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, 2000, 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.
              ----------------------------------------------------
                 (Name of Small Business Issuer 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)                        (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    .
                  ---      ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will 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. [ ]

         State issuer's revenues for its most recent fiscal year $14,408,000.

         As of December 5, 2000,  there were  issued and  outstanding  1,993,292
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 5, 2000, was
$14,000,001.

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, 2000. (Part II)
     2.   Portions of Proxy Statement for the Annual Meeting of Stockholders for
          the Fiscal Year Ended September 30, 2000. (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 the holding  company for Bedford  Federal  Savings  Bank
(the "Bank") and as a unitary  savings and loan holding company is generally 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 the Bank. As a result references to
the  Registrant  or  Company  generally  refer to the Bank  unless  the  context
indicates otherwise.

         The Bank is a federally  chartered stock savings bank  headquartered in
Bedford,  Virginia and is subject to examination and 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 Federal  Home Loan Bank  ("FHLB") of Atlanta,
which is one of the 12 regional banks in the FHLB System.

                                       -1-
<PAGE>

         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  by type of loan and in percent of the  respective
portfolios at the dates indicated.

<TABLE>
<CAPTION>
                                                               September 30,
                                     -------------------------------------------------------------------
                                                  2000                             1999
                                     ---------------------------------   -------------------------------
                                                          Percent of                        Percent of
                                            Amount          Total            Amount           Total
                                            ------          -----            ------           -----
                                                          (Dollars in Thousands)
<S>                                      <C>                <C>            <C>                <C>
Real estate:
Residential:
  One- to four-family................      $112,411           62.74%         $ 97,212           62.19%
  Multi-family.......................         3,083            1.72             2,405            1.54
Commercial...........................         7,891            4.40             7,623            4.88
Construction.........................        19,844           11.08            18,232           11.66
Land.................................         5,755            3.21             5,254            3.36
Consumer and commercial business.....        30,183           16.85            25,595           16.37
                                            -------           -----          --------          ------
      Total loans....................       179,167          100.00%          156,321          100.00%
                                                             ======                            ======

Less:
  Loans-in-process...................         8,438                             7,556
  Allowance for credit losses........           850                               804
  Unearned discounts, premium,
    deferred loan fees, net..........           287                               272
                                          ---------                         ---------
      Total loans, net...............      $169,592                          $147,689
                                            =======                           =======
</TABLE>

                                       -2-
<PAGE>

Loan Maturity Tables

The following table sets forth the maturity of the  Registrant's  loan portfolio
at  September  30,  2000.  The table does not include  prepayments  or scheduled
principal  repayments.  Prepayments and scheduled principal  repayments on loans
totaled $54.3 million for the year ended  September 30, 2000.  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.....   $    69      $ 1,896        $110,446      $112,411
Multi-family residential real estate............         -           47           3,036         3,083
Commercial real estate..........................        22          401           7,468         7,891
Construction, net of loans in process...........    10,198          730             478        11,406
Land............................................         3          674           5,078         5,755
Consumer and commercial business................     3,526       12,989          13,668        30,183
                                                    ------       ------         -------       -------
Total                                              $13,818      $16,737        $140,174      $170,729
                                                    ======       ======         =======       =======
</TABLE>

         The following  table sets forth the dollar amount at September 30, 2000
of all loans due after  September 30, 2001,  which have fixed interest rates and
floating or adjustable interest rates.


                                                   Floating or
                               Fixed Rates       Adjustable Rates          Total
                               -----------       ----------------          -----
Real estate loans:                                (In Thousands)
   One- to four-family......    $21,212               $ 91,130          $112,342
   Multi-family.............        108                  2,975             3,083
   Commercial real estate...      1,701                  6,168             7,869
   Construction.............        786                    422             1,208
   Land.....................      4,122                  1,630             5,752
Consumer and commercial
  business..................     20,312                  6,345            26,657
                                 ------                -------           -------
  Total.....................    $48,241               $108,670          $156,911
                                 ======                =======           =======


         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.

