SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

                       Commission file number. 000-1177182

                       HIGH COUNTRY FINANCIAL CORPORATION
                 (Name of small business issuer in its charter)

         North Carolina                              01-0731354
  (State or other jurisdiction of      (I.R.S. Employer Identification No.)
  incorporation or organization)

             149 Jefferson Road
            Boone, North Carolina                      28607
   (Address of principal executive offices)          (Zip Code)

                                 (828) 265-4333
                (Issuer's telephone number, including area code)

Securities Registered Under Section 12(b) of the Act: None

Securities Registered Under Section 12(g) of the Act: Common Stock, no par value
                                                           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.
Yes |X|    No | |


     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

     State issuer's revenues for its most recent fiscal year. $11,635,430

     State 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, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days. $12,135,035 based on the closing
price of the common stock on March 7, 2003, which was $11.00 per share.

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 1,418,809 shares of common
stock outstanding at March 17, 2003.

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                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report of High Country Financial Corporation for the year
ended December 31, 2002 (the "2002 Annual Report"), are incorporated by
reference into Parts I, II, and III.

Portions of the Proxy Statement for the 2003 Annual Meeting of Stockholders of
High Country Financial Corporation, to be held on May 13, 2003 (the "Proxy
Statement"), are incorporated by reference into Part III.

This report contains certain forward-looking statements with respect to the
financial condition, results of operations and business of the Company. These
forward-looking statements involve risks and uncertainties and are based on the
beliefs and assumptions of management of the Company and on the information
available to management at the time that these disclosures were prepared. These
statements can be identified by the use of words like "expect," "anticipate,"
"estimate" and "believe," variations of these words and other similar
expressions. Readers should not place undue reliance on forward-looking
statements as a number of important factors could cause actual results to differ
materially from those in the forward-looking statements. Factors that could
cause actual results to differ materially include, but are not limited to, (1)
competition in the Bank's markets, (2) changes in the interest rate environment,
(3) general national, regional or local economic conditions may be less
favorable than expected, resulting in, among other things, a deterioration in
credit quality and the possible impairment of collectibility of loans, (4)
legislative or regulatory changes, including changes in accounting standards,
(5) significant changes in the federal and state legal and regulatory
environment and tax laws, (6) the impact of changes in monetary and fiscal
policies, laws, rules and regulations and (7) other risks and factors identified
in the Company's other filings with the Securities and Exchange Commission. The
Company undertakes no obligation to update any forward-looking statements.


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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

     High Country Financial Corporation (the "Company") was formed in 2002 to
serve as the holding company for its sole subsidiary, High Country Bank (the
"Bank"). The Company is registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under the Bank Holding Company Act of
1956, as amended (the "BHCA") and the bank holding company laws of North
Carolina. The Company's office is located at 149 Jefferson Road, Boone, North
Carolina 28607. The Company's principal source of income is earnings on
investments. The Company's sole activity consists of owning the Bank. In
addition, the Company will receive any dividends that are declared and paid by
the Bank on its capital stock.

     The Bank was incorporated under the laws of North Carolina on November 13,
1998 and began operations on November 30, 1998 as a North Carolina chartered
commercial bank. The Bank is engaged in general community-oriented commercial
and consumer banking primarily in Watauga and Ashe Counties, North Carolina.

     The Bank makes business loans secured by real estate, personal property and
accounts receivable; unsecured business loans; consumer loans, which are secured
by consumer products such as automobiles; unsecured consumer loans; commercial
real estate loans; and other loans. The Bank's primary source of revenue is
interest income from its lending activities. The Bank also earns fees from
lending and deposit activities. The major expenses of the Bank are interest on
deposits and general and administrative expenses such as salaries, employee
benefits, advertising and office occupancy.

     As a North Carolina-chartered bank, the Bank is subject to examination and
regulation by the Federal Deposit Insurance Corporation (the "FDIC") and the
Commissioner of Banks, North Carolina Department of Commerce (the
"Commissioner"). The Bank is further subject to certain regulations of the
Federal Reserve governing reserves required to be maintained against deposits
and other matters. The business and regulation of the Bank are also subject to
legislative changes from time to time. See "Supervision and Regulation."

     The Company has no operations and conducts no business of its own other
than owning the Bank. Accordingly, the discussion of the business which follows
concerns the business conducted by the Bank, unless otherwise indicated.

      The Bank's results of operations depend primarily on its net interest
income, which is the difference between the interest income generated from
interest-earning assets and the interest expense on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities outstanding
during the period.

