<PAGE>


                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                  For the fiscal year ended December 31, 2001 .
                                           -------------------

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED).

     For the transition periods from __________________ to _______________.

                        Commission file number: 0-18868 .
                                               ---------

                       Premier Community Bankshares, Inc.
                       ----------------------------------
                 (Name of small business issuer in its charter)
                 ----------------------------------------------

           Virginia                                      54-1560968
--------------------------------            ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                  4095 Valley Pike, Winchester, Virginia 22602
                  --------------------------------------------
               (Address if principal executive offices)(Zip code)

         Issuer's telephone number, including area code (540) 869-6600.

           Securities registered under Section 12(b) of the Act: NONE

         Securities registered under section 12(g) of the Exchange Act.

                     Common Stock, Par Value $1.00 per share
                     ---------------------------------------
                                (Title of Class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.

                                                              [X] YES  [ ] NO

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form and will not 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]

Total revenues for the year ended December 31, 2001 were $22,139,000.

The aggregate market value of the voting stock held by non-affiliates of the
registrant was $34,575,408 as of December 31, 2001. The aggregate market value
was computed by using a market price of $8.50 per share.

As of March 15, 2001, the number of shares outstanding of the registrant's
common stock was 4,527,484.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the 2002 Annual Meeting of Stockholders
("2002 Proxy Statement") are incorporated by reference in Part III of this Form
10-KSB.

<PAGE>

Part I

Item 1. Description of Business
-------------------------------

General

Premier Community Bankshares, Inc. ("the Corporation"), formerly called Marathon
Financial Corporation, is a bank holding company that was incorporated under the
laws of the Commonwealth of Virginia in June 1989. The Corporation owns all of
the outstanding stock of its two subsidiaries, The Marathon Bank ("TMB"), which
was incorporated in August 1987 and acquired by the Corporation in October 1990,
in accordance with the Plan of Exchange approved by the shareholders of TMB in
June 1990, and Rockingham Heritage Bank ("RHB"), which was incorporated in June
1989 and acquired by the Corporation in November of 2000, in accordance with the
Plan of Merger approved by the shareholders of both Marathon Financial
Corporation and RHB in October of 2000. The Corporation is headquartered in
Frederick County, Virginia, operating in TMB's offices in the Marathon Financial
Center, 4095 Valley Pike, Winchester, Virginia.

On August 12, 1993, TMB opened a branch location at 300 Warren Avenue, Post
Office Plaza, Front Royal in Warren County, Virginia. On February 13, 1995, TMB
opened a branch located at 1041 Berryville Avenue, Winchester, Virginia. During
1997, TMB opened two offices. A branch located at 1447 North Frederick Pike,
Winchester, Virginia was opened on June 18, 1997 and a branch located at 1014
South Main Street, Woodstock, Virginia was opened on September 22, 1997.

RHB opened for business on November 15, 1990 in a temporary office at 181 C Neff
Avenue, Harrisonburg, Virginia. On December 7, 1991, RHB moved into its present
facility at 110 University Boulevard, Harrisonburg, Virginia. On January 3,
1994, RHB opened its first branch office in the Red Front Supermarket on Chicago
Avenue, Harrisonburg, Virginia, and the Bank opened its second branch office at
1980 South Main Street, Harrisonburg, Virginia on June 21, 1995. On November 13,
1996 RHB opened a third branch office at 410 W. Spotswood Trail, in the town of
Elkton, Virginia. On April 15, 1999, RHB opened a branch at 51 Franklin Street
in Weyers Cave, Virginia that relocated across the street to 54 Franklin Street,
Suite 102 in December of 2000. On June 1, 1999 the bank opened another branch at
2556 Jefferson Highway, Suite 110, just outside of Waynesboro, Virginia. On June
18, 2001, the bank opened another branch at 49 Lee Jackson Highway, Suite 101 in
Staunton, VA. RHB has one wholly owned subsidiary, RHB Services, Inc.

The Corporation is a holding company for TMB and RHB and is not directly engaged
in the operation of any other business.

TMB and RHB, which are chartered under the laws of the Commonwealth of Virginia,
conduct a general banking business through their offices. Both bank's deposits
are insured under the Federal Deposit Insurance Act and are members of the
Federal Reserve System. As of December 31, 2001, TMB employed 67 persons on a
full-time equivalent basis while RHB employed 49 persons on a full-time
equivalent basis.

Both banks are engaged in the business of offering banking services to the
general public. They offer checking accounts, savings and time deposits, and
commercial, real estate, personal, home improvement, automobile and other
installment and term loans. They also offer travelers checks, safe deposit,
collection, notary public, discount brokerage service, and other customary bank
services (other than trust services) to their customers. The three principal
types of loans made by the banks are: (1) commercial and industrial loans; (2)
real estate loans; and (3) loans to individuals for household, family, and other
consumer expenditures. Both banks' premises include drive-up facilities. There
are ATM's located at each of TMB's offices and an additional four off-premise
ATM's serviced by TMB. RHB has no ATM's at this time.

The Corporation's business in the area served by TMB (the counties of Frederick,
Clarke, Shenandoah, Warren and the city of Winchester, Virginia) and RHB
(Rockingham and Augusta counties, and the cities of Harrisonburg, Waynesboro,
and Staunton, Virginia) are highly competitive with respect to both loans and
deposits. In the Corporation's primary service area, there are numerous
commercial banks (including large, Virginia-wide banks with multiple offices)
offering services ranging from deposits and real estate loans to full service
banking. Certain of the commercial banks in this service area have higher
lending limits than the Corporation and may provide

                                       2

<PAGE>

various services for their customers that are not offered by the Corporation. In
addition, there can be no assurance that other financial institutions, with
substantially greater resources than the Corporation, will not establish
operations in the Corporation's service area.

Recent Developments

In November of 2000, the Corporation changed its name from Marathon Financial
Corporation to Premier Community Bankshares, Inc. and acquired all of the issued
and outstanding capital stock of Rockingham Heritage Bank through a merger with
Rockingham Heritage Bank at the subsidiary level.

The Corporation repurchased 114,669 shares of common stock during 2001 and
16,500 shares of common stock during 2000.

Supervision and Regulation

         General. As a bank holding company, the Corporation is subject to
regulation under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
and the examination and reporting requirements of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Under the BHCA, a bank
holding company may not directly or indirectly acquire ownership or control of
more than 5% of the voting shares or substantially all of the assets of any bank
or merge or consolidate with another bank holding company without the prior
approval of the Federal Reserve Board. The BHCA also generally limits the
activities of a bank holding company to that of banking, managing or controlling
banks, or any other activity that is determined to be so closely related to
banking or to managing or controlling banks that an exception is allowed for
those activities.

         As state-chartered banks, TMB and RHB are subject to regulation,
supervision and examination by the Virginia State Corporation Commission's
Bureau of Financial Institutions. They also are subject to regulation,
supervision and examination by the Federal Reserve Board. State and federal law
also governs the activities in which TMB and RHB engage, the investments that
they make and the aggregate amount of loans that may be granted to one borrower.
Various consumer and compliance laws and regulations also affect the operations
of each of TMB and RHB.

         The earnings of the Corporation's subsidiaries, and therefore the
earnings of the Corporation, are affected by general economic conditions,
management policies, changes in state and federal legislation and actions of
various regulatory authorities, inclu ding those referred to above. The
following description summarizes the significant federal and state laws to which
the Corporation and TMB and RHB are subject. To the extent that statutory or
regulatory provisions or proposals are described, the description is qualified
in its entirety by reference to the particular statutory or regulatory
provisions or proposals.

         Payment of Dividends. The Corporation is a legal entity separate and
distinct from its banking and other subsidiaries. Virtually all of the
Corporation's revenues will result from dividends paid to the Corporation by TMB
and RHB. TMB and RHB are subject to laws and regulations that limit the amount
of dividends that they can pay. In addition, the Corporation and TMB and RHB are
subject to various regulatory restrictions relating to the payment of dividends,
including requirements to maintain capital at or above regulatory minimums.
Banking regulators have indicated that banking organizations should generally
pay dividends only if the organization's net income available to common
shareholders over the past three years has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the organization's capital needs, asset quality and overall financial
condition. The Corporation does not expect that any of these laws, regulations
or policies will materially affect the ability of TMB and RHB to pay dividends.

         Insurance of Accounts, Assessments and Regulation by the FDIC. The
deposits of TMB and RHB are insured by the Federal Deposit Insurance Corporation
(the "FDIC") up to the limits set forth under applicable law. The deposits of
TMB and RHB are subject to the deposit insurance assessments of the Bank
Insurance Fund ("BIF") of the FDIC.

         The FDIC has implemented a risk-based deposit insurance assessment
system under which the assessment rate for an insured institution may vary
according to regulatory capital levels of the institution and other factors
(including supervisory evaluations) . Depository institutions insured by the BIF
that are "well capitalized" are required to pay only the statutory minimum
assessment of $2,000 annually for deposit insurance, while all other

                                       3

<PAGE>

banks are required to pay premiums ranging from .03% to .27% of domestic
deposits. These rate schedules are subject to future adjustments by the FDIC. In
addition, the FDIC has authority to impose special assessments from time to
time. However, because the legislation enacted in 1996 requires that both
Savings Association Insurance Fund insured and BIF-insured deposits pay a pro
rata portion of the interest due on the obligations issued by the Financing
Corporation, the FDIC is assessing BIF-insured deposits an additional 1.30 basis
points per $100 of deposits to cover those obligations.

