SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 2002

                                       OR

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

                           COMMISSION FILE NO. 0-30535

                            GRAYSON BANKSHARES, INC.
             (Exact name of registrant as specified in its charter)

                 Virginia                                   54-1647596
      (State or other jurisdiction of                     (IRS Employer
      incorporation or organization)                   Identification No.)

           113 West Main Street
          Independence, Virginia                              24348
 (Address of principal executive offices)                   (Zip Code)

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

           Securities registered pursuant to Section 12(b) of the Act:

    Title of Securities                    Name of Exchange on Which Registered
    -------------------                    ------------------------------------

         None                                              n/a

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $1.25 per share

         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 past 90 days. Yes _X_ No ___

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]




         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Exchange Act Rule 12b-2).  Yes ___  No  _X_

         State the aggregate  market value of the voting and  non-voting  common
equity held by  non-affiliates  computed by  reference to the price at which the
common  equity was last sold,  or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently  completed
second fiscal quarter. $40,127,751

         Indicate the number of shares  outstanding of each of the  registrant's
classes of common stock, as of the latest practicable date.  1,718,968 shares of
Common Stock

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the 2002 Annual Report to Shareholders  are incorporated by
reference into Part II hereof,  and portions of the definitive  proxy  statement
for the 2003 Annual Meeting of Shareholders  are  incorporated by reference into
Part III hereof.



                                       2


                                TABLE OF CONTENTS

                                     PART I
                                                                            Page
                                                                            ----

ITEM 1.  BUSINESS..............................................................4

ITEM 2.  PROPERTIES...........................................................10

ITEM 3.  LEGAL PROCEEDINGS....................................................10

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE
                      OF SECURITY HOLDERS.....................................11

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
                       RELATED STOCKHOLDER MATTERS............................11

ITEM 6.  SELECTED FINANCIAL DATA..............................................12

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS.....................13

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                      ABOUT MARKET RISK.......................................13

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................13

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                      ON ACCOUNTING AND FINANCIAL DISCLOSURE..................13

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................13

ITEM 11. EXECUTIVE COMPENSATION...............................................13

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT AND RELATED
                      STOCKHOLDER MATTERS.....................................14

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................14

ITEM 14  CONTROLS AND PROCEDURES..............................................14

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                      REPORTS ON FORM 8-K.....................................15


                                       3



                                     PART I

Item 1.           Business

General

         Grayson  Bankshares,  Inc. (the Company) was incorporated as a Virginia
corporation  on  February  3, 1992 to acquire  100% of the stock of The  Grayson
National Bank (the Bank).  The Bank was acquired by the Company on July 1, 1992.
The Grayson  National  Bank was  founded in 1900 and  currently  serves  Grayson
County and surrounding  areas through six banking offices located in the town of
Independence,  the  localities of Elk Creek and Troutdale and the City of Galax,
Virginia, and the Town of Sparta, North Carolina.

         The Bank operates for the primary  purpose of meeting the banking needs
of individuals and small to medium sized  businesses in the Bank's service area,
while developing personal,  hometown associations with these customers. The Bank
offers a wide range of banking services including checking and savings accounts;
commercial,  installment,  mortgage and personal loans;  safe deposit boxes; and
other  associated  services.  The Bank's primary sources of revenue are interest
income from its lending activities, and, to a lesser extent, from its investment
portfolio.  The Bank also earns fees from  lending and deposit  activities.  The
major  expenses  of the Bank are  interest on deposit  accounts  and general and
administrative expenses, such as salaries, occupancy and related expenses.

Lending Activities

         The  Bank's   lending   services   include  real  estate,   commercial,
agricultural  and consumer loans. The loan portfolio  constituted  70.76% of the
earning  assets of the Bank at December 31, 2002 and has  historically  produced
the  highest  interest  rate  spread  above the cost of funds.  The Bank's  loan
personnel have the authority to extend credit under  guidelines  established and
approved by the Board of  Directors.  Any  aggregate  credit  which  exceeds the
authority of the loan officer is forwarded to the loan  committee  for approval.
The loan committee is composed of the Bank President and all loan officers.  All
aggregate  credits  that  exceed  the loan  committee's  lending  authority  are
presented to the full Board of Directors  for ultimate  approval or denial.  The
loan  committee  not  only  acts  as  an  approval  body  to  ensure  consistent
application of the Bank's loan policy but also provides valuable insight through
communication and pooling of knowledge, judgment and experience of its members.