     The Bank's primary source of revenue is interest and fee income from its
lending activities. These lending activities consist principally of originating
commercial operating and working capital loans, residential mortgage loans, home
equity lines of credit, other consumer loans and loans secured by commercial
real estate. The Bank's current lending strategy is to establish market share
throughout Watauga and Ashe Counties, with an emphasis in Boone and West
Jefferson. Loan growth has been steady since the Bank's inception in November
1998. At December 31, 2002, the largest amount the Bank had outstanding to any
one borrower and its affiliates was approximately $2.0 million.

     Interest and dividend income from investment activities generally provides
the second largest source of income to the Bank after interest on loans. During
2002, the Bank maintained all of its excess liquidity in overnight investments
and United States Government agency and mortgage-backed securities. This allowed
the Bank to have maximum flexibility in funding loan demand.


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     Deposits are the primary source of the Bank's funds for lending and other
investment purposes. The Bank attracts both short-term and long-term deposits
from the general public by offering a variety of accounts and rates. The Bank
offers statement savings accounts, negotiable order of withdrawal accounts,
money market demand accounts, noninterest-bearing accounts, and fixed interest
rate certificates with varying maturities.

     Deposit flows are greatly influenced by economic conditions, the general
level of interest rates, competition and other factors. The Bank's savings
deposits are obtained primarily from its primary market area. The Bank uses
traditional marketing methods to attract new customers and savings deposits,
including print media advertising and direct mailings.

Subsidiaries

     The Bank is the subsidiary of the Company. In December 1998, High Country
Bank formed High Country Securities, Inc., a North Carolina corporation and
wholly-owned subsidiary of the Bank. High Country Securities began operations on
February 8, 1999 and provides securities brokerage services to Bank customers
and the public.

Market Area

     The Bank's primary market area consists of Watauga and Ashe Counties, North
Carolina. The Bank's headquarters are located in Boone, the county seat of
Watauga County, which along with the rest of the market area is situated in
northwest North Carolina in the Blue Ridge Mountains. In Boone, the Bank has a
limited-service office at 520 Church Road and full-service branch at 176
Shadowline Drive and two additional offices at 303 East Second Street and 1488
Mt. Jefferson Road in West Jefferson, North Carolina. The Bank's loans and
deposits are primarily generated from the areas where its offices are located.
It does not solicit deposits and loans outside its primary market area and does
not use brokers to obtain deposits.

     The market area is bordered by Alleghany, Avery, Wilkes and Caldwell
Counties. U.S. Highway 421 and U.S. Highway 321 run through the market area
forming the gateway to the northwestern mountains of North Carolina. The banking
industry plays an important role in the economy of the area. Continued growth in
tourism, the second home and retirement markets, service industries, university
expansions, and home based business all indicate a potential greater demand for
banking services in the future.

Competition

     The Bank faces strong competition both in attracting deposits and making
real estate and other loans. Direct competition for deposits comes from
commercial banks, savings institutions, and credit unions located in its primary
market area, including large financial institutions that have greater financial
and marketing resources available to them. In its lending activities, the Bank
competes with all other financial institutions as well as consumer finance
companies, mortgage companies, and other lenders. The Bank also faces additional
significant competition for investors' funds from short-term money market
securities and other corporate and government securities. The ability of the
Bank to attract and retain savings deposits depends on its ability to provide a
rate of return, liquidity and risk comparable to that offered by competing
investment opportunities.

     North Carolina is the home of three of the largest commercial banks in the
southeast, two of which have branches located in the Bank's market area. In
addition to the branches of these super-regional institutions, approximately
nine other commercial banks, thrift institutions, and credit unions operate with
multiple offices in Watauga and Ashe Counties. At June 30, 2002, the Bank had a
deposit market share of approximately 18.36% in Watauga County and 8.42% in Ashe
County.

     The Bank competes for real estate loans with savings institutions,
commercial banks, and mortgage banking companies. Interest rates, both on loans
and deposits, and prices of fee-based services, are generally significant
competitive factors among financial institutions. Other important competitive
factors include office location, office hours, the quality of customer service,
community reputation, continuity of personnel and services, and in the case of
larger commercial customers, relative lending limits and the ability to offer
cash management and other commercial banking services. Many of the Bank's
competitors have greater resources, broader geographic markets and higher
lending limits than the Bank, and they can offer more products and services and
can better afford, and


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make more effective use of, media advertising, support services and electronic
technology than can the Bank. To counter these competitive disadvantages, the
Bank depends on its reputation as a community bank in the market area, its
direct customer contact, its ability to make credit and other business decisions
locally, and its personalized service.

Employees

     As of December 31, 2002, the Bank had 51 full-time employees and 11
part-time employees.

