UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                                   (Mark One)

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

For the quarterly period ended    September 30, 2003

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

For the transition period from__________to__________

Commission file number:       0-18868

                       PREMIER COMMUNITY BANKSHARES, INC.
                       ----------------------------------
             (Exact name of registrant as specified 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

              (Registrant's telephone number, including area code)

         Indicate by check mark whether the  registrant(1) has 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 requirements for the past 90 days.

                                YES__X__ NO______

       Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) YES______  NO___X___

       Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 4,590,584,  $1.00 par value,
as of November 12, 2003.

<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

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

            Consolidated Balance Sheets as of
            September 30, 2003 and December 31, 2002...........................3

            Consolidated Statements of Income for
            the Three Months Ended and Nine Months Ended
            September 30, 2003 and 2002........................................4

            Consolidated Statements of Changes in
            Shareholders' Equity for the Nine Months
            Ended September 30, 2003 and 2002..................................5

            Consolidated Statements of Cash Flows for the
            Nine Months Ended September 30, 2003 and 2002......................6

            Notes to Consolidated Financial Statements......................7-11


Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...........................11-16

Item 3.  Quantitative and Qualitative
         Disclosures about Market Risk.....................................16-17

Item 4.  Controls and Procedures..............................................18

Part II.  OTHER INFORMATION...................................................19


Signatures....................................................................20

                                       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)
                                                                                      September 30,            December 31,
                                                                                           2003                     2002
Assets:                                                                             -------------------------------------
<S>                                                                                      <C>                      <C>
Cash and due from banks                                                                   $22,057                  $22,719
Interest-bearing deposits in other banks                                                      285                    2,049
Federal funds sold                                                                         30,888                   19,017
Securities available for sale, at fair value                                               15,075                   15,276
Securities held to maturity (fair value: September 30, 2003,
       $9,032;  December 31, 2002, $10,033)                                                 9,296                   10,020
Loans, net of allowance for loan losses of $3,965,
       September 30, 2003; $3,340, December 31, 2002                                      359,290                  312,554
Bank premises and equipment, net                                                            9,955                    7,660
Accrued interest receivable                                                                 1,662                    1,645
Other real estate                                                                              67                       67
Other assets                                                                                3,212                    2,748
                                                                                     -------------------------------------

                                                                                         $451,787                 $393,755
                                                                                     =====================================


Liabilities and Shareholders' Equity:
Liabilities:
     Deposits:
          Non-interest bearing demand deposits                                            $57,339                  $48,536
          Savings and interest-bearing demand deposits                                    124,106                  100,969
          Time deposits                                                                   209,900                  195,557
                                                                                     -------------------------------------
                 Total deposits                                                           391,345                  345,062
Federal Home Loan Bank advances                                                            11,000                    9,000
Short-term borrowings                                                                         315                      535
Accounts payable and accrued expenses                                                       1,960                    2,138
Capital lease payable                                                                         190                      196
Trust Preferred Capital Notes                                                              13,000                    7,000
                                                                                     -------------------------------------
                                                                                         $417,810                 $363,931
                                                                                     -------------------------------------


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
     Sept 30, 2003, 4,590,584 shares issued and outstanding;
     December 31, 2002, 4,555,484 shares issued and outstanding                             4,590                    4,555
Capital surplus                                                                            15,150                   14,977
Retained earnings                                                                          14,029                   10,023
Accumulated other comprehensive income                                                        208                      269
                                                                                     -------------------------------------
      Total shareholders' equity                                                           33,977                   29,824

                                                                                         $451,787                 $393,755
                                                                                     =====================================


</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)                       (Unaudited)
                                                                          For the Quarter Ended           For the Nine Months Ended
                                                                              September 30,                     September 30,
                                                                           2003            2002             2003             2002
                                                                         ----------------------------------------------------------
<S>                                                                      <C>              <C>             <C>              <C>
Interest and dividend income:
   Interest and fees on loans                                            $ 6,368          $ 5,638         $ 18,529         $ 15,696
   Interest on investment securities
      Nontaxable                                                              (3)              56              163              139
      Taxable                                                                139               73              250              286
   Interest and dividends on securities available for sale:
      Nontaxable                                                              (2)              29              163               69
      Taxable                                                                140              137              239              378
      Dividends                                                               13               14               50               59
   Interest on deposits in banks                                               0                7                3               11
   Interest on federal funds sold                                             61               51              181              217
                                                                         ----------------------------------------------------------
          Total interest and dividend income                             $ 6,716          $ 6,005         $ 19,578         $ 16,855
                                                                         ----------------------------------------------------------