         The FDIC is authorized to prohibit any BIF-insured institution from
engaging in any activity that the FDIC determines by regulation or order to pose
a serious threat to the respective insurance fund. Also, the FDIC may initiate
enforcement actions against banks, after first giving the institution's primary
regulatory authority an opportunity to take such action. The FDIC may terminate
the deposit insurance of any depository institution if it determines, after a
hearing, that the institution has engaged or is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, order or any condition imposed in
writing by the FDIC. It also may suspend deposit insurance temporarily during
the hearing process for the permanent termination of insurance, if the
institution has no tangible capital. If deposit insurance is terminated, the
deposits at the institution at the time of termination, less subsequent
withdrawals, shall continue to be insured for a period from six months to two
years, as determined by the FDIC. Management is not aware of any existing
circumstances that could result in termination of any deposit insurance of TMB
or RHB.

         Capital. The Federal Reserve Board has issued risk-based and leverage
capital guidelines applicable to banking organizations that it supervises. Under
the risk-based capital requirements, the Corporation and TMB and RHB are each
generally required to maintain a minimum ratio of total capital to risk-weighted
assets (including certain off-balance sheet activities, such as standby letters
of credit) of 8%. At least half of the total capital must be composed of common
equity, retained earnings and qualifying perpetual preferred stock, less certain
intangibles ("Tier 1 capital"). The remainder may consist of certain
subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock and a limited amount of the loan loss allowance ("Tier 2
capital," which, together with Tier 1 capital, composes "total capital").

         In addition, each of the federal banking regulatory agencies has
established minimum leverage capital requirements for banking organizations.
Under these requirements, banking organizations must maintain a minimum ratio of
Tier 1 capital to adjusted average quarterly assets equal to 3% to 5%, subject
to federal bank regulatory evaluation of an organization's overall safety and
soundness.

         The risk-based capital standards of the Federal Reserve Board
explicitly identify concentrations of credit risk and the risk arising from
non-traditional activities, as well as an institution's ability to manage these
risks, as important factors to be taken into account by the agency in assessing
an institution's overall capital adequacy. The capital guidelines also provide
that an institution's exposure to a decline in the economic value of its capital
due to changes in interest rates be considered by the agency as a factor in
evaluating a banking organization's capital adequacy.

         Other Safety and Soundness Regulations. There are a number of
obligations and restrictions imposed on bank holding companies and their
depository institution subsidiaries by federal law and regulatory policy that
are designed to reduce potential loss exposure to the depositors of such
depository institutions and to the FDIC insurance funds in the event that the
depository institution is insolvent or is in danger of becoming insolvent. For
example, under the requirements of the Federal Reserve Board 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 otherwise. In addition, the "cross-guarantee" provisions of federal
law require insured depository institutions under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result
of the insolvency of commonly controlled insured depository institutions or for
any assistance provided by the FDIC to commonly controlled insured depository
institutions in danger of failure. The FDIC may decline to enforce the
cross-guarantee provision if it determines that a waiver is in the best
interests of the deposit insurance funds. The FDIC's claim for reimbursement
under the cross guarantee provisions is superior to claims of shareholders of
the insured depository institution or its holding company but is subordinate to
claims of depositors, secured creditors and nonaffiliated holders of
subordinated debt of the commonly controlled insured depository institutions.

         The federal banking agencies also have broad powers under current
federal law to take prompt corrective action to resolve problems of insured
depository institutions. The extent of these powers depends upon whether the

                                       4

<PAGE>

institution in question is well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized,
as defined by the law. As of December 31, 2001, the Corporation and TMB and RHB
were classified as well capitalized.

         State banking regulators also have broad enforcement powers over TMB
and RHB, including the power to impose fines and other civil and criminal
penalties, and to appoint a conservator.

         Interstate Banking and Branching. Current federal law authorizes
interstate acquisitions of banks and bank holding companies without geographic
limitation. Effective June 1, 1997, a bank headquartered in one state was
authorized to merge with a bank headquartered in another state, as long as
neither of the states had opted out of such interstate merger authority prior to
such date. After a bank has established branches in a state through an
interstate merger transaction, the bank may establish and acquire additional
branches at any location in the state where a bank headquartered in that state
could have established or acquired branches under applicable federal or state
law.

         Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999 (the
"Act") was signed into law on November 12, 1999. The Act covers a broad range of
issues, including a repeal of most of the restrictions on affiliations among
depository institutions, securities firms and insurance companies. Most of the
Act's provisions require the federal bank regulatory agencies and other
regulatory bodies to adopt regulations to implement the Act, and for that reason
an assessment of the full impact on the Corporation of the Act must await
completion of that regulatory process.

         The Act repeals sections 20 and 32 of the Glass-Stegall Act, thus
permitting unrestricted affiliations between banks and securities firms. The Act
also permits bank holding companies to elect to become financial holding
companies. A financial holding company may engage in or acquire companies that
engage in a broad range of financial services, including securities activities
such as underwriting, dealing, brokerage, investment and merchant banking and
insurance underwriting, sales and brokerage activities. In orde r to become a
financial holding company, the bank holding company and all of its affiliated
depository institutions must be well-capitalized, well-managed, and have at
least a satisfactory Community Reinvestment Act rating.

         The Act provides that the states continue to have the authority to
regulate insurance activities, but prohibits the states in most instances from
preventing or significantly interfering with the ability of a bank, directly or
through an affiliate, to engage insurance sales, solicitations or
cross-marketing activities. Although the states generally must regulate bank
insurance activities in a nondiscriminatory manner, the states may continue to
adopt and enforce rules that specifically regulate bank insurance activities in
certain areas identified in the Act. The Act directs the federal bank regulatory
agencies to adopt insurance consumer protection regulations that apply to sales
practices, solicitations, advertising and disclosures.

         The Act adopts a system of functional regulation under which the
Federal Reserve Board is confirmed as the umbrella regulator for financial
holding companies, but financial holding company affiliates are to be
principally regulated by functional regulators such as the FDIC for state
nonmember bank affiliates, the Securities and Exchange Commission for securities
affiliates and state insurance regulators for insurance affiliates. The Act
repeals the broad exemption of banks from the definitions of "broker" and
"dealer" for purposes of the Securities Exchange Act of 1934, as amended, but
identifies a set of specific activities, including traditional bank trust and
fiduciary activities, in which a bank may engage without being deemed a
"broker", and a set of activities in which a bank may engage without being
deemed a "dealer ". The Act also makes conforming changes in the definitions of
"broker" and "dealer" for purposes of the Investment Company Act of 1940, as
amended, and the Investment Advisers Act of 1940, as amended.

         The Act contains extensive customer privacy protection provisions.
Under these provisions, a financial institution must provide to its customers,
at the inception of the customer relationship and annually thereafter, the
institution's policies and procedures regarding the handling of customers'
nonpublic personal financial information. The Act provides that, except for
certain limited exceptions, an institution may not provide such personal
information to unaffiliated third parties unless the institution discloses to
the customer that such information may be so provided and the customer is given
the opportunity to opt out of such disclosure. An institution may not disclose
to a non-affiliated third party, other than to a consumer reporting agency,
customer account numbers or other similar account identifiers for marketing
purposes. The Act also provides that the states may adopt customer privacy
protections that are more strict than those contained in the Act. The Act also
makes a criminal offense, except in

                                       5

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limited circumstances, obtaining or attempting to obtain customer information of
a financial nature by fraudulent or deceptive means.

                                       6

<PAGE>

Statistical Information

The following statistical information is furnished pursuant to the requirements
of Guide 3 (Statistical Disclosure by Bank Holding Companies) promulgated under
the Securities Act of 1933.

                                                 INDEX
                                                 -----
<TABLE>
<CAPTION>

<S>      <C>                                                                                  <C>
1        Selected Financial Data                                                              Page 8
2        Average Balance Sheets, Net Interest Income and Rates                                Page 9
3        Changes in Net Interest Income Attributable to Rate and Volume                       Page 10
4        Types of Investment Securities                                                       Page 11
5        Securities Maturity Analysis                                                         Page 12
6        Composition of the Loan Portfolio                                                    Page 13
7        Maturity Schedule of Selected Loans                                                  Page 14
8        Summary of Risk Elements                                                             Page 14
9        Summary of Loan Loss Experience                                                      Page 15
10       Allocation of Reserve for Loan Losses                                                Page 16
11       Deposits and Rates                                                                   Page 17
12       Maturities of CDs in Excess of $100,000                                              Page 17
13       Analysis of Liquid Assets                                                            Page 18
14       Financial Ratios                                                                     Page 19
15       Short-Term Borrowings                                                                Page 19
16       Interest Sensitivity Analysis                                                        Page 20
17       Quarterly Condensed Statements of Income - Unaudited                                 Page 21
</TABLE>

                                       7

<PAGE>

                            1-Selected Financial Data

The following selected consolidated financial data is based upon the
Corporation's audited financial statements and related notes and should be read
in conjunction with such financial statements and notes.

