UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
      ACT OF 1934

For the fiscal year ended December 31, 1996
Commission file number 0-15645

                                    FCNB Corp
             (Exact name of registrant as specified in its charter)

MARYLAND                                                  52-1479635
(State or other jurisdiction                              (I.R.S. Employer 
of incorporation or organization                          Identification Number)

7200 FCNB Court, Frederick, Maryland                      21703
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:       (301) 662-2191
Securities registered pursuant to Section 12(b) of 
the Act:                                                  None

Securities registered pursuant to Section 12(g) of 
the Act: 
    Common Stock, par value $1.00 per share   
   

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter  period of time that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES [X] NO [ ]

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

The  aggregate  market value of Common Stock (based on $20.50 per share) held by
nonaffiliates on February 20, 1997 was approximately $98,561,397.

As of March 1, 1997,  there were  5,363,560  shares of Common  Stock,  par value
$1.00 per share, of FCNB Corp issued and outstanding.

                       Documents Incorporated by Reference

                      Portions of the 1996 Annual Report to
                  Shareholders for the year ended December 31,
                             1996-PARTS I, II, & IV

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                                     PART I


Item 1.  Business.

General

FCNB Corp (the  "Registrant" or "Company") is a bank holding  company  organized
under the laws of the State of Maryland  and serves as the  holding  company for
FCNB Bank (the  "Bank").  On March 7, 1997,  the Company  merged  Elkridge  Bank
("Elkridge"),  Elkridge, Maryland, its second wholly owned bank subsidiary, with
and into the Bank, with the Bank surviving.

The  information  related  to the  Company's  acquisitions  during  the  year is
contained on page 12 of the Company's 1996 Annual Report to  Shareholders.  Such
information is incorporated herein by reference to the Annual Report.

The Bank

The  Bank,  a  state-chartered  commercial  bank  under the laws of the State of
Maryland was  converted  from a national bank in June 1993,  and was  originally
chartered  in 1818.  The Bank is  engaged  in a general  commercial  and  retail
banking  business serving  individuals and businesses in Frederick,  Carroll and
Montgomery  counties in Maryland.  At December 31, 1996, the Bank operated eight
banking offices located in Frederick, Maryland and one office each in Brunswick,
Damascus,  Eldersburg,  Middletown,  Monrovia,  Mount  Airy,  Walkersville,  and
Westminster,  Maryland.  At December 31, 1996, the Bank had total loans,  net of
unearned income, of approximately $330.83 million, total assets of approximately
$554.94 million,  total deposits of approximately  $416.40 million,  and a legal
lending limit of approximately  $6.10 million to any one borrower.  The deposits
of the Bank are insured by the FDIC.

The  Bank's  primary  market  area  consists  of the City of  Frederick  (with a
population of approximately  35,000 people) and the surrounding area.  Frederick
is the county seat of Frederick County, Maryland and is located approximately 49
miles west of Baltimore, Maryland and 46 miles northwest of Washington, D.C.

Elkridge

Elkridge,  a  state-chartered  commercial  bank  under  the laws of the State of
Maryland  was  converted  from a national  bank in March  1995,  was  originally
chartered  in 1961,  and was  merged  into the Bank on March 7,  1997.  Elkridge
engaged in a general commercial and retail banking business serving  individuals
and businesses in Howard, Prince George's and Anne Arundel counties in Maryland.
Elkridge  operated one banking office each in Columbia,  Elkridge,  Glen Burnie,
Laurel and Odenton,  Maryland.  Following  the merger of Elkridge into the Bank,
the Bank continues to operate the offices and business of Elkridge.  At December
31, 1996,  Elkridge had total loans,  net of unearned  income,  of approximately
$167.17 million,  total assets of 


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approximately $222.09 million,  total deposits of approximately $177.16 million,
and a legal  lending limit of  approximately  $3.26 million to any one borrower.
The deposits of Elkridge are insured by the FDIC.

Elkridge's  primary market area consisted of the territory  immediately south of
the City of Baltimore, Maryland.

COMMERCIAL BANKING AND RELATED SERVICES. The Bank is engaged in the financing of
commerce  and  industry,   providing  credit  facilities  and  related  services
principally  for businesses  located in their market areas.  The Bank offers all
forms of commercial lending,  including lines of credit, revolving credits, term
loans,  accounts  receivable  financing,  real estate loans,  and other forms of
secured financing.

PERSONAL  BANKING  SERVICES.  A wide  range of  personal  banking  services  are
provided  to  individuals  at each of the  Bank's  offices.  Among the  services
provided at most  locations are checking  accounts,  savings  accounts,  various
savings  programs,  installment  and other  personal  loans,  credit  card lines
("VISA"), home improvement loans, personal lines of credit, automobile and other
consumer financing, safe deposit services, and mortgage loans. The Bank also has
automatic teller machines and is a member of the MOST and CIRRUS networks.

COMPETITION.  The Bank faces strong  competition in all areas of its operations.
This  competition  comes  from  entities  principally  operating  in the  Bank's
marketing  area and includes  branches of some of the largest banks in Maryland.
Its most  direct  competition  for  deposits  historically  has come from  other
commercial banks, savings banks, savings and loan associations and credit unions
operating in  Frederick,  Carroll,  Howard,  Prince  George's,  Anne Arundel and
Montgomery  counties,   Maryland.  The  Bank  also  competes  for  deposits  and
investment  dollars  with money  market  mutual funds and public debt and equity
markets.  The Bank competes with banking entities,  mortgage banking  companies,
and other institutional lenders for loans. The competition for loans varies from
time to time depending on certain factors.  These factors include, among others,
the  general  availability  of  lendable  funds and  credit,  general  and local
economic  conditions,  current  interest  rate  levels,  and  conditions  in the
mortgage market.  As a result of recently enacted Federal and State  legislation
allowing interstate banking,  branching and mergers,  additional competitors not
currently in the Bank's market may enter into the Bank's market.

Supervision and Regulation

HOLDING  COMPANY  REGULATION.  The Company is a registered  bank holding company
under the Bank Holding Company Act of 1956, as amended (the BHCA"),  and as such
it is subject to regulation,  supervision  and examination by, and reporting to,
the Board of Governors of the Federal Reserve System (the "Federal Reserve").  A
discussion  related to the capital adequacy of the Company is contained on pages
38 and 39 of the Company's 1996 Annual Report to Shareholders.  Such information
is incorporated  herein by reference to the Annual Report. 

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BHCA -  ACTIVITIES  AND OTHER  LIMITATIONS.  The BHCA  prohibits a bank  holding
company from acquiring  direct or indirect  ownership or control of more than 5%
of the voting shares of any bank, or increasing such ownership or control of any
bank, without prior approval of the Federal Reserve.

The BHCA also prohibits a bank holding company,  with certain  exceptions,  from
acquiring  more than 5% of the voting  shares of any company  that is not a bank
and from engaging in any business  other than banking or managing or controlling
banks.  Under the BHCA,  the  Federal  Reserve  is  authorized  to  approve  the
ownership of shares by a bank holding company in any company,  the activities of
which the Federal  Reserve has determined to be so closely related to banking or
to managing or controlling banks as to be a proper incident  thereto.  In making
such  determinations,  the Federal  Reserve is  required  to weigh the  expected
benefit to the public,  such as greater  convenience,  increased  competition or
gains  in  efficiency,  against  the  possible  adverse  effects,  such as undue
concentration  of  resources,  decreased  or unfair  competition,  conflicts  of
interest or unsound banking practices.

The Federal  Reserve has by regulation  determined  that certain  activities are
closely  related to banking  within the  meaning of the BHCA.  These  activities
include:  making or servicing loans such as would be made by a mortgage company,
consumer finance company, credit card company, or factoring company;  performing
trust  company  functions;   performing  certain  data  processing   operations;
providing  limited  securities  brokerage  services;  acting as an investment or
financial advisor; ownership or operation of a savings association; acting as an
insurance agent for certain types of credit-related insurance;  leasing personal
property on a  full-payout,  non-operating  basis;  providing  tax  planning and
preparation  services;  operating a collection  agency;  and  providing  certain
courier  services.  The Federal  Reserve also has determined  that certain other
activities,  including real estate brokerage and syndication,  land development,
property  management  and  underwriting  life  insurance  not  related to credit
transactions, are not closely related to banking and a proper incident thereto.

COMMITMENTS TO SUBSIDIARY  BANK.  Under Federal Reserve  policy,  the Company is
expected  to act as a source  of  financial  strength  to the Bank and to commit
resources  to support the Bank in  circumstances  when it might not do so absent
such policy.

