<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                      For the quarter ended March 31, 2002
                         Commission file number 0-18868

                       PREMIER COMMUNITY BANKSHARES, INC.
                 (Name of Small Business Issuer in its Charter)

              Virginia                                  54-1560968
              --------                                  ----------
    (State or Other Jurisdiction           (I.R.S. Employer Identification No.)
  Of Incorporation or Organization)

             4095 Valley Pike
          Winchester, Virginia                              22602
          ---------------------                             -----
  (Address of Principal Executive Offices)                 (Zip Code)

                                 (540) 869-6600
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                         Name of Each Exchange
            Title of Each Class                          On Which Registered
             -------------------                         ---------------------
                   None                                         N/A

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $1.00 per share
                     ---------------------------------------
                                (Title of Class)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. YES__X__ NO______

     As of May 10, 2002, there were 4,536,484 shares of the Registrant's common
stock outstanding.

<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

     The following financial statements are provided at the page numbers
indicated.

            Consolidated Statements of Condition
            As of 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 Changes in
            Shareholders Equity for the Three Months
            Ended March 31, 2002 and 2001..............................        5

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

            Notes to Consolidated Financial Statements.................   7 - 10

Item 2.  Management's Discussion and Analysis or
            Plan of Operations.........................................  11 - 14



Part II.  OTHER INFORMATION............................................       15


Signature..............................................................       16

                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          Item 1. FINANCIAL STATEMENTS
                   PREMIER COMMUNITY BANKSHARES, INCORPORATED
                           Consolidated Balance Sheets
                      (In Thousands, Except for Share Data)

<TABLE>
<CAPTION>



                                                                       (Unaudited)
                                                                         March 31,       December 31,
Assets:                                                                    2002              2001
                                                                       ------------------------------
<S> <C>
Cash and due from banks                                                   $18,559            $17,494
Interest-bearing deposits in other banks                                      185                186
Federal funds sold                                                         21,732             22,185
Securities available for sale, at fair value                               14,575             11,637
Securities held to maturity (fair value: March 31, 2002,
       $10,180  December 31, 2001  $9,838)                                 10,275              9,756
Loans held for sale                                                           229                471
Loans, net of allowance for loan losses of $2,542,
       March 31, 2002, $2,459 December 31, 2001)                          247,316            229,300
Bank premises and equipment, net                                            5,524              5,376
Accrued interest receivable                                                 1,415              1,398
Other real estate                                                              67                 67
Other assets                                                                2,110              1,995
                                                                       ------------------------------

                                                                         $321,987           $299,865
                                                                       ==============================

Liabilities and Shareholders' Equity:
Liabilities:
     Deposits:
          Non-interest bearing demand deposits                            $38,535            $36,760
          Savings and interest-bearing demand deposits                     89,807             77,919
          Time deposits                                                   150,686            142,958
                                                                       ------------------------------
                 Total deposits                                           279,028            257,637
Federal Home Loan Bank advances                                             7,000              7,000
Short-term borrowings                                                         511                559
Accounts payable and accrued expenses                                       1,549              1,720
Capital lease payable                                                         202                204
Trust Preferred Capital Notes                                               7,000              7,000
                                                                       ------------------------------
                                                                         $295,290           $274,120
                                                                       ------------------------------

Shareholders' Equity:
Preferred stock, Series A, 5% noncumulative, no par
     value; 1,000,000 shares authorized and unissued                           $0                 $0
Common stock, $1 par value, 20,000,000 shares authorized
     March 31, 2002, 4,536,484 shares issued and outstanding;
     December 31, 2001, 4,527,484 shares issued and outstanding             4,536              4,527
Capital surplus                                                            14,844             14,808
Retained earnings                                                           7,271              6,342
Accumulated other comprehensive income                                         46                 68
                                                                       ------------------------------
      Total shareholders' equity                                           26,697             25,745

                                                                         $321,987           $299,865
                                                                       ==============================
</TABLE>


