SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB



[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
OF 1934

                   For Quarterly Period Ended June 30, 2003

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

                           Commission File No. 0-30541

                               PIONEER BANKSHARES
                                  INCORPORATED
      (Exact name of small business issuer as specified in its charter)

          Virginia                                          54-1278721
-------------------------------                         ------------------
(State or Other Jurisdiction of                         (I.R.S. Employer
 Incorporation or Organization)                         Identification No.)

                              263 East Main Street
                                 P. O. Box 10
                            Stanley, Virginia 22851
         (Address of principal executive offices, including zip code)

                                (540) 778-2294
                          --------------------------
             (Registrant's Telephone Number, Including Area Code)



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



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

            Class                                Outstanding at June 30, 2003
--------------------------------                 ----------------------------
Common Stock, par value - $0.50                          1,092,410 shares



<PAGE> 1



                            PIONEER BANKSHARES, INC.

                                      INDEX
                                                                       Page

PART I     FINANCIAL INFORMATION                                        2

Item 1.    Financial Statements

           Consolidated Statements of Income - Three Months
           Ended June 30, 2003 and 2002                                 2

           Consolidated Statements of Income - Six Months
           Ended June 30, 2003 and 2002                                 3

           Consolidated Balance Sheets - June 30, 2003 and
           December 31, 2002                                            4

           Consolidated Statements of Changes in Stockholders'
           Equity - Six Months Ended June 30, 2003 and 2002             5

           Consolidated Statements of Cash Flows - Six Months
           Ended June 30, 2003 and 2002                                 6

           Notes to Consolidated Financial Statements                   7

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

Item 3.    Controls and Procedures                                     17


PART II    OTHER INFORMATION                                           17

Item 1.    Legal Proceedings                                           17

Item 2.    Changes in Securities                                       17

Item 3.    Defaults upon Senior Securities                             17

Item 4.    Submission of Matters to a Vote of Security Holders         17

Item 5.    Other Information                                           17

Item 6.    Exhibit and Reports on Form 8K                              18

           SIGNATURES                                                  19



<PAGE> 2


Part I  Financial Information
Item 1  Financial Statements

                            PIONEER BANKSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                            (In Thousands of Dollars)
                                   (UNAUDITED)
                                                       Three Months Ended
                                                            June 30,
                                                        2003          2002
Interest and Dividend Income:
   Loans including fees                             $    1,924    $   2,300
   Investments - taxable                                   114           96
   Investments - nontaxable                                 20           23
   Federal funds sold                                        7           41
   Interest bearing deposits                                30           17
                                                     ---------     --------

   Total Interest and Dividend Income                    2,095        2,477
                                                     ---------     --------

Interest Expense:
   Deposits                                                433          776
   Borrowings                                               71           83
                                                     ---------     --------

   Total Interest Expense                                  504          859
                                                     ---------     --------

Net Interest Income                                      1,591        1,618
Provision for loan losses                                  168          288
                                                     ---------     --------

Net interest income after provision
   for loan losses                                       1,423        1,330
                                                     ---------     --------

Noninterest Income:
   Service charges on deposit accounts                     231          211
   Other income                                             52          252
   Gain (Loss) on security transactions                    132          (59)
                                                     ---------     --------

   Total Noninterest Income                                415          404
                                                     ---------     --------

Noninterest Expense:
   Salaries and benefits                                   537          559
   Occupancy expenses                                       67           66
   Equipment expenses                                      173          159
   Other expenses                                          341          500
                                                     ---------     --------

   Total Noninterest Expenses                            1,118        1,284
                                                     ---------     --------

Income before Income Taxes                                 720          450
Income Tax Expense                                         229          148
                                                     ---------     --------

Net Income                                          $      491    $     302
                                                     =========     ========

Per Share Data
   Net income                                       $     0.45   $     0.27
                                                     ==========    =========
   Dividends                                        $     0.11   $     0.11
                                                     ==========    =========

Weighted Average Shares Outstanding                  1,092,410    1,111,109
                                                     =========    =========



<PAGE> 3



                            PIONEER BANKSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                            (In Thousands of Dollars)
                                   (UNAUDITED)
                                                        Six Months Ended
                                                            June 30,
                                                        2003          2002
Interest and Dividend Income:
   Loans including fees                             $    3,930    $   4,622
   Investments - taxable                                   221          196
   Investments - nontaxable                                 41           46
   Federal funds sold                                       31           58
   Interest bearing deposits                                57           34
                                                     ---------     --------