LIMITATIONS OF ACQUISITIONS OF COMMON STOCK.  The federal Change in Bank Control
Act  prohibits  a person or group from  acquiring  "control"  of a bank  holding
company unless the Federal  Reserve has been given 60 days' prior written notice
of such proposed acquisition and within that time period the Federal Reserve has
not issued a notice disapproving the proposed acquisition or extending for up to
another 30 days the period  during which such a  disapproval  may be issued.  An
acquisition  may be made prior to  expiration of the  disapproval  period if the
Federal  Reserve  issues  written  notice of its  intent not to  disapprove  the
action. Under a rebuttable  presumption  established by the Federal Reserve, the
acquisition of 10% or more of a class of voting stock of a bank holding  company
with a class of  securities  registered  under  


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Section 12 of the Exchange Act would,  under the  circumstances set forth in the
presumption, constitute the acquisition of control.

In addition, with limited exceptions,  any "company" would be required to obtain
the approval of the Federal  Reserve under the BHCA before  acquiring 25% (5% in
the  case  of an  acquiror  that  is a bank  holding  company)  or  more  of the
outstanding  Common  Stock of,  or such  lesser  number of shares as  constitute
control over, the Company.  Such approval would be contingent  upon, among other
things,  the acquiror  registering  as a bank  holding  company,  divesting  all
impermissible  holdings and ceasing any  activities not  permissible  for a bank
holding company.

BANK  REGULATION.  The  Bank is a  commercial  bank  chartered  by the  State of
Maryland  which is a member  of the  Federal  Reserve  System,  and as such,  is
subject to extensive  regulation  and  examination  by the Division of Financial
Regulation of the Department of Labor,  Licensing and  Regulation  (the "Banking
Commissioner"),  the FDIC,  which  insures its  deposits  to the maximum  extent
permitted by law, and by the Federal  Reserve.  The federal laws and regulations
which are applicable to banks regulate,  among other things,  the scope of their
business, their investments,  their reserves against deposits, the timing of the
availability  of  deposited  funds and the nature and amount of  collateral  for
certain loans.  The laws and regulations  governing the Bank generally have been
promulgated  to  protect  depositors  and  not  for the  purpose  of  protecting
shareholders.

FDIC  INSURANCE  PREMIUMS.  Institutions  are  assigned to one of three  capital
groups  based  solely  on  the  level  of  the  institution's  capital  -  "well
capitalized,"  "adequately  capitalized" and "undercapitalized" - which would be
defined in the same manner as the regulations establishing the prompt corrective
action  system under  Section 38 of the FDIA,  as discussed  below.  These three
groups are then divided into three  subgroups  which reflect  varying  levels of
supervisory  concern,  from those  which are  considered  to be healthy to those
which are considered to be of  substantial  supervisory  concern.  The matrix so
created results in nine assessment risk classifications, with rates ranging from
0.00% for well capitalized,  healthy institutions, to 0.31% for undercapitalized
institutions with substantial supervisory concerns.


PROMPT  CORRECTIVE  ACTION.  Under Section 38 of the FDIA,  each federal banking
agency  is  required  to  implement  a system of prompt  corrective  action  for
institutions  which it regulates.  The federal banking agencies have promulgated
substantially  similar  regulations to implement the system of prompt corrective
action established by Section 38 of the FDIA, which became effective on December
19,  1992.  Under the  regulations,  a bank  shall be  deemed  to be:  (i) "well
capitalized" if it has a Total Risk Based Capital Ratio of 10.0% or more, a Tier
1 Risk Based Capital Ratio of 6.0% or more, a Leverage  Capital Ratio of 5.0% or
more  and is not  subject  to any  written  capital  order  or  directive;  (ii)
"adequately  capitalized"  if it has a Total Risk Based Capital Ratio of 8.0% or
more,  a Tier 1 Risk Based  Capital  Ratio of 4.0% or more and a Tier 1 Leverage
Capital  Ratio of 4.0% or more (3.0% under certain  circumstances)  and does not
meet the definition of "well capitalized;" (iii)  "undercapitalized" if it has a
Total Risk  Based  Capital  Ratio  that is less than  8.0%,  a Tier 1 Risk Based
Capital  Ratio that is less than 4.0% or a Leverage  Capital  Ratio that is less
than   4.0%   (3.0%   under   certain   circumstances);    (iv)   "significantly
undercapitalized"  if it has a Total Risk Based  Capital Ratio that is less than
6.0%,  a Tier 1 Risk  Based  Capital

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Ratio that is less than 3.0% or a Leverage Capital Ratio that is less than 3.0%;
and (v)  "critically  undercapitalized"  if it has a ratio of tangible equity to
total assets that is equal to or less than 2.0%.

An institution  generally  must file a written  capital  restoration  plan which
meets specified  requirements with an appropriate  federal banking agency within
45 days of the date the institution  receives notice or is deemed to have notice
that  it  is  undercapitalized,  significantly  undercapitalized  or  critically
undercapitalized.  A federal  banking agency must provide the  institution  with
written  notice of  approval  or  disapproval  within 60 days after  receiving a
capital restoration plan, subject to extensions by the applicable agency.

An  institution  which is  required  to submit a capital  restoration  plan must
concurrently  submit a  performance  guaranty by each company that  controls the
institution. Such guaranty shall be limited to the lesser of (i) an amount equal
to 5.0% of the  institution's  total  assets  at the  time the  institution  was
notified  or  deemed to have  notice  that it was  undercapitalized  or (ii) the
amount  necessary at such time to restore the relevant  capital  measures of the
institution  to the levels  required for the  institution  to be  classified  as
adequately capitalized.  Such a guarantee shall expire after the federal banking
agency notifies the institution that it has remained adequately  capitalized for
each of four consecutive calendar quarters. An institution which fails to submit
a written capital  restoration plan within the requisite  period,  including any
required performance guarantee,  or fails in any material respect to implement a
capital  restoration plan, shall be subject to the restrictions in Section 38 of
the FDIA which are applicable to significantly undercapitalized institutions.

A "critically  undercapitalized  institution" is to be placed in conservatorship
or  receivership  within  90 days  unless  the  FDIC  formally  determines  that
forbearance  from such action would better protect the deposit  insurance  fund.
Unless the FDIC or other  appropriate  federal banking  regulatory  agency makes
specific  further  findings and certifies that the  institution is viable and is
not expected to fail, an institution that remains critically undercapitalized on
average during the fourth calendar quarter after the date it becomes  critically
undercapitalized  must be placed in  receivership.  The general rule is that the
FDIC  will  be  appointed  as  receiver  within  90 days  after  a bank  becomes
critically  undercapitalized  unless  extremely  good  cause  is  shown  and  an
extension is agreed to by the federal regulators.

Immediately upon becoming undercapitalized,  an institution shall become subject
to the provisions of Section 38 of the FDIA (i)  restricting  payment of capital
distributions  and management fees, (ii) requiring that the appropriate  federal
banking  agency  monitor the  condition  of the  institution  and its efforts to
restore its capital,  (iii) requiring  submission of a capital restoration plan,
(iv) restricting the growth of the institution's  assets and (v) requiring prior
approval of certain expansion proposals.  The appropriate federal banking agency
for an  

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undercapitalized   institution   also  may  take  any  number  of  discretionary
supervisory  actions  if the agency  determines  that any of these  actions  are
necessary  to resolve the  problems  of the  institution  at the least  possible
long-term  cost to the  deposit  insurance  fund,  subject in  certain  cases to
specified procedures. These discretionary supervisory actions include: requiring
the  institution to raise  additional  capital;  restricting  transactions  with
affiliates;  restricting  interest  rates paid by the  institution  on deposits;
requiring  replacement of senior executive  officers and directors;  restricting
the activities of the institution and its affiliates;  requiring  divestiture of
the institution or the sale of the institution to a willing  purchaser;  and any
other supervisory action that the agency deems appropriate. These and additional
mandatory  and  permissive  supervisory  actions  may be taken  with  respect to
significantly undercapitalized and critically undercapitalized institutions.

Additionally,  under Section  11(c)(5) of the FDIA, as amended by the FDICIA,  a
conservator  or receiver  may be  appointed  for an  institution  where:  (i) an
institution's   obligations  exceed  its  assets;   (ii)  there  is  substantial
dissipation of the institution's assets or earnings as a result of any violation
of law or any unsafe or unsound practice;  (iii) the institution is in an unsafe
or unsound  condition;  (iv) there is a wilful  violation  of a cease and desist
order;  (v) the  institution  is unable to pay its  obligations  in the ordinary
course  of  business;   (vi)  losses  or  threatened   losses   deplete  all  or
substantially  all of an  institution's  capital,  and  there  is no  reasonable
prospect of becoming "adequately capitalized" without assistance; (vii) there is
any violation of law or unsafe or unsound  practice or condition  that is likely
to cause insolvency or substantial dissipation of assets or earnings, weaken the
institution's  condition,  or otherwise  seriously  prejudice  the  interests of
depositors or the insurance  fund;  (viii) an institution  ceases to be insured;
(ix) the institution is undercapitalized  and has no reasonable prospect that it
will become adequately capitalized,  fails to become adequately capitalized when
required  to do so,  or  fails to  submit  or  materially  implement  a  capital
restoration  plan;  or (x) the  institution  is critically  undercapitalized  or
otherwise has substantially insufficient capital.