Interest expense:
   Interest on deposits                                                  $ 1,857          $ 1,969          $ 5,759          $ 5,747
   Interest on capital lease obligations                                       4                4                0               12
   Interest on borrowings                                                    179              171              518              498
                                                                         ----------------------------------------------------------
          Total interest expense                                         $ 2,040          $ 2,144          $ 6,277          $ 6,257
                                                                         ----------------------------------------------------------

          Net interest income                                            $ 4,676          $ 3,861         $ 13,289         $ 10,598
Provision for loan losses                                                    225              385              715              805
                                                                         ----------------------------------------------------------
     Net interest income after provision for loan losses                 $ 4,451          $ 3,476         $ 12,574          $ 9,793
                                                                         ----------------------------------------------------------

Noninterest income
   Service charges on deposit accounts                                     $ 739            $ 397          $ 1,832          $ 1,069
   Commissions and fees                                                      188              171              633              481
   Other                                                                      65               90              188              184
                                                                         ----------------------------------------------------------
          Total noninterest income                                         $ 992            $ 658          $ 2,653          $ 1,734
                                                                         ----------------------------------------------------------

Noninterest expense
    Salaries and employee benefits                                       $ 1,726          $ 1,327          $ 4,850          $ 3,729
    Net occupancy expense of premises                                        180              143              484              400
    Furniture and equipment                                                  223              154              604              415
    Other                                                                  1,169              809            3,388            2,267
                                                                         ----------------------------------------------------------
          Total noninterest expenses                                     $ 3,298          $ 2,433          $ 9,326          $ 6,811
                                                                         ----------------------------------------------------------

          Income before income taxes                                     $ 2,145          $ 1,701          $ 5,901          $ 4,716

Provision for income taxes                                                   689              554            1,895            1,543
                                                                         ----------------------------------------------------------

          Net income                                                     $ 1,456          $ 1,147          $ 4,006          $ 3,173
                                                                         ==========================================================

Average shares:
    Basic                                                              4,578,258        4,536,506        4,567,275        4,534,579
    Assuming dilution                                                  4,731,853        4,700,779        4,702,414        4,629,033

Earnings per common share:
    Basic                                                                   0.32             0.25             0.88             0.70
    Assuming dilution                                                       0.31             0.24             0.85             0.69
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                       4
<PAGE>
                   PREMIER COMMUNITY BANKSHARES, INCORPORATED
            Consolidated Statement of Changes in Shareholders' Equity
              For the Nine Months Ended September 30, 2003 and 2002
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      Accumulated
                                                                                          Other                           Total
                                                 Common       Capital     Retained    Comprehensive   Comprehensive   Shareholders'
                                                  Stock       Surplus     Earnings        Income          Income          Equity
                                                -----------------------------------------------------------------------------------

<S>                                              <C>          <C>         <C>                 <C>           <C>           <C>
Balance December 31, 2001                        $4,527       $ 14,808    $ 6,342             $ 68                        $ 25,745

Comprehensive Income
  Net income                                                                3,173                             3,173          3,173
  Other Comprehensive Income, unrealized
     gain on available for sale securities
     (net of tax $38)                                                                          200              200            200
                                                                                                            -------
  Total comprehensive income                                                                                $ 3,373
                                                                                                            =======

Issuance of Common Stock-exercise
 of stock options (11,000 shares)                    11             49                                                          60
                                                ---------------------------------------------------                      ----------
Balances - September 30, 2002                    $4,538       $ 14,857    $ 9,515            $ 268                        $ 29,178
                                                ===================================================                      ==========

                                                                                      Accumulated
                                                                                          Other                           Total
                                                 Common       Capital     Retained    Comprehensive   Comprehensive   Shareholders'
                                                  Stock       Surplus     Earnings        Income          Income          Equity
                                                -----------------------------------------------------------------------------------

Balance December 31, 2002                        $4,555       $ 14,977    $10,023            $ 269                        $ 29,824

Comprehensive Income
  Net income                                                                4,006                           $ 4,006          4,006
  Other Comprehensive Income, unrealized
     loss on available for sale securities
     (net of tax -$31)                                                                         (61)             (61)           (61)
                                                                                                            -------
  Total comprehensive income                                                                                $ 3,945
                                                                                                            =======

Issuance of common stock-
     exercise of stock options
     (35,000 shares)                                 35            173                                                         208

                                                ---------------------------------------------------                      ----------
Balances - September 30, 2003                    $4,590       $ 15,150    $14,029            $ 208                        $ 33,977
                                                ===================================================                      ==========
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

                                       5
<PAGE>
                                PREMIER COMMUNITY BANKSHARES
                            Consolidated Statements of Cash Flows
                    For the Nine Months Ended September 30, 2003 and 2002
                                       (In Thousands)
                                         (Unaudited)
<TABLE>
<CAPTION>

