U. S. Securities and Exchange Commission
                             Washington, D. C. 20549

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15 (d)
                     of The Securities Exchange Act of 1934

                  For the Quarterly period Ended June 30, 1999

                        Commission file Number 000-24933

                             Heritage Bancorp, Inc.
             (Exact Name of Registrant As Specified In Its Charter)


           VIRGINIA                                              54-1914902
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation of Organization)                               Identification No.)

           1313 Dolley Madison Blvd., McLean, Va.             22101
          (Address of Principal Executive Offices)         (Zip Code)

                          REGISTRANT'S TELEPHONE NUMBER
                                  703-356-6060


                                       N/A

                  (Former Name, Former Address and Former Year,
                          If Changed Since Last Report)



              INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS
        FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF
                      EXCHANGE ACT DURING THE PRECEDING 12
             MONTHS (OF 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___


COMMON SHARES OUTSTANDING AS OF July 26,1999: 2,294,617


                                       38
<PAGE>

                                      INDEX
HERITAGE BANCORP,INC.

Part 1 Financial Information                                             Page
                                                                         ----

       Item 1 Financial Statements
              Balance Sheets
                June 30, 1999 and December 31, 1998                        3

              Statement of income
                Three months ended June 30, 1999 and 1998                  4

              Statement of income
                  Six months ended June 30, 1999 and 1998                  5

              Statement of Stockholders Equity
                Three months ended March 31, 1999 and 1998                 6

              Statement of Cash Flows
                Three months ended March 31, 1999 and 1998                 7

                Notes to Financial Statements                              8

     Item 2. Managements Discussion and Analysis of
                Financial Condition and Results of operation               9
                 and Selected Financial Data

Part II. Other Information:                                               19

         Item 1. Legal Proceedings
         Item 2. Changes in Securities and Use of Proceeds
         Item 3. Defaults Upon /Senior Securities
         Item 4. Submission of Matters to a Vote of Security Holders
         Item 5. Other Information
         Item 6. Exhibits and Reports on Form 8-K



                                       2
<PAGE>
<TABLE>

ITEM I.

Part I. Financial Information


                                          HERITAGE BANCORP,INC. AND SUBSIDIARY
                                          CONSOLIDATED STATEMENTS OF CONDITION
                                               (in thousands, unaudited)

<CAPTION>

ASSETS                                                                JUNE 30,1999                   DECEMBER 31, 1998
                                                                      ------------                   -----------------
<S>                                                                      <C>                                 <C>
Cash and Due from Banks                                                  $   1,955                           $   5,825
Federal Funds Sold                                                           3,900                               8,550
   Total Cash and Due From Banks                                             5,855                              14,375
Securities available for sale                                               22,991                              19,824
Loans, Net                                                                  29,534                              29,181
Premises and Equipment, Net                                                    839                                 376
Other Real Estate Owned                                                        263                                 263
Accrued Interest and other Assets                                              871                              $  757
                                                                         ---------                          ----------

     TOTAL ASSETS                                                        $  60,353                          $   64,776
                                                                         =========                          ==========

LIABILITIES AND STOCKHOLDERS
EQUITY
Liabilities
Noninterest Bearing Deposits                                              $ 11,376                         $    17,386
Interest bearing deposits                                                   37,496                              36,056
                                                                         ---------                          ----------
   Total Deposits                                                           48,872                              53,442
Security Sold Under Agreement to                                             2,595                               2,287
Repurchase
Other liabilities                                                               80                                 119
                                                                         ---------                          ----------
   Total Liabilities                                                        51,547                              55,848
                                                                         ---------                          ----------

Stockholders' Equity
Common Stock                                                                 2,295                               2,295
Surplus                                                                      6,530                               6,530
Undivided Profits                                                              220                                  28
Accumulated other Comprehensive
 Income (Loss)                                                               (239)                                  75
                                                                         ---------                          ----------
   Total Stockholders' Equity                                                8,806                               8,928
                                                                         ---------                          ----------

     TOTAL LIABILITIES AND                                                $ 60,353                            $ 64,776
                                                                         =========                          ==========
     STOCKHOLDERS' EQUITY
</TABLE>

Notes to financial statements are an integral part of these statements.




                                                           3
<PAGE>
<TABLE>

                              HERITAGE BANCORP,INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF OPERATION
                               Three Months Ending June 30, 1999
                                   (in thousands, unaudited)
<CAPTION>

                                                                Three Months Ended
                                                    ------------------------------------------
INTEREST INCOME                                     June 30, 1999                June 30, 1998
                                                    -------------                -------------
<S>                                                  <C>                           <C>
Loans                                                $       692                   $       577
Securities                                                   356                           259
Federal Funds Sold                                            64                            81
                                                     -----------                   -----------
  Total interest income                                    1,112                           917

INTEREST EXPENSE

Interest checking deposit                                     42                            33
Other time deposit                                           235                           222
Cert.of deposit $100,000 or more                              66                            45
Repurchase agreements                                         23                             4
                                                     -----------                   -----------
   Total interest expense                                    366                           304

Net interest income                                          746                           613

Provision for loan losses                                      6                             2
                                                     -----------                   -----------

Net interest income after
provision for loan losses                                    740                           611

