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

                                   Form 10-KSB

[xx] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

                   For the fiscal year ended December 31, 1999
                                             -----------------

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT
     OF 1934

       For the transition period from ____________________ to ___________

                        Commission file number 333-73385

                               HCNB Bancorp, Inc.
                               ------------------
                 (Name of small business issuer in its charter)

                  Maryland                                    52-2083046
                  --------                                    ----------
(State of other jurisdiction of incorporation             (I.R.S. Employer
              or organization)                           Identification No.)

1776 East Jefferson Street, Rockville, MD                     20852
-----------------------------------------                     -----
  (Address of principal executive offices)                  Zip Code

                    Issuer's telephone number (301) 468-8848
                                              --------------
         Securities registered under Section 12(b) of the Exchange Act:

                                              Name of each exchange on which
         Title of each class                                 registered

                  None                                         None

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

                                      None
                                      ----
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [xx] Yes [ ] No


<PAGE>

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [xx]

The issuer's revenues for its most recent fiscal year.   $119,666
                                                         --------

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold as of February 29, 2000 was  $5,282,190.  The initial public offering price
was used to  compute  this  value as there is no active  trading  market for the
common  stock and it is not  possible to  identify  precisely  the market  value
thereof.

As of February 29, 2000,  700,213 shares of the small business  issuer's  common
stock were issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


                                TABLE OF CONTENTS

                                     Part I
Item l    Description of Business                                            1
Item 2    Description of Property                                            9
Item 3    Legal Proceedings                                                  9
Item 4    Submission of Matters to a Vote of Security Holders               10

                                     Part II
Item 5    Market for Common Equity and Related Stockholder Matters          10
Item 6    Management's Discussion and Analysis or Plan of Operations        11
Item 7    Financial Statements                                              15
Item 8    Changes in and Disagreements with Accountants or Accounting
           and Financial Disclosure                                         30

                                    Part III
Item 9    Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act                 30
Item 10   Executive Compensation                                            34
Item 11   Security Ownership of Certain Beneficial Owners and Management    34
Item 12   Certain Relationships and Related Transactions                    37
Item 13   Exhibits, Lists and Reports on Form 8-K                           38


<PAGE>
                                     PART I

Item l DESCRIPTION OF BUSINESS

Organization. HCNB Bancorp, Inc. (the "Company") was incorporated under the laws
of the State of  Maryland  on  February  24,  1998,  to serve as a bank  holding
company for a newly formed  commercial  bank.  Harbor Capital National Bank (the
"Bank")  received its charter from the Office of the Comptroller of the Currency
on December 14, 1999 and commenced operations that day from its sole location at
1776 East Jefferson  Street,  Rockville,  Maryland.  The Bank is a member of the
Federal  Reserve  System and its  deposits  are insured by the  Federal  Deposit
Insurance Corporation.

The Company  completed its initial  offering of its shares of common stock ($.01
par value) in October,  1999. In the initial offering,  700,213 shares were sold
at a  price  of  $10.00  per  share;  total  proceeds  from  the  offering  were
$7,002,130.  After  offering  expenses,  the net  proceeds to the  Company  were
$6,828,075.  The Bank was initially  capitalized  by the Company in an amount of
$6,000,000.

Products and  Services.  The sole  function of the Company,  at this time, is to
hold all of the common stock in its  subsidiary,  Harbor Capital  National Bank.
Harbor Capital National Bank is a community bank providing  commercial  products
and  services  to its  business  and  professional  clients as well as  consumer
banking products and services to individuals.

The Bank offers a full range of deposit  products that are  typically  available
from most banking  institutions.  These products  include  business and personal
checking  accounts and savings/money  market deposit  accounts.  The Bank offers
certificates  of deposit  with  various  rate  structures  and  maturities.  All
accounts  currently  offered  are  insured  by  the  Federal  Deposit  Insurance
Corporation, subject to the aggregation limits set by the FDIC.

As of December 31, 1999, the Bank had total deposits of $1,064,336. This deposit
base represented 50 accounts.

The Bank also  offers a diverse  line of credit  facilities  to both  commercial
clients  and  individuals.   While  the  primary  target  for  loan  development
activities is small to mid-size businesses,  the Bank fully realizes the need to
be a credit source for individuals.

The Bank offers many forms of loans to  businesses,  including  lines of credit,
revolving credit,  term loans,  account  receivable  financing,  and asset-based
financing.  These loans may be made on a secured or  unsecured  basis,  based in
part on the credit  worthiness of the borrower and the type of loan.  Commercial
loans secured by real estate, for the purposes of land development, construction
and permanent financing, are solicited by the Bank.

Credit  facilities that are offered to the individual  consumer include lines of
credit, installment loans, demand loans and mortgage loans, though the Bank will
generally  not offer a loan term greater than five years,  unless the  repricing
option is five years or shorter.

                                       1
<PAGE>

Ancillary  products and  services  that the Bank  provides  include safe deposit
boxes,  night  depository  services,  ATM access,  funds transfer  services both
domestic and foreign,  travelers  checks/money  orders, and retirements products
(IRA's).

Markets.  The  Bank's  primary  service  area is  Montgomery  County,  Maryland.
Montgomery County comprises 495 square miles and is located in Central Maryland.
It is a suburb of  Washington,  DC and is  located  in the  Washington-Baltimore
market  region.  The Bank's  secondary  market area will be the  Washington,  DC
region,  particularly  Washington,  DC;  Prince  George's,  Howard and Frederick
counties in Maryland; and, Arlington,  Loudoun and Fairfax counties in Virginia.
The primary  service area should  provide the deposit base for the Bank and most
credit extension should be made within the extended market area, however,  based
upon the competitive environment, it will be necessary to consider loan requests
from outside of the defined market areas.

The Bank has targeted the market segment of the  Asian-American  community.  The
Asian-American  community in Montgomery  County is  substantial in both size and
growth  patterns.  The  provisions  of  banking  products  and  services  to the
Asian-American  community is the driving force for the  organization of the Bank
and should provide an excellent source of business.

Delivery. The Bank provides banking products and services from its sole location
at 1776 East Jefferson Street, Rockville,  Maryland. The Bank is a member of the
HONOR ATM network and the CIRRUS interchange network, whereby bank customers can
access their  deposits  from around the world,  and the Bank has  announced  the
development of a internet banking program.

An agreement  between the Bank and an internet  banking  provider,  Netzee,  was
signed in December,  1999.  Availability  to the Bank's customer base is planned
for late March, 2000 or early in the second quarter of 2000.

Competition.  The Bank operates in a highly competitive environment.  The wealth
and  sophistication  of the Bank's market area makes it attractive for companies
providing  financial  services.   At  June  30,  1999,  there  were  33  banking
institutions  with offices in  Montgomery  County.  These  institutions  had 279
banking  locations.  In  addition  to the  traditional  competitors,  management
believes  that  non-traditional  financial  services  companies and new internet
banks provide additional competitive challenges. The Bank hopes to differentiate
itself  because  of its market  niche of the  Asian-American  community  and its
commitment to quality customer service.

Competition  for  demand/checking  deposits is mostly  related to convenience of
location.  The Bank's  location  makes it convenient  for both small to mid-size
businesses and  individuals.  The Bank's location is adjacent to one of the most
highly developed  commercial areas in the county, the Route 355 corridor.  Small
retail businesses mix with larger national chains.  The shopping center in which
the Bank is located has about forty  retail  stores,  with  several  being major
merchandisers.  Convenient to the Bank's location is also high density  housing,
most occupied by senior  citizens.  The  Washington  Jewish Home complex is well
within walking distance to the Bank.

Competition for time deposits is mostly  controlled by interest rates.  The Bank
intends to position itself to be competitive within the local market.

                                       2
<PAGE>
Competition for loans is based upon  availability of funds,  interest rates, fee
pricing and time requirements. While insuring that credit quality is maintained,
the Bank is and expects to continue to be  competitive  in the terms of its loan
types.  The  competitive  advantage  for  a  small   locally-managed   financial
institution is the ability to have decision makers actively involved in the loan
transaction  from the early stages and to be able to make a decision is a timely
manner.

Due to the short time that the Bank has been opened,  it is not possible to tell
how well the Bank competes in the market.

Major Vendors. As a small start-up  institution,  the Bank has relied on several
outside service  organizations to support its operational needs. Foremost is the
Bank's  data  processing  service  bureau,  Fiserv  of  Atlanta,  Georgia.  Item
processing/imaging  services are provided by Central  Maryland Service Center of
Ellicott  City,  Maryland.  Unisys  Corporation  has  provided  data  processing
equipment and network installation and support.

Customer Dependencies.  Bank activities to date have not revealed any dependence
on one or a few major customers.  Dependence within the loan portfolio is mostly
controlled by regulatory  limitations.  Dependence  within the deposit portfolio
will be monitored as a part of the Bank's risk management  activities.  The Bank
does not have or plan to accept brokered deposits.

Supervision  and Regulation.  The Bank received its charter to conduct  business
from the Office of the  Comptroller of the currency;  has received  insurance of
accounts from the Federal Deposit Insurance Corporation;  and, has been accepted
for membership in the Federal Reserve  system.  The Company has been approved by
the Federal Reserve System to be a bank holding company.

The  Company and the Bank are subject to  extensive  regulation  under state and
federal banking laws and  regulations.  These laws impose specific  requirements
and  restrictions  on virtually  all aspects of  operations,  and  generally are
intended to protect depositors,  not stockholders.  The following  discussion is
only a summary  and you should  refer to  particular  statutory  and  regulatory
provisions  for more  detailed  information.  Any change in  applicable  laws or
regulations may have a material effect on our business and prospects.  Beginning
with  the  enactment  of  the  Financial   Institutions  Reform,   Recovery  and
Enforcement   Act  of  1989  and  most   recently  with  the  enactment  of  the
Gramm-Leach-Bliley Act of 1999, numerous additional regulatory requirements have
been placed on the banking industry.  We cannot predict the nature or the extent
of the effect on our  business and  earnings  that fiscal or monetary  policies,
economic conditions, or new federal or state legislation may have in the future.

