<PAGE>
 
                      Securities and Exchange Commission
                                Washington D.C.

                                  FORM 10-KSB

               annual report pursuant to section 13 or 15(d) of

                      the securities exchange act of 1934

For the Fiscal Year Ended December 31, 1998      Commission File Number 0-13395

                           UNITED FINANCIAL BANKING
                                COMPANIES, INC.
            (Exact name of registrant as specified in its charter)

                    VIRGINIA                       54-1201253
        (State or other jurisdiction of          (I.R.S. Employer
         incorporation or organization)       Identification Number)

                 8399 Leesburg Pike
                    P.O. Box 2459
                  Vienna, Virginia                     22182
     (Address of principal executive offices)       (Zip Code)

       Registrant's telephone number, including area code: (703) 734-0070

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

                              Title of each class
                         Common Stock, $1.00 par value

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 files 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. _________
 
  For the year ended December 31, 1998, United Financial Banking Companies, Inc.
reported net income of $113,233.
 
  The aggregate market value of the Common Stock held by non-affiliates of the
registrant was $2,825,664 as of March 1, 1999.
 
  As of March 1, 1999, the registrant had 831,590 shares of outstanding common
stock, $1.00 par value.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Selected information from the Company's 1998 Proxy Statement for the Annual
Meeting to be held June 4, 1999 is incorporated by reference into Part III of
this report, and information from the 1998 Annual Report to Shareholders to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
are incorporated by reference into Parts I, II and III of this report.
<PAGE>
 
                                    PART  I
Item 1. Business

  United Financial Banking Companies, Inc. ("UFBC"), is a one-bank holding
company which was organized under the laws of the State of Virginia in February
1982.  In July 1983, UFBC acquired all the outstanding common stock of The
Business Bank (the "Bank"), a banking company organized under the laws of the
State of Virginia. UFBC also wholly owns Business Venture Capital, Inc. (BVCI),
a subsidiary which holds and has developed certain foreclosed real estate.
Collectively, UFBC, the Bank and BVCI are referred to as "the Company".

  The Bank was organized in 1980.  In October 1981, the Bank commenced limited
operations and began full scale operations in August 1982, when its main office
building was completed.

  As of December 31, 1998, the Company had consolidated total assets of
$55,573,072, total deposits of $50,185,459, total loans of $36,962,213 and total
stockholders' equity of $5,075,708.
 
 On March 1, 1999, the Company and its subsidiaries employed 23 full-time
employees.

The Bank
  The Bank, UFBC's primary subsidiary, is a state banking association engaging
in a general commercial banking business and specializing in offering banking
services to business and professional customers. These services include the
usual deposit functions of commercial banks, including business and personal
checking accounts, "NOW" accounts and savings accounts; business and commercial
loans; and processing of collections. The Bank is a Federally insured state non-
member bank and its deposits are insured up to $100,000 by the Bank Insurance
Fund of the Federal Deposit Insurance Corporation (FDIC).

  The Bank markets its services to professionals and small and medium sized
businesses in its service area of Northern Virginia and surrounding communities
because it believes that business accounts are more profitable than small
consumer accounts, which comprise the majority of accounts at most retail banks.
The Bank further believes that professionals and small businesses represent a
market segment whose needs have not been met by many retail banks.

  It is the Bank's belief that business accounts can be more profitable due to
the income generated from business' higher average balances for both deposits
and loans.  Business accounts are less costly than consumer accounts as they
usually require fewer conveniences such as numerous branches, extended hours and
drive-thru facilities. The Bank had previously limited its service relationship
with customers to primarily encompass their business needs.  In order to fully
meet customers' needs and to remain competitive in the current market, the Bank
has broadened service to business and professional customers by offering
products such as consumer installment and mortgage loans to the owners and
employees of the businesses.  It is the Bank's belief that this augmentation
will help maintain the Bank's core accounts and will enable the organization to
diversify asset growth.

  By emphasizing individualized relationships between the Bank's officers and
its customers, the Bank believes it attracts customers that have been neglected
by retail banks that direct their services to more numerous consumer accounts
and large business customers.