                                                              2003        2002
                                                           ---------------------
<S>                                                        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                 $  4,006    $  3,173
Adjustments to reconcile net income
  to net cash provided by operating activities:
  Amortization                                                 --            23
  Depreciation                                                  430         290
  Net amortization and (accretion) on securities                 12          40
  Provision for loan loss                                       715         805
  Change in loans held for sale                                --           471
  Changes in assets and liabilities:
    (Increase) in other assets                                 (139)       (836)
    (Increase) Decrease in accrued interest receivable           17        (264)
    Increase in accounts payable and accrued expenses            79          94
    Increase in interest expense payable                         99         184
                                                           --------    --------
Net cash provided by operating activities                  $  5,219       3,980


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities, calls and principal payments
  on securities held to maturity                           $  4,485    $  1,540
Proceeds from maturities, calls and principal payments
  on securities available for sale                            1,186       4,805
Purchase of securities available for sale                    (1,836)     (7,070)
Purchase of securities held to maturity                      (3,040)     (2,274)
Net (increase) in loans                                     (47,451)    (68,857)
Purchase of bank premises and equipment                      (2,699)     (1,421)
                                                           --------    --------
Net cash used in investing activities                      $(49,355)   $(73,277)
                                                           --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and interest bearing deposits       $ 31,940    $ 27,436
Net increase in certificates of deposits                     14,343      39,825
Net increase (decrease) in borrowings                         7,780         (47)
Principal payments on capital lease obligation                   (6)         (5)
Cash dividends paid                                            (683)       (543)
Proceeds from issuance (repurchase) of common stock             208          60
                                                           --------    --------
Net cash provided by financing activities                  $ 53,582    $ 66,726
                                                           --------    --------

Increase (decrease) in cash and cash equivalents           $  9,446    $ (2,571)
Beginning                                                    43,784      39,865
                                                           --------    --------
Ending                                                     $ 53,230    $ 37,294
                                                           ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash payments for:
   Interest                                                $  6,280    $  6,522
                                                           ========    ========

   Income taxes                                            $  1,650    $  1,785
                                                           ========    ========

Unrealized gain (loss) on securities available for sale    $    (93)   $    238
                                                           ========    ========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                       6
<PAGE>
                       PREMIER COMMUNITY BANKSHARES, INC.

                   Notes to Consolidated Financial Statements
                                   (Unaudited)


Note 1. General

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,  Inc.  ("Premier" or the  "Corporation")  for the periods
ending  September 30, 2003 and December 31, 2002,  and the results of operations
for the  quarters  and nine months  ended  September  30, 2003 and 2002 and cash
flows for the nine months  ended  September  30, 2003 and 2002.  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, 2002.

The results of  operations  for the  three-month  and  nine-month  periods ended
September 30, 2003 and 2002 are not necessarily  indicative of the results to be
expected for the full year.



Note 2. Stock Compensation Plan

The  Corporation  accounts for the plan under the  recognition  and  measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees,  and
related  Interpretations.  No stock-based  compensation cost is reflected in net
income,  as all options  granted under the plan have an exercise  price equal to
the  market  value of the  underlying  common  stock on the date of  grant.  The
following  table  illustrates the effect on net income and earnings per share if
the  Corporation  had  applied  the fair  value  recognition  provision  of FASB
Statement No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based
compensation (dollars in thousands except per share amounts):

                                               Nine Months Ended:
                                                    September
                                               2003          2002
                                              ---------------------
                                                  (In Thousands)
                                              ---------------------

Net income, as reported                       $ 4,006       $ 3,173
Total stock-based compensation expense
determined under fair value based method
for all rewards                                  (133)          (95)
                                              --------      -------
Pro forma net income                          $ 3,873       $ 3,078
                                              ========      =======

Basic earnings per share
  As reported                                 $ 0.88        $ 0.70
                                              =======       =======
  Pro forma                                   $ 0.85        $ 0.67
                                              =======       =======

Diluted earnings per share
  As reported                                 $ 0.85        $ 0.69
                                              =======       =======
  Pro forma                                   $ 0.84        $ 0.65
                                              =======       =======

                                       7
<PAGE>

Note 3.  Securities

Securities  held to maturity as of September 30, 2003 are  summarized as follows
(in thousands):

<TABLE>
<CAPTION>

                                                     Gross              Gross
                                Amortized         Unrealized         Unrealized             Fair
                                   Cost              Gains             (Losses)            Value
                               ------------------------------------------------------------------
                                                         September 30, 2003
                                                           (In Thousands)
                               ------------------------------------------------------------------
<S>                                <C>                  <C>               <C>              <C>
U.S. Government and
   federal agencies                $1,397                 $0               ($22)           $1,375
Obligations of state and
   political subdivisions           5,187                122               (242)            5,067
Mortgage-backed securities              0                  0                  0                 0
Other                               2,712                 17               (139)            2,590
                               ------------------------------------------------------------------
                                   $9,296               $139              ($403)           $9,032
                               ==================================================================