<TABLE>
<CAPTION>

                                                           For the Years Ended December 31,
                                                           --------------------------------
At Period End:                               2001          2000          1999          1998           1997
                                             ----          ----          ----          ----           ----
                                                           (in 000's except per share data)
<S>                                          <C>           <C>           <C>           <C>            <C>
Loans-net of unearned income
   and allowance for loan losses             $ 229,300     $ 185,706     $ 152,474     $ 130,015      $ 103,957
Loans held for resale                              471           155             0           402          1,502
Allowance for loan losses                        2,459         2,000         1,689         1,591          1,294
Total assets                                   299,865       246,315       204,827       177,643        137,452
Deposits                                       257,637       212,155       181,153       156,004        121,853
Shareholders' equity                            25,745        23,307        21,073        19,305         14,655
Income Summary:
Interest income                                 20,235        18,487        15,503        13,145         10,097
Interest expense                                 9,064         8,209         6,617         5,781          4,270
   Net interest income                       $  11,171     $  10,278     $  8,886      $   7,364      $   5,827
Provision for
   loan losses                                     687           483           380           429            277
                                                  ----          ----          ----          ----           ----
Net interest income after
   provision for loan losses                    10,484         9,795         8,506         6,935          5,550
Non interest income                              1,904         1,332         1,231         1,147            849
Non interest expenses                            7,514         7,126         6,242         5,218          4,434
Income before income taxes                       4,874         4,001         3,495         2,864          1,965
Income taxes                                     1,624         1,457         1,182           622            204
   Net income                                  $ 3,250       $ 2,544       $ 2,313       $ 2,242        $ 1,761
                                               =======       =======       =======       =======        =======
Per Share Data: *
Book value at period end                          5.69          5.13          4.62          4.33           3.83
Net income, basic                                 0.72          0.56          0.51          0.50           0.45
Net income, assuming dilution                     0.71          0.55          0.50          0.49           0.43
Cash dividends declared                           0.12          0.10          0.09          0.08           0.07
Average common shares outstanding            4,514,377     4,561,453     4,566,502     4,566,701      4,155,718
</TABLE>

* Adjusted for stock dividends in 1999, 1998, and 1997 and the exchange ratio of
the merger in 2000



            2 - Average Balance Sheets, Net Interest Income and Rates

This table illustrates average balances of total earning assets and total
interest-bearing liabilities for 2001, 2000 and 1999 and shows the average
distribution of assets, liabilities, shareholders' equity, and the related
income, expense, and corresponding weighted average yields and costs. The
average balances used for the purpose of this table and other statistical
disclosures were calculated by using the daily average balances.

                                       8

<PAGE>
<TABLE>

<CAPTION>

(In thousands)                              December 31, 2001               December 31, 2000               December 31, 1999
                                      -----------------------------   -----------------------------   -----------------------------
                                        Average   Earnings/  Yield/     Average   Earnings/  Yield/     Average   Earnings/  Yield/
Assets:                               Balances(1)  Expense    Rate    Balances(1)  Expense    Rate    Balances(1)  Expense    Rate
                                      ----------- --------   ------   ----------- ---------  ------   ----------- ---------  ------
<S>                                    <C>         <C>        <C>      <C>         <C>        <C>      <C>        <C>         <C>
Interest Earning Assets
Loans, net of unearned discounts (2)  $ 206,881   $18,207    8.80%    $ 171,384   $16,054    9.37%    $ 147,372   $13,623     9.24%
Interest-bearing deposits                   885        39    4.41%        1,155        73    6.32%            0         0     0.00%
Securities (3)                           19,509     1,247    6.39%       20,279     1,334    6.58%       17,608     1,070     6.08%
Federal funds sold                       21,889       826    3.77%       16,814     1,066    6.34%       16,404       826     5.04%
                                      ---------   --------            ---------   --------            ---------   -------
Total interest earning assets         $ 249,164   $20,319    8.15%    $ 209,632   $18,527    8.84%    $ 181,384   $15,519     8.56%

Non-Interest Earning Assets

   Cash and due from banks               11,827                          10,721                           9,346
   Bank premises and equipment            5,038                           4,944                           4,721
   Other assets                           1,763                           2,695                           2,043
   Allowance for loan losses             (2,193)                         (1,839                          (1,661)
                                      ---------                       ---------                       ---------
Total assets                          $ 265,599                       $ 226,153                       $ 195,833
                                      ---------                       ---------                       ---------
Liabilities and Shareholders' Equity
Liabilities

   Interest-bearing deposits          $ 197,089   $ 8,662    4.39%    $ 167,327   $ 7,890    4.72%    $ 148,569   $ 6,529     4.39%
   Borrowed funds                         7,663       402    5.25%        4,754       319    6.71%        1,486        88     5.92%
                                      ---------   -------    ----     ---------   -------    ----     ---------   -------     ----
Total interest-bearing liabilities    $ 204,752   $ 9,064    4.43%    $ 172,081   $ 8,209    4.77%    $ 150,055   $ 6,617     4.41%

   Non-Interest Bearing Liabilities:
    Liabilities:
      Demand deposits                 $  34,570                       $  30,901                       $  24,021
      Other liabilities                   1,506                             953                             828
                                      ---------                       ---------                       ---------
   Total liabilities                    240,828                         203,935                         174,904
   Shareholders' equity                  24,771                          22,218                          20,929
                                      ---------                       ---------                       ---------
Total liabilities and shareholders'
equity                                $ 265,599                       $ 226,153                       $ 195,833
                                      ---------                       ---------                       ---------
Net Interest Earnings                             $11,255                         $10,318                         $ 8,902
                                                 ---------                       ---------                        --------
Net Interest Yield on Earnings Assets                         4.52%                           4.92%                           4.91%
                                                             ------                          ------                          ------
</TABLE>

(1) Average balances are calculated using daily balances for each category in
    1999, 2000 and 2001.
(2) Non-accrual loans are included in the average
    balance of this category
(3) Amounts are shown on a tax equivalent basis.

                                       9

<PAGE>

        3 - Changes in Net Interest Income Attributable to Rate & Volume


This table represents the variances of earning assets and interest-bearing
liabilities between the years 2001 and 2000. The total variance for each
category is broken down between volume variance and rate variance which provides
an analysis of the impact that growth and changes in interest rates have upon
the balance sheet structure.

<TABLE>
<CAPTION>

(In thousands)                       December 31, 2001 vs. 2000            December 31, 2000 vs. 1999
                                     --------------------------            --------------------------
                                   Due to     Change in                  Due to      Change in
Interest Earned On:                Volume        Rate        Total       Volume        Rate        Total
                                   ------    ---------       -----       ------    ---------       -----
<S>                                <C>         <C>          <C>          <C>            <C>       <C>
     Loans                         $3,174      ($1,021)     $2,153       $2,243         $188      $2,431
     Interest - bearing deposits      (15)         (19)        (34)          73            0          73
     Securities                       (50)         (37)        (87)         173           91         264
     Federal Funds Sold               265         (505)       (240)          21          219         240
                                   ------      -------      ------       ------        -----      ------
Total interest earned on interest
      bearing assets               $3,374      ($1,582)     $1,792       $2,510         $498      $3,008
                                   ------      -------      ------       ------        -----      ------
Interest Paid On:
     Interest-bearing deposits     $1,332        ($561)       $771         $902         $459      $1,361
     Borrowed funds                   164          (80)         84          218           13         231
                                   ------      -------      ------       ------        -----      ------
Total interest paid on
     liabilities                   $1,496        ($641)       $855       $1,120         $472      $1,592
                                   ------      -------      ------       ------        -----      ------
Net interest income                $1,878        ($941)       $937       $1,390          $26      $1,416
                                   ======       ======      ======       ======        =====      ======
</TABLE>

                                       10

<PAGE>

                        4 -Types of Investment Securities

                   Book Value of Securities Available for Sale
                   -------------------------------------------
<TABLE>
<CAPTION>

                                                          December 31,
                                                         -------------
                                                       2001        2000
                                                       ----        ----
<S>                                              <C>        <C>
     U.S. Government and federal agencies            $ 7,973     $11,890
     Obligations of state & political subdivisions     1,190         768
     Corporate bonds                                     250         269
     Mortgage-backed securities                          870         753
     Other securities                                  1,354       1,354
                                                     -------     -------
                                                     $11,637     $15,034
                                                     =======     =======
</TABLE>

                    Book Value of Securities Held to Maturity
                    -----------------------------------------
<TABLE>
<CAPTION>

                                                         December 31,
                                                        -------------
                                                       2001        2000
                                                       ----        ----
<S>                                              <C>         <C>
     U.S. Government and federal agencies             $3,744      $5,836
     Obligations of state & political subdivisions     3,145       1,763
     Corporate bonds                                       0         263
     Mortgage-backed securities                           93         167
     Other securities                                  2,774           0
                                                      ------      ------
                                                      $9,756      $8,029
                                                      ======      ======
</TABLE>

At December 31, 2001, the securities book value was $21.3 million and the market
value was $21.5 million, compared to December 31, 2000 values of $23.0 and $23.1
million, respectively. As of December 31, 2001, there were no obligations by any
one issuer in the investment portfolio, exclusive of obligations of the U.S.
Government or U.S. Agencies and Corporations, which in the aggregate exceeded
10% of stockholders' equity.

                                       11

<PAGE>

                        5 - Securities Maturity Analysis

Table 5 sets forth the maturity of distribution and weighted average yields of
the securities portfolio at December 31, 2001. The weighted average yields are
calculated on the book value of the portfolio and on securities interest income
adjusted for amortization of premium and accretion of discount.