OTHER INCOME

Service charges on deposit accounts 28                        28
Other operating income, net                                    9                             7
Gain or loss on sale of securities                             1                            (1)
                                                     -----------                   -----------
   Total other income                                         38                            34

OTHER EXPENSES

Salaries and employee benefits                               354                           261
Occupancy expense                                             85                            73
Equipment expense                                             21                            12
Other operating expenses                                     289                           197
                                                     -----------                   -----------
   Total other expenses                                      749                           543

Income before income taxes                                    29                           102

Income tax                                                    14                             2
                                                     -----------                   -----------

NET INCOME                                           $        15                   $       100
                                                     ===========                   ===========

Basic income per share                               $      0.01                   $      0.05
                                                     ===========                   ===========

Diluted income per share                             $      0.01                   $      0.05
                                                     ===========                   ===========

Weighted avg shares outstanding                        2,294,617                     1,879,195
                                                     ===========                   ===========
</TABLE>

Notes to financial statements are an integral part of these statements


                                               4
<PAGE>
<TABLE>
                              HERITAGE BANCORP,INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF OPERATION
                                Six Months Ending June 30, 1999
                                    (in Thousands,unaudited)
<CAPTION>
                                                                 Six Months Ended
                                                    ------------------------------------------

INTEREST INCOME                                     June 30, 1999                June 30, 1998
                                                    -------------                -------------
<S>                                                  <C>                           <C>

Loans                                                $     1,391                   $     1,130
Securities                                                   675                           486
Federal Funds Sold                                           145                           138
                                                     -----------                   -----------
  Total interest income                              $     2,211                   $     1,754

INTEREST EXPENSE

Interest checking deposit                                     78                            64
Other time deposit                                           476                           420
Cert.of deposit $100,000 or more                             137                            90
Repurchase agreements                                         35                             7
                                                     -----------                   -----------
   Total interest expense                                    726                           581

Net interest income                                        1,485                         1,173

Provision for loan losses                                     13                             4
                                                     -----------                   -----------

Net interest income after
provision for loan losses                                  1,472                         1,169

OTHER INCOME

Service charges on deposit accounts                           54                            53
Other operating income, net                                   17                            14
Gain or loss on sale of securities                             1                            (1)
                                                     -----------                   -----------
   Total other income                                         72                            66

OTHER EXPENSES

Salaries and employee benefits                               649                           525
Occupancy expense                                            162                           147
Equipment expense                                             35                            19
Other operating expenses                                     473                           341
                                                     -----------                   -----------
   Total other expenses                                    1,319                         1,032

Income before income taxes                                   225                           203

Income tax                                                    33                             2
                                                     -----------                   -----------

NET INCOME                                           $       192                   $       201
                                                     ===========                   ===========

Basic income per share                               $      0.08                   $      0.12
                                                     ===========                   ===========

Diluted income per share                             $      0.08                   $      0.12
                                                     ===========                   ===========

Weighted avg shares outstanding                        2,294,617                     1,685,353
                                                     ===========                   ===========
</TABLE>

Notes to financial statements are an integral part of these statements



                                               5
<PAGE>
<TABLE>
                                                HERITAGE BANCORP,INC. AND SUBSIDIARY
                                     Consolidated Statements of Change in Stockholder's Equity
                                        For Six Months Ended June 30, 1999 and June 30 1998
                                                  (Dollars in Thousands,unaudited)
<CAPTION>
                                                                                                Accumulated
                                                                                                      other
                                                                    Comprehensive   Retained  comprehensive                  Capital
                                                          Total            income   earnings         income Common stock     surplus
                                                          -----            ------   --------         ------ ------------     -------

<S>                                                     <C>                <C>       <C>              <C>        <C>         <C>
Balances January 1,1998                                 $ 4,731                      $ (104)          $  18      $ 1,490     $ 3,327
Comprehensive income
  Net income                                                201            $  201        201              -            -           -
  Other comprehensive income net of tax

  Unrealized holding gain(loss) arising during period                         (9)          -                           -           -
  net of tax of $(8)
  Less reclassification adjustment                                              1          -                           -           -
  Other comprehensive income, net of tax                    (8)               (8)          -            (8)            -           -
                                                            ---           -------
  Total comprehensive income                                              $   193          -
                                                                          =======                                      -

Issuance of common Stock                                $ 4,107                                                   $  803    $  3,304
                                                        -------                                                   ------    --------
Balances June 30, 1998                                   $9,031                    $      97          $  10      $ 2,293     $ 6,631
                                                         ======                    =========          =====      =======     =======







Balances January 1, 1999                                $ 8,928                       $   28          $  75      $ 2,295     $ 6,530
Comprehensive income
  Net income                                                192             $ 192        192              -            -           -
  Other comprehensive income net of tax

  Unrealized holding gain(loss) arising during period                       (315)          -                           -           -
  net of tax of $(124)
  Less reclassification adjustment                                              1          -                           -           -
                                                                             ----
  Other comprehensive income, net of tax                  (314)             (314)          -          (314)            -           -
  Total comprehensive income                                        $       (122)
                                                         ------     =============       ----           ----        -----

balances June 30, 1999                                  $ 8,806                         $220       $  (239)      $ 2,295     $ 6,530
                                                        =======                         ====       ========      =======     =======

