<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-KSB

           Annual Report under Section 13 of the Exchange Act of 1934
                  for the fiscal year ended DECEMBER 31, 1997

                         Commission File Number 0-16187

                                GRANDBANC, INC.
                      -----------------------------------
             (Exact name of small business issuer in its charter)

              MARYLAND                                      52-1332050
-------------------------------                         ----------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification Number)

         1800 ROCKVILLE PIKE, P.O. BOX 2022, ROCKVILLE, MARYLAND 20852
         -------------------------------------------------------------
          (Address of principal executive offices)         (Zip Code)

Issuer's telephone number, including area code:               (301) 770-1300
                                                              --------------

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

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

                    COMMON STOCK, PAR VALUE $.10 PER SHARE
                    --------------------------------------
                                Title of Class

Check whether the issuer: (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days.   YES X     NO
                                                               ---      ---

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.  [X]

State issuer's revenues for its most recent fiscal year.  $8,753,066

The aggregate market value of the voting stock held by non-affiliates as of
March 6, 1998 was $7,035,637. For purposes of this calculation, it is assumed
that directors, officers and beneficial owners of more than 5% of the
registrant's outstanding voting stock are affiliates.

The number of shares of common stock outstanding as of March 6, 1998:  4,049,665

                      DOCUMENTS INCORPORATED BY REFERENCE:

     The following lists the documents incorporated by reference and the Part of
the Form 10-KSB into which the document is incorporated:

     1. Portions of the Annual Report to Stockholders for the fiscal year
        ended December 31, 1997. (Parts I and II)
     2. Portions of the Proxy Statement for 1998 Annual Meeting of Stockholders.
        (Part III)
        Transitional Small Business Disclosure Format (check one):  YES    NO X
                                                                       ---   ---
<PAGE>

                          FORWARD-LOOKING STATEMENTS

     Part I and Part II of this Annual Report on Form 10-KSB contain forward-
looking statements, including statements of goals, intentions, and expectations,
regarding or based upon general economic conditions, interest rates,
developments in national and local markets, and other matters, and which, by
their nature, are subject to significant uncertainties. Because of these
uncertainties and the assumptions on which statements in this report are based,
the actual future results may differ materially from those indicated in this
report.

                                    PART I

ITEM 1.   DESCRIPTION OF BUSINESS

GENERAL

     GrandBanc, Inc. (the "Corporation"), headquartered in Rockville, Maryland
and incorporated in the State of Maryland in 1983, is a Maryland bank holding
company registered with and subject to the regulation and supervision of the
Board of Governors of the Federal Reserve System ("FRB") under the Bank Holding
Company Act of 1956, as amended (the "Act").  The Corporation's operations
primarily consist of managing the operations of GrandBank (the "Bank"), its
wholly-owned banking subsidiary.  The Bank is a Maryland chartered commercial
bank formed in 1979, with offices now located in Montgomery County, Maryland and
the city of Alexandria, Virginia. The Bank is subject to the regulation and
supervision of the Maryland State Commissioner of Financial Regulation (the
"Maryland Commissioner"), the Virginia Commissioner of Financial Institutions
(the "Virginia Commissioner"), and the Federal Deposit Insurance Corporation
(the "FDIC").  As of December 31, 1997, the Bank had 41 employees, all of which
were full time.  The executive offices of the Corporation and the Bank are
located at 1800 Rockville Pike, Rockville, Maryland 20852 and its telephone
number is (301) 770-1300.

BUSINESS OF THE BANK

     The Bank, in addition to its headquarters in Rockville, has branch offices
in Bethesda and Germantown, Maryland and Alexandria, Virginia.  The Bank is a
full-service community-oriented commercial bank serving small-to-medium sized
businesses, professionals, and individuals in the Washington, DC metropolitan
area.

     The Bank established its Alexandria, Virginia office in connection with the
acquisition of a portfolio of loans, certain other assets, and certain deposits,
from First Commonwealth Financial Corp and its subsidiary, First Commonwealth
Federal Savings Bank FSB ("FSB"). This transaction, which was completed on
September 20, 1996, and a related private offering of common stock,
substantially increased the assets, liabilities and capital of the Corporation
and the Bank, and significantly altered their operations, as indicated in the
comparison provided elsewhere in this report.

     The Bank offers a full range of commercial and retail banking services,
including commercial and consumer loan and deposit products suited to businesses
and professional and consumer customers.  Commercial products include working
capital loans, letters of credit, lines of credit, and real estate loans, along
with deposit products to support the business needs of the customer.  Consumer
products include home equity loans, automobile and other personal loans,
overdraft protection through "Chek-Gard", home improvement loans, mortgage loans
and deposit products including checking, savings, certificates of deposit, and
individual retirement accounts.  The Bank operates three Automated Teller
Machines. The Bank is a member of the Internet shared automated teller system,
the HONOR system and the PLUS system, providing 24 hour access to funds.

     The Bank's mission is to provide a high level of personal service to the
local community and also to participate in community service within the
Montgomery County, Alexandria, Virginia, and the Washington, D.C. metropolitan
area.  The Bank competes with local and regional commercial banks, savings
associations, mutual

                                       1


<PAGE>

savings banks, credit unions, money market brokers, and other financial
institutions that provide loan and deposit relationships.  The Bank competes
with these other institutions for customers by offering competitive products and
services, interest rates, and delivery of quality service and expertise.

LENDING ACTIVITIES

     The Bank's lending activities are broken into three broad types of loan
categories consisting of commercial, real estate and consumer loans.  The
overall size and composition of the loan portfolio depends upon the market
demand for credit and management's requirements for liquidity, asset quality and
profitability.  The composition of the Bank's loan portfolio is shown on the
following table.