                                Held to Maturity
                                ----------------
<TABLE>
<CAPTION>

                                                                         December 31, 2001

                                                                                                After One But
                                                          Within One Year                     Within Five Years
                                                          ---------------                     -----------------
                                                    Amount (000's)     Yield (%)         Amount (000's)     Yield (%)
                                                    --------------     ---------         --------------     ---------
<S>                                                      <C>           <C>                  <C>             <C>
U.S. Government and federal agencies                     499           4.96%                2,245           5.99%
Obligations of state & political subdivisions            260           6.51%                1,433           6.57%
Mortgage-backed securities                                 0           0.00%                   93           6.43%
Other securities                                           0           0.00%                    0           7.10%
                                                       -----           -----               ------          ------
Total                                                    759           5.49%                3,771           6.23%
                                                       -----           -----               ------          ------


                                                                         December 31, 2001

                                                           After Five But
                                                          Within Ten Years                      After Ten Years
                                                           ---------------                     -----------------
                                                    Amount (000's)     Yield (%)         Amount (000's)     Yield (%)
                                                    --------------     ---------         --------------     ---------
U.S. Government and federal agencies                     500           5.03%                  500           7.00%
Obligations of state & political subdivisions          1,052           6.07%                  400           6.59%
Mortgage-backed securities                                 0           0.00%                    0           0.00%
Other securities                                           0           0.00%                2,774           7.41%
                                                       -----           -----               ------          ------
Total                                                  1,552           5.73%                3,674           7.21%
                                                       =====           ====                 =====           ====

</TABLE>

                               Available for Sale

<TABLE>
<CAPTION>

                                                                         December 31, 2001

                                                                                                After One But
                                                          Within One Year                     Within Five Years
                                                          ---------------                     -----------------
                                                    Amount (000's)     Yield (%)         Amount (000's)     Yield (%)
                                                    --------------     ---------         --------------     ---------
<S>                                                      <C>           <C>                  <C>             <C>
U.S. Government and federal agencies                     353           5.33%                6,313           5.02%
Obligations of state & political subdivisions              0           0.00%                  522           6.57%
Mortgage-backed securities                                 0           0.00%                    0           0.00%
Other securities                                           0           0.00%                    0           0.00%
                                                       -----           -----               ------          ------
Total                                                    353           5.33%                6,835           5.14%
                                                         ===           ====                 =====           =====



                                                                         December 31, 2001

                                                           After Five But
                                                          Within Ten Years                      After Ten Years
                                                           ---------------                     -----------------
                                                    Amount (000's)     Yield (%)         Amount (000's)     Yield (%)
                                                    --------------     ---------         --------------     ---------
U.S. Government and federal agencies                   1,307           5.84%                    0           0.00%
Obligations of state & political subdivisions            668           6.19%                    0           0.00%
Mortgage-backed securities                               139           6.98%                  731           5.55%
Other securities                                           0           0.00%                1,604           5.54%
                                                       -----           -----               ------          ------
Total                                                  2,114           6.03%                2,335           5.54%
                                                       =====           =====                =====           =====

</TABLE>

<PAGE>

                      6 - Composition of the Loan Portfolio

The following table summarizes the composition of the loan portfolio at December
31, 2001 through 1997.

<TABLE>
<CAPTION>

(In thousands)                                                                             December 31,
                                                                                           ------------
                                                                     2001         2000         1999         1998        1997
                                                                     ----         ----         ----         ----        ----
Loans secured by real estate:                                                               (In 000's)
<S>                                                                   <C>          <C>          <C>          <C>          <C>
     Construction and land development                               $ 21,926     $ 14,474     $ 12,462     $ 10,216    $  8,078
     Secured by farmland                                                1,677          892          957          959         693
     Secured by 1-4 family residential                                 53,419       36,966       29,363       26,287      23,838
     Multi-family residential                                           3,982        4,809        2,767        1,841       1,456
     Non-farm, non-residential loans                                   83,624       52,982       44,384       28,062      16,922
Loans to farmers (except those secured by real estate)                     12          477          224          223         426
Commercial and industrial loans (except those secured by real estate)  49,445       56,155       44,391       44,568      38,607
Loans to individuals (except those secured by real estate)             17,261       19,935       18,658       20,367      16,497
All other loans                                                           425        1,224        1,404          216         110
                                                                     --------     --------     --------     --------    --------
                                                                     $231,771     $187,914     $154,610     $132,738    $106,627
Less:
     Unearned income                                                       12          208          447        1,133       1,374
     Allowance for loan losses                                          2,459        2,000        1,689        1,591       1,296
                                                                     --------     --------     --------     --------    --------
                                                                     $229,300     $185,706     $152,474     $130,015    $103,957
                                                                     --------     --------     --------     --------    --------
</TABLE>

The Corporation had no loans outstanding to foreign countries or for highly
leveraged transactions as of December 31, 2001, or any of the previous years
disclosed above.

There were no categories of loans that exceeded 10% of outstanding loans as of
December 31, 2001, which were not disclosed in Table 6.

In the normal course of business, the Corporation makes various commitments and
incurs certain contingent liabilities, which are disclosed but not reflected in
the accompanying financial statements. At December 31, 2001, commitments for
standby letters of credit totaled $1.7 million and commitments to extend credit
totaled $45.9 million. At December 31, 2000, commitments for standby letters of
credit totaled $1.4 million and commitments to extend credit totaled $36.8
million.

                                       13

<PAGE>

                     7 - Maturity Schedule of Selected Loans

The table below presents the maturities of selected loans outstanding at
December 31, 2001.
<TABLE>
<CAPTION>

                                                       After One
                                     Within          But Within         After
                                     One Year         Five Years      Five Years          Total
                                     --------         ----------      ----------          -----
                                                               (in 000's)
<S>                                   <C>              <C>              <C>              <C>
Commercial                            $ 32,480         $ 16,130         $   835          $ 49,445
Real estate-construction                17,772            1,516           2,638            21,926
                                      --------         --------         -------          --------
                                      $ 50,252         $ 17,646         $ 3,473          $ 71,371
                                      --------         --------         -------          --------

Interest sensitivity on such loans maturing after one year:

Fixed                                 $ 17,594
Variable                                 3,525
                                      --------
Total                                 $ 21,119
                                      --------
</TABLE>


                          8 - Summary of Risk Elements

The following table details information concerning non-accrual, past due and
restructured loans as of December 31 for each of the years indicated:
<TABLE>
<CAPTION>

                                                               December 31,
                                                               ------------
                                           2001        2000        1999        1998        1997
                                           ----        ----        ----        ----        ----
                                                                (in 000's)
<S>                                      <C>           <C>         <C>         <C>         <C>
Non-accrual loans                        $  211        $371        $ 40        $261        $ 71
Loans past due 90 days or more
  and still acquiring interest            1,079         154         146         200         173
Restructured loans                            0           0           0           0           0
                                         ------        ----        ----        ----        ----
                                         $1,290        $525        $186        $461        $244
                                         ------        ----        ----        ----        ----
</TABLE>


The accrual of interest on mortgage and commercial loans is discontinued at the
time the loan is 90 days delinquent unless the credit is well-secured and in
process of collection. Loans are placed on non-accrual at an earlier date or
charged off if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual
or charged off is reversed against interest income. The interest on these loans
is accounted for on the cash-basis or cost-recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.

Non-accrual loans at December 31, 2001 were $211 thousand compared to $371
thousand for 2000. Approximately $5 thousand of interest income would have been
recorded if interest had been accrued in 2001. As of December 31, 2001, the
Corporation had a total of $1.3 million in non-accrual, 90 days past due and
still accruing interest, and restructured loans, compared to $525 thousand in
2000. This was an increase of $765 thousand or 145.7%.

                                       14

<PAGE>

As of December 31, 2001 the Corporation had no loans in addition to the past due
and non-accrual loans mentioned above that are considered to be potential
problem loans. The Corporation's management and Board of Directors have reviewed
the asset quality of TMB's and RHB's loan portfolios and both loan loss
allowances and have found them to be adequate.

                       9 - Summary of Loan Loss Experience

<TABLE>
<CAPTION>

(In thousands)                             2001        2000        1999        1998        1997
                                           ----        ----        ----        ----        ----
<S>                                      <C>         <C>         <C>         <C>         <C>
Balance, beginning of period             $2,000      $1,689      $1,591      $1,296      $1,060
Less Charge-off's:
         Commercial                          71          47         205          64          54
         Real estate-mortgage                59           0          29           0           0
         Real estate-construction             0           0          19           0           0
         Consumer installment loans         165         235          71         122          50
                                         ------      ------      ------      ------      ------
                          Total          $  295      $  282      $  324      $  186      $  104
                                         ------      ------      ------      ------      ------
Plus Recoveries:
         Commercial                      $    0      $   44      $   17      $   20      $   55
         Real estate-mortgage                 0           0           0          20           0
         Real estate-construction             0           0           2           0           0
         Consumer installment loans          67          66          23          12           8
                                         ------      ------      ------      ------      ------
                           Total         $   67      $  110      $   42      $   52      $   63
                                         ------      ------      ------      ------      ------
Additions charged to operating expense   $  687      $  483      $  380      $  429      $  277
                                         ------      ------      ------      ------      ------
Balance, end of period                   $2,459      $2,000      $1,689      $1,591      $1,296
                                         ------      ------      ------      ------      ------
Ratio of net charge-offs to
    average loans outstanding during the   0.11%       0.10%       0.19%       0.11%       0.05%
    period
</TABLE>

The Corporation maintains the allowance for loan losses at a sufficient level to
provide for potential losses in the loan portfolio. Loan losses are charged
directly to the allowance when they occur, while recoveries are credited to the
allowance. The adequacy of the provision for loan losses is reviewed
periodically by management through consideration of several factors including
changes in the character and size of the loan portfolio and related loan loss
experience, a review and examination of overall loan quality which includes the
assessment of problem loans and an analysis of anticipated economic condition in
the market area. An analysis of the allowance for loan losses, including
charge-off activity, is presented above for the years ended December 31, 2001
through 1997.