         The Bank has in the past and  intends to continue to make most types of
real  estate  loans,  including  but not  limited  to,  single and  multi-family
housing, farm loans, residential and commercial construction loans and loans for
commercial  real  estate.  At the end of 2002 the Bank  had  46.86%  of the loan
portfolio   in  single   and   multi-family   housing,   23.39%   in   non-farm,
non-residential loans, 4.83% in farm related real estate loans and 3.86% in real
estate construction loans.

         The  Bank's  loan  portfolio   includes   commercial  and  agricultural
production  loans totaling  12.13% of the portfolio at year-end  2002.  Consumer
loans make up  approximately  9.43% of the total loan portfolio.  Consumer loans
include  loans  for  household  expenditures,  car  loans  and  other  loans  to
individuals.  While  this  category  has  experienced  a greater  percentage  of
charge-offs than the other classifications, the Bank is committed to continue to
make this type of loan to fill the needs of the Bank's customer base.

         All loans in the Bank's portfolio are subject to risk from the state of
the economy in the Bank's  area and also that of the  nation.  The Bank has used
and  continues to use  conservative  loan-to-value  ratios and  thorough  credit
evaluation  to lessen  the risk on all types of loans.  The use of  conservative
appraisals

                                       4


has also  reduced  exposure on real estate  loans.  Thorough  credit  checks and
evaluation  of past internal  credit  history has helped to reduce the amount of
risk related to consumer  loans.  Government  guarantees  of loans are used when
appropriate,  but apply to a minimal  percentage  of the  portfolio.  Commercial
loans are evaluated by collateral value and ability to service debt.  Businesses
seeking loans must have a good product line and sales,  responsible  management,
manageable  debt load and a product that is not adversely  affected by downturns
in the economy.

Investments

         The Bank  invests a portion  of its  assets in U.S.  Treasury  and U.S.
Government  corporation  and agency  obligations,  state,  county and  municipal
obligations,  and equity  securities.  The  Bank's  investments  are  managed in
relation to loan demand and deposit  growth,  and are generally  used to provide
for the  investment  of excess  funds at reduced  yields and risks  relative  to
increases in loan demand or to offset  fluctuations  in deposits.  The Bank does
not engage in any hedging  activities.  For additional  information  relating to
investments, see "Financial Information."

Deposit Activities

         Deposits are the major source of funds for lending and other investment
activities. Grayson National Bank considers the majority of its regular savings,
demand,  NOW and money market  deposits and small  denomination  certificates of
deposit,  to be core deposits.  These accounts comprised  approximately 83.0% of
the Bank's  total  deposits at December  31,  2002.  Certificates  of deposit in
denominations of $100,000 or more represented the remaining 17.0% of deposits at
year-end.

Competition

         The Company  encounters strong  competition both in making loans and in
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws which permit multi-bank  holding companies as well as an
increasing  level of  interstate  banking  have  created  a  highly  competitive
environment for commercial banking. In one or more aspects of its business,  the
Company competes with other  commercial  banks,  savings and loan  associations,
credit unions, finance companies,  mutual funds, insurance companies,  brokerage
and investment banking companies,  and other financial  intermediaries.  Many of
these  competitors have  substantially  greater resources and lending limits and
may offer certain services that we do not currently provide.  In addition,  many
of Grayson Bankshares,  Inc.'s competitors are not subject to the same extensive
federal  regulations  that govern bank holding  companies and federally  insured
banks.  Recent federal and state  legislation  has  heightened  the  competitive
environment in which financial institutions must conduct their business, and the
potential  for  competition  among  financial  institutions  of  all  types  has
increased significantly.

         To compete,  the Company relies upon specialized  services,  responsive
handling of customer needs,  and personal  contacts by its officers,  directors,
and staff. Large multi-branch  banking  competitors tend to compete primarily by
rate  and the  number  and  location  of  branches  while  smaller,  independent
financial institutions tend to compete primarily by rate and personal service.

         Currently,  in Grayson County the Company  competes with only two other
commercial banks, which operate a total of three branch banking  facilities.  As
of June 30,  2002,  Grayson  Bankshares,  Inc.  held  83.54% of the  deposits in
Grayson  County.  In the City of  Galax  the  Company  competes  with six  other
commercial  banks.  Since opening in May of 1996 we have captured a market share
of 15.42% of  deposits  to become the third  largest  holder of  deposits in the
market.  Mountain  National  Bank leads the market with 32.94% of deposits as of
June 30, 2002.

                                       5


Employees

         At  December  31,  2002,  the  Company  had  73  full  time  equivalent
employees,  none of which are  represented by a union or covered by a collective
bargaining agreement. Management considers employee relations to be good.