                A.     LOANS OUTSTANDING BY TYPE AT DECEMBER 31
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                           % of                  % of                  % of
                                1997    Portfolio     1996    Portfolio     1995    Portfolio
                              --------  ----------  --------  ----------  --------  ----------
<S>                           <C>       <C>         <C>       <C>         <C>       <C>
Real Estate - Mortgage......   $47,017         61%   $54,164         74%   $17,107         57%

Real Estate - Construction..       434          1      1,709          2        221          1

Commercial..................    21,684         28     15,804         21     10,463         35

Consumer....................     8,311         10      2,047          3      2,021          7
                               -------        ---    -------        ---    -------        ---

     Total..................   $77,446        100%   $73,724        100%   $29,812        100%
                               =======        ===    =======        ===    =======        ===

</TABLE>
          B.  MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                  DUE IN ONE     DUE AFTER     DUE AFTER
             AT DECEMBER 31, 1997                YEAR OR LESS  ONE-FIVE YEARS  FIVE YEARS
-----------------------------------------------  ------------  --------------  ----------
<S>                                              <C>           <C>             <C>
Real Estate - Mortgage                                $ 8,369         $16,616     $22,032
Real Estate - Construction                                434  __              __
Commercial                                             10,835          10,066         783
Consumer                                                4,715           2,898         698
                                                      -------         -------     -------

  Total loans maturities                              $24,353         $29,580     $23,513
                                                      =======         =======     =======
<CAPTION>
                                                                  Variable
 LOANS WITH MATURITIES OF ONE YEAR OR GREATER                     Fixed Rate      Rate
                                                                 ------------  ----------
<S>                                              <C>           <C>             <C>
Real Estate - Mortgage                                                $ 7,915     $30,733
Real Estate - Construction                                                 --          --
Commercial                                                              3,061       7,788
Consumer                                                                2,725         871
                                                                      -------     -------
  Total Loans                                                         $13,701     $39,392
                                                                      =======     =======
</TABLE>
REAL ESTATE MORTGAGE AND CONSTRUCTION LOANS

     The Bank makes a wide variety of mortgage loan products available to
businesses and individuals.  Residential mortgages are made through the Bank's
mortgage lending division, with numerous pricing, term and structuring options
available.  The Bank makes home equity lines of credit available to homeowners
for a variety of purposes, with rates based upon the prime

                                       2
<PAGE>
rate published in The Wall Street Journal, as well as fixed rate home equity
                  -----------------------
term loans for a variety of purposes including home improvement.  These loans
are typically secured by 1- to 4-family, owner occupied homes in the Washington,
D.C. metropolitan area.  Commercial mortgages are made available to businesses
and individuals for the purchase or re-finance of commercial properties such as
office buildings, apartment buildings and industrial buildings located in the
Washington, D.C. metropolitan area.  These commercial mortgages generally have
adjustable rates of interest based upon the prime rate as published in The Wall
                                                                       --------
Street Journal, or tied to an index of U.S. Government securities, have
--------------
maturities of five years or less and have amortizations of 15-30 years.  The
Bank does not generally make fixed-rate loans with maturities greater than 15
years for its own portfolio.

     On a limited basis, the Bank makes loans to businesses and individuals to
finance the acquisition, development and construction of real estate.
Generally, the loans are made to entities that are constructing the property for
their own use and have qualified for permanent financing prior to beginning
construction.  The Bank's construction loans generally have adjustable rates of
interest based on the prime rate as published in The Wall Street Journal, with
                                                 -----------------------
terms not generally exceeding one year.

COMMERCIAL LOANS

     The Bank makes commercial loans primarily to small- to medium-sized
businesses, professionals, and other individuals who desire specialized and
personalized financial services.  The Bank offers a variety of commercial
lending products, including revolving lines of credit, letters of credit,
working capital loans, and loans to finance accounts receivable, inventory, and
equipment.  The Bank's commercial loans generally have adjustable rates of
interest based on either the Bank's base lending rate or the prime rate, with
terms not generally exceeding five years.  Revolving lines of credit generally
do not exceed terms of one year.  Commercial loans are generally secured by
accounts receivable, inventory, other business assets, or real estate.

CONSUMER LOANS

     The Bank makes consumer (installment) loans to individuals for a variety of
personal and household purposes.  Such loans generally are at fixed rates for
terms of up to five years.  In December, 1996, the Company and the Bank entered
into an agreement that calls for the Bank to develop a credit card lending
program for participants in certain health care plans.  Lending began under this
program during 1997.  As of December 31, 1997, credit card receivables amounted
to $3,809,572.


DELINQUENCIES AND NON-ACCRUAL LOANS

     All delinquencies over five days are reviewed by loan officers and
management on a weekly basis.  Delinquencies greater than 30 days are reviewed
by the Board of Directors on a monthly basis.  The Bank's loan policy states
that the transfer of a loan to non-accrual status will occur when there is a
deterioration in the financial condition of the borrower and/or of collateral
such that the collectability of principal and interest is in question or when a
loan becomes contractually 90 days past due, unless, based upon management's
judgment, the loan is well secured and in the process of collection.  When a
loan is placed on non-accrual status, all accrued but unpaid interest is
reversed from income and future payments are treated as cash income when
received.  Refer to the schedule of non-performing assets and past-due loans on
page 4.

     Collection Policy.  The loan officer who services a borrower's loan is
     -----------------
responsible for monitoring the borrower's financial condition and reviewing the
file on a regular basis.  If the loan becomes delinquent, the officer is
responsible for the collection of the loan.  A past due notice is generally sent
when a loan becomes 15 days past due.  Thereafter, the account officer makes
contact with the borrower on a regular basis as necessary.  The officer is
responsible for keeping the Bank's management up to date on their collection
efforts and new developments regarding the loan's status.  As stated above, the
Bank's past due reports are reviewed by management on a weekly basis.  When a
loan becomes 90 days delinquent it is to be transferred to non-accrual status
based on the non-accrual guidelines stated above.