   Total Interest and Dividend Income                    4,280        4,956
                                                     ---------     --------

Interest Expense:
   Deposits                                                941        1,540
   Borrowings                                              145          165
                                                     ---------     --------

   Total Interest Expense                                1,086        1,705
                                                     ---------     --------

Net Interest Income                                      3,194        3,251
Provision for loan losses                                  485          498
                                                     ---------     --------

Net interest income after provision
   for loan losses                                       2,709        2,753
                                                     ---------     --------

Noninterest Income:
   Service charges on deposit accounts                     429          392
   Other income                                            143          314
   Gain (loss) on security transactions                    128          (64)
                                                     ---------     --------

   Total Noninterest Income                                700          642
                                                     ---------     --------

Noninterest Expense:
   Salaries and benefits                                 1,044        1,113
   Occupancy expenses                                      130          135
   Equipment expenses                                      344          316
   Other expenses                                          687          971
                                                     ---------     --------

   Total Noninterest Expenses                            2,205        2,535
                                                     ---------     --------

Income before Income Taxes                               1,204          860
Income Tax Expense                                         389          278
                                                     ---------     --------

Net Income                                          $      815    $     582
                                                     =========     ========

Per Share Data
   Net income                                       $     0.75   $     0.52
                                                     ==========    =========
   Dividends                                        $     0.22   $     0.22
                                                     ==========    =========

Weighted Average Shares Outstanding                  1,092,410    1,111,109
                                                     =========     =========



<PAGE> 4


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

                                                      June 30,    December 31,
                                                        2003          2002
                                                     (Unaudited)    (Audited)
ASSETS

Cash and due from banks                              $   7,242    $   7,680
Federal funds sold                                         150          500
Interest bearing deposits in banks                       5,862        4,811
Investment securities
   Held to maturity                                         64           76
   Available for sale                                   14,688       19,551
Loans receivable, net of allowance for loan
   losses of $1,504 and $1,448 respectively             81,448       86,099
Premises and equipment                                   4,339        3,919
Other assets                                             2,675        2,493
                                                      --------     --------

   Total assets                                      $ 116,468    $ 125,129
                                                      ========     ========

LIABILITIES

Deposits
   Noninterest bearing demand                        $  19,171    $  20,367
   Interest bearing
      Demand                                            13,093       12,986
      Savings                                           12,543       12,482
      Time deposits over $100,000                        7,985        9,949
      Other time deposits                               44,975       50,741
                                                      --------     --------

   Total Deposits                                       97,767      106,525

Accrued expenses and other liabilities                     792          854
Borrowings                                               4,750        5,075
                                                      --------     --------

   Total Liabilities                                   103,309      112,454
                                                      --------     --------

STOCKHOLDERS' EQUITY

Common stock; $.50 par value, authorized
   5,000,000, outstanding 1,092,410                        546          546
Retained earnings                                       12,489       11,913
Accumulated other comprehensive income                     124          216
                                                      --------     --------

   Total Stockholders' Equity                           13,159       12,675
                                                      --------     --------

   Total Liabilities and Stockholders' Equity        $ 116,468    $ 125,129
                                                      ========     ========



<PAGE> 5



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


                                                       Six Months Ended
                                                           June 30,
                                                       2003         2002

Balance, beginning of period                       $  12,675     $  12,257

Comprehensive Income:

   Net income for period                                 815           582
   Net change in unrealized gains
      on securities available for sale,
      net of income taxes                                (92)           58
                                                    ---------     --------

   Total Comprehensive Income                            723           640

Dividends declared                                      (239)         (245)
                                                    ---------     --------

Balance, end of period                             $  13,159     $  12,652
                                                    ========      ========



<PAGE> 6



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

                                                        Six Months Ended
                                                            June 30,
                                                        2003         2002
Cash Flows from Operating Activities:
   Net income                                          $   815     $   582
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Provision for loan losses                         485         498
         Depreciation and amortization                     252         331
         Net Accretion/Amortization of securities                        8
         Loss (gain) on sale of securities                (128)         64
         Income on insurance policies                      (24)        (18)
         Net change in:
            Accrued income                                  58         (84)
            Other assets                                  (216)       (118)
            Accrued expense and other liabilities           (7)       (178)
                                                      ---------   --------

   Net Cash Provided by Operating Activities             1,235       1,085
                                                      --------    --------