Government Supervision and Regulation

         The  following  discussion  is a  summary  of the  principal  laws  and
regulations that comprise the regulatory framework applicable to the Company and
the  Bank.  Other  laws and  regulations  that  govern  various  aspects  of the
operations  of banks  and  bank  holding  companies  are not  described  herein,
although  violations of such laws and  regulations  could result in  supervisory
enforcement action against the Company or the Bank. The following  descriptions,
as well as  descriptions  of laws and  regulations  contained  elsewhere in this
filing,  summarize the material terms of the principal laws and  regulations and
are qualified in their entirety by reference to applicable laws and regulations.

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

         As a national bank, The Grayson National Bank is subject to regulation,
supervision  and  examination  by the Office of the  Comptroller of the Currency
("OCC"). The Bank is also subject to regulation,  supervision and examination by
the FDIC.  Federal law also governs the activities in which the Bank may engage,
the investments it may make and limits the aggregate amount of loans that may be
granted  to one  borrower  to 15% of the bank's  capital  and  surplus.  Various
consumer and compliance laws and regulations also affect the Bank's operations.

         The earnings of the Bank,  and  therefore  the earnings of the Company,
are  affected  by  general  economic  conditions,  management  policies  and the
legislative  and  governmental   actions  of  various  regulatory   authorities,
including those referred to above.

         The OCC will conduct regular  examinations of the Bank,  reviewing such
matters as the adequacy of loan loss reserves, quality of loans and investments,
management practices, compliance with laws, and other aspects of its operations.
In addition to these  regular  examinations,  the Bank must furnish the OCC with
periodic  reports  containing  a full and  accurate  statement  of its  affairs.
Supervision,  regulation and examination of banks by these agencies are intended
primarily for the protection of depositors rather than shareholders.

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

         The FDIC has  implemented  a risk-based  deposit  insurance  assessment
system  under  which the  assessment  rate for an insured  institution  may vary
according to  regulatory  capital  levels of the  institution  and other factors
(including supervisory evaluations).  Under this system, depository institutions
are

                                       6


charged anywhere from zero to $.27 for every $100 in insured domestic  deposits,
based on such institutions'  capital levels and supervisory subgroup assignment.
These rate schedules are subject to future adjustments by the FDIC. In addition,
the FDIC has authority to impose special  assessments from time to time. The BIF
reached its  required  1.25  reserve  ratio in 1995,  and in  response  the FDIC
reduced deposit insurance  assessment rates on BIF-insured  deposits to historic
low levels. However, due to legislation enacted in 1996 which requires that both
Savings  Association  Insurance Fund  ("SAIF")-insured  deposits and BIF-insured
deposits pay a pro rata portion of the interest due on the obligations issued by
the Financing Corporation ("FICO"),  the FDIC has imposed additional assessments
on BIF-insured deposits.

         The FDIC is authorized  to prohibit any  BIF-insured  institution  from
engaging in any activity that the FDIC determines by regulation or order to pose
a serious threat to the respective  insurance fund.  Also, the FDIC may initiate
enforcement actions against banks, after first giving the institution's  primary
regulatory  authority an opportunity to take such action. The FDIC may terminate
the deposit  insurance of any depository  institution if it determines,  after a
hearing,  that the  institution  has engaged or is engaging in unsafe or unsound
practices,  is in an unsafe or unsound condition to continue operations,  or has
violated any  applicable  law,  regulation,  order or any  condition  imposed in
writing by the FDIC. It also may suspend deposit  insurance  temporarily  during
the  hearing  process  for  the  permanent  termination  of  insurance,  if  the
institution has no tangible  capital.  If deposit  insurance is terminated,  the
deposits  at the  institution  at  the  time  of  termination,  less  subsequent
withdrawals,  shall  continue  to be insured for a period from six months to two
years,  as  determined  by  the  FDIC.   Management  is  aware  of  no  existing
circumstances  that could result in termination of The Grayson  National  Bank's
deposit insurance.

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

         In  addition,  each of the  Federal  banking  regulatory  agencies  has
established   minimum   leverage   capital   ratio   requirements   for  banking
organizations. These requirements provide for a minimum leverage ratio of Tier 1
capital  to  adjusted  average  quarterly  assets  equal to 3% for bank  holding
companies  that are  rated a  composite  "1" and 4% for all other  bank  holding
companies.  Bank holding  companies are expected to maintain higher than minimum
capital ratios if they have  supervisory,  financial,  operational or managerial
weaknesses, or if they are anticipating or experiencing significant growth.