                                       15

<PAGE>

                10 - Allocation of the Allowance for Loan Losses

The following table reflects management's allocation of the allowance for loan
losses for the years ended December 31, 2001 through 1997.

<TABLE>
<CAPTION>

                                                         December 31, 2001          December 31, 2000         December 31, 1999
                                                         -----------------          -----------------         -----------------
                                                                 % of Loans to              % of Loans to             % of Loans to
                                                        Amount    Total Loans      Amount    Total Loans     Amount    Total Loans
                                                        ------   -------------     ------   -------------    ------   -------------
Loans secured by real estate:                                 (in 000's)                 (in 000's)                (in 000's)
<S>                                                          <C>         <C>            <C>         <C>           <C>        <C>
     Construction and land development                       $233        9.5%           $152        7.7%          $53        8.1%
     Secured by farmland                                       18        0.7%              9        0.5%            9        0.6%
     Secured by 1-4 family residential                        567       23.0%            394       19.7%          165       19.0%
     Nonfarm, nonresidential loans                            929       37.8%            622       30.6%          686       30.5%
Loans to farmers (except those secured by real estate)          0        0.0%              5        0.3%            3        0.1%
Commercial loans (except those secured by real estate)        525       21.3%            596       29.9%          628       29.2%
Consumer installment loans (except those secured by r/e)      183        7.4%            209       10.6%          138       12.1%
All other loans                                                 5        0.2%             13        0.7%            7        0.4%
                                                           ------      ------         ------      ------       ------      ------
                                                           $2,459      100.0%         $2,000      100.0%       $1,689      100.0%
                                                           ------      ------         ------      ------       ------      ------
</TABLE>

<TABLE>
<CAPTION>

                                                         December 31, 1998            December 31, 1997
                                                         -----------------            -----------------
                                                                   % of Loans to                % of Loans to
                                                        Amount      Total Loans      Amount      Total Loans
                                                        ------     -------------     ------     -------------
Loans secured by real estate:                                 (in 000's)                   (in 000's)
<S>                                                           <C>        <C>               <C>        <C>
     Construction and land development                        $48        7.7%              $40        7.5%
     Secured by farmland                                       10        0.7%               11        0.6%
     Secured by 1-4 family residential                        174       19.8%              188       23.4%
     Nonfarm, nonresidential loans                            606       22.5%              445       17.0%
Loans to farmers (except those secured by real estate)          3        0.2%                2        0.4%
Commercial loans (except those secured by real estate)        627       33.6%              525       35.7%
Consumer installment loans (except those secured by r/e)      118       15.3%               81       15.3%
All other loans                                                 5        0.2%                4        0.1%
                                                           ------      ------           ------      ------
                                                           $1,591     100.00%           $1,296      100.0%
                                                           ------      ------           ------      ------
</TABLE>
                                       16

<PAGE>

                             11 - Deposits and Rates

The following table details the average amount of, and the average rate paid on
the following primary deposit categories for the years ended December 31, 2001,
2000 and 1999.

<TABLE>
<CAPTION>

                                                  Year ended                  Year ended                   Year ended
(In thousands)                                 December 31, 2001           December 31, 2000            December 31, 1999
                                               -----------------           -----------------            -----------------
                                             Average       Average       Average       Average        Average       Average
                                             Balance        Rate         Balance        Rate          Balance        Rate
                                             -------       -------       -------       -------        -------       -------
<S>                                           <C>           <C>           <C>           <C>            <C>           <C>
Demand deposits                              $ 34,570                    $ 30,901                     $ 24,021
Interest - bearing demand                      32,679       1.90%          27,736       2.60%           31,685       2.80%
Savings                                        35,585       2.71%          29,990       3.20%           19,781       3.00%
Certificates of deposit                       128,825       5.49%         109,601       5.70%           97,103       5.20%
                                             --------                    --------                     --------
   Total interest - bearing deposits          197,089       4.39%         167,327       4.72%          148,569       4.39%
                                             --------                    --------                     --------
Borrowed money                                  7,663       5.25%           4,754       6.71%            1,486       5.92%
                                             --------                    --------                     --------
   Total interest - bearing liabilities       204,752       4.43%         172,081       4.77%          150,055       4.41%
                                             ========                    ========                     ========
Total deposits & borrowed money              $239,322                    $202,982                     $174,076
                                             ========                    ========                     ========
</TABLE>

The Corporation primarily uses deposits to fund its loans and investment
securities. The Corporation offers individuals and small-to-medium-size
businesses a variety of deposit accounts. Deposit accounts, including checking,
savings, money markets and certificates of deposit, are obtained primarily from
the communities which the Corporation services.

      12 - Maturities of CDs and Other Time Deposits in Excess of $100,000

The following is a summary of the maturity distribution of certificates of
deposit and other time deposits in amounts of $100,000 or more as of December
31, 2001.

<TABLE>
<CAPTION>

                                     Amount          Percent
                                     ------          -------
                                           (in 000's)
<S>                                  <C>              <C>
Three months or less                 $ 5,307          16.97%
Over three-six months                  7,167          22.91%
Over six-twelve months                12,353          39.49%
Over twelve months                     6,451          20.62%
                                     -------         ------
     Total                           $31,278         100.00%
                                     -------         ------
</TABLE>

Certificates of deposit in the amounts of $100,000 or more were $31.3 million at
December 31, 2001. This represents 21.9% of the total certificates of deposit
balance of $143.0 million at December 31, 2001. The Corporation does not solicit
such deposits. Further, the Corporation does bid for selected public funds
deposits in large denominations, and such deposits may require a pledging of
investment securities.

The Corporation competes with the major regional financial institutions for
money market accounts and certificates of deposits less than $100,000. While the
Corporation is competitive with its interest rates, using a tiered rate system
to increase individual account balances, the Corporation has found that it can
continue to maintain a higher interest margin than its peers by matching loan
maturities with certificate maturities and setting loan rates based on the
Corporation's cost of funds.

                                       17

<PAGE>

                         13 - Analysis of Liquid Assets

Liquidity is a measure of the Corporation's ability to generate sufficient cash
to meet present and future obligations in a timely manner. These obligations
include the credit needs of customers, funding deposit withdrawals, and the
day-to-day operations of the Corporation. The Corporation's ability to fund
these daily commitments at December 31, 2001, 2000 and 1999 is illustrated in
the table below:

<TABLE>
<CAPTION>

                                                               December 31,
                                                               ------------
                                                     2001          2000        1999
                                                     ----          ----        ----
                                                           (amounts in 000's)
Liquid Assets:
<S>                                                    <C>          <C>         <C>
   Cash and due from banks                             $17,680      $12,765     $11,919
   Federal funds sold                                   22,185       16,996      14,293
   Liquid securities                                    12,396       16,048      12,240
   Loans maturing in one year or less                   90,764       72,898      51,243
                                                      --------     --------    --------
        Total liquid assets                           $143,025     $118,707     $89,695
                                                      --------     --------    --------
   Total deposits and other liabilities               $274,120     $223,008    $183,755
                                                      --------     --------    --------
   Ratio of liquid assets to deposits
   and other liabilities                                 52.18%       53.23%      48.80%
                                                      --------     --------    --------
</TABLE>

The net loan to deposit ratio (89.00%) as of December 31, 2001 has provided the
opportunity for the Corporation to achieve a high return on its deposits. For
the year ended December 31, 2001, the Corporation experienced a return on assets
of 1.22% and a net interest margin of 4.52%.

The source of new funds is strong for both long-term and short-term duration.
The growth in deposits was $45.5 million or 21.4% during 2001. The Corporation
also has access to overnight federal funds from correspondent banks totaling up
to $13.9 million. In addition, The Corporation has established borrowing limits
through the Federal Reserve Bank's discount window for $2.0 million. Also, the
Corporation has $46.2 million of funds available through the Federal Home Loan
Bank of Atlanta of which $7.0 million has been utilized. Management believes
that the opportunity for the sale of loans on the market is good.

                                       18

<PAGE>

                              14 - Financial Ratios

The following table summarizes ratios considered to be significant indicators of
the Corporation's profitability and financial condition for the years ended
December 31, 2001, 2000 and 1999.



                                           For the Years Ending December 31,
                                           ---------------------------------
                                             2001         2000        1999
                                             ----         ----        ----

Return on average assets
   (Net income/average total assets)         1.22%        1.12%        1.21%
                                            ------       ------       ------
Return on average equity
    (Net income/average equity)             13.12%       11.45%       11.05%
                                            ------       ------       ------
Dividends payment ratio
     (Dividends declared/
         Net income)                        16.65%       18.00%        7.96%
                                            ------       ------       ------
Average equity to average asset ratio        8.59%        9.46%       10.29%
                                            ------       ------       ------


                           15 - Short-Term Borrowings

The Corporation had no short-term borrowings with an average balance outstanding
of more than 30% of stockholders' equity for the years ended December 31, 2001,
2000 and 1999.

