Grayson Bankshares 10Q 2012 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012

[ ] 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: 0-30535

GRAYSON BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	54-1647596 (I.R.S. Employer Identification No.)
113 West Main Street Independence, Virginia (Address of principal executive offices)	24348 (Zip Code)

(276) 773-2811

(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 R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £	Accelerated filer £
Non-accelerated filer £ (Do not check if smaller reporting company)	Smaller reporting company R

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £ No R

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

1,718,968 shares of Common Stock, par value

$1.25 per share, outstanding as of May 14, 2012.

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets—March 31, 2012 (Unaudited)
		and December 31, 2011 (Audited)	3

	Unaudited Consolidated Statements of Income—Three Months Ended
		March 31, 2012 and March 31, 2011	4

	Unaudited Consolidated Statements of Comprehensive Income (Loss)—Three Months
		Ended March 31, 2012 and March 31, 2011	5

	Consolidated Statements of Changes in Stockholders’ Equity—Three Months
		Ended March 31, 2012 (Unaudited) and Year Ended December 31, 2011 (Audited)	6

	Unaudited Consolidated Statements of Cash Flows—Three Months Ended
		March 31, 2012 and March 31, 2011	7

	Notes to Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition
		and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		30

Item 4.	Controls and Procedures		31

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings		32

Item 1A.	Risk Factors		32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 3.	Defaults Upon Senior Securities		32

Item 4.	Mine Safety Disclosures		32

Item 5.	Other Information		32

Item 6.	Exhibits		32

Signatures			33

Part I. Financial Information

Item 1. Financial Statements

Grayson Bankshares, Inc. and Subsidiary

Consolidated Balance Sheets

March 31, 2012 and December 31, 2011

	March 31,			December 31,
	2012			2011
	(Unaudited)			(Audited)
Assets

Cash and due from banks	$	7,300,058		$	8,241,875
Interest-bearing deposits with banks		4,316,912			3,316,338
Federal funds sold		36,233,175			39,013,090
Investment securities available for sale		57,797,786			48,974,328
Investment securities held to maturity
(fair value approximately $571,588 at March 31, 2012,
and $564,051 at December 31, 2011)		539,527			533,042
Restricted equity securities		1,380,700			1,380,700
Loans, net of allowance for loan losses of $5,002,236 at
March 31, 2012 and $4,941,645 at December 31, 2011		206,745,523			214,226,800
Cash value of life insurance		8,853,039			8,772,039
Foreclosed assets		2,822,673			3,351,861
Property and equipment, net		11,036,993			11,181,700
Accrued interest receivable		1,343,397			1,514,734
Other assets		5,886,534			5,876,556
	$	344,256,317		$	346,383,063
Liabilities and Stockholders’ Equity

Liabilities
Deposits
Noninterest-bearing	$	52,303,239		$	50,180,058
Interest-bearing		242,762,391			247,071,718
Total deposits		295,065,630			297,251,776

Long-term debt		20,000,000			20,000,000
Accrued interest payable		531,064			230,723
Other liabilities		512,059			560,658
		316,108,753			318,043,157

Commitments and contingencies		-			-

Stockholders’ equity
Preferred stock, $25 par value; 500,000
shares authorized; none issued		-			-
Common stock, $1.25 par value; 2,000,000 shares
authorized; 1,718,968 shares issued
in 2012 and 2011, respectively		2,148,710			2,148,710
Surplus		521,625			521,625
Retained earnings		27,648,154			27,157,751
Accumulated other comprehensive income (loss)		(2,170,925	)		(1,488,180	)
		28,147,564			28,339,906
	$	344,256,317		$	346,383,063

See Notes to Consolidated Financial Statements.

Grayson Bankshares, Inc. and Subsidiary

Consolidated Statements of Income

For the Three Months ended March 31, 2012 and 2011

	Three Months Ended
	March 31,
	2012		2011
	(Unaudited)		(Unaudited)
Interest income
Loans and fees on loans	$	3,074,444	$	3,802,684
Interest-bearing deposits in banks		3,104		1,742
Federal funds sold		17,578		16,750
Investment securities:
Taxable		237,143		257,342
Exempt from federal income tax		44,147		117,719
		3,376,416		4,196,237

Interest expense
Deposits		735,446		1,089,694
Interest on borrowings		220,293		260,463
		955,739		1,350,157
Net interest income		2,420,677		2,846,080

Provision for loan losses		315,995		1,306,387
Net interest income after
provision for loan losses		2,104,682		1,539,693

Noninterest income
Service charges on deposit accounts		265,377		243,218
Increase in cash value of life insurance		81,000		81,000
Net realized gains on securities		1,126,115		87,856
Other income		203,793		188,501
		1,676,285		600,575

Noninterest expense
Salaries and employee benefits		1,720,939		1,507,080
Occupancy expense		128,076		124,931
Equipment expense		144,718		167,249
Foreclosed asset expense, net		178,510		122,612
Other expense		932,321		778,582
		3,104,564		2,700,454
Income (loss) before income taxes		676,403		(560,186	)


Income tax expense (benefit)		186,000		(257,000	)
Net income (loss)	$	490,403	$	(303,186	)

Basic earnings (loss) per share	$	0.29	$	(0.18	)
Weighted average shares outstanding		1,718,968		1,718,968
Dividends declared per share	$	0.00	$	0.10

See Notes to Consolidated Financial Statements.

Grayson Bankshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Loss)

For the Three Months ended March 31, 2012 and 2011

	Three Months Ended
	March 31,
	2012			2011
	(Unaudited)			(Unaudited)

Net income	$	490,403		$	(303,186	)

Other comprehensive income (loss):
Unrealized gains (losses) on investment securities:		91,653			308,847
Unrealized gains (losses) arising during the period		(31,162	)		(105,008	)
Tax related to unrealized gains (losses)		(1,126,115	)		(87,856	)
Reclassification of realized (gains) during the period
Tax related to realized gains		382,879			29,871


Total other comprehensive income (loss)		(682,745	)		145,854
Total comprehensive income (loss)	$	(192,342	)	$	(157,332	)

See Notes to Consolidated Financial Statements.

Grayson Bankshares, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months ended March 31, 2012 (unaudited) and the Year ended December 31, 2011 (audited)

										Accumulated
										Other
	Common Stock						Retained			Comprehensive
	Shares		Amount		Surplus		Earnings			Income (Loss)			Total

Balance, December 31, 2010		1,718,968	$	2,148,710	$	521,625	$	28,975,488		$	(1,236,053	)	$	30,409,770

Net loss		-		-		-		(1,645,840	)		-			(1,645,840	)
						-
Other comprehensive income		-		-		-		-			(252,127	)		(252,127	)

Dividends paid
($.10 per share)		-		-		-		(171,897	)		-			(171,897	)
Balance, December 31, 2011		1,718,968		2,148,710		521,625		27,157,751			(1,488,180	)		28,339,906


Comprehensive income
Net income		-		-		-		490,403			-			490,403
								-

Other comprehensive income		-		-		-		-			(682,745	)		(682,745	)
				-

Dividends paid
($.00 per share)		-		-		-		-			-			-
				-				-						-
Balance, March 31, 2012		1,718,968	$	2,148,710	$	521,625	$	27,648,154		$	(2,170,925	)	$	28,147,564

See Notes to Consolidated Financial Statements.

