      -4-
<PAGE>

         Loans secured by  multi-family  and commercial  real estate  properties
generally  involve a greater degree of risk than residential  mortgage loans and
carry larger loan balances.  This  increased  credit risk is a result of several
factors,  including the  concentration of principal in a limited number of loans
and borrowers,  the effects of general  economic  conditions on income producing
properties and the increased difficulty of evaluating and monitoring these types
of loans. Furthermore,  the repayment of loans secured by commercial real estate
is typically dependent upon the successful  operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired.

         Land Loans.  Land loans are made  primarily to individuals on developed
residential lots located in the Registrant's market area. Land lending generally
involves  additional risks to the lender as compared with  residential  mortgage
lending.  These risks are  attributable to the fact that loan funds are advanced
upon the security of unimproved  and developed  lots or land under  development,
predicated on the future value of the property upon  completion of  development.
Loans  on  undeveloped  land  may  run  the  risk  of  adverse  zoning  changes,
environmental or other restrictions on future use. Because of these factors, the
analysis of land loans  requires an expertise  that is different in  significant
respects from that which is required for residential mortgage lending.

         Consumer and Commercial Business Loans. In response to a perceived need
in the local community and to provide for diversification of its asset portfolio
and improved interest rate risk management,  the Registrant continues increasing
the amount of consumer and commercial  business  loans it  originates.  Consumer
loans consist of automobile loans, savings account loans, home equity,  personal
secured  and  unsecured  loans  and home  improvement  loans.  The  underwriting
standards  employed by the Registrant for consumer loans include a determination
of the  applicant's  payment  history on other  debts and an  assessment  of the
borrower's ability to make payments on the proposed loan and other indebtedness.
In addition to the  creditworthiness of the applicant,  the underwriting process
also includes a comparison of the value of the security,  if any, in relation to
the proposed loan amount.  The  Registrant's  consumer loans tend to have higher
interest rates and shorter  maturities  than one- to four-family  first mortgage
loans,  but are  considered  to entail a greater risk of default  than  mortgage
loans.

         Commercial  business  loans  consisting  of revolving  lines of credit,
short-term  working  capital  loans,  and  term  loans  up to  seven  years  are
originated  to meet  the  needs  of  local  small  businesses.  Some  loans  are
unsecured,  but the  majority  are  secured by  inventory,  equipment,  accounts
receivable,  marketable  securities,  savings  deposits,  real estate,  personal
guaranties,  or a combination of these types of collateral.  Commercial business
loans generally involve a greater degree of risk than residential mortgage loans
and frequently  carry larger loan balances.  The  Registrant  offers  fixed-rate
commercial business loans and adjustable-rate  loans. This increased credit risk
is a result of several  factors,  including the  concentration of principal in a
limited  number  of  loans  and  borrowers,  the  effects  of  general  economic
conditions  on  business  cash  flow,  and  the  difficulty  of  evaluating  and
monitoring these types of loans.

         Loan Solicitation and Processing.  The Registrant's sources of mortgage
loan  applications  are referrals from existing or past  customers,  real estate
brokers,  builders,  call-in  and  walk-in  customers  and  also the  result  of
advertising.  All loans are underwritten and approved by the loan committee. Any
loan up to  $300,000  is  reviewed  and  approved  by two  members  of the  loan
committee.  Any loan over  $300,000 is reviewed and approved by three members of
the loan committee. All loan approvals are ratified by the Board of Directors on
a monthly basis.

                                      -5-
<PAGE>

         The  Registrant  uses  independent  fee  appraisers  on all real estate
related  transactions.  Each fee appraiser  used must be state licensed or state
certified  and  approved  by the  Registrant's  board  of  directors.  It is the
Registrant's  policy to obtain  title  insurance  or an  attorney's  opinion and
certification  of title and fire and casualty  insurance for all mortgage loans.
If appropriate, flood insurance is also required.

         Loan Commitments.  The Registrant issues written, formal commitments as
to interest rate to  prospective  borrowers on all real estate loans at the date
of  application.  The interest rate commitment is good for 60 days from the date
of the application.  Upon receipt of loan approval, the borrower has the balance
of the 60 day  period  to close  the loan at the  interest  rate  committed.  At
September 30, 1999,  the Registrant had $4.6 million of commitments to originate
mortgage loans,  $5.9 million in unfunded home equity loans and $2.5 in unfunded
commercial lines of credit.

