Exhibit 99.1
GRAYSON
BANKSHARES, INC.
June 1, 2012
Dear Fellow Shareholders,
In these days when good news and bad news about the economy seem to fluctuate almost hourly we know you are interested in recent developments at Grayson National Bank. We are proud to be part of an institution that has weathered the ups and downs for 112 years, and we can never thank you enough for the confidence you have expressed in the bank and for the commitment we all share in serving our community
First thanks to all who turned out for the Annual Shareholders Meeting earlier this month. With 117 people in attendance, this meeting was larger than any of us can remember from prior years. Our management team shared valuable information about where our bank has been, the progress we have made, and where we are going in the future. We cannot begin to express our gratitude for the support we have received from shareholders as we continue to navigate very tough economic conditions.
Our earnings are up. We are pleased to report positive earnings of $490,403 for the first quarter of 2012. This represents an increase of $793,589 compared to the loss of $303,186 in the first quarter of 2011. Our net interest income continued to decline as interest rates and loan balances continue their downward trend. However, we did see a decrease in loan loss provisions, or bad debt expense, of $990,392 from the first quarter of 2011 to the first quarter of 2012. This is a positive indicator that we are beginning to make some progress with regards to our non-performing assets. Further evidence of this lies in the fact that all categories of non-performing assets actually decreased in the first quarter of 2012, as compared to the fourth quarter of 2011. This masked the first quarter since the economic downturn began that we saw such a decrease in non-performing assets. We know that we still have challenges ahead and the numbers may continue to fluctuate as we go, but this is definitely a good sign. Past due loan indicators continued to show improvement compared to the prior quarter as well. Other income increased due to securities gains which resulted from a tax planning strategy to reduce our level of tax-exempt investment securities.
Finally some relief on the regulatory front: We are also pleased with the fact that the community banking industry has achieved a significant victory on the regulatory front. In April of this year the President signed into law the JOBS Act of 2012. One key provision of this law was an increase in the number of shareholders required for registration with the Securities and Exchange Commission, ("SEC"). The law allows community banks with less than 1,200 shareholders to effectively de-register from the SEC and therefore not be subject to many overly burdensome reporting requirements that we have been subject to since our initial required registration in 2000. In passing this legislation congress recognized the fact that small community banks are sufficiently regulated by the various banking agencies and therefore additional oversight by the SEC is simply not warranted. This will result in immediate cost savings to the Bank not to mention the managerial resources that will now be available to focus on more productive pursuits. For the past two years the community banking industry has lobbied extensively in support of this legislation and now community banks nationwide are acting to take advantage of this opportunity.
Our current initiatives include growing our markets and keeping our communications with customers and prospective customers in line with their expectations as to technological capabilities. You may be interested to know that:
| · | We've launched our new website. Here our customers, as well as businesses and individuals who are shopping for business services, will find clear and easily navigated descriptions of exactly what Grayson offers, and how our culture and approach differ from other financial institutions. See for yourself at www.graysonnationalbank.com |
| · | We've made online banking really convenient. More and more customers prefer to do their banking from their home or office, and this is definitely the way of the future. We've upgraded this capability to make it easy for customers to understand, access and use. |
As always, we appreciate the opportunity to serve you. We invite you to review the following financial report which will fill in the details of our ongoing story. You will see that even in these challenging times, we remain a healthy, forward-looking institution. We invite your questions, observations or concerns.