At  December  31,  1996 the  Bank  would be  deemed  to be a "well  capitalized"
institution  for purposes of Section 38 of the FDIA.  Also at December 31, 1996,
the Company and the Bank were in compliance with all minimum federal  regulatory
capital requirements which are generally applicable to banks.

REGULATORY ENFORCEMENT AUTHORITY.  The Financial Institutions Reform,  Recovery,
and Enforcement Act of 1989 ("FIRREA") included  substantial  enhancement to the
enforcement  powers  available to federal banking  regulators.  This enforcement
authority  includes,  among  other  things,  the  ability to assess  civil money
penalties,   to  issue  cease-and-desist  or  removal  orders  and  to  initiate
injunctive  actions against  banking  organizations  and  institution-affiliated
parties,  as defined in FIRREA.  In general,  these  enforcement  actions may be
initiated  for  violations  of  laws  and  regulations  and  unsafe  or  unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,   including   misleading  or  untimely  reports  filed  with  regulatory
authorities.  FIRREA significantly increased the amount of and grounds for civil


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money  penalties  and  requires,  except  under  certain  circumstances,  public
disclosure of final enforcement actions by the federal banking agencies.

The foregoing  references to laws and  regulations  which are  applicable to the
Company  and the Bank are brief  summaries  thereof  which do not  purport to be
complete and which are qualified in their entirety by reference to such laws and
regulations.

FCNB Investment Holdings, Inc.

FCNB  Investment  Holdings,  Inc.,  a Delaware  corporation,  is a  wholly-owned
subsidiary of the Bank that was organized on April 21, 1994. This subsidiary was
established to manage a portion of the investment portfolio of the Bank.

First Choice Insurance Agency, Inc.

First Choice Insurance Agency, Inc., a Maryland  corporation,  is a wholly-owned
subsidiary of the Bank that was organized on June 13, 1994.  This subsidiary was
established to enable FCNB to sell insurance products.

Monocacy Management Company

Monocacy  Management  Company,  a  Maryland   corporation,   is  a  wholly-owned
subsidiary  of the Bank that was organized on January 6, 1992.  This  subsidiary
was established to purchase troubled assets from the Bank.

Governmental Monetary Policies and Economic Controls

The Bank is affected by monetary policies of regulatory  authorities,  including
the Federal Reserve Board, which regulates the national money supply in order to
mitigate recessionary and inflationary pressures. Among the techniques available
to the Federal Reserve Board are engaging in open market  transactions in United
States Government securities,  changing the discount rate on bank borrowings and
changing reserve requirements  against bank deposits.  These techniques are used
in  varying  combinations  to  influence  the  overall  growth  of  bank  loans,
investments  and deposits.  Their use may also affect  interest rates charged on
loans or paid on deposits.  The effect of governmental  policies on the earnings
of the Bank or the Company for any future periods cannot be predicted.

Employees

At December 31, 1996,  the Company had  approximately  355  employees of which 6
were executive  officers,  75 were other officers,  223 were full-time employees
and 51 were part-time employees.

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Item 2.  Properties.

The Company owns the property on which the  principal  office of the Company and
the main office of the Bank are located at 7200 FCNB Court, Frederick, Maryland.
The Bank also owns the  properties  which  house the Square  Corner  Branch at 1
North Market  Street,  the Rosemont  Branch at 1602  Rosemont  Avenue,  the East
Frederick  Branch  at 1303  East  Patrick  Street,  the  Route 85 Branch at 5602
Buckeystown Pike, the Walkersville  Branch at 100 Commerce Drive,  Walkersville,
Maryland, the Eldersburg Branch at 6229 Sykesville Road,  Eldersburg,  Maryland,
the Elkridge  Branch at 7290 Montgomery  Road,  Elkridge,  Maryland,  the Laurel
Branch  at 380  Main  Street,  Laurel,  Maryland,  the  Odenton  Branch  at 1219
Annapolis  Boulevard,  Odenton,  Maryland and the Middletown  Branch at 819 East
Main Street,  Middletown,  Maryland.  The land upon which the Middletown  Branch
office is located is leased pursuant to a twenty-year  lease, with an expiration
date of November  2009 and contains  provisions to extend the initial lease term
for three  ten-year  periods.  The lease also contains an option to purchase the
land at fair market value at the end of the initial  lease term or at the end of
any extension term.

The  Bank  leases  the  following  properties:   the  Antietam  Branch  at  1595
Opossumtown  Pike, the 40 West Branch at 1100 West Patrick Street,  the FSK Mall
Branch at 5500  Buckeystown  Pike,  the  Brunswick  Branch  at 94  Souder  Road,
Brunswick,  Maryland,  the  Damascus  Branch  at  9815  Main  Street,  Damascus,
Maryland, the Green Valley Branch at 11801 Fingerboard Road, Monrovia, Maryland,
the Mount Airy Branch at 400 Ridgeville Boulevard, Mount Airy, Maryland, and the
Englar  Road Branch at Route 140 and Englar  Road,  Westminster,  Maryland,  the
Columbia Branch at 5585 Twin Knolls Road,  Columbia,  Maryland,  the Glen Burnie
Branch  at  7381   Baltimore-Annapolis   Blvd.,   Glen   Burnie,   Maryland  and
Administrative Offices at 6810 Deerpath Road, Elkridge, Maryland. Facilities are
leased at 15 East Main Street,  Westminster,  Maryland,  and 8101 Sandy  Springs
Road, in Laurel, Maryland for loan production offices.

The Bank also owns a 12,000  square foot  building  that is adjacent to its East
Frederick  Branch  office,  which was previously  used as the Bank's  operations
center  and  was  vacated  upon  completion  of the new  headquarters  facility.
However,  the  Company  is  pursuing  leasing   opportunities  for  the  vacated
facilities.

Item 3.  Legal Proceedings.

The  Company  and the Bank are subject to various  legal  proceedings  which are
incidental to their business. In the opinion of management,  the liabilities (if
any) resulting from such legal  proceedings  will not have a material  effect on
the consolidated  financial statements or consolidated ratios of the Company and
the Bank.

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

There were no matters  that were  submitted  to a vote of the  security  holders
during the fourth quarter of 1996.


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                                     PART II


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

The  information  required by this item is contained on page 44 of the Company's
1996 Annual Report to Shareholders.  Such information is incorporated  herein by
reference to the Annual Report.

Dividend Limitations and Certain Other Restrictions

The payment of dividends by the Company  depends largely upon the ability of the
Bank to declare and pay dividends to the Company because the principal source of
the  Company's  revenue is dividends  paid by the Bank.  Future  dividends  will
depend primarily upon the Bank's  earnings,  financial  condition,  and need for
funds,  as well as  governmental  policies  and  regulations  applicable  to the
Company and the Bank.

A  discussion  related to dividend  limitations  is  contained on page 38 of the
Company's 1996 Annual Report to  Shareholders.  Such information is incorporated
herein by reference to the Annual Report.

The Federal Reserve has  established  guidelines with respect to the maintenance
of  appropriate   levels  of  capital  by  registered  bank  holding  companies.
Compliance  with such  standards,  as  presently  in  effect,  or as they may be
amended from time to time, could possibly limit the amount of dividends that the
Company may pay in the future.  In 1985,  the  Federal  Reserve  issued a policy
statement on the payment of cash  dividends by bank  holding  companies.  In the
statement,  the  Federal  Reserve  expressed  its view  that a  holding  company
experiencing earnings weaknesses should not pay cash dividends exceeding its net
income or which could only be funded in ways that weakened the holding company's
financial health, such as by borrowing.

As a  depository  institution,  deposits  of which are  insured  by The  Federal
Deposit  Insurance  Corporation  ("FDIC"),  the  Bank may not pay  dividends  or
distribute  any of its  capital  assets  while  it  remains  in  default  on any
assessment due the FDIC. The Bank currently is not in default under any of their
obligations to the FDIC.

Item 6.  Selected Financial Data.

The  information  required by this item is contained on page 24 of the Company's
1996 Annual Report to Shareholders.  Such information is incorporated  herein by
reference to the Annual Report.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.


                                       10

<PAGE>


The  information  required  by this item is  contained  on pages 12 to 23 of the
Company's 1996 Annual Report to  Shareholders.  Such information is incorporated
herein by reference to the Annual Report.

Item 8.  Financial Statements and Supplementary Data.

