SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 2002

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

          For the transition period from ____________ to _____________

                         Commission file number: 0-30535

                            GRAYSON BANKSHARES, INC.
             (Exact Name of Registrant as Specified in its Charter)


                 Virginia                                 54-1647596
      (State or Other Jurisdiction of                  (I.R.S. Employer
      Incorporation or Organization)                 Identification No.)

           113 West Main Street
          Independence, Virginia                            24348
 (Address of Principal Executive Offices)                 (Zip Code)

Registrant's telephone number, including area code  (276) 773-2811


         Indicate  by check  mark  whether  the  registrant:  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the  Exchange Act during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__ No _____

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of March 31, 2002.

           1,718,968 shares of common stock, par value $1.25 per share



<PAGE>


                            GRAYSON BANKSHARES, INC.

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                          Page No.
<S>       <C>                                                                                               <C>
Part I.       Financial Information

         Item 1.  Financial Statements

                  Consolidated Balance Sheets
                  March 31, 2002 and December 31, 2001.......................................................3

                  Consolidated Statements of Income
                  For the Three Months Ended March 31, 2002 and 2001.........................................4

                  Consolidated Statements of Stockholders' Equity
                  For the Three Months Ended March 31, 2002 and
                  the Year Ended December 31, 2001...........................................................5

                  Consolidated Statements of Cash Flows
                  For the Three Months Ended March 31, 2002 and 2001.........................................6

                  Notes to Consolidated Financial Statements.................................................7

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

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk................................11


Part II.      Other Information

         Item 1.  Legal Proceedings.........................................................................12

         Item 2.  Changes in Securities and Use of Proceeds.................................................12

         Item 3.  Defaults Upon Senior Securities...........................................................12

         Item 4.  Submission of Matters to a Vote of Security Holders.......................................12

         Item 5.  Other Information.........................................................................12

         Item 6.  Exhibits and Reports on Form 8-K..........................................................12

Signatures

</TABLE>


                                       2
<PAGE>


                          Part I: Financial Information

Item 1:  Financial Statements


                     Grayson Bankshares, Inc. and Subsidiary
                           Consolidated Balance Sheets
                      March 31, 2002 and December 31, 2001

<TABLE>
<CAPTION>

                                                                                    March 31,            December 31,
Assets                                                                                2002                   2001
                                                                                -----------------       -------------------
                                                                                   (Unaudited)            (Audited)
<S>                                                                             <C>                <C>
Cash and due from banks                                                         $     8,001,940    $      8,715,457
Interest-bearing deposits with banks                                                          -                   -
Federal funds sold                                                                   13,293,865          12,636,046
Investment securities available for sale                                             36,267,257          26,010,899
Investment securities held to maturity                                                5,801,768           6,615,328
Restricted equity securities                                                            845,450             825,750
Loans, net of allowance for loan losses of $1,868,621
  at March 31, 2002 and $1,821,966 at December 31, 2001                             144,503,080         140,897,841
Property and equipment, net                                                           3,031,382           2,913,998
Accrued income                                                                        1,766,880           1,713,644
Other assets                                                                          5,286,191           1,140,177
                                                                                ---------------    ----------------
                                                                                $   218,797,813    $    201,469,140
                                                                                ===============    ================

Liabilities and Stockholders' Equity

Liabilities
Demand deposits                                                                 $    19,863,763    $     20,790,306
Interest-bearing demand deposits                                                     15,831,324          15,168,088
Savings deposits                                                                     33,564,020          31,606,065
Large denomination time deposits                                                     32,526,015          29,944,872
Other time deposits                                                                  83,688,778          81,813,651
                                                                                ---------------    ----------------
     Total deposits                                                                 185,473,900         179,322,982

FHLB Advances                                                                        10,000,000                   -

Accrued interest payable                                                                755,417             267,798
Other liabilities                                                                     1,016,377             792,587
                                                                                ---------------    ----------------
                                                                                    197,245,694         180,383,367