</TABLE>



                                                         6

<PAGE>
<TABLE>

HERITAGE BANCORP, INC. AND
SUBSIDIARY

Consolidated Statements of Cash Flows
(In Thousands of Dollars unaudited)
<CAPTION>
                                                                           Six months Ended
                                                                   June 30,1999        June 30,1998
                                                                   ------------        ------------
<S>                                                                  <C>               <C>
Cash Flows From Operating Activities
 Net income                                                          $   192           $     201
 Adjustments to reconcile net income(loss) to net
   cash provided by (used in) operating activities
     Provision for loan losses                                            13                   4
     Depreciation and amortization                                        33                  29
     Gain on sale of available for sale investments                        1                  (1)
     Amortization of investment security
     premiums, net of discount                                            13                  15
    (Increase)decrease in accrued interest and
      other assets                                                        36                (417)
    (Increase)in accrued interest and other
     liabilities                                                         (26)                ( 1)
                                                                     -------             -------
      Net cash provided by(used in) operating activities             $   262               $(170)
                                                                     -------             -------


Cash Flows From Investing Activities
  Maturities of securities available-for-sale                        $ 7,895              $4,000
  Purchases of securities available-for-sale                        ( 11,552)            (11,803)
  Proceeds from sale of securities available for sale                                        499
 (Increase)in loans                                                     (366)             (2,580)
  Purchase of premises and equipment                                    (496)                 (4)
                                                                     -------             -------
     Net cash (used in) investing activities                        $( 4,519)            $(9,888)
                                                                     -------             -------


Cash Flows From Financing Activities
  (Decrease) in non interest-bearing deposits                        $(6,178)           $ (  183)
  Increase in certif of deposits and savings                           1,607               3,181
  Increase in securities sold under repurchase
  agreement.                                                             308                 530
  Issuance of common stock                                                 0               4,107
                                                                     -------             -------
      Net cash provided by (used in) financing activities            $(4,263)            $ 7,635
                                                                     -------             -------

     Net change in cash and cash equivalents                          (8,520)            $(2,423)

Cash and cash equivalents, beginning of year                          14,375               9,587
                                                                     -------             -------

Cash and cash equivalents, end of period                             $ 5,855             $ 7,164
                                                                     =======             =======
</TABLE>



                                        7
<PAGE>


HERITAGE BANCORP,INC. AND SUBSIDIARY
NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1)     Basis of Presentation

        The consolidated financial statements included herein have been prepared
by the company  without  audit.  In the  opinion of  management,  the  quarterly
unaudited  financial  statements  include all adjustments,  consisting of normal
recurring accruals,  necessary for a fair presentation of the financial position
and results of operations at and for the periods presented. The Company believes
that  the  disclosures  are  adequate  to make  the  information  presented  not
misleading,  however,  the results for the periods presented are not necessarily
indicative  of results to be  expected  for the entire  year.  The  consolidated
statements  include the accounts of Heritage  Bancorp Inc.  and  subsidiary  The
Heritage Bank. All significant  intercompany balances and transactions have been
eliminated.

(2)     Accounting Policies

        The interim financial information should be read in conjunction with the
Company's  1998 Annual  Report on Form  10-KSB.  Management  is required to make
estimates  and  assumptions  that  affect  amounts  reported  in  the  financial
statements. Actual results could differ significantly from estimates.

(3)     Earnings Per Share

       The  following  shows the  weighted  average  number  of  shares  used in
computing earnings per share and the effect on weighted average number of shares
of diluted potential common stock. Potential dilutive common stock had no effect
on income available to common shareholders.
<TABLE>
<CAPTION>
                                                        June  30, 1999             June 30,1998
                                                        ----  --------             ------------

                                                         Per Share                            Per Share
                                          Shares           Amount              Shares           Amount
                                          ------           ------              ------           ------
             <S>                         <C>            <C>                   <C>            <C>
             Basic earnings
               per share                 2,294,617      $         .08         1,685,353      $         .12
                                                        =============                        =============
             Effect of dilutive
               securities:
                 Stock options              54,050                               37,375

             Diluted earnings
               per share                 2,348,667      $         .08         1,722,728      $         .12
                                      ============      =============      ============      =============
</TABLE>

(4) Holding Company Formation

             On  October  1,  1998,  the  Heritage  Bank  became a  wholly-owned
subsidiary  of Heritage  Bancorp,  Inc., a newly formed stock  holding  company,
pursuant  to an  agreement  and plan of  reorganization  approved  by the Bank's
shareholders on August 26, 1998. Upon completion of the reorganization,  holders
of the Bank's common stock became holders of Heritage Bancorp, Inc. common stock
in a share for share exchange. The common stock of Heritage Bancorp, Inc. trades
on the Nasdaq SmallCap Market under the symbol "HBVA."


                                       8
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations

General

         The  following  discussion  and  analysis of  financial  condition  and
results of operations,  unless otherwise disclosed,  presented in this quarterly
report on Form 10-QSB  represents  the activities of the Company for the quarter
ended  June 30,  1999  and  should  be read in  conjunction  with the  financial
statements of the Company included in this Form 10-QSB.