         Loans to One  Borrower.  Savings  institutions  are subject to the same
limits  as  those  applicable  to  national  Registrants,  which  under  current
regulations limit loans-to-one  borrower to an amount equal to 15% of unimpaired
capital and retained income on an unsecured basis and an additional amount equal
to 10% of  unimpaired  capital  and  retained  income if the loan is  secured by
readily  marketable  collateral  (generally,  financial  instruments,  not  real
estate)  or  $500,000,   whichever  is  greater.  Under  such  regulations,  the
Registrant's  maximum loan-to-one  borrower limit was approximately $3.3 million
as of September 30, 1999.

Non-Performing and Problem Assets

         Loan   Delinquencies  and   Non-Performing   Assets.  The  Registrant's
collection  procedures  provide that when a mortgage loan is 15 days past due, a
computer printed  delinquency  notice is sent. If payment is still delinquent at
the  end of  that  month,  within  five  days a  telephone  call  is made to the
borrower. If the delinquency continues, subsequent efforts are made to eliminate
the  delinquency.  If the loan  continues in a delinquent  status for 90 days or
more, the Board of Directors of the Registrant generally approves the initiation
of foreclosure  proceedings  unless other repayment  arrangements are made and a
specific reserve for 100% of uncollected interest is established, thus effecting
non-accrual status. Collection procedures for non-mortgage loans generally begin
after a loan is 10 days delinquent.

         The following table sets forth information  regarding  nonaccrual loans
and real estate owned,  as of the dates  indicated.  The Registrant had no loans
categorized  as impaired loans and troubled debt  restructurings.  Additionally,
there were no accruing loans that were delinquent more than 90 days.

                                       -6-
<PAGE>
                                                             At September 30,
                                                          ----------------------
                                                            1999          1998
                                                          ---------    ---------
                                                          (Dollars in thousands)
Loans accounted for on a nonaccrual basis:
Mortgage loans:
  One- to four-family residential real estate ........      $  211       $  281
  Land ...............................................         839          214
  Consumer and commercial business loans .............          39           37
                                                            ------       ------
Total non-accrual loans ..............................      $1,089       $  532
                                                            ======       ======
Real estate owned ....................................      $ --         $ --
                                                            ======       ======
Total non-performing assets ..........................      $1,089       $  532
                                                            ======       ======
Total non-accrual loans to total loans ...............         .73%         .41%
                                                            ======       ======

         Interest income that would have been recorded on loans accounted for on
a nonaccrual basis under the original terms of such loans was immaterial for the
year ended September 30, 1999.

         Classified Assets. OTS regulations provide for a classification  system
for problem assets of insured  institutions.  Under this classification  system,
problem  assets  of  insured   institutions  are  classified  as  "substandard,"
"doubtful,"  or  "loss."  An  asset  is  considered   "substandard"   if  it  is
inadequately  protected  by the  current  net worth and paying  capacity  of the
obligor or of the collateral pledged, if any.

         "Substandard"  assets  include  those  characterized  by the  "distinct
possibility"  that the  insured  institution  will  sustain  "some  loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts,  conditions and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
designated   "special   mention"  by  management  are  assets  included  on  the
Registrant's  internal  watchlist because of potential weakness but which do not
currently warrant classification in one of the aforementioned categories.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish general  allowances for credit losses
in an amount deemed prudent by  management.  General  allowances  represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem  assets as  "loss,"  it is  required  either  to  establish  a  specific
provision for losses equal to 100% of that portion of the asset so classified or
to  charge  off  such  amount.   An   institution's   determination  as  to  the
classification  of its  assets  and the amount of its  valuation  allowances  is
subject to review by the OTS,  which may order the  establishment  of additional
general or  specific  loss  allowances.  A portion of  general  loss  allowances
established to cover possible losses related to assets classified as substandard
or doubtful may be included in determining an institution's  regulatory capital,
while specific  valuation  allowances for credit losses generally do not qualify
as regulatory  capital.  At September 30, 1999,  classified  assets consisted of
$597,000 and $492,000,  respectively, of special mention and substandard assets.
Such assets were classified as non-accrual loans.