Commitments and contingencies

Stockholders' equity
Preferred stock, $25 par value; 500,000
   shares authorized; none issued                                                             -                   -
Common stock, $1.25 par value; 5,000,000 shares
   authorized; 1,718,968 shares issued and
   outstanding in 2002 and 2001                                                       2,148,710           2,148,710
Surplus                                                                                 521,625             521,625
Retained earnings                                                                    18,780,285          18,221,877
Accumulated other comprehensive income (loss)                                           101,499             193,561
                                                                                ---------------    ----------------
                                                                                     21,552,119          21,085,773
                                                                                ---------------    ----------------
                                                                                $   218,797,813    $    201,469,140
                                                                                ===============    ================
</TABLE>


See Notes to Consolidated Financial Statements

                                       3
<PAGE>



                     Grayson Bankshares, Inc. and Subsidiary
                        Consolidated Statements of Income
               For the Three Months ended March 31, 2002 and 2001

<TABLE>
<CAPTION>


                                                                                         Three Months Ended
                                                                                               March 31,
                                                                                        2002              2001
                                                                                    -------------    --------------
<S>                                                                                 <C>              <C>
Interest income:                                                                    (Unaudited)        (Unaudited)
   Loans and fees on loans                                                          $   2,939,966    $    2,978,360
   Federal funds sold                                                                      61,871           103,843
   Investment securities:
     Taxable                                                                              392,650           274,167
     Exempt from federal income tax                                                       106,639           121,547
   Deposits with banks                                                                          -                 -
                                                                                    -------------    --------------
                                                                                        3,501,126         3,477,917

Interest expense:
   Deposits                                                                             1,588,003         1,842,807
   Interest on borrowings                                                                  94,767                 -
                                                                                    -------------    --------------
                                                                                        1,682,770         1,842,807
         Net interest income                                                            1,818,356         1,635,110

Provision for loan losses                                                                 105,000            75,000
                                                                                    -------------    --------------
   Net interest income after
     provision for loan losses                                                          1,713,356         1,560,110
                                                                                    -------------    --------------

Noninterest income:
   Service charges on deposit accounts                                                     71,380            78,391
   Other income                                                                            73,757            28,529
                                                                                    -------------    --------------
                                                                                          145,137           106,920
                                                                                    -------------    --------------

Noninterest expense:
   Salaries and employee benefits                                                         688,807           625,679
   Occupancy expense                                                                       29,916            33,006
   Equipment expense                                                                      104,140            84,936
   Other expense                                                                          278,222           232,676
                                                                                    -------------    --------------
                                                                                        1,101,085           976,297
                                                                                    -------------    --------------
         Income before income taxes                                                       757,408           690,733

Income tax expense                                                                        199,000           197,000
                                                                                    -------------    --------------
         Net income                                                                 $     558,408    $      493,733
                                                                                    =============    ==============

Basic earnings per share                                                            $         .32    $          .29
                                                                                    =============    ==============
Weighted average shares outstanding                                                     1,718,968         1,718,968
                                                                                    =============    ==============

</TABLE>

See Notes to Consolidated Financial Statements


                                       4

<PAGE>



                     Grayson Bankshares, Inc. and Subsidiary
                 Consolidated Statements of Stockholders' Equity
          For the Three Months ended March 31, 2002 (unaudited) and the
                     Year ended December 31, 2001 (audited)


<TABLE>
<CAPTION>

                                                                                                      Accumulated
                                                                                                         Other
                                          Common Stock                                  Retained      Comprehensive
                                     Shares          Amount       Surplus               Earnings      Income (Loss)        Total
                                    ----------    -----------   -------------       ---------------   --------------  --------------

<S>                                 <C>           <C>           <C>                  <C>                <C>           <C>
Balance, December 31, 2000          1,718,968     $ 2,148,710   $    521,625         $  16,986,754      $  (19,428)   $ 19,637,661

   Comprehensive income
   Net income                               -               -              -             1,939,900               -       1,939,900
   Net change in unrealized
     depreciation on investment
     securities available for
     sale, net of taxes of $109,722         -               -              -                     -         212,989         212,989
                                                                                                                      ------------
     Total comprehensive income                                                                                          2,152,889

   Dividends paid
     ($.41 per share)                       -               -              -              (704,777)             -         (704,777)

                                    ---------      ----------      ---------         -------------    -------------   ------------
Balance, December 31, 2001          1,718,968       2,148,710        521,625            18,221,877         193,561      21,085,773