Supervision and Regulation

     Bank holding companies and commercial banks are extensively regulated under
both federal and state law. The following is a brief summary of certain statutes
and rules and regulations that affect or will affect the Company, the Bank and
any subsidiaries. This summary is qualified in its entirety by reference to the
particular statute and regulatory provisions referred to below and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the business of the Company and the Bank. Supervision, regulation
and examination of the Company and the Bank by the regulatory agencies are
intended primarily for the protection of depositors rather than shareholders of
the Company. Statutes and regulations which contain wide-ranging proposals for
altering the structures, regulations and competitive relationship of financial
institutions are introduced regularly. The Company cannot predict whether or in
what form any proposed statute or regulation will be adopted or the extent to
which the business of the Company and the Bank may be affected by such statute
or regulation.

     General. There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by law and
regulatory policy that are designed to minimize potential loss to the depositors
of such depository institutions and the FDIC insurance funds in the event the
depository institution becomes in danger of default or in default. For example,
to avoid receivership of an insured depository institution subsidiary, a bank
holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the bank's total assets at the time the bank became undercapitalized or (ii)
the amount which is necessary (or would have been necessary) to bring the bank
into compliance with all acceptable capital standards as of the time the bank
fails to comply with such capital restoration plan. The Company, as a registered
bank holding company, is subject to the regulation of the Federal Reserve. Under
a policy of the Federal Reserve with respect to bank holding company operations,
a bank holding company is required to serve as a source of financial strength to
its subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. The
Federal Reserve under the BHCA also has the authority to require a bank holding
company to terminate any activity or to 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 and stability of any bank subsidiary of the bank
holding company.

     In addition, insured depository institutions under common control are
required to reimburse the FDIC for any loss suffered by its deposit insurance
funds as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the deposit insurance funds. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.

     As a result of the Company's ownership of the Bank, the Company is also
registered under the bank holding company laws of North Carolina. Accordingly,
the Company is also subject to regulation and supervision by the Commissioner.

     Capital Adequacy Guidelines for Holding Companies. The Federal Reserve has
adopted capital adequacy guidelines for bank holding companies and banks that
are members of the Federal Reserve system and have consolidated assets of $150
million or more. Bank holding companies subject to the Federal Reserve's capital

<PAGE>


adequacy guidelines are required to comply with the Federal Reserve's risk-based
capital guidelines. Under these regulations, the minimum ratio of total capital
to risk-weighted assets is 8%. At least half of the total capital is required to
be "Tier I capital," principally consisting of common stockholders' equity,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less certain goodwill items. The remainder ("Tier II
capital") may consist of a limited amount of subordinated debt, certain hybrid
capital instruments and other debt securities, perpetual preferred stock, and a
limited amount of the general loan loss allowance. In addition to the risk-based
capital guidelines, the Federal Reserve has adopted a minimum Tier I capital
(leverage) ratio, under which a bank holding company must maintain a minimum
level of Tier I capital to average total consolidated assets of at least 3% in
the case of a bank holding company which has the highest regulatory examination
rating and is not contemplating significant growth or expansion. All other bank
holding companies are expected to maintain a Tier I capital (leverage) ratio of
at least 1% to 2% above the stated minimum.

     Capital Requirements for the Bank. The Bank, as a North Carolina commercial
bank, is required to maintain a surplus account equal to 50% or more of its
paid-in capital stock. As a North Carolina chartered, FDIC-insured commercial
bank which is not a member of the Federal Reserve System, the Bank is also
subject to capital requirements imposed by the FDIC. Under the FDIC's
regulations, state nonmember banks that (a) receive the highest rating during
the examination process and (b) are not anticipating or experiencing any
significant growth, are required to maintain a minimum leverage ratio of 3% of
total consolidated assets; all other banks are required to maintain a minimum
ratio of 1% or 2% above the stated minimum, with a minimum leverage ratio of not
less than 4%. The Bank exceeded all applicable capital requirements as of
December 31, 2002.

     Dividend and Repurchase Limitations. The Company must obtain Federal
Reserve approval prior to repurchasing Common Stock in excess of 10% of its net
worth during any twelve-month period unless the Company (i) both before and
after the redemption satisfies capital requirements for "well capitalized" state
member banks; (ii) received a one or two rating in its last examination; and
(iii) is not the subject of any unresolved supervisory issues.

     Although the payment of dividends and repurchase of stock by the Company
are subject to certain requirements and limitations of North Carolina corporate
law, except as set forth in this paragraph, neither the Commissioner nor the
FDIC have promulgated any regulations specifically limiting the right of the
Company to pay dividends and repurchase shares. However, the ability of the
Company to pay dividends or repurchase shares may be dependent upon the
Company's receipt of dividends from the Bank.