  The Company experiences a high degree of competition in the Washington
Metropolitan area.  All of the Company's products and services compete actively
with national and state banks, savings banks, savings and loan associations,
credit unions, finance companies, money market funds, mortgage banks, insurance
companies, investment banking firms, brokerage firms and other nonbank
institutions that provide one or more of the services offered by the Company and
its subsidiaries, primarily the Bank.  As a result of federal and state
legislation regarding interstate branching and mergers, additional competitors
not currently in the Bank's service area  may enter the market.  Among
commercial banks, the principal method of competition is the provision and
delivery of financial services that are specific to the needs of the community.
The Company believes that the expertise in and awareness of the demands of our
business community position us with the unique ability to meet those needs
expeditiously.

     The Company does not believe that there will be any material effect on
capital expenditures, results of operations, financial condition or the
competitive position of itself or any of its subsidiaries with regard to
compliance with federal, state or local requirements related to the general
protection of the environment.

                                       2
<PAGE>
 
Supervision and Regulation

General
  United Financial Banking Companies, Inc. is a bank holding company subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") pursuant to the BHCA, and files with the
Federal Reserve Board an annual report and such additional reports as the
Federal Reserve Board may require. As a bank holding company, UFBC's activities
and those of its banking and nonbanking subsidiary are limited to the business
of banking and activities closely related or incidental to banking, and UFBC may
not directly or indirectly acquire the ownership or control of more than 5
percent of any class of voting shares or substantially all of the assets of any
company, including a bank, without prior approval of the Federal Reserve Board.

  The deposits of UFBC's subsidiary bank are insured by, and therefore the
subsidiary bank is subject to the regulations of the FDIC, and is also subject
to regulation and examination by the State of Virginia. Various consumer laws
and regulations also affect the operations of the Bank.  Regulatory limitations
on the payment of dividends to UFBC by its banking subsidiary are discussed in
Note 11 to the consolidated financial statements.

Holding Company Liability

  Federal Reserve Board policy requires bank holding companies to serve as a
source of financial strength to their subsidiary banks by standing ready to use
available resources to provide adequate capital funds to subsidiary banks during
periods of financial stress or adversity. A bank holding company also could be
liable under certain provisions of a new banking law for the capital
deficiencies of an undercapitalized bank subsidiary. In the event of a bank
holding company's bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the
trustee will be deemed to have assumed and is required to cure immediately any
deficit under any commitment by the debtor to any of the federal banking
agencies to maintain the capital of an insured depository institution, and any
claim for a subsequent breach of such obligation will generally have priority
over most other unsecured claims.

Supervisory Agreements

  At December 31, 1998, neither UFBC nor it subsidiaries were subject to any
formal supervisory agreements with their regulators.  On May 19, 1997, the Board
of Directors of the Bank submitted an informal resolution to the FDIC and to the
Virginia Commissioner of Financial Institutions (SCC).  The resolution addresses
specific areas of Bank operations.  The resolution is discussed in further
detail in Note 11 to the consolidated financial statements.  Subsequent to
December 31, 1998, the FDIC and the SCC informed the Bank that the resolution
and its agreements were no longer necessary.


Enforcement Actions and Administrative Sanctions

  Failure to comply with applicable laws and regulations could subject UFBC, its
subsidiary bank and their officers, directors and other institution-affiliated
parties to administrative sanctions and potentially substantial civil money
penalties.

Transactions with Affiliates

  UFBC's subsidiary bank is subject to restrictions under federal law which
limit a bank's extensions of credit to, and certain other transactions with,
affiliates. Such transactions by any subsidiary bank with any one affiliate are
limited in amount to 10 percent of such subsidiary bank's capital and surplus
and with all affiliates to 20 percent of such subsidiary bank's capital and
surplus. Furthermore, such loans and extensions of credit, as well as certain
other transactions, are required to be secured in accordance with specific
statutory requirements. The purchase of low quality assets from affiliates is
generally prohibited. Federal law also provides that certain transactions with
affiliates, including loans and asset purchases, must be on terms and under
circumstances, including credit standards, that are substantially the same, or
at least as favorable to the institution as those prevailing at the time for
comparable transactions involving other non-qualified companies or, in the
absence of comparable transactions, on terms and under circumstances, including
credit standards, that in good faith would be offered to, or would apply to,
non-affiliated companies.