     Classified Assets.  The Bank reviews the loan portfolio on an ongoing basis
     -----------------
to detect and identify loans that show a deterioration in the borrower's
financial condition or collateral values.  Each loan is rated through a criteria
and classification system based on the quality of the loan.  There are eight
ratings that can be assigned to a loan.  These ratings are reviewed on an annual
basis.   These ratings are intended to be identical to the ratings used by the
Bank's regulatory agencies.  Of the eight ratings, the first four are generally
referred to as "pass" loans, the fifth as "special mention" loans and the sixth,
seventh, and eighth as "substandard," "doubtful," and "loss."  When the Bank
classifies loans as either "substandard" or "doubtful," it is required to
establish a specific allowance for loss in an amount deemed prudent by
management.  When the Bank classifies a loan as "loss" it is required to
establish a specific allowance equal to 100% of the amount or to charge-off the
amount against the allowance for credit losses.  In addition to these specific
allowances, the Bank maintains a general allocation which represents loss
allowances which have been established to recognize the inherent risk associated
with lending activities but have not been allocated to particular loans.  The
Bank's determination as to the classification of its assets and the amount of
its allowance for

                                       3
<PAGE>

credit losses is subject to review by the FDIC and the Commissioner which can
require the establishment of additional general or specific loss allowances.

     The Bank maintains a Watch List of all loans rated special mention or
worse.  The Watch List includes, among other things, basic information on the
loan, its risk rating, allowance percentage allocated to the loan and the dollar
amount of the allowance specifically reserved against the loan.  All changes in
risk rating assignments must be approved by the chief lending officer.  Changes
also are made on a monthly basis upon the recommendation of the loan officer
responsible for the loan.  The Watch List is reviewed by the Board of Directors
on a monthly basis.

OTHER REAL ESTATE OWNED

     Other real estate owned represents assets acquired in satisfaction of loans
either by foreclosure or deeds taken in lieu of foreclosure.

     Properties acquired are recorded at the lower of cost or fair value minus
estimated selling costs at the time of acquisition with any deficiency charged
to the allowance for credit losses.  Thereafter, costs incurred to operate or
carry the properties are charged to operating expense.  Gains and losses
resulting from the final disposition of the properties are included in non-
interest expense.  Any reductions in value as determined by periodic re-
appraisal of the property, or other means, is either charged to operations or
reserved against the property by an allowance which is funded by a charge to
operations.

     Generally, the Bank obtains appraisals annually by state licensed or
certified appraisers for each property owned at acquisition, and evaluates each
property's value regularly thereafter.

                                       4
<PAGE>

                C.     NON-PERFORMING ASSETS AND PAST DUE LOANS
                          (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                       1997      1996      1995
                                                                      ------    ------    ------
<S>                                                                  <C>       <C>       <C>
Non-Performing Assets:
  Loans accounted for on a non-accrual basis.......................   $2,772    $  742    $   77
  Restructured loans...............................................       --       361       388
                                                                      ------    ------    ------
     Total non-performing loans....................................    2,772     1,103       465
  Other real estate owned net of allowance.........................    1,435       975     1,052
  Other non-performing assets......................................       13       184       100
                                                                      ------    ------    ------
   Total non-performing assets.....................................   $4,220    $2,262    $1,617
                                                                      ======    ======    ======
     Total non-performing assets to total assets...................     4.06%     2.24%     3.98%
     Total non-performing loans to total loans.....................     3.58%     1.50%     1.56%


Past Due Loans:
  Loans contractually past due 90 days or more as to
     interest or principal payments, still accruing................   $   13    $  184    $   --
  Loans contractually past due 30 days or more through
     90 days as to interest or principal payments, still accruing..      350     1,641       954
                                                                      ------    ------    ------
     Total Past Due Loans..........................................   $  363    $1,825    $  954
                                                                      ======    ======    ======
</TABLE>

ALLOWANCE FOR CREDIT LOSSES

     The allowance for credit losses is established through a provision for
credit losses based on management's evaluation of the risk inherent in the loan
portfolio and the general economy.  This evaluation, which includes a review of
the loan portfolio, considers, among other things, the estimated net realizable
value of the underlying collateral, economic conditions, historical loan loss
experience, and other factors.  The adequacy of this allowance is reviewed by
management on a quarterly basis and subsequently reviewed by the Board of
Directors.  Although the Bank attempts to maintain an allowance adequate to
cover potential losses, there can be no assurance that future losses will not
exceed the Bank's allowance.

                                       5
<PAGE>

                      SUMMARY OF LOAN LOSS EXPERIENCE AND
                          ALLOWANCE FOR CREDIT LOSSES
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                     1997        1996                1995
                                                                    -------   ---------           -----------
<S>                                                                 <C>       <C>                 <C>

Balance January 1                                                   $ 1,016     $   748           $     704
                                                                    -------     -------           ---------
Provision (recovery) charged to operating expense                     1,209         (35)                (30)
                                                                    -------     -------           ---------

Recoveries:
  Commercial                                                             53          51                  13
  Real Estate - Construction                                             --         172                  83
  Real Estate - Mortgage                                                 --          --                  --
  Consumer and other                                                     10           3                  12
                                                                    -------     -------           ---------

     Total recoveries                                                    63         226                 108
                                                                    -------     -------           ---------

Charge-offs:
  Commercial                                                            322         112                  --
  Real Estate - Construction                                             --          --                  --
  Real Estate - Mortgage                                                234          --                   5
  Consumer and other                                                     30          32                  30
                                                                    -------     -------           ---------
     Total charge-offs                                                  586         144                  35