         HCNB Bancorp.  The Company is a bank holding company  registered  under
the Bank Holding Company Act of 1956, as amended,  and is subject to supervision
by the Board of  Governors  of the Federal  Reserve  System.  As a bank  holding
company,  the  Company is required  to file with the  Federal  Reserve  Board an
annual report and such other additional information as the Federal Reserve Board
may require by statute.  The Federal Reserve Board may also make examinations of
the Company and each of its subsidiaries.

The Federal Reserve Board must approve, among other things, the acquisition by a
proposed  bank holding  company of control of more than five percent (5%) of the
voting shares,  or  substantially  all the assets,  of any bank or the merger or
consolidation by a bank holding company with another bank

                                       3
<PAGE>
holding company. A bank holding company may acquire control of substantially all
the assets of any bank  located in a state other than the home state of the bank
holding company, except where the bank has not been in existence for the minimum
period of time  required by state law. If the bank has been in existence for the
required time period, the Federal Reserve Board may approve the acquisition.

With certain  limited  exceptions,  a bank holding  company is  prohibited  from
acquiring  control of any voting  shares of any  company  which is not a bank or
bank holding  company and from  engaging  directly or indirectly in any activity
other than banking or managing or controlling  banks or furnishing  services for
its authorized  subsidiaries.  A bank holding  company may,  however,  engage in
activities which the Federal Reserve Board has determined by order or regulation
to be so closely  related to banking or managing or controlling  banks, as to be
"properly incident thereto." In making such a determination, the Federal Reserve
Board is required to consider  whether the  performance  of such  activities can
reasonably be expected to produce  benefits to the public,  such as convenience,
increased  competition or gains in efficiency,  which outweigh  possible adverse
effects,  such  as  undue  concentration  of  resources,   decreased  or  unfair
competition,  conflicts of interest or unsound  banking  practices.  The Federal
Reserve Board is also empowered to differentiate between activities commenced de
novo and  activities  commenced by the  acquisition,  in whole or in part,  of a
going  concern.  Some of the  activities  that the  Federal  Reserve  Board  has
determined  by  regulation to be closely  related to banking  include  making or
servicing  loans,  performing  certain  data  processing  services,  acting as a
fiduciary  or  investment  or  financial  advisor,  and  making  investments  in
corporations or projects designed primarily to promote community welfare.

Subsidiary  banks of a bank holding company are subject to certain  restrictions
imposed by statute on any  extensions  of credit to the bank holding  company or
any of its subsidiaries,  or investments in their stock or other securities, and
on taking such stock or  securities  as  collateral  for loans to any  borrower.
Further,  a holding company and any subsidiary bank are prohibited from engaging
in certain tie-in  arrangements  in connection  with the extension of credit.  A
subsidiary  bank may not extend  credit,  lease or sell  property or furnish any
services,  or fix or vary  the  consideration  for any of the  foregoing  on the
condition  that:  (i) the  customer  obtain or provide some  additional  credit,
property or services from or to such bank other than a loan,  discount,  deposit
or trust service;  (ii) the customer obtain or provide some  additional  credit,
property  or  service  from or to the  Company  or any other  subsidiary  of the
Company, or (iii) the customer not obtain some other credit, property or service
from competitors,  except for reasonable requirements to assure the soundness of
credit extended.

In accordance with Federal Reserve Board 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  in which the Company  might not otherwise do so. The
Federal  Reserve  Board may  require a bank  holding  company to  terminate  any
activity or  relinquish  control of a nonbank  subsidiary  (other than a nonbank
subsidiary  of a bank)  upon  the  Federal  Reserve's  determination  that  such
activity or control  constitutes  a serious risk to the  financial  soundness or
stability of any subsidiary depository  institution of the bank holding company.
Further,  federal bank  regulatory  authorities  have  additional  discretion to
require  a bank  holding  company  to  divest  itself  of any  bank  or  nonbank
subsidiary if the agency  determines  that  divestiture  may aid the  depository
institution's financial condition.

As a Maryland  incorporated bank holding company, the Company is also subject to
certain limitations and restrictions under applicable Maryland corporate law and
the Maryland Financial Institutions Code.

                                       4
<PAGE>
On November 12, 1999,  President Clinton signed into law the  Gramm-Leach-Bliley
Act ("GLBA").  Effective March 11, 2000, pursuant to authority granted under the
GLBA, a bank holding company may elect to become a financial holding company and
thereby  engage in a broader  range of financial and other  activities  than are
permissible for traditional bank holding companies.  In order to qualify for the
election,  all of the depository  institution  subsidiaries  of the bank holding
company must be well capitalized and well managed, as defined by regulation, and
all of its insured depository institution subsidiaries have achieved a rating of
"satisfactory" or better with respect to meeting community credit needs.

Pursuant to the GLBA, financial holding companies will be permitted to engage in
activities  that are  "financial  in  nature"  or  incidental  or  complementary
thereto, as determined by the Federal Reserve Board. The GLBA identifies several
activities  as  "financial  in  nature,"  including,   among  others,  insurance
underwriting  and agency,  investment  advisory  services,  merchant banking and
underwriting,  and dealing or making a market  insecurities.  Being designated a
financial holding company will allow insurance companies, securities brokers and
other types of financial  companies to affiliate with and or acquire  depository
institutions.  These financial  holding  companies'  resources are substantially
greater than those of the Company or the Bank and may now compete  directly with
the Company and the Bank in their lines of business.

         Harbor  Capital   National  Bank.  The  Bank,  as  a  national  banking
association whose accounts are insured by the Bank Insurance Fund of the FDIC up
to the maximum legal limits,  is subject to regulation,  supervision and regular
examinations  by the OCC.  The Bank is a member of the Federal  Reserve  System,
and, as such, is subject to certain  regulations  issued by the Federal  Reserve
Board.  The Bank is also subject to  applicable  banking  provisions of Maryland
law,  insofar as they do not conflict  with or are not preempted by federal law.
The  regulations  of these  various  agencies  govern most aspects of The Bank's
business,   including  setting  required   reserves  against  deposits,   loans,
investments,  mergers and  acquisitions,  borrowing,  dividends and location and
number of branch offices.

Competition among commercial banks,  savings and loan  associations,  and credit
unions has increased  following  enactment of legislation which greatly expanded
the ability of banks and bank holding companies to engage in interstate  banking
or acquisition activities. Banks in the Washington,  D.C./Maryland/Virginia area
can, subject to limited restrictions, acquire or merge with a bank in another of
the jurisdictions, and can branch de novo in any of the jurisdictions.

Under the GLBA,  subject to limitations  on investment,  a national bank that is
well  capitalized  and  well  managed,  as  defined  by  regulation,  and  has a
satisfactory  or better  community  reinvestment  rating,  may engage  through a
financial  subsidiary of the bank in activities  that are financial in nature or
incidental  thereto.  Existing authority of the Office of the Comptroller of the
Currency and the FDIC to review subsidiary activities are preserved. No decision
has, at this time, been made with respect to the  establishment of new financial
subsidiaries of either the Bank or the Company.

         Branching  and  Interstate  Banking.  Beginning  on June 1,  1997,  the
federal  banking  agencies  were  authorized to approve  interstate  bank merger
transactions without regard to whether such transaction is prohibited by the law
of any  state,  unless  the home  state of one of the banks has opted out of the
interstate  bank merger  provisions of the  Riegle-Neal  Interstate  Banking and
Branching Efficiency

                                       5
<PAGE>
Act of 1994.  Interstate  acquisitions of branches will be permitted only if the
law of the state in which the branch is located permits such acquisitions.

The Riegle-Neal Act authorizes the OCC and FDIC to approve interstate  branching
de novo by national and state banks, but only in states which specifically allow
for such  branching.  The District of Columbia,  Maryland and Virginia  have all
enacted laws which permit interstate acquisitions of banks and bank branches and
permit out-of-state banks to establish de novo branches.

         Capital Adequacy Guidelines. The Federal Reserve Board, the OCC and the
FDIC have all  adopted  risk based  capital  adequacy  guidelines  by which they
assess the  adequacy  of capital in  examining  and  supervising  banks and bank
holding  companies and in analyzing bank  regulatory  applications.  Risk- based
capital  requirements,  determine  the  adequacy  of  capital  based on the risk
inherent in various classes of assets and off-balance sheet items.

Since  December 31, 1992,  national  banks have been expected to meet a minimum,
ratio  of  total  qualifying  capital  (the  sum of core  capital  (Tier  1) and
supplementary  capital (Tier 2)) to risk weighted assets of 8%. At least half of
this amount (4%) should be in the form of core capital. These requirements apply
to Harbor  Capital  Bank and will apply to HCNB  Bancorp  once its total  assets
equal $150,000,000 or more, it engages in certain highly leveraged activities or
it has publicly held debt securities.

Tier I  Capital  for  national  banks  generally  consists  of the sum of common
stockholders'  equity and perpetual  preferred stock (subject in the case of the
latter to limitations on the kind and amount of such stock which may be included
as Tier 1 Capital),  less goodwill,  without  adjustment in accordance with SFAS
115.  Tier 2 Capital  consists of the  following:  hybrid  capital  instruments;
perpetual preferred stock which is not otherwise eligible to be included as Tier
I Capital;  term subordinated debt and  intermediate-term  preferred stock; and,
subject to limitations,  general allowances for loan losses. Assets are adjusted
under  the   risk-based   guidelines  to  take  into  account   different   risk
characteristics,  with the  categories  ranging from 0% (requiring no risk-based
capital)  for  assets  such as cash,  to 100% for the bulk of  assets  which are
typically  held  by  a  bank  holding  company,  including  certain  multifamily
residential  and  commercial  real estate loans,  commercial  business loans and
consumer  loans.  Residential  first  mortgage  loans  on  one  to  four  family
residential  real  estate and certain  seasoned  multi-family  residential  real
estate loans, which are not 90 days or more past-due or non-performing and which
have been made in accordance with prudent underwriting standards, are assigned a
50%  level  in  the  risk-weighting  system,  as  are  certain  privately-issued
mortgage-backed  securities  representing  indirect  ownership  of  such  loans.
Off-balance  sheet items also are  adjusted to take into  account  certain  risk
characteristics.