Cash Flows from Investing Activities:
   Net change in federal funds sold                        350     (11,150)
   Net change in interest bearing deposits              (1,051)        506
   Proceeds from maturities and sales
      of securities available for sale                  15,676       3,122
   Proceeds from maturities and calls
      of securities held to maturity                        12         159
   Purchase of securities available for sale           (10,832)     (2,199)
   Net change in loans                                   4,166      (2,221)
   Purchase of bank premises and equipment                (672)       (536)
                                                      ---------   --------

   Net Cash Used in Investing Activities                 7,649     (12,319)
                                                      --------    --------

Cash Flows from Financing Activities:
   Net change in:
      Demand and savings deposits                       (1,028)      4,639
      Time deposits                                     (7,730)      7,894
   Curtailments of borrowings                             (325)       (325)
   Dividends paid                                         (239)       (123)
                                                      ---------   --------

   Net Cash Provided by Financing Activities            (9,322)     12,085
                                                      ---------   --------

Cash and Cash Equivalents
   Net increase (decrease) in cash and
      cash equivalents                                    (438)        851
   Cash and Cash Equivalents, beginning of year          7,680       4,865
                                                      --------    --------

   Cash and Cash Equivalents, End of Year            $   7,242   $   5,716
                                                      ========    ========

Supplemental Disclosure of Cash Paid
   During the Year for:
      Interest                                       $   1,213   $   1,756
      Income taxes                                   $     253   $     161



<PAGE> 7


                            PIONEER BANKSHARES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1   ACCOUNTING PRINCIPLES:

         The consolidated financial statements conform to generally accepted
         accounting principles and to general industry practices. In the opinion
         of management,  the accompanying unaudited consolidated financial
         statements contain all adjustments (consisting of only normal recurring
         accruals) necessary to present fairly the financial position as of June
         30, 2003 and the results of operations for the three month periods and
         year to date periods ended June 30, 2003 and June 30, 2002. The notes
         included  herein should be read in conjunction with the notes to
         financial statements included in the 2002 annual report to stockholders
         of Pioneer Bankshares, Inc.


NOTE 2   INVESTMENT SECURITIES:

         The amortized cost of investment securities and their approximate
         market values at June 30, 2003 and December 31, 2002 follows:

                                              2003                2002
                                        Carrying  Market   Carrying  Market
                                          Value    Value     Value    Value

         Securities held to maturity:
            Mortgage-backed securities $     64 $     68   $    76  $    78
                                        -------   ------     -----    -----

            Total                      $     64 $     68   $    76  $    78
                                        =======  =======    ======   ======

         Securities available for sale:
            U.S. Treasury and agency
              obligations              $ 11,019 $ 11,101   $15,508  $15,666
            Municipal Securities          1,997    2,202     2,342    2,476
            Equity Securities             1,491    1,385     1,372    1,409
                                        -------  -------    ------   ------

            Total                      $ 14,507 $ 14,688   $19,222  $19,551
                                        =======  =======    ======   ======



<PAGE> 8



                            PIONEER BANKSHARES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3   LOANS:

         Loans outstanding are summarized as follows:

                                                      June 30,   December 31,
                                                        2003         2002

         Real estate loans                            $ 43,883    $ 45,641
         Commercial and industrial loans                23,022      22,170
         Loans to individuals, primarily
            collateralized by autos                     17,946      22,388
         All other loans                                   159         220
                                                       -------     -------

            Total Loans                                 85,010      90,419

         Less unearned discount                         (2,058)     (2,872)
                                                       --------    --------

         Loans, less unearned discount                  82,952      87,547

         Less allowance for loan losses                 (1,504)     (1,448)
                                                       --------    --------

            Net Loans Receivable                      $ 81,448    $ 86,099
                                                       =======     =======


NOTE 4   ALLOWANCE FOR LOAN LOSSES:

         A summary of transactions in the allowance for loan losses for the
         six months ended
          June 30, 2003 and June 30, 2002 follows:

                                                          2003        2002

         Balance, beginning of period                 $  1,448    $  1,153
         Provision charged to operating expenses           485         498
         Recoveries of loans charged off                   356         120
         Loans charged off                                (785)       (523)
                                                       --------    -------

         Balance, End of Period                       $  1,504    $  1,248
                                                       =======     =======



<PAGE> 9



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


The discussion covers the consolidated financial condition and operations of
Pioneer Bankshares, Inc. ("Company") and its subsidiary Pioneer Bank ("Bank").