           See Accompanying Notes to Consolidated Financial Statements

                                       3

<PAGE>


                   PREMIER COMMUNITY BANKSHARES, INCORPORATED
                        Consolidated Statements of Income
                      (In Thousands, Except for Share Data)
<TABLE>
<CAPTION>



                                                                                (Unaudited)
                                                                       For the Three Months Ended
                                                                                 March 31,
                                                                           2002               2001
                                                                      ------------------------------
<S> <C>
Interest and dividend income:
   Interest and fees on loans                                         $     4,795        $     4,388
   Interest on investment securities
      Nontaxable                                                               35                 25
      Taxable                                                                 106                 84
   Interest and dividends on securities available for sale:
      Nontaxable                                                               17                 10
      Taxable                                                                 118                188
      Dividends                                                                23                 18
   Interest on deposits in banks                                                1                 22
   Interest on federal funds sold                                              95                245
                                                                      ------------------------------
          Total interest and dividend income                          $     5,190        $     4,980
                                                                      ------------------------------

Interest expense:
   Interest on deposits                                               $     1,891        $     2,220
   Interest on capital lease obligations                                        4                  4
   Interest on borrowings                                                     165                127
                                                                      ------------------------------
          Total interest expense                                      $     2,060        $     2,351
                                                                      ------------------------------

          Net interest income                                         $     3,130        $     2,629
Provision for loan losses                                                     210                125
                                                                      ------------------------------
          Net interest income after provision for loan losses         $     2,920        $     2,504
                                                                      ------------------------------

Noninterest income
   Service charges on deposit accounts                                $       327        $       308
   Commissions and fees                                                       159                 50
   Other                                                                       55                 21
                                                                      ------------------------------
          Total noninterest income                                    $       541        $       379
                                                                      ------------------------------

Noninterest expense
    Salaries and employees                                            $     1,152        $       978
    Net occupancy expense of premises                                         127                120
    Furniture and equipment                                                   124                134
    Other                                                                     673                511
                                                                      ------------------------------
          Total noninterest expenses                                  $     2,076        $     1,743
                                                                      ------------------------------

          Income before income taxes                                  $     1,385        $     1,140

Provision for income taxes                                                    456                380
                                                                      ------------------------------
          Net income                                                  $       929        $       760
                                                                      ==============================

Average shares:
    Basic                                                               4,529,262          4,546,695
    Assuming dilution                                                   4,585,660          4,611,741

Earnings per common per share:
    Basic                                                                    0.21               0.17
    Assuming dilution                                                        0.20               0.16

</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                       4

<PAGE>


                   PREMIER COMMUNITY BANKSHARES, INCORPORATED
            Consolidated Statement of Changes in Shareholders' Equity
               For the Three Months Ended March 31, 2002 and 2001
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                             Accumulated
                                                                                 Other                             Total
                                           Common    Capital     Retained    Comprehensive     Comprehensive     Shareholders'
                                           Stock     Surplus     Earnings       Income            Income           Equity
                                         --------------------------------------------------------------------------------------
<S> <C>
Balance December 31, 2000                $  4,547    $15,118     $ 3,634    $          9                        $   23,308

Comprehensive Income
  Net income                                                         760                               760             760
  Other comprehensive income
     net of tax                                                        -                                 -               -
  Unrealized gain on available for
     sale securities (net of tax $131)                                              $255              $255             255
                                                                                              ------------
  Total comprehensive income                                                                  $      1,015
                                                                                              ============



                                         --------------------------------------------------------------------------------------
Balances - March 31, 2001                $  4,547    $15,118     $ 4,394    $        264                        $   24,323
                                         ======================================================================================
</TABLE>


<TABLE>
<CAPTION>


                                                                             Accumulated
                                                                                 Other                             Total
                                           Common    Capital     Retained    Comprehensive     Comprehensive     Shareholders'
                                           Stock     Surplus     Earnings       Income            Income           Equity
                                         --------------------------------------------------------------------------------------
<S> <C>
Balance December 31, 2001                $  4,527    $14,808     $ 6,342    $         68                        $   25,745