In addition to the risk based capital  requirements,  the OCC has  established a
minimum 3%  Leverage  Capital  Ratio (Tier 1 Capital to total  adjusted  assets)
requirement for the most highly-rated national banks, with an additional cushion
of at  least  100 to 200  basis  points  for all  other  national  banks,  which
effectively increases the minimum Leverage Capital Ratio for such other banks to
4%-5% or more. Under the OCC's regulations,  highest-rated  banks are those that
the OCC determines are not anticipating or experiencing  significant  growth and
have well  diversified  risk,  including no undue  interest rate risk  exposure,
excellent asset quality,  high liquidity,  good earnings and, in general,  those
which are  considered a strong  banking  organization.  A national bank that has
less than the minimum  Leverage  Capital  Ratio  requirement  must submit to the
applicable  district office for review and approval a reasonable plan describing
the means and timing by which the bank will achieve its minimum

                                       6
<PAGE>

Leverage  Capital  Ratio  requirement.  A national bank which fails to file such
plan is deemed to be  operating  in an unsafe and unsound  manner,  and could be
subject to a cease-and-desist order.

The OCC's regulations also provide that any insured depository  institution with
a Leverage  Capital  Ratio that is less than 2% is deemed to be  operating in an
unsafe or unsound  condition and is subject to potential  termination of deposit
insurance.  However,  such an institution  will not be subject to an enforcement
proceeding  solely on account of its capital ratios,  if it has entered into and
is in compliance with a written  agreement with the OCC to increase its Leverage
Capital Ratio to such level as the OCC deems  appropriate and to take such other
action as may be  necessary  for the  institution  to be  operated in a safe and
sound manner. The capital regulations also provide,  among other things, for the
issuance by the OCC or its designee(s) of a capital directive,  which is a final
order issued to a bank that fails to maintain  minimum capital or to restore its
capital to the minimum capital  requirement within a specified time period. Such
directive is enforceable in the same manner as a final cease-and-desist order.

         Prompt  Corrective  Action.  Each federal banking agency is required to
implement  a system  of  prompt  corrective  action  for  institutions  which it
regulates.  Under applicable regulations, a bank will be deemed to be: (i) "well
capitalized" if it has a Total Risk Based Capital Ratio of 10% or more, a Tier 1
Risk Based Capital  Ratio of 6% or more, a Leverage  Capital Ratio of 5% or more
and is not subject to any written capital order or directive;  (ii)  "adequately
capitalized"  if it has a Total Risk Based  Capital  Tier Ratio of 8% or more, a
Tier 1 Risk  Based  Capital  Ratio of 4% or more and a Tier I  Leverage  Capital
Ratio of 4% or more (3% under certain circumstances);  (iii)  "undercapitalized"
if it has a Total Risk Based  Capital  Ratio that is less than 8%, a Tier 1 Risk
Based  Capital  Ratio that is less than 4% or a Leverage  Capital  Ratio that is
less  than  4%  (3.3%  under   certain   circumstances);   (iv)   "significantly
undercapitalized"  if it has a Total Risk Based  Capital Ratio that is less than
6%, a Tier 1 Risk Based Capital Ratio that is less than 3% or a Leverage Capital
Ratio that is less than 3% or a Leverage Capital Ratio that is less than 3%; and
(v) "critically  undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2%.

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.

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 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.

                                       7
<PAGE>
Immediately upon becoming  undercapitalized,  an institution  becomes subject to
statutory  provisions  which (i) restrict payment of capital  distributions  and
management  fees;  (ii)  require that the  appropriate  federal  banking  agency
monitor the condition of the institution and its efforts to restore its capital;
(iii) require submission of a capital restoration plan; (iv) restrict the growth
of the institution's assets; and (v) require prior approval of certain expansion
proposals.  The  appropriate  federal  banking  agency  for an  undercapitalized
institution also may take any number of discretionary supervisory actions if the
agency determines that any of these actions is 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;  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.

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

         Transactions  with Affiliates and Insiders.  The Bank is subject to the
provisions of Section 23A of the Federal  Reserve Act, which place limits on the
amount of loans or  extensions  of credit to,  investments  in or certain  other
transactions  with  affiliates,  and on the amount of advances to third  parties
collateralized  by the  securities or  obligations  of  affiliates.  Section 23A
limits the aggregate amount of transactions with any individual affiliate to ten
percent  (10%) of the  capital  and  surplus  of the Bank  and also  limits  the
aggregate amount of transactions  with all affiliates to twenty percent (20%) of
capital and surplus.  Loans and certain other extensions of credit to affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A, and the purchase of low quality assets from affiliates is generally
prohibited.

The Bank is also subject to the provisions of Section 23B of the Federal Reserve
Act which, among other things,  prohibit an institution from engaging in certain
transactions  with  certain  affiliates  unless  the  transactions  are on terms
substantially  the same,  or at least as  favorable to such  institution  or its
subsidiaries,  as those prevailing at the time for comparable  transactions with
non-  affiliated  companies.  In the absence of  comparable  transactions,  such
transactions  may only occur under  terms and  circumstances,  including  credit
standards,   that  in  good  faith  would  be  offered  to  or  would  apply  to
non-affiliated companies.

The Bank is subject to certain restrictions on extensions of credit to executive
officers, directors, certain principal stockholders and their related interests.
Such  extensions  of credit (i) must be made on  substantially  the same  terms,
including interest rates and collateral, as those prevailing at the time for

                                       8
<PAGE>

comparable  transactions  with third parties and (ii) must not involve more than
the normal risk of repayment or present other unfavorable features.

         Community  Reinvestment  Act. The  Community  Reinvestment  Act ("CRA")
requires that, in connection with examinations of financial  institutions within
their respective jurisdictions,  the Federal Reserve Board, the FDIC, the OCC or
the Office of Thrift  Supervision  shall  evaluate  the record of the  financial
institution  in meeting the credit needs of their local  communities,  including
low and  moderate  income  neighborhoods,  consistent  with the  safe and  sound
operation of those  institutions.  The CRA does not establish  specific  lending
requirements  or  programs  for  financial  institutions  nor  does it  limit an
institution's  discretion  to develop the types of products and services that it
believes are best suited to its particular  community,  consistent with the CRA.
These  factors  are   considered  in  evaluating   mergers,   acquisitions   and
applications  to  open  a  branch  or  facility.   The  CRA  also  requires  all
institutions to make public disclosure of their CRA ratings.

Employees.  As of December 31, 1999, the Company had no employees other than its
officers;  the Bank had a total of twelve employees,  nine of whom were employed
full time.


Item 2 DESCRIPTION OF PROPERTY

The Company entered into a lease agreement with Federal Realty  Investment Trust
on December  23, 1998 for the  premises to be used as the  Company's  and Bank's
initial  location.  This  location  is 1776 East  Jefferson  Street,  Rockville,
Maryland. It is Suite 119 of the Federal Plaza Shopping Center. The leased space
comprises  approximately  4,153  square  feet and  included  a  remote  drive in
facility located in the shopping center's parking lot. The drive in facility has
three drive through lanes.

The  initial  term of the lease is two years and the  Company has one eight year
option. The initial term of the lease will expire on February 28, 2001.

The lease expense commitment is as follows:
                          Year 1           $87,213.00
                          Year 2            90,244.69
                          Year 3            93,442.50
                          Year 4            96,681.84
                          Year 5           100,087.30
                          Year 6           104,074.18
                          Year 7           108,227.18
                          Year 8           112,587.83
                          Year 9           117,073.07
                          Year 10          121,765.96

In  addition  to the lease  expense,  the  Company  is  responsible  for the tax
liability on the lease space and a common area maintenance assessment.


Item 3 LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company or Bank is a party.



                                       9
<PAGE>
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 1999.


                                     Part II

Item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Stock; Dividends.  The Company's common stock is not traded on
any organized  exchange or on the Nasdaq National Market or the Nasdaq Small Cap
Market.  There is no  active  market  for the  Company's  stock and there are no
assurances that one will develop in the foreseeable future. Since the closing of
the initial stock offering there have been several private  trades.  The bid and
asked price has been the same as the initial stock price of $10.00 per share.

At February,  29, 2000, there were 175 holders of record of the Company's common
stock.

It is  anticipated  that the Bank will incur losses  during its initial phase of
operations,  therefore,  it is not anticipated that any dividend will be paid by
the Bank or the Company for, at least,  two years.  Even if the Bank and Company
have earnings in an amount  sufficient to pay dividends,  the Board of Directors
may decide to retain  earnings  for the  purpose  of  funding  the growth of the
Company and Bank.

There were no sales of unregistered shares of the Company in 1999.

Use of Proceeds of Initial  Public  Offering.  The following  tables reflect the
offering  expenses,  net offering  proceeds and use of proceeds of the Company's
initial public offering:
<TABLE>
<CAPTION>
Offering Expenses
-----------------
                                           2/24/98-9/30/99   10/1/99-12/31/99     Total
                                           ---------------   ----------------     -----
<S>                                           <C>              <C>              <C>
Underwriters' discounts & commissions                0                0                0
Finder's fees                                        0                0                0
Expenses paid to or for underwriters                 0                0                0
Other expenses
         Legal & other professional             83,107           29,451          112,558
         Regulatory fees                        34,915                0           34,915
         Printing                               25,082                0           25,082
         Other                                   1,500                0            1,500
         Total other expenses                  144,604           29,451          174,055
Total expenses                                 144,604           29,451          174,055
</TABLE>


                                       10
<PAGE>
<TABLE>
<CAPTION>
Net Offering Proceeds
---------------------
<S>                                            <C>              <C>                  <C>
         Offering proceeds                                                             7,002,130
         Offering expenses                                                               174,055
         Net offering proceeds                                                         6,828,075


Use of Proceeds
---------------
Investment in subsidiary                              0           6,000,000            6,000,000
Interest expense                                      0              54,744               54,744
Operating expenses
         Legal & other professional             202,475              47,379              249,854
         Compensation & benefits                220,768             139,575              360,343
         Rent                                    41,387              37,004               78,391
         Other expenses                         108,260             (10,439)              97,821
         Total operating expenses               572,890             268,263              841,153
</TABLE>

Item 6 PLAN OF OPERATION

The Company's main function is to serve as the holding  company of the Bank. The
Bank was initially capitalized by the Company at $6,000,000. Of this amount, the
Bank used funds for capital expenditures totaling approximately  $450,000.  This
includes  $178,000 for  leasehold  improvements,  $169,000  for data  processing
equipment  and  installation  services,  $79,000  for  furniture,  fixtures  and
equipment and $25,000 for  software.  The Bank's  operating  losses for the year
ended December 31, 1999 were approximately $106,000.