Grayson Bankshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Three Months ended March 31, 2012 and 2011

	Three Months Ended
	March 31,
	2012			2011
	(Unaudited)			(Unaudited)

Cash flows from operating activities
Net income (loss)	$	490,403		$	(303,186	)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation and amortization		171,000			186,000
Provision for loan losses		315,995			1,306,387
Deferred income taxes		5,000			(128,000	)
Net realized gains on securities		(1,126,115	)		(87,856	)
Accretion of discount on securities, net of
amortization of premiums		116,105			99,344
Deferred compensation		(5,735	)		(5,364	)
Net realized loss on foreclosed assets		116,662			-
Changes in assets and liabilities:
Cash value of life insurance		(81,000	)		(81,000	)
Accrued income		171,337			62,338
Other assets		339,739			263,312
Accrued interest payable		300,341			397,806
Other liabilities		(42,864	)		(298,615	)
Net cash provided by operating activities		767,868			1,411,166

Cash flows from investing activities
Purchases of available-for-sale investment securities		(36,243,935	)		(7,652,495	)
Sales of available-for-sale investment securities		25,491,007			2,862,074
Maturities/calls/paydowns of available-for-sale investment securities		1,898,533			3,872,073
Net decrease in loans		7,018,282			7,188,028
Proceeds from the sale of foreclosed assets		559,526			-
Purchases of property and equipment, net of sales		(26,293	)		(182,392	)
Net cash provided by investing activities		(1,302,880	)		6,087,288

Cash flows from financing activities
Net decrease in deposits		(2,186,146	)		(1,172,001	)
Dividends paid		-			(171,897	)
Net cash used in financing activities		(2,186,146	)		(1,343,898	)
Net increase in cash and cash equivalents		(2,721,158	)		6,154,556

Cash and cash equivalents, beginning		50,571,303			40,251,868
Cash and cash equivalents, ending	$	47,850,145		$	46,406,424

Supplemental disclosure of cash flow information
Interest paid	$	655,398		$	952,351
Taxes paid	$	-		$	43,000
Transfers of loans to foreclosed properties	$	147,000		$	1,733,000

See Notes to Consolidated Financial Statements.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Grayson Bankshares, Inc. (the “Company”) was incorporated as a Virginia corporation on February 3, 1992 to acquire the stock of The Grayson National Bank (the “Bank”) in a bank holding company reorganization. The Bank was acquired by the Company on July 1, 1992.

The Bank was organized under the laws of the United States in 1900 and currently serves Grayson County, Virginia and surrounding areas through ten banking offices. As an FDIC-insured National Banking Association, the Bank is subject to regulation by the Comptroller of the Currency. The Company is regulated by the Board of Governors of the Federal Reserve System.

The consolidated financial statements as of March 31, 2012 and for the periods ended March 31, 2012 and 2011 included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished in the interim consolidated financial statements reflects all adjustments necessary to present fairly the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows for such interim periods. Management believes that all interim period adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2011, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The results of operations for the three-month periods ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year.

The accounting and reporting policies of the Company and the Bank follow generally accepted accounting principles and general practices within the financial services industry.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the Bank, which is wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation.

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents includes cash and amounts due from banks (including cash items in process of collection), interest-bearing deposits with banks and Federal funds sold.

Recent Accounting Pronouncements

In April 2011, the criteria used to determine effective control of transferred assets in the Transfers and Servicing topic of the ASC was amended by ASU 2011-03. The requirement for the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms and the collateral maintenance implementation guidance related to that criterion were removed from the assessment of effective control. The other criteria to assess effective control were not changed. The amendments were effective for the Company on January 1, 2012 and had no effect on the financial statements.

ASU 2011-04 was issued in May 2011 to amend the Fair Value Measurement topic of the ASC by clarifying the application of existing fair value measurement and disclosure requirements and by changing particular principles or requirements for measuring fair value or for disclosing information about fair value measurements. The amendments were effective for the Company beginning January 1, 2012 and have been included in Note 8.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Recent Accounting Pronouncements, continued

The Comprehensive Income topic of the ASC was amended in June 2011. The amendment eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and requires consecutive presentation of the statement of net income and other comprehensive income. The amendments were applicable to the Company on January 1, 2012 and have been applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements. Companies should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the amendments while FASB redeliberates future requirements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 2. Restrictions on Cash

To comply with banking regulations, the Bank is required to maintain certain average cash reserve balances. The daily average cash reserve requirement was approximately $1,981,000 and $1,794,000 for the periods including March 31, 2012 and December 31, 2011, respectively.

Note 3. Investment Securities

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at March 31, 2012 and December 31, 2011 follow:

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

March 31, 2012
Available for sale:
U.S. Government agency securities	$	2,915,377	$	101,298	$	-	$	3,016,675
Government sponsored enterprises		23,870,507		149,658		81,682		23,938,483
Mortgage-backed securities		19,015,839		84,434		115,800		18,984,473
Corporate bonds		3,077,737		10,793		10,715		3,077,815
State and municipal securities		8,888,001		29,256		136,917		8,780,340
	$	57,767,461	$	375,439	$	345,114	$	57,797,786
Held to maturity:
State and municipal securities	$	539,527	$	32,061	$	-	$	571,588

December 31, 2011
Available for sale:
U.S. Government agency securities	$	2,994,524	$	80,995	$	-	$	3,075,519
Government sponsored enterprises		19,964,092		540,636		8,243		20,496,485
Mortgage-backed securities		12,064,933		85,917		28,108		12,122,742
State and municipal securities		12,885,992		409,471		15,881		13,279,582
	$	47,909,541	$	1,117,019	$	52,232	$	48,974,328
Held to maturity:
State and municipal securities	$	533,042	$	31,009	$	-	$	564,051

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Investment Securities, continued

Restricted equity securities were $1,380,700 at March 31, 2012 and December 31, 2011. Restricted equity securities consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”), Community Bankers Bank, Pacific Coast Bankers Bank, and the Federal Reserve Bank of Richmond, all of which are carried at cost. All of these entities are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Bank is required to hold that stock so long as it borrows from the FHLB. The Federal Reserve requires banks to purchase stock as a condition for membership in the Federal Reserve system. The Bank’s stock in Community Bankers Bank and Pacific Coast Bankers Bank is restricted only in the fact that the stock may only be repurchased by the respective banks.

The following table details unrealized losses and related fair values in the Company’s investment securities portfolios. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2012 and December 31, 2011.

	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses

March 31, 2012
Available for sale
Government sponsored enterprises	$	14,561,350	$	81,682	$	-	$	-	$	14,561,350	$	81,682
Mortgage-backed securities		10,445,396		115,800		-		-		10,445,396		115,800
Corporate Bonds		1,409,690		10,715		-		-		1,409,690		10,715
State and municipal securities		5,195,466		136,917		-		-		5,195,466		136,917
Total securities available for sale	$	31,611,902	$	345,114	$	-	$	-	$	31,611,902	$	345,114


December 31, 2011
Available for sale:
Government sponsored enterprises	$	3,032,760	$	8,243	$	-	$	-	$	3,032,760	$	8,243
Mortgage-backed securities		6,803,995		28,108		-		-		6,803,995		28,108
State and municipal securities		1,625,661		8,626		451,117		7,255		2,076,778		15,881
Total securities available for sale	$	11,462,416	$	44,977	$	451,117	$	7,255	$	11,913,533	$	52,232

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near-term prospects of the issuer. The relative significance of these and other factors will vary on a case by case basis.

