Grayson Bankshares (GSON) 8-K Results of Operations and Financial Condition

Exhibit 99.1

GRAYSON BANKSHARES, INC.

Financial Report

December 31, 2009

113 West Main Street s Post Office Box 186

Independence, Virginia  24348

(276) 773-2811

East Independence	(276) 773-2811
Elk Creek	(276) 655-4011
Galax	(276) 238-2411
Troutdale	(276) 677-3722
Sparta	(336) 372-2811
Carroll	(276) 238-8112
Hillsville	(276) 728-2810
Whitetop	(276) 388-3811
Wytheville	(276) 228-6050

Message to Shareholders

Dear Fellow Shareholders,

It is our pleasure to present our 4th Quarter, 2009 Financial Report to you.

We finished the year with total assets of $369,601,921, up $1,404,997, or 0.38% for the year.  Net loans decreased by $1,261,037, or 0.47%, while deposits increased by $7,753,042, or 2.54% over the course of the year.

Stockholders’ equity totaled $30,539,945 at December 31, 2009 compared to $29,016,695 at December 31, 2008, representing an increase of $1,523,250, or 5.25%. The book value of our stock at December 31, 2009 totaled $17.77 per share.  Dividends of 10 cents per share were declared and paid in December, for a total of 40 cents per share for the year.

The Company recorded net income of $50,941 for the quarter ended December 31, 2009 compared to a net loss of $218,973 for the same quarter in 2008.    Earnings for the year totaled $882,719, compared to $754,359 for the prior year.

A more detailed analysis of the Company’s financial condition and results of operations for 2009 will be available in the Company’s Annual Report which you will receive in coming weeks along with proxy materials for the Company’s annual meeting to be held on May 11, 2010.

As always, we appreciate your support, welcome your comments and the opportunity to serve you.

Sincerely,

Jacky K. Anderson

President and CEO

Consolidated Balance Sheets

	December 31,			December 31,
	2009			2008
Assets
Cash and due from banks	$	8,937,124		$	9,536,772
Federal funds sold		19,356,999			11,149,718
Investment securities		43,817,701			51,182,412
Loans		270,183,323			271,249,033
Less allowance for loan losses		3,555,273			3,359,946
Net loans		266,628,050			267,889,087
Properties and equipment		11,133,834			11,115,033
Accrued interest receivable		2,626,164			3,124,540
Other assets		17,102,049			14,199,362
Total assets	$	369,601,921		$	368,196,924
Liabilities
Demand deposits	$	44,924,699		$	41,883,404
Interest-bearing demand deposits		21,998,338			20,058,740
Savings deposits		43,592,437			37,092,225
Large denomination time deposits		67,294,642			68,860,088
Other time deposits		135,673,100			137,835,717
Total deposits		313,483,216			305,730,174
FHLB Advances		15,000,000			20,000,000
Other Borrowings		10,000,000			10,000,000
Accrued interest payable		382,653			492,105
Other liabilities		196,107			2,957,950
Total liabilities		339,061,976			339,180,229
Commitments and contingencies
Stockholders’ equity
Preferred stock, $25 par value; 500,000
shares authorized; none outstanding		-			-
Common stock, $1.25 par value; 2,000,000
shares authorized; 1,718,968 shares
issued and outstanding		2,148,710			2,148,710
Surplus		521,625			521,625
Retained earnings		28,497,214			28,302,082
Accumulated other comprehensive income (loss)		(627,604	)		(1,955,722	)
Total stockholders’ equity		30,539,945			29,016,695
Total liabilities and stockholders’ equity	$	369,601,921		$	368,196,924

Officers
Julian L. Givens	Chairman of the Board
Jacky K. Anderson	President & CEO
Dennis B. Gambill	Vice President
Brenda C. Smith	Secretary
Blake M. Edwards	Chief Financial Officer

Consolidated Statements of Operations

	Three Months Ended December 31,						Year Ended December 31,
	2009			2008			2009		2008
Interest income
Loans and fees on loans	$	4,395,694		$	4,521,877		$	17,813,275	$	19,312,389
Interest on securities		480,764			594,115			2,066,558		2,307,415
Federal funds sold		9,807			22,910			37,187		329,750
Total interest income		4,886,265			5,138,902			19,917,020		21,949,554
Interest expense
Deposits		1,614,323			2,110,391			7,271,248		9,381,827
FHLB Advances		145,519			191,991			657,503		561,291
Other Borrowings		123,182			126,694			488,694		489,358
Total interest expense		1,883,024			2,429,076			8,417,445		10,432,476
Net interest income		3,003,241			2,709,826			11,499,575		11,517,078
Provision for loan losses		628,517			906,988			1,490,848		1,200,385
Net interest income after provision
for loan losses		2,374,724			1,802,838			10,008,727		10,316,693
Other income
Service charges on deposit accounts		295,183			250,985			1,031,306		956,049
Other income		350,348			310,897			1,211,539		(484,139	)
Total other income		645,531			561,882			2,242,845		471,910
Other expenses
Salaries and employee benefits		1,630,262			1,609,022			6,553,441		6,009,825
Occupancy expense		135,257			118,522			494,863		389,215
Equipment expense		199,112			194,734			830,877		858,919
Other expense		1,064,382			923,358			3,389,371		2,827,987
Total other expense		3,029,013			2,845,636			11,268,552		10,085,946
Net income before income taxes		(8,758	)		(480,916	)		983,020		702,657
Income taxes		(59,699	)		(261,943	)		100,301		(51,702	)
Net income	$	250,821		$	448,063		$	981,204	$	1,140,507
Net income	$	50,941		$	(218,973	)	$	882,719	$	754,359
Net income per share	$	.03		$	(.13	)	$	.51	$	.44
Weighted average shares outstanding		1,718,968			1,718,968			1,718,968		1,718,968

Board of Directors
Julian L. Givens	Retired Physician
Carl J. Richardson	Retired
Jacky K. Anderson	Grayson BankShares, Inc. and The Grayson National Bank
Jean W. Lindsey	Walters’ Drug, Inc.
Dennis B. Gambill	Grayson BankShares, Inc. and The Grayson National Bank
Jack E. Guynn, Jr.	Guynn Enterprises, Inc.
Charles T. Sturgill	Retired Grayson County Clerk of Court
J. David Vaughan	Vaughan Furniture
Thomas M. Jackson, Jr.	Attorney
Bryan L. Edwards	Sparta Town Manager
Hayden H. Horney	Wythe County Clerk of Court

Member Federal Deposit Insurance Corporation