Comprehensive Income
  Net income                                                         929                      $        929             929
  Other comprehensive income
     net of tax                                                        -                                 -               -
  Unrealized loss on available for
     sale securities (net of tax -$11)                                               (22)              (22)            (22)
                                                                                              ------------
  Total comprehensive income                                                                  $        907
                                                                                              ============

Issuance of common stock-
     exercise of stock options
     (9,000 shares)                             9         36                                                            45

                                         ----------------------------------------------------------------       ---------------
Balances - March 31, 2002                $  4,536    $14,844     $ 7,271    $         46                        $   26,697
                                         ================================================================       ===============
</TABLE>


           See Accompanying Notes to Consolidated Financial Statements

                                       5

<PAGE>


                          PREMIER COMMUNITY BANKSHARES
                      Consolidated Statements of Cash Flows
               For the Three Months Ended March 31, 2002 and 2001
                                 (In Thousands)

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                         2002                 2001
                                                                  ----------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                        $        929         $        760
Adjustments to reconcile net income
to net cash provided by operating activities:
  Amortization                                                              16                   18
  Depreciation                                                              89                   94
  Net amortization and (accretion) on securities                             4                   (3)
  Provision for loan loss                                                  210                  125
  Origination of loans available for sale                               (1,662)                (856)
  Proceeds from sale of loans available for sale                         1,904                  474
  Changes in assets and liabilities:
    (Increase) Decrease in other assets                                   (161)                  27
    Decrease in accrued interest receivable                                283                  127
    Increase (Decrease)in accounts payable/accrued expenses               (160)                 215
    Increase in interest expense payable                                   260                   88
                                                                  ----------------------------------
Net cash provided by operating activities                         $      1,712         $      1,069
                                                                  ----------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities, calls and principal payments
     on securities held to maturity                               $        479         $      1,358
Proceeds from maturities, calls and principal payments
     on securities available for sale                                    1,538                4,020
Purchase of securities available for sale                               (4,517)                (804)
Purchase of securities held to maturity                                 (1,000)                   -
Net increase in loans                                                  (18,226)              (6,062)
Purchase of bank premises and equipment                                   (232)                 (64)
                                                                  ----------------------------------
Net cash used in investing activities                             $    (21,958)        $     (1,552)
                                                                  ----------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts and                 $     13,663         $      1,422
     savings accounts
Net increase in certificates of deposits                                 7,727                6,568
Net decrease in borrowings                                                 (48)                  (2)
Principal payments on capital lease obligation                              (2)                (455)
Cash dividends paid                                                       (528)                   -
Proceeds from issuance of common stock                                      45                    -
Reduction in borrowed money                                                                  (1,792)
                                                                  ----------------------------------
Net cash provided by financing activities                         $     20,857         $      5,741
                                                                  ----------------------------------

Increase in cash and cash equivalents                             $        611         $      5,258
Beginning                                                               39,865               29,761
                                                                  ----------------------------------
Ending                                                            $     40,476         $     35,019
                                                                  ==================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash payments for:

   Interest                                                       $      2,077         $      2,329
                                                                  ==================================

   Income taxes                                                   $          -         $          1
                                                                  ==================================

Unrealized gain (loss) on securities available for sale           $        (33)        $         98
                                                                  ==================================
</TABLE>


           See Accompanying Notes to Consolidated Financial Statements

                                       6

<PAGE>

                        PREMIER COMMUNITY BANKSHARES, INC

                   Notes to Consolidated Financial Statements
                                   (Unaudited)
               For the Three Months Ended March 31, 2002 and 2001

Note 1.

     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 of
Premier Community Bankshares, Incorporated ("Premier" or the "Corporation") for
the periods ending March 31, 2002 and December 31, 2001, and the result of
operations and cash flows for the three months ended March 31, 2002 and 2001.
The statements should be read in conjunction with the Notes to Financial
Statements included in Premier's Annual Report on Form 10-KSB for the year ended
December 31, 2001.

Note 2.

     The results of operations for the three month period ended March 31, 2002
and 2001 are not necessarily indicative of the results to be expected for the
full year.