   Comprehensive income
   Net income                               -               -              -               558,408              -         558,408
   Net change in unrealized
     depreciation on investment
     securities available for
     sale, net of taxes of ($47,426)        -               -              -                     -          (92,062)       (92,062)
                                                                                                                      ------------
   Total comprehensive income                                                                               466,346

   Dividends paid                           -               -              -                     -               -               -
                                    ---------      ----------      ---------         -------------    -------------   ------------
Balance, March 31, 2002             1,718,968      $2,148,710      $ 521,625         $  18,780,285    $     101,499   $ 21,552,119
                                    =========      ==========      =========         =============    =============   ============



</TABLE>




See Notes to Consolidated Financial Statements


                                       5

<PAGE>



                     Grayson Bankshares, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
               For the Three Months ended March 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                                                            Three Months Ended
                                                                                               March 31,
                                                                                        2002              2001
                                                                                    -------------    --------------
                                                                                    (Unaudited)       (Unaudited)
<S>                                                                                 <C>              <C>
Cash flows from operating activities:
   Net income                                                                       $     558,408    $      493,733
   Adjustments to reconcile net income
     to net cash provided by operations:
       Depreciation and amortization                                                       88,500            74,400
       Provision for loan losses                                                          105,000            75,000
       Deferred income taxes                                                              (42,000)          101,948
       Net realized gains on securities                                                      (750)             (538)
       Accretion of discount on securities, net of
         amortization of premiums                                                          26,767             4,316
       Deferred compensation                                                                  962             3,469
       Changes in assets and liabilities:
         Accrued income                                                                   (53,236)          (44,275)
         Other assets                                                                     (56,588)          (84,853)
         Accrued interest payable                                                         487,619           438,705
         Other liabilities                                                                222,828            (2,916)
                                                                                    -------------    --------------
           Net cash provided by operating activities                                    1,337,510         1,058,989
                                                                                    -------------    --------------

Cash flows from investing activities:
   (Increase) decrease in interest-bearing deposits with banks                                  -                 -
   Net (increase) decrease in federal funds sold                                         (657,819)       (1,273,614)
   Purchases of investment securities                                                 (11,645,014)       (4,512,206)
   Sales of investment securities                                                               -         2,401,407
   Maturities of investment securities                                                  2,036,711         2,740,668
   Purchases of restricted equity securities                                              (19,700)                -
   Net increase in loans                                                               (3,710,239)       (2,638,924)
   Purchases of bank-owned life insurance                                              (4,000,000)                -
   Purchases of property and equipment, net of sales                                     (205,884)          (45,445)
                                                                                    -------------    --------------
           Net cash used in investing activities                                      (18,201,945)       (3,328,114)
                                                                                    -------------    --------------

Cash flows from financing activities:
   Net increase (decrease) in demand,
     savings and NOW deposits                                                           1,694,648        (1,642,581)
   Net increase in time deposits                                                        4,456,270         4,478,574
   Dividends paid                                                                               -                 -
   Net increase (decrease) in other borrowings                                         10,000,000                 -
                                                                                    -------------    --------------
           Net cash provided by financing activities                                   16,150,918         2,835,993
                                                                                    -------------    --------------
           Net increase (decrease) in cash and cash equivalents                          (713,517)          566,868

Cash and cash equivalents, beginning                                                    8,715,457         4,993,526
                                                                                    -------------    --------------
Cash and cash equivalents, ending                                                   $   8,001,940    $    5,560,394
                                                                                    =============    ==============

Supplemental disclosure of cash flow information:
   Interest paid                                                                    $   1,195,151    $    1,404,102
                                                                                    =============    ==============
   Taxes paid                                                                       $       7,940    $            -
                                                                                    =============    ==============
</TABLE>




See Notes to Consolidated Financial Statements

                                       6
<PAGE>
                     Grayson Bankshares, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements


Note 1.  Organization and Summary of Significant Accounting Policies

Organization

Grayson   Bankshares,   Inc.  (the  Company)  was  incorporated  as  a  Virginia
corporation  on February  3, 1992 to acquire  the stock of The Grayson  National
Bank (the Bank). The Bank was acquired by the Company on July 1, 1992.

The Bank was organized under the laws of the United States in 1900 and currently
serves  Grayson  County,  Virginia  and  surrounding  areas  through six banking
offices. As an FDIC insured,  National Banking Association,  the Bank is subject
to regulation by the  Comptroller  of the Currency.  The Company is regulated by
the Federal Reserve.