</TABLE>

            Securities   available  for  sale  as  of  September  30,  2003  are
summarized as follows (in thousands):


<TABLE>
<CAPTION>

                                                     Gross              Gross
                                Amortized         Unrealized         Unrealized             Fair
                                   Cost              Gains             (Losses)            Value
                               ------------------------------------------------------------------
                                                         September 30, 2003
                                                           (In Thousands)
                               ------------------------------------------------------------------
<S>                                <C>                  <C>                  <C>           <C>
U.S. Government and
   federal agencies                $5,588               $148                 $0            $5,736
Obligations of state and                                   0
   political subdivisions           6,348                 81                  0             6,429
Corporate Bonds                       250                 62                  0               312
Mortgage-backed securities            741                 24                  0               765
Restricted Securities               1,833                  0                  0             1,833
                               ------------------------------------------------------------------
                                  $14,760               $315                 $0           $15,075
                               ==================================================================
</TABLE>

                                       8
<PAGE>


Note 4. Loans.

The consolidated loan portfolio consists of the following:

<TABLE>
<CAPTION>

                                                                September 30          December 31,
                                                                     2003                  2002
                                                               ------------------------------------
                                                                            (In Thousands)
                                                               ------------------------------------
<S>                                                                 <C>                  <C>
Loans secured by real estate:
  Construction and land development                                    64,256               38,063
  Secured by farmland                                                   4,983                2,774
  Secured by 1-4 family residential                                    91,882               70,773
  Multi-family residential                                             12,559                6,258
  Nonfarm, nonresidential                                             116,707              123,478
Loans to farmers (except those secured by real estate)                    188                   42
Commercial loans (except those secured by real estate)                 47,537               52,970
Loans to individuals (except those secured by real estate)             22,027               19,699
All other loans                                                         3,116                1,838
                                                               ------------------------------------
Total loans                                                         $ 363,255            $ 315,895

Less:  Unearned income                                                      -                    1
       Allowance for loan losses                                        3,965                3,340
                                                               ------------------------------------
Loans, net                                                          $ 359,290            $ 312,554
                                                               ====================================
</TABLE>

Impaired  loans totaled $517 thousand and $1.1 million at September 30, 2003 and
December 31, 2002, respectively.  Non-accrual loans excluded from impaired loans
disclosure  under  FASB  114  amounted  to $44  thousand  and $114  thousand  at
September 30, 2003 and December 31, 2002, respectively.



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
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  loss,  including
charge-off activity,  is presented below for the nine months ended September 30,
2003 and 2002.

                                       9
<PAGE>


                                                          September 30,
         (In Thousands)                                2003          2002
                                                      --------------------

         Balance, beginning of period                 $3,340        $2,459
         Less Charge-off's:
                  Commercial                              27            20
                  Real estate-mortgage                     0             1
                  Real estate-construction                 0             0
                  Consumer installment loans             120           220
                                                      --------------------
                                   Total                $147          $241

         Plus Recoveries:
                  Commercial                              $8           $12
                  Real estate-mortgage                     0             0
                  Real estate-construction                 0             0
                  Consumer installment loans              49            34
                                                      --------------------
                                    Total                $57           $46

         Additions charged to operating expense         $715          $805

         Balance, end of period                       $3,965        $3,069
                                                      --------------------

The  following  is a summary of  information  pertaining  to risk  elements  and
impaired loans for the periods ended September 30, 2003 and December 31, 2002.


                                         September 30,          December 31,
                                             2003                   2002
                                         -----------------------------------
                                                    (In Thousands)
                                         -----------------------------------

         Non-accrual loans                    $561                   $631
         Loans past due 90 days or
         more and still accruing
         interest                            1,364                    223
         Restructured loans                      0                      0
                                         -----------------------------------
                                            $1,925                   $854
                                         -----------------------------------

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.

                                       10
<PAGE>

Note 6.  Earnings Per Share

<TABLE>
<CAPTION>

                                                                             For the Nine Months Ended:
                                                                    September 30,                   September 30
                                                                         2003                            2002
                                                              ------------------------------------------------------
                                                               Shares           Amount         Shares         Amount
                                                              ------------------------------------------------------

<S>                                                            <C>               <C>         <C>               <C>
Basic earnings per share                                       4,567,275         $0.88       4,534,579         $0.70

Effect of dilutive securities:
Stock options                                                    134,028                        94,454

Diluted earnings per share                                     4,701,303         $0.85       4,629,033         $0.69
</TABLE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Financial Summary


General

     Premier Community Bankshares, Incorporated ("Premier" or the "Corporation")
is a Virginia multi-bank holding company headquartered in Winchester,  Virginia.
The  Corporation  owns The Marathon  Bank and  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, the Corporation changed its name
from Marathon Financial  Corporation 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.