Note 3.  Securities

     Securities held to maturity as of March 31, 2002 are summarized as follows
(in thousands):

                                            Gross         Gross
                              Amortized   Unrealized   Unrealized      Fair
                                Cost        Gains       (Losses)      Value
                              ----------------------------------------------
                                              March 31, 2002
                              ----------------------------------------------
U.S. Government and
   federal agencies            $3,545         $70         ($10)      $3,605
Obligations of state and
   political subdivisions       3,883          34          (28)       3,889
Mortgage-backed securities         76           2             0          78
Other                           2,771           0         (163)       2,608
                              ----------------------------------------------
                              $10,275        $106        ($201)     $10,180
                              ==============================================

                                        7

<PAGE>

            Securities available for sale as of March 31, 2002 are summarized as
follows (in thousands):

                                                Gross        Gross
                                 Amortized    Unrealized   Unrealized    Fair
                                   Cost         Gains       (Losses)     Value
                                 ---------------------------------------------
                                                  March 31, 2002
                                 ---------------------------------------------
U.S. Government and
   federal agencies              $ 9,915         $72          ($10)     $9,977
Obligations of state and
   political subdivisions          1,640          16           (13)      1,643
Corporate bonds                      250           0             0         250
Mortgage-backed securities         1,276           8            (4)      1,280
Other                              1,425           0             0       1,425
                                 ---------------------------------------------
                                 $14,506         $96          ($27)    $14,575
                                 =============================================

Note 4. Loans.

     The consolidated loan portfolio is composed of the following:


<TABLE>
<CAPTION>

                                                          March 31,     December 31,
                                                            2002           2001
                                                          --------------------------
                                                                (000 Omitted)
                                                          --------------------------
<S> <C>
Loans secured by real estate:
  Construction and land development                         25,592          21,926
  Secured by farmland                                        1,723           1,677
  Secured by 1-4 family residential                         54,905          53,419
  Multi-family residential                                   4,134           3,982
  Nonfarm, nonresidential                                   93,770          83,624
Loans to farmers (except those secured by real estate)          10              12
Commercial loans (except those secured by real estate)      51,843          49,445
Loans to individuals (except those secured by real estate)  17,367          17,261
All other loans                                                522             425
                                                          --------------------------
Total loans                                               $249,866        $231,771

Less:  Unearned income                                           8              12
Allowance for loan losses                                    2,542           2,459
                                                          --------------------------
Loans, net                                                $247,316        $229,300
                                                          ==========================
</TABLE>


Impaired loans totaled $5 thousand and $190 thousand at March 31, 2002 and
December 31, 2001, respectively. Non-accrual loans excluded from impaired loans
disclosure under FASB 114 amounted to $34 thousand and $21 thousand at March 31,
2002 and December 31, 2001, respectively.

                                       8

<PAGE>
Note 5. Reserve for Loan Losses.

The Corporation maintains the allowance for loan losses at a sufficient level to
provide for potential losses in the loan portfolio. Loan losses are charged
directly to the allowance when they occur, while recoveries are credited to the
allowance. The adequacy of the provision for loan losses is reviewed
periodically by management through consideration of several factors including
changes in the character and size of the loan portfolio and related loan loss
experience, a review and examination of overall loan quality which includes the
assessment of problem loans and an analysis of anticipated economic condition in
the market area. An analysis of the allowance for loan losses, including
charge-off activity, is presented below for the quarters ended March 31, 2002
and 2001.

                                                March 31,
(In thousands)                              2002         2001
                                           --------------------

Balance, beginning of period               $2,459       $2,000
Less Charge-off's:
         Commercial                             0            1
         Real estate-mortgage                   0            0
         Real estate-construction               0            0
         Consumer installment loans           139           22
                                           --------------------
                          Total              $139          $23

Plus Recoveries:
         Commercial                            $2           $2
         Real estate-mortgage                   0            0
         Real estate-construction               0            0
         Consumer installment loans            10           16
                                           --------------------
                           Total              $12          $18

Additions charged to operating expense       $210         $125

Balance, end of period                     $2,542       $2,120
                                           ====================




The following is a summary of information pertaining to risk elements and
impaired loans for the periods ended March 31, 2002 and December 31, 2001.

