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

                                    FORM 10-Q



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

For Quarter Ended                             Commission File No.   0-16761
  September 30, 2002

                           HIGHLANDS BANKSHARES, INC.


           West Virginia                                       55-0650793
----------------------------------                        -------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                           Identification No.)

                                 P.O. Box 929
                         Petersburg, West Virginia 26847

                                (304) 257-4111
                          --------------------------
             (Registrant's Telephone Number, Including Area Code)



      Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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
requirement for the past 90 days. Yes ..X. No ....


      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

                Class                       Outstanding at September 30, 2002
------------------------------------------  ---------------------------------
Common Stock, par value - $5                              1,436,874 shares


<PAGE> 1

                           HIGHLANDS BANKSHARES, INC.

                                      INDEX


                                                                        Page

PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Statements of Income - Nine Months
          Ended September 30, 2002 and 2001                               2

          Consolidated Statements of Income - Three Months
          Ended September 30, 2002 and 2001                               3

          Consolidated Balance Sheets - September 30, 2002 and
          December 31, 2001                                               4

          Consolidated Statements of Changes in Stockholders'
          Equity - Nine Months Ended September 30, 2002 and 2001          5

          Consolidated Statements of Cash Flows - Nine Months
          Ended September 30, 2002 and 2001                               6

          Notes to Consolidated Financial Statements                      7

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations                   9

Item 3.   Evaluation of Disclosure of Controls and Procedures            19


PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                              20

Item 2.   Changes in Securities                                          20

Item 3.   Defaults upon Senior Securities                                20

Item 4.   Submission of Matters to a Vote of Security Holders            20

Item 5.   Other Information                                              20

Item 6.   Exhibits and Reports on Form 8K                                20


          SIGNATURES                                                     21

          CERTIFICATION OF CHIEF EXECUTIVE OFFICER                       22
          CERTIFICATION OF EXECUTIVE OFFICER                             23
          CERTIFICATION OF CHIEF FINANCIAL OFFICER                       25



<PAGE> 2


Part I  Financial Information
Item 1  Financial Statements
                           HIGHLANDS BANKSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
               (In Thousands of Dollars Except Per Share Amounts)

                                                           Nine Months Ended
                                                             September 30
                                                          2002        2001
                                                       ----------  ----------
Interest Income
   Interest and fees on loans                           $ 12,974    $13,476
   Interest on federal funds sold                            126        363
   Interest on time deposits                                  85        183
   Interest and dividends on investment securities
     Taxable                                                 913      1,101
     Nontaxable                                              154        120
                                                         -------     ------

   Total Interest Income                                  14,252     15,243
                                                         -------     ------

Interest Expense
   Interest on time deposits over $100,000                 1,573      1,944
   Interest on other deposits                              4,161      5,492
   Interest on borrowed money                                154        162
                                                         -------     ------

   Total Interest Expense                                  5,888      7,598
                                                         -------     ------

Net Interest Income                                        8,364      7,645

Provision for Loan Losses                                    470        390
                                                         -------     ------

Net Interest Income After Provision for Loan Losses        7,894      7,255
                                                         -------     ------

Noninterest Income
   Service charges                                           431        436
   Other                                                     461        388
                                                         -------     ------

   Total Noninterest Income                                  892        824
                                                         -------     ------

Noninterest Expense
   Salaries and employee benefits                          3,116      2,874
   Equipment and occupancy expense                           780        729
   Data processing                                           423        398
   Other                                                   1,498      1,315
                                                         -------     ------

Total Noninterest Expense                                  5,817      5,316
                                                         -------     ------

Income Before Income Taxes                                 2,969      2,763

Provision for Income Taxes                                   956        942
                                                         -------     ------

Net Income                                              $  2,013    $ 1,821
                                                         =======     ======

Per Share Data

   Net Income                                           $   1.38    $  1.21 (1)
                                                         =======     ======

   Cash Dividends                                       $    .38    $   .34 (1)
                                                         =======     ======


Weighted Average Common Shares Outstanding             1,461,792  1,505,694 (1)
                                                       =========  =========

(1)Restated to reflect the stock split which was distributed to stockholders of
   record as of August 1, 2002.

       The accompanying notes are an integral part of these statements.


<PAGE> 3


                           HIGHLANDS BANKSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
               (In Thousands of Dollars Except Per Share Amounts)

                                                         Three Months Ended
                                                            September 30
                                                          2002        2001
                                                       ----------  ----------
Interest Income
   Interest and fees on loans                           $  4,418    $ 4,553
   Interest on federal funds sold                             30        115
   Interest on time deposits                                  20         51
   Interest and dividends on investment securities
     Taxable                                                 290        366
     Nontaxable                                               51         41
                                                         -------     ------

   Total Interest Income                                   4,809      5,126
                                                         -------     ------

Interest Expense
   Interest on time deposits over $100,000                   452        668
   Interest on other deposits                              1,298      1,837
   Interest on borrowed money                                 51         57
                                                         -------     ------

   Total Interest Expense                                  1,801      2,562
                                                         -------     ------

Net Interest Income                                        3,008      2,564

Provision for Loan Losses                                    210        135
                                                         -------     ------

Net Interest Income After Provision for Loan Losses        2,798      2,429
                                                         -------     ------

Noninterest Income
   Service charges                                           158        146
   Other income                                              170        135
                                                         -------     ------

   Total Noninterest Income                                  328        281
                                                         -------     ------

Noninterest Expense
   Salaries and employee benefits                          1,050        986
   Equipment and Occupancy expense                           263        259
   Data processing expense                                   137        136
   Other                                                     550        447
                                                         -------     ------

   Total Noninterest Expense                               2,000      1,828
                                                         -------     ------

Income Before Income Taxes                                 1,126        882

Provision for Income Taxes                                   375        302
                                                         -------     ------

Net Income                                              $    751    $   580
                                                         =======     ======

Per Share Data

   Net Income                                           $    .52    $   .39 (1)
                                                         =======     ======

   Cash Dividends                                       $    .13    $   .11 (1)
                                                         =======     ======

Weighted Average Common Shares Outstanding             1,436,874  1,505,694 (1)
                                                       =========  =========

(1)Restated to reflect the stock split which was distributed to stockholders of
record as of August 1, 2002.

       The accompanying notes are an integral part of these statements.


