OTCQX BanksInvestor Conference  March 15, 2017 

 This presentation contains forward-looking statements, as defined by federal securities laws, including statements about Highlands and its financial outlook. These statements are based on management's current expectations and are provided to assist investors in understanding our operations and business outlook. Highlands' operations involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in forward-looking statements. For a discussion of some of the risks and other factors that may cause such forward-looking statements to differ materially from actual results, please refer to Highlands Bankshares, Inc.’s filings with the Securities and Exchange Commission, including its 2015 Annual Report on Form 10-K and its most recent quarterly report on Form 10-Q under the sections entitled “Forward-Looking Statements.” Forward-looking statements relate only to the date they are made. Highlands undertakes no obligation to update or revise forward-looking statements.   hubank.com |  2  Forward-Looking Statements 

   3  hubank.com |  Snapshot of Highlands Bankshares  Market Data    Ticker  HLND  Price (as of 3/09/2017)  $6.65  Market Cap  $54.5MM  P/E   NM  P/BV1  127%  Avg. Daily Vol. (30d)  1,250  Insider Ownership  16.3%  Institutional Ownership  42.7%  Fourth Quarter 2016    Assets  $612.7MM  Loans  $409.7MM  Deposits  $489.9MM  Common Equity  $46.4MM  Preferred Equity  $7.3MM  Equity / Assets  8.9%  Total Risk Based Capital  13.0%  Past Due Loans / Loans  1.87%  Nonperforming Assets / Loans & OREO  1.64%  Earnings per Share  $0.02  Return on Assets  0.10%  Return on Equity  1.14%  Founded in 198515 financial services centers2 mortgage officesPrivate business/owner, professional, and entrepreneur focusShareholder-friendly management                1 Calculated using the conversion impact of HLND's preferred equity. 

 Originated in response to local consolidationFavorable market reception led to early success in both profitability and growthExpanded out of market without prior out of market experience or contactsFollowing expansion, profitability and growth declined below industry averagesOver time, shareholder returns suffered   Little operational improvement leading to continued financial stressAdditional procedural and control issues identified resulting in prolonged Written AgreementNew CEO with turnaround and high performing bank experience hired in November 2015Significant progress achieved in stabilizing Highlands and transforming to a focused, shareholder-friendly company  Pre-Crisis  hubank.com |  4  History  Crisis  Post-Crisis  Experienced severe credit related costs due to poor underwriting and credit risk managementEarnings and capital stressed due to elevated credit costs and higher operating expensesEntered into a Written AgreementIssued equity shoring up capital levels and significantly diluting shareholders 

 Net Income  Note: Net Income and Return on Assets exclude offsetting DTA adjustments during the period.Note: 1Q17 results represent management's estimation for the period.  hubank.com |  5  Key Performance Indicators  Return on Assets  $MM  Pre-crisis net income and return on assets was below the company's cost of capital and industry averagesHighlands has reported a net loss the last ten yearsEarnings and profitability have not reboundedExcessive credit costs and operating expenses are the driver  Issue  Management has proactively taken steps to materially improve the company's credit and operating costs  Action Taken 

 Note: 1Q17 results represent management's estimation for the period.  hubank.com |  6  Key Performance Indicators  Past Due Loans  NPAs / Loans and OREO  Pre-crisis past dues and credit related costs were more than double industry averagesApproval criteria was outside the industry normConcentrations in lower risk adjusted return categoriesLax collection culture and no collection process  Issue  Hired new Chief Credit Officer, Collections Manager, and Special Assets ManagerActively managed troubled and past due creditsReviewed portfolio for weak pass creditsReviewed and amended credit policy to industry normsOutsourced loan review  Action Taken 