     The  Corporation  intends to organize a third bank in West Virginia,  which
will be named Premier  Bank.  The  Corporation  plans to locate  Premier  Bank's
headquarters  in Martinsburg and its initial branch office in  Shepherdstown  in
West  Virginia.  It is expected that Premier Bank will open in the third quarter
of 2004, after it receives a banking charter from West Virginia and insurance of
accounts  from the FDIC.  Premier Bank will offer a wide variety of deposits and
loans, including residential loans, commercial loans and commercial construction
and development loans.

                                       11
<PAGE>

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 periodic  basis.  Marathon Bank evaluates its allowance  monthly,
while  Rockingham  Heritage Bank evaluates its allowance  quarterly.  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.


Net Income

     Net  income for the  quarter  ended  September  30,  2003 was $1.5  million
compared to $1.1  million  for the same  period in 2002.  This is an increase of
$309  thousand or 26.9% over the same period in 2002.  The  provision for income
tax expense  increased $135 thousand from $554 thousand in 2002 to $689 thousand
in 2003. The annualized return on assets was 1.31% for the third quarter of 2003
as compared to 1.27% for the same  period in 2002.  Annualized  return on equity
was 17.37% and 15.83% for the third quarters of 2003 and 2002, respectively.

     Net income for the nine months  ended  September  30, 2003 was $4.0 million
compared to $3.2  million  for the same  period in 2002.  This is an increase of
$833  thousand or 26.3% over the same period 2002.  The provision for income tax
expense  increased  $352  thousand  from $1.5 million in 2002 to $1.9 million in
2003.  The  annualized  return on assets was 1.27% for the first nine  months of
2003 as compared to 1.28% for the same period in 2002. For the first nine months
of 2003 the  annualized  return on equity was 16.83% up from 15.51% for the same
period in 2002.


Total Assets

     Total assets of Premier  increased to $451.8  million at September 30, 2003
compared to $393.8  million at December  31,  2002  representing  an increase of
$58.0 million or 14.7%.  Total loans at September 30, 2003, were $363.3 million,
of which $290.4 million were loans secured by real estate. (Of the loans secured
by real estate, $64.3 million were construction and land development loans.) The
remaining

                                       12
<PAGE>

loans consisted of $47.5 million in commercial loans,  $22.0 million in consumer
installment  loans and $3 million in all other loans. Net loans at September 30,
2003,  were  $359.3  million,  an  increase  of $46.7  million or 14.9% from the
December 31, 2002 balance of $312.6 million. The loan to deposit ratio was 92.8%
as of September  30, 2003 and 91.5% as of December 31, 2002.  Steady loan demand
in an expanding market generated the loan growth  experienced for the first nine
months of 2003.

     The investment  portfolio  decreased 3.7% to $24.4 million at September 30,
2003  compared  to $25.3  million  at  December  31,  2002.  Federal  funds sold
increased $11.9 million to $30.9 million at September 30, 2003 compared to $19.0
million at December 31, 2002.  Total  interest  earning assets  increased  $56.5
million or 15.6% from December 31, 2002 to September 30, 2003. This increase was
primarily the result of the increase in outstanding loan balances.

Allowance for Loan Losses

     The allowance for loan losses,  as of September 30, 2003, was $4.0 million.
This is an increase of $625 thousand or 18.7% from December 31, 2002. This gives
the Corporation a 1.09% 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 $391.3  million at September 30, 2003,  from a
balance of $345.1  million at December 31,  2002,  which is an increase of $46.3
million or 13.4%.  Non-interest bearing deposits have increased to $57.3 million
as of September 30, 2003, an increase of $8.8 million or 18.1% from December 31,
2002.  During this  period,  interest  bearing  checking  and  savings  accounts
increased $23.1 million or 22.9% to $124.1 million. The balance in time deposits
was $209.9  million at the end of the third  quarter,  reflecting an increase of
$14.3  million  or  7.3%  over  the  end of  2002.  As of  September  30,  2003,
non-interest bearing deposits represented 14.7% of total deposits as compared to
14.1% at year-end 2002. Low cost interest bearing  deposits,  including  savings
and interest bearing checking,  were 31.7% of total deposits,  compared to 29.3%
at December 31,  2002.  Time  deposits  represented  53.6% of total  deposits at
September 30, 2003, a decrease from 56.7% at year-end 2002.