In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer's financial condition and the issuer's anticipated ability to pay the contractual cash flows of the investments. Since the Company intends to hold all of its investment securities until maturity, and it is more likely than not that the Company will not have to sell any of its investment securities before unrealized losses have been recovered, and the Company expects to recover the entire amount of the amortized cost basis of all its securities, none of the securities are deemed other than temporarily impaired at March 31, 2012 or December 31, 2011. Management continues to monitor all of these securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities are other than temporarily impaired, which could require a charge to earnings in such periods.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Investment Securities, continued

Investment securities with amortized cost of approximately $18,653,315 at March 31, 2012 and $26,326,337 at December 31, 2011, were pledged as collateral on public deposits and for other purposes as required or permitted by law. Gains and losses on the sale of investment securities are recorded on the trade date and are determined using the specific identification method. Gross realized gains and losses for the three-month periods ended March 31, 2012 and 2011 are as follows:

	2012		2011

Realized gains	$	1,126,115		96,971
Realized losses		-		(9,115	)
	$	1,126,115	$	87,856

The scheduled maturities of securities available for sale and securities held to maturity at March 31, 2012, were as follows:

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

Due in one year or less	$	689,828	$	702,739	$	390,682		400,768
Due after one year through five years		3,028,989		3,053,440		-		-
Due after five years through ten years		18,638,904		18,578,825		-		-
Due after ten years		35,409,740		35,462,782		148,845		170,820
	$	57,767,461	$	57,797,786	$	539,527	$	571,588

Maturities of mortgage backed securities are based on contractual amounts. Actual maturity will vary as loans underlying the securities are prepaid.

Note 4. Allowance for Loan Losses and Impaired Loans

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed to be sufficient to provide for estimated loan losses based on evaluating known and inherent risks in the loan portfolio. The allowance is provided based upon management’s comprehensive analysis of the pertinent factors underlying the quality of the loan portfolio. These factors include changes in the amount and composition of the loan portfolio, delinquency levels, actual loss experience, current economic conditions, and detailed analysis of individual loans for which the full collectability may not be assured. The detailed analysis includes methods to estimate the fair value of loan collateral and the existence of potential alternative sources of repayment. The allowance consists of specific and general components. The specific component relates to loans that are deemed impaired. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the recorded value of that loan. The general component covers the remaining loan portfolio not evaluated individually for impairment, and is based on historical loss experience adjusted for qualitative factors. The appropriateness of the allowance for loan losses on loans is estimated based upon these factors and trends identified by management at the time financial statements are prepared.

A provision for loan losses is charged against operations and is added to the allowance for loan losses based on quarterly comprehensive analyses of the loan portfolio. The allowance for loan losses is allocated to certain loan categories based on the relative risk characteristics, asset classifications and actual loss experience of the loan portfolio. While management has allocated the allowance for loan losses to various loan portfolio segments, the allowance is general in nature and is available for the loan portfolio in its entirety.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

The following table presents the activity in the allowance and information on the loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses as of March 31, 2012 and March 31, 2011:

Allowance for Loan Losses and Recorded Investment in Loans

	Commercial						Construction
	&			Commercial			&									Consumer
	Agricultural			Mortgage			Development			Farmland			Residential			& Other			Total

March 31, 2012
Allowance for loan losses:
Beginning Balance	$	398,162		$	888,965		$	544,739		$	551,147		$	2,303,045		$	255,587		$	4,941,645
Charge-offs		(4,193	)		(69,403	)		(822	)		(56,026	)		(139,173	)		(21,063	)		(290,680	)
Recoveries		13,260			15,278			-			-			3,574			3,164			35,276
Provision		(62,092	)		85,731			27,490			83,601			198,577			(17,312	)		315,995
Ending Balance	$	345,137		$	920,571		$	571,407		$	578,722		$	2,366,023		$	220,376		$	5,002,236
Ending balance: individually
evaluated for impairment		37,050			30,707			65,849			72,223			199,111			3,372		$	408,312
Ending balance: collectively
evaluated for impairment		308,087			889,864			505,558			506,499			2,166,912			217,004			4,593,924

Loans outstanding:
Ending balance		13,485,316			34,045,120			16,477,900			32,405,617			105,901,097			9,432,709			211,747,759
Ending balance: individually
evaluated for impairment		557,793			3,476,148			4,148,207			6,229,586			6,880,463			33,497			21,325,694
Ending balance: collectively
evaluated for impairment		12,927,523			30,568,972			12,329,693			26,176,031			99,020,634			9,399,212			190,422,065

March 31, 2011
Allowance for loan losses:
Beginning Balance		436,872			777,515			526,231			710,368			1,861,953			229,481			4,542,420
Charge-offs		(112,146	)		-			(20,000	)		-			(789,463	)		(60,003	)		(981,612	)
Recoveries		5,663			197			-			-			2,489			9,057			17,406
Provision		136,053			37,503			201,954			48,068			826,452			56,357			1,306,387
Ending Balance		466,442			815,215			708,185			758,436			1,901,431			234,892			4,884,601
Ending balance: individually
evaluated for impairment	$	10,798		$	44,640		$	175,347		$	13,535		$	54,809		$	-		$	299,129
Ending balance: collectively
evaluated for impairment	$	455,644		$	770,575		$	532,838		$	744,901		$	1,846,622		$	234,892		$	4,585,472

Loans outstanding:
Ending balance	$	15,738,688		$	39,520,547		$	19,966,290		$	34,365,645		$	121,444,930		$	12,134,044		$	243,170,144
Ending balance: individually
evaluated for impairment	$	107,979		$	2,585,268		$	1,970,174		$	3,745,199		$	3,652,186		$	-		$	12,060,806
Ending balance: collectively
evaluated for impairment	$	15,630,709		$	36,935,279		$	17,996,116		$	30,620,446		$	117,792,744		$	12,134,044		$	231,109,338

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality of the Bank’s loan portfolio. The Bank’s loan ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. Substandard assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as Doubtful have all the weaknesses inherent in assets classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as Loss are those considered uncollectible, and of such little value that its continuance on the books is not warranted. Assets that do not currently expose the insured financial institutions to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.” Management also maintains a listing of loans designated “Watch”. These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk. As of March 31, 2012 and December 31, 2011, respectively, the Bank had no loans graded “Doubtful” or “Loss” included in the balance of total loans outstanding.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

The following table lists the loan grades utilized by the Bank and the corresponding total of outstanding loans in each category as of March 31, 2012 and December 31, 2011:

Credit Risk Profile by Internally Assigned Grades

	Loan Grades
					Special
	Pass		Watch		Mention		Substandard		Total
March 31, 2012
Real Estate Secured:
1-4 residential construction	$	798,686	$	-	$	-	$	63,000	$	861,686
Commercial construction		413,108		-		-		-		413,108
Loan development &
other land		9,910,641		578,370		30,148		4,683,947		15,203,106
Farmland		21,712,541		1,624,202		1,501,760		7,567,114		32,405,617
1-4 residential mortgage		75,114,088		2,264,851		2,466,830		9,600,951		89,446,720
Multifamily		2,036,972		-		-		-		2,036,972
Home equity and second
mortgage		11,312,496		746,662		309,883		2,048,364		14,417,405
Commercial mortgage		22,263,823		4,321,323		1,834,697		5,625,277		34,045,120
Non-Real Estate Secured:
Commercial & agricultural		11,638,750		524,037		231,432		849,809		13,244,028
Financial institutions		-		-		241,288		-		241,288
Civic organizations		336,898		-		-		-		336,898
Consumer-auto		2,482,757		9,027		14,468		28,469		2,534,721
Consumer-Other		6,237,176		10,990		143,243		169,681		6,561,090
Total	$	164,257,936	$	10,079,462	$	6,773,749	$	30,636,612	$	211,747,759

	Loan Grades
					Special
	Pass		Watch		Mention		Substandard		Total

December 31, 2011
Real Estate Secured:
1-4 residential construction	$	494,146	$	-	$	-	$	63,000	$	557,146
Commercial construction		331,613		-		-		-		331,613
Loan development &
other land		10,104,050		652,059		292,485		5,994,251		17,042,845
Farmland		22,705,684		1,501,012		1,640,587		8,164,163		34,011,446
1-4 residential mortgage		77,852,671		2,054,982		2,722,842		8,709,898		91,340,393
Multifamily		2,060,482		662,971		-		-		2,723,453
Home equity and second
mortgage		11,375,249		639,021		480,225		2,149,878		14,644,721
Commercial mortgage		24,015,569		2,055,363		2,560,894		5,567,404		34,199,230
Non-Real Estate Secured:				-
Commercial & agricultural		11,538,611		679,021		253,522		994,245		13,465,399
Financial institutions		-		-		242,813		-		242,813
Civic organizations		360,715		-		-		-		360,715
Consumer-auto		2,862,264		9,799		17,125		43,165		2,932,353
Consumer-Other		6,984,580		14,841		138,515		178,382		7,316,318
Total	$	170,685,634	$	8,269,417	$	8,349,008	$	31,864,386	$	219,168,445

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Loans may be placed in nonaccrual status when, in management’s opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received. Payments received are first applied to principal, and any remaining funds are then applied to interest. Loans are removed from nonaccrual status when they are deemed a loss and charged to the allowance, transferred to foreclosed assets, or returned to accrual status based upon performance consistent with the original terms of the loan or a subsequent restructuring thereof.

The following table presents an age analysis of nonaccrual and past due loans by category as of March 31, 2012 and December 31, 2011:

Analysis of Past Due and Nonaccrual Loans

													90+ Days
					90 Days or								Past Due
	30-59 Days		60-89 Days		More Past		Total Past				Total		and Still		Nonaccrual
	Past Due		Past Due		Due		Due		Current		loans		Accruing		Loans
March 31, 2012
Real Estate Secured:
1-4 residential construction	$	-	$	-	$	63,000	$	63,000	$	798,686	$	861,686	$	-	$	63,000
Commercial construction		-		-		-		-		413,108		413,108		-		-
Loan development &										��
other land		15,982		-		2,589,795		2,605,777		12,597,329		15,203,106		-		4,001,141
Farmland		11,872		107,253		3,787,550		3,906,675		28,498,942		32,405,617		120,662		6,102,784
1-4 residential mortgage		1,329,152		691,304		3,550,190		5,570,646		83,876,0743		89,446,720		99,309		5,739,219
Multifamily		-		-		-		-		2,036,972		2,036,972		-		-
Home equity and second
mortgage		302,703		249,131		767,220		1,319,054		13,098,351		14,417,405		-		1,128,825
Commercial mortgage		222,301		-		1,539,566		1,761,867		32,283,253		34,045,120		-		3,434,738
Non-Real Estate Secured:
Commercial & agricultural		55,069		17,124		325,525		397,718		12,846,310		13,244,028		-		410,867
Financial institutions		-		-		-		-		241,288		241,288		-		-
Civic organizations		-		-		-		-		336,898		336,898		-		-
Consumer-auto		51,436		6,855		7,418		65,709		2,469,012		2,534,721		-		11,202
Consumer-Other		22,051		72,087		87,727		181,865		6,379,225		6,561,090		15,153		72,575
Total	$	2,010,566	$	1,143,754	$	12,717,991	$	15,872,311	$	195,875,448	$	211,747,759	$	235,124	$	20,964,351

													90+ Days
					90 Days or								Past Due
	30-59 Days		60-89 Days		More Past		Total Past				Total		and Still		Nonaccrual
	Past Due		Past Due		Due		Due		Current		loans		Accruing		Loans
December 31, 2011
Real Estate Secured:
1-4 residential construction	$	-	$	-	$	63,000	$	63,000	$	494,146	$	557,146	$	-	$	63,000
Commercial construction		-		-		-		-		331,613		331,613		-		-
Loan development &
other land		241,031		464,326		4,083,688		4,789,045		12,253,800		17,042,845		-		4,891,184
Farmland		398,146		665,577		3,559,159		4,622,882		29,388,564		34,011,446		-		6,779,457
1-4 residential mortgage		2,337,732		1,100,428		4,255,532		7,693,692		83,646,701		91,340,393		364,926		5,759,832
Multifamily		-		-		-		-		2,723,453		2,723,453		-		-
Home equity and second
mortgage		315,568		176,448		844,737		1,336,753		13,307,968		14,644,721		76,231		1,079,672
Commercial mortgage		264,664		78,983		2,110,790		2,454,437		31,744,793		34,199,230		18,343		3,374,650
Non-Real Estate Secured:
Commercial & agricultural		211,542		402,399		158,467		772,408		12,692,991		13,465,399		-		602,682
Financial institutions		-		-		-		-		242,813		242,813		-		-
Civic organizations		-		-		-		-		360,715		360,715		-		-
Consumer-auto		45,568		31,314		24,443		101,325		2,831,028		2,932,353		17,048		7,395
Consumer-Other		109,290		14,986		108,204		232,480		7,083,838		7,316,318		61,339		47,771
Total	$	3,923,541	$	2,934,461	$	15,208,020	$	22,066,022	$	197,102,423	$	219,168,445	$	537,887	$	22,605,643

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Impaired Loans

A loan is considered impaired when it is probable that the Bank will be unable to collect all contractual principal and interest payments due in accordance with the original or modified terms of the loan agreement. Smaller balance homogenous loans may be collectively evaluated for impairment. Impaired loans are measured based on the estimated fair value of the collateral less estimated cost to sell if the loan is considered collateral dependent. Impaired loans not considered to be collateral dependent are measured based on the present value of expected future cash flows. The valuation of real estate collateral is subjective in nature and may be adjusted in future periods because of changes in economic conditions. Management considers third-party appraisals, as well as independent fair market value assessments in determining the estimated fair value of particular properties. In addition, as certain of these third-party appraisals and independent fair market value assessments are only updated periodically, changes in the values of specific properties may have occurred subsequent to the most recent appraisals. Accordingly, the amounts of any such potential changes and any related adjustments are generally recorded at the time such information is received. When the measurement of the impaired loan is less than the recorded investment in the loan, impairment is recognized by creating or adjusting an allocation of the allowance for loan losses and uncollected accrued interest is reversed against interest income. If ultimate collection of principal is in doubt, all cash receipts on impaired loans are applied to reduce the principal balance.