<PAGE> 4


                           HIGHLANDS BANKSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS
                            (In Thousands of Dollars)

                                                    September 30,  December 31,
                                                        2002          2001
                                                    ------------ ------------
     ASSETS

Cash and due from banks - noninterest bearing         $  7,638    $  6,492
Time deposits in other banks                             3,367       6,334
Federal funds sold                                       8,249      13,284
Securities held to maturity (note 2)                     1,370       1,603
Securities available for sale (note 3)                  26,360      29,460
Other investments (note 4)                                 859         792
Loans, net of unearned interest (note 5)               225,080     205,469
   Less allowance for loan losses (note 6)              (1,781)     (1,603)
Bank premises and equipment                              6,916       7,056
Interest receivable                                      1,988       1,818
Investment in insurance contracts (note 7)               5,237       5,100
Other assets                                             1,284         973
                                                       -------     -------

   Total Assets                                       $286,567    $276,778
                                                       =======     =======

     LIABILITIES

Deposits:
   Noninterest bearing
     Demand deposits                                  $ 34,057    $ 29,279
   Interest bearing
     Money market and checking                          19,892      17,936
     Money market savings                               16,022      11,407
     Savings                                            29,863      26,782
     Time deposits over $100,000                        43,156      45,182
     All other time deposits                           108,869     111,456
                                                       -------     -------

   Total Deposits                                      251,859     242,042

Borrowed money                                           4,157       4,523
Accrued expenses and other liabilities                   1,958       1,903
                                                       -------     -------

   Total Liabilities                                   257,974     248,468
                                                       -------    --------

   STOCKHOLDERS' EQUITY

Common stock ($5 par value, 3,000,000 shares
   authorized, 1,436,874 shares issued
   at September 30, 2002 and 546,764 shares
   issued at December 31, 2001) (Note 8)                 7,184       2,734
Surplus                                                  1,662       1,662
Retained earnings                                       19,425      24,624
Accumulated other comprehensive income                     322         283
Treasury stock (at cost, 44,866 shares in 2001)                       (993)
                                                       -------     --------

   Total Stockholders' Equity                           28,593      28,310
                                                       -------     -------

   Total Liabilities and Stockholders' Equity         $286,567    $276,778
                                                       =======     =======


       The accompanying notes are an integral part of these statements.



<PAGE> 5

<TABLE>

                           HIGHLANDS BANKSHARES, INC.
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                            (In Thousands of Dollars)

<CAPTION>

                                                                       Accumulated
                                                                          Other
                              Common           Treasury  Retained    Comprehensive
                              Stock   Surplus   Stock    Earnings         Income       Total
<S>                         <C>      <C>      <C>        <C>         <C>             <C>

Balance, December 31, 2001  $ 2,734  $ 1,662  $  (993)   $  24,624   $     283       $ 28,310
   Comprehensive Income
   Net Income                                                2,013                      2,013
   Net change in
     unrealized
     appreciation on
     investment
     securities available
     for sale,
     net of taxes                                                           39             39
                             -----   ------    ------      ------        ------        ------

   Total Comprehensive
     Income                                                                             2,052

   Treasury stock
     repurchased                               (1,217)                                 (1,217)
   Treasury stock retired      (340)            2,210       (1,870)
   Stock split effected
     in the form
     of dividend              4,790                         (4,790)
   Cash dividends paid                                        (552)                      (552)
                              -----   ------   ------       -------      ------        -------

   Balances, September 30,
     2002                   $ 7,184  $ 1,662  $           $ 19,425    $    322       $ 28,593
                              =====   ======   ======       ======      ======        ======


                                                                        Accumulated
                                                                           Other
                             Common           Treasury   Retained     Comprehensive
                             Stock    Surplus   Stock     Earnings       Income         Total

Balance, December 31, 2000  $ 2,734  $ 1,662  $  (993)    $ 22,826    $     39       $ 26,268
   Comprehensive Income
   Net Income                                                1,821                      1,821
   Net change in
     unrealized
     appreciation on
     investment
     securities available
     for sale,
     net of taxes                                                          312            312
                             -----   ------    ------      ------        ------         ------

   Total Comprehensive
     Income                                                                             2,133

   Cash dividends paid                                        (512)                      (512)
                             -----   ------    ------       ------       ------        ------

   Balances, September 30,
     2001                  $  2,734  $ 1,662  $  (993)    $ 24,135     $   351       $ 27,889
                           ========   ======   ======      =======      ======        =======

</TABLE>

       The accompanying notes are an integral part of these statements.


<PAGE> 6


                           HIGHLANDS BANKSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In Thousands of Dollars)

                                                          Nine Months Ended
                                                            September 30
                                                          2002        2001
                                                       ----------  ----------
Cash Flows from Operating Activities:
   Net income                                           $  2,013    $ 1,821
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation                                          392        383
       Net securities amortization                           227         70
       Provision for loan losses                             470        390
       Income from insurance investments                    (137)      (145)
       Increase in interest receivable                      (170)      (197)
       Decrease in other assets                             (286)       (89)
       Increase in accrued expenses                           55        926
                                                         -------     ------

   Net Cash Provided by Operating Activities               2,564      3,159
                                                         -------     ------

Cash Flows from Investing Activities:
   Net change in time deposits in other banks              2,967        339
   Net change in federal funds sold                        5,035     (9,140)
   Proceeds from maturities of securities
     available for sale                                    6,817     15,289
   Proceeds from maturities of securities
     held to maturity                                        232        603
   Purchase of securities available for sale              (3,876)   (18,767)
   Purchase of other investments                             (67)       (29)
   Net change in loans                                   (19,903)   (11,907)
   Purchase of property and equipment                       (305)      (711)
                                                         --------    ------

   Net Cash Consumed by Investing Activities              (9,100)   (24,323)
                                                         --------   -------

Cash Flows from Financing Activities:
   Net change in time deposits                            (4,613)    19,250
   Net change in other deposits                           14,430      1,718
   Dividends paid in cash                                   (552)      (512)
   Purchase of treasury stock                             (1,217)
   Repayment of borrowed money                              (366)      (450)
   Advances of borrowed money                                           600
                                                         -------     ------

   Net Cash Provided by Financing Activities               7,682     20,606
                                                         -------     ------

Net Increase (Decrease) in Cash and
   Cash Equivalents                                        1,146       (558)

Cash and Cash Equivalents, Beginning of Period             6,492      7,062
                                                         -------     ------

Cash and Cash Equivalents, End of Period                $  7,638    $ 6,504
                                                         =======     ======

Supplemental Disclosures:
   Cash Paid For:
     Income taxes                                       $    956    $ 1,392
     Interest                                              6,078      6,997

       The accompanying notes are an integral part of these statements.