The Bank has  developed  a growth plan for the next  twelve  months  relating to
deposits and loans. At December 31, 2000,  deposits are projected at $18,000,000
and  total  loans  are  projected  at  $12,000,000.  The  deposit  mix  includes
non-interest   bearing  demand  deposit  accounts,   interest  bearing  checking
accounts, savings and money market deposit accounts and certificates of deposit.
The anticipated deposit mix is:

                           Non-interest bearing DDA           20%
                           Interest bearing checking           5
                           Savings & MMDA                     22
                           Certificates of deposit            53

The projected loan portfolio mix is:

                           Commercial loans                   42%
                           Consumer loans                      8
                           Real Estate loans                  50



                                       11
<PAGE>
Management  expects that deposit and loan growth will be realized as a result of
aggressive  business  development   activities  by  both  officers,   staff  and
directors.  The Bank's  geographic  location is good and the  convenience of the
location  will be a  deciding  factor  for  many  potential  customers.  This is
especially  true for senior  citizens  living in high  density  housing near the
banking location.

The Bank will provide banking  services from its banking  location.  The Bank is
also affiliated  with the HONOR and CIRRUS  automated  teller machine  networks,
whereby the Bank's customers may access their funds from any ATM affiliated with
these networks.  Practically speaking,  these networks provide access throughout
the United States and around the world.

The Bank has entered into an agreement with Netzee to provide  internet  banking
services to the Bank and its customers. It is anticipated that this service will
be available to the Bank's  customers late in the first quarter of 2000 or early
in the second quarter. Using this service,  customers, both individual consumers
and businesses,  will be able to open accounts, inquire into account activities,
transfer  funds,  and  generally  communicate  with Bank staff.  A bill  payment
feature will also be provided.

Operating results for the year ending December 31, 2000 are projected to reflect
losses.  This  mostly  is the  result  of  overhead  burden.  No  major  capital
expenditures are expected in the year 2000 and no major expansion activities are
planned.  While staff levels are projected to increase by 3 persons, this is not
considered  significant  due to the  start-up  nature  of the  Bank.  Management
expects  that the initial  capitalization  and the funds  provided by the Bank's
deposit  growth  will be  adequate  to fund the  operations  of the Bank for the
twelve month period.

Some of the information in this Plan of Operations section and elsewhere in this
annual report includes "forward-looking statements".  These statements use words
such as "may", "will", "expect",  "anticipate",  "plan",  "estimate", or similar
words,  and they  discuss  our future  expectations,  projections  of  financial
results or strategies that are subject to risks and uncertainties. When you read
a forward-looking  statement, you should keep in mind the risk factors described
below and any other information contained in this annual report which identifies
a risk or  uncertainty.  Our  actual  results  and  the  actual  outcome  of our
expectations  and strategies could be different from what have been described in
this report because of these risks and uncertainties.

We have no operating  history upon which to evaluate our future success,  and we
do not expect to be  profitable  initially.  HCNB  Bancorp  and  Harbor  Capital
National Bank are newly organized,  and neither has any prior operating history.
The  Company's  profitability  will depend on the results of  operations  of our
principal  asset,  Harbor  Capital  National  Bank. We expect that the Bank will
incur  operating  losses  during its  initial  years of  operation,  and may not
achieve  profitability,  if at all, for at least two years. If we decide to open
new branch offices, that decision may further delay profitability because of the
increased  expenses of  expansion  and because the  branches may not enhance our
results of operations as anticipated.

Our lending strategy involves risks resulting from our choice of loan portfolio.
We expect that the Bank's loan  portfolio  will be made up largely of commercial
business and real estate  loans.  The Bank will offer  mortgage  loans for owner
occupied residential  properties.  Commercial real estate,  commercial business,
construction  and consumer loans  generally carry a higher degree of credit risk
than residential mortgage loans.

                                       12
<PAGE>

Future  provisions  for loan  losses  could  adversely  affect  our  results  of
operations.  The Bank will  maintain an allowance for loan losses to provide for
loan defaults and nonperformance. The allowance is based on, among other things,
prior  experience with loan losses and an evaluation of the risks in the current
portfolio. Because the Bank is a new bank with no prior loan experience,  future
adjustments may be necessary if economic,  operating and other conditions differ
substantially  from  the  assumptions  used  in  making  the  initial  allowance
determinations.  In addition,  we anticipate that the Bank's provisions for loan
losses will increase in the future as it expands its lending  activities.  Also,
regulatory  agencies may require the Bank to add to the allowance based on their
judgements when they conduct examinations of the Bank.

We cannot guarantee that our expansion strategies will be successful.  We intend
to expand our  business  in the future by opening  branches  and/or  considering
other  opportunities  when they arise. If we are not able to expand our business
successfully,  our  competitive  position  and our  results of  operations  will
suffer.  At this time, we have not identified any new branch  locations or other
opportunities. Our success in expanding our business will depend on, among other
things, our ability to obtain regulatory  approvals,  our access to capital, our
ability  to manage  growth  and our  ability  to  attract  and  train  qualified
employees. We cannot guarantee that we will be able to do any of these things.

Government  regulation  might  negatively  impact our  operating  results.  HCNB
Bancorp and Harbor  Capital  National  Bank will  operate in a highly  regulated
environment  and will be subject to examination,  supervision and  comprehensive
regulation  by  several   federal  and  state   regulatory   agencies.   Banking
regulations,  designed  primarily  for the safety of  depositors,  may limit the
growth of the Bank and the return to investors by restricting activities such as
the payment of dividends,  mergers with or acquisitions  by other  institutions,
investments,  loans and interest rates,  interest rates paid on deposits and the
creation of branch offices.  Laws and regulations  could change at any time, and
changes  could  adversely  affect  our  ability  to  operate   profitably.   See
"Supervision  and  Regulation" for more  information  about  applicable  banking
regulations.

The Bank will face  substantial  competition  which could  adversely  affect our
growth and operating results.  The Bank will operate in a competitive market for
financial services and will face intense competition both in making loans and in
attracting deposits.  Many of these financial institutions have been in business
for many years, are significantly  larger,  have established  customer bases and
greater  financial  resources  and lending  limits than the Bank and are able to
offer certain services that the Bank is not able to offer.

The  Bank's  ability  to  compete  may  suffer if it cannot  take  advantage  of
technological  changes.  The market for financial  services,  including  banking
services and consumer finance services,  is increasingly affected by advances in
technology,  including  developments  in  telecommunications,  data  processing,
computers,  automation,  Internet-based banking,  telephone banking, debit cards
and so-called "smart cards".  Our ability to compete  successfully may depend on
the extent to which the Bank can take advantage of technological changes.

The Company's  profitability  will depend,  to some degree, on economic policies
and factors beyond its control.  The operating income of the Bank will depend to
a great  extent on "rate  differentials",  the  difference  between the interest
yields the Bank receives on its loans, securities and other interest-

                                       13
<PAGE>

bearing assets and the interest rates it pays on its  interest-bearing  deposits
and other  liabilities.  These rates are highly sensitive to many factors beyond
the control of the Bank, including general economic conditions,  the competitive
environment and the policies of various governmental and regulatory agencies.














                                       14
<PAGE>

Item 7 FINANCIAL STATEMENTS



                        HCNB BANCORP, INC. AND SUBSIDIARY


                                TABLE OF CONTENTS


                                                                   Page

Report of Independent Public Accountants                             16

Financial statements

  Consolidated Balance Sheets                                        17

  Consolidated Statements of Operations                              18

  Consolidated Statements of Stockholders' Equity                    19

  Consolidated Statements of Cash Flows                              20

Notes to Consolidated Financial Statements                        21-29










                                       15
<PAGE>

                    [Jameson & Associates, P.A. LETTERHEAD]


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of HCNB Bancorp, Inc.
Rockville, Maryland


We have audited the  accompanying  consolidated  balance  sheet of HCNB Bancorp,
Inc.  and  subsidiary  as  of  December  31,  1999  and  1998  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the year  ended  December  31,  1999  and the  period  from  February  24,  1998
(inception) to December 31, 1998. These  consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of HCNB Bancorp,  Inc.
and  subsidiary  as of  December  31,  1999 and 1998  and the  results  of their
operations  and their cash flows for the year ended  December  31,  1999 and the
period from  February 24, 1998  (inception)  to December 31, 1998 in  conformity
with generally accepted accounting principles.






/s/ Jameson & Associates, P.A.