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

         Other  Safety  and  Soundness  Regulations.   There  are  a  number  of
obligations  and  restrictions  imposed  on bank  holding  companies  and  their
depository  institution  subsidiaries by Federal law and regulatory  policy that
are  designed  to reduce  potential  loss  exposure  to the  depositors  of such
depository

                                       7


institutions  and to the  FDIC  insurance  funds  in the  event  the  depository
institution becomes in danger of default or is in default. For example,  under a
policy of the Federal Reserve with respect to bank holding company operations, a
bank holding  company is required to serve as a source of financial  strength to
its subsidiary  depository  institutions and to commit resources to support such
institutions in circumstances  where it might not do so otherwise.  In addition,
the  "cross-guarantee"  provisions  of Federal  law require  insured  depository
institutions under common control to reimburse the FDIC for any loss suffered or
reasonably  anticipated  by the BIF as a result  of the  default  of a  commonly
controlled insured depository  institution or for any assistance provided by the
FDIC to a  commonly  controlled  insured  depository  institution  in  danger of
default.  The FDIC may decline to enforce the  cross-guarantee  provision  if it
determines  that a waiver is in the best  interests of the BIF. The FDIC's claim
for  reimbursement  is  superior  to  claims  of  shareholders  of  the  insured
depository  institution  or its holding  company but is subordinate to claims of
depositors,  secured  creditors  and  holders of  subordinated  debt (other than
affiliates) of the commonly controlled insured depository institution.

         The Federal  banking  agencies  also have broad  powers  under  current
Federal  law to take  prompt  corrective  action to resolve  problems of insured
depository  institutions.  The Federal  Deposit  Insurance Act requires that the
federal banking  agencies  establish five capital levels for insured  depository
institutions - "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly  undercapitalized,"  and "critically  undercapitalized."  It also
requires or permits such agencies to take certain  supervisory actions should an
insured   institution's   capital  level  fall.  For  example,   an  "adequately
capitalized"  institution is restricted  from accepting  brokered  deposits.  An
"undercapitalized" or "significantly  undercapitalized" institution must develop
a  capital  restoration  plan  and is  subject  to a  number  of  mandatory  and
discretionary  supervisory actions. These powers and authorities are in addition
to  the  traditional  powers  of the  Federal  banking  agencies  to  deal  with
undercapitalized institutions.

         Federal regulatory  authorities also have broad enforcement powers over
the Company and the Bank,  including  the power to impose  fines and other civil
and  criminal  penalties,  and to appoint a receiver  in order to  conserve  the
assets  of any  such  institution  for  the  benefit  of  depositors  and  other
creditors.

         Payment of  Dividends.  The  Company  is a legal  entity  separate  and
distinct  from the Bank.  Virtually  all of the revenues of the Company  results
from dividends paid to the Company by the Bank. Under OCC regulations a national
bank  may  not  declare  a  dividend  in  excess  of  its   undivided   profits.
Additionally,  a national bank may not declare a dividend if the total amount of
all dividends, including the proposed dividend, declared by the national bank in
any calendar year exceeds the total of the national  bank's  retained net income
of that year to date, combined with its retained net income of the two preceding
years,  unless the  dividend  is  approved  by the OCC. A national  bank may not
declare or pay any dividend if, after  making the  dividend,  the national  bank
would be  "undercapitalized,"  as defined in regulations of the OCC. The Company
is  subject to state laws that  limit the  amount of  dividends  it can pay.  In
addition, the Company is subject to various general regulatory policies relating
to the payment of dividends, including requirements to maintain adequate capital
above  regulatory  minimums.  The Federal  Reserve has  indicated  that  banking
organizations should generally pay dividends only if, (1) the organization's net
income available to common  shareholders  over the past year has been sufficient
to fully fund the dividends,  and (2) the prospective rate of earnings retention
appears  consistent  with the  organization's  capital needs,  asset quality and
overall financial condition.

         Community Reinvestment.  The requirements of the Community Reinvestment
Act  ("CRA")  are   applicable  to  the  Bank.  The  CRA  imposes  on  financial
institutions an affirmative  and ongoing  obligation to meet the credit needs of
their  local  communities,  including  low and  moderate  income  neighborhoods,
consistent with the safe and sound operation of those institutions.  A financial
institution's  efforts in meeting community credit needs currently are evaluated
as part of the examination process pursuant to

                                       8


twelve  assessment  factors.  These  factors also are  considered  in evaluating
mergers, acquisitions and applications to open a branch or facility.