<PAGE> 7


                           HIGHLANDS BANKSHARES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1    ACCOUNTING PRINCIPLES:

             The consolidated  financial  statements conform to generally
          accepted accounting principles and to general industry practices. In
          the  opinion  of  management,  the  accompanying
          unaudited consolidated financial  statements  contain  all
          adjustments (consisting of only normal recurring accruals)
          necessary to present fairly the financial position as of September 30,
          2002, and the results of operations for the three and nine month
          periods ended September 30, 2001 and 2002. The notes included herein
          should be read in conjunction with the notes to financial statements
          included in the 2001 annual report to stockholders of Highlands
          Bankshares, Inc.

             The Company does not expect the anticipated adoption of any newly
          issued accounting standards to have a material impact on future
          operations or financial position.


NOTE 2    SECURITIES HELD TO MATURITY:

             The amortized cost and fair value of securities held to maturity as
          of September 30, 2002 and December 31, 2001, are as follows:

                                         2002                 2001
                                 --------------------   ------------------
                                   Amortized   Fair     Amortized    Fair
                                     Cost      Value       Cost      Value

          Obligations of states and
            political subdivisions  $ 1,366  $ 1,476      $1,597   $ 1,633
          Mortgage-backed securities      4        4           6         6
                                    -------   ------      ------   -------

            Total                   $ 1,370  $ 1,480      $1,603   $ 1,639
                                     ======   ======       =====    ======


NOTE 3    SECURITIES AVAILABLE FOR SALE:

             The amortized cost and fair value of securities available for sale
          as of September 30, 2002 and December 31, 2001, are as follows:

                                         2002                 2001
                                ----------------------  -------------------
                                   Amortized   Fair     Amortized     Fair
                                     Cost      Value       Cost      Value

          US Treasury securities
            and obligations of
            US Government
            corporations and
            agencies                $15,526  $15,766      $16,123   $16,432
          Obligations of states and
            political subdivisions    5,417    5,519        6,319     6,380
          Mortgage-backed securities  4,885    5,044        6,527     6,609
          Other investments              34       31           42        39
                                     ------   ------       -----    ------

            Total                   $25,862  $26,360      $29,011   $29,460
                                     ======   ======       ======   ======


<PAGE> 8


                           HIGHLANDS BANKSHARES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4    OTHER INVESTMENTS

            Other investments totaling $ 859,000 include investments in the
          Federal Home Loan Bank and other governmental  entities whose
          transferability is restricted.


NOTE 5    LOANS OUTSTANDING:

             A summary of loans outstanding as of September 30, 2002 and
          December 31, 2001, is as follows:

                                                        2002         2001
                                                        ----         ----

          Commercial                                  $ 14,154    $ 16,072
          Real estate - construction                     6,092       3,868
                   - mortgages                         148,663     129,361
          Consumer installment                          56,250      56,366
                                                       -------     -------

            Total                                      225,001     205,667
          Unearned interest                                (79)       (198)
                                                       --------    --------

            Net loans outstanding                     $225,080    $205,469
                                                       =======     =======


NOTE 6    ALLOWANCE FOR LOAN LOSSES:

             A summary of transactions in the allowance for loan losses for the
          nine months ended September 30, 2002 and 2001, follows:

                                                        2002         2001
                                                        ----         ----

          Balance, beginning of period                $  1,603    $  1,493
          Provisions charged to operating expenses         470         390
          Loan recoveries                                  117         173
          Loan charge-offs                                (409)       (504)
                                                       --------    -------

            Balance, end of period                    $  1,781    $  1,552
                                                       =======     =======


NOTE 7    INVESTMENT IN INSURANCE CONTRACTS:

             Investment in insurance contracts consist of single premium
          insurance contracts which have the dual purposes of providing a rate
          of return to the Company which approximately equals the Company's
          average cost of funds and providing life insurance and retirement
          benefits to employees. The carrying value of these investments was
          $5,237,000 at September 30, 2002 and $5,100,000 at December 31, 2001.


NOTE 8    CAPITAL STOCK TRANSACTIONS:

             In the second quarter of 2002, the Company repurchased stock from
          unrelated parties in two separate transactions. Total shares
          repurchased were 22,940 at a cost of $1,217,000.

             In June 2002, the Company approved a stock split effected in the
          form of a dividend which was distributed September 3, 2002 to
          shareholders of record as of August 1, 2002. This transaction resulted
          in an increase of shares outstanding from 478,958 as of June 30, 2002
          to 1,436,874 as of September 30, 2002. Earnings per share and
          dividends per share calculations for prior periods have been adjusted
          for this stock dividend. The Board of Directors also voted to retire
          67,806 shares of treasury stock in the third quarter of 2002.


<PAGE> 9



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


Overview

    Year to Date Operations

    The Company's year to date net income was $2,013,000, an increase of 10.52%
compared to 2001. Earnings per share were $1.38 for 2002 compared to $1.21 per
share for 2001. The Company's annualized return on average equity was 9.47% in
2002 compared to 8.97% for 2001. Return on average assets was .96% for 2002 and
..93% for 2001, respectively.

    The increase in earnings was due primarily to a 9.44% increase in net
interest income. A decrease of 6.50% in interest income was offset by a 22.54%
decrease in interest expense. Net interest income after provision for loan loss
grew 8.80% over 2001. The provision for loan losses of $470,000 represents an
increase of $90,000 over the same period in 2001. This is reflective of a 9.54%
overall increase in loan balances from December 31, 2001 to September 30, 2002
and changes in the levels of employment in the Company's service area.

    Noninterest  income  increased 8.27% due largely to an increase in
insurance activity and an increase in fees earned by Highlands Bankshares Trust
Company. Noninterest expenses increased 9.42%. Costs of salaries and benefits
increased 8.44% due to a 2.8% increase in full time equivalent employees and
customary salary increases.

    Quarter Ending September 30 Operations

    Overall net income for the quarter ending September 30, 2002 increased
29.46% to $751,000 when compared to 2001 income of $580,000. Earnings per share
for the third quarter of 2002 were $.52 versus $.39 in 2001 (a 36.22% increase).
An increase of 15.17% in net interest income, driven by a 32.34% reduction in
interest expense on time deposits over $100,000, and an increase in noninterest
income of 16.78% was offset in part by an increase in operating expenses of
9.39% The increase in earnings per share was also influenced by the repurchase
of 22,940 shares of treasury stock during 2002.