Baltimore, Maryland
January 13, 2000



                                       16
<PAGE>
                                  HCNB BANCORP, INC. AND SUBSIDIARY

                                     CONSOLIDATED BALANCE SHEETS

                                  AS OF DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                1999                      1998
                                                            -----------                -----------
<S>                                                         <C>                        <C>
                                               ASSETS

Cash and cash equivalents:
  On-hand and due from banks                                $   562,648                $     8,341
  Federal funds sold                                          1,777,648                         --
Investment securities, available for sale                     4,000,000                         --
Loans receivable                                                 24,800                         --
Investment in Federal Reserve Board
  stock, at cost                                                180,000                         --
Accrued interest receivable                                      33,141                         --
Property and equipment, net                                     449,530                         --
Other assets, net                                                74,293                     39,422
                                                            -----------                -----------

         Total assets                                       $ 7,102,060                $    47,763
                                                            ===========                ===========

                                LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits
     Noninterest-bearing                                    $    81,190                $        --
         Interest-bearing                                       783,146                         --
  Accounts payable and accrued expenses                         131,136                    176,702
                                                            -----------                -----------

         Total liabilities                                      995,472                    176,702
                                                            -----------                -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, par value $0.01 per share,
    1,000,000 shares authorized, 0 shares
    issued and outstanding                                           --                         --
  Common stock, par value $0.01 per share,
    9,000,000 shares authorized, 700,213
    shares issued and outstanding                                 7,002                         --
  Additional paid-in capital                                  6,995,128                         --
  Accumulated deficit                                          (895,542)                  (128,939)
                                                            -----------                -----------

         Total stockholders' equity                           6,106,588                   (128,939)
                                                            -----------                -----------

         Total liabilities and stockholders'
           equity                                           $ 7,102,060                $    47,763
                                                            ===========                ===========
</TABLE>

                             The accompanying notes are an integral part
                                 of this consolidated balance sheet

                                               17
<PAGE>
                                HCNB BANCORP, INC. AND SUBSIDIARY

                              CONSOLIDATED STATEMENTS OF OPERATIONS

                              FOR THE YEAR ENDED DECEMBER 31, 1999
                      AND FOR THE PERIOD FROM FEBRUARY 24, 1998 (INCEPTION)
                                      TO DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                                1999                      1998
                                                              ---------                ---------
<S>                                                           <C>                      <C>
INTEREST INCOME
  Interest income on loans                                    $      46                $      --
  Interest income on investment securities                      119,176                       --
                                                              ---------                ---------

         Total interest income                                  119,222                       --
                                                              ---------                ---------

INTEREST EXPENSE
  On deposits                                                       703                       --
  Other                                                          54,041                       --
                                                              ---------                ---------
                                                                 54,744                       --
                                                              ---------                ---------

         Net interest income                                     64,478                       --

PROVISION FOR LOAN LOSSES                                            --                       --
                                                              ---------                ---------

         Net interest income after provision
       for loan losses                                           64,478                       --

SERVICE FEES AND CHARGES                                            444                       --
                                                              ---------                ---------

         Net interest income after services
       fees and charges                                          64,922                       --
                                                              ---------                ---------

OTHER OPERATING EXPENSES
  Salaries and benefits                                         360,343                       --
  Depreciation and amortization                                   1,728                       --
  Occupancy expense, data processing and
    supplies                                                    149,875                       --
  Marketing                                                      19,183                       --
  Professional fees                                             253,032                  109,380
  Regulatory expense                                             22,475                   17,600
  Other operating expenses                                       24,889                    1,959
                                                              ---------                ---------

         Total other operating expenses                         831,525                  128,939
                                                              ---------                ---------

         Loss before provision for income taxes                (766,603)                (128,939)

PROVISION FOR INCOME TAXES                                           --                       --
                                                              ---------                ---------

         Net loss                                             $(766,603)               $(128,939)
                                                              =========                =========

NET LOSS PER SHARE - BOTH BASIC AND DILUTIVE

         NET LOSS PER SHARE                                   $    1.09                       --

WEIGHTED AVERAGE SHARES OUTSTANDING                             700,213                       --
</TABLE>
                           The accompanying notes are an integral part
                                of these consolidated statements.

                                               18
<PAGE>
                                HCNB BANCORP, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                              FOR THE YEAR ENDED DECEMBER 31, 1999
                      AND FOR THE PERIOD FROM FEBRUARY 24, 1998 (INCEPTION)
                                      TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                  Additional
                                    Preferred   Common            Paid-in           Accumulated
                                    Stock       Stock             Capital           Deficit
                                    ----        ----------        ----------        ----------
<S>                                <C>         <C>               <C>              <C>
BALANCE, February 24, 1998          $ --        $       --        $       --        $       --

  Net loss                            --                --                --          (128,939)
                                    ----        ----------        ----------        ----------

BALANCE, December 31, 1998            --                --                --          (128,939)

  Net proceeds from issuance
    of common stock                   --             7,002         6,995,128                --

  Net loss                            --                --                --          (766,603)
                                    ----        ----------        ----------        ----------

BALANCE, December 31, 1999          $ --        $    7,002        $6,995,128        $ (895,542)
                                    ====        ==========        ==========        ==========

</TABLE>



                           The accompanying notes are an integral part
                               of these consolidated statements.

                                               19
<PAGE>
                              HCNB BANCORP, INC. AND SUBSIDIARY

                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                             FOR THE YEAR ENDED DECEMBER 31, 1999
                    AND FOR THE PERIOD FROM FEBRUARY 24, 1998 (INCEPTION)
                                     TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                1999                1998
                                                            -----------         -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                         <C>                 <C>
  Net loss                                                  $  (766,603)        $  (128,939)
  Adjustments to reconcile net loss to
    net cash from operating activities
         Provision for loan losses                                   --                  --
         Depreciation and amortization                            1,728                  --
         Effect of change in
           Accrued interest receivable                          (33,141)                 --
           Other assets                                         (34,871)                 --
           Accounts payable and accrued expenses                 74,434              56,702
                                                            -----------         -----------

                  Net cash from operating activities           (758,453)            (72,237)
                                                            -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of investment securities                         (4,000,000)                 --
  Purchase of Federal Reserve Board stock                      (180,000)                 --
  Refundable deposit                                                 --             (19,422)
  Loan principal disbursements                                  (24,800)                 --
  Purchase of property and equipment                           (451,258)                 --
                                                            -----------         -----------

                  Net cash from investing activities         (4,656,058)            (19,422)
                                                            -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Increase in savings deposits,                                 864,336                  --
  Proceeds from common stock offering                         7,002,130                  --
  Advance (repayments) of related party
    advances                                                   (120,000)            100,000
                                                            -----------         -----------

                  Net cash from financing activities          7,746,466             100,000
                                                            -----------         -----------

INCREASE IN CASH AND CASH EQUIVALENTS                         2,331,955               8,341

CASH AND CASH EQUIVALENTS, beginning
  of period                                                       8,341                  --
                                                            -----------         -----------

CASH AND CASH EQUIVALENTS, end of period                    $ 2,340,296         $     8,341
                                                            ===========         ===========

Interest paid                                               $    38,909         $        --

Income taxes paid                                           $        --         $        --
</TABLE>

                         The accompanying notes are an integral part
                              of these consolidated statements.

                                             20
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999

1. ORGANIZATION

HCNB,  Bancorp,  Inc. (the Company) was incorporated under the laws of the State
of Maryland on February 24, 1998,  primarily to hold all the outstanding  shares
of capital stock of a national bank.

Effective, September 1999, the Company completed an initial public offering (the
Offering)  in which it sold  700,213  shares of common  stock for $10 per share.
During 1999, the Company received net proceeds from the Offering of $7,002,130.

On December 14,  1999,  the Bank  received  authority  from the Federal  Deposit
Insurance  Corporation  (FDIC)  and  Office of the  Comtroller  of the  Currency
(O.C.C.) to begin banking operations.

As the Bank is a start-up operation, there can be no assurance that the Bank can
attract sufficient  depositors or issue sufficient quality loans to operate at a
profit.  The Bank is subject  to  certain  risks  inherent  in making  loans and
accepting deposits.

In addition to these risks, the Company is currently operating at a loss. Growth
of operations will be necessary for the Company to be able to cover overhead and
other operational costs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying  consolidated financial statements include the activity of HCNB
Bancorp, Inc. and its wholly-owned subsidiary, Harbor Capital National Bank. All
intercompany transactions have been eliminated in consolidation.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with generally accepted accounting  principles and conform to general
practices  within the banking  industry.  The Company's  primary  operations are
conducted by the Bank,  which  operates one branch in Rockville,  Maryland.  The
Bank is  principally  engaged in the  business of investing  in  commercial  and
consumer loans and attracting deposits.

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing  deposits in other banks with
original maturities of less than three months and Federal funds sold. Generally,
Federal funds are purchased and sold for one-day periods.

                                       21
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

Federal Reserve Board Stock

Federal Reserve Bank stock is carried at cost.

Investment Securities

Debt  securities  that the Bank has the  positive  intent and ability to hold to
maturity are classified as held-to-maturity and recorded at amortized cost. Debt
not  classified  as   held-to-maturity   and  equity   securities  with  readily
determinable fair values are classified as trading securities if bought and held
principally for the purpose of selling them in the near term. Trading securities
are  reported  at fair  value,  with  unrealized  gains and losses  included  in
earnings.   Investments  not  classified  as  held-to-maturity  or  trading  are
considered  available-for-sale  and are reported at fair value,  with unrealized
gains and losses excluded from earnings and reported as a separate  component of
stockholders'  equity,  net of tax effects.  A fair value is determined based on
bid prices  published in financial  newspapers or bid  quotations  received from
securities  dealers.  For purposes of computing  realized gains or losses on the
sales of  investments,  cost is determined by using the specific  identification
method.  Gains and losses on sales of securities  are  recognized at the time of
sale.  Premiums and discounts on investment and mortgage- backed  securities are
amortized  over the term of the  security  using  methods that  approximate  the
interest method.

Loans Receivable and Allowance for Loan Losses

Loans  receivable  are stated at the amount of unpaid  principal,  reduced by an
allowance  for  loan  losses  and  deferred  loan  fees.  Interest  on  loans is
calculated using the  simple-interest  method on principal  amounts  outstanding
each month.

The allowance for losses on loans is determined based on management's  review of
the loan  portfolio  and  analysis  of the  borrowers'  ability  to repay,  past
collection  experience,  risk  characteristics  of individual loans or groups of
similar  loans and  underlying  collateral,  current  and  prospective  economic
conditions  and  status  of  nonperforming  loans.  Loans are  charged  off when
considered, in the opinion of management, uncollectible.

Interest  on  potential  problem  loans is not accrued  when,  in the opinion of
management,  full collection of principal or interest is in doubt, or payment of
principal or interest has become 90 days past due.  Such  interest is considered
in  management's  determination  of the allowance for loan losses.  Any interest
received in excess of the amount previously accrued on such loans is recorded in
income in the period of recovery.

                                      22
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

Statement of  Financial  Accounting  Standards  (SFAS) No. 114,  "Accounting  by
Creditors for  Impairment of a Loan" (SFAS No. 114)  addresses the accounting by
creditors for  impairment of certain  loans.  It is generally  applicable to all
loans, except large groups of smaller balance homogeneous loans. It also applies
to loans that are  restructured  in a troubled  debt  restructuring  involving a
modification of terms, with limited exceptions.