The information required by this item is contained in the Consolidated Financial
Statements and Notes to Consolidated  Financial Statements appearing on pages 25
to 43 of the Company's 1996 Annual Report to  Shareholders.  Such information is
incorporated herein by reference to the Annual Report.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

The Board of Directors has set the number of directors that constitute the Board
of Directors at fourteen.  The Articles of  Incorporation of the Company provide
that the directors  shall be classified  with respect to the time for which they
severally hold office into three classes.  Each year all of the directors in one
class are elected to serve for a term of three years. The shareholders will vote
at this Annual  Meeting for the election of four directors for a three year term
expiring at the Annual Meeting of Shareholders in 2000, or at such time as their
respective successors have been elected and qualified.

The following  table sets forth as to each  director of the Company,  his or her
name,  age,  the year he or she first  became a director  of the Company and the
number of shares of Common Stock beneficially owned at February 11, 1997.

<TABLE>
<CAPTION>




                                                  Year                                     Shares of 
                                                  First               Year                Common Stock         Percent
                                                 Elected              Term                Beneficially           of
Name                                Age(1)      Director             Expires                Owned (2)           Class
----                                ------     ----------            -------          ---------------------     ------

                                                    BOARD NOMINEES

<S>                                    <C>       <C>                  <C>                     <C>                <C> 
George B. Callan Jr.                   65        1986                 2000                    10,159             0.19

Clyde C. Crum                          61        1986                 2000                    41,635(3)          0.78



                                       11

<PAGE>




Frank L. Hewitt, III                   55        1996(4)              2000                   123,657             2.31

DeWalt J. Willard, Jr.                 65        1986                 2000                    43,773             0.82

                                            DIRECTORS CONTINUING IN OFFICE
        
Miles M. Circo                         50        1986                 1998                     3,022              .06

James S. Grimes                        57        1989                 1998                     5,343              .10

Gail T. Guyton                         56        1986                 1998                    57,300(5)          1.07

A. Patrick Linton                      47        1991                 1998                    66,931(6)          1.24

Jacob R. Ramsburg, Jr.                 60        1986                 1998                    90,681(7)          1.69

Bernard L. Grove, Jr.                  63        1988                 1999                    12,771(8)           .24

Ramona C. Remsberg                     68        1987                 1999                    48,000(9)           .90

Kenneth W. Rice                        53        1988                 1999                    11,222              .21

Rand D. Weinberg                       40        1996(10)             1999                     3,500(10)          .07
</TABLE>

---------------

(1)      At February 11, 1997.

(2)      In  accordance  with Rule  13d-3  under the  Exchange  Act, a person is
         deemed to be the beneficial  owner,  for purposes of this table, of any
         shares  of Common  Stock  with  respect  to which he or she has sole or
         shared voting and/or  investment.  The table  includes  shares owned by
         spouses,  other  immediate  family  members  in trust,  shares  held in
         retirement  accounts or funds for the benefit of the named individuals,
         and other forms of  ownership,  over which shares the persons  named in
         the table  possess  voting and  investment  power.  Except as otherwise
         noted, each person has sole voting and investment power with respect to
         all shares beneficially owned.

(3)      The shares  attributed  to Mr. Crum  include  6,603 shares owned by Mr.
         Crum's wife, as to which Mr. Crum disclaims beneficial ownership.

(4)      Mr.  Hewitt was  elected to the Board of  Directors  as a member of the
         Class of 1997 in connection  with the Company's  acquisition  of Laurel
         Bancorp,  Inc. ("Laurel").  The shares attributed to Mr. Hewitt include
         22,153  shares as to which he shares voting and  investment  power with
         his wife, 11,114 shares owned by Mr. Hewitt's children,  as to which he
         has

                                       12
<PAGE>



         voting and investment power,  1,531 shares held in trust as to which he
         has shared  voting and  investment  power and 2,697 shares owned by Mr.
         Hewitt's wife.

(5)      The shares  attributed to Mr. Guyton  include 2,455 shares owned by Mr.
         Guyton's wife, as to which Mr. Guyton  disclaims  beneficial  ownership
         and  3,645  shares  held in trust by a  corporation  controlled  by Mr.
         Guyton, as to which he has shared voting and investment power.

(6)      The shares  attributed to Mr. Linton  include 30,307 shares as to which
         he shares voting and investment power with his wife, 3,236 shares owned
         by Mr.  Linton's  children,  as to which he has voting  and  investment
         power and 400 shares owned by Mr.  Linton's  wife . Mr. Linton also has
         options to  purchase  35,435  shares,  of which  28,484  are  presently
         exercisable and are included in the total shares beneficially owned. In
         addition, Mr. Linton will also receive 5,697 shares of restricted stock
         when the underlying stock options are exercised.

(7)      The shares attributed to Mr. Ramsburg include 4,906 shares owned by Mr.
         Ramsburg's wife, and 4,833 shares owned jointly by Mr.  Ramsburg's wife
         and son, as to which Mr. Ramsburg disclaims beneficial  ownership,  and
         22,766 shares owned by two corporations  controlled by Mr. Ramsburg, as
         to which he holds voting and investment power.

(8)      The shares  attributed  to Mr. Grove  include  7,699 shares held in his
         wife's revocable, convertible trust.

(9)      The shares  attributed to Ms.  Remsberg  include 2,100 shares held in a
         trust as to which she has shared voting and investment power.

(10)     Mr. Weinberg was elected to the Board of Directors to fill a vacancy in
         the Class of 1999. The shares  attributed to Mr. Weinberg include 1,000
         shares as to which Mr. Weinberg shares voting and investment power with
         his wife,  and 2,500 shares  invested in a pension trust as to which he
         has voting and investment power.

Set forth below is certain information with respect to the nominees for director
and the continuing  directors of the Company.  Unless otherwise  indicated,  the
principal occupation listed for each person below has been his or her occupation
for the past five years.

GEORGE B. CALLAN,  JR. is president of Associates in Management,  a company that
specializes in historic preservation, museum management and automotive sales.

CLYDE C. CRUM,  chairman of the board of the Bank and the Company  since January
1995, is president of Clyde C. Crum and Son, Inc., a dairy farm operation.


                                       13
<PAGE>



FRANK L.  HEWITT,  III is retired  after  being  president  of Laurel and Laurel
Federal  Savings  Bank until the merger of Laurel  with and into the Company and
the merger of Laurel Federal Savings Bank with and into Elkridge Bank in January
1996.

DEWALT  J.  WILLARD,  JR.  is  president  of  Ideal  Buick-GMC,   an  automobile
dealership.

MILES M. CIRCO is general  manager of  Patapsco  Designs,  Inc.,  an  electronic
design and manufacturing firm.

JAMES S. GRIMES has been Mayor of the City of Frederick, Maryland since 1994 and
is  president of James S. Grimes,  Inc.,  a full  service  truck  transportation
service operation.

GAIL T.  GUYTON,  vice  chairman  of the board of both the Bank and the  Company
since January 1995, is president of Morgan-Keller, Inc., a commercial/industrial
construction firm.

A. PATRICK LINTON has been president and chief executive officer of the Bank and
the Company  since  January  1991.  During  1990,  he served as  executive  vice
president  of the Company  and  executive  vice  president  and chief  operating
officer of the Bank. Mr. Linton has been an executive  officer of the Bank since
1982 and of the Company since 1986, with principal responsibilities in the areas
of finance and administration.

JACOB R. RAMSBURG, JR. is president of Frederick  Underwriters,  Inc., a general
insurance agency.

BERNARD  L.  GROVE,  JR. is an advisor to Genstar  Stone  Products,  Inc.  since
January 1996,  after having been  president  since  January 1, 1992,  and having
previously served as executive vice president of that company.

RAMONA C. REMSBERG is the former vice chairman of the board of both the Bank and
of the Company,  having retired from the Bank and the Company in September 1993.
Ms.  Remsberg  served as president of each entity from  December 1987 to January
1991.

KENNETH  W.  RICE is  president  of  Donald  B.  Rice  Tire  Co.,  Inc.,  a tire
distribution firm.

RAND D. WEINBERG is a partner with Weinberg & Weinberg, a law firm in Frederick,
Maryland.

BOARD AND COMMITTEE MEETINGS

The Board of  Directors  of the  Company  has  standing  audit and  compensation
committees, but does not have a standing nominating committee.


                                       14
<PAGE>



The Audit Committee, comprised of Directors Circo, Hewitt, Ramsburg and Willard,
assists  the  Board  of  Directors  of the  Bank  in  exercising  its  fiduciary
responsibilities for oversight of audit and related matters, including corporate
accounting,  internal  controls and regulatory  compliance.  Its duties include:
monitoring  the  Bank's  internal  controls  and  procedures;  meeting  with the
internal  auditors and reviewing  their reports;  recommending  the selection of
independent auditors; reviewing the scope of audits conducted by the independent
auditors,  as well as the  results  of  their  audits;  and  reviewing  policies
relating to compliance with applicable banking and other laws.