Net Interest Income

    Year to Date Operations

    Overall, increases in loan balances coupled with declines in interest
expense offset the decrease in yields on earning assets to contribute to a
taxable equivalent net interest margin increase of 9.59% when compared to the
first nine months of 2001.

    The Company's net yield on interest earning assets on a tax equivalent basis
was 4.34% through the third quarter of 2002 compared to 4.25% through the third
quarter of 2001.  The volume of all lending has increased substantially,
with Earning Assets rising 3.56% from December 31, 2001 to September 30, 2002
and Average Earning Assests rising 7.74% over 2001 averages. Rates on all types
of loans declined from the same period in 2001 as rates industry wide declined.
Commercial rates decreased from 9.32% in 2001 to 7.07% in 2002 due to the
Federal Reserve Bank ("The Fed") actions in 2001. Rates on real estate loans
declined 99 basis points and rates on consumer loans declined 43 basis points
and are reflected in 2002 income within the year.



<PAGE> 10


    Through the third quarter of 2002, the Company saw an overall decrease of
115 basis points in yields on investment  securities compared to 2001
results. The decrease is reflective of recent reinvestments at lower rates.
Average investments in securities were larger for the nine months ended
September 30, 2002 in comparison to the same period last year as deposit growth
during the early part of 2002 outpaced loan demand which created excess cash to
invest. The Company later funded loan growth through reductions in fed
funds sold. Interest rates earned on fed funds sold declined 256 basis points as
the Fed cut rates 11 times in 2001 by one-quarter to one-half point each time.
Average interest bearing deposits at other banks fell 11.47% over the same
period in 2001. This has occurred as the Company has used maturing certificates
to fund loan growth and deposits of subsidiaries previously held in unrelated
institutions have been deposited with other Company subsidiaries.

    Customers appear reluctant to commit to long-term,  fixed rates on
certificates when rates are at historical lows and instead are placing their
deposits in accounts that are highly liquid and will allow them to respond
quickly when rates increase. Noninterest bearing deposits grew 16.32% from
December 31, 2001 to September 30, 2002, while interest bearing deposits grew
2.37% over the same time period.

    Interest rates paid on transaction and savings accounts declined a combined
90 basis points due to lower rates resulting from the Fed actions. The Company
experienced an 8.13% growth in average interest bearing deposits over the same
time period in 2001. Growth in average balances of money market and savings
accounts was 17.31% while time deposits grew at a more moderate 4.81%. A 149
basis point decrease in rates paid on time deposits between 2001 and 2002
reflects the declining rate environment throughout 2002.

    Beginning in 1999, the Company begin borrowing from the FHLB at fixed rates
of interest and has loaned these monies to customers on a fixed rate basis. The
Company  anticipates  continuing to use this approach as a mechanism to
provide long-term financing to customers and limit market rate risk. In
addition, monies were borrowed on a short-term, variable rate basis to fund the
renovation and expansion at the Capon Valley Bank. In the third quarter of 2002,
this variable rate debt was refinanced on a 10 year fixed rate loan at 3.94%.

    Quarter Ending September 30 Operations

    In 2002, the Company's net interest income on a tax equivalent basis was
$3,038,000 and the taxable equivalent net interest yield was 4.62%. This was an
increase of 17.34% over the third quarter of 2001. The yield on average earning
assets fell 82 basis points while the rates paid on average balances of interest
bearing liabilities fell 171 basis points compared to last year. Average earning
assets increased 4.49%. Average balances of interest bearing liabilities grew
7.66%. Yields on loans fell 114 basis points and the yield on fed funds was cut
nearly in half, falling from 3.31% in the third quarter of 2001 to 1.66% during
the same period this year. Outpacing the decline in asset yields was a decrease
in average rates paid on interest bearing liabilities from 4.92% in 2001 to
3.21% in 2002. The decrease was primarily the result of a 190 basis point
decline in the cost of time deposits as high rate deposits are maturing and are
being replaced by lower rate deposits. The Company expects future deposit rates
to remain stable or decline based on Fed actions.

    A complete yield analysis is shown as Table I on page 17.

Noninterest Income

    Year to Date Operations

    Noninterest income for 2002 rose 8.27% from the same period in 2001. Service
charge income decreased by 1.16% and other operating income increased by 18.88%.
An increase in service charges due to the overall increase in business activity
was outweighed by a decrease in service charge revenue relating to a single
customer who had historically paid large overdraft and related fees. This
company was sold to new investors who infused funds in the business and
eliminated the fees. The increase in other operating income is due to an
increase in underwriting revenue of HBI Life Insurance Company and an increase
in trust fees earned by Highlands Bankshares Trust Company.

    Quarter Ending September 30 Operations

    Noninterest income for the quarter ending September 30, 2002 increased
16.78% over 2001 as the result of the increase in other income discussed in the
preceding paragraph.


<PAGE> 11



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Noninterest Expenses

    Year to Date Operations

    Overall noninterest expense increased 9.42% over the same period in 2001.
This increase is related in part to costs of operating Capon Valley Bank's Gore,
Virginia branch (opened June 2001). Marketing expenditures rose as the result of
enlarged marketing campaigns and costs associated with The Grant County Bank's
100th anniversary celebration. Equipment and occupancy expense and data
processing expense rose 7.00% and 6.28% respectively as the volume of operations
increased and both banks continued efforts to upgrade data processing and other
equipment. Costs of salary and benefits increased due to an increase in
full-time equivalent employees and an inflationary increase in wages. The
overall noninterest expense is in line with management estimates through the
third quarter of the year and is consistent with the increase in average earning
assets of 6.47%.

    Quarter Ending September 30 Operations

    Overall, noninterest expenses increased 9.39% for the quarter ending
September 30, 2002 compared to the quarter ending September 30, 2001. The
reasons for the quarterly increase are the same as for the year-to-date
increases and the percentage increases for the quarters are relatively the same
as the year-to-date increases.

Loan Portfolio

    The Company is an active residential mortgage and construction lender and
generally extends commercial loans to small and medium sized businesses within
its primary service area. The Company's commercial lending activity extends
across its primary service areas of Grant, Hardy, Randolph, Mineral, Hampshire,
northern Pendleton counties in West Virginia and Frederick County in Virginia.
Consistent  with its focus on  providing  community-based financial
services, the Company does not attempt to diversify its loan portfolio
geographically by making significant amounts of loans to borrowers outside of
its primary service area.