                                      -7-
<PAGE>

         Allowances for Loan Losses.  It is  management's  policy to provide for
losses on unidentified loans in its loan portfolio.  A provision for loan losses
is charged to operations based on management's evaluation of the losses that may
be incurred in the Registrant's loan portfolio. Such evaluation,  which includes
a review of all loans of which full collectibility of interest and principal may
not be reasonably assured, considers the Registrant's past loan loss experience,
known and inherent risks in the portfolio,  adverse  situations  that may affect
the borrower's ability to repay,  estimated value of any underlying  collateral,
any existing guarantees,  past performance of the loan, available  documentation
for the loan,  legal  impediments  to  collection,  financial  condition  of the
borrower, and current economic conditions.

         Management  will  continue  to review  the  entire  loan  portfolio  to
determine the extent, if any, to which further additional loss provisions may be
deemed  necessary.  There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
additional provisions for losses will not be required.

         The following  table sets forth the  Registrant's  allowance for credit
losses, allowance for losses on foreclosed real estate and related ratios.

                                                   At or For the Year Ended
                                                   ------------------------
                                                        September 30,
                                                   ------------------------
                                                      1999            1998
                                                   ---------        --------
                                                     (Dollars in thousands)

Allowance balance (at beginning of period)            $764            $678
                                                       ---            ----
 Charge-offs:
   One- to four-family.........................          -               -
   Multi-family................................          -               -
   Commercial real estate......................          -               -
   Construction and land.......................          -               -
   Consumer and commercial business............         58               8
                                                       ---            ----
     Total charge-offs.........................         58               8
  Recoveries...................................         (8)             (4)
  Provision....................................         90              90
                                                       ---            ----
Allowance balance (at end of period)...........       $804            $764
                                                      ====            ====

Ratios of net charge-offs during the period
  to average loans outstanding during the
  period.......................................        .04%            .01%
                                                       ===             ===
Ratio of allowance for credit losses to total
  loans at the end of the period...............        .54%            .58%
                                                       ===             ===
Ratio of allowance for credit losses to non-
  performing assets at the end of the
  period.......................................        .74%         143.80%
                                                       ===          ======


                                      -8-
<PAGE>



         Analyses of the  Allowance for Loan Losses.  The  following  table sets
forth the allocation of the allowance by category, which management believes can
be allocated  only on an approximate  basis.  The allocation of the allowance to
each category is not necessarily indicative of future loss and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
                                                            At September 30,
                                     ------------------------------------------------------------
                                             1999                              1998
                                     ----------------------------       -------------------------
                                                  Percent of                      Percent of
                                                 Loans in Each                   Loans in Each
                                                  Category to                     Category to
                                      Amount      Total Loans            Amount   Total Loans
                                      ------      ----------            ------   -----------
                                                      (Dollars in Thousands)

<S>                                 <C>           <C>                 <C>           <C>
One- to four-family ............       $294          62.2%               $381          70.5%
Multi-family ...................         10           1.5                   1            .6
Commercial real estate .........         90           4.9                  50           3.1
Construction ...................         75          11.7                  49           6.2
Land ...........................         50           3.3                  39           8.7
Consumer and commercial
 business ......................        285          16.4                 244          10.9
                                       ----         -----                ----         -----
  Total ........................       $804         100.0%               $764         100.0%
                                       ====         =====                ====         =====
</TABLE>

Investment and Mortgage-backed Securities Activities

         Investment  Securities.   The  Registrant  is  required  under  federal
regulations  to maintain a minimum amount of liquid assets which may be invested
in specified short-term securities and certain other investments. The Registrant
has  generally  maintained a liquidity  portfolio  well in excess of  regulatory
requirements.  Liquidity levels may be increased or decreased depending upon the
yields on  investment  alternatives  and upon  management's  judgment  as to the
attractiveness  of the yields then available in relation to other  opportunities
and its expectation of future yield levels, as well as management's  projections
as to the  short-term  demand  for  funds  to be used in the  Registrant's  loan
origination and other activities.