  Net (charge-offs) recoveries                                         (523)         82                  74
                                                                    -------     -------           ---------
  Allowance acquired                                                     --         221                  --
                                                                    -------     -------           ---------


Balance December 31                                                 $ 1,702     $ 1,016           $     748
                                                                    =======     =======           =========

Average amount of total loans outstanding, net                      $74,822     $42,891           $  29,524
Total loans outstanding at December 31, gross                        77,446     $73,724           $  29,812

Loan loss ratios:
  Net charge-offs (recoveries) to average loans outstanding, net       0.70%       (.19%)              (.25%)

Allowance for possible loan losses to total
  loans outstanding December 31                                        2.20%       1.38%               2.51%

<CAPTION>

ALLOCATION OF ALLOWANCE FOR LOAN
LOSSES AMONG LOAN TYPE AND % OF                                                 % OF                % OF                % OF
LOAN TYPE TO TOTAL LOAN PORTFOLIO                                     1997    PORTFOLIO    1996   PORTFOLIO    1995   PORTFOLIO
------------------------------------------------------------------  -------   ---------   ------  ---------    -----  ---------
<S>                                                                 <C>       <C>         <C>     <C>          <C>    <C>
Commercial........................................................  $   560          28%  $  115         21%   $   1         35%
Real Estate - Construction........................................        5           1      111          2       96          1
Real Estate - Mortgage............................................      745          61       25         74      117         57
Consumer..........................................................       25          10       --          3       --          7
Unallocated.......................................................      367         N/A      765        N/A      534        N/A
                                                                    -------               ------               -----
     Total........................................................  $ 1,702               $1,016               $ 748
                                                                    =======               ======               =====
</TABLE>

INVESTMENT ACTIVITY

     The Corporation's investment policy is implemented by the Investment
Committee, which is comprised of selected Board members and management.  The
investments are chosen primarily to provide and maintain adequate

                                       6

<PAGE>

liquidity and to generate a positive return on investments without undue
interest or credit risk.  Investments are generally made with the intent to hold
them until maturity.  The Corporation invests in various types of liquid assets,
including United States Treasury obligations and securities of Federal
Government agencies and sponsored entities, certain certificates of deposit,
Federal funds, and other qualifying liquid investments.  At December 31, 1997,
the Corporation had $13,973,840 outstanding in the investment portfolio and
$390,900 in other investments.  Refer to Note 4 of the Notes to the Consolidated
Financial Statements contained in Item 7 hereof for the carrying and fair values
of the investment securities portfolio.  The investment portfolio is accounted
for in accordance with FAS 115 which was implemented as of December 31, 1994.
Refer to Management's Discussion and Analysis in Item 6 hereof for a discussion
of certain investments.

DEPOSIT ACTIVITIES

     The Bank offers a wide range of deposit products with varying rates and
terms to meet the banking needs of both individuals and business customers in
the community.  The Bank offers checking, interest checking, money market
accounts, savings, and individual retirement accounts ("IRAs").  The Bank also
offers a variety of certificates of deposit with maturities of three months to
five years.

     The average balance of deposits and average interest paid during the years
1997, 1996 and 1995 can be found in the Three Year Average Consolidated Balance
Sheet contained in Item 6 hereof.

    A.  CERTIFICATE OF DEPOSIT OF OVER $100,000 BY MATURITY AT DECEMBER 31,
                                (IN THOUSANDS)
<TABLE>
<CAPTION>
                                          1997     1996    1995
                                        --------  ------  ------
<S>                                     <C>       <C>     <C>
Three months or less..................   $ 5,592  $2,881  $1,191
Over three months through six months..     5,110   2,426     100
Over six months through one year......     1,760   1,972     436
Over one year.........................     2,808   1,821     106
                                         -------  ------  ------
     Total............................   $15,269  $9,100  $1,833
                                         =======  ======  ======
</TABLE>

BORROWINGS

     The average amounts of borrowings outstanding during 1997, 1996 and 1995
and the approximate weighted average interest rate thereon is contained in the
Three-Year Average Consolidated Balance Sheet in Item 6 hereof.

SUPERVISION AND REGULATION

     The Corporation is a bank holding company within the meaning of the Act and
is registered as such with the FRB.  The Corporation is required to file with
the FRB an annual report and such other information as the FRB may require
pursuant to the Act.  The Corporation is subject to regulation and examination
by the FRB, which may also examine any of the Corporation's subsidiaries.

     The Act generally restricts activities of all bank holding companies and
their subsidiaries to banking, and the business of managing and controlling
banks, and to other activities which are determined by the FRB to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.  The Act generally requires prior approval by the FRB of the
acquisition by a bank holding company of more than five percent of the voting
shares of any bank.  With certain exceptions, the Act prohibits a bank holding
company from acquiring direct or indirect ownership or control of more than five
percent of the voting shares of any company which is not a bank or bank holding
company, unless the FRB determines by order or regulation that the activities of
the company whose shares are to be acquired are so closely related to banking or
managing or controlling banks as to be a proper

                                       7
<PAGE>

incident thereto.  Some of the principal activities that the FRB has determined
by regulation to be so closely related to banking are: (i) making or servicing
loans; (ii) performing certain data processing services; (iii) providing
securities brokerage services; (iv) acting as fiduciary, investment or financial
advisor; (v) leasing personal or real property where the lease serves as the
functional equivalent of a loan; (vi) making investments in corporations or
projects designed primarily to promote community welfare; and (vii) acquiring a
savings and loan association.