         Interstate  Banking  and  Branching.  Current  Federal  law  authorizes
interstate  acquisitions of banks and bank holding companies without  geographic
limitation. Effective June 1, 1997, a bank headquartered in one state is able to
merge  with a bank  headquartered  in another  state,  as long as neither of the
states has opted out of such  interstate  merger  authority  prior to such date.
States are  authorized  to enact laws  permitting  such  interstate  bank merger
transactions  prior to June 1, 1997, as well as  authorizing a bank to establish
"de novo" interstate branches.  Virginia enacted early "opt in" laws, permitting
interstate bank merger  transactions.  Once a bank has established branches in a
state  through an  interstate  merger  transaction,  the bank may  establish and
acquire  additional  branches  at  any  location  in  the  state  where  a  bank
headquartered  in that state could have  established or acquired  branches under
applicable Federal or state law.

         Economic  and  Monetary  Polices.  The  operations  of the  Company are
affected not only by general economic  conditions,  but also by the economic and
monetary policies of various regulatory authorities.  In particular, the Federal
Reserve regulates money, credit and interest rates in order to influence general
economic  conditions.  These  policies have a  significant  influence on overall
growth and  distribution of loans,  investments and deposits and affect interest
rates charged on loans or paid for time and savings  deposits.  Federal  Reserve
monetary  policies  have had a significant  effect on the  operating  results of
commercial  banks in the  past  and are  expected  to  continue  to do so in the
future.


                                       9


Item 2.           Properties

         Grayson   Bankshares,   Inc.   and  The  Grayson   National   Bank  are
headquartered  in  the  Main  Office  at 113  West  Main  Street,  Independence,
Virginia. The Bank owns and operates branches at the following locations:

                                                                  BANKING
                               LOCATION/                         FUNCTIONS
NAME OF OFFICE                 TELEPHONE NUMBER                   OFFERED

Main Office                    113 West Main Street              Full Service
                               Independence, Virginia 24348
                               (276) 773-2811

East Independence Office       558 East Main Street              Full Service
                               Independence, Virginia 24348      24 Hour Teller
                               (276) 773-2811

Elk Creek Office               60 Comers Rock Road               Full Service
                               Elk Creek, Virginia 24326
                               (276) 655-4011

Troutdale Office               101 Ripshin Road.                 Full Service
                               Troutdale, Virginia 24378
                               (276) 677-3722

Galax Office                   209 West Grayson Street           Full Service
                               Galax, Virginia 24333             24 Hour Teller
                               (276) 238-2411

Sparta Office                  98 South Grayson Street           Full Service
                               Sparta, North Carolina 28675      24 Hour Teller
                               (336) 372-2811

         The Bank currently has two full-service branch banking facilities under
construction.  One is located at 802 East Main Street,  Independence,  Virginia.
When completed,  the East Independence  Office listed above will be relocated to
this facility.  The second facility is located at 8417 Carrollton  Pike,  Galax,
Virginia. Located in Carroll County, just outside the City of Galax, this office
will provide additional convenience to our Galax customers and allow us to serve
new  customers  in  the  western  districts  of  Carroll  County.   The  Company
anticipates  completion of these  facilities  in April 2003 and September  2003,
respectively.  The  Bank  also  owns a  vacant  lot  near  the  main  office  in
Independence, Virginia. This property is being held as a potential building site
for an operations center


Item 3.           Legal Proceedings

         In the ordinary  course of operations,  the Company and the Bank expect
to be parties to various legal proceedings.  At present, there are no pending or
threatened  proceedings  against the Company or the Bank  which,  if  determined
adversely,  would have a material effect on the business, results of operations,
or financial position of the Company or the Bank.


                                       10


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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of 2002.


                                     PART II

Item 5.           Market  for Registrant's Common Equity and Related Stockholder
                  Matters

         Shares of the  Company's  Common  Stock is neither  listed on any stock
exchange nor quoted on the any market and trades infrequently.  Shares of Common
Stock have  periodically  been sold in a limited number of privately  negotiated
transactions.  Based on information  available to it, the Company  believes that
from January 1, 2001 to December 31, 2002, the selling price of shares of Common
Stock  ranged  from  $22.00 to  $71.00.  There  may,  however,  have been  other
transactions at other prices not known to the Company.