         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, 2000,  the Registrant had $1.2 million of commitments to originate
mortgage loans,  $7.0 million in unfunded home equity loans and $3.7 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 $5.0 million
as of September 30, 2000.

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,
                                                          ----------------------
                                                            2000           1999
                                                          -----------  --------
                                                          (Dollars in thousands)
Loans accounted for on a nonaccrual basis:
Mortgage loans:
  One- to four-family residential real estate.........      $517         $  211
  Land................................................       336            839
  Consumer and commercial business loans..............       107             39
                                                            ----         ------
Total non-accrual loans...............................      $960         $1,089
                                                            ====          =====
Real estate owned.....................................      $  -         $    -
                                                            ====         ======
Total non-performing assets...........................      $960         $1,089
                                                            ====         ======
Total non-accrual loans to total loans................       .56%           .73%
                                                            ====         ======

         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, 2000.

         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.

                                       -7-
<PAGE>

         The following table sets forth the  Registrant's  classified  assets in
accordance with its classification.


                                   At September 30, 2000
                                   ---------------------
                                      (In Thousands)

Special Mention                           $294
Substandard                                666
Doubtful                                     -
Loss                                         -
                                          ----
                                          $960
                                          ====

         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.

                                       -8-
<PAGE>

         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,
                                                           2000           1999
                                                           ----           ----
                                                          (Dollars in thousands)

Allowance balance (at beginning of period)........         $804           $764
                                                           ----           ----
 Charge-offs:
   One- to four-family............................            -              -
   Multi-family...................................            -              -
   Commercial real estate.........................            -              -
   Construction and land..........................            -              -
   Consumer and commercial business...............          140             58
                                                           ----           ----
     Total charge-offs............................         (140)           (58)
  Recoveries......................................           66              8
  Provision.......................................          120             90
                                                           ----           ----
Allowance balance (at end of period)..............         $850           $804
                                                           ====           ====

Ratios of net charge-offs during the period
  to average loans outstanding during the
  period..........................................          .05%           .04%
                                                            ===            ===
Ratio of allowance for credit losses to total
  loans at the end of the period..................          .50%           .54%
                                                            ===            ===
Ratio of allowance for credit losses to non-
  performing assets at the end of the
  period..........................................           89%            74%
                                                            ===            ===

                                       -9-
<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,
                                                    ------------------------------------------------------
                                                             2000                            1999
                                                    --------------------------    ------------------------
                                                                  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.............................     $304            62.7%        $294          62.2%
Multi-family....................................       10             1.7           10           1.5
Commercial real estate..........................       90             4.4           90           4.9
Construction....................................       70            11.1           75          11.7
Land............................................       45             3.2           50           3.3
Consumer and commercial
 business.......................................      331            16.9          285          16.4
                                                     ----           -----         ----         -----
  Total.........................................     $850           100.0%        $804         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, 2000,  the Company had
securities  classified  as  "held  to  maturity",   including  FHLB  stock,  and
"available for sale" in the amount of $2,407,000 and  $6,905,000,  respectively.
At September 30, 2000,  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, 2000, the Company had securities available
for sale with an amortized  cost of  $7,102,000  and market value of  $6,905,000
(unrealized  loss of  $197,000).  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.

                                      -10-
<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,
                                                          -------------------------
                                                             2000           1999
                                                          ------------  -----------
                                                                (In thousands)
<S>                                                         <C>           <C>
Investment securities and mortgage backed securities:
  Held to maturity:
    Mortgage backed securities..........................      $    7        $    10
    FHLB stock..........................................       1,900          1,500
    U.S. Government and agency obligations..............         500            800
                                                              ------         ------
      Total held to maturity............................       2,407          2,310
                                                               -----          -----
Available for sale:
    U.S. Government and agency obligations..............       6,802          5,830
    Marketable equity securities and other..............         103          4,628
                                                              ------         ------
      Total available for sale..........................       6,905         10,458
                                                               -----         ------
      Total ............................................      $9,312        $12,768
                                                               =====         ======
</TABLE>

                                      -11-
<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, 2000.