     Subsidiary banks of a bank holding company are subject to certain
quantitative restrictions imposed by the Federal Reserve Act on any extension of
credit to, or purchase of assets from, or guarantee or letter of credit on
behalf of the bank holding company or its subsidiaries, and on the investment in
or acceptance of stocks or securities of such holding company or its
subsidiaries as collateral for loans.  In addition, provisions of the Federal
Reserve Act and FRB regulations limit the amounts of, and establish required
procedures and credit standards with respect to, loans and other extensions of
credit to officers, directors, and principal shareholders of the Holding Company
and its subsidiaries, and related interests of such persons.

     As a state-chartered commercial bank, the Bank is subject to regulation and
examination primarily by the Commissioner but also by the FDIC. The operations
of the Bank in Virginia also are subject to the oversight of the Virginia
Commissioner and laws of the Commonwealth of Virginia.  These agencies, as well
as Federal and State law, extensively regulate various aspects of the Bank's
business including permissible types and amounts of loans, investments and other
activities, capital adequacy (by requiring minimum capital ratios), branching,
and the safety and soundness of banking practices.  Both the Commissioner and
the FDIC have substantial authority to regulate unsafe or unsound practices and
violations of law including cease and desist orders, removal of directors and
officers, civil money penalties and, ultimately, appointment of a receiver or
conservator.  Banking regulations restrict transactions by banks owned by a bank
holding company, including: (1) loans to and certain purchases from the parent
holding company, principal shareholders, officers, directors, and their
affiliates; (2) investments by the subsidiary bank in the shares or securities
of the parent bank holding company (or any other nonbank affiliates); and (3)
acceptance of such shares or securities as collateral for loans to any borrower.
The Bank's regulators also may review other transactions, such as payments of
management fees by subsidiary banks to affiliated companies.  The Bank is
subject to legal limitations on the frequency and amount of dividends that can
be paid to the Corporation.  Under Maryland banking regulations, the Bank may
not declare a cash dividend except out of undivided profits, or from its surplus
in excess of 100% of its required capital stock with the prior approval of the
Commissioner, both after providing for due and accrued expenses, losses,
interest and taxes.  In addition, the FDIC may restrict the ability of the Bank
to pay dividends if such payments would constitute an unsafe or unsound banking
practice.  Also, State and Federal laws regulate the amount of voting stock of a
bank or bank holding company that a person may acquire without prior approval.

     Under Federal Reserve Board regulations, the Bank is required to maintain
noninterest-earning reserves against its transaction accounts (primarily
interest checking and regular checking accounts).  The Federal Reserve Board
regulations generally require that, for 1997, reserves of 3% must be maintained
against aggregate transaction accounts of $54.0 million or less (subject to
adjustment by the Federal Reserve Board) and an initial reserve of $1.62 million
plus 10% (subject to adjustment by the Federal Reserve Board between 8% and 14%
and was reduced to 10% effective April 1, 1992) against that portion of total
transaction accounts in excess of $54.0 million.  The first $4.2 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements.  Since the amount of the
Bank's transaction accounts are below the $54.0 million, the Bank is currently
subject to the 3% reserve requirement for maintaining reserves.  Because
required reserves must be maintained in the form of either vault cash, a
noninterest-bearing account at a Federal Reserve Bank, or a pass-through account
as defined by the FRB, the effect of this reserve requirement is to reduce the
Bank's interest-earning assets.

EFFECT OF GOVERNMENTAL ACTION

     Operating results of the Corporation and the Bank are affected by the
policies of various regulatory, fiscal and monetary authorities including the
FRB.  Major functions of the FRB, in addition to those set out under Supervision
and Regulation above, are to regulate the supply of bank credit and to deal
generally with economic conditions within the United States, including efforts
to combat recessionary economic conditions and to curb inflationary pressures.
The instruments of monetary policy employed by the FRB for these purposes
influence in

                                       8
<PAGE>

various ways the overall levels of bank loans and extensions of credit,
investments and deposits as well as the interest rate paid on liabilities and
received on earning assets.  The implementation of these policies has had a
significant effect on the operating results of bank holding companies and banks
in the past and will continue to do so in the future.  In view of changing
conditions within the national economy as well as the uncertain effects of
actions by regulatory, fiscal, and monetary authorities, no prediction can be
made as to possible future changes in interest rates, deposit levels or loan
demand, or their effect on the business and earnings of the Corporation and the
Bank.  Also, it cannot be predicted whether or in what manner the operation of
the Corporation and the Bank may be effected by any pending or future Federal or
state legislative actions.

NEW LAW.

     The operations of the Corporation and the Bank are affected by new federal
and state laws.  The federal Economic Growth and Regulatory Paperwork Reduction
Act of 1996 (the "New Act"), enacted in September 1996, includes provisions that
affect banks, bank holding companies, and savings institutions.  The New Act
had, and is expected to have in the future, its most significant effect upon
bank and savings institutions that hold deposits assessed at Savings Deposit
Insurance Fund ("SAIF") rates.  Among other things, the New Act recapitalized
the SAIF through a special assessment on savings association deposits and bank
deposits that had been acquired from savings associations. As described further
below, a portion of the Bank's deposits is subject to assessment at "SAIF"
rates, but the Bank was not subject to any special SAIF assessment on such
deposits, and the direct impact of the New Act on the Bank was not material in
1996. The New Act may increase competition from savings associations by
equalizing, over time, the amount of federal insurance premiums paid on savings
association and bank deposits.  The New Act also provides that, beginning in
1997, institutions with deposits insured by the Bank Insurance Fund, as well as
those with SAIF insured deposits, will be responsible for payment of certain
bonds issued in connection with the resolution of failed savings associations.
The result of these provisions will be somewhat higher federal deposit insurance
premiums for the Bank.  These higher insurance premiums are not expected to have
a material adverse effect on the Bank or the Corporation.