    The principal economic risk associated with each of the categories of loans
in the Company's portfolio is the creditworthiness of its borrowers. Within each
category, such risk is increased or decreased depending on prevailing economic
conditions. The risk associated with the real estate mortgage loans and
installment loans to individuals  varies based upon employment levels,
consumer confidence, fluctuations in value of residential real estate and other
conditions that affect the ability of consumers to repay indebtedness. The risk
associated with commercial,  financial and agricultural loans varies based
upon the strength and activity of the local economies of the Company's market
areas. The risk associated with real estate construction loans varies based upon
the supply of and demand for the type of real estate under construction.

    Loans outstanding increased $19,610,198 or 9.54% through the first nine
months of 2002 compared to levels at December 31, 2001. The loan to deposit
ratio was 89.37% at September 30, 2002 compared to 84.89% at December 31, 2001.
Loan demand is expected to remain satisfactory in the near future barring any
significant declines in the local or national economies.



<PAGE> 12



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Asset Quality and Risk Elements

    Nonperforming loans include nonaccrual loans, loans 90 days or more past due
and restructured loans. Nonaccrual loans are loans on which interest accruals
have been suspended or discontinued permanently. Restructured loans are loans on
which the original interest rate or repayment terms have been changed due to
financial hardship of the borrower.

    Real estate acquired through foreclosure was $460,358 at September 30, 2002
and $77,000 at December 31, 2001. All foreclosed property held was in the
Company's primary service area. The Company's practice is to value real estate
acquired through foreclosure at the lower of (i) an independent current
appraisal or market analysis less anticipated costs of disposal, or (ii) the
existing loan balance. The Company is actively marketing all foreclosed real
estate and does not anticipate material write-downs in value before disposition.

    An inherent risk in the lending of money is that the borrower will not be
able to repay the loan under the terms of the original agreement. The allowance
for loan losses (see subsequent section) provides for this risk and is reviewed
periodically  for  adequacy.  This  review also  considers
concentrations of loans in terms of geography, business type or level of risk.
While lending is geographically diversified within the service area, the Company
does have some concentration of loans in the area of agriculture (primarily
poultry farming),  timber and related industries.  Management recognizes
these concentrations and considers them when structuring its loan portfolio. As
of September 30, 2002, management is not aware of any significant potential
problem loans in which the debtor is currently meeting their obligations as
stated in the loan agreement but which may change in future periods.

Allowance for Loan Losses

    General

    Management evaluates the loan portfolio in light of national and local
economic changes, changes in the nature and value of the portfolio and industry
standards. The Company's loan classification system, which rates existing loans,
provides the basis for adjusting the allowance for loan losses. Management
reviews these classification totals, past due reports, historical loan loss
experience and individual borrower's financial health to determine the necessary
amount to be provided in the allowance for loan losses. Management  evaluates
nonperforming  loans  relative  to their collateral value and their
discounted estimated cash flows and makes the appropriate adjustments to the
allowance when needed.

    Critical Accounting Policies

    The allowance for loan losses is an estimate of the losses in the current
loan portfolio. The allowance is based on two principles of accounting: (i) SFAS
5, Accounting for Contingencies which requires that losses be accrued when they
are probable of occurring and estimatable and (ii) SFAS 114, Accounting by
Creditors for Impairment of a Loan, which requires that loans be identified
which have characteristics of impairment as individual risks, (e.g. the
collateral, present value of cash flows or observable market values are less
than the loan balance).

    Each of Company's banking subsidiaries, Capon Valley Bank and The Grant
County Bank, determines its allowance for loan losses independently. Each bank
pays particular attention to individual loan performance, collateral values,
borrower financial condition and overall national and local economic conditions.
The determination of adequate reserves at each bank is done in a three step
process. The first step is to identify problem loans above a certain threshold
and estimated losses are calculated based on collateral values and projected
cash flows. The second step is to identify loans above a certain threshold which
are problem loans due to the borrowers' payment history or deteriorating
financial condition. Losses in this category are determined based on historical
loss rates adjusted for current economic conditions. The final step is to
calculate a loss for the remainder of the portfolio using  historical
loss  information  for each type of loan classification. The determination
of specific allowances and weights is in some part subjective and actual losses
may be greater or less than the amount of the allowance. However, management
feels that the allowance represents a fair assessment of the losses that exist
in the loan portfolio.


<PAGE> 13



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Allowance for Loan Losses (Continued)

Changes in Allowance for Loan Losses

    The provision for loan losses and changes in the allowance for loan losses
are shown below (in thousands of dollars).
                                       Quarter Ended     Nine Months Ended
                                         Sept 30,          Sept 30,
                                    ------------------   ----------------
    Allowance for loan losses          2002    2001       2002     2001
    -------------------------          ----    ----       ----     ----

    Balance, beginning of period     $ 1,723  $ 1,700    $ 1,603  $ 1,493
    Net charge-offs (recoveries)
      Charge-offs                       (173)    (317)      (409)    (504)
      Recoveries                          21       34        117      173
                                      ------   ------     ------   ------

    Total net charge-offs *             (152)    (283)      (292)    (331)
    Provision for loan losses            210      135        470      390
                                      ------   ------     ------   ------

      Balance, End of Period         $ 1,781  $ 1,552    $ 1,781  $ 1,552
                                      ======   ======     ======   ======


                                       Quarter Ended     Nine Months Ended
                                       September 30,        September 30,
                                  ------------------------------------------
                                       2002    2001       2002     2001
                                       ----    ----       ----     ----
   * Components of net charge-offs:
      Real estate                    $   (19) $   (40)   $    (6) $   (40)
      Commercial                         (74)    (166)       (92)    (174)
      Installment                        (59)     (73)      (194)    (113)
      Credit Card                                  (4)        (4)
                                      ------   ------     ------   ------

      Total                          $  (152) $  (283)   $  (292) $  (331)
                                      =======  ======     =======  =======

    The following is a summary of information pertaining to risk elements and
impaired loans for the periods ended September 30, 2002 and December 31, 2001.