Shareholders' Equity

     Total  equity has  increased  by $4.2  million or 13.9% since  December 31,
2002.  The  increase  was due to a $4.0  million  net  profit for the first nine
months  plus  exercised  stock  options of $208  thousand  and a decrease of $61
thousand in  accumulated  other  comprehensive  income.  The primary  capital to
assets ratio is 7.5%.

Interest Income

     Interest  income totaled $19.6 million for the nine months ended  September
30, 2003,  $2.7 million or 16.2% higher than the nine months ended September 30,
2002.  Interest and fees on loans of $18.5 million comprise the vast majority of
interest  income.  Interest income from investment  securities was $865 thousand
for the first nine month of 2003,  basically  unchanged  from the same period in
2002.  Interest income on federal funds,  the third major component of Premier's
investments,  decreased $36 thousand or 16.6%. The decline in interest earned on
federal funds balance was the result of lower  interest  rates and decreased fed
funds balances, as those funds were converted to meet loan demand.

                                       13
<PAGE>


Interest Expense

     Total  interest  expense for the nine months ended  September  30, 2003 was
$6.3  million,  $32 thousand or 0.5% lower than the nine months ended  September
31,  2002.  Interest on deposits  for the  nine-month  period  increased  by $12
thousand or 0.2% over the same period in 2002. The impact of declining  interest
rates from  September  2002 through  September 2003 nearly offset the additional
expense  generated by an increase of $46.3 million in total deposits  during the
same period.  Interest on borrowings  increased by $20 thousand or 4.0% over the
same period last year. Borrowings are obtained from the Federal Home Loan Bank.



Net Interest Income

     Net interest  income for the nine months ended September 30, 2003 was $13.3
million,  $2.7 million or 25.4% higher than the nine months ended  September 30,
2002.  This  increase  is the result of the  growth in  earning  assets of $56.5
million from September 30, 2002. The  combination of growth and rate changes had
the effect of decreasing the net interest margin from 4.62% on a  tax-equivalent
basis for the nine months ending September 30, 2002 to 4.57% for the same period
of 2003. Premier is liability  sensitive for interest bearing balances repricing
or maturing within one year.

Other Income

     Total other  income for the nine months ended  September  30, 2003 was $2.7
million,  an  increase of $919  thousand or 53.0% over the 2002  balance of $1.7
million.  This was the result of service charges and fees for overdraft charges,
check fees and ATM fees due to an increasing number of customer accounts.

Other Expenses

     Total other expenses for the nine months ended September 30, 2003 were $9.3
million,  $2.5 million or 36.9% higher than the nine months ended  September 30,
2002.  Salary  expense  increased  $1.1 million or 30.1%,  and  advertising  and
marketing  expenses  increased  by $152  thousand  over the same period in 2002.
Advertising  and  marketing  expenses  were  impacted by the publicity for a new
branch  opened by The Marathon  Bank in  Winchester,  Virginia in April 2003, as
well as a  campaign  to  increase  market  share due to the  change in the local
banking  environment.  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 Marathon Bank
also incurred additional salary and occupancy expenses related to the opening of
the new branch.  The Corporation's  efficiency ratio was 57.9% through September
30, 2003 compared to 54.8% for the same period in 2002. The Efficiency  Ratio is
a non-GAAP financial measure, which we believe provides investors with important
information  regarding our  operational  efficiency.  We compute our  Efficiency
Ratio by dividing  non-interest expense by the sum of the net interest income on
a  tax-equivalent  basis and  non-interest  income,  net of securities  gains or
losses.

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,

                                       14
<PAGE>

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.  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 September 30, 2003 was
$45.0 million,  or 12.48% of risk-weighted  assets, for Tier I capital and $50.7
million,  or 14.07%  for  total  risk  based  capital.  Tier I capital  consists
primarily of common  shareholders'  equity and Trust  Preferred  Capital  Notes.
Total  risk-based  capital includes the allowance for loan losses in addition to
Tier 1 Capital.  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%.  The  Corporation's
issuance of $7.0 million in Trust Preferred  Capital Notes in the fourth quarter
of 2001, and the issuance of an additional  $6.0 million in the third quarter of
2003,  of which $4.3 million is  allowable in Tier 1 capital and the  additional
$1.7 million is  allocated  to Tier 2 capital,  are included in the capital base
and will serve as a long-term source of funding.