         Current  regulatory  and  accounting  guidelines  regarding  investment
securities  require the Company to categorize  securities as "held to maturity,"
"available  for sale" or "trading."  As of September  30, 1999,  the Company had
securities  classified  as "held to maturity"  and  "available  for sale" in the
amount of $2,310,000 and $10,458,000,  respectively.  At September 30, 1999, the
Company had no  securities  classified as  "trading."  Securities  classified as
"available for sale" are reported for financial  reporting  purposes at the fair
market value with net changes in the market value from period to period included
as a  separate  component  of  stockholders'  equity,  net of income  taxes.  At
September  30,  1999,  the Company  had  securities  available  for sale with an
amortized cost of $10,706,000 and market value of $10,458,000  (unrealized  loss
of $248,000).  Changes in the market value of  securities  available for sale do
not affect the  Company's  income.  In addition,  changes in the market value of
securities  available  for sale do not  affect  the  Bank's  regulatory  capital
requirements or its loan-to-one borrower limit.

                                      -9-
<PAGE>


         Mortgage-backed    Securities.     Mortgage-backed    securities    are
participation  certificates issued and guaranteed by the FHLMC and secured by an
interest  in pools  of  conventional  mortgages  originated  by other  financial
institutions.   Mortgage-backed  securities  provide  for  monthly  payments  of
principal and interest and generally have  contractual  maturities  ranging from
five to 30 years.  However,  due to expected repayment terms being significantly
less  than  the  underlying  mortgage  loan  pool  contractual  maturities,  the
estimated lives of these securities could be significantly shorter.

        Securities Portfolio.  The following table sets forth the carrying value
of the Registrant's securities at the dates indicated:
<TABLE>
<CAPTION>


                                                               At September 30,
                                                               ----------------
                                                               1999       1998
                                                              -------    -------
                                                               (In thousands)
<S>                                                           <C>        <C>
Federal funds sold and other short-term investments ......    $  --      $ 3,650
Investment securities and mortgage backed securities:
  Held to maturity:
    Mortgage backed securities ...........................         10         15
    FHLB stock ...........................................      1,500      1,550
    U.S. Government and agency obligations ...............        800      2,099
                                                              -------    -------
      Total held to maturity .............................      2,310      3,664
                                                              -------    -------
Available for sale:
    U.S. Government and agency obligations ...............      5,830     12,371
    Marketable equity securities and other(1) ............      4,628      4,449
                                                              -------    -------
      Total available for sale ...........................     10,458     16,820
                                                              -------    -------
      Total ..............................................    $12,768    $24,134
                                                              =======    =======
</TABLE>

(1)      Marketable equity  securities  available for sale -consist of the Asset
         Management Fund for Financial Institutions, Inc. ("AMF Fund"), a mutual
         fund that  invests in  securities  eligible  for direct  investment  by
         savings  associations.  The  Company  uses  this fund to  increase  its
         short-term  yield,  primarily on overnight funds. The AMF Fund consists
         primarily of adjustable-rate mortgage-related securities.



                                      -10-
<PAGE>



         Investment  Yields and  Maturities.  The table below sets forth certain
information   regarding  the  carrying  value,   weighted   average  yields  and
contractual  maturities  of  the  Registrant's  federal  funds  sold  and  other
short-term  investments,  investment  securities,  securities  held for sale and
mortgage-backed securities as of September 30, 1999.
<TABLE>
<CAPTION>
                                                                                                                       Total
                                     One Year or Less  One to Five Years Five to Ten Years More than Ten Years   Investment Years
                                     ----------------  ----------------- ----------------- ------------------- ---------------------
                                               Weighted         Weighted         Weighted          Weighted          Weighted
                                     Carrying  Average Carrying Average Carrying Average Carrying  Average Carrying  Average  Market
                                      Value     Yield   Value   Yield     Value   Yield   Value     Yield    Value    Yield   Value
                                      -----     -----   -----   -----     -----   -----   -----     -----    -----    -----   -----
                                                                        (Dollars in thousands)
<S>                                 <C>         <C>   <C>       <C>     <C>      <C>    <C>         <C>    <C>        <C>   <C>
Held to maturity:
    Mortgage-backed securities....        10     8.31      --      --      --       --       --        --        10    8.31       10
    FHLB stock ...................     1,500     7.48      --      --      --       --       --        --     1,500    7.48    1,500
    U.S. government and agency
      obligations ................       800     6.97      --      --      --       --       --        --       800    6.97      800
Available for sale:
    U.S. Government and agency
      obligations ................        --       --   4,359    6.32      --       --    1,471      6.90     5,830    6.47    5,830
    Marketable equity securities
      and other...................     4,628       --       --     --      --       --       --        --     4,628    5.39    4,628
                                     -------           -------           ----            ------             -------          -------
Total ............................   $ 6,938     5.97  $ 4,359   6.32    $ --       --   $1,471      6.90   $12,768    6.23  $12,768
                                     =======     ====  =======   ====    ====    =====   ======      ====   =======    ====  =======
</TABLE>