                                                      September 30,December 31,
      (in thousands)                                      2002       2001

      Non-accural loans                                $     649  $     885
      Loans past due 90 days or more
        and still accruing interest                        2,187      2,295
      Restructured loans                                       0          0
                                                        --------   --------

        Total                                          $   2,836  $   3,180

    The allowance for loan losses of $1,781,000 at September 30, 2002, was up
$229,000 from its level at September 30, 2001 and up $178,000 from the level at
December 31, 2001. The increase was due to a greater volume of lending and
declines in the local and national economies as compared to the same period in
2001. Loan balances have grown 9.5% since December 31, 2001 and 12.1% since
September 30, 2001. The allowance was equal to .79% and .78% of total loans at
September 30, 2002 and December 31, 2001, respectively. In the opinion of
management, the allowance, when taken as a whole, fairly reflects estimated loan
losses existing in the Company's portfolio.


<PAGE> 14



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Allowance for Loan Losses (Continued)


     The following table shows the allocation of loans in the loan portfolio and
the corresponding amounts of the allowance allocated by loan types as of
September 30, 2002 and December 31, 2001:

<TABLE>
<CAPTION>

                 September 30, 2002                            December 31, 2001
                 ------------------                             -----------------

   Loan     Allowance    Percentage  Percentage of    Allowance   Percentage   Percentage of
   Type    Allocation  of Allowance   Total Loans    Allocation  of Allowance    Total Loans

<S>         <C>             <C>          <C>          <C>             <C>            <C>

Commercial  $  628          35%          6%           $  487          30%            5%
Mortgage       560          32%         69%              576          36%           66%
Consumer       593          33%         25%              450          28%           29%
Unallocated                                               90           6%
             -----         ----       -----            -----          ---          ----

   Totals   $1,781         100%        100%           $1,603         100%          100%
             =====         ====       ====            ======        ====          ====
</TABLE>

Securities

     The Company's securities portfolio serves numerous purposes. Portions of
the portfolio may secure certain public and trust deposits. The remaining
portions are held as investments or used to assist the Company in liquidity and
asset/liability management. Total securities at September 30,2002 were
$27,730,000 compared to $31,063,000 at December 31, 2001. Securities as a
percentage of total assets were 9.68% at September 30, 2002 compared to 11.22%
at December 31, 2001. The level of securities relative to total assets has
dropped slightly throughout 2002 as the demand for loans has been partially
funded by investment maturities.

     The securities portfolio consists of three components, specifically,
securities held to maturity,  securities  available for sale and other
investments. Securities are classified as held to maturity when management has
the intent and the Company has the ability at the time of purchase to hold the
securities to maturity. Held to maturity securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts. Securities to
be held for indefinite periods of time are classified as available for sale and
accounted for at market value. Securities available for sale include securities
that may be sold in response to changes in market interest rates, changes in the
security's prepayment risk, increases in loan demand, general liquidity needs
and other similar factors. Other investments include restricted securities whose
ownership is required to participate in certain governmental  programs.
The Company's recent purchases of all securities have generally been limited to
securities of high credit quality with short to medium term maturities. Changes
in the market values of securities available for sale are reflected as changes
in stockholders' equity, net of the deferred tax effect. As of September 30,
2002, the fair value of the securities available for sale exceeded their cost by
$498,000 ($322,000 after tax considerations).


<PAGE> 15



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Deposits

     The Company's main source of funds remains deposits received from
individuals, governmental  entities and  businesses  located within the
Company's service area. Deposit accounts include demand deposits, savings, money
market and certificates of deposit.

     Total deposits increased 4.06% between December 31, 2001 and September 30,
2002. The cost of funds for the first nine months of 2002 was 3.55% compared to
4.94% for the same period in 2001. The majority of the Company's deposits are
time deposits that are attractive to persons seeking high yields on their
deposits but without the need for liquidity. The Company has seen a decrease in
all time deposits since December 31, 2001 as a result of maturing high-rate
certificates of deposits that were not renewed with the Company's subsidiary
banks.

Capital

     The Company seeks to maintain a strong capital base to expand facilities,
promote public  confidence,  support current  operations and grow at a
manageable level. As of September 30, 2002, the Company's total risk based
capital ratio was 13.91% which is far above the regulatory minimum of 8.0%. The
leverage ratio of total capital to total assets was 9.98% at September 30, 2002,
which is comparable to the Company's peer group.

Liquidity

     Liquidity is the ability to meet present and future financial obligations
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. Liquid assets include cash,
interest-bearing deposits with banks, federal funds sold, investments and loans
maturing within one year. The Company's ability to obtain deposits and purchase
funds at favorable rates determines its liquidity exposure. As a result of the
Company's management of liquid assets and the ability to generate liquidity
through liability funding, management believes that the Company maintains
overall liquidity sufficient to satisfy its depositors' requirements and meet
its customers' credit needs.

     Additional sources of liquidity available to the Company include, but are
not limited to, loan repayments, the ability to obtain deposits through the
adjustment of interest rates and the purchasing of federal funds. To further
meet its liquidity needs, the Company also maintains lines of credit with
correspondent financial  institutions  and the Federal Reserve Bank of
Richmond. Both subsidiary banks have lines of credit with the Federal Home Loan
Bank of Pittsburgh although utilization has been insignificant. In the past,
growth in deposits has been sufficient to fund the net increase in loans and
investment securities

Interest Rate Sensitivity

     In conjunction with maintaining a satisfactory level of liquidity,
management must also control the degree of interest rate risk assumed on the
balance sheet.  Managing this risk involves regular  monitoring of the
interest sensitive assets relative to interest sensitive liabilities over
specific time intervals.



<PAGE> 16



Item 2 Management's   Discussion  and  Analysis  of  Financial   Condition  and
       Results of Operations (Continued)


Interest Rate Sensitivity (Continued)

     At September 30, 2002 the Company had a negative gap position through the
first three months, shifting to a positive gap by the end of one year. With the
largest amount of interest sensitive assets and liabilities repricing within one
year, the Company believes it is in an excellent position to respond quickly to
rapid market rate changes. Early withdrawal of deposits, prepayments of loans
and loan delinquencies are some of the factors that could affect actual versus
expected cash flows. In addition, changes in rates on interest sensitive assets
and liabilities may not be equal, which could result in a change in net interest
margin. While the Company does not match each of its interest  sensitive
assets against specific interest sensitive liabilities, it does review its
positions regularly and takes actions to reposition it when necessary.

Securities and Exchange Commission Web Site

     The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including Highlands
Bankshares, Inc., and the address is (http://www.sec.gov).