                                             March 31,       December 31,
                                               2002                2001
                                             ----------------------------

Non-accrual loans                              $39                  $211
Loans past due 90 days or more and still
accruing interest                              154                 1,079
Restructured loans                               0                     0
                                             ----------------------------
                                              $193                $1,290
                                             ============================


                                       9

<PAGE>

The decrease in the 90 day category is the result of the payoff of two loans
totaling in excess of $650 thousand and several other loans being made current
during the first quarter of 2002.

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

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

Note 6.  Earnings Per Share

                                       March 31,                  March 31,
                                         2002                       2001
                               ------------------------------------------------
                                Shares       Amount          Shares      Amount
                               ------------------------------------------------

Basic earnings per share       4,529,262     $0.21          4,546,695     $0.17

Effect of dilutive securities:
Stock options                     56,398                       65,046

Diluted earnings per share     4,585,660     $0.20          4,611,741     $0.16



     Options of 19,523 were not included in computing diluted EPS for March 31,
2001, because their effects were anti-dilutive.

                                       10

<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Financial Summary

General
-------

     Premier Community Bankshares, Inc. ("Premier" or the "Corporation") is a
Virginia multi-bank holding company headquartered in Winchester, Virginia. The
Corporation owns The Marathon Bank as well as Rockingham Heritage Bank and its
subsidiary, RHB Services, Inc. Rockingham Heritage Bank and its subsidiary were
merged into Premier in a pooling of interests transaction consummated on
November 20, 2000. Concurrent with the merger, Marathon Financial Corporation
changed its name to Premier Community Bankshares, Inc. The consolidated
statements include the accounts of Premier and its wholly-owned subsidiaries.
All significant inter-company accounts have been eliminated.

     The Corporation and its subsidiaries, The Marathon Bank and Rockingham
Heritage Bank, are engaged in the business of offering banking services to the
general public. Premier offers checking accounts, savings and time deposits, and
commercial, real estate, personal, home improvement, automobile and other
installment and term loans. The Corporation also offers financial services,
travelers checks, safe deposit boxes, collection, notary public and other
customary bank services (with the exception of trust services) to its customers.
The three principal types of loans made by Premier are: (1) commercial and
industrial loans; (2) real estate loans; and (3) loans to individuals for
household, family and other consumer expenditures.

Critical Accounting Policies
----------------------------

     The allowance for loan losses is an estimate of the losses that may be
sustained in our loan portfolio. The allowance is based on two basic principles
of accounting: (i) SFAS 5, Accounting for Contingences, which requires that
losses be accrued when they are probable of occurring and estimatable and (ii)
SFAS 114, Accounting by Creditors for Impairment of a Loan, which requires that
losses be accrued based on the differences between the value of collateral,
present value of future cash flows or values that are observable in the
secondary market and the loan balance.

     Premier's allowance for loan losses is determined by evaluating its loan
portfolio on a quarterly basis. Particular attention is paid to individual loan
performance, collateral values, borrower financial condition and overall
economic conditions. The evaluation includes a close review of the internal
watch list and other non-performing loans. Management uses three steps in
calculating the balance of the reserve. The first step is the specific
classification which examines problem loans and applies a weight factor to each
category. The weight factor is based upon historical data and the loans within
each category are reviewed on a monthly basis to determine changes in their
status. The second step applies a predetermined rate against total loans with
unspecified reserves. Again, this rate is based upon experience and can change
over time. The third step is an unallocated allowance which is determined by
economic events and conditions that may have a real, but as yet undetermined,
impact upon the portfolio. Each of these steps is based on data that can be
subjective and the actual losses may be greater or less than the amount of the
allowance. However, management feels that the allowance represents a reasonable
assessment of the risk imbedded in the portfolio.