The  Compensation  Committee,  comprised of Directors  Callan,  Grove, and Rice,
reviews and recommends to the Board of Directors the overall compensation policy
for the  Company.  The  Board of  Directors  of the  Bank  follows  this  policy
specifically  related to the salaries and other  benefits for senior  management
thereof.

The Board of Directors of the Company held nineteen  meetings  during 1996,  and
the Audit and the Compensation  Committees each held seven meetings during 1996.
Each of the  directors  of the Company  attended at least 75% of the meetings of
the Board of Directors and all committees on which they served during 1996.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors  and  executive  officers to file reports of ownership  and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange  Commission,  and
to provide the Company with copies of all Forms 3, 4, and 5 they file.

Based solely upon the  Company's  review of the copies of the forms which it has
received and written  representations from the Company's directors and executive
officers,  the  Company  is  not  aware  of  any  failure  to  comply  with  the
requirements of Section 16(a) except that Clyde C. Crum and Kenneth W. Rice each
failed to file reports  required by Section 16(a) on a timely basis during 1996.
Each late report related to one transaction each.

Executive Officers of the Company.

Information  concerning  non-director executive officers of the Registrant is as
follows:

Martin S. Lapera (age 44) became an Executive  Vice  President of the Company in
June 1992 after having been a Vice  President.  Mr.  Lapera became the Executive
Vice  President,  Chief  Operating  Officer and Chief Lending Officer of FCNB in
January 1995 after having been the  Executive  Vice  President and Chief Lending
Officer of the Bank.

Charles E.  Weller  (age 48) became a Senior  Vice  President  of the Company in
January 1996 after having been a Vice  President of the Company  since March 24,
1995.  Mr. Weller was President of Elkridge until it was merged with the Bank on
March 7, 1997.  

                                       15

<PAGE>



Mark A.  Severson  (age 43) became a Senior Vice  President and Treasurer of the
Company in January 1996 after having been the Vice President and Treasurer.  Mr.
Severson is the Senior Vice President and Chief Financial Officer of the Bank.

Fern W. Mercer (age 59) is a Vice  President of the Company and is a Senior Vice
President of the Bank.

Helen G. Hahn (age 60) is a Vice  President and  Secretary of the Company.  Mrs.
Hahn became a Senior Vice President and Cashier of the Bank in June 1992 and was
the Cashier prior to that time.

Item 11.  Executive Compensation.

COMPENSATION OF DIRECTORS

During 1996, the directors of the Company  received an annual retainer of $2,000
for attending Board of Directors  meetings of the Company.  Members of the Board
of  Directors  of the Company who were  members of the Board of Directors of the
Bank received an additional  fee of $200 for each meeting  attended.  Members of
the Board of Directors of the Company who also served as members of the Board of
Directors  of the Bank  received an annual  retainer of $5,000 and a fee of $200
for  each  bi-weekly  Board  of  Directors  and  committee  meeting  of the Bank
attended.  Any member of the Board of  Directors  of the Company who was also on
the Board of Directors of Elkridge Bank  received  board meeting fees of $350.00
and committee  meeting fees of $250.00 meeting  attended.  Elkridge Bank did not
pay an annual retainer fee.

Clyde C. Crum received a $30,000  annual fee for his services as Chairman of the
Board of both the  Company  and the  Bank,  along  with the  bi-weekly  Board of
Directors meeting fees.  However, he did not receive any committee meeting fees.
Effective in January 1997, the annual fee for Mr. Crum was increased to $35,000.

Directors  who agree to defer  receipt of at least  four  years of their  annual
retainers may participate in an unfunded  deferred  compensation plan maintained
by the Bank. Under this plan,  deferred amounts earn interest at the rate of 10%
per annum until the director attains age sixty-five,  dies or becomes  disabled.
Upon any such event, the deferred amount plus credited  interest thereon will be
paid to the  participant  or his  beneficiary  over a period of up to ten years,
with interest  continuing to accrue on the unpaid balance at the rate of 10% per
annum.

The Company  paid a total of $121,000 in  director  and  committee  fees for the
fiscal year ended December 31, 1996.

            EXECUTIVE OFFICERS' COMPENSATION AND CERTAIN TRANSACTIONS

COMPENSATION - OVERVIEW


                                       16
<PAGE>




Set forth below are summarized tables of all compensation awarded to, earned by,
or  paid  to  certain  executive  officers.  It  should  be  noted  that no cash
compensation  was paid to any  executive  officer  of the  Company in his or her
capacity  as  such.  Each of the  executive  officers  of the  Company  received
compensation  from  the Bank  for  services  rendered  in  their  capacities  as
executive officers of the Bank.

The following table sets forth a comprehensive  overview of the compensation for
the Company's Chief Executive Officer and the most highly compensated  executive
officers for the year ended December 31, 1996. Comparative data is also provided
for the previous two fiscal years, in selected  categories.  Except as disclosed
below, no other executive officer of the Company or the Bank received salary and
bonus in excess of $100,000 during the year ended December 31, 1996.















                                       17



<PAGE>



<TABLE>
<CAPTION>




                           SUMMARY COMPENSATION TABLE


                                                                             Long-Term
                                              Annual Compensation           Compensation

                                                                       Restr-        Secur- 
                                                                       icted         ities          All      
Name and                                                               Stock         Under-         Other    
Principal                Fiscal                                         Awards       lying          Compen-  
Position                  Year             Salary(1)      Bonus (2)      (3)         Options        sation(4)
--------                  ----             ---------      ---------      ---         -------        ---------
                                                                                                

<S>                      <C>                <C>            <C>          <C>           <C>            <C>     
A. Patrick               1996               $198,222       $46,930      1,390         6,951          $10,442 
Linton, Director,        1995                186,352        66,516      1,259         6,297            7,747 
President and Chief      1994                161,321        46,283      1,154         5,765            2,087 
Executive Officer of                                                                                 
the Company and
the Bank
                  


Martin S. Lapera,        1996               $119,797        $23,733       546         2,732          $    -- 
Executive Vice           1995                112,091         30,513       497         2,485               --
President of the         1994                 93,723         23,013       447         2,232               --
Company and                                                                                          
Executive Vice
President, Chief
Operating Officer and 
Chief Lending Officer 
of the Bank


Charles E. Weller,       1996               $112,579        $14,925       362         1,810           $1,427 
Senior Vice President    1995                100,836         12,909       370         1,852               -- 
of the Company and                                                                                   
Senior Vice President
of the Bank (5)
                  

Mark A. Severson,        1996               $101,194        $15,169       326         1,629           $   -- 
Senior Vice President    1995                 94,677         19,620       298         1,491               --
and Treasurer of the     1994                 83,309         15,568       278         1,389               --
Company and Senior                                                                                    
Vice President and
Chief Financial 
Officer of the Bank
</TABLE>

-------------


                                       18

<PAGE>


(1)      Includes  contributions  made by the Bank and Elkridge Bank under their
         401(k) Profit Sharing Plans.  Contributions  made by the banks in 1996,
         1995, and 1994, respectively, amounted to $8,222, $8,977 and $6,321 for
         Mr.  Linton,  $7,797,  $7,091 and $3,723 for Mr.  Lapera,  and  $5,794,
         $4,677,  and $3,309 for Mr. Severson.  Mr. Weller's  contributions  for
         1996 and 1995 were $6,579 and $3,036, respectively.

(2)      During 1994, the Bank changed the method of paying the annual  bonuses.
         There  were no cash  bonuses  paid in  1994,  however,  annual  bonuses
         accrued as of  December  31,  1996,  1995 and 1994 were paid in January
         1997, 1996 and 1995, respectively.  Previously, the annual bonuses were
         paid in the year earned.  The annual  bonus for Mr.  Weller was paid by
         Elkridge Bank.

(3)      The awards of restricted  stock  received are based on the formula of a
         grant of one (1)  restricted  share for every five (5) shares of Common
         Stock  purchased  pursuant  to  the  exercise  of  stock  options.  The
         restriction period is for three (3) years from the date of receipt, and
         if the shares  purchased  pursuant to the exercise of stock options are
         sold within this time period,  a pro rata  percentage of the restricted
         shares are forfeited and must be returned to the Company.  In 1994, Mr.
         Lapera   exercised   options   resulting  in  696   restricted   shares
         outstanding, which are held in escrow for the benefit of Mr. Lapera, at
         year end December 31, 1996.

(4)      Includes payments for vacation pay taken in lieu of vacation.  Included
         in the 1996 and 1995  amounts  for Mr.  Linton are  $8,250 and  $5,700,
         respectively, of Elkridge Bank directors' fees.