                           Market Price and Dividends

                                                                  Sales Price ($) (1)                Dividends ($)
                                                                  -------------------                -------------
                                                               High                  Low
                                                               ----                  ---
                                                                                                 
2001:
     1st quarter...................................            32.00                32.00                 .00
     2nd quarter...................................            32.00                30.00                 .20
     3rd quarter...................................            71.00                22.00                 .00
     4th quarter...................................            30.00                29.00                 .21

2002:
     1st quarter...................................            29.00                26.00                 .00
     2nd quarter...................................            27.00                24.00                 .22
     3rd quarter...................................            32.00                29.00                 .00
     4th quarter...................................            32.00                27.00                 .24



         As of December 31, 2002, there were approximately 650 record holders of
Common Stock.


                                       11


Item 6.           Selected Financial Data



                                              2002           2001           2000            1999           1998
                                          -----------     -----------    -----------    -----------     -----------
Summary of Operations

                                                                                         
   Interest income                        $    14,280     $    13,717    $    13,153    $    11,655     $    11,010
   Interest expense                             6,640           7,204          6,785          5,921           5,786
                                          -----------     -----------    -----------    -----------     -----------
         Net interest income                    7,640           6,513          6,368          5,734           5,224
   Provision for credit losses                    441             280            280            300             319
   Other income                                 1,021             589            435            347             375
   Other expense                                4,720           4,092          3,772          3,371           2,986
   Income taxes                                   964             790            687            466             397
                                          -----------     -----------    -----------    -----------     -----------
         Net income                       $     2,536     $     1,940    $     2,064    $     1,944     $     1,897
                                          ===========     ===========    ===========    ===========     ===========

Per Share Data2

   Net income                             $      1.48     $      1.13    $      1.20    $      1.13     $      1.10
   Cash dividends declared                        .46             .41            .37            .33             .30
   Book value                                   13.51           12.27          11.42          10.41            9.90
   Estimated market value3                      32.00           29.00          32.00          32.00           27.50

Year-end Balance Sheet Summary

   Loans, net                             $   154,190     $   140,898    $   133,072    $   121,498     $   105,924
   Investment securities                       44,872          33,452         28,766         29,430          32,510
   Total assets                               241,283         201,469        180,318        170,335         159,745
   Deposits                                   206,909         179,323        159,590        151,620         141,803
   Stockholders' equity                        23,230          21,086         19,638         17,890          17,028

Selected Ratios

   Return on average assets                     1.13%           1.02%          1.18%          1.18%           1.24%
   Return on average equity                    11.40%           9.44%         10.95%         11.05%          11.54%
   Average equity to average assets             9.88%          10.85%         10.75%         10.69%          10.73%



- ---------

         1    In thousands of dollars, except per share data.

         2    Adjusted for the effects of a two for one stock split in 1999.

         3    Provided at the trade date nearest year end.

                                       12


Item 7.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

         Pursuant  to General  Instruction  G(2) of Form 10-K,  the  information
contained under the heading  "Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations"  in the  Company's  2002 Annual Report to
Shareholders is incorporated herein by reference.


Item 7A.          Quantitative and Qualitative Disclosures about Market Risk

         Pursuant  to General  Instruction  G(2) of Form 10-K,  the  information
contained under the heading  "Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations"  in the  Company's  2002 Annual Report to
Shareholders is incorporated herein by reference.


Item 8.           Financial Statements and Supplementary Data.

         Pursuant  to  General  Instruction  G(2) of Form  10-K,  the  following
financial  statements in the Company's  2002 Annual Report to  Shareholders  are
incorporated herein by reference.

              Independent Auditor's Report
              Consolidated Balance Sheets as of December 31, 2002 and 2001
              Consolidated Statements of Income for the Years Ended December 31,
              2002,  2001,  and  2000
              Consolidated  Statements  of  Changes  in Shareholders' Equity for
              the Years Ended December 31, 2002, 2001, and 2000
              Consolidated Statements of Cash Flows for the Years Ended December
              31, 2002, 2001, and 2000
              Notes to Consolidated  Financial Statements

Item 9.       Changes  in  and  Disagreements With Accountants on Accounting and
              Financial Disclosure

         None


                                    PART III

Item 10.          Directors and Executive Officers of the Registrant

         Pursuant  to General  Instruction  G(3) of Form 10-K,  the  information
contained under the headings  "Election of Directors,"  "Executive  Officers Who
Are Not Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's  Proxy Statement for the 2003 Annual Meeting of Shareholders is
incorporated herein by reference.


Item 11. Executive Compensation

         Pursuant  to General  Instruction  G(3) of Form 10-K,  the  information
contained  under the  heading  "Compensation  and Related  Transactions"  in the
Company's  Proxy  Statement  for the 2003  Annual  Meeting  of  Shareholders  is
incorporated herein by reference.