Overview

In the first half of 2003, net income including securities transactions was
$815,000 ($0.75 per share) compared with $582,000 ($0.52 per share) for the
first six months of 2002. This increase in net income can be attributed to gains
on securities transactions and reductions in non-interest expenses. The first
six months of 2003 included significant security gains of $128,000 ($79,000 net
of tax effect) which represents $0.07 a share.

Net income per share, exclusive of security transactions, was $0.68 for the
first half of 2003 compared to $0.56 for the first half of 2002.

Results of Operations

Net Interest Margin

The tax equivalent net interest income decreased $59,000 or 1.80% in the first
half of 2003 compared to the first half of 2002. The net yield on interest
earning assets increased from 5.81% for the first half of 2002 to 5.87% for the
first half of 2003. This was due to a combination of factors. The volume and
rate of time deposits decreased significantly during the first half of 2003. The
volume of installment loans also decreased significantly during the first half
of 2003. During the same period, there was an increase in the volume of
investments with a lower yield.

Noninterest Income

In the first half of 2003, noninterest income increased $58,000. This is a
result of increased service charge income of $37,000 primarily generated by a
deposit product called "bounce checking." Other income decreased by $171,000 due
to an insurance reimbursement received in 2002 relating to the Company's ESOP
that was not repeated in 2003.  Offsetting this decrease was a significant
increase in gains on security  transactions  of $192,000. Non-interest
income (annualized), exclusive of security transactions and insurance proceeds,
increased from 0.84% of average assets at June 30, 2002 to 0.97% at June 30,
2003.

Noninterest Expense

For the first half of 2003, noninterest expense decreased $330,000 (13.02%) from
the first half of 2002. Salaries and benefits decreased $69,000 due to the
departure of two officers whose positions have been filled at a lower
compensation level. Equipment expense increased $28,000 primarily due to
increased depreciation  on significant  asset purchases for technology
upgrades. Other expense decreased due to a combination of factors: a $101,000
decrease in legal fees and $22,000 decrease in audit fees primarily related to
the Company's ESOP, $27,000 decrease in supply expenses, $11,000 decrease in
advertising expenses, and an additional $27,000 in miscellaneous expenses.
Noninterest expense (annualized) decreased from 4.12% of average assets at June
30, 2002 to 3.72% at June 30, 2003.



<PAGE> 10



Financial Condition

Securities

The Company's securities portfolio is held to assist the Company in liquidity
and asset liability management as well as capital  appreciation.  The
securities portfolio consists of securities held to maturity and securities
available for sale. Securities are classified as held to maturity when
management has the intent and ability to hold the securities to maturity. These
securities are carried at amortized cost. Securities available for sale include
securities that may be sold in response to general market fluctuations, general
liquidity needs and other similar factors. Securities available for sale are
recorded at market value. Unrealized holding gains and losses of available for
sale securities are excluded from earnings and reported (net of deferred
income taxes) as a separate component of shareholders' equity. As of June
30, 2003, the market value of all securities available for sale was in excess of
their amortized cost by $181,000 ($118,000 after the consideration of income
taxes). Management has traditionally held debt securities until maturity and
thus it does not expect the minor fluctuation in the value of these securities
to have a direct impact on earnings.

Investments in securities decreased 24.84% in the first half of 2003. The
Company generally invests in securities with a relatively short-term maturity
due to uncertainty in the direction of interest rates. Of the investments in
securities available for sale, 9.43% (based on market value) are invested in
equities, some of which are dividend producing and subject to the corporate
dividend exclusion for taxation  purposes.  The Company believes these
investments offer adequate returns and/or have the potential for increases in
value.

Loan Portfolio

The Company operates in a service area in the western portion of Virginia, which
includes the counties of Page, Greene, Rockingham, and the City of Harrisonburg.
The Company does not make a significant number of loans to borrowers outside its
primary service area. The Company is very active in local residential
construction mortgages. Commercial lending includes loans to small and medium
sized business within its service area.

An inherent risk in the lending of money is that the borrower will not be able
to repay the loan under the terms of the original agreement. The allowance for
loan losses (see subsequent section) provides for this risk and is reviewed
periodically for adequacy. The risk associated with real estate and installment
notes to individuals is based upon employment, the local and national economies
and consumer confidence. All of these affect the ability of borrowers to repay
indebtedness. The risk associated with commercial lending is substantially based
on the strength of the local and national economies in addition to the financial
strength of the borrower.