The consolidated  financial  statements as of March 31, 2002 and for the periods
ended March 31, 2002 and 2001 included herein, have been prepared by the Company
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange Commission. In the opinion of management,  the information furnished in
the interim consolidated financial statements reflects all adjustments necessary
to present  fairly the Company's  consolidated  financial  position,  results of
operations,  changes in  stockholders'  equity  and cash flows for such  interim
periods. Management believes that all interim period adjustments are of a normal
recurring  nature.  These  consolidated  financial  statements should be read in
conjunction  with the  Company's  audited  financial  statements  and the  notes
thereto as of December 31, 2001, included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2001.

The  accounting  and  reporting  policies  of the  Company  and the Bank  follow
generally  accepted  accounting  principles  and  general  practices  within the
financial services industry.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
the Bank, which is wholly owned. All significant,  intercompany transactions and
balances have been eliminated in consolidation.

Note 2.  Allowance for Loan Losses

The  following  is an  analysis of the  allowance  for loan losses for the three
months ended March 31.

                                                2002              2001
                                            -------------    --------------

Balance, beginning                          $   1,821,966    $    1,760,999
Provision charged to expense                      105,000            75,000
Recoveries of amounts charged off                  74,408            32,618
Amounts charged off                              (132,753)          (34,516)
                                            -------------    --------------
Balance, ending                             $   1,868,621    $    1,834,101
                                            =============    ==============

Note 3.  Income Taxes

A reconciliation  of income tax expense computed at the statutory federal income
tax rate to income tax  expense  included  in the  statements  of income for the
three months ended March 31, 2002 and 2001 follows:

                                                2002              2001
                                            -------------    --------------

Tax at statutory federal rate               $     257,519    $      234,849
Tax exempt interest income                        (43,703)          (41,326)
Other tax exempt income                           (16,320)                -
Other                                               1,504             3,477
                                            -------------    --------------
                                            $     199,000    $      197,000
                                            =============    ==============


                                       7
<PAGE>



                     Grayson Bankshares, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements


Note 4.  Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk

The Bank is party to financial  instruments with  off-balance-sheet  risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments  include commitments to extend credit and standby letters
of credit. These instruments involve, to varying degrees,  credit risk in excess
of the amount recognized in the consolidated balance sheets.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit  policies in making  commitments  and  conditional
obligations  as for  on-balance-sheet  instruments.  A  summary  of  the  Bank's
commitments at March 31, 2002 and 2001 is as follows:

                                                2002              2001
                                            -------------    --------------

Commitments to extend credit                $   5,277,627    $    4,197,623
Standby letters of credit                               -                 -
                                            -------------    --------------
                                            $   5,277,627    $    4,197,623
                                            =============    ==============

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future  cash   requirements.   The  Bank  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,  if
deemed necessary by the Bank upon extension of credit,  is based on management's
credit evaluation of the party. Collateral held varies, but may include accounts
receivable,  inventory,  property  and  equipment,  residential  real estate and
income-producing commercial properties.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements.  The
credit risk  involved in issuing  letters of credit is  essentially  the same as
that involved in extending loan facilities to customers.  Collateral held varies
as specified above and is required in instances which the Bank deems necessary.



                                       8

<PAGE>



                          Part I: Financial Information

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


General

The following  discussion provides information about the major components of the
results of operations and financial  condition of the Company.  This  discussion
and  analysis  should be read in  conjunction  with the  Consolidated  Financial
Statements  and Notes to  Consolidated  Financial  Statements  included  in this
report.

Results of Operations

Net income  for the  quarter  ended  March 31,  2002 was  $558,408  compared  to
$493,733 for the same period last year,  representing an increase of $64,675, or
13.10%.  Total interest  income  increased only slightly in the first quarter of
2002 as additional income from the increased volume of  interest-earning  assets
was offset by the decline in interest rates.  Interest  expense on deposits also
fell as a result of declining interest rates.

In the fourth quarter of 2001, the Bank applied for, and was granted  membership
in the Federal Home Loan Bank of Atlanta.  The Bank used this  membership in the
first quarter of 2002 to borrow funds at a low  fixed-interest  rate and in turn
invest  the funds in  securities  with  similar  maturities  in order to enhance
earnings. Interest expense of $94,767 was incurred on FHLB borrowings during the
first quarter of 2002.