         Heritage Bancorp, Inc. (the "Company"), a Virginia corporation,  is the
holding  company  for The  Heritage  Bank (the  "Bank"),  a  Virginia  chartered
commercial  bank.  On October 1, 1998,  the Company  acquired all of the capital
stock of the Bank  and  shareholders  of the  Bank  became  shareholders  of the
Company  in a share  for share  exchange  pursuant  to a plan of  reorganization
approved by the Bank's  shareholders on August 26, 1998, whereby the Bank became
the wholly-owned subsidiary of the Company (the "Reorganization"). The Company's
sole  business  activity is ownership of the Bank.  The  Company's  common stock
trades on the Nasdaq SmallCap Market under the symbol "HBVA".

         The Bank is the only independent financial institution headquartered in
McLean,  Virginia.  Established  in 1987,  the Bank  operated as a  wholly-owned
subsidiary of Heritage Bankshares, Inc. (formerly Independent Banks of Virginia,
Inc.)  until  1992  when  it  became  an   independent   bank.  The  Bank  is  a
well-capitalized,   profitable  community  bank  dedicated  to  financing  small
business  and consumer  needs in its market area.  The Bank also is committed to
providing personalized  "hometown" quality service to its customers by tailoring
its  products  and services to appeal to its local  market.  The Bank  currently
operates  two  full-service  offices and engages in a broad range of lending and
deposit services aimed at individual and commercial customers in the McLean area
of Fairfax County, Virginia and the Sterling area of Loudoun County.

         The  business of the Bank  consists  of  attracting  deposits  from the
general  public and using these funds to originate  various  types of individual
and  commercial  loans  primarily in the McLean and Sterling  areas.  The Bank's
commercial activities include providing checking accounts, money market accounts
and certificates of deposit to small and medium sized businesses.  The Bank also
provides  credit  services,  such as lines of credit,  term loans,  construction
loans,  and letters of credit,  as well as real estate  loans and other forms of
collateralized  financing.  The Bank's products include checking  accounts,  NOW
accounts,  savings  accounts,  certificates  of deposit,  installment  accounts,
construction and other personal loans,  home improvement  loans,  automobile and
other consumer financing.

         On May 18, 1998, the Bank closed a secondary offering of 805,000 shares
of its common stock,  par value $1.00 per share (the  "Offering"),  at $5.50 per
share,  raising  $4.4 million in gross  proceeds.  After  offering  expenses and
underwriting  commission , the Bank received  $4,012,204 in new capital from the
offering.


                                       9
<PAGE>
<TABLE>
         The selected  financial  ratios and other data of the Company set forth
below is derived  in part from,  and  should be read in  conjunction  with,  the
Unaudited  Financial  Statements  of the  Company  and Notes  thereto  presented
elsewhere in this report.
                                              SELECTED FINANCIAL DATA

<CAPTION>

                                                                     For the Six months Ended         For the Six Months
                                                                          June 30, 1999               Ended June 30, 1998
                                                                          -------------               -------------------
                                                                                    (Dollars in thousands)
                                                                                          (Unaudited)

Summary of operating results:
<S>                                                                      <C>                               <C>
Total interest income...............................                     $       2,211                     $   1,754
Total interest expense..............................                               726                           581
                                                                                 -----                          ----
Net interest income.................................                          $  1,485                      $  1,173
Provision for loan losses...........................                                13                             4
                                                                                  ----                         -----
Net interest income after provision for
       loan losses..................................                          $  1,472                      $  1,169
Other income........................................                                72                            66
Other expenses......................................                             1,319                         1,032
                                                                                ------                       -------
Income before taxes.................................                               225                           203
Income tax expense(1)...............................                                33                             2
Net income..........................................                              $192                          $201
                                                                                  ====                          ====

Per share:
Basic earnings per share............................                        $     0.08                    $     0.12

Diluted earnings per share..........................                              0.08                          0.12
Cash dividend declared..............................                                 0                             0
Book value at period end............................                              3.84                          3.94
Common shares outstanding...........................                         2,294,617                     2,292,917

Balance sheet data (at period end):                                      June 30, 1999             December 31, 1998
                                                                         -------------             -----------------

Loans, net of unearned interest.....................                         $  29,965                     $  29,610
Allowance for loan loss.............................                               431                           429
Total assets........................................                            60,353                        64,776
Total deposits......................................                            48,872                        53,442
Total stockholders' equity..........................                             8,806                         8,928

Performance and asset quality ratios:
Return on average total assets (3)..................                             0.63%                         0.26%
Return on average stockholders' equity...........(3)                              4.27                          1.79
Average stockholders' equity to average total
assets..............................................                             14.84                         14.47
Non-accrual and past due loans to total loans.......                              2.67                          1.35
Allowance for loan losses to total loans............                              1.44                          1.45
Net yield...........................................                              3.88                          3.87
Net interest margin(2)..............................                              5.18                          5.09
------------------
</TABLE>


(1)      At December 31, 1998, the Company had available  approximately $129,000
         of an operating loss carryforward  which could be offset against future
         income.
(2)      Net interest  margin is  calculated as net interest  income  divided by
         average  earning  assets and  represents the Company's net yield on its
         earning assets.
(3)      Annualized for the six months ended June 30, 1999.