(5)      Mr.  Weller  became an  executive  officer of the  Company on March 24,
         1995, as a result of the merger of ENB Financial  Corporation  with and
         into the  Company.  Until the merger of Elkridge  Bank into the Bank on
         March 7, 1997, Mr. Weller served as President at Elkridge Bank.

STOCK OPTION PLAN. The following  table sets forth as to the executive  officers
whose  compensation  is  reported  in the  SUMMARY  COMPENSATION  TABLE  certain
information  relating to options to purchase Common Stock of the Company granted
during fiscal 1996 under the 1992 Employee Stock Option Plan.


                                       19


<PAGE>


<TABLE>
<CAPTION>
  

                                                        OPTION GRANTS IN LAST FISCAL YEAR


                                                                                                             
                                                                                                            Potential Realizable 
                                                                                                              Value at Assumed   
                                                                                                              Annual Rates of    
                                                                                                                Stock Price      
                                                                                                              Appreciation for   
                                                       Individual Grants                                       Option Term(5)    
------------------------------------------------------------------------------------------------------------------------------------

                                                     % of Total 
                              Number of                Options  
                              Securities             Granted to            Exercise
                              Underlying             Employees             or Base 
                                Options               in Fiscal             Price         Expiration  
   Name                       Granted (#)                Year             ($/Share)          Date            5%($)       10%($)  
   ----                       -----------                ----             ---------          ----            -----       ------  
                                                                                                                                 
<S>                            <C>                       <C>               <C>             <C>             <C>          <C>      
A. Patrick Linton              6,951(1)                  33%               $20.50          12/31/06        $89,614      $227,100 
                                                                                                                          
Martin S. Lapera               2,732(2)                  13%               $20.50          12/31/06        $35,221      $ 89,259
                                 
Charles E. Weller              1,810(3)                   9%               $20.50          12/31/06        $23,334      $ 59,135

Mark A. Severson               1,629(4)                   8%               $20.50          12/31/06        $21,001      $ 53,222


</TABLE>


---------------
(1)      The options  granted to Mr.  Linton to  purchase  6,951  shares  become
         exercisable  on December 31, 1997, and entitle Mr. Linton to receive an
         aggregate of 1,390 shares of restricted stock when the underlying stock
         options are  exercised.  The awards of  restricted  stock  received are
         based on the  formula  of one (1)  restricted  share for every five (5)
         shares of Common  Stock  purchased  pursuant  to the  exercise of stock
         options. The restriction period is for three (3) years from the date of
         receipt,  and if the shares purchased pursuant to the exercise of stock
         options are sold within this time period,  a pro rata percentage of the
         restricted shares are forfeited and must be returned to the Company.

(2)      The options  granted to Mr.  Lapera to  purchase  2,732  shares  become
         exercisable  on December 31, 1997, and entitle Mr. Lapera to receive an
         aggregate of 546 shares of restricted  stock when the underlying  stock
         options are exercised.


                                       20


<PAGE>


(3)      The options  granted to Mr.  Weller to  purchase  1,810  shares  become
         exercisable  on December 31, 1997, and entitle Mr. Weller to receive an
         aggregate of 362 shares of restricted  stock when the underlying  stock
         options are exercised.

(4)      The options  granted to Mr.  Severson to purchase  1,629 shares  become
         exercisable on December 31, 1997,  and entitle Mr.  Severson to receive
         an  aggregate  of 326 shares of  restricted  stock when the  underlying
         stock options are exercised.

(5)      The assumed  annual  rates of  appreciation  in the table are shown for
         illustrative  purposes only pursuant to  applicable  SEC  requirements.
         Actual values  realized on stock options are dependent on actual future
         performance of the Company's stock,  among other factors.  Accordingly,
         the amounts shown may not necessarily be realized. Does not include the
         value of  restricted  stock  awards  in  conjunction  with the grant of
         options.

The table set forth below  presents  the amount and  potential  value of options
held by each named executive at the end of fiscal 1996.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                            AND FY-END OPTION VALUES

<TABLE>
<CAPTION>

                                                                    Number of   
                                                                    Securities                 Value of    
                                                                    Underlying               Unexercised   
                                                                    Unexercised             In-the-Money   
                                                                      Options                   Options    
                            Shares                                   at FY-End(#)             at FY-End ($) 
                           Acquired           Value                  Exercisable/             Exercisable/  
Name                     On Exercise         Realized               Unexercisable           Unexercisable(1)
----                     -----------         --------               -------------           ----------------
                                                                                                      
<S>                          <C>                <C>                 <C>                        <C>   
A. Patrick Linton            --                 --                  28,484/6,951               $122,588/-

Martin S. Lapera             --                 --                   7,474/2,732                 15,250/-
 
Charles E. Weller            --                 --                  11,110/1,810                110,693/-

Mark A. Severson             --                 --                   6,853/1,629                 29,720/-

</TABLE>

---------------
(1)      Does not include the value of  restricted  stock awards in  conjunction
         with the grant of options.


                                       21

<PAGE>


PROFIT  SHARING PLAN. The Company has a Section 401 (k) profit sharing plan (the
"Plan")  covering  employees  meeting  certain  eligibility  requirements  as to
minimum age and years of service.  Employees may make voluntary contributions to
the Plan through payroll  deductions on either a pre-tax or after-tax basis. The
Company makes contributions to the Plan in its discretion, based on a percentage
of the Bank's and Elkridge  Bank's  earnings.  The Company's  contributions  are
subject to a vesting  period based upon the  completion of five years of service
with the Company,  at which time they are fully vested. A participant's  account
under  the  Plan,   together  with  investment  earnings  thereon,  is  normally
distributable,  following retirement,  death, disability or other termination of
employment, in a single lump-sum payment.

The  Company's  annual  contribution  to the  Plan  totaled  $357,000  in  1996,
including an aggregate of $28,392 of  contributions  for the executive  officers
named in the SUMMARY COMPENSATION TABLE.

EXECUTIVE  COMPENSATION PLAN. The Bank maintains an Executive  Compensation Plan
which is  intended to provide  supplemental  retirement  benefits  to  executive
officers  designated  by the  Compensation  Committee  of the  Bank's  Board  of
Directors.  Under this plan, an amount  determined by the Committee will be paid
to a  participant  annually  (in twelve  monthly  payments)  for up to ten years
commencing upon the earliest of (a) his or her attaining sixty-five years of age
(or such later date as the participant and the Bank agree), (b) his or her death
or (C) his or her disability.  The payments will be made to a participant or his
or her  beneficiaries  from the  general  funds of the Bank.  Periodically,  the
Compensation  Committee  will approve a change to the amount of annual  benefits
payable  under the  Executive  Compensation  Plan.  Under the plan,  the current
annual  benefits  at  normal  retirement  age  established  by the  Compensation
Committee for Messrs. Linton, and Lapera are $20,000 and $10,000,  respectively.
Messrs. Severson and Weller have no benefits under this plan.

COMPENSATION COMMITTEE REPORT

The  Compensation  Committee  of  the  Company  is  composed  of  three  outside
directors,  Messrs.  George B. Callan, Jr., Bernard L. Grove, Jr. and Kenneth W.
Rice. None of the committee  members has ever been an employee of the Company or
any of its subsidiaries.  The Committee makes  recommendations to the full Board
of Directors regarding the adoption, extension, amendment and termination of the
Company's  compensation  plans. In conjunction  with the Company's  Chairman and
President/Chief  Executive Officer ("CEO"), it reviews the performance of senior
management,  recommends  annual salary  revisions and  administers the Company's
compensation plans.

The Committee is guided by the following  executive  compensation  philosophy of
the Company:

1.       Enable the  Company  to  attract  and  retain  superior  management  by
         providing a very competitive total compensation package.


                                       22

<PAGE>



2.       Align the interests of  shareholders  and management by providing stock
         options as a portion of the executive's total compensation package.

3.       Base a portion of the executive's total  compensation  package upon the
         attainment  of defined  performance  goals that  support the growth and
         appreciation of the Company's value over time.

4.       Balance  objectives of short-term  performance and long-term growth and
         appreciation  of  the  Company  through  a  combination  of  an  annual
         incentive compensation program using annual cash bonuses, and the stock
         option plan that rewards the executives  through  long-term  growth and
         appreciation of the Company.

Executive  compensation  consists  primarily of three  components:  Base Salary,
Annual Bonus, and Stock Options.

BASE SALARY

The  Company's  policy  is to set  base  salaries  for  each  executive  officer
position,  including  that of the CEO, in a range  commensurate  for  equivalent
banking  jobs  in  the  Mid-Atlantic   region.   The  Company  utilizes  outside
consultants to monitor the Company's  competitive  compensation status. The base
salaries of executive  officers are set by the Board of Directors based upon the
Compensation Committee's recommendations.