                                       13


Item 12.          Security Ownership of Certain Beneficial Owners and Management
                  and Related Stockholder Matters

         Pursuant  to General  Instruction  G(3) of Form 10-K,  the  information
contained  under the headings  "Security  Ownership of Management" and "Security
Ownership of Certain Beneficial Owners" in the Company's Proxy Statement for the
2003 Annual Meeting of Shareholders is incorporated herein by reference.

         The  Company  does not have  compensation  plans or other  arrangements
under which equity securities are authorized for issuance.


Item 13. Certain Relationships and Related Transactions

         Pursuant  to General  Instruction  G(3) of Form 10-K,  the  information
contained  under the heading  "Transactions  with  Management"  in the Company's
Proxy  Statement for the 2003 Annual  Meeting of  Shareholders  is  incorporated
herein by reference.


Item 14. Controls and Procedures

         Within  the 90 days  prior  to the  date of this  report,  the  Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's management,  including the Company's President and Chief Executive
Officer along with the Chief  Financial  Officer,  of the  effectiveness  of the
design  and  operation  of the  Company's  disclosure  controls  and  procedures
pursuant to Rule 13a-14,  under the Securities Exchange Act of 1934, as amended.
Based upon that evaluation,  the Company's President and Chief Executive Officer
along with the Chief Financial Officer  concluded that the Company's  disclosure
controls  and  procedures  are  effective  in timely  alerting  them to material
information  relating to the Company  (including its consolidated  subsidiaries)
required to be included in our periodic filings with the Securities and Exchange
Commission.

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date that the Company carried out this evaluation.


                                       14


                                     PART IV

Item 15.          Exhibits,  Financial  Statement  Schedules and Reports on Form
                  8-K


         (a)      Financial   statements,   financial  statement  schedules  and
                  reports included in this Annual Report on Form 10-K

                  (1)      Financial Statements

                           The  response to this portion of Item 15 is set forth
                           in Item 8 above.

                  (2)      Financial Statement Schedules

                           No financial  statement  schedules,  other than those
                           schedules   included  in  the   Company's   financial
                           statements, are required or applicable.

                  (3)      The  exhibits  that  are  required  to  be  filed  or
                           incorporated by reference herein are as follows:

                  Exhibit No.                                 Document
                  -----------                                 --------

                      3.1           Articles of  Incorporation,  incorporated by
                                    reference  to Exhibit 3.1 of  the  Company's
                                    Registration Statement on Form 10, File No.
                                    0-30535 (the "Form 10").

                      3.2           Bylaws, incorporated by reference to Exhibit
                                    3.2 of the Form 10.

                      13.1          2002 Annual Report to Shareholders.*

                      21            Subsidiary of the Company.*

                      99.1          Statement  of  Chief  Executive  Officer and
                                    Chief   Financial  Officer  Pursuant  to  18
                                    U.S.C. ss. 1350.*

                  ---------
                  *  Filed herewith

         (b)      Reports on Form 8-K.

                  None.

         (c)      Exhibits

                  The  response to this  portion of Item 15 is set forth in Item
                  15(a)(3) above.

         (d)      Financial Statement Schedules

                  No financial statement  schedules,  other than those schedules
                  included in the Company's financial  statements,  are required
                  or applicable.


                                       15


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                     GRAYSON BANKSHARES, INC.



Date:  March 28, 2003                By:      /s/ Jacky K. Anderson
                                        ---------------------------------------
                                          Jacky K. Anderson
                                          President and Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.




                  Signature                                       Title                              Date
                  ---------                                       -----                              ----


                                                                                         

           /s/ Jacky K. Anderson                      President and Chief Executive             March 28, 2003
- -------------------------------------------               Officer and Director
              Jacky K. Anderson                       (Principal Executive Officer)


         /s/ Blake M. Edwards, Jr.                       Chief Financial Officer                March 28, 2003
- -------------------------------------------               (Principal Financial
            Blake M. Edwards, Jr.                         and Accounting Officer)


           /s/ Dennis B. Gambill                                Director                        March 28, 2003
- -------------------------------------------
              Dennis B. Gambill


           /s/ Julian L. Givens                                 Director                        March 28, 2003
- -------------------------------------------
              Julian L. Givens


                                                                Director                        March __, 2003
- -------------------------------------------
             Jack E. Guynn, Jr.


        /s/ Thomas M. Jackson, Jr.                              Director                        March 28, 2003
- -------------------------------------------
           Thomas M. Jackson, Jr.