                                       10
<PAGE>

Comparison of Financial Condition at June 30, 1999 and December 31, 1998

     Total  assets  decreased  $4.4  million,  or 6.8%,  from  $64.8  million at
December 31, 1998 to $60.4 million at June 30, 1999. This decrease in assets was
due to the withdrawal of funds from attorneys escrow  accounts.  On December 28,
1998 the Bank had $8.0 million dollars  deposited into attorneys escrow account.
These funds were  withdrawn  the first week of January  1999.  In addition,  net
loans increased by $0.4 million.  Federal funds sold decreased $4.7 million from
$8.6  million  at  December  31,  1998 to $3.9  million at June 30,  1999.  This
decrease  primarily is due to the use of these funds to purchase U. S.  Agencies
Bonds in order to receive a higher yield.

         Securities  available for sale increased $3.2 million,  or 15.9%,  from
$19.8  million at  December  31,  1998 to $23.0  million at June 30,  1999.  The
increase was primarily  caused by the investment of funds  transferred  from fed
funds sold into the bond portfolio.

         Net loans  increased  $353  thousand,  or 1.2%,  from $29.2  million at
December 31, 1998 to $29.5 million at June 30, 1999. This increase was primarily
due to a increase in loan demand due to marketing efforts.

         Total deposits  decreased $4.6 million,  or 8.6%, from $53.4 million at
December 31, 1998 to $48.9 million at June 30, 1999. This decrease was caused by
a decrease in attorney's  escrow  account  balances.  Of these  deposits,  $40.0
million were core deposits which the Bank uses to originate loans.

         Repurchase agreements at June 30, 1999 totaled $2.6 million as compared
to $2.3 million at December 31, 1998. The Bank utilizes repurchase agreements to
fund customer sweep accounts.



                                       11
<PAGE>


Comparison of Operating Results for the Three Months Ended June 30,
1999 and 1998

         Net income.  The Company had net income for the three months ended June
30, 1999 of $15 000, or $0.01 basic and diluted earnings per share,  compared to
net income of $100,000,  or $0.05 basic and diluted  earnings per share, for the
three months ended June 30,  1998.  This $85,000  decrease in net income for the
three  months  ended June  30,1999  compared  to the same period in 1998 was due
primarily  to an  increase  of $43,000 in  occupancy  expense  connected  to the
opening of the Sterling Branch and some new office space in the main office, and
an increase in personnel expense of $93,000. Personnel expense increased because
of additional  salaries of $41,000 for the Sterling Branch and incentive bonuses
paid to employees of $52,000. Consulting and legal expenses in connection with a
potential  branch site and expansion of the main office totaled  $45,000.  Other
expenses were affected by $40,000 of non-loan charge-offs, of which a large part
was the  payment due under the terms of a lawsuit  settled in March 1999.  These
expenses were partially offset by an increase of $133,000 in net interest income
due primarily to the growth in both the loan and security portfolio.

Interest Income.  Total interest income for the three months ended June 30, 1999
was $1.1  million as compared to $917,000  for the three  months  ended June 30,
1998,  representing  an increase of $195,000,  or 21.3%.  This  increase was due
primarily  to the  increase in the bond  portfolio  and interest on loans due to
increased marketing efforts.

         Interest  Expense.  Total interest expense  increased from $304,000 for
the three months ended June 30, 1998 to $366,000 for the three months ended June
30, 1999,  representing an increase of $62,000,  or 20.4%. This increase was due
primarily to the increase in interest bearing deposits from June 30, 1998.

         Net Interest  Income.  Net interest  income is the  difference  between
interest earned on loans, investments, securities and short term investments and
interest  paid on  deposits.  Factors  affecting  net  interest  income  include
interest rates earned on loans and investments  and those paid on deposits,  the
mix and volume of earning assets and interest bearing  liabilities and the level
of  non-earning  assets  and  non-interest  bearing   liabilities.   The  Bank's
management  seeks to maximize net interest  income by managing the balance sheet
and  determining  the optimal  product mix with  respect to yields on assets and
costs of funds in light of projected economic  conditions,  while maintaining an
acceptable level of risk.

         Net interest  income  increased in the three months ended June 30, 1999
by $133,000, or 21.7%, from $613,000 for the three months ended June 30, 1998 to
$746,000  for the three  months  ended  June 30,  1999.  This  increase  was due
primarily to the increase in the bond portfolio and interest on loans.

         Provision for Loan Losses.  The provision for loan losses for the three
months ended June 30, 1999 was $6,000, as compared to $2,000 for the same period
in the prior year,  representing a 200% increase. The level of the allowance for
loan losses is based upon management's  ongoing review of the loan portfolio and
includes  the  present  and  prospective   financial   condition  of  borrowers,
consideration of actual loan loss experience and projected  economic  conditions
in general and for the Bank's service areas in particular.  Management  believes
that the  provision  for loan  losses  and the  allowance  for loan  losses  are
reasonable  and  adequate  to cover any known  losses and any losses  reasonably
expected in the existing loan portfolio.  While management estimates loan losses
using  the  best  available  information,  such  as  independent  appraisals  on
collateral,  no assurance  can be given that future  additions to the  allowance
will not be  necessary  based on  changes in  economic  and real  estate  market
conditions,   further  information   obtained  regarding  known  problem  loans,
identification of




                                       12
<PAGE>


additional problem loans, regulatory examinations and other factors, both within
and outside of management's control.