While lending is geographically diversified within the service area, the Company
does have loan concentrations in residential real estate loans and consumer auto
loans. A significant percentage of residential real estate loans and consumer
installment loans are made to borrowers employed by businesses located outside
the service area.

In the first half of 2003, the loan portfolio decreased $4,595,000, as a result
of a  substantial  decrease  in  installment  loans,
primarily collateralized by automobiles. The Company has taken proactive
measures to reduce the risk exposure related to automobile financing and plans
to expand the commercial loan portfolio in the future. A schedule of loans by
type is shown in a note to the consolidated financial statement included in this
report.


<PAGE> 11



Loan Portfolio (Continued)

The risk elements in lending activities include nonaccrual loans, loans 90 days
or more past due and restructured loans. Nonaccrual loans are loans on which
interest accruals have been suspended or discontinued permanently. Restructured
loans are loans which have changed the original interest rate or repayment terms
due to financial hardship. Nonaccrual loans and loans 90 days or more past due
totaled $342,000 at June 30, 2003 compared to $884,000 at June 30, 2002. This
decrease is primarily attributed to loan charge-offs, increased collection
efforts and tightened lending criteria. A majority of these past due loans are
secured by residential real estate and automobiles. Although the potential
exists for some loan losses, management believes the bank is generally well
secured and continues to actively work with these customers to effect payment.

Problem loans (serious doubt loans) are loans whereby information known by
management indicates that the borrower may not be able to comply with present
payment terms. Management was not aware of any problem loans at June 30, 2003
not included in the past due or nonaccrual status.

As of June 30, 2003 the Company held real estate, including poultry houses and
farm equipment, valued at $95,000 that was acquired through foreclosure.


Allowance for Loan Losses

Management evaluates the loan portfolio in light of national and local economic
trends, changes in the nature and value of the portfolio and industry standards.
Specific factors considered by management in determining the adequacy of the
level of the allowance include internally generated loan review reports, past
due reports, historical loan loss experience and individual borrower's financial
condition.  This review also considers concentrations of loans in terms of
geography, business type, or level of risk. Management evaluates the risk
elements involved in loans relative to their collateral value and maintains the
allowance for loan losses at a level which is adequate to absorb credit losses
inherent in the loan portfolio. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the estimated losses on
loans. Such agencies may require the Bank to recognize additional losses based
on their judgment about information available to them at the time of their
examination.

The methodology used to calculate the allowance for loan losses and the
provision for loan losses is a significant accounting principle which is based
on estimates that are particularly susceptible to significant changes in the
economic environment and market conditions.

The provision for loan losses and changes in the allowance for loan losses are
shown in Note 4 to the financial statements.

The allowance for loan losses of $1,504,000 at June 30, 2003 increased $56,000
from its level at December 31, 2002. The increase was due to funding for
charge-offs and the risks related to auto and credit card financing. The
allowance was equal to 1.81% and 1.65% of total loans at June 30, 2003 and
December 31, 2002, respectively.


Premises and Equipment

During the second quarter of 2002, the Company purchased a lot for a new branch
facility  located in  Harrisonburg  for $249,000.  The current
Harrisonburg branch will be relocated to the new office and Valley Finance
Service will be relocated to the existing branch location. As of June 30, 2003,
the bank has expended $613,000 on constructing the branch and estimates the cost
to complete the building to be $338,000. The Bank anticipates the new branch
will be completed in the summer of 2003.


<PAGE> 12



Deposits

The Company's main source of funds is customer deposits received from
individuals, governmental  entities and businesses  located within the
Company's service area. Deposit accounts include demand deposits, savings, money
market and certificates of deposit. The Company's deposits decreased by
$8,758,000 or 8.22% during the first half of 2003. This decrease is mainly in
the area of certificates of deposit and is a result of management's efforts to
reduce deposit expense by offering lower rates than in the past. Rates offered
during the period were still competitive with other financial institutions.


Capital

The Company maintains a strong capital base to expand facilities, promote public
confidence, support operations and grow at a manageable level. As of June 30,
2003 and December 31, 2002, the Company's total capital to total assets ratios
were 11.30% and 10.13%, respectively. The capital ratios exceed regulatory
minimums. Earnings have been sufficient to allow for dividends to be declared on
a quarterly basis and management has no reason to believe this payment schedule
will not continue.


Liquidity

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

Additional sources of liquidity available to the Company include, but are not
limited to, loan repayments, deposits obtained through the adjustment of
interest rates, purchases of federal funds and borrowings. To further meet its
liquidity needs, the Company also maintains lines of credit with the Federal
Home Loan Bank of Atlanta and correspondent banks.