     North Carolina commercial banks, such as the Bank, are subject to legal
limitations on the amounts of dividends they are permitted to pay. Dividends may
be paid by the Bank from undivided profits, which are determined by deducting
and charging certain items against actual profits, including any contributions
to surplus required by North Carolina law. Also, an insured depository
institution, such as the Bank, is prohibited from making capital distributions,
including the payment of dividends, if, after making such distribution, the
institution would become "undercapitalized" (as such term is defined in the
applicable law and regulations).

     Deposit Insurance Assessments. The Bank is subject to insurance assessments
imposed by the FDIC. Under current law, the insurance assessment to be paid by
members of the Bank Insurance Fund, such as the Bank, shall be as specified in a
schedule required to be issued by the FDIC. FDIC assessments for deposit
insurance range from 0 to 31 basis points per $100 of insured deposits,
depending on the institution's capital position and other supervisory factors.

     Federal Home Loan Bank System. The FHLB system provides a central credit
facility for member institutions. As a member of the FHLB of Atlanta, the Bank
is required to own capital stock in the FHLB of Atlanta in an amount at least
equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the end of each calendar year, or 5% of its outstanding advances (borrowings)
from the FHLB of Atlanta. On December 31, 2002, the Bank was in compliance with
this requirement.

     Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
implemented by regulations of the FDIC, an insured institution has a continuing
and affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions, nor


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does it limit an institution's discretion to develop, consistent with the CRA,
the types of products and services that it believes are best suited to its
particular community. The CRA requires the federal banking regulators, in
connection with their examinations of insured institutions, to assess the
institutions' records of meeting the credit needs of their communities, using
the ratings of "outstanding," "satisfactory," "needs to improve," or
"substantial noncompliance," and to take that record into account in its
evaluation of certain applications by those institutions. All institutions are
required to make public disclosure of their CRA performance ratings. The Bank
received a "satisfactory" rating in its last CRA examination which was conducted
during June 2000.

     Prompt Corrective Action. The FDIC has broad powers to take corrective
action to resolve the problems of insured depository institutions. The extent of
these powers will depend upon whether the institution in question is "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized." Under the regulations, an
institution is considered "well capitalized" if it has (i) a total risk-based
capital ratio of 10% or greater, (ii) a Tier I risk-based capital ratio of 6% or
greater, (iii) a leverage ratio of 5% or greater and (iv) is not subject to any
order or written directive to meet and maintain a specific capital level for any
capital measure. An "adequately capitalized" institution is defined as one that
has (i) a total risk-based capital ratio of 8% or greater, (ii) a Tier I
risk-based capital ratio of 4% or greater and (iii) a leverage ratio of 4% or
greater (or 3% or greater in the case of an institution with the highest
examination rating). An institution is considered (A) "undercapitalized" if it
has (i) a total risk-based capital ratio of less than 8%, (ii) a Tier I
risk-based capital ratio of less than 4% or (iii) a leverage ratio of less than
4% (or 3% in the case of an institution with the highest examination rating);
(B) "significantly undercapitalized" if the institution has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier I risk-based capital
ratio of less than 3% or (iii) a leverage ratio of less than 3% and (c)
"critically undercapitalized" if the institution has a ratio of tangible equity
to total assets equal to or less than 2%.

     Changes in Control. The BHCA prohibits the Company from acquiring direct or
indirect control of more than 5% of the outstanding voting stock or
substantially all of the assets of any bank or savings bank or merging or
consolidating with another bank holding company or savings bank holding company
without prior approval of the Federal Reserve. Similarly, Federal Reserve
approval (or, in certain cases, non-disapproval) must be obtained prior to any
person acquiring control of the Company. Control is conclusively presumed to
exist if, among other things, a person acquires more than 25% of any class of
voting stock of the Company or controls in any manner the election of a majority
of the directors of the Company. Control is presumed to exist if a person
acquires more than 10% of any class of voting stock and the stock is registered
under Section 12 of the Securities Exchange Act of 1934 or the acquiror will be
the largest shareholder after the acquisition.