                                       11

<PAGE>

Net Income
----------

     Net income for the quarter ending March 31, 2002 was $929 thousand compared
to $760 thousand for the same period in 2001. This is an increase of $169
thousand or 22.2% over the same period 2001. The provision for income tax
expense increased $76 thousand or 20.0% from $380 thousand in 2001 to $456
thousand in 2002. The return on assets was 1.21% for the first quarter of 2002
as compared to 1.25% for the same period 2001. Return on equity was 14.32% and
13.06% for the first quarter of 2002 and 2001, respectively.

Total Assets
------------

     Total assets of Premier increased to $322.0 million at March 31, 2002
compared to $299.9 million at December 31, 2001 representing an increase of
$22.1 million or 7.4%. Total loans at March 31, 2002, were $249.9 million of
which $180.1 million were loans secured by real estate. The remaining loans
consisted of $51.8 million in commercial loans, $17.4 million in consumer
installment loans and $532 thousand in all other loans. Net loans at March 31,
2002 increased $18.0 million or 7.9% from the December 31, 2001 balance of
$229.3 million. The loan to deposit ratio was 89.5% as of March 31, 2002 and
90.0% as of March 31, 2001. The loan growth has been generated by a strong local
market that is diverse in several areas of the economy. Premier has also been
able to increase its customer base due to recent mergers and consolidations of
competitor offices in its market area.

     The investment portfolio increased 16.2% to $24.9 million at March 31, 2002
compared to $21.4 million at December 31, 2001. The increase in investments was
chiefly the result of the reinvestment of funds generated by the issuance of
Preferred Trust Securities in late 2001 and an increase in the deposit base.
Federal funds sold remained steady, decreasing slightly to $21.7 million at
March 31, 2002 from $22.2 million at December 31, 2001. Total earning assets
increased by $21.1 million or 7.7% to $297.4 million from December 31, 2001.

Allowance for Loan Losses
-------------------------

     The allowance for loan losses, as of March 31, 2002, was $2.5 million. This
is an increase of $83 thousand or 3.4% from December 31, 2001. This gives the
Corporation a 1.02% allowance for loan losses to total loans. Management has
completed an analysis on the reserve and feels the reserve is adequate.

Liabilities
-----------

     Total deposits increased to $279.0 million at March 31, 2002, from a
balance of $257.6 million at December 31, 2001, which is an increase of $21.4
million or 8.3%. Non-interest bearing deposits have increased to $38.5 million
as of March 31, 2002, an increase of $1.8 million or 4.8% from December 31,
2001. During this period interest bearing checking and savings accounts
increased $11.9 million or 15.3% to $89.8 million. The balance in time deposits
was $150.7 million at the end of the first quarter reflecting an increase of
$7.7 million or 5.4% over the end of the year. As of March 31, 2002 non-interest
bearing deposits represented 13.8% of total deposits as compared to 14.3% at
year-end 2001. Low cost interest bearing deposits including savings and interest
bearing checking were 32.2% which represents an increase of 2.0% from the
year-end December 31, 2001 balance. Time deposits represented 54.0% of total
deposits at March 31, 2002, a decrease of 1.5% from 55.5% at year-end.

                                       12

<PAGE>

Shareholders' Equity
--------------------

     Total equity has increased by $952 thousand or 3.7% since December 31,
2001. The increase was due to a net profit of $929 thousand for the first three
months of 2002. Stock options totaling $45 thousand were exercised. Accumulated
other comprehensive income decreased $22 thousand, net of tax. The primary
capital to assets ratio is 8.3%.

Interest Income
---------------

     Interest income totaled $5.2 million for the three months ending March 31,
2002, $210 thousand or 4.2% higher than the three months ending March 31, 2001.
Interest and fees on loans comprise the vast majority of interest income with
$4.8 million for the first three months of 2002. Interest income from investment
securities dropped by $26 thousand from the first quarter of 2001 due to the
decline in interest rates in 2001. Interest income on federal funds, the third
major component of the bank's investments, decreased $150 thousand or 61.2%.
Again, this decrease is a direct result of the decline in interest rates.