<TABLE>
<CAPTION>
                          One Year or Less  One to Five Years  Five to Ten Years  More than Ten Years Total Investment Securities
                         ------------------ ------------------ -----------------  ------------------- ---------------------------
                                   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........        7    8.31%     --        --          --       --        --         --       7     8.31%       7
    FHLB stock..........    1,900    7.75%     --        --          --       --        --         --   1,900     7.75%   1,900
    U.S. government
      and agency
      obligations.......      500    7.25%     --        --          --       --        --         --     500     7.25%     499
Available for sale:
    U.S. Government
      and agency
      obligations ......    6,307    6.66%    495      6.53%         --       --        --         --   6,802     6.65%   6,802
    Marketable
      equity
      securities
      and other.........      103    3.00%     --        --          --       --        --         --     103     3.00%     103
                           ------            ----              --------             -------            ------            ------
Total...................   $8,817    6.87%   $495      6.53%   $     --  $    --    $   --    $    --  $9,312     6.87%  $9,311
                           ======    ====    ====      ====    ========  =======    =======    ======  ======     ====   ======
</TABLE>

                                      -12-
<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, 2000, 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, 2000


                                                                   Amount
                                                                   ------
Maturity Period                                                 (In thousands)
---------------
Within three months..........................................     $ 2,256
Three through six months.....................................       3,915
Six through twelve months....................................       3,698
Over twelve months...........................................       4,805
                                                                  -------
    Total....................................................     $14,674
                                                                  =======

         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.

         The following tables sets forth the maximum  month-end  balance and the
average balance of short term FHLB advances for the periods indicated.

                                      -13-
<PAGE>

<TABLE>
<CAPTION>
                                                                                 During the Year Ended
                                                                                     September 30,
                                                                                -------------------------
                                                                                  2000            1999
                                                                                -----------    ----------
                                                                                      (In thousands)
<S>                                                                            <C>              <C>
Maximum amount of short-term borrowings outstanding at any month end:
  Advances from Federal Home Loan Bank..............................             $22,000          $19,000
Approximate average short-term borrowings outstanding with
respect to:
  Advances from Federal Home Loan Bank..............................             $14,399          $13,042
  Approximate weighted average rate paid on:
  Advances from Federal Home Loan Bank..............................                6.33%            5.67%
</TABLE>

Personnel

         As of September 30, 2000, the Registrant had 47 full-time employees and
4 part-time employees.  None of the Registrant's  employees are represented by a
collective  bargaining group. The Registrant believes that its relationship with
its employees is good.

Regulation

         Set forth below is a brief description of certain laws which related 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.

Recent Regulation

         The  Gramm-Leach-Bliley  Financial  Services  Modernization Act of 1999
(the "Act")  authorized  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. The Company,  however, as a grandfathered unitary thrift holding company
under the Act, will retain its authority to engage in nonfinancial activities.

         In addition,  the GLB Act imposes  significant  new  financial  privacy
obligations and reporting requirements on all financial institutions,  including
federal savings  associations.  Specifically,  the statute,  among other things,
will  require  financial  institutions  (a) to  establish  privacy  policies and
disclose them to customers both at the  commencement of a customer  relationship
and on an annual  basis and (b) to permit  customers  to opt out of a  financial
institution's   disclosure  of  financial  information  to  nonaffiliated  third
parties.  The federal  financial  regulators have promulgated  final regulations
implementing these provisions, which will become effective July 1, 2001.

                                      -14-
<PAGE>

Regulation of the Company

         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.

         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.  The Act  terminated  the "unitary  thrift  holding
company   exemption"  for  all  companies   that  applied  to  acquire   savings
associations  after May 4, 1999. Since the Company is  grandfathered  under this
provision of the Act, its unitary holding  company powers and  authorities  were
not affected.  However,  if the Company were to acquire control of an additional
savings  association,  its business  activities  would be subject to restriction
under the Home Owners' Loan Act. Furthermore,  if the Company were in the future
to sell control of the Bank to any other company, such company would not succeed
to the Company's  grandfathered status under the Act and would be subject to the
same business activity  restrictions.  See "- Regulation of the Bank - Qualified
Thrift Lender Test."