     The New Act also simplifies the regulatory approval process for new
activities of banks and bank holding companies, and reduces a number of other
regulatory burdens.  None of these changes is expected to have a significant
effect on the Corporation or the Bank.

COMMUNITY REINVESTMENT

     Under the Community Reinvestment Act ("CRA"), as implemented by FDIC
regulations, a financial institution has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low and moderate income neighborhoods.  The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA.  The CRA requires the FDIC, in connection
with its examination of a bank, to assess the institution's record of meeting
the credit needs of its community and to take such record into account in its
evaluation of certain applications by such institution.  The CRA rating system
identifies four levels of performance that may describe an institution's record
of meeting community needs:  outstanding, satisfactory, needs to improve and
substantial noncompliance.  The CRA also requires all institutions to make
public disclosure of their CRA ratings.  The Bank received a "Satisfactory" CRA
rating in its most recent examination.

CAPITAL MAINTENANCE

     The FDIC has issued regulations that require banks with deposits insured by
the Bank Insurance Fund  ("BIF"), such as the Bank, to maintain minimum levels
of capital.  The regulations establish a minimum leverage capital requirement of
not less than 3% core capital to total average assets for banks in the strongest
financial and managerial condition, with a CAMEL Rating of 1 (the highest
examination rating of the FDIC for banks).  For all other banks, the minimum
leverage capital requirement is 3% plus an additional cushion of at least 100 to
200 basis

                                       9
<PAGE>

points.  Core capital is comprised of the sum of common stockholders' equity,
noncumulative perpetual preferred stock (including any related surplus) and
minority interests in consolidated subsidiaries, minus all intangible assets
(other than qualifying mortgage servicing rights and purchased credit card
relationships).  At December 31, 1997, the Bank's ratio of core capital to total
average assets equalled 7.29% which exceeded the minimum leverage requirement.

     The FDIC also requires that banks meet a risk-based capital standard.  The
risk-based capital standard requires the maintenance of total capital (which is
defined as core capital and supplementary capital) to risk-weighted assets of 8
% and core capital to risk-weighted assets of 4%.  In determining the amount of
risk-weighted assets, all assets, plus certain off balance sheet items are
multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes
are inherent in the type of asset or item.  The components of core capital are
equivalent to those discussed earlier under the 3% leverage requirement.  The
components of supplementary capital currently include cumulative perpetual
preferred stock, certain other preferred stock, mandatory convertible debt
securities, subordinated debt and intermediate term preferred stock, and
allowance for loan and lease losses.  Allowance for loan and lease losses
included in supplementary capital is limited to a maximum of 1.25% of risk-
weighted assets.  Overall, the amount of capital counted toward supplementary
capital cannot exceed 100% of core capital.  Federal law also prohibits a bank
from paying a dividend if it will not meet applicable capital requirements after
the payment.

     In July 1996, the federal bank regulatory agencies, including the FDIC,
issued a joint policy statement regarding the evaluation of commercial banks'
capital adequacy for interest rate risk.  Under the policy, the FDIC's
assessment of a bank's capital adequacy includes an assessment of the bank's
exposure to adverse changes in interest rates.  The FDIC has determined to rely
on its examination process for such evaluations rather than on standardized
measurement systems or formulas.  The FDIC may require banks that are found to
have a high level of interest rate risk exposure or weak interest rate risk
management systems to take corrective actions.  Management believes its interest
rate risk management systems and its capital relative to its interest rate risk
are adequate.


     At December 31, 1997, the Bank's total capital to risk-weighted assets was
9.98% and the Bank's core capital to risk-weighted assets was 8.72%, both
exceeding the FDIC risk-based capital requirement.

PROMPT CORRECTIVE ACTION

     The Federal Deposit Insurance Act establishes a system of prompt corrective
action to resolve the problems of undercapitalized institutions. The FDIC's
Prompt Corrective Action rules require the FDIC to take certain supervisory
actions against undercapitalized institutions for which it is the primary
federal regulator, the severity of which depends upon the categories consisting
of "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized."  Regulatory
action taken will depend on the level of capitalization of the institution and
may range from restrictions on capital distributions and dividends to seizure of
the institution.  Generally, subject to narrow exceptions, FDICIA authorizes the
banking regulators to specify the ratio of tangible capital to assets at which
an institution becomes critically undercapitalized and requires that ratio to be
no less than 2% of assets.  The Federal Deposit Insurance Act  also allows the
regulator to downgrade an institution if the institution is determined to be in
an unsafe or unsound condition or to be engaging in unsafe or unsound practices.
Such a downgrading may result in an otherwise "adequately capitalized"
institution with other problems being subject to supervisory actions as if it
were classified as "undercapitalized."  FDIC rules generally provide that an
insured institution that has total risk-based capital of less than 8%, core
capital of less than 4%, or a leverage ratio that is less than 4% would be
considered to be "undercapitalized," an insured institution that has total risk-
based capital less than 6%, core capital of less than 3%, or a leverage ratio
that is less than 3% would be considered to be "significantly undercapitalized,"
and an insured institution that is "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized" becomes immediately subject
to certain regulatory restrictions, including, but not limited to, restrictions
on growth, investment activities, capital distributions and affiliate
transactions.  The filing of a capital restoration plan, which must be
guaranteed by any parent holding company, is also required.  In addition,
"critically undercapitalized" institutions must receive prior written approval
from the FDIC to engage in any material transaction other than the normal course
of business.  Subject to a narrow exception, a

                                       10
<PAGE>

receiver or conservator must be appointed for any critically undercapitalized
institution within 90 days after it becomes critically undercapitalized.