Interest Expense
----------------

     Total interest expense for the three months ending March 31, 2002 was $2.1
million, $291 thousand or 12.4% lower than the three months ending March 31,
2001. Interest on deposits for the three month period decreased by $329 thousand
or 14.8% over the same period in 2001. The impact of declining interest rates
more than offset the additional expense generated by an increase of $58.9
million in total deposits during the same period. Interest on borrowings
increased by $38 thousand or 29.9% over the same period last year. Borrowings
are generated through an agreement with the Federal Home Loan Bank. Additional
funds were acquired through the issuance of Trust Preferred Securities in
December 2001.

Net Interest Income
-------------------

     Net interest income for the three months ending March 31, 2002 was $3.1
million, $501 thousand or 19.1% higher than the three months ending March 31,
2001. This increase is the result of the combination of the growth in earning
assets of $21.4 million and a decline of 3.75% in the prime rate from 8.00% on
March 31, 2001 to 4.75% as of March 31, 2002. The falling rate changes in 2001
had the effect of decreasing the net interest margin by 14 basis points to 4.46%
for the three months ending March 31, 2002 from 4.60% for the same period of
2001. The impact on the margin was mitigated to a certain extent because of
Premier's liability sensitive status for interest bearing balances maturing or
repricing within one year.

Other Income
------------

     Total other income for the three months ending March 31, 2002 was $541
thousand, an increase of $162 thousand or 42.7% over the 2001 balance of $379
thousand. This was the result of fees charged for services such as overdraft
charges, check fees and ATM fees due to an increasing number of customer
accounts derived from a growing customer base. Another factor was a 242.7%
increase in fees derived from the secondary real estate market.

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<PAGE>

Other Expenses
--------------

     Total other expenses for the three months ending March 31, 2002 were $2.1
million, $333 thousand or 19.1% higher than the three months ending March 31,
2001. Salary expense increased $174 thousand or 17.8%, and advertising and
marketing expenses increased by $28 thousand over the same period in 2001. The
net increase in other expenses is in part a result of additional staffing to
handle the growth of the bank and the costs involved in processing an increasing
number of accounts and transactions. The Corporation's efficiency ratio was
52.6% through March 31, 2002 compared to 66.8% for the same period 2001.

Liquidity
---------

     Premier's liquidity requirements are measured by the need to meet deposit
withdrawals, fund loans, meet reserve requirements and maintain cash levels
necessary for daily operations. To meet liquidity requirements, Premier
maintains cash reserves and has an adequate flow of funds from maturing loans,
securities, and short-term investments. In addition, Premier's affiliate banks
have the ability to borrow additional funds from various sources. Short-term
borrowings are available from federal funds facilities at correspondent banks
and from the discount window of the Federal Reserve Bank. Long-term borrowings
are available from the Federal Home Loan Bank. The Corporation considers its
sources of liquidity to be ample to meet its estimated needs.

Capital Resources
-----------------

     The Corporation's risk-based capital position at March 31, 2002 was $33.7
million, or 13.4% of risk-weighted assets, for Tier I capital and $36.2 million,
or 14.4% for total risk based capital. Tier I capital consists primarily of
common shareholders' equity. Total risk-based capital includes the allowance for
loan losses in addition to total shareholders equity. Risk-weighted assets are
determined by assigning various levels of risk to different categories of assets
and off-balance sheet items. Under current risk-based capital standards, all
banks are required to have Tier I capital of at least 4% and a total capital
ratio of 8%.

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<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Change in Securities.

         None

Item 3.  Defaults upon Senior Securities.

         None

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 Form 8-K - None

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<PAGE>

SIGNATURES:

Pursuant to 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.

                                         PREMIER COMMUNITY BANKSHARES, INC.


DATE:  May 14, 2002                      /s/    John K. Stephens
-------------------                      -----------------------
                                            JOHN K. STEPHENS
                                            CHAIRMAN

DATE:  May 14, 2002                      /s/    Donald L. Unger
---------------------                    ----------------------
                                            DONALD L. UNGER
                                            PRESIDENT & CEO


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