<PAGE>

                       16 - Interest Sensitivity Analysis

This table represents the relationship of earning assets to interest-bearing
liabilities at selected periods of time. The period GAP shows whether the
Corporation is rate sensitive on either the asset or liability side for each of
the periods while the cumulative GAP reflects the sensitivity on a year-to-date
basis. As reflected in this table, the Corporation is asset sensitive during the
1-90 day period while on a cumulative basis the Corporation is liability
sensitive for the one-year period.

<TABLE>
<CAPTION>

(In thousands)                                                     90 Days                      Over
                                                     1-90 Days    to 1 Year     1-5 Years     5 Years        Total
                                                     ---------    ---------     ---------     -------        -----
<S>                                                 <C>          <C>            <C>          <C>            <C>
Earning assets
Fed funds sold                                        $ 22,185          $ -           $ -          $ -      $ 22,185
Interest - bearing demand                                  186            0             0            0           186
Securities                                                 512          600        10,606        9,675        21,393
Loans                                                   58,454       32,310       122,474       18,992       232,230
                                                     ---------    ---------     ---------      -------     ---------
Total earning assets                                  $ 81,337     $ 32,910     $ 133,080     $ 28,667     $ 275,994
Interest - bearing liabilities
Interest - bearing demand                             $ 17,692          $ -      $ 19,103          $ -      $ 36,795
Savings                                                  6,323            0        13,210            0        19,533
Money market savings                                    21,591            0             0            0        21,591
Certificates of deposit                                 23,729       84,955        34,274            0       142,958
Borrowed funds                                           4,559            0         8,000        2,204        14,763
                                                     ---------    ---------     ---------      -------     ---------
Total interest - bearing liabilities                  $ 73,894     $ 84,955      $ 74,587      $ 2,204     $ 235,640
                                                     ---------    ---------     ---------      -------     ---------
Period GAP                                             $ 7,443     $(52,045)     $ 58,493     $ 26,463
                                                     ---------    ---------     ---------      -------
Cumulative GAP                                         $ 7,443     $(44,602)     $ 13,891     $ 40,354
                                                     ---------    ---------     ---------      -------
Cumulative GAP/Earning assets                            2.70%      -16.16%         5.03%       14.62%
</TABLE>

                                       20

<PAGE>

            17 - Quarterly Condensed Statements of Income - Unaudited

<TABLE>
<CAPTION>

                                                                      2001 Quarter Ended
                                                                      ------------------
                                                                In thousands (except per share)
                                                         March 31     June 30     Sept 30     Dec 31
                                                         --------     -------     -------     ------
<S>                                                          <C>         <C>         <C>         <C>
Total interest income                                        $4,980      $5,062      $5,085      $5,108
Net interest income after provision for loan losses           2,504       2,609       2,703       2,668
Non interest income                                             379         451         512         562
Non interest expense                                          1,743       1,863       1,886       2,022
Income before income taxes                                    1,140       1,197       1,329       1,208
Net income                                                      760         796         890         804
Earnings per common share - assuming dilution                 $0.16       $0.17       $0.20       $0.18
Dividends per common share                                     0.00        0.00        0.00        0.12


                                                                      2000 Quarter Ended
                                                                      ------------------
                                                               In thousands (except per share)
                                                         March 31     June 30     Sept 30     Dec 31
                                                         --------     -------     -------     ------
Total interest income                                        $4,184      $4,496      $4,757      $5,050
Net interest income after provision for loan losses           2,278       2,455       2,437       2,625
Non interest income                                             298         337         358         339
Non interest expense                                          1,610       1,680       1,770       2,066
Income before income taxes                                      966       1,112       1,025         898
Net income                                                      643         737         651         513
Earnings per common share - assuming dilution                 $0.14       $0.17       $0.14       $0.10
Dividends per common share                                     0.00        0.00        0.00        0.10
</TABLE>

Item 2. Description of Properties
---------------------------------

TMB's main office is located at 4095 Valley Pike, Winchester, Virginia. On
December 31, 1993, the Marathon Land Trust executed a deed and transferred the
office to TMB. This property is owned free of encumbrances.

On August 12, 1993, TMB opened its Warren County Branch at 300 Warren Avenue in
Post Office Plaza, Front Royal, Warren County, and Virginia. On July 1, 1996 TMB
entered into a new lease with Post Office Plaza, L.C. for the new branch
facility in Front Royal. The terms of the lease include a current monthly rent
of $4,000 and is adjusted annually. The lease term is twenty years with the
option to renew for two additional five-year terms.

On February 13, 1995, TMB opened its Winchester Branch at 1041 Berryville Avenue
in the City of Winchester, Virginia. TMB executed a lease on October 1, 1994,
for five years. On October 1, 1999, TMB exercised the first of two five year
options. The current monthly lease payment is $1,664. TMB has one five-year
option to extend this lease.

On June 18, 1997, TMB opened a second Winchester Branch at 1447 North Frederick
Pike, Winchester, Virginia. TMB entered into a lease on January 13, 1997, with a
termination date of December 31, 2006. TMB has two five-year options to extend
the lease. The monthly lease payment is $2,500.

On September 22, 1997, TMB opened its Shenandoah County Branch at 1014 South
Main Street, Woodstock, Virginia. A new lease was executed by TMB on September
1, 1997, for five years with a monthly lease payment of $800 per month through
the third year, $900 per month for the fourth year and $1,000 per month for the
fifth year. TMB has two five-year options to extend that lease.

On December 16, 1998, TMB purchased a lot consisting of 1.033 acres adjacent to
the main office property located at 4095 Valley Pike, Winchester. TMB acquired
the property to be used for additional parking and future expansion.

                                       21

<PAGE>

On August 28, 2001, TMB purchased a lot consisting of 3,367 square feet located
at 139 North Cameron Street, Winchester. This property was acquired for future
branch expansion. TMB is in the process of constructing a new branch building on
this site which is expected to open for business in May, 2002.

On August 31, 2001, TMB purchased 26,336 square feet located at 1729 Shenandoah
Avenue, Front Royal. TMB acquired the property for future branch expansion.

RHB presently owns three facilities: its main office at 110 University Boulevard
in Harrisonburg, a second branch located at 1980 South Main Street, and a
building located at 410 W. Spotswood Trail in Elkton, Virginia which serves as a
third branch location. The main office is a one story brick building with
approximately 5,800 square feet and was constructed in 1991. The site is 1.9
acres and will accommodate up to 5,000 square feet of additional building space.
It is located in a relatively new and rapidly growing retail and professional
area of the city. The South Main Branch is located on a .75 acre site on the
south end of the city and provides 3,000 square feet of office space. The Elkton
Branch resides on a .33 acre site providing 2,500 square feet of office space.
The Bank also owns an undeveloped commercial lot on Evelyn Byrd Avenue,
approximately 100 yards from the main office. This .4 acre lot is for possible
future expansion purposes.

Additionally, the RHB has a branch located in the Red Front Supermarket on
Chicago Avenue in the City of Harrisonburg. This is a leased facility with
approximately 260 square feet of space. The lease has a five year term with an
automatic five year renewal. The Bank has entered into a lease agreement for its
new Weyers Cave branch. The lease runs for 5 years with options for 4 more terms
of 5 years. The space is approximately 2,040 square feet. The Waynesboro lease
agreement is for space of approximately 2,040 square feet. The lease runs for 5
years with options for 4 more terms of 5 years. The newest branch in Staunton
has 1,500 square feet and the lease runs for 5 years with options for 4 more
terms of 5 years each. All properties are in sound physical condition and are
deemed to be adequately insured. There are no mortgages, liens or other
limitations on the RHB's ownership of its properties.

Item 3.  Legal Proceedings
--------------------------

In the course of normal operations, the Corporation, TMB and RHB are parties to
various legal proceedings. Based upon information currently available, and after
consultations with legal counsel, management believes that such legal
proceedings will not have a material adverse effect on the Corporation's
business, financial position, or results of operations.

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

No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders of the Corporation through a
solicitation of proxies or otherwise.

Part II

Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

The Corporation's common stock is listed on the NASDAQ Small Cap Market under
the symbol PREM. Prior to the common stock's listing on NASDAQ on October 3,
1996, there were occasional transactions in the stock and management assisted in
matching persons interested in buying or selling the stock. During 2001, the
Corporation repurchased 114,669 shares of common stock for $793 thousand. During
2000, the Corporation repurchased 16,500 shares of common stock for $81
thousand.

                                       22

<PAGE>

The following table represents the Corporation's stock prices for 2001 and 2000.
This sales price information reflects inter-dealer prices, without retail
mark-up, mark-down, or commission.

<TABLE>
<CAPTION>

                 1st Quarter               2nd Quarter               3rd Quarter                4th Quarter
              Low          High          Low         High          Low         High          Low          High
         -----------------------------------------------------------------------------------------------------------
<S>          <C>           <C>          <C>          <C>          <C>          <C>          <C>           <C>
2001         5.125         6.75         5.80         7.60         7.00         8.75         7.20          8.50
         -----------------------------------------------------------------------------------------------------------
         -----------------------------------------------------------------------------------------------------------
2000         5.47          6.75         5.00         6.25         5.00         6.06         4.75          5.25
         -----------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2001, the Corporation had approximately 2,293 stockholders of
record.