Sincerely,
| /s/ Jacky K. Anderson | /s/ Thomas M. Jackson, Jr. | ||
| Jacky K. Anderson | Thomas M. Jackson, Jr. | ||
| President and CEO | Chairman of the Board | ||
| Condensed Consolidated Balance Sheets | Condensed Consolidated Statements of Operations | |||||||||||||||||
| March 31, | December 31, | Three Months Ended March 31, | ||||||||||||||||
| Assets | 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Interest income | ||||||||||||||||||
| Cash and due from banks | $ | 7,300,058 | $ | 8,241,875 | Loans and fees on loans | $ | 3,074,444 | $ | 3,802,684 | |||||||||
| Interest-bearing deposits in banks | 4,316,912 | 3,316,338 | Interest on securities | 281,290 | 375,061 | |||||||||||||
| Federal funds sold | 36,233,175 | 39,013,090 | Federal funds sold | 17,578 | 16,750 | |||||||||||||
| Investment securities | 59,718,013 | 50,888,070 | Interest-bearing deposits | 3,104 | 1,742 | |||||||||||||
| Loans | 211,747,759 | 219,168,445 | Total interest income | 3.376,416 | 4,196,237 | |||||||||||||
| Less allowance for loan losses | 5,002,236 | 4,941,645 | Interest expense | |||||||||||||||
| Net loans | 206,745,523 | 214,226,800 | Deposits | 735,446 | 1,089,694 | |||||||||||||
| Cash Value of Life Insurance | 8,853,039 | 8,772,039 | Interest on borrowings | 220,293 | 260,463 | |||||||||||||
| Foreclosed Assets | 2,822,673 | 3,351,861 | Total interest expense | 955,739 | 1,350,157 | |||||||||||||
| Properties and equipment | 11,036,993 | 11,181,700 | Net interest income | 2,420,677 | 2,846,080 | |||||||||||||
| Accrued interest receivable | 1,343,397 | 1,514,734 | Provision for loan losses | 315,995 | 1,306,387 | |||||||||||||
| Other assets | 5,886,534 | 5,876,556 | Net interest income after provision | 2,104,682 | 1,539,693 | |||||||||||||
| Total assets | $ | 344,256,317 | $ | 346,383,063 | Other income | |||||||||||||
| Liabilities | Service charges on deposit accounts | 265,377 | 243,218 | |||||||||||||||
| Deposits | Other income | 1,410,908 | 357,357 | |||||||||||||||
| Noninterest-bearing | $ | 52,303,239 | $ | 50,180,058 | Total other income | 1,676,285 | 600,575 | |||||||||||
| Interest-bearing | 242,762,391 | 247,071,718 | Other expenses | |||||||||||||||
| Total deposits | 295,065,630 | 297,251,776 | Salaries and employee benefits | 1,720,939 | 1,507,080 | |||||||||||||
| Long-term debt | 20,000,000 | 20,000,000 | Occupancy expense | 128,076 | 124,931 | |||||||||||||
| Accrued interest payable | 531,064 | 230,723 | Equipment expense | 144,718 | 167,249 | |||||||||||||
| Other liabilities | 512,059 | 560,658 | Foreclosed asset expense, net | 178,510 | 122,612 | |||||||||||||
| Total liabilities | 316,108,753 | 318,043,157 | Other expense | 932,321 | 778,582 | |||||||||||||
| Stockholder's equity | Total other expense | 3,104,564 | 2,700,454 | |||||||||||||||
Preferred stock, $25 par value; 500,000 shares authorized; none outstanding | Net income before income taxes | 676,403 | (560,186 | ) | ||||||||||||||
Common stock, $1.25 par value; 2,000,000 shares authorized; 1,718,968 shares issued and outstanding | 2,148,710 | 2,148,710 | Income taxes | 186,000 | (257,000 | ) | ||||||||||||
| Surplus | 521,625 | 521,625 | Net income | $ | 490,403 | $ | (303,186 | ) | ||||||||||
| Retained earnings | 27,648,154 | 27,157,751 | Net income per share | $ | 0.29 | $ | (0.18 | ) | ||||||||||
| Accumulated other comprehensive income (loss) | (2,170,925 | ) | (1,488,180 | ) | Weighted average shares outstanding | 1,718,968 | 1,718,968 | |||||||||||
| Total stockholder' equity | 28,147,564 | 28,339,906 | ||||||||||||||||
| Total liabilities and stocltholder' equity | $ | 344,256,317 | $ | 346,383,063 | ||||||||||||||
Member Federal Deposit Insurance Corporation
 |
GRAYSON BANKSHARES, INC. |
| Officers |
Thomas M. Jackson, Jr. Chairman of the Board |
Jack E. Guynn, Jr. |
| Vice Chairman |
Jacky K. Anderson |
| President & CEO |
Brenda C. Smith |
| Secretary |
Blake M. Edwards |
Chief Financial Officer |
| Board of Directors |
Jacky K. Anderson |
Grayson BankShares, Inc. and The Grayson National Bank |
Bryan L Edwards |
| Sparta Town Manager |
Jack E. Guynn, Jr. |
Guynn Enterprises, Inc. |
Hayden H. Horney Wythe County Clerk of Court |
Thomas M. Jackson, Jr. Attorney |
Theresa S. Lazo Community Activist |
Carl J. Richardson Retired |
Charles T. Sturgill Retired Grayson County Clerk of Court |
J. David Vaughan Vaughan Furniture |
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GRAYSON BANKSHARES, INC. |
Carroll} P.O. Box 1185, Galax, VA 24333 P}476/238.8112
Elk Creek} P.O. Box 17, Elk Creek, VA 2432.6 P}276/655.4011
Galex} P.O. Box 795, Galax, VA 24333 11276/238.2411
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Independence} P.O. Box 186, Independence, VA 24348 P}276/773.2821
Sparta} P.O. Box 1900, Sparta, NC 28675 P}336/372.2811
Troutdale} P.O. Box 26, Troutdale, VA 24378 P}1276/677.3722
Whitetop} P.O. Box 88, Whitetop, VA 24292 P}276/388.3811
Wytheville} P.O. Box 557, Wytheville, VA 24382 P}276/228.6050