                                      -11-


<PAGE>

Sources of Funds

         General.  Deposits are the major source of the  Registrant's  funds for
lending and other  investment  purposes.  The Registrant also derives funds from
amortization  and prepayment of loans,  maturities of investment  securities and
operations  and  utilizes  advances  from the FHLB of  Atlanta.  Scheduled  loan
principal  repayments  are a relatively  stable  source of funds,  while deposit
inflows and  outflows  and loan  prepayments  are  significantly  influenced  by
general interest rates and market  conditions.  The Registrant does not have any
brokered deposits.

         Deposits.  Customer deposits are attracted  principally from within the
Registrant's  primary  market area through the offering of a broad  selection of
deposit  instruments  including  negotiable order of withdrawal accounts ("NOW")
(including  interest-bearing  and  noninterest-bearing),  passbook and statement
savings,   money  market  deposit,  term  certificate  accounts  and  Individual
Retirement Accounts. Deposit account terms vary according to the minimum balance
required,  the time  period the funds must  remain on deposit  and the  interest
rate. At September 30, 1999, the Registrant had no brokered deposits.

         Certificates  of Deposit  of  $100,000  or More.  The  following  table
indicates the amount of the Registrant's  certificates of deposit and other time
deposits of $100,000 or more by time  remaining  until  maturity as of September
30, 1999

                                                   Amount
                                                   ------
Maturity Period                                (In thousands)
---------------
Within three months                                 $ 3,503
Three through six months                              2,447
Six through twelve months                             3,788
Over twelve months                                    4,047
                                                    -------
    Total                                           $13,785
                                                    =======

         Borrowings.  While  deposits  are the  primary  source of funds for the
Registrant's  lending and  investment  activities  and for its general  business
purposes,  the  Registrant  also  obtains  advances  from the FHLB of Atlanta to
supplement its supply of lendable  funds.  Advances from the FHLB of Atlanta are
secured by the Registrant's  first mortgage loans.  The Registrant,  if the need
arises,  may also  access the  Federal  Reserve  Registrant  discount  window to
supplement  its  supply  of  lendable  funds  and  to  meet  deposit  withdrawal
requirements.

Personnel

         As of September 30, 1999, the Registrant had 43 full-time employees and
3 part-time  employee.  None of the Registrant's  employees are represented by a
collective  bargaining group. The Registrant believes that its relationship with
its employees is good.


                                      -12-
<PAGE>



Regulation

         Set forth below is a summary  description  of certain laws which relate
to the regulation of the Company and the Bank. The description  does not purport
to be complete and is qualified in its entirety by reference to applicable  laws
and regulations.

         On  November  12,  1999,   President   Clinton   signed  into  law  the
Gramm-Leach-Bliley  Act (the "Act") which will, effective March 11, 2000, permit
qualifying  bank holding  companies to become  financial  holding  companies and
thereby  affiliate with securities  firms and insurance  companies and engage in
other  activities  that are financial in nature.  The Act defines  "financial in
nature"  to  include  securities   underwriting,   dealing  and  market  making;
sponsoring  mutual funds and investment  companies;  insurance  underwriting and
agency;  merchant  banking  activities;   and  activities  that  the  Board  has
determined to be closely related to banking. A qualifying national bank also may
engage,  subject to limitations on investment,  in activities that are financial
in nature,  other  than  insurance  underwriting,  insurance  company  portfolio
investment,  real  estate  development,  and real estate  investment,  through a
financial subsidiary of the bank.

         The Act also  prohibits  new  unitary  thrift  holding  companies  from
engaging in  nonfinancial  activities or from  affiliating  with an nonfinancial
entity.  As a  grandfathered  unitary thrift holding  company,  the Company will
retain its authority to engage in nonfinancial activities.