     Transactions with Affiliates. Under current federal law, depository
institutions are subject to the restrictions contained in Section 22(h) of the
Federal Reserve Act with respect to loans to directors, executive officers and
principal shareholders. Under Section 22(h), loans to directors, executive
officers and shareholders who own more than 10% of a depository institution (18%
in the case of institutions located in an area with less than 30,000 in
population), and certain affiliated entities of any of the foregoing, may not
exceed, together with all other outstanding loans to such person and affiliated
entities, the institution's loans-to-one-borrower limit (as discussed below).
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers and shareholders who own
more than 10% of an institution, and their respective affiliates, unless such
loans are approved in advance by a majority of the board of directors of the
institution. Any "interested" director may not participate in the voting. The
FDIC has prescribed the loan amount (which includes all other outstanding loans
to such person), as to which such prior board of director approval is required,
as being the greater of $25,000 or 5% of capital and surplus (up to $500,000).
Further, pursuant to Section 22(h), the Federal Reserve requires that loans to
directors, executive officers, and principal shareholders be made on terms
substantially the same as offered in comparable transactions with non-executive
employees of the Bank. The FDIC has imposed additional limits on the amount a
bank can loan to an executive officer.

     Loans to One Borrower. The Bank is subject to the Commissioner's loans to
one borrower limits which are substantially the same as those applicable to
national banks. Under these limits, no loans and extensions of credit to any
borrower outstanding at one time and not fully secured by readily marketable
collateral shall exceed 15% of the unimpaired capital and unimpaired surplus of
the bank. Loans and extensions of credit fully secured by readily marketable
collateral may comprise an additional 10% of unimpaired capital and unimpaired
surplus.


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     Gramm-Leach-Bliley Act. Federal legislation adopted by Congress during
1999, the Gramm-Leach-Bliley Act (the "GLB Act"), has dramatically changed
various federal laws governing the banking, securities, and insurance
industries. The GLB Act has expanded opportunities for banks and bank holding
companies to provide services and engage in other revenue-generating activities
that previously were prohibited to them.

     In general, the GLB Act (i) expands opportunities to affiliate with
securities firms and insurance companies; (ii) overrides certain state laws that
would prohibit certain banking and insurance affiliations; (iii) expands the
activities in which banks and bank holding companies may participate; (iv)
requires that banks and bank holding companies engage in some activities only
through affiliates owned or managed in accordance with certain requirements; (v)
reorganizes responsibility among various federal regulators for oversight of
certain securities activities conducted by banks and bank holding companies; and
(vi) requires banks to adopt and implement policies and procedures for the
protection of the financial privacy of their customers, including procedures
that allow customers to elect that certain financial information not be
disclosed to certain persons.

     The GLB Act has expanded opportunities for the Bank to provide other
services and obtain revenues in the future but, at present, it has not had a
significant effect on our respective operations as they are presently conducted.
However, this expanded authority also may present us with new challenges as we
compete with larger financial institutions that expand their services and
products into the same areas that are now feasible for smaller,
community-oriented financial institutions. The economic effects of the GLB Act
on the banking industry, and on competitive conditions in the financial services
industry generally, may be profound.

     USA Patriot Act. In response to the events of September 11, 2001, President
George W. Bush signed into law the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, or the USA PATRIOT Act, on October 26, 2001. The USA PATRIOT Act gives the
federal government new powers to address terrorist threats through many means,
including broadened anti-money laundering requirements. For example, by way of
amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act encourages
information sharing among banks, bank regulatory agencies, and law enforcement
bodies to prevent money laundering. Additionally, Title III of the USA PATRIOT
ACT imposes several affirmative obligations on a broad range of financial
institutions, including banks, thrifts, brokers, dealers, credit unions, money
transfer agents, and parties registered under the Commodity Exchange Act.

     Pursuant to Section 352 of the USA PATRIOT Act, all financial institutions
must establish anti-money laundering programs that include, at a minimum: (i)
internal policies, procedures, and controls, (ii) specific designation of an
anti-money laundering compliance officer, (iii) ongoing employee training
programs, and (iv) an independent audit function to test the anti-money
laundering program. Also, Section 326 of the Act requires certain minimum
standards with respect to customer identification and verification. Section 312
of the Act requires financial institutions that establish, maintain, administer,
or manage private banking accounts or correspondent accounts in the United
States for non-United States persons or their representatives (including foreign
individuals visiting the United States) to establish appropriate, specific, and,
where necessary, enhanced due diligence policies, procedures, and controls
designed to detect and report money laundering. Furthermore, effective December
25, 2001, financial institutions were prohibited from establishing, maintaining,
administering or managing correspondent accounts for foreign shell banks
(foreign banks that do not have a physical presence in any country), and are
subject to certain recordkeeping obligations with respect to correspondent
accounts of foreign banks.

     Bank regulators are directed to consider a company's effectiveness in
combating money laundering when ruling on Federal Reserve Act and Bank Merger
Act applications.