Executive officers, other than the CEO, are reviewed annually by their superiors
while  the CEO is  reviewed  by the  Compensation  Committee  and the  Executive
Committee  of the Board of  Directors of the  Company.  Salary  adjustments  for
executive   officers  are   determined  by  the  quality  of  their   individual
performances  and the relationship of their salary to their  established  salary
range.

Adjustments  to the base salary of the CEO are  governed by the same  factors as
other executive officers,  but also specifically take into account the Company's
current financial performance as measured by earnings, asset growth, and overall
financial  soundness.  The  Committee  also  considers  the CEO's  leadership in
setting high  standards for financial  performance,  motivating  his  management
colleagues, and representing the Company and its values to internal and external
communities.

ANNUAL BONUS

The Company has an Employee Performance Bonus Plan (the "Bonus Plan").

Annual  bonuses  are  accrued as of the end of the  fiscal  year and are paid in
January.  The  Company's  Bonus  Plan  has  several  components  related  to the
Company's  performance.  For 1996,  these  components  consisted  of the Company
achieving  pre-determined  return on average 


                                       23

<PAGE>



shareholders'  equity,  asset growth,  stock price appreciation and earnings per
share growth.  The CEO's annual cash bonus is strictly  related to the Company's
performance goals,  while the other named executive  officers' annual cash bonus
was related  one-third to the Company's  performance goals and two-thirds to the
Bank's  performance  goals.  Goals  for each  component  of the  Bonus  Plan are
approved by the  Compensation  Committee at the  beginning of each year.  Annual
cash bonuses tied to Bank  performance  goals and/or the  Company's  performance
goals are  evaluated  on a point  system.  Points are  awarded  for  equaling or
exceeding the predetermined base for each component. Target goals are determined
that exceed the threshold  level,  as well as maximum  goals.  For each specific
component,  if the threshold level is not achieved, no bonus is awarded for that
component. The maximum potential annual bonus award for the four named executive
officers is 25% to 37.5% of base salary, depending on the executive's position.

In 1996,  the Company  exceeded  its target  performance  goals.  Based on these
results,  the CEO was awarded a bonus of $46,930 which  constituted 24.7% of his
1996 base  salary.  This annual bonus amount was accrued as of December 31, 1996
and paid in January 1997. The Committee also  considered the  performance of the
Company's  Common Stock and the CEO's role in promoting the long-term  strategic
growth of the Company.

For the other named executive  officers,  divisional bank performance goals were
substantially met in addition to exceeding the target corporate bank performance
goals.

As of December  31,  1996,  the total  accrued  annual  bonus for the four named
executive  officers  in the Bonus Plan was  $100,757,  which was paid in January
1997.

STOCK OPTIONS

The Company maintains a 1992 Stock Option Plan currently covering 413,438 shares
of the Company's Common Stock. This Stock Option Plan provides for grants by the
Compensation  Committee of  non-qualified  stock  options,  as well as incentive
stock options, thus tying a portion of the executive's  compensation directly to
the performance of the Company's  stock price.  The exercise price of the option
to  purchase  stock  under the plan may not be less than 100% of the fair market
value  of the  Company's  stock  on the  date of  grant.  Stock  options  become
exercisable  one year from the date of the grant and  expire  five and ten years
from the date of the grant.  Stock options for the four named executive officers
typically  are granted each year for a number of shares,  the  aggregate  market
value  of  which is in a range  of 35% to 75% of the  executive  officer's  base
salary as of the date of grant.  The Stock  Option Plan also  provides  that the
Company will grant one (1) share of  restricted  stock for every five (5) shares
of Common Stock  purchased  pursuant to the exercise of options  under the plan.
The Common Stock purchased pursuant to the exercise of such options must be held
for a period of three years before the  restricted  stock granted by the Company
will fully vest to the recipient thereof. Stock options must be exercised in the
sequence in which they were granted.

                                       24

<PAGE>


In 1996,  the CEO  received  options to purchase  6,951  shares with an exercise
price of $20.50  per  share.  The CEO now owns  38,447  shares of the  Company's
Common Stock and holds options to purchase an additional 35,435 shares, of which
28,484  shares are presently  exercisable.  In 1996,  the other named  executive
officers  received  options to  purchase  an  aggregate  of 6,171  shares of the
Company's  Common  Stock  with an  exercise  price  of  $20.50  per  share.  The
Compensation Committee believes that significant equity interests in the Company
held by the  Company's  management  align  the  interests  of  shareholders  and
management.

Stock options are designed to align the  interests of  executives  with those of
the  shareholders.  This  approach is designed to  incentivize  the  creation of
shareholder  value over the long term since the full benefit of the compensation
package cannot be realized unless stock price appreciation  occurs over a number
of years.

CONCLUSION

Through  the  programs  described  above,  a moderate  portion of the  Company's
executive   compensation   is  linked   directly  to  individual  and  corporate
performance and stock price appreciation.  In the case of the CEO, approximately
19% of his total 1996  compensation,  including  the accrued  annual bonus as of
December  31,  1996,  consisted  of  performance-based  variable  elements.  The
Compensation  Committee  intends to  continue  the  policy of linking  executive
compensation to corporate  performance and returns to shareholders,  recognizing
that ups and downs of the  business  cycle  from  time to time may  result in an
imbalance for a particular period.

This report has been prepared by the Compensation Committee of the Company.

George B. Callan, Jr.,    Bernard L. Grove, Jr.,     Kenneth W. Rice.




                                       25



<PAGE>




PERFORMANCE GRAPH

Set forth  below is a line  graph  comparing  the  yearly  percentage  change in
cumulative total  shareholder  return on the Company's Common Stock from January
1,  1992 to  December  31,  1996.  The  Company's  yearly  percentage  change in
cumulative  total  shareholder  return as shown  below is compared to the NASDAQ
Market  Index and the  published  Industry  Peer Group Index  consisting  of 142
middle Atlantic banks published by Media General Financial Services.


                                   PLOT POINTS
--------------------------------------------------------------------------------


                               FCNB             Peer Group           NASDAQ
                               ----             ----------           ------

        12/31/91             $100.00             $100.00            $100.00
        12/31/92              102.50              125.23             100.98
        12/31/93              139.66              155.57             121.13
        12/31/94              189.62              147.70             127.17
        12/31/95              194.87              224.28             164.96
        12/31/96              202.86              317.65             204.98


Notes: 1. Total return assumes reinvestment of dividends.
       2. Fiscal Year Ending December 31.
       3. Return based on $100 dollars  invested on January 1, 1992 in FCNB Corp
          Common Stock, an index for NASDAQ Stock Market (U.S.  Companies),  and
          Bank peer group.

                                VOTING SECURITIES

All voting rights are vested  exclusively  in the holders of the Common Stock of
the Company.  Each  shareholder is entitled to one vote for each share of Common
Stock owned on all matters  brought to a vote of the  shareholders.  The Company
had  5,359,560  shares of Common  Stock  outstanding  on the record date for the
Annual Meeting. The Company has no other class of equity securities outstanding.

Persons and groups  beneficially  owning in excess of 5% of the Common Stock are
required to file  certain  reports  disclosing  such  ownership  pursuant to the
Securities  Exchange Act of 1934, as amended  (hereinafter  called the "Exchange
Act").  The  following  table sets  forth,  as of  February  11,  1997,  certain
information  as to the  shares of Common  Stock  beneficially  owned by  certain
officers of the  Company  who are not also  directors  of the  Company,  and all
officers and directors of the Company as a group. Management knows of no persons
who beneficially owned more than 5% of the outstanding shares of Common Stock at
February 11, 1997.



                                       26



<PAGE>


                                         Amount and Nature           Percentage
Name of Beneficial Owner           of Beneficial Ownership(1)(2)      Of Class
------------------------           -----------------------------      --------

Martin S. Lapera                            23,121(3)                    0.43%

Mark A. Severson                            10,139(4)                    0.19

Charles E. Weller                           12,070(5)                    0.22

All Officers and Directors                 613,943(6)                   11.32
as a Group (18 persons)

----------------

(1)                     Unless  otherwise   indicated,   all  shares  are  owned
                        directly by the named  individual  or by the  individual
                        indirectly through a trust,  corporation or association,
                        or by the  individual or his/her  spouse as custodian or
                        trustee  for the  shares  of minor  children.  Except as
                        otherwise indicated, the named individual exercises sole
                        voting and investment power over such shares.

(2)                     Restricted  stock  to be  received  by  officers  of the
                        Company  or  Bank is  based  on the  formula  of one (1)
                        restricted  share  for every  five (5)  shares of Common
                        Stock  purchased  pursuant  to  the  exercise  of  stock
                        options.  The restriction  period is for three (3) years
                        from the date of  receipt,  and if the shares  purchased
                        pursuant  to the  exercise  of  stock  options  are sold
                        within this time period,  a pro rata  percentage  of the
                        restricted  shares are forfeited and must be returned to
                        the Company.

