Try something like this

sb.Append("<LIST>");

int i=0;

while (sdr.Read())

{

string node1 = (sdr["STATE"].ToString());

string node2 = (sdr["Subcat1"].ToString());

string node3 = (sdr["Subcat2"].ToString());

if(i==0)

sb.Append("<STATE NAME=\"" + node1 + "\" >");

i=1;

sb.Append("<Subcat1 NAME=\"" + node2 + "\" >");

sb.Append("<Subcat2 NAME=\"" + node3...