             /s/ Fred B. Jones                                  Director                        March 28, 2003
- -------------------------------------------
                Fred B. Jones




                                                                Director                        March __, 2003
- -------------------------------------------
               Jean W. Lindsey


                                                                Director                        March __, 2003
- -------------------------------------------
             Carl J. Richardson


          /s/ Charles T. Sturgill                               Director                        March 28, 2003
- -------------------------------------------
             Charles T. Sturgill


                                                                Director                        March __, 2003
- -------------------------------------------
              J. David Vaughan






                                 CERTIFICATIONS

         I, Jacky K. Anderson certify that:

         1.       I have  reviewed  this  annual  report on Form 10-K of Grayson
Bankshares, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3.       Based on my  knowledge,  the financial  statements,  and other
financial  information  included in this annual  report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

         4.       The   registrant's   other   certifying   officer  and  I  are
responsible for establishing and maintaining  disclosure controls and procedures
(as defined in Exchange  Act Rules  13a-14 and  15d-14) for the  registrant  and
have:

                  a)       designed such  disclosure  controls and procedures to
         ensure that material information relating to the registrant,  including
         its  consolidated  subsidiaries,  is made known to us by others  within
         those  entities,  particularly  during the period in which this  annual
         report is being prepared;

                  b)       evaluated  the   effectiveness  of  the  registrant's
         disclosure controls and procedures as of a date within 90 days prior to
         the filing date of this annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
         the  effectiveness  of the disclosure  controls and procedures based on
         our evaluation as of the Evaluation Date;

         5.       The  registrant's   other   certifying   officer  and  I  have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit  committee of registrant's  board of directors (or persons  performing
the equivalent functions):

                  a)       all   significant   deficiencies  in  the  design  or
         operation  of  internal  controls  which  could  adversely  affect  the
         registrant's ability to record, process, summarize and report financial
         data and have  identified  for the  registrant's  auditors any material
         weaknesses in internal controls; and

                  b)       any fraud,  whether or not  material,  that  involves
         management  or  other  employees  who  have a  significant  role in the
         registrant's internal controls; and

         6.       The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


         Date:  March 28, 2003           /s/ Jacky K. Anderson
                                      ---------------------------------------
                                         Jacky K. Anderson
                                         President and Chief Executive Officer






                                 CERTIFICATIONS

         I, Blake M. Edwards certify that:

         1.       I have  reviewed  this  annual  report on Form 10-K of Grayson
Bankshares, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3.       Based on my  knowledge,  the financial  statements,  and other
financial  information  included in this annual  report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

         4.       The   registrant's   other   certifying   officer  and  I  are
responsible for establishing and maintaining  disclosure controls and procedures
(as defined in Exchange  Act Rules  13a-14 and  15d-14) for the  registrant  and
have:

                  a)       designed such  disclosure  controls and procedures to
         ensure that material information relating to the registrant,  including
         its  consolidated  subsidiaries,  is made known to us by others  within
         those  entities,  particularly  during the period in which this  annual
         report is being prepared;

                  b)       evaluated  the   effectiveness  of  the  registrant's
         disclosure controls and procedures as of a date within 90 days prior to
         the filing date of this annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
         the  effectiveness  of the disclosure  controls and procedures based on
         our evaluation as of the Evaluation Date;

         5.       The  registrant's   other   certifying   officer  and  I  have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit  committee of registrant's  board of directors (or persons  performing
the equivalent functions):

                  a)       all   significant   deficiencies  in  the  design  or
         operation  of  internal  controls  which  could  adversely  affect  the
         registrant's ability to record, process, summarize and report financial
         data and have  identified  for the  registrant's  auditors any material
         weaknesses in internal controls; and

                  b)       any fraud,  whether or not  material,  that  involves
         management  or  other  employees  who  have a  significant  role in the
         registrant's internal controls; and

         6.       The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

         Date:  March 28, 2003                  /s/ Blake M. Edwards
                                           ------------------------------------
                                                Blake M. Edwards
                                                Chief Financial Officer







                                  EXHIBIT INDEX

     Exhibit No.                                 Document
     -----------                                 --------

        3.1       Articles  of  Incorporation,   incorporated  by  reference  to
                  Exhibit 3.1 of the  Company's  Registration  Statement on Form
                  10, File No. 0-30535 (the "Form 10").

        3.2       Bylaws,  incorporated  by reference to Exhibit 3.2 of the Form
                  10.

        13.1      2002 Annual Report to Shareholders.*

        21        Subsidiary of the Company.*

        99.1      Statement  of Chief  Executive  Officer  and  Chief  Financial
                  Officer Pursuant to 18 U.S.C. ss. 1350.*

- ---------
*  Filed herewith