Dividends from TMB and RHB serve as the primary funding to the Corporation for
dividend payment. The Corporation declared a $.12 per share cash dividend to
stockholders of record as of December 27, 2001. Cash dividends of $.10 per share
cash declared in 2000 were paid in January, 2001 and cash dividends of $.09 per
share, declared in 1999, were paid in January, 2000.

Item 6.  Management's Discussion and Analysis or Plan of Operations
-------------------------------------------------------------------

Premier Community Bankshares, Inc. (the Corporation) is the holding company for
The Marathon Bank (TMB) and Rockingham Heritage Bank (RHB). The following
discussion complements the financial statements and is intended to assist the
reader in evaluating the financial performance and condition of Premier
Community Bankshares, Inc. as of December 31, 2001. Premier Community
Bankshares, Inc. was formerly called Marathon Financial Corporation. On November
20, 2000, the Corporation changed its name and acquired all of the issued and
outstanding capital stock of Rockingham Heritage Bank through a merger with
Rockingham Heritage Bank at the subsidiary level. All information has been
restated to reflect the merger of Rockingham Heritage Bank for all years stated.

Overview

The Corporation's assets grew at a 21.7% pace, ending the year at $299.9
million. The growth was primarily due to a 23.5% increase in net loans with a
balance of $229.3 million at year-end. The loan growth was funded by a 21.4%
increase in deposits and by $7.0 million borrowed from Trust Preferred Capital
Notes. Net income for the year was $3.3 million up 27.8% from 2000.

Results of Operations

The return on average assets was 1.22% as compared to 1.12% in 2000. Included in
expenses for 2000 are nonrecurring merger expenses of $340 thousand. Excluding
these expenses, the return on average assets would have been 1.28% for 2000.
Return on average equity for 2001 was 13.12% as compared to 11.45% for 2000.
Eliminating merger expenses, the return on average equity for 2000 would have
been 13.00%.

Net income for the years ended December 31, 2001 and 2000 was $3.3 million and
$2.5 million, respectively, a 27.8% increase. An increase in net interest income
before provision for loan losses of $893 thousand was the primary reason for the
improvement in earnings.

Net Interest Income

The Corporation's net interest income before provision for loan losses for the
years ended December 31, 2001 and 2000 was $11.2 million and $10.3 million,
respectively.

Net interest income is the difference between interest income and interest
expense and represents the Corporation's gross profit margin. The net interest
margin represents net interest income divided by average earning assets. It
reflects the average effective rate earned by the Corporation on its earning
assets. The increase in net interest income of $893 thousand for the year ended
December 31, 2001 when compared to 2000, was primarily the result of increases
in average earning assets. For the year ended 2001, the net interest margin
decreased to 4.52% from

                                       23

<PAGE>

4.92% last year. The impact of the 475 basis point drop in the prime rate during
2001 was the reason for the decline in the net interest margin. The prime rate
as of December 31, 2001 was 4.75% as compared to 9.50% a year earlier.

Net interest income is affected by changes in both average interest rates and
average volumes of interest earning assets and interest bearing liabilities.

Non-interest Income

The Corporation's non-interest income is derived chiefly from service charges on
deposit accounts and commissions and fees from bank services. The Corporation's
total non-interest income increased from $1.3 million in 2000 to $1.9 million in
2001. The increase is due to a higher volume of deposit customers.

Non-interest Expenses

Non-interest expense consists of salaries and employee benefits, occupancy
expenses, furniture and equipment and other operating expenses. During 2001,
total non-interest expenses increased $388 thousand or 5.4% compared to the same
period last year. Salaries and benefits increased $522 thousand, most of which
was due to new hires, 401k plan additions and rising medical insurance. In
addition, other operating expenses increased $82 thousand from the prior period.
The increase in non-interest expenses were due to increased business activity.

Income Taxes

Income tax expense was $1.6 million for the year ended December 31, 2001 and
$1.5 million for the same period of 2000. The increase is due to an increase in
taxable income. A detailed discussion of the Corporation's tax calculation is
contained in Note 8 to the Consolidated Financial Statements.

Financial Condition

Loan Portfolio

Loan demand was strong during 2001. Total net loans increased $43.6 million or
23.5%, from December 31, 2000 to December 31, 2001. The net loan to deposit
ratio was 89.0% at December 31, 2001, compared to 87.5% at December 31, 2000.

Through December 31, 2001, the Corporation experienced net charge-offs of $228
thousand, or 0.11% of average loans. Net loan charge-offs through December 31,
2000 were $172 thousand, or 0.10% of average loans. At December 31, 2001, the
Corporation had non-accrual loans totaling $211 thousand while at December 31,
2000, the Corporation had non-accrual loans totaling $371 thousand.

In determining the adequacy of the allowance for loan losses, management
considers the size and composition of the loan portfolio, historical experience,
economic conditions, the value and adequacy of collateral and guarantors, and
the current level of the allowance. In addition, consideration is given to
potential losses associated with non-accrual loans and loans that are considered
to be potential problems.

At December 31, 2001, the allowance for loan losses was $2.5 million, or 1.06%
of loans. At December 31, 2000, the allowance for loan losses was $2.0 million,
or 1.07% of loans. Management believes that the allowance is adequate, subject
to unforeseen economic changes or unexpected regulatory developments.

Deposits and Borrowings

Deposits and borrowings increased $51 million or 23.1% from December 31, 2000 to
December 31, 2001. RHB borrowed money from the Federal Home Loan Bank of Atlanta
as a less expensive alternative to purchasing retail deposit funds. Premier
borrowed $7 million in Trust Preferred Capital Notes as a long-term source of
funding.

                                       24

<PAGE>

Capital Resources

Total stockholders' equity on December 31, 2001 was $25.7 million, or 10.5%
above the December 31, 2000 level of $23.3 million. Return on average equity for
the year ended December 31, 2001 was 13.12% as compared to 11.45% for the year
ended December 31, 2000. The Federal Reserve mandates minimum capital
requirements for the Corporation. Under this system, all balance sheet assets
are assigned a certain risk category with a prescribed weight. Off-balance-sheet
items, such as loan commitments and letters of credit, are also assigned a risk
rating. The sum of the balance sheet and off-balance-sheet amounts multiplied by
their respective risk weight factors must then meet a required minimum test.
Tier 1 Capital is defined as stockholders' equity minus certain intangible
assets. Tier 2 Capital consists of Tier 1 Capital plus a certain amount of the
allowance for loan losses. At December 31, 2001, the Corporation substantially
exceeded all minimum requirements. See Note 15 to the Consolidated Financial
Statements for more detail.

Liquidity

Liquidity is defined as the Corporation's ability to provide funds for
customers' demands for loans and deposit withdrawals without impairing
profitability. To meet these needs, the Corporation maintains cash reserves and
overnight and readily marketable investments. Funds can also be obtained through
increasing deposits or through the Corporation's borrowing privileges with
several correspondents.

A related concern of liquidity management is interest rate sensitivity. Changes
in interest rates may affect funding requirements, as well as the relative
liquidity of certain assets. As of December 31, 2001, the Corporation's interest
sensitive liabilities maturing or repricing within one year exceeded interest
sensitive assets maturing or repricing within one year, creating a negative
"gap" position. To assist further in the analysis and management process, the
Corporation calculates the effects of sudden interest rate changes upon net
interest income by taking into account the balance sheet gap position and the
degree of sensitivity to rate changes of each grouping of assets and
liabilities. The Corporation's objective is to minimize risk associated with
sudden changes in interest rates and, accordingly, avoid speculating on interest
rate movement.

Forward-Looking Statements

Certain information contained in this discussion may include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are generally identified by phrase such as "the
Corporation expects," "the Corporation believes" or words of similar import.
Such forward-looking statements involve known and unknown risks including, but
not limited to, changes in general economic and business conditions, interest
rate fluctuations, competition within and from outside the banking industry,
risk inherent in making loans such as repayment risks and fluctuating collateral
values, problems with technology utilized by the Corporation, changing trends in
customer profiles and changes in laws and regulations applicable to the
Corporation. Although the Corporation believes that its expectations with
respect to the forward-looking statements are based upon reliable assumptions
within the bounds of its knowledge of its business and operations, there can be
no assurance that actual results, performance or achievements of the Corporation
will not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements.

Recent Accounting Pronouncements

         In July, 2001, the Financial Accounting Standards Board issued two
statements - Statement 141, Business Combinations, and Statement 142, Goodwill
and Other Intangible Assets, which will potentially impact the accounting for
goodwill and other intangible assets. Statement 141 eliminates the pooling
method of accounting for business combinations and requires that intangible
assets that meet certain criteria be reported separately from goodwill. The
Statement also requires negative goodwill arising from a business combination to
be recorded as an extraordinary gain. Statement 142 eliminates the amortization
of goodwill and other intangibles that are determined to have an indefinite
life. The Statement requires, at a minimum, annual impairment tests for goodwill
and other intangible assets that are determined to have an indefinite life.

                                       25

<PAGE>

         Upon adoption of these Statements, an organization is required to
re-evaluate goodwill and other intangible assets that arose from business
combinations entered into before July 1, 2001. If the recorded other intangibles
assets do not meet the criteria for recognition, they should be classified as
goodwill. Similarly, if there are other intangible assets that meet the criteria
for recognition but were not separately recorded from goodwill, they should be
reclassified from goodwill. An organization also must reassess the useful lives
of intangible assets and adjust the remaining amortization periods accordingly.
Any negative goodwill must be written-off.

