<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, 1996

                        Commission File Number 0-16187

                              FWB BANCORPORATION
                    --------------------------------------
             (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.  $5,323,959

The aggregate market value of the voting stock held by non-affiliates as of
March 7, 1997 was $4,991,548.  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 7, 1997:  4,040,915

                     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, 1996. (Parts I and II)
          2.  Portions of the Proxy Statement for 1997 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

     FWB Bancorporation (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"). A majority of the
Corporation's outstanding stock is owned by women.  The Corporation's operations
primarily consist of managing the operations of GrandBank, formerly FWB Bank
(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, 1996, 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,
form 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, PLUS, and the Exchange systems, 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
                                1996    Portfolio     1995    Portfolio     1994    Portfolio
                              --------  ----------  --------  ----------  --------  ----------
<S>                           <C>       <C>         <C>       <C>         <C>       <C>
 
Real Estate - Mortgage......   $54,164     74%       $17,107     57%       $16,329     60%
                                                                                     
Real Estate - Construction..     1,709      2            221      1             29     --
                                                                                     
Commercial..................    15,804     21         10,463     35          9,125     34
                                                                                     
Consumer....................     2,047      3          2,021      7          1,519      6
                               -------    ---        -------    ---        -------    ---
                                                                                     
     Total..................   $73,724    100%       $29,812    100%       $27,002    100%
                               =======    ===        =======    ===        =======    ===
 
</TABLE>
          B.  MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
 
                                                  DUE AFTER      DUE IN ONE     DUE AFTER 
 AT DECEMBER 31, 1996                            YEAR OR LESS  ONE-FIVE YEARS  FIVE YEARS
---------------------                            ------------  --------------  ----------
<S>                                              <C>           <C>             <C>
 
Real Estate - Mortgage.........................    $38,874         $11,761       $3,529
Real Estate - Construction.....................      1,709              --           --
Commercial.....................................     13,677           2,124            3
Consumer.......................................      1,294             604          149
                                                   -------         -------       ------
                                                                              
  Total loans maturities.......................    $55,554         $14,489       $3,681
                                                   =======         =======       ======
</TABLE> 
 
<TABLE> 
<CAPTION>                                                                        Variable
 LOANS WITH MATURITIES OF ONE YEAR OR GREATER                      Fixed Rate      Rate
                                                                   ----------      ----                
<S>                                                                <C>            <C>
Real Estate - Mortgage.........................                     $13,463       $1,827
Real Estate - Construction.....................                          --           --
Commercial.....................................                       2,127           --
Consumer.......................................                         753           --
                                                                    -------       ------ 
  Total Loans..................................                     $16,343       $1,827
                                                                    =======       ====== 
</TABLE>

                                       2
<PAGE>
 
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 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. At year-end 1996,
the program was under development, and lending had not begun.


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 5.

          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

                                       3
<PAGE>
 
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 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>
                                                                       1996      1995      1994
                                                                      ------    ------    ------
<S>                                                                  <C>       <C>       <C>
Non-Performing Assets:
  Loans accounted for on a non-accrual basis.......................   $  742    $   77    $   --
  Restructured loans...............................................      361       388       397
                                                                      ------    ------    ------
     Total non-performing loans....................................    1,103       465       397
  Other real estate owned net of allowance.........................      975     1,052     1,633
  Other non-performing assets......................................      184       100        --
                                                                      ------    ------    ------
   Total non-performing assets.....................................   $2,262    $1,617    $2,030
                                                                      ======    ======    ======
     Total non-performing assets to total assets...................     2.24%     3.98%     4.90%
     Total non-performing loans to total loans.....................     1.50%     1.56%     1.47%
 
 
Past Due Loans:
  Loans contractually past due 90 days or more as to
     interest or principal payments, still accruing................   $  184    $   --    $   --
  Loans contractually past due 30 days or more through
     90 days as to interest or principal payments, still accruing..    1,641       954        --
                                                                      ------    ------    ------
     Total Past Due Loans..........................................   $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>
 
                                                                                          1996        1995                  1994
                                                                                       ----------  ----------            ----------
<S>                                                                                    <C>         <C>                   <C>
 
Balance January 1                                                                       $   748      $   704                 $ 809
Provision (recovery) charged to operating expense                                           (35)         (30)                 (114)
                                                                                        -------    ---------             ---------
 
Recoveries:
 Commercial                                                                                  51           13                    91
 Real Estate - Construction                                                                 172           83                    31
 Real Estate - Mortgage                                                                      --           --                    --
 Consumer and other                                                                           3           12                    23
                                                                                         ------    ---------             ---------
 
  Total recoveries                                                                          226          109                   145
                                                                                        -------    ---------             ---------
 
 Allowance acquired                                                                         221           --                    --
                                                                                        -------    ---------             ---------
 
Charge-offs:
 Commercial                                                                                 112           --                    82
 Real Estate - Construction                                                                  --           --                    25
 Real Estate - Mortgage                                                                      --            5                     9
 Consumer and other                                                                          32           30                    20
                                                                                        -------    ---------             ---------
  Total charge-offs                                                                         144           35                   136
                                                                                        -------    ---------             ---------
                                                                                            303           74                     9
                                                                                        -------    ---------             ---------
Balance December 31                                                                     $ 1,016      $   748                 $ 704
                                                                                        =======    =========             =========
 
