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

Exhibit 99.1

GRAYSON

BANKSHARES, INC.

Financial Report

March 31, 2010

113 West Main Street s Post Office Box 186

Independence, Virginia 24348

(276) 773-2811

East Independence	(276) 773-2821
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 Stockholders

Dear Stockholder,

It is our pleasure to present our 1st Quarter 2010, Financial Report to you.

Our total assets decreased slightly to $368,978,851 from $369,601,921 during the quarter, representing a decrease of $623,070, or 0.17%.  Net loans decreased by $3,777,767, or 1.42%.  Investment securities increased by $881,384 and federal funds sold increased by $1,942,797 due primarily to the decrease in loans. Deposits decreased by $1,767,880, or 0.56% during the first quarter.

Our net income was $409,084 for the quarter ended March 31, 2010, compared to $463,418 for the quarter ended March 31, 2009.  Net interest income increased by $223,915 as decreases in deposit rates offset decreases in loan volume and rates.  The provision for loan losses increased during the quarter ended March 31, 2010 compared to the same period last year due to increases in past-due and nonperforming loans.  Salary and benefit costs were down due to employee attrition and decreases in benefit costs.  Other expenses increased by $281,021 due primarily to the recognition of a credit to the reserve for overdraft losses of approximately $170,000 in the first quarter of 2009 that did not recur in 2010.  FDIC assessments also increased by $72,000 in the first quart er of 2010 compared to the first quarter of 2009.

Stockholders’ equity increased $397,239 for the quarter resulting in total stockholders’ equity of $30,937,184 at March 31, 2010.  The book value of our stock is now $18.00 per share.  We paid a first quarter dividend of 10 cents per share on March 31.

We hope you can attend this year’s Annual Meeting of Shareholders which will be held at 1:00 p.m. on May 11.  Doors will open at 12:30 p.m. with refreshments provided.

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

Sincerely,

Jacky K. Anderson

President and CEO

Condensed Consolidated Balance Sheets

	March 31,			December 31,
	2010			2009
Assets
Cash and due from banks	$	9,469,485		$	8,637,123
Interest-bearing deposits in banks		300,188			300,000
Federal funds sold		21,299,796			19,356,999
Investment securities		44,699,085			43,817,701
Loans		266,595,217			270,183,323
Less allowance for loan losses		3,744,934			3,555,273
Net loans		262,850,283			266,628,050
Cash value of life insurance		8,173,134			8,098,134
Foreclosed assets		2,786,385			2,808,885
Properties and equipment		11,034,756			11,133,834
Accrued interest receivable		2,294,589			2,626,164
Other assets		6,071,150			6,195,031
Total assets	$	368,978,851		$	369,601,921
Liabilities
Deposits
Noninterest-bearing		43,309,657			44,924,699
Interest-bearing		268,405,679			268,558,517
Total deposits		311,715,336			313,483,216
FHLB Advances		15,000,000			15,000,000
Other borrowings		10,000,000			10,000,000
Accrued interest payable		782,944			382,653
Other liabilities		543,387			196,107
Total liabilities		338,041,667			339,061,976
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		28,734,401			28,497,214
Accumulated other comprehensive income (loss)		(467,552	)		(627,604	)
Total stockholders’ equity		30,937,184			30,539,945
Total liabilities and stockholders’ equity	$	368,978,851		$	369,601,921

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

Condensed Consolidated Statements of Operations

	Three Months Ended March 31,
	2010		2009
Interest income
Loans and fees on loans	$	4,305,442	$	4,574,039
Interest on securities		430,017		546,101
Federal funds sold		9,501		10,633
Total interest income		4,744,960		5,130,773
Interest expense
Deposits		1,467,909		2,027,201
FHLB Advances		139,964		190,400
Other Borrowings		120,499		120,499
Total interest expense		1,728,372		2,338,100
Net interest income		3,016,588		2,792,673
Provision for loan losses		286,508		134,834
Net interest income after provision		2,730,080		2,657,839
Other income
Service charges on deposit accounts		232,738		209,150
Other income		275,926		264,282
Total other income		508,664		473,432
Other expenses
Salaries and employee benefits		1,565,785		1,641,713
Occupancy expense		136,128		120,215
Equipment expense		195,738		206,937
Other expense		813,009		531,988
Total other expense		2,710,660		2,500,853
Net income before income taxes		528,084		630,418
Income taxes		119,000		167,000
Net income	$	409,084	$	463,418
Net income per share	$	.24	$	.27
Weighted average shares outstanding		1,718,968		1,718,968

Board of Directors
Julian L. Givens	Retired Physician
Carl J. Richardson	Retired – Grayson BankShares, Inc. and Grayson National Bank
Jacky K. Anderson	Grayson BankShares, Inc. and Grayson National Bank
Jean W. Lindsey	Walters’ Drug, Inc.
Dennis B. Gambill	Grayson BankShares, Inc. and 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