For the  quarter  ended  March 31,  2001,  net income was  $493,733  compared to
$564,478  for the quarter  ended  March 31,  2000,  representing  an decrease of
$70,745 or 12.53%.  However, net income before income taxes increased by $16,255
or 2.41% for the same  period.  The  increase  in  income  taxes was a result of
alternative  minimum tax credits,  which were  available  for the quarter  ended
March 31, 2000, but were exhausted prior to the quarter ended March 31, 2001.

The  provision  for credit  losses was $105,000 for the quarter  ended March 31,
2002 and $75,000 for the quarter ended March 31, 2001. Management has elected to
increase the  provision in 2002 in response to increased  demand for  commercial
loans and the resulting change in the overall loan mix.  Management believes the
provision and the resulting allowance for loan losses are adequate.

Other  income  increased  by 158.53% to  $73,757,  in the first  quarter of 2002
compared to 2001 as a result of income  earned from an  investment in bank-owned
life insurance of approximately $4.0 million in January 2002.

Other  expenses for the quarter ended March 31, 2002  increased by $124,788,  or
12.78% over the same  quarter  last year due to  increases  in certain  employee
benefit costs, as well as costs associated with significant  equipment purchases
and branching activities.

Financial Condition

Total assets  increased by $17,328,673 for the quarter ended March 31, 2002. Net
loans increased by $3,605,239 while deposits increased by $6,150,918. Investment
securities  increased by  $9,462,498 as advances from the Federal Home Loan Bank
were used to purchase  securities  as noted above in the  discussion of interest
expense.

The  increase in other assets was due to an  investment  of  approximately  $4.0
million in bank-owned life insurance in January, 2002.

Shareholders'   equity  totaled  $21,552,119  at  March  31,  2002  compared  to
$21,085,773  at December  31,  2001.  The  $466,346  increase  was the result of
earnings  for the three months  combined  with a decrease in the market value of
securities that are classified as available for sale.

                                       9
<PAGE>

                          Part I: Financial Information

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


Regulatory  guidelines  relating to capital adequacy provide minimum  risk-based
ratios at the Bank level which assess capital  adequacy while  encompassing  all
credit risks, including those related to off-balance sheet activities.  The Bank
(a wholly  owned  subsidiary  of the  Company)  exceeds all  regulatory  capital
guidelines and is considered to be well capitalized.

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 phrases such as
"the Company expects," "the Company  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,  new
products and  services in the banking  industry,  risk  inherent in making loans
such as  repayment  risks  and  fluctuating  collateral  values,  problems  with
technology  utilized by the Company,  changing  trends in customer  profiles and
changes in laws and regulations applicable to the Company.  Although the Company
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 Company will not differ  materially from any
future  results,  performance  or  achievements  expressed  or  implied  by such
forward-looking statements.








                                       10

<PAGE>

                          Part I: Financial Information

Item 3:  Quantitative and Qualitative Disclosures about Market Risk


The principal  goals of the Bank's asset and liability  management  strategy are
the maintenance of adequate  liquidity and the management of interest rate risk.
Liquidity  is the  ability  to  convert  assets  to  cash  to  fund  depositors'
withdrawals or borrowers'  loans without  significant  loss.  Interest rate risk
management  balances  the effects of interest  rate  changes on assets that earn
interest or liabilities on which interest is paid, to protect the Bank from wide
fluctuations  in its net interest  income which could result from  interest rate
changes.

Management  must insure that  adequate  funds are available at all times to meet
the needs of its  customers.  On the asset side of the balance  sheet,  maturing
investments,  loan payments,  maturing loans,  federal funds sold, and unpledged
investment securities are principal sources of liquidity.  On the liability side
of the balance sheet,  liquidity  sources include core deposits,  the ability to
increase large denomination certificates,  federal fund lines from correspondent
banks,  borrowings  from the Federal  Home Loan Bank,  as well as the ability to
generate funds through the issuance of long-term debt and equity.

Interest  rate risk is the effect that  changes in interest  rates would have on
interest  income  and  interest   expense  as   interest-sensitive   assets  and
interest-sensitive  liabilities either reprice or mature. Management attempts to
maintain  the  portfolios  of  interest-earning   assets  and   interest-bearing
liabilities  with  maturities  or  repricing  opportunities  at levels that will
afford  protection from erosion of net interest margin, to the extent practical,
from changes in interest rates.