Company Regulation

         General.  The  Company is a unitary  savings and loan  holding  company
subject to regulatory  oversight by the OTS. As such, the Company is required to
register  and  file  reports  with  the OTS and is  subject  to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Company and its non-savings association  subsidiaries,  should such subsidiaries
be formed,  which also permits the OTS to restrict or prohibit  activities  that
are determined to be a serious risk to the subsidiary savings association.  This
regulation  and  oversight  is  intended  primarily  for the  protection  of the
depositors of the Bank and not for the benefit of stockholders of the Company.

         Qualified  Thrift  Lender Test.  As a unitary  savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank  satisfies  the Qualified  Thrift  Lender  ("QTL") test. If the Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the  Company  and any of its  subsidiaries  (other  than the  Bank or any  other
SAIF-insured   savings   association)   would  become  subject  to  restrictions
applicable to bank holding  companies unless such other  associations  each also
qualify  as a QTL  and  were  acquired  in a  supervisory  acquisition.  See  "-
Regulation of the Bank - Qualified Thrift Lender Test."

Regulation of the Bank

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to  extensive  regulation  by the OTS and the FDIC.  Lending
activities and other  investments must comply with various federal statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.

                                      -13-
<PAGE>

         The OTS, in conjunction with the FDIC,  regularly examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's  operations.  The Bank's  relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law,  especially in such matters as the ownership of savings  accounts
and the form and content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the  establishment  of adequate  loan loss  reserves  for  regulatory
purposes.

         Insurance of Deposit  Accounts.  The deposit  accounts held by the Bank
are insured by SAIF to a maximum of $100,000 for each insured member (as defined
by law and regulation). Insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
institution's primary regulator.

         A member of the SAIF pays an annual insurance premium to the FDIC of at
least 0.064% of total deposits of that member.  The FDIC also maintains  another
insurance  fund,  the Bank  Insurance  Fund  ("BIF"),  which  primarily  insures
commercial bank deposits. Most members of BIF pay a lower premium to the FDIC.

         After 1999, assessments for BIF and SAIF members should be the same. It
is expected that these continuing assessments for both SAIF and BIF members will
be used to repay outstanding Financing Corporation bond obligations.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted  assets,  (2) a leverage ratio (core capital) equal to
at least 4% of total adjusted assets, and (3) a risk-based  capital  requirement
equal to 8.0% of total risk-weighted assets.

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

         A  savings  association  that is a  subsidiary  of a  savings  and loan
holding company,  such as the Bank must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and need only file a notice if the following  conditions  are met:
(1) they are eligible for expedited  treatment under OTS  regulations,  (2) they
would  remain  adequately  capitalized  after the  distribution,  (3) the annual
amount of capital  distribution does not exceed net income

                                      -14-
<PAGE>

for that year to date added to retained net income for the two preceding  years,
and (4) the capital distribution would not violate any agreements between he OTS
and the savings  association or any OTS  regulations.  Any other situation would
require an application to the OTS.

         The OTS may disapprove an application or notice if the proposed capital
distribution   would:  (i)  make  the  savings   association   undercapitalized,
significantly  undercapitalized,  or  critically  undercapitalized;  (ii)  raise
safety or  soundness  concerns;  or (iii)  violate  a  statute,  regulation,  or
agreement  with  the OTS (or  with  the  FDIC),  or a  condition  imposed  in an
OTS-approved application or notice. Further, a federal savings association, like
the  Bank,  cannot  distribute   regulatory  capital  that  is  needed  for  its
liquidation account.

         Qualified  Thrift  Lender Test.  Savings  institutions  must meet a QTL
test. If the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-related  securities) ("QTIs") and otherwise qualifies as a QTL, it will
continue  to enjoy  full  borrowing  privileges  from the FHLB of  Atlanta.  The
required  percentage of QTIs is 65% of portfolio  assets  (defined as all assets
minus  intangible  assets,  property used by the  institution  in conducting its
business and liquid  assets equal to 10% of total  assets).  Certain  assets are
subject to a  percentage  limitation  of 20% of portfolio  assets.  In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying  QTIs. An  association  must be in compliance  with the QTL test on a
monthly basis in nine out of every 12 months. As of September 30, 1999, the Bank
was in compliance with its QTL requirement.