As of March 31, 2012 and December 31, 2011, respectively, the recorded investment in impaired loans totaled $21,325,694 and $21,967,946. The average age of the third-party appraisal or independent assessment used to measure impairment on our collateral-dependent loans at March 31, 2012 was 13 months. The Bank’s current practice is to consider an appraisal or assessment to be current if it is less than 18 months old. The total amount of collateral-dependent impaired loans at March 31, 2012 and December 31, 2011, respectively, was $14,511,788 and $18,219,185, of these $12,549,223 and $14,849,143 were measured for impairment using appraisals aged less than 18 months. The remaining $1,962,565 and $3,370,042 of collateral-dependent impaired loans was measured for impairment using existing appraisals discounted 15-20% for age and other pertinent factors. As of March 31, 2012 and December 31, 2011, respectively, $3,245,768 and $3,925,933 of the recorded investment in impaired loans did not require specific reserves because they had been written down to the fair value of collateral through a direct charge-off. The Bank had $11,385,523 and $7,585,520 in troubled debt restructured loans included in impaired loans at March 31, 2012 and December 31, 2011, respectively.

The categories of non-accrual loans and impaired loans overlap, although they are not coextensive. The Bank considers all circumstances regarding the loan and borrower on an individual basis when determining whether an impaired loan should be placed on non-accrual status, such as the financial strength of the borrower, the estimated collateral value, reasons for the delay, payment record, the amount past due and the number of days past due.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Impaired Loans, continued

The following table is a summary of information related to impaired loans as of March 31, 2012 and December 31, 2011:

Impaired Loans

						Unpaid				Average		Interest
				Recorded		Principal		Related		Recorded		Income
				Investment (1)		Balance		Allowance		Investment		Recognized
March 31, 2012
With no related allowance recorded:
	1-4 Residential Construction		$	63,000	$	115,238	$	-	$	63,000	$	-
	Land development & other land			3,482,774		4,363,615		-		3,444,654		-
	Farmland			3,482,774		4,711,926		-		4,724,746		2,227
	1-4 residential mortgage			3,918,312		4,170,228		-		3,948,466		6,519
	Commercial mortgage			2,573,192		2,868,203		-		2,749,239		5,012
	Commercial & agricultural			168,029		168,029		-		168,029		-
	Consumer & other			-		-		-		-		-
		Subtotal		14,896,207		16,397,239		-		15,098,134		13,758

With an allowance recorded:
	1-4 Residential Construction			-		-		-		-		-
	Land development & other land			602,433		650,681		65,849		602,433		-
	Farmland			1,538,686		1,538,686		72,223		1,538,686		-
	1-4 residential mortgage			2,962,151		3,154,020		199,111		2,335,118		10,726
	Commercial mortgage			902,956		969,545		30,707		902,956		9,913
	Commercial & agricultural			389,764		389,764		37,050		324,806		2,449
	Consumer & other			33,497		33,497		3,372		33,497		557
		Subtotal		6,429,487		6,736,193		408,312		5,737,496		23,645

Totals:
	1-4 Residential Construction			63,000		115,238		-		63,000		-
	Land development & other land			4,085,207		5,014,296		65,849		4,047,087		2,227
	Farmland			6,229,586		6,250,612		72,223		6,263,432		6,519
	1-4 residential mortgage			6,880,463		7,324,248		199,111		6,283,584		15,738
	Commercial mortgage			3,476,148		3,837,748		30,707		3,652,195		9,913
	Commercial & agricultural			557,793		557,793		37,050		492,835		2,449
	Consumer & other			33,49		33,497		3,372		33,497		557
		Total	$	21,325,694	$	23,133,432	$	408,312	$	20,835,630	$	37,403

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Impaired Loans, continued

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment (1)		Balance		Allowance		Investment		Recognized
December 31, 2011
With no related allowance recorded:
1-4 Residential Construction	$	63,000	$	115,238	$	-	$	47,293	$	-
Land development & other land		4,666,763		5,591,104		-		3,154,134		-
Farmland		6,187,137		6,187,137		-		5,222,771		45,059
1-4 residential mortgage		4,397,661		5,021,591		-		5,289,195		10,823
Commercial mortgage		2,894,820		3,214,076		-		2,327,091		8,446
Commercial & agricultural		144,034		144,034		-		105,439		28
Consumer & other		-		-		-		-		-
Subtotal		18,353,415		20,273,180		-		16,145,923		64,356

With an allowance recorded:
1-4 Residential Construction		-		-		-		-		-
Land development & other land		287,531		335,779		17,130		158,872		9,695
Farmland		801,094		801,094		30,392		81,619		-
1-4 residential mortgage		1,435,015		1,481,238		74,951		717,354		32,097
Commercial mortgage		519,991		519,991		2,313		22,794		-
Commercial & agricultural		536,510		536,510		62,854		205,647		2,738
Consumer & other		34,390		34,390		3,565		3,769		241
Subtotal		3,614,531		3,709,002		191,205		1,190,055		44,771

Totals:
1-4 Residential Construction		63,000		115,238		-		47,293		-
Land development & other land		4,954,294		5,926,883		17,130		3,313,006		9,695
Farmland		6,988,231		6,988,231		30,392		5,304,390		45,059
1-4 residential mortgage		5,832,676		6,502,829		74,951		6,006,549		42,920
Commercial mortgage		3,414,811		3,734,067		2,313		2,349,885		8,446
Commercial & agricultural		680,544		680,544		62,854		311,086		2,766
Consumer & other		34,390		34,390		3,565		3,769		241
Total	$	21,967,946	$	23,982,182	$	191,205	$	17,335,978	$	109,127

(1) Recorded investment is the loan balance, net of any charge-offs

The average recorded investment in impaired loans and interest income recognized on impaired loans for the three months ended March 31, 2012 and March 31, 2011 (all approximate) are summarized below:

	2012		2011

Average investment in impaired loans	$	20,835,630	$	13,109,457
Interest income recognized on impaired loans	$	37,403	$	15,450
Interest income recognized on a cash basis on impaired loans	$	62,650	$	15,737

No additional funds are committed to be advanced in connection with impaired loans.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Troubled Debt Restructuring

As a result of adopting the amendments in ASU 2011-02, The Bank reassessed restructurings that occurred on or after the beginning of the fiscal year of adoption (January 1, 2011) to determine whether they are considered troubled debt restructurings (TDRs) under the amended guidance. The Bank identified as TDRs certain loans for which the allowance for loan losses had previously been measured under a general allowance methodology. Upon identifying those loans as TDRs, The Bank identified them as impaired under the guidance in ASC 310-10-35. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for those loans newly identified as impaired. At the end of the first interim period of adoption (September 30, 2011), the recorded investment in loans for which the allowance was previously measured under a general allowance methodology are now impaired under ASC 310-10-35 was $203,507, and the allowance for loan losses associated with those loans on the basis of a current evaluation of loss was $0.