A loan is considered  impaired when, based on current information and events, it
is probable  that a creditor will be unable to collect all amounts due according
to the  contractual  terms of the loan  agreement.  SFAS No. 114  requires  that
impaired  loans be measured  based on the present value of expected  future cash
flows  discounted  at the  loans'  effective  interest  rate,  or at the  loans'
observable  market  price or the fair  value  of the  collateral  if the loan is
collateral  dependent.  If the  measure  of the  impaired  loan is less than the
recorded investment in the loan, an impairment is recognized through a valuation
allowance.

Property and equipment

Property and equipment are stated at cost,  less  accumulated  depreciation  and
amortization.  Depreciation is computed using the straight-line  method over the
estimated  useful lives of the respective  assets.  Leasehold  improvements  are
depreciated over 40 years. Furniture and equipment are depreciated over 7 years.
Software is depreciated over 5 years.

Organizational Costs

In April 1998,  the  Accounting  Standards  Executive  Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5 (the
"SOP") regarding financial reporting on the costs of start-up activities.  Under
the SOP, organizational costs are considered start-up costs and, commencing with
fiscal years beginning after December 15, 1998, entities are required to expense
such  costs as they are  incurred.  As a result  of the  SOP,  the  Company  was
required to write off its organizational costs.






                                       23
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

Comprehensive Income

During 1997, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 130,  "Reporting  Comprehensive
Income" ("SFAS No. 130"),  which is effective for fiscal years  beginning  after
December 15, 1997.  This  statement  establishes  standards  for  reporting  and
display of  comprehensive  income and its  components.  Comprehensive  income is
defined as the change in equity of a business  enterprise  during a period  from
transactions  and other events and  circumstances  from  nonowner  sources.  The
Company  adopted this standard  effective  January 1, 1999. The Company does not
have any adjustment for comprehensive  income for 1999.  Comprehensive income is
the same as income reported in the accompanying statement of operations.

Segments of an Enterprise

During  1997,  the FASB issued SFAS No. 131,  "Disclosure  About  Segments of an
Enterprise  and Related  Information"  ("SFAS No. 131"),  which is effective for
fiscal years  beginning  after December 15, 1997.  SFAS No. 131 introduces a new
model for segment reporting,  called the "management  approach".  The management
approach  is based  on the way the  chief  operating  decision  maker  organizes
segments  within  a  company  for  making  operating   decisions  and  assessing
performance.  Reportable segments are based on products and services, geography,
legal  structure,  management  structure  --  any  manner  in  which  management
desegregates a company.  The management approach replaces the notion of industry
and  geographic  segments  in  current  FASB  standards.  The  Bank has only one
reportable segment and,  accordingly,  no additional disclosure pursuant to SFAS
No. 131 is necessary.

Derivatives

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities".  SFAS No. 133  established  accounting and
reporting  standards  requiring  that  every  derivative  instrument  (including
certain derivative  instruments  embedded in other contracts) be recorded in the
balance sheet as either an asset or liability  measured at its fair value.  SFAS
No. 133  requires  that  changes in the  derivative's  fair value be  recognized
currently in earnings  unless specific hedge  accounting  criteria are met. SFAS
No. 133 is effective for fiscal years  beginning  after June 15, 1999 and cannot
be applied retroactively.  The Bank will adopt SFAS No. 133 effective January 1,
2000.  The Bank  anticipates  that the  adoption of SFAS No. 133 will not have a
material effect on its financial condition or results of operations.

                                       24
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

Loan Origination Fees

Loan  origination  fees,  net of certain  direct  loan  origination  costs,  are
deferred and recognized as an adjustment to interest income over the life of the
loans.

Use of Estimates

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amount  of  assets  and  liabilities  and  disclosure  of
contingent assets and liabilities as of the date of the financial statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

3. INVESTMENT SECURITIES AVAILABLE FOR SALE

As of December 31, 1999, investment securities available for sale consist of the
following:
                                                      Cost       Market

FNMA - repurchase agreement,
  variable interest rate, due May 1, 2014          $4,000,000  $4,000,000
                                                   ==========  ==========

4. LOANS RECEIVABLE

As of December 31, 1999, loans receivable consist of:

           Unsecured consumer loans                      $24,800

           Less allowance for loan losses                     --
                                                         -------

           Loans receivable, net                         $24,800
                                                         =======

Outstanding loan commitments,  which primarily represent undisbursed proceeds on
personal lines of credit, were $7,200 as of December 31, 1999.

5.       PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31, 1999:

           Leasehold improvements                     $178,152
           Furniture and equipment                     273,106
                                                      --------
                                                       451,258
           Less accumulated depreciation                 1,728
                                                      --------
           Property and equipment, net                $449,530
                                                      ========

Depreciation expense for the year ended December 31, 1999 was $1,728.

                                       25
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

6. DEPOSITS

As of December 31, 1999, deposits consisted of:

                           Weighted
                           Average Rate at
                           December 31, 1999             Amount     Percent
                           -----------------             ------     -------
Checking accounts              -                        $ 81,190      9.4%
NOW accounts                  1.75%                      182,661     21.1%
Money market accounts         3.60%                      220,107     25.5%
Certificates of deposit       4.99%                      379,178     43.9%
Savings                       2.25%                        1,200       .1%
                                                        --------    ------
                                                        $864,336    100.0%
                                                        ========    ======


A schedule of maturities of deposits as of December 31, 1999 is as follows:

           No contractual maturity                       $485,158
           Maturity within one year                       377,678
           Maturity in one to five years                    1,500
                                                         --------
                                                         $864,336
                                                         ========

The aggregate amount of deposits,  each with a minimum  denomination of $100,000
or more, was approximately $365,328 as of December 31, 1999.


7. INCOME TAXES

The  reconciliation of the federal statutory to the actual income tax rate is as
follows:
                                                     1999             1998
                                                   --------         ------

Statutory federal income tax rate (35%)            $268,300         $ 45,100
State income tax benefit, net of federal
  income tax effect                                  38,300            6,400
Valuation allowances                               (306,600)         (51,500)
                                                   --------         --------

                  Total                            $     --         $     --
                                                   ========         ========

The Company has  recorded a 100%  valuation  allowance  against its deferred tax
asset as the Company is a start-up operation and it is more likely than not that
the deferred tax asset will not be realized.

                                       26
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)


The tax effect of temporary  differences  between the financial  reporting basis
and income tax basis of assets and  liabilities  relates to the  following as of
December 31, 1999:

         Deferred tax assets:
         Allowance for loan losses                       $     --
         Net operating loss carryforwards                 358,100
                                                         --------

                  Total gross deferred tax assets         358,100

         Less:  Valuation allowance                      (358,100)
                                                         --------

                  Net deferred tax asset                 $     --
                                                         ========


8. RELATED PARTY TRANSACTIONS

The insider founding  stockholders  that made advances to the development  stage
company are to be paid  interest in the amount of $14,508.  This  liability  was
accrued at December 31, 1999.

The officers and directors have deposits in the Company  approximating  $420,000
at December 31, 1999.


9. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of cash and cash  equivalents and accounts  payable  approximates
the carrying amount. For investment  securities,  fair value is determined using
quoted market prices.

Fair value of loans  receivable is estimated by  discounting  future cash flows,
taking into  consideration  future loan  losses,  using  current  rates at which
similar  loans would be made to borrowers  with similar  credit  ratings for the
same remaining maturities. For commitments to extend credit, the carrying amount
is a reasonable estimate of fair value. Management estimates that the fair value
of loans receivable is approximately $24,800 at December 31, 1999.

With respect to deposits, fair value of savings deposits,  money market accounts
and NOW accounts is the amount  payable on demand at the  reporting  date.  Fair
value of fixed  maturity term  accounts and  individual  retirement  accounts is
estimated  using  rates  currently  offered for  accounts  of similar  remaining
maturities.  Management  estimates that the fair value of deposits  approximates
the carrying amount as of December 31, 1999.


                                       27
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

10. REGULATORY MATTERS

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory - and possibly additional  discretionary - actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's financial  statements.  Under capital action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities and certain  off-balance  sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weighting and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum  amounts and ratios set forth in the table
below  of  total  and  Tier  I  capital  (as  defined  in  the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1999, that the Bank
meets all capital adequacy requirements to which it is subject.

Due to the Bank's recent  formation,  as of December 14, 1999,  the Bank has not
been categorized by the Office of the Comptroller of the Currency (O.C.C.) under
the  regulatory  framework for prompt  corrective  action.  To be categorized as
well-capitalized,  the Bank  must  maintain  minimum  total  risk-based,  Tier I
Risk-based,  Tier 1  leverage  ratios  as set forth in the  table.  There are no
conditions or events that management  believes would prevent the Bank from being
categorized as well-capitalized. The table below shows the regulatory capital as
of December 31, 1999.
















                                       28
<PAGE>
                        HCNB BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (CONTINUED)

                                                        For Capital Adequacy
                                      Actual                 Purposes
                                -------------------      ----------------
                                Amount        Ratio      Amount     Ratio
                                ------        -----      ------     -----
Total Capital
(to risk-weighted
 assets)                      $5,894,000     340.69%   $  138,000    8.0%

Tier I Capital
(to risk-weighted
 assets)                      $5,894,000     340.69%   $   69,000    4.0%

Tier I Capital
(to ending assets)            $5,894,000     84.15%    $  210,000    3.0%


                                         To Be Well-Capitalized Under
                                       Prompt Corrective Action Provisions
                                       -----------------------------------
                                            Amount                 Ratio
                                            ------                 -----
Total Capital
(to risk-weighted
 assets)                                 $  173,000                10.0%

Tier I Capital
(to risk-weighted
 assets)                                 $  104,000                 6.0%

Tier I Capital
(to ending assets)                       $  350,000                 5.0%

10.      LEASE

The Company entered into a lease agreement on December 23, 1998 to lease banking
facilities  and  offices  in  Rockville,  Maryland.  The lease is for a two year
period  with an option to renew for 8 years.  Rent  expense  was $87,213 for the
year ended December 31, 1999.

The rental commitment is as follows:

                  December 31, 2000                     $90,245





                                       29
<PAGE>
Item 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
       AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants.


                                    Part III

Item 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
       COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors and officers.  The current Board has seven (7)  directors.  All of the
Company's  current  directors  were  organizers of the Company and Bank and were
duly elected or  appointed to the Board and will  continue to serve as directors
until their successors are elected and qualified.