INSURANCE OF DEPOSIT ACCOUNTS

     The FDIC has established a risk-based deposit insurance premium assessment
system for insured depository institutions.  Under the system, the assessment
rate for an insured depository institution depends on the assessment risk
classification assigned to the institution by the FDIC, which is determined by
the institution's capital level and supervisory evaluations.  Institutions are
assigned to one of three capital groups -- well-capitalized, adequately
capitalized or undercapitalized -- based on the data reported to regulators for
the date closest to the last day of the seventh month preceding the semi-annual
assessment period.  Well-capitalized institutions are institutions satisfying
the following capital ratio standards: (i) total risk-based capital ratio of
10.0% or greater; (ii) Tier 1 risk-based capital ratio of 6.0% or greater; and
(iii) Tier 1 leverage ratio of 5.0% or greater.  Adequately capitalized
institutions are institutions that do not meet the standards for well-
capitalized institutions but that satisfy the following capital ratio standards:
(i) total risk-based capital ratio of 8.0% or greater; (ii) Tier 1 risk-based
capital ratio of 4.0% or greater; and (iii) Tier 1 leverage ratio of 4.0% or
greater.  Undercapitalized institutions consist of institutions that do not
qualify as either well-capitalized or adequately capitalized institutions.
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund.  Subgroup A consists of financially sound institutions with only
a few minor weaknesses.  Subgroup B consists of institutions that demonstrate
weaknesses that, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken.  The
portion of the Bank's deposits attributable to deposits acquired from FSB on
September 20, 1996, is subject to assessment at SAIF rates, which currently are
higher than BIF rates. The Bank was not subject to the special assessment on
SAIF-insured deposits imposed by the New Act.

     Supervision, regulation and examination of the Bank and the Corporation by
the bank regulatory agencies are intended primarily for the protection of
depositors rather than for holders of Bank or Corporation stock.

     Under the Federal Deposit Insurance Act, 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.  The management of the Bank does not know of any
practice, condition or violation that might lead to termination of deposit
insurance.

COMPETITION

     In order to compete effectively, the Bank relies substantially on local
commercial and consumer activity; personal contacts by its directors, officers,
other employees and shareholders; personalized services; and its reputation in
the communities it serves.

     The Bank presently competes within its market area with numerous bank
subsidiaries of larger bank holding companies, including the subsidiaries of
regional bank holding companies with principal operations in states other than
Maryland.  It also competes with numerous independent banks, thrift
institutions, credit unions, and various other nonbank financial companies.

     The banking business in Maryland and Virginia generally, and the Bank's
primary service areas specifically, are highly competitive with respect to both
loans and deposits.  As noted above, the Bank competes with many larger banking
organizations that have offices over a wide geographic area.  These larger
institutions have certain inherent advantages, such as the ability to finance
wide ranging advertising campaigns and promotions and to allocate their
investment assets to regions offering the highest yield and demand.  They also
offer services such as international

                                       11
<PAGE>

banking, which are not offered directly by the Bank (but could be offered
indirectly through correspondent institutions); and by virtue of their larger
total capitalization (legal lending limits to an individual consumer or
corporation are limited to a percentage of the Bank's total capital accounts),
such banks have substantially higher lending limits than does the Bank.  Other
entities, both governmental and in private industry, raise capital through the
issuance and sale of debt and equity securities and thereby indirectly compete
with the Bank in the acquisition of deposits.

     In addition to competing with other commercial banks and thrift
institutions, commercial banks such as the Bank compete with nonbank financial
institutions for funds.  For instance, yields on corporate and government debt
and equity securities affect the ability of commercial banks to attract and hold
deposits.  Commercial banks also compete for available funds with money market
instruments, which are not subject to interest rate ceilings.  Such money market
funds have provided substantial competition to banks for deposits, and it is
anticipated they may continue to do so in the future.

     The FRB may approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state.  The FRB may not approve the acquisition of
a bank that has not been in existence for the minimum time period (not exceeding
five years) specified by the statutory law of the host state.  The FRB may not
approve an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. Federal banking
agencies, effective June 1, 1997, also may approve interstate merger
transactions without regard to whether such transaction is prohibited by the law
of any state, unless the home state of one of the banks expressly prohibits
merger transactions involving out-of-state banks.

     The States of Maryland and Virginia each had previously enacted reciprocal
interstate banking statutes that authorized banks and thrift institutions, and
their holding companies, in those states to be acquired by regional banks and
thrift institutions, or their holding companies, in designated states, and
permitted Maryland and Virginia banks and thrift institutions, and their holding
companies, to acquire banks and thrift institutions in designated states, if
such jurisdictions have enacted reciprocal statutes.  In 1996, the States of
Maryland and Virginia each adopted legislation allowing out of state financial
institutions to merge with their banks and to establish branches in Maryland and
Virginia, respectively, subject to certain limitations. The Bank's establishment
of a branch in Alexandria Virginia was made possible by these laws. The effect
of the federal and state legislation, however, may be to increase competition
within the States of Maryland and Virginia among banking and thrift
institutions.

ITEM 2.   DESCRIPTION OF PROPERTY

     The main office of the Corporation and the Bank is located at Twinbrook
Square, 1800 Rockville Pike, Rockville, Maryland.  The premises are leased under
an agreement which expires in 1999.  The Bank leases three  branches; the
Germantown location is operating under a lease which expires in 2005, the
Bethesda locations operate under leases which expire in 2002 and 2006. The
Company also owns a 6,000 square foot office building in Alexandria, Virginia
which it leases to the Bank. The Bank considers these properties suitable and
adequate for current operations.  During 1997, the Bank incurred rental expenses
for properties totaling $581,044. Refer to Note 6--"Bank Premises and Equipment"
on page 18 of the Annual Report, which is hereby incorporated by reference.