There are no off-balance sheet items that should impair future liquidity.

Liquidity as of June 30, 2003, remains adequate and within policy guidelines.


Interest Rate Sensitivity

The Company historically has had a stable core deposit base and, therefore, does
not have to rely on volatile funding sources. Because of the stable core deposit
base, changes in interest rates should not have a significant effect on
liquidity. During 2003, the Company has used loan repayments and maturing
investments to meet its liquidity needs. The Bank's membership in the Federal
Home Loan Bank System also provides liquidity. The matching of the long-term
receivables and liabilities helps the Company reduce its sensitivity to interest
rate changes.

The Company reviews its interest rate gap periodically and makes adjustments as
needed.

Table II contains an analysis, which shows the repricing opportunities of
earning assets and interest bearing liabilities as of June 30, 2003.


<PAGE> 13



Interest Rate Sensitivity (Continued)

As of June 30, 2003, the Company had a cumulative Gap Rate Sensitivity Ratio of
(38.29%) for the one year repricing period, compared with (33.47%) at December
31, 2002. This was primarily due to a significant decrease in interest bearing
assets that reprice with one year. This generally indicates that earnings would
improve in a declining interest rate environment as liabilities reprice more
quickly than assets. Conversely, earnings would probably decrease in periods
during which interest rates are increasing. However, in actual practice, this
may not be the case as deposits may not reprice concurrently with changes in
rates within the general economy. Management constantly monitors the Company's
interest rate risk and has decided the current position is acceptable for a
well-capitalized community bank operating in a rural environment.

Effect of Proposed Accounting Standards

The Company does not believe that any newly issued but as yet unapplied
accounting standards will have a material impact on the Company's financial
position or operations.


Securities and Exchange Commission Web Site

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





<PAGE> 14


TABLE I

                            PIONEER BANKSHARES, INC.
                          NET INTEREST MARGIN ANALYSIS
                        (On a Fully Tax Equivalent Basis)
                          (Dollar Amounts in Thousands)


                         Six Months Ended              Six Months Ended
                           June 30, 2003                 June 30, 2002

                     Average  Income/              Average  Income/
                    Balance4  Expense   Rates      Balance  Expense   Rates

Interest Income
  Loans 1
    Commercial      $ 2,997   $  126    8.41%     $ 2,969   $  124    8.35%
    Real estate 4    64,096    2,418    7.54%      65,049    2,664    8.19%
    Installment      17,387    1,299   14.94%      23,546    1,739   14.77%
    Credit card         866       87   20.09%         915       95   20.77%
  Federal funds
    sold              5,592       31    1.11%       7,040       58    1.65%
  Interest bearing
      deposits        5,636       57    2.02%       4,078       34    1.67%
  Investments
    Taxable 3        11,006      233    4.24%       7,065      207    5.86%
    Nontaxable 2      2,339       62    5.31%       2,513       70    5.55%
                     ------    -----    -----      ------    -----   -----

Total earning
  assets            109,919    4,313    7.85%     113,175    4,991    8.82%
                     -------   -----    -----      -------   -----   -----

Interest Expense
  Demand deposits    13,153       40    0.61%      11,697       60    1.03%
  Savings            12,691       52    0.82%      10,807       62    1.15%
  Time deposits      55,168      849    3.08%      61,205    1,418    4.63%
  Borrowings          4,981      145    5.82%       5,636      165    5.86%
                     ------    -----    -----      ------    -----   -----

Total Interest Bearing
  Liabilities       $85,993   $1,086    2.53%     $89,345   $1,705    3.82%
                     ======    =====   =====       ======    =====   =====

Net Interest Income 1          3,227                         3,286
                               =====                         =====

Net Interest Margin                     5.87%                         5.81%
                                       =====                         =====


1 Interest on loans includes loan fees
2 An incremental tax rate of 34% was used to calculate the tax equivalent
  income
3 An incremental tax rate of 34% and 70% dividend exclusion was used
  to calculate the tax equivalent income
4 Includes residential and commercial real estate loans
5 Average balances include non-accruing loans


<PAGE> 15


TABLE I

                            PIONEER BANKSHARES, INC.
                          NET INTEREST MARGIN ANALYSIS
                        (On a Fully Tax Equivalent Basis)
                          (Dollar Amounts in Thousands)


                        Three Months Ended            Three Months Ended
                           June 30, 2003                 June 30, 2002