     Sarbanes-Oxley Act of 2002. On July 30, 2002, the Sarbanes-Oxley Act of
2002 was signed into law. The impact of the Sarbanes-Oxley Act is wide-ranging
as it applies to all public companies and imposes significant new requirements
for public company auditing, corporate governance and disclosure requirements.
Some of the provisions of the Sarbanes-Oxley Act became effective immediately
while others have been and will be implemented over the coming months.

     In general, the Sarbanes-Oxley Act mandates important new corporate
governance and financial reporting requirements intended to enhance the accuracy
and transparency of public companies' reported financial results. It establishes
new responsibilities for corporate chief executive officers, chief financial
officers and audit committees


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in the financial reporting process and creates a new regulatory body to oversee
auditors of public companies. It backs these requirements with new SEC
enforcement tools, increases criminal penalties for federal mail, wire and
securities fraud, and creates new criminal penalties for document and record
destruction in connection with federal investigations. It also increases the
opportunity for more private litigation by lengthening the statute of
limitations for securities fraud claims and providing new federal corporate
whistleblower protection.

         The full impact of the Sarbanes-Oxley Act cannot be fully measured
until the SEC completes its actions to implement the numerous provisions for
which Congress has delegated implementation authority. The economic and
operational effects of this new legislation on public companies, including the
Company, will be significant in terms of the time, resources and costs
associated with complying with the new law. Because the Sarbanes-Oxley Act, for
the most part, applies equally to larger and smaller public companies, the
Company will be presented with additional challenges as a smaller,
community-oriented financial institution seeking to compete with larger
financial institutions in its market.

         Other. Additional regulations require annual examinations of all
insured depository institutions by the appropriate federal banking agency, with
some exceptions for small, well-capitalized institutions and state chartered
institutions examined by state regulators, and establish operational and
managerial, asset quality, earnings and stock valuation standards for insured
depository institutions, as well as compensation standards.

         The Bank is subject to examination by the FDIC and the Commissioner. In
addition, the Bank is subject to various other state and federal laws and
regulations, including state usury laws, laws relating to fiduciaries, consumer
credit and equal credit, fair credit reporting laws and laws relating to branch
banking. The Bank, as an insured North Carolina commercial bank, is prohibited
from engaging as a principal in activities that are not permitted for national
banks, unless (i) the FDIC determines that the activity would pose no
significant risk to the appropriate deposit insurance fund and (ii) the Bank is,
and continues to be, in compliance with all applicable capital standards.

ITEM 2. DESCRIPTION OF PROPERTY

At December 31, 2002, the Bank conducted its business from its main office in
Boone, North Carolina, and its two other branch offices in Boone and two branch
offices in West Jefferson, North Carolina. The following table sets forth
certain information regarding the Bank's properties at December 31, 2002. Unless
indicated otherwise, all properties are owned by the Bank.


                                       9
<PAGE>


                                                              Owned or Leased
                                                              ---------------
        Main Office
        149 Jefferson Road                                        Owned
        Boone, North Carolina 28607

        Operations Center                                        Leased
        516 New Market Boulevard, Suite 3
        Boone, North Carolina 28607

        Branch Office                                        Property Leased
        176 Shadowline Drive                                 Building Owned
        Boone, North Carolina 28607

        Limited-Service Office                                   Leased
        520 Church Road
        Boone, North Carolina 28607

        Branch Office                                            Leased
        303 East Second Street
        West Jefferson, North Carolina 28694

        Branch Office                                             Owned
        1488 Mt. Jefferson Road
        West Jefferson, North Carolina 28694

        Future Branch Expansion Office                            Owned
        199 Boone Heights Drive
        Boone, North Carolina 28607

     The total net book value of the Company's furniture, fixtures, leasehold
improvements, and equipment at December 31, 2002 was $5,759,886. All properties
are considered by the Company's management to be in good condition and
adequately covered by insurance. Additional information about this property is
set forth in Note 6 to the Financial Statements in the 2002 Annual Report, which
note is incorporated herein by reference.

     Any property acquired as a result of foreclosure or by deed in lieu of
foreclosure is classified as real estate owned until the time it is sold or
otherwise disposed of by the Bank in an effort to recover its investment. At
December 31, 2002, the Bank held three properties for sale that were acquired in
settlement of loans.

ITEM 3. LEGAL PROCEEDINGS

     From time to time the Company may become involved in legal proceedings
occurring in the ordinary course of business. However, subject to the
uncertainties inherent in any litigation, management believes there currently
are no pending or threatened proceedings that are reasonably likely to result in
a material adverse change in the Company's financial condition or operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted during the fourth quarter of the fiscal year ended
December 31, 2002 to a vote of the stockholders of the Company.