A troubled debt restructured loan is a loan for which the Bank, for reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Bank would not otherwise consider.

The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to: a reduction in the stated interest rate; an extension of the maturity at an interest rate below current market; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals and renewals. Troubled debt restructured loans are considered impaired and are individually evaluated for impairment.

The following table sets forth information with respect to the Bank’s troubled debt restructurings as of March 31, 2012 and March 31, 2011:

Modifications

	March 31, 2012
					Post-
			Pre-Modification		Modification
			Outstanding		Outstanding
	Number		Recorded		Recorded
	of Contracts		Investment (1)		Investment (1)
Troubled Debt Restructurings
Land development & other land		5	$	1,230,630	$	1,232,300
Farmland		3		1,072,362		1,072,362
1-4 residential mortgage		11		1,672,579		1,683,781
Commercial mortgage		5		1,191,368		1,189,726
Commercial & agricultural		1		67,173		67,173
Consumer & other		-		-		-

	Number		Recorded
	of Contracts		Investment
Troubled Debt Restructurings
That Subsequently Defaulted
Troubled debt restructurings:
Land development & other land		-	$	-
Farmland		-	$	-
1-4 residential mortgage		1	$	151,832
Commercial mortgage		-	$	-
Commercial & agricultural		-	$	-
Consumer & other		-	$	-

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Loan Losses and Impaired Loans, continued

Troubled Debt Restructuring, continued

Modifications

	March 31, 2011
					Post-
			Pre-Modification		Modification
			Outstanding		Outstanding
	Number		Recorded		Recorded
	of Contracts		Investment (1)		Investment (1)
Troubled Debt Restructurings
Land development & other land		1	$	275,000	$	275,000
Farmland		1		526,242		527,557
1-4 residential mortgage		4		359,172		386,923
Commercial mortgage		1		1,427,149		1,427,149
Commercial & agricultural		-		-		-
Consumer & other		-		-		-

(1) Recorded investment is the loan balance, net of any charge-offs

During the three months ended March 31, 2012 and March 31, 2011, respectively, the Bank modified 25 and 7 loans that were considered to be troubled debt restructurings. Additional funds were advanced on one loan in 2012 in order to pay real estate taxes current. Also, additional funds were advanced on one loan in 2011 in order to improve the Bank’s collateral position.

During the three months ended March 31, 2012, 1 loan that had been restructured during the twelve-month period preceding March 31, 2012, defaulted. Restructured loans are deemed to be in default if they become past due by 30 days or more.

Note 5. Income Taxes

A reconciliation of income tax expense computed at the statutory federal income tax rate to income tax expense included in the statements of income for the three months ended March 31, 2012 and 2011 follows:

	2012			2011

Tax at statutory federal rate	$	229,977		$	(190,463	)
Tax exempt interest income		(18,981	)		(44,780	)
Other tax exempt income		(27,540	)		(27,540	)
Other		2,544			5,783
	$	186,000		$	(257,000	)

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 6. Employee Benefit Plan

The Bank has a qualified noncontributory defined benefit pension plan that covers substantially all of its employees. The benefits are primarily based on years of service and earnings. The following is a summary of net periodic pension costs for the three-month periods ended March 31, 2012 and 2011.

	March 31,
	2012			2011

Service cost	$	128,975		$	114,499
Interest cost		108,614			109,934
Expected return on plan assets		(211,628	)		(193,682	)
Amortization of net obligation at transition		-			-
Amortization of prior service cost		808			808
Amortization of net (gain) or loss		37,004			11,254
Net periodic benefit cost	$	63,773		$	42,813

No contribution to the plan was made during the three month period ended March 31, 2012. Based on current information, the Bank does not anticipate making a contribution to the plan during 2012.

Note 7. Commitments and Contingencies

The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Bank’s commitments at March 31, 2012 and December 31, 2011 is as follows:

	March 31, 2012		December 31, 2011

Commitments to extend credit	$	15,378,431	$	15,557,229
Standby letters of credit		-		-
	$	15,378,431	$	15,557,229

Commitments to extend credit are agreements to lend to a customer, at a fixed or variable interest rate, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances that the Bank deems necessary.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 8. Fair Value

FASB ASC 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value of future cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. FASB ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2012 and December 31, 2011. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity. These assets and liabilities are classified in Level 1 of the fair value hierarchy.


					Quoted Prices in
					Active Markets
					for Identical				Significant
					Assets or		Significant Other		Unobservable
	Carrying		Fair		Liabilities		Observable Inputs		Inputs
	Amount		Value		(Level 1)		(Level 2)		(Level 3)
(dollars in thousands)

March 31, 2012

Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	540	$	572	$	-	$	572	$	-
Net Loans		206,746		209,841		-		205,495		4,346

Financial Instruments – Liabilities		158,320		161,929		-		161,929		-
Time Deposits		20,000		22,225		-		22,225		-
Long-Term Debt

December 31, 2011

Financial Instruments - Assets
Investment Securities Held-to-Maturity	$	533	$	564	$	-	$	564	$	-
Net Loans		214,227		218,498		-		213,441		5,057

Financial Instruments – Liabilities
Time Deposits		161,963		165,906		-		165,906		-
Long-Term Debt		20,000		22,334		-		22,334		-

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans or foreclosed assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 8. Fair Value, continued

Fair Value Hierarchy

Under FASB ASC 820, “Fair Value Measurements and Disclosures”, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. If a loan is identified as individually impaired, management measures impairment in accordance with applicable accounting guidance. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with accounting standards, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price the Company records the impaired loan as nonrecurring Level 2. When the fair value is based on either an external or internal appraisal and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 8. Fair Value, continued

Derivative Assets and Liabilities

Derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. Management engages third-party intermediaries to determine the fair market value of these derivative instruments and classifies these instruments as Level 2. Examples of Level 2 derivatives are interest rate swaps, caps and floors. No derivative instruments were held as of March 31, 2012 or December 31, 2011.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price the Company records the foreclosed asset as nonrecurring Level 2. When the fair value of the collateral is based on either an external or internal appraisal and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

	Total		Level 1		Level 2		Level 3

March 31, 2012
Investment securities available for sale
U.S. Government agency securities	$	3,016,675	$	-	$	3,016,675	$	-
Government sponsored enterprises		23,938,483		-		23,938,483		-
Mortgage-backed securities		18,984,473		-		18,984,473		-
Corporate bonds		3,077,815		-		3,077,815		-
State and municipal securities		8,780,340		-		8,780,340		-
Total investment securities
available for sale	$	57,797,786	$	-	$	57,797,786	$	-
Total assets at fair value	$	57,797,786	$	-	$	57,797,786	$	-

Total liabilities at fair value	$	-	$	-	$	-	$	-

December 31, 2011
Investment securities available for sale
U.S. Government agency securities	$	3,075,519	$	-	$	3,075,519	$	-
Government sponsored enterprises		20,496,485		-		20,496,485		-
Mortgage-backed securities		12,122,742		-		12,122,742		-
State and municipal securities		13,279,582		-		13,279,582		-
Total investment securities
available for sale	$	48,974,328	$	-	$	48,974,328	$	-
Total assets at fair value	$	48,974,328	$	-	$	48,974,328	$	-

Total liabilities at fair value	$	-	$	-	$	-	$	-

There were no significant transfers to or from Levels 1 and 2 during the three-month period ended March 31, 2012 or for the year ended December 31, 2011.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets and liabilities that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets and liabilities measured at fair value on a nonrecurring basis are included in the table below.