Set forth  below is a listing of all  directors  and  executive  officers of the
Company  and/or the Bank.  Except as expressly  indicated,  each person has been
engaged in his principal occupation for, at least, five years.

<TABLE>
<CAPTION>
Name                      Age              Position
<S>                       <C>              <C>
Michael J. Burke           50               Chairman/President, HCNB Bancorp;
                                                     Chairman, Harbor Capital National Bank

Chi Ping Chow              38               Director, HCNB Bancorp;
                                                     Director/Vice President, Harbor Capital National Bank

Michael L. Derr            49               Secretary, HCNB Bancorp;
                                                     Senior Vice President/Secretary, Harbor Capital National Bank

Harvey S. Fenster          61               Director, HCNB Bancorp;
                                                     Director, Harbor Capital National Bank

Wayne A. Harrison          50               Director, HCNB Bancorp
                                                     Director, Harbor Capital National Bank

Li-min Lee                 41               Director/Treasurer, HCNB Bancorp
                                                     Director/Treasurer-Cashier, Harbor Capital National Bank

William J. Olsen           49               Director/Vice President, HCNB Bancorp
                                                     Director/President, Harbor Capital National Bank

Robert K. Wang             45               Director, HCNB Bancorp
                                                     Vice Chairman, Harbor Capital National Bank
</TABLE>


                                       30
<PAGE>
Michael J. Burke serves as Chairman of the Board of directors  and  President of
HCNB  Bancorp,  and is  Chairman  of the Board of  directors  of Harbor  Capital
National  Bank.  Mr.  Burke is a certified  public  accountant  and has been the
president since 1996 and a principal  since 1971 of Yorke,  Burke and Lee, CPA's
P.A. Mr. Burke has been the president of East West  Communications,  Inc.  since
1989,  and the  president of Metro  Billing  Corporation  since 1993.  Mr. Burke
served as president of Quads Trust Company from 1995 to 1996, and was a director
from 1991 to 1996, and as the chief financial officer of The Parvus Company,  an
international security firm, from 1986 to 1999.

Chi Ping Penny Chow is Vice President and Business Development Officer of Harbor
Capital  National Bank. She is a director of HCNB Bancorp,  and is a director of
Harbor Capital National Bank. From 1996, until joining the organizing efforts of
Harbor Capital National Bank, Ms. Chow was the treasurer of the Development Bank
of  Singapore.  Ms.  Chow was a  senior  loan  processor  at  Fidelity  Mortgage
Services,  Inc.  from 1992 to 1994,  when she was  promoted  to the  position of
manager, which she held from 1994 to 1996.

Michael L. Derr is the Senior  Vice  President  and Chief  Operating  Officer of
Harbor Capital National Bank. He is secretary of HCNB Bancorp.  Prior to joining
the organizing  efforts of Harbor Capital  National Bank, Mr. Derr was president
of MLD Consulting,  Inc., a bank consulting  company,  which he founded in 1998.
Mr. Derr  previously  served as assistant  vice  president and vice president of
operations at The Bank of Glen Burnie from 1989 to 1998.  From 1972 to 1989, Mr.
Derr held various positions,  including vice president of operations, at Citizen
Savings Bank, FSB.

Harvey S. Fenster is a director of HCNB Bancorp and of Harbor  Capital  National
Bank. Dr. Fenster has practiced as an orthodontist  since 1964,  specializing in
orthodontics and dentofacial orthopedics. Dr. Fenster was an organizer, director
and vice  chairman  of the board of Kennedy  Bank & Trust  Company  from 1970 to
1982. In addition,  Dr. Fenster has been a director of East West Communications,
Inc. since 1985.

Wayne A. Harrison is a director of HCNB Bancorp and of Harbor  Capital  National
Bank.  Since 1983, Mr. Harrison has been the president of H.T.  Harrison & Sons,
Inc.,  a family  owned  roofing  and  building  contractor  which has been doing
business  in the  Washington,  D.C.  metropolitan  area for over 50  years.  Mr.
Harrison  has served as a director and  secretary  of East West  Communications,
Inc. since 1995.

Li-min Lee is Treasurer of HCNB  Bancorp.  She is a director of HCNB Bancorp and
of Harbor Capital National Bank. She is also the  Treasurer/Cashier of the Bank.
Ms. Lee is  currently a certified  public  accountant  and a principal of Yorke,
Burke and Lee, CPA's PA, where she has served as the vice president  since 1985.
Ms. Lee has served as vice president for Com-Tech International, Inc. since 1996
and as vice president of Crossover International, LLC since 1996.

William J. Olsen is the President and Chief Executive  Officer of Harbor Capital
National Bank, and Vice President of HCNB Bancorp. He is also a director of HCNB
Bancorp and of Harbor Capital  National  Bank. Mr. Olsen,  also the Bank's Chief
Lending Officer,  is a credit trained  commercial banker with more than 26 years
of experience acquired at money center, regional and community banks. His client
base has included  professionals  as well as small to middle market  businesses,
and  his  primary   responsibilities   were  to  build  full   service   banking
relationships.  He moved to the  Baltimore-Washington

                                       31
<PAGE>

metropolitan  area in 1993 and  most  recently  served  as a vice  president  at
Crestar  Bank,  managing  the Maryland  region's  Professional  & Executive  and
Not-for-Profit new business efforts.

Robert K. Wang is a member of the board of directors of HCNB Bancorp and Vice
Chairman of the Board of Harbor Capital National Bank. Mr. Wang is currently the
chairman and president of Comtech Micro Systems, Inc., which he founded in 1986.
Comtech Micro Systems, Inc. specializes in the manufacture and distribution of
micro computers and related products. The company also is an authorized
distributor for major brand personal computers and related products.

Each  director and officer has served in their  respective  positions  since the
formation of the Company and Bank.

There are no family relationships among directors and executive officers.

Nominees for election to Board of Directors of the Bank.  The following  persons
have been nominated to serve as additional  directors of Harbor Capital National
Bank.  Before  being  considered  further for  election,  each  nominee  must be
approved by the Office of the  Comptroller of the Currency,  the Federal Deposit
Insurance Corporation and the Federal Reserve Board.

Name                   Age              Position
----                   ---              --------

Craig S. Cohen         28               Director nominee,
                                            Harbor Capital National Bank

James M. Davin         54               Director nominee,
                                            Harbor Capital National Bank

Edward R. Kuan         41               Director nominee,
                                            Harbor Capital National Bank

George H. Lowe, Jr.    38               Director nominee,
                                            Harbor Capital National Bank

Stephen E. McGregor    50               Director nominee,
                                            Harbor Capital National Bank

Marc L. Meisel         28               Director nominee,
                                            Harbor Capital National Bank

James F. Whalen        38               Director nominee,
                                            Harbor Capital National Bank

Craig S. Cohen is  currently  the Vice  President  of Leasing  for Ronald  Cohen
Investments, a real estate investment company located in Bethesda,  Maryland. He
has held that  position  since 1993.  Mr. Cohen is also a  stockholder,  officer
and/or partner in several other real estate holding companies.

                                       32
<PAGE>

James M.  Davin  is the  President  of  Davin  Capital  Corporation,  a  private
investment  company,  and the General Partner of Davin Capital,  L.P., a private
investment  partnership.  He has held these  positions  since 1994.  Previous to
these  positions,  Mr. Davin held several  senior level  positons in  investment
banking companies,  including First Boston Corporation,  Drexel Burnham Lambert,
and Lehman Brothers. Mr. Davin served as Chairman and Vice Chairman of the Board
of Governors of the National  Association of Securities Dealers in 1987 and as a
board member from 1985 until 1988.

Edward R. Kuan is President of Belle Terre Development and Construction Company,
a real estate  development  firms, and of Monticello Homes Inc., a home building
company. Both are headquartered in Rockville,  Maryland.  Mr, Kuan is a licensed
building contractor.

George H. Lowe Jr. is the President and Chief Executive Officer of G. Lowe &
Associates, Ltd., a firm involved in government relations and financial
consulting. Mr. Lowe is also the CEO of Potomac RiverJet, Inc. and the General
Partner of Strategic Investment Holding, LLC, an investment firm. Previous to
these positions, Mr. Lowe was a commercial banking officer with First American
Bank and Maryland National Bank.

Stephen E. McGregor is currently self employed as a financial services advisor.
From 1997 until 1999, Mr. McGregor was the Executive Vice President and Chief
Financial Officer of Key Energy Group, Inc. and from 1995 to 1997 he was a
Senior Financial Advisor of James D. Wolfensohn, Inc., a New York investment
banking firms. Mr. McGregor is an attorney and has had extensive experience at
the federal government level having served in both the Executive and Legislative
branches.

Marc L. Meisel is the Chief Operating Officer of Worldwide Parking, Inc., an
international company headquartered in Rockville, Maryland. He has held this
position since 1993.

James F. Whalen is President and Owner of Investment Properties, Inc., a real
estate development company doing business in the Baltimore-Washington area

Section 16(a) Beneficial Ownership Reporting Compliance

No reports were filed under Section  16(a) of  Securities  Exchange Act of 1934.
The Company is not subject to the provisions of Section 16.

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<PAGE>

Item 10 EXECUTIVE COMPENSATION

For the year ended December 31, 1999, no compensation was paid by the Company to
any person serving as a director or officer.

The following table sets forth the compensation for Mr. Olsen, Chief Executive
Officer of the Bank. Mr. Burke, Chief Executive Officer of the Company, received
no compensation.

Name & Principal Position           Year      Salary         Bonus      Other
-------------------------           ----      ------         -----      -----

William J. Olsen                    1999      $90,269(1)     $10,000       0
President/CEO, Harbor Capital
     National Bank

(1) Of this salary amount, $9,500 was paid as an automobile allowance.

No other  executive  officer of the Bank had  compensation in excess of $100,000
for the fiscal year ended December 31, 1999.

HCNB Bancorp entered into a written  employment  agreement with Mr. Olsen. Under
the  Agreement,  Mr. Olsen served as Vice President of HCNB Bancorp at an annual
base salary of $100,000, subject to annual review. The agreement terminated with
the opening of Harbor  Capital  National Bank and the execution of an employment
agreement with the Bank.