                     Average  Income/              Average  Income/
                    Balance4  Expense   Rates      Balance  Expense   Rates

Interest Income
  Loans 1
    Commercial      $ 3,066   $   64    8.35%     $ 2,989   $   62    8.30%
    Real estate 4    64,056    1,201    7.50%      66,410    1,334    8.03%
    Installment      16,668      616   14.78%      23,203      859   14.81%
    Credit card         809       43   21.26%         891       45   20.20%
  Federal funds sold  2,730        7    1.03%       9,924       41    1.65%
  Interest bearing
    deposits          6,049       30    1.98%       3,937       17    1.73%
  Investments
    Taxable 3        11,691      126    4.32%       7,150      102    5.69%
    Nontaxable 2      2,337       30    5.19%       2,512       35    5.55%
                     ------    -----   -----       ------    -----   -----

Total earning
  assets            107,406    2,117    7.89%     117,016    2,495    8.53%
                     -------   -----   -----       -------   -----   -----

Interest Expense
  Demand deposits    13,277       21    0.63%      11,958       32    1.07%
  Savings            12,502       25    0.80%      11,013       32    1.16%
  Time deposits      52,824      387    2.93%      63,921      712    4.46%
  Borrowings          4,911       71    5.78%       5,555       83    5.98%
                     ------    -----   -----       ------    -----   -----

Total Interest Bearing
  Liabilities       $83,514   $  504    2.41%     $92,447   $  859    3.72%
                     ======    =====   =====       ======    =====   =====

Net Interest Income 1          1,613                         1,636
                               =====                         =====

Net Interest Margin                     6.01%                         5.59%
                                       =====                         ======


1 Interest on loans includes loan fees
2 An incremental tax rate of 34% was used to calculate the tax equivalent
  income
3 An incremental tax rate of 34% and 70% dividend exclusion was used
  to calculate the tax equivalent income
4 Includes residential and commercial real estate loans
5 Average balances include non-accruing loans


<PAGE> 16


TABLE II

                            PIONEER BANKSHARES, INC.
                          INTEREST SENSITIVITY ANALYSIS
                                  JUNE 30, 2003
                          (Dollar Amounts in Thousands)

                          0-3     4-12      1-5    Over 5     Not     Total
                        Months   Months    Years    Years   Class-
Uses of Funds:                                               ified

Loans                  $ 4,250  $ 4,261  $30,474  $43,967  $        $82,952
Interest bearing
   bank deposits         5,862                                        5,862
Investment securities    3,500      514    8,177    1,176    1,385   14,752
Federal funds sold         150                                          150
                        ------   ------   ------   ------   ------   ------

Total                   13,762    4,775   38,651   45,143    1,385   103,716
                        ------   ------   ------   ------   ------   -------

Sources of Funds:

Interest bearing
   demand deposits      13,093                                       13,093
Regular savings         12,543                                       12,543
Certificates of deposit
   $100,000 and over       944    4,022    3,019                      7,985
Other certificates
   of deposit            6,770   20,230   17,975                     44,975
Borrowings                 163      487    2,600    1,500             4,750
                        ------   ------   ------   ------   ------   ------

Total                   33,513   24,739   23,594    1,500            83,346
                       -------  -------  -------  -------  -------  -------

Discrete Gap           (19,751) (19,964)  15,057   43,643    1,385   20,370

Cumulative Gap         (19,751) (39,715) (24,658)  18,985   20,370

Ratio of Cumulative
   Gap To Total
   Earning Assets       -19.04%  -38.29%  -23.77%   18.30%   19.64%
                         ======   ======   ======    =====    =====


Ratio of Cumulative
   Gap To Total
   Earning Assets at
   December 31, 2002    -22.90%  -33.47%    5.90%   19.69%   20.91%
                        ======   ======     ====    =====    =====



<PAGE> 17



Item 3.   Controls and Procedures

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

We have established disclosure controls and procedures to ensure that material
information related to Pioneer Bankshares, Inc. is made known to our principal
executive officers and principal financial officer on a regular basis, in
particular during the periods in which our quarterly and annual reports are
being prepared. As required, we evaluate the effectiveness of these disclosure
controls and procedures on a quarterly basis, and have done so as of the end of
the period covered by this report. Based on this evaluation, Pioneer Bankshares'
management, including the Chief Executive Officer and the  Chief
Financial  Officer,  concluded  that  Pioneer Bankshares' disclosure
controls and procedures were operating effectively as designed as of the date of
such evaluation.