<PAGE> 17
Table I

                           HIGHLANDS BANKSHARES, INC.
                          NET INTEREST MARGIN ANALYSIS
                          (Dollar Amounts in Thousands)

                        Nine Months Ended                Nine Months  Ended
                        September 30, 2002              September  30, 2001
                    ---------------------------   -----------------------------
                     Average    Income/             Average   Income/
                     Balance    Expense   Rates     Balance   Expense     Rates

Interest Income
   Loans 1, 4
   Commercial        $ 13,543   $   716    7.07%    $ 11,030   $  771      9.32%
     Consumer          53,715     4,509   11.22%      56,575    4,944     11.65%
     Real estate      147,813     7,749    7.01%     129,368    7,761      8.00%
                      -------    ------   ------    ---------   -----    -------

   Total              215,071    12,974    8.07%     196,973   13,476      9.12%

   Federal funds sold  10,109       126    1.67%      11,443      363      4.23%
   Interest bearing
     deposits           5,055        85    2.25%       5,710      183      4.27%
   Investments
     Taxable 3         24,932       913    4.90%      24,375    1,101      6.02%
     Tax exempt 2,3     5,473       244    5.97%       3,421      190      7.41%
                        -----     -----    ----        -----     -----     -----

   Total Earning
     Assets           260,640    14,343    7.36%     241,922   15,313      8.44%
                      -------    ------  -------     -------   ------    ------

Interest Expense
   Money markets       33,288       302    1.21%      28,410      432      2.03%
   Savings             29,260       297    1.36%      24,908      439      2.35%
   Time deposits      154,587     5,134    4.44%     147,495    6,565      5.93%
   Other borrowed
     money              4,317       154    4.77%       4,096      162      5.27%
                        -----     -----    ----        -----    -----     -----

   Total Interest
     Bearing
     Liabilities      221,452     5,888    3.55%     204,909    7,598      4.94%
                      -------  --------   -------   --------    -----    -------

   Net Interest
     Income                     $ 8,455                       $ 7,715
                                  =====                         =====

   Net Yield on
     Interest Earning
     Assets                                4.34%                           4.25%
                                           ====                            =====

1  Interest income on loans includes loan fees.
2  On a taxable equivalent basis based on a tax rate of 37%.
3  Average  balance  information is reflective of historical  cost and has not
   been adjusted for changes in market value.
4  Average balances include non-accrual loans.


<PAGE> 17 (Continued)
Table I (Continued)


                           HIGHLANDS BANKSHARES, INC.
                          NET INTEREST MARGIN ANALYSIS
                          (Dollar Amounts in Thousands)

                       Three Months Ended                 Three Months Ended
                       September 30, 2002                 September 30, 2001
               ---------------------------------    ---------------------------
                     Average    Income/             Average    Income/
                     Balance    Expense   Rates     Balance    Expense    Rates

Interest Income
   Loans 1, 4
   Commercial        $ 14,062   $   256    7.28%    $ 10,453   $   237     9.07%
     Consumer          55,549     1,361    9.80%      49,176     1,418    11.53%
     Real estate      153,227     2,801    7.31%     141,268     2,898     8.21%
                      -------   -------   ------     -------     -----   -------

   Total              222,838     4,418    7.93%     200,897     4,553     9.07%

   Federal funds sold   7,257        30    1.66%      13,883       115     3.31%
   Interest bearing
     deposits           3,636        20    2.20%       5,470        51     3.73%
   Investments
     Taxable 3         23,803       290    4.87%      27,535       366     5.32%
     Tax exempt 2,3     5,225        81    6.20%       3,683        65     7.06%
                        -----     -----     ----       -----     -----     -----

   Total Earning
     Assets           262,760     4,839    7.37%     251,468     5,150     8.19%
                      -------   -------   ------     ------      -----    ------

Interest Expense
   Money markets       35,640        98    1.10%      27,038       122     1.80%
   Savings             30,113        91    1.21%      25,728       132     2.05%
   Time deposits      154,188     1,561    4.05%     151,257     2,251     5.95%
   Other borrowed
     money              4,195        51    4.87%       4,170        57     5.47%
                        -----     -----    ----        -----     -----    -----

   Total Interest Bearing
     Liabilities      224,136     1,801    3.21%     208,193     2,562     4.92%
                      -------   -------  --------    ------      -----   ------

   Net Interest Income          $ 3,038                        $ 2,588
                                  =====                          =====

   Net Yield on Interest
     Earning
     Assets                                4.62%                           4.12%
                                           ====                           =====

1  Interest income on loans includes loan fees.
2  On a taxable equivalent basis based on a tax rate of 37%.
3  Average  balance  information is reflective of historical  cost and has not
been adjusted for changes in market value.
4  Average balances include non-accrual loans.


<PAGE> 18


TABLE II

                           HIGHLANDS BANKSHARES, INC.
                       INTEREST RATE SENSITIVITY ANALYSIS
                               SEPTEMBER 30, 2002
                            (In Thousands of Dollars)

                                                           More than
                                                            5 Years
                         1 - 90  91 - 365 1 to 3   3 to 5    or no
                          Days     Days    Years    Years  Maturity   Total
EARNINGS ASSETS

   Loans                $36,468  $107,852 $61,478  $ 8,434  $10,848 $225,080
   Fed funds sold         8,249                                        8,249
   Securities             9,244     7,410   6,293    1,331    4,311   28,589
   Time deposits in other
     banks                3,167       200                              3,367
                         ------   ------   ------   ------   -----   ------

   Total                 57,128   115,462  67,771    9,765   15,159  265,285
                         ------   -------  ------   ------   ------  -------



INTEREST BEARING LIABILITIES

   Transaction accounts  19,892                                       19,892
   Money market savings  16,022                                       16,022
   Savings accounts      29,863                                       29,863
   Time deposits more
     than $100,000        4,027    23,597   8,401    7,131            43,156
   Time deposits less
     than $100,000       22,959    53,423  23,815    8,672           108,869
   Other borrowed money     127       394     970      750    1,916    4,157
                         ------   ------   ------   ------   -----   ------

   Total                 92,890    77,414  33,186   16,553    1,916  221,959
                         ------   ------   ------   ------   -----   -------


Rate sensitivity GAP    (35,762)   38,048  34,585   (6,788)  13,243

Cumulative GAP          (35,762)    2,286  36,871   30,083   43,326

Ratio of cumulative
   interest sensitive
   assets to
   cumulative interest
   sensitive
   liabilities          (61.50%)  101.34%  118.12%  113.67%  119.52%



Assumes all transaction, money market and savings deposit accounts reprice
within 90 days.