Under the  Agreement  with Harbor  Capital  National  Bank,  Mr. Olsen serves as
President of Harbor Capital  National Bank at an annual base salary of $100,000,
subject to annual  review,  and an initial  term of three  years,  automatically
renewable for one year terms unless  written  notice is provided by either party
90 days before  expiration of a term.  However,  either Harbor Capital  National
Bank or Mr. Olsen may terminate  his  employment at any time upon 30 days' prior
written  notice,  and Mr. Olsen may be terminated  for cause at any time without
prior  notice.  Harbor  Capital  National  Bank also  provides  Mr. Olsen with a
monthly automobile allowance and benefits available to other employees.

Item 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following set forth information  regarding stock ownership of management and
holders of 5% or more of the Company's common stock as of February 29, 2000.


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<PAGE>

                                                 Amount & Nature
                  Name & Address                 Of Beneficial       Percent
Title of Class    Of Beneficial Owner            Ownership           of Class
--------------    -------------------            -------------       --------

Common Stock      Sy-Pien Chow                      66,950             9.56%
                  706 Ivy League Lane               (1)
                  Rockville, MD  20850

Common Stock      Warren Trepp                      69,300             9.90
                  590 Lakeshore Boulevard           (2)
                  Incline Village, NV  89450

Common Stock      Edward R. Kuan                    50,000             7.14
                  11047 Cedarwood Drive             Individual
                  Rockville, MD 20852

Common Stock      Carmelo Montalbano                50,107             7.16
                  5044 Millwood Lane, NW            (3)
                  Washington, DC  20016

Common Stock      Michael J. Burke                  20,020             2.86
                  21216 Christman Hill Terrace      (4)
                  Boyds, MD  20841

Common Stock      Chi Ping Chow                     17,700             2.53
                  706 Ivy League Lane               Individual
                  Rockville, MD  20852              (5)

Common Stock      Michael L. Derr                    1,000             0.14
                  242 Mill Church Road              IRA
                  Arnold, MD  21012

Common Stock      Harvey S. Fenster                 10,100             1.44
                  6316 Lenox Road                   (6)
                  Bethesda, MD  20817

Common Stock      Wayne A. Harrison                 21,094             3.01
                  12709 High Meadow Road            Individual
                  North Potomac, MD  20878

Common Stock      Li-Min Lee                        41,480             5.92
                  5 Maplecrest Court                (7)
                  Potomac, MD  20854


                                       35
<PAGE>

Common Stock      William J. Olsen                     500             0.07
                  8501 High Timber Court            (8)
                  Ellicott City, MD  21043

Common Stock      Robert K. Wang                    59,300             8.47
                  9300 Inglewood Court              (9)
                  Potomac, MD  20854

                  Officers and Directors           171,194            24.45%
                  As a group (8 persons)


(1)  Total includes 17,700 shares held by daughter, Chi Ping Chow, and 5,000
     shares held by daughter Chih Ching Chow in trust. All other shares are held
     individually.
(2)  Stock is held in two separate trusts, 34,650 shares in each, in which Mr.
     Trepp is the sole trustee.
(3)  Total includes 19,107 shares held in Mr. Montalbano's SEP IRA. All other
     shares are held individually.
(4)  Total includes 16,500 shares held individually; 4,020 shares held in Mr.
     Burke's IRA; and, 5,000 shares held in a trust in which Mr. Burke is a
     trustee.
(5)  In addition to the shares held individually, 44,250 shares are held by Ms.
     Chow's father, Sy-Pien Chow and 5,000 shares are held by her sister, Chih
     Ching Chow, in trust.
(6)  Total includes 100 shares held individually and 10,000 held by Dr.
     Fenster's pension plan.
(7)  Total includes 3,650 shares held individually; 3,080 shares held in Ms.
     Lee's IRA; and 34,750 shares held jointly with others. In addition, 5,250
     shares are owned by Ms. Lee's husband, Dar-Ning Kung, in his IRA and 520
     shares are held by her son, Albert Kung.
(8)  Total includes 200 shares held individually and 300 shares held jointly.
(9)  Total includes 7,300 shares held individually and 52,000 shares held in a
     trust with Mr. Wang as sole trustee. In addition, Mr. Wang's sister,
     Jennifer Wang, holds 10,000 shares individually.






                                       36
<PAGE>

In addition to the  directors  and  executive  officers  noted above,  there are
currently  seven  nominees  for  election to the Board of Directors of the Bank.
Their ownership interests in the Company are as follows:

Common Stock      Craig S. Cohen                     5,834             0.83
                  6500 Rock Spring Dr. #302          Individual
                  Bethesda, MD  20817

Common Stock      James M. Davin                         0             0.00
                  630 Fifth Avenue, #1965
                  New York, NY  10111

Common Stock      Edward R. Kuan                    50,000             7.14
                  11047 Cedarwood Drive             Individual
                  Rockville, MD  20852

Common Stock      George H. Lowe, Jr.                  500             0.07
                  1211 Connecticut Ave., NW         Individual
                  Suite 805                         (10)
                  Washington, DC  20036

Common Stock      Stephen E. McGregor                    0             0.00
                  2329 Tilden Place, NW
                  Washington, DC  20008

Common Stock      Marc L. Meisel                    17,500             2.50
                  6000 Executive Blvd., 7th Floor   Individual
                  Rockville, MD  20852

Common Stock      James F. Whalen                   10,000             1.43
                  807I Rockville Pike               Individual
                  Rockville, MD  20852              (11)


(10) In addition, 4,500 shares are held by Strategic Investment Holdings, LLC,
     of which Mr.Lowe is the President.
(11) In addition, 1,500 shares are held by I.P. Associates, LLC, of which Mr.
     Whalen is the President; 2,500 shares are held by his father, C.M. Whalen;
     and 2,500 shares are held in a trust where is father is the sole trustee.


Item 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Bank has had, and expects to have in the future, banking transactions in the
ordinary  course of business with the Company's and Bank's  directors,  officers
and employees and their associates. In the past, all such transactions have been
on  the  same  terms,  including  interest  rates,   maturities  and  collateral
requirements as those  prevailing at the time for comparable  transactions  with
non-affiliated


                                       37
<PAGE>

persons  and did not  involve  more than the normal  risk of  collectibility  or
present other unfavorable features.

During the  organization  of the Company and the Bank, the organizing  directors
made  advances to the  Company in the  aggregate  amount of $555,000  which were
repaid as  subscriptions  for common stock in the offering.  These advances were
made under a founders loan  agreement  whereby the  organizers  would receive an
interest  payment at the rate of 5.00% per  annum.  This  amount was  carried as
interest payable and booked as an expense as of December 31, 1999.

In  addition,  one  organizing  director  made an advance to the  Company in the
amount of  $20,000  which was  repaid  from the  proceeds  of the  offering.  No
interest was paid on this loan. Certain  organizing  directors also guaranteed a
bank line of credit to the  Company  in an  aggregate  amount of  $150,000.  All
advances from this line were repaid from the offering proceeds.

Item 13 EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit No.   Description of Exhibits

         3(i)     Articles  of  Incorporation  of the Company  (incorporated  by
                  reference to Exhibit 3.1 of the Registration Statement on Form
                  SB-2, File No. 333-73385)

         3(ii)    Bylaws of the Company  (incorporated  by  reference to Exhibit
                  3.2 of the  Registration  Statement  on Form  SB-2,  File  No.
                  333-73385)

         10.1     Employment  Agreement  between  William  J. Olsen and the Bank
                  (incorporated by reference to Exhibit 10.3 of the Registration
                  Statement on Form SB-2, File No. 333-73385)

         10.2     Employment  Agreement  between  Michael  L.  Derr and the Bank
                  (incorporated by reference to Exhibit 10.4 of the Registration
                  Statement on Form SB-2, File No. 333-73385)

         10.3     Lease Agreement between HCNB Bancorp,  Inc. and Federal Realty
                  Investment Trust (incorporated by reference to Exhibit 10.5 of
                  the Registration Statement on Form SB-2, File No. 333-73385).

         21       Subsidiaries of the Registrant  (incorporated  by reference to
                  Exhibit 21.1 of the Registration  Statement on Form BS-2, File
                  No. 333-73385).

         27       Financial Data Schedule

(b) No reports on Form 8-K were filed by the Company  during the fourth  quarter
of the year ended December 31, 1999.


                                       38
<PAGE>
                                   Signatures

In  accordance  with  Section  13 or 15(d) of the  Securities  Act of 1934,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                        HCNB Bancorp, Inc.
                                        ------------------
                                        (Registrant)

                                        By: /s/ Michael J. Burke
                                            ---------------------------------
                                            Michael J. Burke.
                                            Chairman of the Board/President

Date:  March 27, 2000

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed  below by the  following  persons  on  behalf  of the  registrant  and in
capacities and on the dates indicated.

Signature                     Title                             Date

/s/ Michael J. Burke          Chairman of the Board/President   March 27, 2000
-----------------------       (Principal Executive Officer)
Michael J. Burke

/s/ Chi Ping Chow             Director                          March 27, 2000
-----------------------
Chi Ping Chow

/s/ Harvey S. Fenster         Director                          March 27, 2000
-----------------------
Harvey S. Fenster

/s/ Wayne A. Harrison         Director                          March 27, 2000
-----------------------
Wayne A. Harrison

/s/ Li-Min Lee                Director/Treasurer                March 27, 2000
-----------------------
Li-Min Lee

/s/ William J. Olsen          Director/Vice President           March 27, 2000
-----------------------       (Principal Financial Officer
William J. Olsen              and Principal Accounting
                              Officer)

/s/ Robert K. Wang            Director                          March 27, 2000
-----------------------
Robert K. Wang



                                       39
<PAGE>

           SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
         PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING
                                     ISSUERS


HCNB  Bancorp,  Inc. has not sent and will not send to its  security  holders an
annual report other than this Annual Report on Form 10-KSB.  HCNB Bancorp,  Inc.
intends to provide proxy materials to its security holders on or about April 28,
2000.  A copy of such  materials  have  been  furnished  to the  Securities  and
Exchange Commission for its information, and HCNB Bancorp, Inc. understands that
such materials will not be considered to be filed or subject to the  liabilities
of Section 18 of the Exchange Act.


















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