Changes in Internal Controls

There were no significant changes in Pioneer Bankshares' internal controls
pertaining to its financial reporting and control of its assets or in other
factors that could significantly affect these controls since the date of their
evaluation.


Part II Other Information

Item 1.  Legal Proceedings -                Not Applicable


Item 2.  Changes in Securities -            Not Applicable


Item 3.  Defaults Upon Senior Securities -  Not Applicable


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


On May 13, 2003, the Annual Shareholders Meeting was held. At this meeting,
Robert E. Long [votes for 755,134, against 200], Kyle L. Miller [votes for
754,474, against 860] and Patricia G. Baker [votes for 754,394, against 940]
were elected to serve as directors. Their term will expire in 2006.

After the  meeting,  the Board of  Directors  consisted  of Patricia G. Baker,
Louis L. Bosley,  Robert E. Long,  Harry F.  Louderback,  Edwin P.  Markowitz,
Kyle L. Miller, Mark N. Reed, Thomas R. Rosazza and David N. Slye.


Item 5.  Other Matters

The Company's 1998 Stock Incentive Plan (the "Plan") was adopted by the Board of
Directors on June 11, 1998 and approved by the shareholders on June 11, 1999.
The Plan makes available up to 14,000 shares of common stock for awards to
employees and to non-employee directors of the Company and its subsidiaries in
the form of stock options ("Options"), however, no Options have been awarded in
previous years, under the Plan.




<PAGE> 18



Generally, the Plan provides for the grants of incentive stock options and
non-qualified stock options. The exercise price of the Option cannot be less
than 100% of the fair market value of the common stock (or if greater, the book
value) on the date of the grant. The option terms applicable to each grant are
determined at the grant date, but no Option can be exercisable in any event,
after ten years from its grant date. On June 5, 2003, the Board of Directors
granted Options to current non-employee directors for 2003. The effective date
of the grant is May 13, 2003 and the Options may be exercised on or after May
13, 2004. The total options granted under the plan are shown in the following
table:

      Class         Number          Exercise Price        Expiration Date
      -----         ------          --------------        ---------------
      1998           700               $  18.00            June 10, 2008
      1999           800                  12.75            June 7, 2009
      2000           800                  12.75            April 10, 2010
      2001           800                  12.75            May 7, 2011
      2002           800                  12.75            May 6, 2012
      2003           800                  12.50            May 12, 2013
                     ---

      Total        4,700
                   -----



Item 6.  Exhibits and Reports on 8-K

         (a)  Exhibits

              3.1    Articles of  Incorporation  of Pioneer  Bankshares,  Inc.
                     (incorporated  by  reference  to  Exhibit  3.1 of Pioneer
                     Bankshares, Inc. Form 10SB filed May 1, 2001).

              3.2    Bylaws  of  Pioneer  Bankshares,  Inc.  (incorporated  by
                     reference  to  Exhibit  3.2 of Pioneer  Bankshares,  Inc.
                     Form 10SB filed May 1, 2000).

              10.i   Pioneer  Bankshares,   Inc.  (Formerly  Page  Bankshares,
                     Inc.),   1998  Stock  Incentive  Plan   (incorporated  by
                     reference  to  Exhibit A of  Pioneer  Bankshares,  Inc.'s
                     Form 10-QSB filed August 12, 2002).

              31.1   Certification of Chief Executive Officer pursuant to
                     Rule 13a-14(a) (filed herewith).

              31.2   Certification of Chief Financial Officer pursuant to
                     Rule 13a-14(a) (filed herewith).

              32     Certifications  of Chief  Executive
                     Officer,  Chief Operating Officer and Chief Financial
                     Officer pursuant to 18 U.S.C. Section 1350, as adopted
                     pursuant to Section 906 of the Sabanes-Oxley Act of 2002
                     (filed herewith).


         (b)  Reports on Form 8-K

              The Company did not file any reports on Form 8-K for the quarter
              ending June 30, 2003.


<PAGE> 19




                                    Signature

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

                                 Pioneer Bankshares, Inc.



                                 /s/ THOMAS R. ROSAZZA
                                 ---------------------------------
                                 Thomas R. Rosazza
                                 President and Chief Executive Officer



                                 /s/ LORI  G.  HASSETT
                                 ---------------------------------
                                 Lori G. Hassett
                                 Chief Financial Officer and Vice President


Date  August 12, 2003