                                       10
<PAGE>


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     There currently is a limited local trading market for the Company's common
stock, and there can be no assurance that a more active market will develop. The
Company's common stock is traded over-the-counter with quotations available on
the National Daily Quotation Services "Bulletin Board" under the symbols "HGCF"
and "HGCFU." There were approximately 1,600 stockholders of record as of March
17, 2003, not including the persons or entities whose stock is held in nominee
or "street" name and by various banks and brokerage firms.

     Information required by this Item regarding over-the-counter quotations for
the Company's common stock for the years ended December 31, 2002 and 2001 is set
forth under the section captioned "Market for the Common Stock, Stock Prices and
Dividends" in the Company's 2002 Annual Report, which section is incorporated by
reference. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions.

     See "ITEM 1. DESCRIPTION OF BUSINESS-Supervision and Regulation" above for
regulatory restrictions which limit the ability of the Company to pay dividends.
See "ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"
below for information on equity compensation plan information.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
        CONDITION

     See the information set forth under Item 1 above and the information set
forth under the section captioned "Management's Discussion and Analysis" in the
Company's 2002 Annual Report, which section is incorporated herein by reference.

ITEM 7. FINANCIAL STATEMENTS

     The consolidated financial statements of the Company and supplementary data
set forth on pages 3 through 25 of the Company's 2002 Annual Report are
incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

     Information regarding (i) directors of the Company is set forth under the
section captioned "Proposal I--Election of Directors -Nominees" on pages 4
through 6 of the Proxy Statement, (ii) executive officers of the Company is set
forth under the section captioned "Proposal I--Election of Directors-Executive
Officers" on page 8 of the Proxy Statement, and (iii) Section 16(a) compliance
is set forth under the section captioned "Section 16(a) Beneficial Ownership
Reporting Compliance" on page 4 of the Proxy Statement, all of which is
incorporated herein by reference.


                                       11
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

     Information required by this Item is set forth under the section captioned
"Proposal I--Election of Directors-Director Compensation" on pages 7 through 8
and "-Executive Compensation" on pages 8 through 13 of the Proxy Statement, all
of which is incorporated by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     Information required by this Item is set forth under the sections captioned
"Security Ownership of Certain Beneficial Owners" on pages 2 through 4 of the
Proxy Statement, and "Executive Compensation - Equity Compensation Plan
Information" on pages 8 through 13 of the Proxy Statement, which sections are
incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is set forth under the section
captioned "Certain Indebtedness and Transactions of Management" on page 13 of
the Proxy Statement which is incorporated herein by reference.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

13(a)    Exhibits

         (3)(i)   Articles of Incorporation of High Country Financial
                  Corporation, incorporated herein by reference to Exhibit 3(i)
                  to the Form 8-A filed with the SEC on July 31, 2002.

         (3)(ii)  Bylaws of High Country Financial Corporation, incorporated
                  herein by reference to Exhibit 3(ii) to the Form 8-A filed
                  with the SEC on July 31, 2002.

         4        Specimen Stock Certificate of High Country Financial
                  Corporation, incorporated herein by reference to Exhibit 4 to
                  the Form 10-QSB filed with the SEC on November 14, 2002.

         (10)(i)  Employment Agreement with John M. Brubaker, incorporated
                  herein by reference to Exhibit 6(i) to the Form 10-SB filed
                  with the FDIC on April 30, 1999.

         (10)(ii) Employment Agreement with Robert E. Washburn, incorporated
                  herein by reference to Exhibit 6(iii) to the Form 10-SB filed
                  with the FDIC on April 30, 1999.

         (10)(iii)High Country Bank Stock Option Plan, as amended May 15, 2001,
                  and as assumed by High Country Financial Corporation on August
                  20, 2002, incorporated herein by reference to Exhibit 10(iii)
                  to the Form 10-QSB filed on November 14, 2002.

         (10)(iv) Lease Agreement between Paul Brown Enterprises, Inc. and High
                  Country Bank dated July 1, 2000 incorporated herein by
                  reference to Exhibit 10(vi) to the Form 10-KSB filed with the
                  FDIC on March 30, 2001.

         (10)(v)  Lease Agreement between B&D Associates and High Country Bank
                  dated August 1, 2000 incorporated herein by reference to
                  Exhibit 10(vii) to the Form 10-KSB filed with the FDIC on
                  March 30, 2001.

         (11)     Statement Regarding Computation of Per Share Earnings.