Recent Accounting Pronouncements

     In November 2002, the FASB issued FASB  Interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). The Interpretation  elaborates
on the disclosures to be made by a guarantor in its financial  statements  under
certain  guarantees  that it has issued.  It also  clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee.  The Interpretation
requires disclosure of the nature of the guarantee, the maximum potential amount
of future  payments  that the  guarantor  could be  required  to make  under the
guarantee,  and the current amount of the liability, if any, for the guarantor's
obligations   under  the  guarantee.   The   recognition   requirements  of  the
Interpretation  were effective  beginning  January 1, 2003.  Management does not
anticipate that the recognition  requirements of this Interpretation will have a
material impact on the Corporation's consolidated financial statements.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). This Interpretation provides guidance
with respect to the  identification  of variable  interest entities and when the
assets,  liabilities,  noncontrolling  interests, and results of operations of a
variable  interest  entity need to be included in a  corporation's  consolidated
financial  statements.  The  Interpretation  requires  consolidation by business
enterprises of variable  interest  entities in cases where the equity investment
at risk is not sufficient to permit the entity to finance its activities without
additional  subordinated financial support from other parties, which is provided
through other  interests that will absorb some or all of the expected  losses of
the  entity,  or in cases  where the  equity  investors  lack one or more of the
essential characteristics of a controlling financial interest, which include the
ability to make decisions about the entity's  activities  through voting rights,
the  obligations to absorb the expected  losses of the entity if they occur,  or
the right to receive the expected  residual returns of the entity if they occur.
The  Interpretation  applies  immediately to variable  interest entities created
after January 31, 2003, and applies to previously existing entities beginning in
the

                                       15
<PAGE>


fourth quarter of 2003.  Management is currently evaluating the applicability of
FIN 46 but  the  adoption  of  this  Interpretation  is not  expected  to have a
material impact on the Corporation's consolidated financial statements.


     In April 2003, the Financial  Accounting  Standards Board issued  Statement
No. 149,  Amendment  of  Statement  133 on  Derivative  Instruments  and Hedging
Activities.  This  Statement  amends  and  clarifies  financial  accounting  and
reporting for derivative  instruments,  including certain derivative instruments
embedded in other  contracts(collectively  referred to as  derivatives)  and for
hedging  activities  under FASB  Statement No. 133,  Accounting  for  Derivative
Instruments  and Hedging  Activities.  This Statement is effective for contracts
entered  into or  modified  after June 30,  2003 and is not  expected to have an
impact on the Corporation's consolidated financial statements.


     In May 2003, the Financial  Accounting Standards Board issued Statement No.
150, Accounting for Certain Financial  Instruments with  Characteristics of both
Liabilities and Equity. This Statement  establishes  standards for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  It requires that an issuer  classify a financial
instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances).  Many of those instruments were previously classified as equity.
This Statement is effective for financial  instruments  entered into or modified
after May 31, 2003,  and  otherwise  is effective at the  beginning of the first
interim period  beginning after June 15, 2003,  except for mandatory  redeemable
financial  instruments of nonpublic entities.  Adoption of the Statement did not
result in an impact on the Corporation's consolidated financial statements.



Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising  from adverse  changes in the fair value
of financial  instruments due to changes in interest  rates,  exchange rates and
equity prices.  The Corporation's  market risk is composed primarily of interest
rate risk. The Corporation's Asset and Liability  Management Committee (ALCO) is
responsible   for  reviewing  the  interest   rate   sensitivity   position  and
establishing  policies to monitor and limit  exposure to this risk. The Board of
Directors reviews the guidelines established by ALCO.

Interest rate risk is monitored through the use of three complimentary  modeling
tools:  static gap analysis,  earnings  simulation  modeling and economic  value
simulation (net present value estimation). Each of these models measures changes
in a variety of interest  rate  scenarios.  While each of the interest rate risk
measures  has   limitations,   taken   together  they   represent  a  reasonably
comprehensive  view of the magnitude of interest  rate risk to the  Corporation,
the  distribution of risk along the yield curve, the level of risk through time,
and the amount of exposure to changes in certain  interest  rate  relationships.
Static gap, which measures aggregate repricing values, is less utilized since it
does not  effectively  measure the earnings impact on the Corporation and is not
addressed here.  Earnings simulation and economic value models,  however,  which
more effectively  reflect the earnings  impact,  are utilized by management on a
regular basis and are explained below.

                                       16
<PAGE>


Earnings Simulation Analysis

Management uses simulation  analysis to measure the sensitivity of net income to
changes in interest rates.  The model  calculates an earnings  estimate based on
current and projected balances and rates. This method is subject to the accuracy
of the assumptions that underlie the process,  but it provides a better analysis
of the  sensitivity of earnings to changes in interest rates than other analysis
such as the static gap analysis.