         The standards generally are required to be implemented by the
Corporation in its 2002 financial statements. The adoption of these standards
will not have a material impact on the financial statements.

         In June 2001, the Financial Accounting Standards Board issued Statement
143, Accounting for Asset Retirement Obligations. This Statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and associated retirement costs. It
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred and the associated asset
retirement costs be capitalized as part of the carrying amount of the long-lived
asset. This Statement is effective for financial statements issued for fiscal
years beginning after June 15, 2002. The Statement is not expected to have a
material effect on the Corporation's financial statements.

         In August 2001, the Financial Accounting Standards Board issued
Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
The Statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. It also establishes a single accounting model for
long-lived assets to be disposed of by sale, which includes long-lived assets
that are part of a discontinued operation. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
December 15, 2001. The Statement is not expected to have a material effect on
the Corporation's financial statements.

Item 7. Financial Statements
----------------------------

Financial Statements are included in this Form 10-KSB as Exhibit 99.1

Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------------------
        Financial Disclosure
        --------------------

None.

Part III

The information required by Items 9, 10, 11 and 12 of Part III has been
incorporated herein by reference to the Corporation's 2002 Proxy Statement as
set forth below in accordance with General Instruction E.3 of Form 10-KSB.

Item 9. Directors, Executive Officers, Promoters and Control Persons;
---------------------------------------------------------------------
        Compliance With Section 16(a) of the Exchange Act
        -------------------------------------------------

Information relating to directors and executive officers of the Corporation is
set forth in the sections entitled "Election of Directors", "Executive Officers"
and "Section 16(a) Beneficial Ownership Reporting Compliance" of the 2002 Proxy
Statement and is incorporated herein by reference.

Item 10.  Executive Compensation
--------------------------------

Information regarding compensation of officers and directors is set forth in the
sections entitled "Executive Officer Compensation", "Stock Options", "Employment
Agreements" and "Director Compensation" in the 2002 Proxy Statement and is
incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

Information concerning the security ownership of certain beneficial owners and
management is set forth in the sections entitled "Security Ownership of
Management" and "Security Ownership of Certain Beneficial Owners" in the 2002
Proxy Statement and is incorporated herein by reference.

                                       26

<PAGE>

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

Information regarding certain relationships and related transactions is set
forth in the section entitled "Certain Relationships and Related Transactions"
in the 2002 Proxy Statement and is incorporated herein by reference.


Item 13. Exhibits and Reports on Form 8-K
-----------------------------------------
<TABLE>
<CAPTION>
<S>         <C>

     (a)      Exhibit Index

              3.1      Amended and Restated Articles of Incorporation, incorporated herein by reference to the Corporation's
                       Annual Report on Form 10-KSB for the year ended December 31, 2000 (File No. 0-18868).

              3.2      By-laws, incorporated herein by reference to the Corporation's Annual Report on Form 10-KSB for the year
                       ended December 31, 2000 (File No. 0-18868).

              10.1     401(k) Plan of Marathon Financial Corporation, incorporated herein by reference as Exhibit 10.1 to the
                       Corporation's Registration Statement on Form S-1 filed August 26, 1992 (File No. 33-51366).

              10.2     Employment Agreement between TMB and Donald L. Unger, incorporated herein by reference as Exhibit 10.2 to
                       the Corporation's Registration Statement on Form S-1 filed on August 26, 1992 (File No. 33-51366).

              10.3     Lease between TMB and Post Office Plaza, L.C. for the branch office at 300 Warren Avenue, Front Royal,
                       Virginia, incorporated herein by reference as Exhibit 10.3 to the Corporation's Registration Statement
                       on Form S-1 filed July 26, 1996 (File No. 333-08995).

              10.4     Lease between TMB and the Lessor, James Butcher, for the branch office at 1041 Berryville Avenue,
                       Winchester, Virginia, incorporated herein by reference to the Corporation's Annual Report on Form
                       10-K for the year ended December 31, 1995 (File No. 0-18868).

              10.5     Lease between TMB and the Lessors, Keith R. Lantz and Mary G. Lantz, for land at 1014 Main Street,
                       Woodstock, Virginia, incorporated by reference herein by reference to the Corporation's Annual Report on
                       Form 10-KSB for the year ended December 31, 1997 (File No. 0-18868).

              10.6     1996 Long-Term Incentive Plan of Marathon Financial Corporation, incorporated herein by reference as
                       Exhibit 99 to the Corporation's Registration Statement on Form S-8 filed November 26, 1997 (File No.
                       333-41163).

              21       Subsidiaries of Premier Community Bankshares, Inc.

              23       Consent of Yount, Hyde & Barbour, P.C.

              99.1     Financial Report of Premier Community Bankshares, Inc., including the following:

                       -- Independent Auditor's Report of Yount, Hyde & Barbour, P.C.
                       -- Consolidated Balance Sheets - December 31, 2001 and 2000
                       -- Consolidated Statements of Income - Years ended December 31, 2001, 2000 and 1999
                       -- Consolidated Statements of Changes in Shareholders' Equity - Years Ended December 31, 2001,2000 and 1999
                       -- Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000 and 1999
                       -- Notes to Consolidated Financial Statements.

              99.2     Independent Auditor's Report from McGladrey & Pullen, LLP with respect to RHB.

     (b)      Reports on Form 8-K.  None.

</TABLE>


                                       27

<PAGE>

                                   SIGNATURES

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

                                            PREMIER COMMUNITY BANKSHARES, INC.
                                            (Registrant)

                                            By:    /s/ Donald L. Unger
                                                   -------------------
                                                   Donald L. Unger
                                                   President & CEO

                                                   /s/ Frederick A. Board
                                                   ----------------------
                                                   Frederick A. Board
                                                   CFO

DATE:  March 29, 2002

         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
Registrant and in the capacities and on the dates indicated

DATE                                        SIGNATURE AND TITLE

March 29, 2002                              /s/ Walter H. Aikens
--------------                              --------------------
                                            (Walter H. Aikens, Director)

March 29, 2002                              /s/ Clifton L. Good
--------------                              -------------------
                                            (Clifton L. Good, Director)

March 29, 2002                              /s/ Stephen T. Heitz
--------------                              --------------------
                                            (Stephen T. Heitz, Director)

March 29, 2002                              /s/ Joseph W. Hollis
--------------                              --------------------
                                            (Joseph W. Hollis, Director)

March 29, 2002                              /s/ Wayne B. Ruck
--------------                              -----------------
                                            (Wayne B. Ruck, Director)

March 29, 2002                              /s/ John K. Stephens
--------------                              --------------------
                                            (John K. Stephens, Chairman)

March 29, 2002                              /s/ Donald L. Unger
--------------                              -------------------
                                            (Donald L. Unger, President & CEO)

March 29, 2002                              /s/ Paul R. Yoder, Jr., MD
--------------                              --------------------------
                                            (Paul R. Yoder, Jr., MD, Director)

                                       28

<PAGE>

<TABLE>
<CAPTION>

                                  EXHIBIT INDEX

No.                  Description
---                  -----------
<S>        <C>
3.1         Amended and Restated Articles of Incorporation, incorporated herein by reference to the Corporation's
            Annual Report on Form 10-KSB for the year ended December 31, 2000 (File No. 0-18868).

3.2         By-laws, incorporated herein by reference to the Corporation's Annual Report on Form 10-KSB for the year
            ended December 31, 2000 (File No. 0-18868).

10.1        401(k) Plan of Marathon Financial Corporation, incorporated herein by reference as Exhibit 10.1 to the
            Corporation's Registration Statement on Form S-1 filed August 26, 1992 (File No. 33-51366).

10.2        Employment Agreement between The Marathon Bank and Donald L. Unger, incorporated herein by reference as
            Exhibit 10.2 to the Corporation's Registration Statement on Form S-1 filed on August 26, 1992 (File No.
            33-51366).

10.3        Lease between The Marathon Bank and Post Office Plaza, L.C. for the branch office at 300 Warren Avenue,
            Front Royal, Virginia, incorporated herein by reference as Exhibit 10.3 to the Corporation's Registration
            Statement on Form S-1 filed July 26, 1996 (File No. 333-08995).

10.4        Lease between The Marathon Bank and the Lessor, James Butcher, for the branch office at 1041 Berryville
            Avenue, Winchester, Virginia, incorporated herein by reference to the Corporation's Annual Report on Form
            10-K for the year ended December 31, 1995 (File No. 0-18868).

10.5        Lease between The Marathon Bank and the Lessors, Keith R. Lantz and Mary G. Lantz, for land at 1014 Main
            Street, Woodstock, Virginia, incorporated by reference herein by reference to the Corporation's Annual
            Report on Form 10-KSB for the year ended December 31, 1997 (File No. 0-18868).

10.6        1996 Long-Term Incentive Plan of Marathon Financial Corporation, incorporated herein by reference as
            Exhibit 99 to the Corporation's Registration Statement on Form S-8 filed November 26, 1997 (File No.
            333-41163).

21          Subsidiaries of Premier Community Bankshares, Inc.

23          Consent of Yount, Hyde & Barbour, P.C.

99.1        Financial Report of Premier Community Bankshares, Inc.

99.2        Independent Auditor's Report from McGladrey & Pullen, LLP with respect to Rockingham Heritage Bank.
</TABLE>