         (13)     2002 Annual Report, excluding page 2.


                                       12
<PAGE>


         (21)     Subsidiaries of the Company.

         (99)     Certification of Periodic Financial Report Pursuant to 18
                  U.S.C. Section 1350.

13(b)    The Company filed no reports on Form 8-K during the last quarter of the
         fiscal year ended December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

     The Company maintains a system of internal controls and procedures designed
to provide reasonable assurance as to the reliability of our published financial
statements and other disclosures included in this report. The Company's Board of
Directors, operating through its audit committee which is composed entirely of
independent outside directors, provides oversight to the Company's financial
reporting process.

     The Chief Executive Officer and the Chief Financial Officer of the Company
(its principal executive officer and principal financial officer, respectively)
have concluded, based on their evaluation as of a date within 90 days prior to
the date of the filing of this Report, that the Company's disclosure controls
and procedures are effective to ensure that information required to be disclosed
by the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the applicable rules and forms,
and include controls and procedures designed to ensure that information required
to be disclosed by the Company in such reports is accumulated and communicated
to the Bank's management, including the Chief Executive Officer and the Chief
Financial Officer of the Company, as appropriate to allow timely decisions
regarding required disclosure.

     There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.


                                       13
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                 HIGH COUNTRY FINANCIAL CORPORATION

                                 By:   /s/ John M. Brubaker
                                      ------------------------------------------
                                       John M. Brubaker
                                       President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

Signature                                Title                                 Date
---------                                -----                                 -----
<S>                                      <C>                                   <C>
 /s/ John M. Brubaker                    President, Chief Executive Officer    March 18, 2003
-------------------------                and Director
John M. Brubaker

 /s/ David H. Harman                     Senior Vice President and Chief       March 18, 2003
-------------------------                Financial Officer
David H. Harman

/s/ Robert E. Washburn                   Senior Vice President and Chief       March 18, 2003
-------------------------                Credit Officer
Robert E. Washburn

/s/ Joseph E. Eller                      Senior Vice President                 March 18, 2003
-------------------------
Joseph E. Eller

 /s/ Faye E. Cooper                      Director                              March 18, 2003
-------------------------
Faye E. Cooper

 /s/ John H. Councill                    Director                              March 18, 2003
-------------------------
John H. Councill

 /s/ Harry M. Davis                      Director                              March 18, 2003
-------------------------
Harry M. Davis

 /s/ James C. Furman                     Director                              March 18, 2003
-------------------------
James C. Furman

 /s/ Cecil M. Greene                     Director                              March 18, 2003
-------------------------
Cecil M. Greene

 /s/ Dale L. Greene                      Director                              March 18, 2003
-------------------------
Dale L. Greene

 /s/ Larry V. Hughes                     Director                              March 18, 2003
-------------------------
Larry V. Hughes

 /s/ Reba S. Moretz                      Director                              March 18, 2003
-------------------------
Reba S. Moretz

 /s/ C. Kenneth Wilcox                   Director                              March 18, 2003
-------------------------
C. Kenneth Wilcox

 /s/ Roger D. Wright                     Director                              March 18, 2003
-------------------------
Roger D. Wright
</TABLE>


                                       14
<PAGE>

                                 CERTIFICATIONS

I, John M. Brubaker, certify that:

1.   I have reviewed this annual report on Form 10-KSB of High Country Financial
     Corporation;

2.   Based on my knowledge, this annual 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 annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

     c)   Presented in this annual 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 functions):

     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
     annual 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: March 18, 2003                        /s/ John M. Brubaker
                                           -------------------------------------
                                           John M. Brubaker
                                           President and Chief Executive Officer


                                     15
<PAGE>

                                 CERTIFICATIONS

I, David H. Harman, certify that:

1.   I have reviewed this annual report on Form 10-KSB of High Country Financial
     Corporation;

2.   Based on my knowledge, this annual 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 annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

     (c)   Presented in this annual 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 functions):

     (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
     annual 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: March 18, 2003             /s/ David H. Harman
                                 -----------------------------------------------
                                 David H. Harman
                                 Senior Vice President & Chief Financial Officer


                                       16
<PAGE>

                                INDEX TO EXHIBITS

Exhibit No.                                 Description

Exhibit (11)         Statement Regarding Computation of Per Share Earnings

Exhibit (13)         High Country Financial Corporation 2002 Annual Report
                     to Stockholders, excluding page 2.

Exhibit (21)         Subsidiaries of the Company

Exhibit (99)         Certification of Periodic Financial Report Pursuant to
                     18 U.S.C. Section 1350


                                       17