                                       3
<PAGE>
 
CAPITAL REQUIREMENTS

  Under the prompt corrective action provisions of the Federal Deposit Insurance
Act of 1991 ("FDIA") federal banking regulators are required to take prompt
corrective action in respect of depository institutions that do not meet minimum
capital requirements. FDIA establishes five capital categories: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized ."
 
  Under the regulations, a "well capitalized" institution has a minimum total
capital to total risk-weighted assets ratio of at least 10 percent, a minimum
Tier I capital to total risk-weighted assets ratio of at least 6 percent, a
minimum leverage ratio of at least 5 percent and is not subject to any written
order, agreement, or directive; an "adequately capitalized" institution has a
total capital to total risk-weighted assets ratio of at least 8 percent, a Tier
I capital to total risk-weighted assets ratio of at least 4 percent, and a
leverage ratio of at least 4 percent (3 percent if given the highest regulatory
rating and not experiencing significant growth), but does not qualify as "well
capitalized." An "undercapitalized" institution fails to meet any one of the
three minimum capital requirements. A "significantly undercapitalized"
institution has a total capital to total risk-weighted assets ratio of less than
6 percent, a Tier I capital to total risk-weighted assets ratio of less than 3
percent or a Tier I leverage ratio of less than 3 percent. A "critically
undercapitalized" institution has a Tier I leverage ratio of 2 percent or less.
Under certain circumstances, a "well capitalized," "adequately capitalized" or
"undercapitalized" institution may be required to comply with supervisory
actions as if the institution was in the next lower capital category.  The Bank
meets the criteria of a well capitalized institution.
 
  A depository institution is generally prohibited from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System.  In addition,
undercapitalized depository institutions are subject to growth and activity
limitations and are required to submit "acceptable" capital restoration plans.
Such a plan will not be acceptable unless, among other things, the depository
institution's holding company guarantees the capital plan, up to an amount equal
to the lesser of five percent of the depository institution's assets at the time
it becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan.  Federal banking agencies may not
accept a capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized and
may be placed into conservatorship or receivership.
 
  Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, more stringent requirements to
reduce total assets, cessation of receipt of deposits from correspondent banks,
further activity restricting prohibitions on dividends to the holding company
and requirements that the holding company divest its bank subsidiary, in certain
instances. Subject to certain exceptions, critically undercapitalized depository
institutions must have a conservator or receiver appointed for them within a
certain period after becoming critically undercapitalized.

Brokered Deposits

  FDIC regulations prohibit a bank from accepting brokered deposits (which term
is defined to include any deposit with an interest rate more than 75 basis
points above prevailing rates in the applicable market area) unless (i) it is
well capitalized, or (ii) it is adequately capitalized and receives a waiver
from the FDIC. For purposes of this regulation, a bank is defined to be well
capitalized if it maintains a leverage ratio of at least 5 percent, a risk-
adjusted Tier I capital ratio of at least 6 percent and a risk-adjusted total
capital ratio of at least 10 percent and is not otherwise in a "troubled
condition", as specified by its appropriate federal regulatory agency. A bank
that is not adequately capitalized may not pay an interest rate on any deposits
in excess of 75 basis points over the prevailing market rates of its specified
market area. There are no such restrictions on a bank that is well capitalized.
At December 31, 1998, the Company had no brokered deposits.

FDIC Insurance Assessments

  The bank is subject to FDIC deposit insurance assessments.  The FDIC has
adopted a risk-based system for determining deposit insurance assessments.  An
insured institution is assessed at rates depending on its capital and
supervisory classifications, as assigned by its primary federal regulator.  As a
result of the bank insurance fund ("BIF"), which insures the Bank's deposits,
reaching the mandated level of reserves, the range of deposit premium rates was
reduced in the first half of 1996 to a range of .00 percent to .27 percent.

                                       4
<PAGE>
 
Conservatorship and Receivership Powers of Federal Banking Agencies

  The authority of the federal banking regulators over depository institutions
includes, among other things, appointment of the FDIC as conservator or receiver
of an undercapitalized institution under certain circumstances. In the event a
bank is placed into conservatorship or receivership, the FDIC is required,
subject to certain exceptions, to choose the method for resolving the
institution that is least costly to the BIF of the FDIC, such as liquidation.