Assumptions  used in the model,  including  loan and deposit  growth rates,  are
derived from seasonal trends and  management's  outlook,  as are the assumptions
used to project the yields and rates for new loans and deposits. All maturities,
calls and  prepayments in the securities  portfolio are assumed to be reinvested
in like instruments.  Mortgage loans and mortgage backed  securities  prepayment
assumptions are based on industry  estimates of prepayment speeds for portfolios
with similar coupon ranges and seasoning.  Different interest rate scenarios and
yield  curves  are used to measure  the  sensitivity  of  earnings  to  changing
interest rates.  Interest rates on different  asset and liability  accounts move
differently  when the prime rate changes and are  accounted for in the different
rate scenarios.

The following table  represents the interest rate  sensitivity on net income for
the  Corporation  using  different  rate scenarios as of June 30, 2003, the most
recent  date for which an  analysis  is  available.  There have been no material
changes in qualitative and qualitative  disclosures about market risk since this
information was developed using June 30, 2003 data.

                                                          % Change in
                       Change in Prime Rate                Net Income
                   -----------------------------   ---------------------
                   +300 basis points                         +8.1%
                   +200 basis points                         +9.9%
                   +100 basis points                         +9.3%
                   Most Likely                                 0
                   -100 basis points                         +0.9%
                   -200 basis points                         -6.2%
                   -300 basis points                         -20.6%



Economic Value Simulation

Economic  value  simulation  is used to calculate  the  estimated  fair value of
assets and  liabilities  over  different  interest rate  environments.  Economic
values are calculated based on discounted cash flow analysis. The economic value
of equity is the economic  value of all assets  minus the economic  value of all
liabilities.  The  change  in  economic  value of  equity  over  different  rate
environments  is an indication of the longer term  repricing risk in the balance
sheet.  The same assumptions are used in the economic value simulation as in the
earnings simulation.

The  following  chart  reflects the change in net market value by using June 30,
2003 data, over different rate environments with a one-year horizon.

                                       Change in Economic Value of Equity
               Change in Prime Rate            (dollars in thousands)
           --------------------------   -----------------------------------
           +300 basis points                            3,250
           +200 basis points                            3,557
           +100 basis points                            3,681
           Most Likely                                  4,214
           -100 basis points                            4,419
           -200 basis points                            2,769
           -300 basis points                           (-930)

                                       17
<PAGE>

Item 4.  Controls and Procedures

The Corporation  maintains  disclosure controls and procedures that are designed
to  provide  assurance  that  information   required  to  be  disclosed  by  the
Corporation  in the  reports  that it  files or  submits  under  the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods required by the Securities and Exchange  Commission.  An evaluation
of the effectiveness of the design and operation of the Corporation's disclosure
controls  and  procedures  as of  September  30,  2003 was carried out under the
supervision   and  with  the   participation   of   management,   including  the
Corporation's Chief Executive Officer and Chief Financial Officer.  Based on and
as of the date of such evaluation,  the  aforementioned  officers concluded that
the Corporation's disclosure controls and procedures were effective.


The   Corporation's   management  is  also   responsible  for  establishing  and
maintaining  adequate internal control over financial  reporting.  There were no
changes  in  the  Corporation's   internal  control  over  financial   reporting
identified in  connection  with the  evaluation  of it that occurred  during the
Corporation's  last fiscal quarter that  materially  affected, or are reasonably
likely to materially affect, internal control over financial reporting.

                                       18
<PAGE>

                           PART II. OTHER INFORMATION



Item 1.  Legal Proceedings.

         None

Item 2.  Change in Securities and Use of Proceeds.

         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
              31.1     Rule 13(a)-14(a) Certification of Chief Executive Officer
              31.2     Rule 13(a)-14(a) Certification of Chief Financial Officer
              32.1     Statement of Chief Executive Officer and Chief
                       Financial Officer Pursuant to 18 U.S.C. Section 1350

         (b) Reports on Form 8-K - None

                                      19
<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:  11/13/03                      /s/ John K. Stephens
--------------------               -------------------------------------------
                                     JOHN K. STEPHENS
                                     CHAIRMAN




DATE:  11/13/03                      /s/ Donald L. Unger
--------------------               -------------------------------------------
                                     DONALD L. UNGER
                                     PRESIDENT & CEO




DATE:  11/13/03                      /s/ Frederick A. Board
--------------------               -------------------------------------------
                                     FREDERICK A. BOARD
                                     CHIEF FINANCIAL OFFICER



                                       20
<PAGE>
                                  EXHIBIT INDEX

31.1     Rule 13(a)-14(a) Certification of Chief Executive Officer

31.2     Rule 13(a)-14(a) Certification of Chief Financial Officer

32.1     Statement of Chief Executive Officer and Chief Financial Officer
         Pursuant to 18 U.S.C. Section 1350







                                       21