<PAGE> 19


Item 3.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers
such as Highlands Bankshares, Inc. that file periodic reports under the
Securities Exchange Act of 1934 (the "Act") are now required to include in those
reports certain information concerning the issuer's controls and procedures for
complying with the disclosure requirements of the federal securities laws.
Under rules adopted by the Securities and Exchange Commission effective August
29, 2002,  these disclosure  controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in the reports it files or submits under the Act,
is  communicated to the issuer's management, including its principal
executive officer or officers and principal financial officer or officers, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.

     We have established our disclosure controls and procedures to ensure that
material information related to Highlands Bankshares, Inc. is made known to our
principal executive officers and principal finance officer on a regular basis,
in particular during the periods in which our quarterly and annual reports are
being prepared. These disclosure controls and procedures consist principally of
communications between and among the President and the Finance Officer, and the
other executive officers of Highlands Bankshares, Inc. and its subsidiaries to
identify any new transactions, events, trends, contingencies or other matters
that may be material to the Company's operations. As required, we will evaluate
the effectiveness of these disclosure controls and procedures on a quarterly
basis, and most recently did so as of October 31, 2002, a date within 90 days
prior to the filing of this quarterly report. Based on this evaluation, the
management of Highlands Bankshares, Inc., including the Finance Officer,
concluded that such disclosure controls and procedures were operating
effectively as designed as of the date of such evaluation.

Changes in Internal Controls

     During the period reported upon, there were no significant changes in the
internal controls of Highlands Bankshares, Inc. pertaining to its financial
reporting and control of its assets or in other factors that could significantly
affect these controls.




<PAGE> 20



Part II Other Information


Item 1. Legal Proceedings -         Not Applicable

Item 2. Changes in Securities -     Not Applicable

Item 3. Defaults Upon Senior Securities - Not Applicable

Item 4. Submission of Matters to a Vote
        of Security Holders -       Not Applicable


Item 5. Other Information -         Not Applicable

Item 6. Exhibits and Reports on 8-K -  (a)Exhibits

                                       3 (i) Articles  of   Incorporation   of
                                             Highlands  Bankshares,  Inc.  are
                                             incorporated   by   reference  to
                                             Appendix    C    to     Highlands
                                             Bankshares,   Inc.'s   Form   S-4
                                             filed October 20, 1986.

                                       3 (ii)Bylaws of  Highlands  Bankshares,
                                             Inc.    are    incorporated    by
                                             reference   to   Appendix   D  to
                                             Highland Bankshares,  Inc.'s Form
                                             S-4 filed October 20, 1986.

                                       (b)Reports on Form 8-K filed during the
                                          three months ended September 30, 2002.

                                          None




<PAGE> 21




                                    Signature



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

                                       HIGHLANDS BANKSHARES, INC.



                                       /s/   LESLIE A. BARR
                                       ---------------------------------------
                                       Leslie A. Barr
                                       President


                                       /s/   R. ALAN MILLER
                                       ---------------------------------------
                                       R. Alan Miller
                                       Finance Officer





Date:  November 12, 2002


Certification of the CEO and CFO under Section 906 of the Sarbanes-Oxley
Act of 2002 is attached as correspondence.


<PAGE> 22


                                  CERTIFICATION
                          OF CHIEF EXECUTIVE OFFICER
          Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
              Chapter 63, Title 18 USC Section 1350 (A) and (B)


I, Leslie A. Barr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Highlands
   Bankshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report;

3. Based on my knowledge, the financial statements,  and other financial
   information included in this quarterly report, fairly present in all material
   respects the financial condition, results of operations and cash flows of the
   registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining  disclosure controls and procedures (as
   defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
   have:

   a).designed such disclosure controls and procedures to
      ensure that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors (or persons performing the equivalent
   function):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   November 13, 2002



                                      /s/  LESLIE A. BARR
                                      ----------------------------------
                                          Leslie A. Barr
                                          President


<PAGE> 23



                                  CERTIFICATION
                             OF EXECUTIVE OFFICER
          Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
              Chapter 63, Title 18 USC Section 1350 (A) and (B)


I, Clarence E. Porter, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Highlands
   Bankshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report;

3. Based on my knowledge, the financial statements,  and other financial
   information included in this quarterly report, fairly present in all material
   respects the financial condition, results of operations and cash flows of the
   registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining  disclosure controls and procedures (as
   defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
   have:

   a).designed such disclosure controls and procedures to
      ensure that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors (or persons performing the equivalent
   function):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   November 12, 2002



                                      /s/  CLARENCE E. PORTER
                                      ----------------------------------
                                          Clarence E. Porter
                                          Treasurer


<PAGE> 24



                                  CERTIFICATION
                             OF EXECUTIVE OFFICER
          Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
              Chapter 63, Title 18 USC Section 1350 (A) and (B)


I, Alan L. Brill, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Highlands
   Bankshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report;

3. Based on my knowledge, the financial statements,  and other financial
   information included in this quarterly report, fairly present in all material
   respects the financial condition, results of operations and cash flows of the
   registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining  disclosure controls and procedures (as
   defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
   have:

   a).designed such disclosure controls and procedures to
      ensure that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors (or persons performing the equivalent
   function):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   November 13, 2002



                                      /s/  ALAN L. BRILL
                                      ----------------------------------
                                          Alan L. Brill
                                          Secretary


<PAGE> 25



                                  CERTIFICATION
                          OF CHIEF FINANCIAL OFFICER
          Pursuant to section 302 of the Sarbanes-Oxley Act of 2002
              Chapter 63, Title 18 USC Section 1350 (A) and (B)


I, R. Alan Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Highlands
   Bankshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report;

3. Based on my knowledge, the financial statements,  and other financial
   information included in this quarterly report, fairly present in all material
   respects the financial condition, results of operations and cash flows of the
   registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining  disclosure controls and procedures (as
   defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
   have:

   a).designed such disclosure controls and procedures to
      ensure that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   c) presented in this quarterly report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors (or persons performing the equivalent
   function):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   November 13, 2002



                                      /s/  R. ALAN MILLER
                                      ----------------------------------
                                          R. Alan Miller
                                          Finance Officer