  The FDIC may provide federal assistance to a "troubled institution" without
placing the institution into conservatorship or receivership. In such case, pre-
existing debtholders and shareholders may be required to make substantial
concessions and, insofar as practical, the FDIC will succeed to their interests
in proportion to the amount of federal assistance provided.

  Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository institution may
make with insured funds are from time to time introduced in Congress. The
Company cannot determine the ultimate effect that recent legislation and the
implementing regulations to be adopted thereunder, or any other potential
legislation, if enacted, would have upon its financial condition or results of
operations.

United Financial Banking Companies, Inc. Subsidiaries
The Business Bank
 The Business Bank was organized on April 17, 1980 to provide commercial banking
services.

Business Venture Capital, Inc.
  Business Venture Capital, Inc. was incorporated February 26, 1985 to hold
certain foreclosed real estate.

Item 2.  Properties

  The main offices of the Company and the Bank are located at 8399 Leesburg
Pike, Vienna, Virginia 22182.  The Company was consolidated into the main office
location in May 1995.  The Bank's Operations Center was formerly located at 8351
Leesburg Pike under a lease which expires in June 2000 and for which the Bank
remains liable through June 2000.  Rental expense for 1998 under the lease
totaled $63,132 and increases 3.0% per year for the remainder of the lease.  One
hundred percent of the former Operations Center space is sublet through the end
of the lease term.

  At December 31, 1998, the Bank had no branches. Subsequent to December 31,
1998, the Company entered into a lease for a Bank branch location pending
regulatory approval. The lease term is for ten years and two months, commencing
April 1, 1999. The future minimum lease payments for the branch operating lease
total $722,127.

  On December 30, 1996, the Bank sold the building it occupies and the
surrounding land for $1,968,171, net, to an entity in which a holder of more
than 5% of the Company's Common Stock has an interest.  The transaction resulted
in a gain of $734,291.  The Bank then entered into a one year lease to rent the
building sold.  As of December 31, 1996, the Bank's minimum obligation for the
lease totaled $187,820.  The lease terms include three options for renewal and a
right of first offer.  Subsequent to December 31, 1996, the Bank chose to
exercise the first option, a nine year extension, after significant analysis of
alternative bank sites.  As of December 31, 1998, the  future minimum lease
payments for the Bank lease, including the option period, totaled $1,666,896.
Further information regarding this transaction is discussed in Part III, item 12
of this report.

  Management believes that the Company's current facilities are adequate for
operating in the normal course of business.

Item 3. Legal Proceedings

  In the ordinary course of its business, the Company is party to legal
proceedings.  There is no litigation currently pending against the Company or
any of its subsidiaries which individually or in the aggregate would have a
material adverse affect on the Company's financial condition or results of
operation.

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

     No matters were submitted to security holders during the fourth quarter of
the Company's fiscal year.

                                       5
<PAGE>
 
                                    PART II

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

  A. There is no established trading market for the stock of the Company.

  B. There were 345 holders of record of the Registrant's common stock as of
December 31, 1998.

  C. The Company's cash dividend history is incorporated by reference to the
section entitled "Corporate Information" appearing on page 43 of the Annual
Report to Shareholders for the year ended December 31, 1998.

Selected Consolidated Financial Data

  The information required by this item is incorporated by reference to the
section entitled, "Selected Consolidated Financial Data" appearing on page 26 of
the Annual Report to Shareholders for the year ended December 31, 1998.

Item 6. Management's Discussion and Analysis

  The information required by this item is incorporated by reference to the
section entitled, "Management's Discussion and Analysis" appearing on pages 27
through 41 of the Annual Report to Shareholders for the year ended December 31,
1998.

Item 7. Financial Statements and Supplementary Data

  The information required by this item is incorporated by reference from the
information appearing on pages 1 through 25 of the Annual Report to Shareholders
for the year ended December 31, 1998.

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

    None.