The Bank uses a number of tools to manage  its  interest  rate  risk,  including
simulating net interest income under various  scenarios,  monitoring the present
value change in equity under the same  scenarios,  and monitoring the difference
or gap between rate sensitive assets and rate sensitive liabilities over various
time periods.

The earnings  simulation  model  forecasts  annual net income under a variety of
scenarios  that  incorporate  changes in the absolute  level of interest  rates,
changes  in  the  shape  of  the  yield  curve  and  changes  in  interest  rate
relationships.  Management  evaluates  the  effect on net  interest  income  and
present value equity from gradual  changes in rates of up to 400 basis points up
or down  over a  12-month  period.  The  following  table  presents  the  Bank's
forecasts  for changes in net income and market  value of equity as of March 31,
2002.

Table:  Interest Rate Risk (dollars in thousands)

             Rate Shocked Interest Margin and Market Value of Equity
<TABLE>
<CAPTION>
       Rate Change            -400bp     -300bp       -200bp      -100bp       0bp      +100bp     +200bp     +300bp     +400bp
       -----------            ------     ------       ------      ------       ---      ------     ------     ------     ------

<S>                         <C>         <C>         <C>         <C>        <C>         <C>        <C>        <C>        <C>
Interest Income:
Federal funds sold          $     (57)  $      15   $      87   $     159  $     231   $     303  $     375  $     447  $     519
Investments                     2,388       2,413       2,440       2,465      2,482       2,497      2,507      2,518      2,530
Loans                          10,467      10,757      11,053      11,341     11,605      11,864     12,121     12,376     12,634
                            ---------   ---------   ---------   ---------  ---------   ---------  ---------  ---------  ---------
  Total interest income        12,798      13,185      13,580      13,965     14,318      14,664     15,003     15,341     15,683

Interest Expense:
Deposits                        5,544       5,769       5,994       6,219      6,444       6,669      6,894      7,120      7,345
Federal funds purchased           -           -           -           -          -           -          -         --          -
Other borrowings                  462         462         462         462        462         462        462        462        462
                            ---------   ---------   ---------   ---------  ---------   ---------  ---------  ---------  ---------
  Total interest expense        6,006       6,231       6,456       6,681      6,906       7,131      7,356      7,582      7,807

Interest Margin             $   6,792   $   6,954   $   7,124   $   7,284  $   7,412   $   7,533  $   7,647  $   7,759  $   7,876
Actual Dollars at Risk      $     620   $     458   $     288   $     128  $     -     $     -    $     -    $    --    $     -

Market value of assets      $ 231,897   $ 228,653   $ 225,581   $ 222,415  $ 218,834   $ 215,166  $ 211,367  $ 207,635  $ 203,964
Market value of liabilities   209,708     207,532     205,355     203,179    201,002     198,825    196,649    194,472    192,296
                            ---------   ---------   ---------   ---------  ---------   ---------  ---------  ---------  ---------

Market Value of Equity      $  22,189   $  21,121   $  20,226   $  19,236  $  17,832   $  16,341  $  14,718  $  13,163  $  11,668
</TABLE>

                                       11
<PAGE>


                           Part II: Other Information


                     Grayson Bankshares, Inc. and Subsidiary


Item 1.  Legal Proceedings

         There are no material pending legal proceedings to which the Company or
         its  subsidiary  is a party or of which  any of their  property  is the
         subject.

Item 2.  Changes in Securities and Use of Proceeds

         Not applicable

Item 3.  Defaults Upon Senior Securities

         Not applicable

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

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

        (a)      Exhibits
                 None
        (b)      Reports on 8-K
                 None


                                       12
<PAGE>


                                   SIGNATURES

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

                            GRAYSON BANKSHARES, INC.



Date:  May 15, 2002             By:      /s/ Jacky K. Anderson
                                   ---------------------------------------------
                                    Jacky K. Anderson
                                    President and Chief Executive Officer



Date:  May 15, 2002             By:     /s/ Blake M. Edwards, Jr.
                                   ---------------------------------------------
                                    Blake M. Edwards, Jr.
                                    Chief Financial Officer


                                       13