(3)                     Mr.  Lapera is executive  vice  president of the Company
                        and is executive vice president, chief operating officer
                        and  chief  lending  officer  of the  Bank.  The  shares
                        attributed  to Mr.  Lapera  include  15,257 shares as to
                        which Mr. Lapera shares voting and investment power with
                        his wife.  Also,  included in the total shares owned are
                        options, currently exercisable, to purchase 7,474 shares
                        of the Company's  Common Stock. In addition,  Mr. Lapera
                        will also receive 1,496 shares of restricted  stock when
                        the underlying stock options are exercised, which shares
                        are not reflected in the table.

(4)                     Mr.  Severson is senior vice  president and treasurer of
                        the  Company  and is  senior  vice  president  and chief
                        financial  officer of the Bank. The shares attributed to
                        Mr.  Severson  include  1,578  shares  as to  which  Mr.
                        Severson  shares  voting and  investment  power with his
                        wife.  Also,  included  in the  total  shares  owned are
                        options, currently exercisable, to purchase 6,853 shares
                        of the Company's Common Stock. In addition, Mr. Severson
                        will also receive 



                                       27

<PAGE>



                        1,370  shares of  restricted  stock when the  underlying
                        stock  options  are  exercised,  which  shares  are  not
                        reflected in the table.

(5)                     Mr.  Weller is senior vice  president of the Company and
                        senior  vice  president  of the Bank,  having  served as
                        President of Elkridge Bank. The shares attributed to Mr.
                        Weller include 156 shares owned by Mr. Weller's wife, as
                        to which Mr. Weller disclaims  beneficial  ownership and
                        283 shares  held in joint  ownership  with Mr.  Weller's
                        daughter.  Also,  included in the total shares owned are
                        options,  currently  exercisable,   to  purchase  11,110
                        shares of the Company's  Common Stock. In addition,  Mr.
                        Weller will also receive 370 shares of restricted  stock
                        when the underlying  stock options are exercised,  which
                        shares are not reflected in the table.

(6)                     Includes  an  aggregate  of  62,478   shares  which  may
                        currently  be  acquired  by  certain  of such  executive
                        officers  upon  the  exercise  of  stock   options.   In
                        addition,  such  officers will also receive an aggregate
                        of 12,496 shares of restricted stock when the underlying
                        stock  options  are  exercised,  which  shares  are  not
                        reflected in the table.

Item 13.  Certain Relationships and Related Transactions.

During the past year the Bank and  Elkridge  Bank have had, and the Bank expects
to have in the future,  banking  transactions in the ordinary course of business
with  its  directors  and  officers  as  well as with  their  associates.  These
transactions have been made on substantially the same terms,  including interest
rates, collateral, and repayment terms, as those prevailing at the same time for
comparable  transactions with unaffiliated  parties. The extensions of credit to
these persons have not and do not currently involve more than the normal risk of
collectibility  or present  other  unfavorable  features.  At December 31, 1996,
loans to directors and officers and their respective associates, including loans
guaranteed  by  such  persons,   aggregated  $8.6  million,   which  represented
approximately 12.4% of consolidated shareholders' equity.

Gail T.  Guyton,  a director  of the Company and the Bank,  is  president  and a
principal  shareholder  of  Morgan-Keller,  Inc., a  construction  firm which is
serving  as  construction  manager in  connection  with the  development  of the
Company's new headquarters project. During 1996, the Company paid Morgan-Keller,
Inc. a total of $1.3  million in  construction  payments,  which  included  $1.2
million for the Company's  headquarters  project and $104,000 related to various
other construction projects.  Morgan-Keller, Inc. received approximately $66,000
in fees which are included in the above totals,  for serving as the construction
manager for the headquarter's project.

Jacob R. Ramsburg, Jr., a director of the Company and the Bank, is president and
a principal  shareholder of Frederick  Underwriters,  Inc., a general  insurance
agency which received  $104,000


                                       28

<PAGE>


in premiums  during 1996 in connection  with the  Company's  purchase of certain
types of insurance coverage.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         (a)      Documents filed as a part of the Report:

                  1.       The  following   consolidated   financial  statements
                           included  in the 1996 Annual  Report to  Shareholders
                           are incorporated  herein by reference under Item 8 of
                           this Report:

                                                                  Page Number in
                                                                  Annual Report
                                                                  -------------

                           Consolidated Balance Sheets                 25

                           Consolidated Statements of Income           26

                           Consolidated Statements of Changes
                           in Shareholders' Equity                     27

                           Consolidated Statements of Cash
                           Flows                                       28

                           Notes to Consolidated Financial
                           Statements                                  30-43

                           Report of Independent Auditors              43


                  2.       All  schedules  for  which  provision  is made in the
                           accounting regulations of the Securities and Exchange
                           Commission  are not  applicable  or are not  required
                           under the related instruction and therefore have been
                           omitted.

                  3.       Exhibits required by Item 601 of Regulation S-K:



                                       29

<PAGE>


                  Exhibit No.           Item
                  -----------           ----

                  2-A                   A  copy  of  the  Laurel  Bancorp,  Inc.
                                        Agreement  and Plan of  Merger is hereby
                                        incorporated  by  reference to Exhibit 2
                                        to the  Registration  Statement  on Form
                                        S-4 of the Registrant  filed on July 31,
                                        1995.

                  2-B                   A   copy   of  the   Harbor   Investment
                                        Corporation Agreement and Plan of Merger
                                        is hereby  incorporated  by reference to
                                        Exhibit  99(a) to the Current  Report on
                                        Form   8-K  of  the   Registrant   dated
                                        December  22,  1995 and filed on January
                                        10, 1996.

                  3-A                   A copy of the Articles of Restatement of
                                        the  Articles of  Incorporation  of FCNB
                                        Corp is hereby incorporated by reference
                                        to Exhibit  3-A of the Annual  Report on
                                        Form 10-K for 1994 of the Registrant.

                  3-B                   A copy of the  amended  By-Laws  of FCNB
                                        Corp is hereby incorporated by reference
                                        to Exhibit  3-B of the Annual  Report on
                                        Form 10-K for 1993 of the Registrant.

                  10-D                  A  copy  of the  Executive  Compensation
                                        Plan  for  Directors  of  FCNB  Bank  is
                                        hereby   incorporated  by  reference  to
                                        Exhibit   10-D   to   the   Registration
                                        Statement   on  Form   S-4   (File   No.
                                        33-09406) of the Registrant.

                  10-E                  A  copy  of the  Executive  Compensation
                                        Plan for  Management  Personnel  of FCNB
                                        Bank is hereby incorporated by reference
                                        to  Exhibit  10-E  to  the  Registration
                                        Statement  on Form  S-4  (File  No.  33-
                                        09406) of the Registrant.

                  10-F                  A copy of the Employee  Incentive  Bonus
                                        Plan of FCNB Bank is hereby incorporated
                                        by  reference  to  Exhibit  10-F  of the
                                        Annual  Report  on Form 10-K for 1991 of
                                        the Registrant.


                                       30

<PAGE>



                  Exhibit No.           Item
                  -----------           ----

                  10-G                  A  copy  of the  Compensation  Agreement
                                        with    Clyde   C.    Crum   is   hereby
                                        incorporated  by  reference  to  Exhibit
                                        10-G of the  Annual  Report on Form 10-K
                                        for 1994 of the Registrant.

                  11                    Statement  Regarding  Computation of Per
                                        Share Earnings, filed herewith.

                  12                    Statement   Regarding   Computation   of
                                        Ratios, filed herewith.

                  13                    The  Company's  1996  Annual  Report  to
                                        Shareholders, filed herewith.

                  21                    A list of the  subsidiaries of FCNB Corp
                                        is hereby  incorporated  by reference to
                                        the 1996 Annual  Report to  Shareholders
                                        at page 45.

                  23                    Consent of Independent Auditor

                  27                    Financial Data Schedule

                  99-A                  A copy of the Dividend  Reinvestment and
                                        Stock  Purchase  Plan  of  FCNB  Corp is
                                        hereby   incorporated  by  reference  to
                                        Registration Statement on Form S-3 (File
                                        No. 33-55040) of Registrant.

                  99-B                  A copy of the FCNB  Corp  1992  Employee
                                        Stock Option Plan is hereby incorporated
                                        by reference to  Registration  Statement
                                        on  Form  S-8  (File  No.  33-63092)  of
                                        Registrant.

                  99-C                  A  copy  of  the  Independent  Auditor's
                                        Report from Anderson  Associates,  filed
                                        herewith.

(b)      There  were no  Reports  on Form 8-K filed  during  the  quarter  ended
         December 31, 1996.


                                       31