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Atlanta,  which is one of 12 regional FHLBs that  administers the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central Bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Atlanta  in an  amount  equal to at least  1% of its  aggregate  unpaid
residential mortgage loans, home purchase contracts or similar obligations or 5%
of its outstanding  borrowings to the FHLB of Atlanta,  at the beginning of each
year.

         Liquidity  Requirements.  All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  associations.  At September  30, 1999,  the Bank's  actual
liquid asset ratio was 8.5%, which is in excess of current requirements.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction  accounts (primarily  checking,  NOW, and Super
NOW checking accounts) and non-personal time deposits.  The balances  maintained
to meet the reserve  requirements  imposed by the Federal  Reserve  Board may be
used to satisfy


                                      -15-
<PAGE>

the liquidity  requirements  that are imposed by the OTS. At September 30, 1999,
the Bank was in compliance with these Federal Reserve Board requirements.

Item 2.  Description of Property.
---------------------------------

         (a) The Registrant  conducts its business through a main office located
in  Bedford,  Virginia  and two  branch  offices.  The  Registrant  also has six
freestanding  ATM's  two of  which  are  located  in  convenience  markets.  The
Registrant believes that the current facilities are adequate to meet its present
and immediately foreseeable needs.

                                                              Original Date
Location                     Leased or Owned               Leased or Acquired
--------                     ---------------               ------------------

125-133 W. Main Street           Owned                     12/70 - Main Office
Bedford, VA  24523                                         12/84 - Drive thru
                                                              3/89 - Annex

1152 Hendricks Store Road     Land Leased                         8/86
Moneta, VA  24121            Building Owned                       1/87

ATM                           Land Leased                         7/95
Moneta Road                  Building Owned                       8/95
Moneta, VA  24121

ATM                              Owned                            12/78
14915 Forest Road
Forest, VA  24551

ATM
Longwood Avenue                  Owned                            1/85
Bedford, VA  24523

ATM                           Land Leased                         10/99
Blue Ridge Avenue
Bedford, VA  24523


         (b) Investment  Policies.  See "Item 1.  Business"  above for a general
description of the Registrant's  investment policies and any regulatory or Board
of Directors'  percentage of assets limitations  regarding certain  investments.
The Registrant's  investments are primarily acquired to produce income, and to a
lesser extent, possible capital gain.

         (1)  Investments in Real Estate or Interests in Real Estate.  See "Item
1. Business - Lending  Activities and - Regulation of the Registrant," and "Item
2. Description of Property."


                                      -16-
<PAGE>

         (2)  Investments  in Real  Estate  Mortgages.  See "Item 1.  Business -
Lending Activities and - Regulation of the Registrant."

         (3)  Investments  in  Securities  of or Interests in Persons  Primarily
Engaged in Real Estate  Activities.  See "Item 1. Business - Lending  Activities
and - Regulation of the Registrant."

         (c)      Description of Real Estate and Operating Data. Not Applicable.

Item 3.  Legal Proceedings
--------------------------

         Neither  the  Company  nor the  Registrant  are  engaged  in any  legal
proceedings  of a material  nature at the present time.  From time to time,  the
Registrant is a party to legal  proceedings  in the ordinary  course of business
wherein it enforces its security interest in mortgage loans made by it.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.

                                     PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
--------------------------------------------------------------------------------
         Matters
         -------

         The information  contained under the sections  captioned  "Stock Market
Information" in the Company's  Annual Report to Stockholders for the Fiscal Year
Ended  September  30,  1999 (the  "Annual  Report")  is  incorporated  herein by
reference.

Item  6.  Management's Discussion and Analysis or Plan of Operation
-------------------------------------------------------------------

         The  information  contained  in  the  section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.

Item  7.  Financial Statements
------------------------------

         The  Registrant's   financial  statements  listed  under  Item  13  are
incorporated herein by reference.

Item  8.  Changes  in and  Disagreements  with  Accountants  On  Accounting  and
--------------------------------------------------------------------------------
          Financial Disclosure.
          ---------------------

         Not applicable.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
        with Section 16(a) of the Exchange Act.
        ---------------------------------------

         The  information  required  under this item is  incorporated  herein by
reference  to the  Proxy  Statement  for the 2000  Annual  Meeting  (the  "Proxy
Statement")  contained under the sections  captioned

                                      -17-
<PAGE>

"Section  16(a)  Beneficial  Ownership  Reporting  Compliance,"  "Proposal  I  -
Election of Directors," and "- Biographical Information."