          Other income. Total other income consists primarily of service charges
and fees associated with the Bank's checking and savings  accounts.  Total other
income increased $4,000 from $34,000 for the three months ended June 30, 1998 to
$38,000 for the three months ended June 30, 1999. This was caused by an increase
in service charges on deposit accounts.

          Other expense.  Other expense consists primarily of operating expenses
for compensation and related benefits, occupancy, federal insurance premiums and
operating assessments and data processing charges. Total other expense increased
by $206,000, or 37.9%, from $543,000 for the three months ended June 30, 1998 to
$749,000  for the three  months  ended  June 30,  1999.  This  increase  was due
primarily to an increase of $93,000 in salaries and employees benefits caused by
$41,000 in  additional  salaries  for the  Sterling  Branch and $52,000  paid to
employees in incentive  bonuses.  Also  occupancy  expense  increased by $49,000
caused by the opening of the Loudoun Branch and the addition of new space in the
main  office.  Other  expenses  increased  by  $56,000  caused by legal fees and
consultant  fees in connection  with a possible  branch location in Great Falls,
Va. Other  expenses  were also affected by $40,000 of non-loan  charge-offs,  of
which a large part was the payment  due under the terms of a lawsuit  settled in
March 1999.

          Income Tax  Expense.  The Company had a tax expense of $14,000 for the
three months  ended June 30, 1999 and $2,000 for June 30, 1998.  At December 31,
1998, the Company had operating loss  carryforwards  of  approximately  $129,000
that may be offset against future taxable  income.  The Company has used its net
operating loss carryforward in its entirety by June 30, 1999.



                                       13
<PAGE>

Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998

          Net income.  The Company had net income for the six months  ended June
30, 1999 of $192,000, or $0.08 basic and diluted earnings per share, compared to
net income of $201,000,  or $0.12 basic and diluted  earnings per share, for the
six months ended June 30,  1998.  This $9,000  decrease was due  primarily to an
increase of $124,000 in salaries and benefits  caused by additional  salaries of
$41,000 for the  Sterling  Branch and  incentive  bonuses  paid to  employees of
$52,000.  Interest expense increased $145,000,  also occupancy expense increased
by $43,000  caused by the opening of the Loudoun  County Branch and the addition
of new space in the main office.  Other expenses increased by $105,000 caused by
legal fees and consultant  fees in connection with a possible branch location in
Great Falls,  Va. and  non-loan  charge-offs  of $40,000.  These  expenses  were
partially offset by a increase of $457,000 in total interest income.

          Interest  Income.  Total interest income for the six months ended June
30, 1999 was $2.2  million as compared to $1.8 million for six months ended June
30, 1998,  representing an increase of $457,000, or 26.1%. This increase was due
primarily to the growth in the bond portfolio and interest on loans.

          Interest  Expense.  Total interest expense increased from $581,000 for
the six months ended June 30, 1998 to $726,000 for the six months ended June 30,
1999,  representing  an increase of $145,000,  or 25.0%.  This  increase was due
primarily to the growth in interest  bearing deposits from June 30, 1998 to June
30, 1999.

          Net Interest  Income.  Net interest  income is the difference  between
interest earned on loans, investments, securities and short term investments and
interest  paid on  deposits.  Factors  affecting  net  interest  income  include
interest rates earned on loans and investments  and those paid on deposits,  the
mix and volume of earning assets and interest bearing  liabilities and the level
or  non-earning  assets  and  non-interest  bearing   liabilities.   The  Bank's
management  seeks to maximize net interest  income by managing the balance sheet
and  determining  the optimal  product mix with  respect to yields on assets and
costs of funds in light of projected economic  conditions,  while maintaining an
acceptable level of risk.

          Net interest income increased in the six months ended June 30, 1999 by
$312,000,  or 26.6%,  from  $1,173,000 for the six months ended June 30, 1998 to
$1,485,000 for the six months ended June 30, 1999.  This increase was due to the
growth in the security portfolio and loan portfolios, which was partially offset
by the increase in interest bearing deposits used to fund the growth.

          Provision  for Loan Losses.  The provision for loan losses for the six
months  ended June 30,  1999 was  $13,000,  as  compared  to $4,000 for the same
period in the  prior  year,  representing  a $9,000  increase.  The level of the
allowance for loan losses is based upon management's  ongoing review of the loan
portfolio  and  includes  the present and  prospective  financial  condition  of
borrowers,  consideration of actual loan loss experience and projected  economic
conditions in general and for the Bank's service areas in particular. Management
believes  that the  provision  for loan losses and the allowance for loan losses
are reasonable and adequate to cover any known losses and any losses  reasonably
expected in the existing loan portfolio.  While management estimates loan losses
using  the  best  available  information,  such  as  independent  appraisals  on
collateral,  no assurance  can be given that future  additions to the  allowance
will not be  necessary  based on  changes in  economic  and real  estate  market
conditions,   further  information   obtained  regarding  known  problem  loans,
identification of additional  problem loans,  regulatory  examinations and other
factors, both within and outside of management's control.