March 31, 2012	Total		Level 1		Level 2		Level 3

Loans	$	4,345,903	$	-	$	-	$	4,345,903
Foreclosed assets		399,947		-		-		399,947
Total assets at fair value	$	4,745,850	$	-	$	-	$	4,745,850

Total liabilities at fair value	$	-	$	-	$	-	$	-

December 31, 2011	Total		Level 1		Level 2		Level 3

Loans	$	5,056,734	$	-	$	-	$	5,056,734
Foreclosed assets		929,135		-		-		929,135
Total assets at fair value	$	5,985,869	$	-	$	-	$	5,985,869

Total liabilities at fair value	$	-	$	-	$	-	$	-

Level 3 Valuation Techniques

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of March 31, 2012, and December 31, 2011, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value at March 31, 2012		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value

Impaired Loans	$	4,345,903	Appraised Value/ Comparable Sales	Appraisals		n/a

OREO	$	399,947	Appraised Value/ Comparable Sales	Appraisals		n/a

	Fair Value at December 31, 2011		Valuation Technique	Significant Unobservable Inputs	Significant Unobservable Input Value

Impaired Loans	$	5,056,734	Appraised Value/ Comparable Sales	Appraisals		n/a

OREO	$	929,135	Appraised Value/ Comparable Sales	Appraisals		n/a

whose aggregate loans or other extensions exceed $250,000 absent prior approval by the Board of Directors consistent with the requirements of the Formal Agreement.

Grayson Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 9. Formal Agreement and Individual Minimum Capital Ratios

On August 9, 2011, the Bank entered into a Formal Agreement with the OCC. Under the terms of the Formal Agreement, the Board of Directors will perform a review of the Bank’s management and thereafter on an ongoing basis ensure that the Bank has competent management to operate the Bank. In addition, the Bank has agreed to develop, implement and ensure compliance with written plans to (a) maintain sufficient capital, (b) improve and sustain earnings, (c) improve the Bank’s position with respect to loans, relationships or other assets criticized in any report of examination of the Bank, and (d) strengthen the loan review system to ensure timely identification and categorization of problem credits. In addition, as part of the Bank’s plan to maintain sufficient capital, the Bank must adopt a dividend policy that permits the declaration of a dividend only when the Bank is in compliance with its approved capital program and certain federal statutes and with the prior written determination of no supervisory objection by the OCC. The Bank has also agreed that it will not extend, renew or capitalize accrued interest on any credit to any borrower whose loans or other extensions of credit have been criticized in any report of examination of the Bank and

In addition to the Formal Agreement, the OCC established minimum capital ratios that require the Bank to maintain a minimum Tier 1 leverage ratio of 8.25%, a Tier 1 risk-based capital ratio of 12.00% and a total risk-based capital ratio of 13.00%.

Management and the Board of Directors are in the process of addressing the requirements of the Formal Agreement and have already taken important steps towards complying with its terms. The Bank continues to maintain sufficient capital and is submitting quarterly capital and profitability plans to the OCC as required by the agreement. A special assets team has been created that is solely responsible for working to improve the Bank’s position with respect to loans, relationships or other assets criticized in any report of examination of the Bank. The Bank has engaged external firms to conduct extensive independent loan reviews and strengthen our internal loan review systems. The Bank has also adopted the required dividend policy as described above.

Note 10. Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has evaluated events occurring subsequent to the balance sheet date through the date these financial statements were issued, determining no events require additional disclosure in these consolidated financial statements.

Part I. Financial Information

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion provides information about the major components of the results of operations and financial condition of the Company. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, including its allowance for loan losses, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Deregistration from SEC Reporting System

On April 5, 2012, President Obama signed into law the Jumpstart our Business Startups Act (the JOBS Act). Among other things, the JOBS Act amended the Securities Exchange Act of 1934 (the “Exchange Act”) to allow bank holding companies with fewer than 1,200 shareholders of record to deregister from the SEC reporting system. On May 14, 2012, the Company filed a Form 15 with the SEC to deregister its common stock under Section 12(g) of the Exchange Act. As a result, the Company’s obligation to file periodic reports such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K will be suspended as of August 12, 2012.

Results of Operations

Overall, the Company recorded pre-tax earnings of $676,403 for the quarter ended March 31, 2012 compared to a pre-tax loss of $560,186 for the quarter ended March 31, 2011. Income tax expense increased by $443,000 from the first quarter of 2011 to 2012 resulting in net income of $490,403 for the first quarter of 2011, compared to a net loss of $303,186 for the same period in 2011. The increase in pretax earnings of $1,236,589 from the first quarter of 2011 to the first quarter of 2012 was due to an increase in securities gains of $1,038,259 combined with a decrease in loan loss provisions of $990,392.

Total interest income decreased by $819,821 for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011, while interest expense on deposits and other borrowings decreased by $394,418 over the same period. The decrease in interest income was attributable primarily to a decrease in the average outstanding balance of loans for the first quarter of 2012 as compared to the same quarter in 2011, an increase in the amount of loans on non-accrual status, and a decrease in the average yield on investment securities in the first quarter of 2012 compared to 2011. From December 31, 2009 to March 31, 2012 the bank has experienced a decrease in loans of 21.5%, from $270 million to $212 million caused by continued weakness in loan demand in the bank’s market area. In response to the decrease in loan demand management has continued to reduce interest rates on deposits, leading to the reduction in interest expense. The result was a decrease in net interest income of $425,403, or 14.9% for the quarter ended March 31, 2012, compared to the same quarter last year.

The provision for loan losses was $315,995 for the quarter ended March 31, 2012 and $1,306,387 for the same period in 2011. The decrease was due to decreased charge-offs and decreases in the level of past-due loans. The reserve for loan losses at March 31, 2012 was approximately 2.36% of total loans, compared to 2.01% at March 31, 2011. Management believes the provision and the resulting allowance for loan losses are adequate.

Total noninterest income was $1,676,285 in the first quarter of 2012 compared to $600,575 in the first quarter of 2011. The majority of the increase came as a result of increased gains on the sale of investment securities totaling $1,038,259 as indicated above. The increased securities gains resulted from sales of tax-exempt municipal bonds in a tax-planning strategy to reduce overall tax-exempt earnings.