Item 10.  Executive Compensation
--------------------------------

         The  information  required by this item is incorporated by reference to
the  Proxy  Statement  contained  under  the  section  captioned  "Director  and
Executive Officer Compensation."

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners
         (b)      Security Ownership of Management

                  The information  required by items (a) and (b) is incorporated
                  herein by reference to the Proxy Statement contained under the
                  sections  captioned  "Principal  Holders"  and  "Proposal  I -
                  Election of Directors."

         (c)      Management of the Company knows of no arrangements,  including
                  any pledge by any person of  securities  of the  Company,  the
                  operation of which may at a subsequent date result in a change
                  in control of the Company.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.

Item 13. Exhibits, List, and Reports on Form 8-K
------------------------------------------------

         (a) Listed below are all  financial  statements  and exhibits  filed as
part of this report.

                  1.       The   consolidated    balance   sheets   of   Bedford
                           Bancshares,  Inc. as of  September  30, 1999 and 1998
                           and the related  consolidated  statements  of income,
                           changes  in  stockholders'  equity and cash flows for
                           each of the  years in the  three  year  period  ended
                           September  30, 1999,  together with the related notes
                           and the independent  auditors' report of BDO Seidman,
                           LLP independent certified public accountants.

                  2.       Schedules omitted as they are not applicable.


                                      -18-
<PAGE>



                  3. The  following  exhibits  are  included  in this  Report or
                     incorporated herein by reference:

                           (a)      List of Exhibits:
<TABLE>
<CAPTION>
                                  <S>     <C>
                                     3(i)   Restated Articles of Incorporation of Bedford Bancshares, Inc. *
                                     3(ii)  Bylaws of Bedford Bancshares, Inc. *
                                     4      Specimen Stock Certificate *
                                    10.1    1994 Stock Option Plan *
                                    10.2    Recognition  and  Retention  Plan  and Trust Agreement *
                                    10.3    Employment  Agreement between the  Registrant and Harold K. Neal *
                                    13      Portions of the 1999  Annual  Report to  Stockholders
                                    21      Subsidiaries of the Registrant (See "Item 1-
                                            Description  of  Business)
                                    23      Consent of BDO Seidman, LLP
                                    27      Financial  Data  Schedule (electronic filing only)
</TABLE>




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




                                       19
<PAGE>


                                   SIGNATURES

          Pursuant to the  requirements of Section 13 or 15(d) 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  as of December 21,
1999.

                                           BEDFORD BANCSHARES, INC.


                                      By:  /s/Harold K. Neal
                                           -------------------------------------
                                           Harold K. Neal, President and
                                           Chief Executive Officer
                                           (Duly Authorized Representative)

          Pursuant to the  requirement of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the  capacities and on the dates  indicated as of December 21,
1999.
<TABLE>
<CAPTION>

<S>                                                         <C>
By:  /s/Harold K. Neal                                       By: /s/Hugh H. Bond
     --------------------------------------------                ------------------------------------
     Harold K. Neal                                              Hugh H. Bond
     President, Chief Executive                                  Chairman of the Board
     Officer and Director
     (Principal Executive Officer)



By:  /s/James W. Smith                                        By:/s/George N. Cooper
     --------------------------------------------                ------------------------------------
     James W. Smith                                              George N. Cooper
     Vice President, Treasurer and Comptroller                   Director
     (Principal Financial and Accounting Officer)



By:  /s/Macon C. Putney                                       By:/s/Harry W. Garrett, Jr.
     --------------------------------------------                ------------------------------------
     Macon C. Putney                                             Harry W. Garrett, Jr.
     Director                                                    Director



By:  /s/W. Henry Walton, Jr.                                  By:/s/William P. Pickett
     --------------------------------------------                ------------------------------------
     W. Henry Walton, Jr.                                        William P. Pickett
     Director                                                    Director



By:  /s/William T. Powell
     --------------------------------------------
     William T. Powell
     Director
</TABLE>