Average amount of total loans  
 outstanding, net                                                                       $42,891      $29,524               $24,464
Total loans outstanding at December 31, gross                                           $73,724      $29,812               $27,002
 
Loan loss ratios:
 Net charge-offs
  (recoveries) to average
  loans outstanding, net                                                                   (.19%)       (.25%)                (.04%)
 
Allowance for possible
 loan losses to total
 loans outstanding
  December 31                                                                              1.38%        2.51%                 2.61%
</TABLE> 

<TABLE> 
<CAPTION> 
ALLOCATION OF ALLOWANCE
 FOR LOAN LOSSES AMONG LOAN TYPE AND
 % OF LOAN TYPE TO TOTAL LOAN PORTFOLIO                                     % OF                     % OF                  % OF
                                                                 1996     PORTFOLIO       1995     PORTFOLIO     1994    PORTFOLIO
                                                                ------    ---------     -------    ---------   --------  ---------
<S>                                                             <C>       <C>           <C>        <C>         <C>       <C> 
Commercial.................                                     $  115           21%    $     1           35%     $  70         34%
Real Estate - Construction.                                        111            2          96            1         12         --
Real Estate - Mortgage.....                                         25           74         117           57         57         60
Consumer...................                                         --            3          --            7          3          6
Unallocated................                                        765          N/A         534          N/A        562        N/A
                                                                ------         ----     -------    ---------   --------  ---------
  Total....................                                     $1,016                  $   748                   $ 704
                                                                ======                  =======                ========
</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 liquidity and
to generate a positive return on investments without undue interest or credit
risk.  Investments are

                                       6
<PAGE>
 
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, 1996, the Corporation had $16,263,924
outstanding in the investment portfolio and $214,100 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 1996, 1995 and 1994 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>
 
                                         1996    1995    1994
                                        ------  ------  -------
<S>                                     <C>     <C>     <C>
 
Three months or less..................  $2,881  $1,191   $  330
Over three months through six months..   2,426     100      100
Over six months through one year......   1,972     436      675
Over one year.........................   1,821     106       --
                                        ------  ------   ------
     Total............................  $9,100  $1,833   $1,105
                                        ======  ======   ======
 
</TABLE>

BORROWINGS

          The average amounts of borrowings outstanding during 1996, 1995 and
1994 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 incident thereto. Some of the
principal activities that the FRB has determined by regulation to be so closely
related

                                       7
<PAGE>
 
to banking are: (i) making or servicing loans; (ii) performing certain data
process ing 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 1996, 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 various ways the overall levels of bank loans and extensions of
credit, investments and deposits as well as the interest

                                       8
<PAGE>
 
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, 1996, the Bank's ratio of core capital to total
average assets equalled 6.80% 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, 1996, the Bank's total capital to risk-weighted assets
was 10.25% and the Bank's core capital to risk-weighted assets was 9.00%, 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. For
the semi-annual period beginning June 30, 1996, the assessment rate for BIF-
insured institutions, such as the Bank, was lowered to between 0.04% and .31% of
insured deposits from 0.23% to 0.31% of insured deposits and was subsequently
reduced to the statutory minimum of $1,000 for the most highly rated banks for
the semi-annual period beginning January 1, 1997. The Bank was notified that its
BIF assessment rate for the first six months of 1997 is .001296%. 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. The Bank has been notified that its SAIF
assessment rate for the first six months of 1997 is .0648%.

          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.

                                       11
<PAGE>
 
          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 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 1996, the Bank incurred rental expenses
for properties totaling $428,059. Refer to Note 6--"Bank Premises and Equipment"
on page 19 of the Annual Report, which is hereby incorporated by reference.

                                       12
<PAGE>
 
ITEM 3.  LEGAL PROCEEDINGS

          Note 14--"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, 1996, 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 8 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 13 -- "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
3 through 8 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 9 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 through 7 of the Proxy Statement are hereby incorporated by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          Pages 2 and 3 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,
               1996 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, 1996 and 1995

                Consolidated Statements of Income for the Years
                Ended December 31, 1996, 1995 and 1994

                Consolidated Statements of Changes in Stockholders' Equity
                for the Years Ended December 31, 1996, 1995 and 1994

                Consolidated Statements of Cash Flows for the Years Ended
                December 31, 1996, 1995 and 1994

                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.

                                    FWB BANCORPORATION

 
                                    Steven K. Colliatie
Date: March 25, 1997               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 25, 1997

/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, 1996.  This report has been signed below by such
attorney-in-fact as of March 20, 1997.


                              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  FWB Bancorporation Bylaws                                        *
 
      4    Form of Common Stock Certificate                                 *
 
**   10.1  FWB Corporation 1994 Incentive Stock Option Plan                 *
 
**   10.2  FWB Bancorporation 1994 Stock Option Plan for Outside Directors  *
 
**   10.3  Employment Agreement Dated as of February 27, 1996,              Exhibit 10
           by and between FWB Bancorporation, FWB Bank, 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.

                                       16