 Efficiency Ratio  Note: 1Q17 results represent management's estimation for the period.  hubank.com |  7  Key Performance Indicators  Assets per Employee  Pre-crisis efficiency ratio was higher than industry averagesStaffing levels were not monitored or managed to workload creating a low Assets per Employee ratioContracts were not marketed or renegotiated  Issue  Benchmarked staffing levels to other banks our size by department and workload2016 net income included nonrecurring severance expense related to associated staff reductionsBidding all major contracts (annual, recurring savings):Health insurance - $500,000 ATM/Debit card processing - $400,000 Data lines - $250,000Internal Audit - $140,000 Janitorial and trash collection - $120,000 P&C insurance - $100,000   Action Taken 

 hubank.com |  8  Management Team    Title  Major Experience  Years inBanking  Years atHLND  Ray Skinner  Chief Banking Officer  American Savings, National Commerce  27  1  Kevin Pack  CEO - Highlands Home Mortgage  National Commerce  25  1  Brian Lowery  Chief Credit Officer  National Commerce  28  1  Vicki Andrews  EVP Bank Operations  National Commerce  34  1  Bryan Booher  EVP Loan Operations   BB&T, Highlands  25  13  Jim Edmondson  Chief Financial Officer  Highlands  31  20  Rusty Little  Chief Risk Officer  Highlands  25  25  Tim Schools joined Highlands in November 2015 as Chief Executive Officer and a Director. He is leading the execution of the company's strategic plan and effort to improve financial performance. Previously, he served as President of $7 billion American Savings Bank where over a three year period he led its highly successful transformation from an 82 year old thrift to a full service bank. With the assistance of six former National Commerce teammates, ASB: remediated a preexisting Cease and Desist Order, improved pretax preprovision income $38 million or 45%, enhanced its return on assets from 65 bps to 130 bps, increased its leverage ratio from 7.7% to 9.3% while at the same time providing a special one-time dividend to shareholders of $55 million, and created a dynamic culture that earned ASB a reputation as one of the best companies to work for. Schools began his banking career at National Commerce and SouthTrust. 

 At our core, we are investors focused on increasing the value of our common stock not necessarily our deposits, loans, assets, revenues, or earnings.“In assessing performance, what matters isn’t the absolute rate of return but the return relative to peers and the market.  You really only need to know three things to evaluate a CEO’s greatness: the compound annual return to shareholders during his or her tenure and the return over the same period for peer companies and for the broader market (usually measured by the S&P 500).”"CEOs need to do two things well to be successful: run their operations efficiently and deploy the cash generated by those operations.""Capital allocation is a CEO's most important job.""CEOs have five essential choices for deploying capital - investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock…""Sometimes the best investment opportunity is your own stock."  hubank.com |  9  Management Philosophy 

 Target Customer  Small to mid-sized private businessesTheir owners and managementProfessionalsOther individuals  Strategy  Provide a differentiated, relationship-based, and highly personal banking experienceSeek low cost deposits and ancillary deposit servicesOperate with industry leading efficiencyInvest/lend prudently never sacrificing risk adjusted spreads for balance or earnings growth   Delivery  Focus on where we can find the best people; not filling in a geographic mapAttract and retain "best in breed" employees; hire better and manage lessLimit bricks and mortar to strategically located business-oriented officesApply technology strategically to provide a wow employee and customer experience  Goals  Outstanding customer serviceDisciplined capital allocationHigh returns on capitalStable and growing earnings per share  hubank.com |  10  Business Model  Simple, Focused, and Disciplined 

 Recognized as #1 bank past three yearsRecently hired David Lecka as Market Executive who joined having been City President for United CommunityRecently added an additional Commercial Relationship Officer, Financial Advisor, and Mortgage AdvisorEstablished local advisory board comprised of accomplished business leaders300,000 residents   High Country  hubank.com |  11  Market Areas 

 Knoxville  hubank.com |  12  Market Areas  Recently hired Amy Pangelinan as Market Executive who joined having been a Commercial Relationship Officer at Atlantic Capital, Pinnacle, and BB&TEntered the market a decade ago with no brand recognition or contacts so limited success to dateRecently "redenovoed" recruiting well recognized names in the marketEstablished local advisory board comprised of accomplished business leaders1.1 million residents – 3rd largest area in TN 