                                       12
<PAGE>

ITEM 3.   LEGAL PROCEEDINGS

     Note 15 --"Litigation" on page 22 of the Annual Report is hereby
incorporated by reference.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the Corporation's security holders
during the quarter ended December 31, 1997, through solicitation of proxies or
otherwise.

                                    PART II

ITEM 5.   MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The section entitled "Market for the Common Equity and Related Stockholder
Matters" on page 6 of the Annual Report is hereby incorporated by reference.
For information regarding regulatory restrictions on the Bank's, and, therefore,
the Corporation's payment of dividends, see Note 14 -- "Regulatory Matters" on
pages 21 and 22 of the Annual Report, which hereby is incorporated by reference.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The section entitled "Selected Financial Data" on page 1 of the Annual
Report and the section entitled "Management's Discussion and Analysis" on pages
2 through 7 in the Annual Report are hereby incorporated by reference.


ITEM 7.   FINANCIAL STATEMENTS

     The Consolidated Financial Statements, Notes to Consolidated Financial
Statements and Independent Auditors' Report on pages 8 through 25 in the Annual
Report, which are listed under Item 13 herein, are incorporated herein by
reference.  The remaining information appearing in the Annual Report is not
deemed to be filed as part of this Report, except as expressly provided herein.


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 relating to the Directors and Executive Officers of the
Corporation on pages 3 and 4 of the Corporation's definitive proxy statement for
the Corporation's 1997 Annual Meeting of Stockholders (the "Proxy Statement") is
hereby incorporated by reference.

                                       13
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

     The section entitled "Executive Compensation and Other Benefits" on pages 5
and 6 of the Proxy Statement are hereby incorporated by reference.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Page 2 of the Proxy Statement relating to security ownership of certain
beneficial owners and management is hereby incorporated herein by reference.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The section entitled "Certain Transactions" on page 7 of the Proxy
Statement is incorporated herein by reference.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  The following financial statements of the Corporation included in the
          Annual Report to stockholders for the year end December 31, 1997 are
          incorporated by reference in Item 7 of this Report.  The remaining
          information appearing in the Annual Report to stockholders is not
          deemed to be filed as part of this Report except as expressly provided
          herein.  The following financial statements are filed as part of this
          Report:


               Consolidated Balance Sheets at December 31, 1997 and 1996

               Consolidated Statements of Income for the Years
               Ended December 31, 1997, 1996 and 1995

               Consolidated Statements of Changes in Stockholders' Equity
               for the Years Ended December 31, 1997, 1996 and 1995

               Consolidated Statements of Cash Flows for the Years Ended
               December 31, 1997, 1996 and 1995

               Notes to Consolidated Financial Statements

               Independent Auditors' Report


               All financial statement schedules are omitted as the required
          information is inapplicable or the information is presented in the
          consolidated financial statements or related notes which are
          incorporated by reference in item 7 hereof.

                                       14
<PAGE>

                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                    GRANDBANC, INC.

                                    /s/ Steven K. Colliatie
                                    -------------------------------------
                                    Steven K. Colliatie
Date: March 24, 1998                President and Chief Executive Officer

     In accordance with the Securities and 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:


March 24, 1998
--------------

/s/ Steven K. Colliatie
-------------------------------
Steven K. Colliatie
President, Chief Executive Officer and Director


/s/ David L. Erickson
-------------------------------
David L. Erickson
Chief Financial Officer and Secretary


     A majority of the directors of the Corporation executed a power of attorney
appointing Steven K. Colliatie as their attorney-in-fact, empowering him to sign
this report on their behalf.  This power of attorney has been filed with the
Securities and Exchange Commission under Part IV, Exhibit 24 of this Form 10-K
for the year ended December 31, 1997.  This report has been signed below by such
attorney-in-fact as of March 23, 1998.


                                       By: /s/ Steven K. Colliatie
                                           -------------------------------------
                                           Steven K. Colliatie
                                           Attorney-in-Fact for Majority of the
                                           Directors of the Corporation

                                       15
<PAGE>

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>
                                                                 Incorporated
                                                                      by
  Exhibit No. Description                                        Reference to
  ----------- ---------------------------------------------      ------------
<S>           <C>                                                <C>
   3.1        (a)  Articles of Incorporation, April 4, 1983         *

              (b)  Articles of Share Exchange, August 9, 1983       *

              (c)  Articles of Amendment, June 7, 1984              *

              (d)  Articles of Amendment, May 7, 1987               *

              (e)  Articles of Amendment, September 14, 1988        *

              (f)  Articles of Amendment, April 22, 1993            *

   3.2        GrandBanc, Inc. Bylaws                                *

    4         Form of Common Stock Certificate                      *

** 10.1       FWB Corporation 1994 Incentive Stock Option Plan      *

** 10.2       GrandBanc, Inc. 1994 Stock Option Plan for Outside
              Directors                                             *

** 10.3       Employment Agreement Dated as of February 27, 1996,   Exhibit 10
              by and between GrandBanc, Inc., GrandBank, and        to Report on
              Steven K. Colliatie                                   Form 10-QSB
                                                                    the Quarter
                                                                    Ended June
                                                                    30, 1996
                                                                    (File No.
                                                                    0-16187)
   13         Annual Report to Stockholders

   21         Subsidiaries of the Registrant

   23         Consent of Independent Auditors

   24         Power of Attorney

   27         Financial Data Schedule
</TABLE>
--------------------
     *   Incorporated herein by reference from the Registrant's Annual Report
         on Form 10-KSB for the year ended December 31, 1995 (File No. 0-16187).

     **  Compensatory plan or arrangement

     (b) The Corporation did not file a report on Form 8-K during the last
         quarter of the period covered by this report.