                                       14
<PAGE>

          Other income. Total other income consists primarily of service charges
and fees associated with the Bank's checking and savings  accounts.  Total other
income  increased  $6,000 from $66,000 for the six months ended June 30, 1998 to
$72,000 for the six months ended June 30, 1999.  This  increase was caused by an
increase in other service charges.

          Other expense.  Other expense consists primarily of operating expenses
for compensation and related benefits, occupancy, federal insurance premiums and
operating assessments and data processing charges. Total other expense increased
by $287,000, or 27.8%, from $1,032,000 for the six months ended June 30, 1998 to
$1,319,000  for the six  months  ended  June 30,  1999.  This  increase  was due
primarily to an increase of $124,000 in salaries and employees  benefits  caused
in part by $41,000 in  additional  salaries for the Sterling  Branch and $52,000
paid to employees in incentive  bonuses.  Also  occupancy  expense  increased by
$49,000  caused by the  opening of the  Loudoun  Branch and the  addition of new
space in the main office.  Other expenses  increased by $105,000 caused by legal
fees and consultant  fees in connection with a possible branch location in Great
Falls, Va. Other expenses were also affected by $40,000 of non-loan charge-offs,
of which a large part was the payment  due under the terms of a lawsuit  settled
in March 1999.

          Income Tax  Expense.  The Company had a tax expense of $33,000 for the
six months ended June 30, 1999 and $2,000 expense for June 30, 1998. At December
31, 1998, the Company had operating loss carryforwards of approximately $129,000
that may be offset against future taxable  income.  The Company had used its net
operating loss carryforward in its entirety by June 30, 1999.

Liquidity and Capital Resources

         Liquidity  is a measure of the Bank's  ability to  generate  sufficient
cash to meet present and future financial obligations in a timely manner through
either the sale or maturity of existing  assets or the acquisition of additional
funds through liability  management.  These obligations include the credit needs
of customers,  funding deposit withdrawals, and the day-to-day operations of the
Bank. Liquid assets include cash,  interest-bearing deposits with banks, federal
funds  sold,  and  certain  investment  securities.  As a result  of the  Bank's
management  of liquid  assets and the  ability  to  generate  liquidity  through
liability funding, management believes that the Bank maintains overall liquidity
sufficient  to satisfy  its  depositors'  requirements  and meet its  customers'
credit needs. The levels of the Bank's liquid assets are dependent on the Bank's
operating,   financing  and  investing   activities  during  any  given  period.
Management believes it will have adequate resources to fund all commitments on a
short-term and long-term basis in accordance with its business strategy.

         As of June 30, 1999, cash,  federal funds sold, and  available-for-sale
securities  represented  55.96% of deposits and other  liabilities,  compared to
61.24% at December 31, 1998.

         Management  continuously  reviews the  capital  position of the Bank to
insure  compliance with minimum  regulatory  requirements,  as well as exploring
ways to increase capital either by retained earnings or other means.

         Banks are required to maintain minimum risk-based capital ratios. These
ratios  compare  capital,  as defined by the risk-based  regulations,  to assets
adjusted  for their  relative  risk as  defined by the  regulations.  Guidelines
require  banks  to have a  minimum  Tier 1  capital  ratio,  as  defined  by the
regulators,  of 4.00% and a minimum Tier 2 capital ratio of 8.00%, and a minimum
4.00% leverage  capital ratio. On June 30, 1999, the Bank's Tier 1 capital ratio
was 24.69%, Tier 2 capital ratio was 25.94% and leverage ratio was 14.59%, which
exceeded all of its regulatory capital requirements.


                                       15
<PAGE>

         At June 30,  1999,  the total  stockholders'  equity of the Company was
$8.8  million,  and the ratio of average  stockholders'  equity to average total
assets was 14.84%, as compared to 14.47% for 1998.

Year 2000 Issues

         The "Year 2000 Problem" centers on the inability of computer systems to
recognize  the Year 2000.  Many  existing  computer  programs  and systems  were
originally  programmed  with six digit  dates that  provided  only two digits to
identify the calendar year in the date field,  without  considering the upcoming
change  in the  century.  With the  impending  millennium,  these  programs  and
computers will  recognize "00" as the year 1900 rather than the Year 2000.  Like
most financial service providers,  the Bank may be significantly affected by the
Year 2000 Problem due to the nature of financial  information.  Furthermore,  if
computer  systems are not  adequately  changed to identify  the Year 2000,  many
computer applications could fail or create erroneous results.

         In addition,  noninformation  technology  systems,  such as telephones,
copies  and  elevators  may  contain  embedded  technology  which  controls  its
operations  and  which may be  affected  by the Year 2000  Problem.  Thus,  even
noninformation  technology  systems  may  affect the  normal  operations  of the
Company upon the arrival of the Year 2000.

       To address the Year 2000 Problem, the Bank hired an outside consultant to
assess  the  impact  of the Year 2000  Problem  on the  Bank.  Because  the Bank
outsources its data processing  operations,  a significant component of the Year
2000 plan is working with external  vendors to test and certify their systems as
Year 2000 compliant. The Bank's external vendors have surveyed their programs to
inventory  the  necessary  changes  and have  begun  correcting  the  applicable
computer programs and replacing equipment so that the Bank's information systems
will be Year 2000 compliant  prior to the end of 1998. This will enable the Bank
to devote  substantial  time to the testing of the upgraded systems prior to the
arrival of the millennium in order to comply with all applicable regulations.