 Southwest Virginia  hubank.com |  13  Market Areas  #1 deposit market share and recognized as #1 bank in Smyth CountyMark Farris serves as Market Executive and is a career Highlands employeeRecently added a Branch Manager and Personal Banker from Wells Fargo - the largest single branch in the areaEstablished local advisory board comprised of accomplished business leaders120,000 residents  

 Recognized as #1 bank in Bristol marketRecently hired Mike Hill as Market Executive who joined having been First Citizens' Market ExecutiveRecently added an additional Commercial Relationship Officer and Financial AdvisorEstablished local advisory board comprised of accomplished business leaders500,000 residents – 5th largest area in TN  Tri-Cities  hubank.com |  14  Market Areas 

 hubank.com |  15  HLND Trading Comps  Banks headquartered in NC, SC, TN, and VA between $400MM and $1B in assets, equity/assets between 8 - 10.5%, nonperforming assets/assets < 1%, and return on assets > 0.50%  Note: Market data as of March 2, 2017.Note: HLND data is management's estimation of 2017 earnings; Price to BV calculated using the conversion impact of HLND's preferred equity.Data Source: SNL Financial 

 hubank.com |  16  HLND Investment Thesis  Quality ManagementNew management team comprised principally from the former National CommerceAdding three new board members with successful CEO/COO value creation experienceInsiders own 16.3% of the companyShareholder-friendly culture committed to prudent capital allocationIndustry Leading Operational ExperienceNational Commerce and SouthTrust maintained top decile financial performance for over twenty yearsCEO and CBO led highly successful transformation of American SavingsHighlands' operating metrics approaching median to top quartile performance in only a 12 month periodRepeatable Investment OpportunitiesWell networked management team providing numerous lift out opportunities for consolidated regional bank employees across the Southeast who value a higher touch and more entrepreneurial cultureExtensive experience in creating significant shareholder value from underperforming banks providing acquisition opportunities others might not find appealing or might not be as successful withAttractive ValuationMarket value to intrinsic value gap as operating metrics and growth prospects have materially improved and are approaching peer median to top quartile levels while Highlands' valuation lags these groups 30% – 60% for an equivalent price of $8.65 – $10.65 

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 Appendix    hubank.com |  18 

 

 

 hubank.com |  20  Loan Mix    4Q15  1Q16  2Q16  3Q16  4Q16  Commercial / Agricultural  6.2  6.1  5.9  5.6  5.6  Commercial / Real Estate  18.1  17.1  16.7  16.7  16.5   Total Commercial  24.3  23.2  22.6  22.4  22.1  1-4 Family  36.9  37.1  36.8  36.3  35.3  HELOC  1.0  1.0  1.0  1.1  2.2  Construction / Land / Farmland  5.0  4.9  4.8  4.9  4.6  Other Consumer  3.4  3.3  3.3  3.0  2.9  Total Consumer  46.2  46.3  45.8  45.3  45.0  Total Loans  70.5%  69.5%  68.4%  67.7%  67.0%  Percentage of Average Assets 

 hubank.com |  21  Customer Funding Mix  Percentage of Average Assets    4Q15  1Q16  2Q16  3Q16  4Q16  Noninterest Bearing  21.1  20.9  20.1  21.9  22.2  Interest Bearing  7.7  7.5  7.5  8.3  8.3   Total Checking  28.8  28.4  27.6  30.2  30.5  MMA  11.8  11.8  11.5  11.4  11.9  Savings  14.6  15.0  15.0  14.9  14.8   Total Core Deposits  55.2  55.2  53.7  56.5  57.2  CDs  25.4  24.6  24.3  24.0  22.9  Total Customer Funding   80.6%   80.0%  78.0%  80.5%  80.1%