                                    PART III

Item 9. Directors and Executive Officers of the Registrant

  Information as to the Registrant's Executive Officers and Directors is
incorporated by reference from the information contained under "Election of
Directors" in the Registrant's Proxy Statement filed with respect to the Annual
Meeting of Shareholders to be held on June 4, 1999.

Item 10. Executive Compensation

  The information required by this item is incorporated by reference to the
information contained under "Election of Directors" in the Registrant's Proxy
Statement filed with respect to the Annual Meeting of Shareholders to be held on
June 4, 1999.

Item 11. Security Ownership of Certain Beneficial Owners and Management

  The information required by this item is incorporated by reference to the
information contained under "Election of Directors" in the Registrant's Proxy
Statement filed with respect to the Annual Meeting of Shareholders to be held on
June 4, 1999.

Item 12. Certain Relationships and Related Transactions

  The information required by this item is incorporated by reference to the
information contained under "Election of Directors" in the Registrant's Proxy
Statement filed with respect to the Annual Meeting of Shareholders to be held on
June 4, 1999.

                                       6
<PAGE>
 
Item 13. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a)(1) Financial Statements

  The following financial statements of United Financial Banking Companies, Inc.
and subsidiaries are incorporated by reference to the Registrant's 1998 Annual
Report to Shareholders as listed below:


                                                                Page
                                                                ----
Report of Independent Certified Public Accountants                 1
Consolidated Balance Sheets--December 31, 1998 and 1997            2
Consolidated Statements of Income--
Years Ended December 31, 1998, 1997 and 1996                       3
Consolidated Statements of Changes in Shareholders' Equity--
Years Ended December 31, 1998, 1997 and 1996                       4
Consolidated Statements of Cash Flows--
Years Ended December 31, 1998, 1997 and 1996                       5
Notes to Financial Statements                                   6-25

(a)(2) Schedules

  All schedules are omitted since the required information is either not
applicable, not deemed material or is shown in the respective financial
statements or in the notes thereto.

(b) Reports on Form 8-K
 There were no items reported on Form 8-K during the quarter ended December 31,
1998.

(c)  Exhibits

Exhibit 11--Statement Regarding Computation of Per Share Earnings
  Earnings per share are computed as expressed in Note 1 to the consolidated
financial statements, incorporated by reference to the 1998 Annual Report.

Exhibit 13--Annual Report to Security Holders

Exhibit 21--Subsidiaries of the Registrant

                                          Jurisdiction        Percent of
                                           under laws       Voting Security
                                             of which           owned by
 Name of Subsidiary                         organized       Immediate Parent
 ------------------                         ---------       ----------------
 
 The Business Bank                           Virginia                   100%
 Business Venture Capital, Inc               Virginia                   100%
 

                                       7
<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 or amendment
thereto to be signed on its behalf by the undersigned, thereunto duly authorized
on the   31st    day of March, 1999.
       ---------        -----       

                                    UNITED FINANCIAL BANKING COMPANIES, INC.
                                    (Registrant)

 
                                    By:  /s/  JEFFERY T. VALCOURT
                                         -----------------------------------
                                         Jeffery T. Valcourt, Chairman


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
 
 
/s/  JEFFERY T. VALCOURT         Chairman/Director             3/31/99
-------------------------------                                -------
Jeffery T. Valcourt
 
/s/ HAROLD C. RAUNER             President, CEO/Director       3/31/99
-------------------------------                                -------
Harold C. Rauner
 
/s/ MANUEL V. FERNANDEZ          Director                      3/31/99
-------------------------------                                -------
Manuel V. Fernandez
 
/s/ WILLIAM J. MCCORMICK, JR.    Director                      3/31/99
-------------------------------                                -------
William J. McCormick, Jr.
 
/s/ DENNIS I. MEYER              Director                      3/31/99
-------------------------------                                -------
Dennis I. Meyer
 
/s/ EDWARD H. PECHAN             Director                      3/31/99
-------------------------------                                -------
Edward H. Pechan
 
/s/ SHARON A. STAKES             Director                      3/31/99
-------------------------------                                -------
Sharon A. Stakes
 
/s/ LISA M. PORTER               Principal Financial Officer   3/31/99
-------------------------------                                -------
Lisa M. Porter                   Principal Accounting Officer

                                       8