Regulation of the Bank

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

         The OTS  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  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.

                                      -15-
<PAGE>

         Insurance of Deposit  Accounts.  The deposit  accounts held by the Bank
are insured by the 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.

         The Bank is required to pay insurance premiums based on a percentage of
its insured  deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC also  maintains  another  insurance  fund, the Bank Insurance Fund ("BIF"),
which primarily insures  commercial bank deposits.  The FDIC has set the deposit
insurance assessment rates for SAIF-member  institutions for 2000 at 0% to .027%
of insured  deposits on an annualized  basis,  with the assessment rate for most
savings institutions set at 0%.

         In  addition,  all  FDIC-insured   institutions  are  required  to  pay
assessments  to the FDIC at an annual  rate of  approximately  .0212% of insured
deposits to fund interest payments on bonds issued by the Financing  Corporation
("FICO"),  an agency of the Federal  government  established to recapitalize the
predecessor to the SAIF.  These  assessments  will continue until the FICO bonds
mature in 2017.

         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) "Tier 1" or "core"  capital equal to at
least 4% (3% if the institution  has received the highest  rating,  "composite 1
CAMELS," on its most  recent  examination)  of total  adjusted  assets,  and (3)
risk-based capital equal to 8% 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 aggregate
annual amount of capital  distributions does not exceed net income 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 the 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  statue,  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.  Federal savings  institutions  must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total

                                      -16-
<PAGE>

assets  in  specified  types  of  assets,  including  cash,  certain  government
securities,  loans  secured  by and other  assets  related to  residential  real
property,  educational  loans and  investments in premises of the institution or
(ii)  satisfy the  statutory  QTL test set forth in the Home Owner's Loan Act by
maintaining at least 65% of its "portfolio assets" in  certain"Qualified  Thrift
Investments"  (defined  to include  residential  mortgages  and  related  equity
investments,  certain mortgage-related securities, small business loans, student
loans and credit card loans, and 50% of certain  community  development  loans).
For purposes of the  statutory QTL test,  portfolio  assets are defined as total
assets minus intangible  assets,  property used by the institution in conducting
its  business,  and  liquid  assets  equal to 10% of  total  assets.  A  savings
institution  must  maintain  its status as a QTL on a monthly  basis in at least
nine out of every 12 months.  A failure to qualify as a QTL  results in a number
of sanctions,  including the imposition of certain operating  restrictions and a
restriction  on obtaining  additional  advances  from its FHLB. At September 30,
2000, 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 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.

         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  the  liquidity  requirements  that are  imposed by the OTS.  At
September 30, 2000, 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 three branch  offices.  The Registrant  also has seven
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.

                                      -17-
<PAGE>


                                                                 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

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

ATM
Longwood Avenue                              Owned                   1/85
Bedford, VA  24523

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

12130 East Lynchburg Turnpike               Leased                   8/00
Forest, VA 24551
Including ATM


         (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."

         (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."

                                      -18-
<PAGE>

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

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

         There are  various  claims and  lawsuits  in which the  Registrant  are
periodically involved, such as claims to enforce liens, condemnation proceedings
on properties in which the Registrant holds security interests, claims involving
the making and servicing of real property  loans,  and other issues  incident to
the  Registrant's  business.  In the opinion of management,  no material loss is
expected from any of such pending claims or lawsuits.

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,  2000 (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 2001  Annual  Meeting  (the  "Proxy
Statement")  contained under the sections  captioned  "Section 16(a)  Beneficial
Ownership  Reporting  Compliance,"  "Proposal I - Election of Directors," and "-
Biographical Information."

                                      -19-
<PAGE>

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, 2000 and 1999
                           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, 2000,  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.


                                      -20-
<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 2000 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 10-KSB filed with
         the SEC on December 9, 1994.

                                      -21-

<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 15,
2000.
                                       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 15,
2000.

<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>