Part I. Financial Information

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Noninterest expenses increased by $404,110 for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011. Salary and employee benefit expenses increased by $213,859 due primarily to an increase in the number of employees and the timing of compensation for unused vacation benefits. Employees who are eligible for three or more weeks of vacation in a given year have the option to receive pay in lieu of a portion of their vacation time. Payments for excess vacation time occurred in the second quarter of 2011 and in the first quarter of 2012. Other expenses increased by $153,739, or 19.75%, from $778,582 in the first quarter of 2011, to $932,321 in the first quarter of 2012. The increase in other expenses in 2012 was due primarily to increases in legal and professional fees related to foreclosure activity and troubled debt restructurings. Legal and professional fees accounted for $134,094 of the increase in other expenses.

Financial Condition

Total assets decreased by $2,126,746, or 0.61%, from December 31, 2011 to March 31, 2012. Net loans decreased by $7,481,277, federal funds sold decreased by $2,779,915 and investment securities increased by $8,829,943. The decrease in loans and related increase in investment securities is the result of continued weakness in loan demand in the bank’s market area.

Total deposits decreased by $2,186,146, or 0.74%, from December 31, 2011 to March 31, 2012. The decrease in deposits came as management maintained lower deposit interest rates in response to the aforementioned decrease in loan demand.

Nonperforming assets, including nonaccrual loans, loans past due more than ninety days and foreclosed assets, decreased from $26,495,391 at December 31, 2011 to $24,022,148 at March 31, 2012. Foreclosed assets consist of five properties totaling $2,822,673 at March 31, 2012. One commercial real estate property represents a significant portion of the balance in foreclosed assets with a value of $2,422,726. The four remaining properties are residential real estate properties. Four properties were sold in the quarter ending March 31, 2012. Proceeds from the sale of these properties totaled $559,526 representing a net loss on disposal of $92,109. All foreclosed properties are being marketed for sale. Loans past due more than ninety days, and still accruing interest, decreased from $537,887 at December 31, 2011 to $235,124 at March 31, 2012.

Nonaccrual loans decreased from $22,605,643 at December 31, 2011 to $20,964,351 at March 31, 2012. During the first three months of 2012, loans totaling $1,708,413 were added to nonaccrual status while loans totaling $3,349,705 were removed from nonaccrual status. Loans are generally placed in nonaccrual status when principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection.

Loans less than 90 days past due may be placed in nonaccrual status if management determines that payment in full of principal or interest is not expected. Loans are removed from nonaccrual status when they are deemed a loss and charged to the allowance, transferred to foreclosed assets, or returned to accrual status based upon performance consistent with the original terms of the loan or a subsequent restructuring thereof. Management continues to closely monitor nonperforming assets and their impact on earnings and loan loss reserves.

At March 31, 2012 the allowance for loan losses included $408,312 specifically reserved for impaired loans in the amount of $6,429,487. Based on impairment analysis, loans totaling $14,896,207 were also considered to be impaired but did not require a specific reserve or the related reserve had previously been charged-off. Impaired loans at December 31, 2011 totaled $21,967,946, of which $3,614,531 required specific reserves of $191,205.

Certain types of loans, such as option ARM (adjustable rate mortgage) products, interest-only loans, subprime loans and loans with initial teaser rates, can have a greater risk of non-collection than other loans. The Bank has not offered these types of loans in the past and does not offer them currently. Junior-lien mortgages can also be considered higher risk loans. Our junior-lien portfolio at March 31, 2012 totaled $8.1 million, or 3.84% of total loans. Historical charge-off rates in this category have not varied significantly from other real estate secured loans.

Part I. Financial Information

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Stockholders’ equity totaled $28,147,564 at March 31, 2012 compared to $28,339,906 at December 31, 2011. The $192,342 decrease was the result of the net income of $490,403, offset by a decrease in the market value of securities classified as available for sale of $682,745.

Regulatory guidelines relating to capital adequacy provide minimum risk-based ratios at the Bank level which assess capital adequacy while encompassing all credit risks, including those related to off-balance sheet activities. The Bank is also subject to minimum capital requirements established by the Formal Agreement discussed below. The Bank exceeds all regulatory capital guidelines to which it is currently subject.

Liquidity and Capital Resources

Liquidity is the ability to convert assets to cash to fund depositors’ withdrawals or borrowers’ loans without significant loss. Unsecured federal fund lines available from correspondent banks totaled $6,000,000 at March 31, 2012. No balances were outstanding on these lines at March 31, 2012 or December 31, 2011. Long-term debt consists of borrowings from the Federal Home Loan Bank and Deutsche Bank. Borrowings from the Federal Home Loan Bank, which are secured by a blanket collateral agreement on the Bank’s 1 to 4 family residential real estate loans, totaled $10,000,000 at March 31, 2012 and December 31, 2011. Borrowings from Deutsche Bank, which are secured by the pledging of specific investment securities, totaled $10,000,000 at each of March 31, 2012, and December 31, 2011. The unused credit line from the Federal Home Loan Bank as of March 31, 2012 is approximately $41,870,000.

The Bank uses cash and federal funds sold to meet its daily funding needs. If funding needs are met through holdings of excess cash and federal funds, then profits might be sacrificed as higher-yielding investments are foregone in the interest of liquidity. Therefore management determines, based on such items as loan demand and deposit activity, an appropriate level of cash and federal funds and seeks to maintain that level.

The Bank’s investment security portfolio also serves as a source of liquidity. The primary goals of the investment portfolio are liquidity management and maturity gap management. As investment securities mature, the proceeds are reinvested in federal funds sold if the federal funds level needs to be increased; otherwise the proceeds are reinvested in similar investment securities. The Bank keeps a portion of its investment portfolio in unpledged assets with average lives or repricing terms of less than 60 months. These investments are a preferred source of funds because their market value is not as sensitive to changes in interest rates as investments with longer durations.

As a result of the steps described above, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.

Formal Agreement and Individual Minimum Capital Ratios

Part I. Financial Information

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by phrases such as “the Company expects,” “the Company believes” or words of similar import. Such forward-looking statements involve known and unknown risks including, but not limited to, changes in general economic and business conditions, interest rate fluctuations, competition within and from outside the banking industry, new products and services in the banking industry, risk inherent in making loans such as repayment risks and fluctuating collateral values, problems with technology utilized by the Company, changing trends in customer profiles and changes in laws and regulations applicable to the Company. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For additional information on known and unknown risks, see the “Forward Looking Statements” section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Part I. Financial Information

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

Part I. Financial Information

Item 4. Controls and Procedures

As of the end of the period covered by this report, we 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 and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in its periodic filings with the Securities and Exchange Commission.

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

Part II. Other Information

Item 1. Legal Proceedings

There are no pending legal proceedings to which the Company or the Bank is a party or of which any of their property is subject.

Item 1A. Risk Factors

Not applicable to smaller reporting companies

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. 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.

101

Interactive Data File.

Part II. Other Information

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.

	GRAYSON BANKSHARES, INC.

Date: May 15, 2012	By:	/s/Jacky K. Anderson
		Jacky K. Anderson
		President and Chief Executive Officer



Date: May 15, 2012	By:	/s/Blake M. Edwards
		Blake M. Edwards
		Chief Financial Officer

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.

101

Interactive Data File.

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	8th grade Avg

Grayson Bankshares (GSON) Inactive 10-Q2012 Q1 Quarterly report

Content analysis