         The Company's timetable for working on the Year 2000 Problem is divided
into the following five phases:
<TABLE>
<CAPTION>
Phase                     Description                                                        Status
-----                     -----------                                                        ------
<S>  <C>
1. Awareness              Define the problem.                                                Completed
                                                                                             11/1/97.
2. Assessment             Identify all systems and criticality of systems.                   Completed 6/1/98

3. Renovation             Program enhancements, hardware and software                        Complete
                          upgrades, system replacements, and vendor                          6/30/99
                          certifications.
4. Validation             Test and verify system changes.                                    Completed
                                                                                             12/30/98
5. Implementation         Components certified as Year 2000 compliant and                    Completed
                          moved to production.                                                6/30/99
</TABLE>

         Contingency Planning.  The Bank has a contingency plan to keep the Bank
in operation in the event that some Year 2000 problems have been  overlooked and
system malfunctions occur at the turn of the century. This plan was developed by
the Bank's outside consultant with the help of Bank management.  The Company has
developed contingency or


                                       16
<PAGE>

alternate plans for its mission critical systems on a department-by-  department
basis in anticipation of potential  unplanned system difficulties or third-party
failures at January 1, 2000 or dates beyond.  However, the Bank understands that
certain  events beyond its control,  such as extended  power outages and loss of
telecommunications,  may  diminish  its  ability  to provide  minimum  levels of
service.  Failure of these services will affect  companies,  individuals and the
government,  and can not be remedied by anyone other than the responsible party.
For some  systems,  contingency  plans  consist of using or  reverting to manual
systems until the problems can be corrected.

         While the Company expects to complete its Year 2000 project in a timely
manner,  it cannot guarantee that the systems of companies with whom it conducts
business,  will also be  completed  in a timely  manner.  The  failure  of these
entities to adequately  address the Year 2000 Problem could adversely affect the
Company's and Bank's ability to conduct business.

         Costs.  The Company  currently  estimates its total direct and indirect
cost will be  $35,000.  To date,  the  Company  has spent  $31,000  on Year 2000
issues.  The  costs  of the  project  and the date on  which  the Bank  plans to
complete the Year 2000  modifications  are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources,  third party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved,  and actual  results  could differ  materially  from those  plans.  In
addition, there can be no guarantee that the systems of other companies on which
the Bank's systems rely will be timely  converted,  or that a failure to convert
by  another  company,  or a  conversion  that is  incompatible  with the  Bank's
systems,  would not have a material  adverse  effect on the Bank. The Bank has a
contingency  plan to keep the bank in operation in the event that some year 2000
problems have been overlooked and system  malfunctions  occur at the turn of the
century.  This plan was developed by the Bank's outside consultant with the help
of Bank management.


Provision for Loan Losses

         For the three months ended June 30, 1999 the  provision for loan losses
was $6,000,  a 200%  increase  compared to the $2,000  allowance for loan losses
recorded in the second three months of 1998.

 An analysis of the allowance for loan losses is as follows:

Loan Loss Reserve
Balance, December 31,                           429,000
1998
Provision for Loan Losses                        13,000
Charge-offs                                    (20,000)
Recoveries                                        9,000
Balance, June 30,1999                           431,000
                                                =======

         The level of the allowance is based upon management's ongoing review of
the loan portfolio and includes the present and prospective  financial condition
of  borrowers,  consideration  of actual  loan  loss  experience  and  projected
economic conditions in general and for the Bank's service areas in particular.



                                       17
<PAGE>

Potential Problem Loans


         At  June  30,  1999,  in  addition  to  $129,000  of  loans  on  either
non-accrual  status or loans  past due 90 days or more and still  accruing,  the
Bank had  approximately  3.17% of the loan  portfolio in loans which were either
internally  classified  or  specially  mentioned  and  require  more than normal
attention and are potential  problem loans.  The Bank has considered these loans
in establishing the level of the allowance for loan losses.  As of June 30 1998,
$454,000 of loans were either on a non-accrual  status or loans past due 90 days
or more  and  still  accruing.  In  addition  to these  loans,  7.1% of the loan
portfolio was either internally  classified or specially  mentioned and required
more than normal attention and considered potential problems loans.



                                       18
<PAGE>


Part II   OTHER INFORMATION

Item 1. Legal Proceedings

         None

Item 2. Changes in Securities and Use of Proceeds
         None


Item 3. Defaults upon Senior Securities

         None


Item 4. Submission of matters to a Vote of Security Holders
                None

Item 5. Other Information

               None


Item 6. Exhibits and Reports on Form 8-K

         (a) Exhibits
               Exhibit 10.1 Consulting and Employment Agreements

               Exhibit 27.1-Financial Data Schedule* *Filed in electronic format
                            only.

         (b) Reports on Form 8-K

               None



                                       19
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Act 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned  thereunto duly
authorized.


                                           HERITAGE BANCORP, INC.
                                                 (Registrant)

Date:  August 13, 1999                      /s/ William B. Sutphin
                                            -------------------------------
                                            William B. Sutphin
                                            Senior V. P. and Cashier



                                       20