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 September 30, 2002
[ ] 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 54-1647596
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
113 West Main Street
Independence, Virginia 24348
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (276) 773-2811
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 __X__ No _____
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes ___ No _X_
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of September 30, 2002.
1,718,968 shares of common stock, par value $1.25 per share
GRAYSON BANKSHARES, INC.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001.....................3
Consolidated Statements of Income
For the Nine Months Ended September 30, 2002 and 2001........4
Consolidated Statements of Income
For the Three Months Ended September 30, 2002 and 2001.......5
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 30, 2002 and
the Year Ended December 31, 2001.............................6
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002 and 2001........7
Notes to Consolidated Financial Statements...................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk..12
Item 4. Controls and Procedures.....................................13
Part II. Other Information
Item 1. Legal Proceedings...........................................14
Item 2. Changes in Securities and Use of Proceeds...................14
Item 3. Defaults Upon Senior Securities.............................14
Item 4. Submission of Matters to a Vote of Security Holders.........14
Item 5. Other Information...........................................14
Item 6. Exhibits and Reports on Form 8-K............................14
Signatures
2
Part I: Financial Information
Item 1: Financial Statements
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Grayson Bankshares, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
- --------------------------------------------------------------------------------
September 30, December 31,
Assets 2002 2001
----------------- ----------------
(Unaudited) (Audited)
Cash and due from banks $ 11,010,690 $ 8,715,457
Interest-bearing deposits with banks - -
Federal funds sold 13,149,400 12,636,046
Investment securities available for sale 39,430,551 26,010,899
Investment securities held to maturity 4,753,283 6,615,328
Restricted equity securities 845,450 825,750
Loans, net of allowance for loan losses of $2,084,206
at September 30, 2002 and $1,821,966 at December 31, 2001 153,142,945 140,897,841
Property and equipment, net 3,615,851 2,913,998
Accrued income 1,946,202 1,713,644
Other assets 5,089,704 1,140,177
--------------- ----------------
$ 232,984,076 $ 201,469,140
=============== ================
Liabilities and Stockholders' Equity
Liabilities
Demand deposits $ 21,938,768 $ 20,790,306
Interest-bearing demand deposits 17,651,554 15,168,088
Savings deposits 37,178,427 31,606,065
Large denomination time deposits 33,311,580 29,944,872
Other time deposits 88,494,659 81,813,651
--------------- ----------------
Total deposits 198,574,988 179,322,982
FHLB Advances 10,000,000 -
Accrued interest payable 752,180 267,798
Other liabilities 622,158 792,587
--------------- ----------------
209,949,326 180,383,368
Commitments and contingencies
Stockholders' equity
Preferred stock, $25 par value; 500,000
shares authorized; none issued - -
Common stock, $1.25 par value; 5,000,000 shares
authorized; 1,718,968 shares issued and
outstanding in 2002 and 2001 2,148,710 2,148,710
Surplus 521,625 521,625
Retained earnings 19,667,874 18,221,877
Accumulated other comprehensive income (loss) 696,541 193,561
--------------- ----------------
23,034,750 21,085,773
--------------- ----------------
$ 232,984,076 $ 201,469,140
=============== ================
See Notes to Consolidated Financial Statements
3
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Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Income
For the Nine Months ended September 30, 2002 and 2001
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
2002 2001
------------- -------------
Interest income: (Unaudited) (Unaudited)
Loans and fees on loans $ 8,925,294 $ 8,921,169
Federal funds sold 175,994 272,592
Investment securities:
Taxable 1,349,497 844,043
Exempt from federal income tax 321,355 351,591
Deposits with banks - -
------------- --------------
10,772,140 10,389,395
Interest expense:
Deposits 4,686,115 5,492,367
Interest on borrowings 326,568 -
------------- --------------
5,012,683 5,492,367
Net interest income 5,759,457 4,897,028
Provision for loan losses 315,000 205,000
------------- --------------
Net interest income after
provision for loan losses 5,444,457 4,692,028
------------- --------------
Noninterest income:
Service charges on deposit accounts 253,107 247,576
Other income 310,477 76,550
------------- --------------
563,584 324,126
------------- --------------
Noninterest expense:
Salaries and employee benefits 2,207,522 1,927,115
Occupancy expense 90,912 98,581
Equipment expense 321,456 263,158
Other expense 897,981 764,255
------------- --------------
3,517,871 3,053,109
Income before income taxes 2,490,170 1,963,045
Income tax expense 666,000 560,500
------------- --------------
Net income $ 1,824,170 $ 1,402,545
============= ==============
Basic earnings per share $ 1.06 $ .82
============= ==============
Weighted average shares outstanding 1,718,968 1,718,968
============= ==============
See Notes to Consolidated Financial Statements
4
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Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Income
For the Three Months ended September 30, 2002 and 2001
- --------------------------------------------------------------------------------
Three Months Ended
September 30,
2002 2001
------------- -------------
Interest income: (Unaudited) (Unaudited)
Loans and fees on loans $ 3,058,723 $ 2,988,478
Federal funds sold 59,390 71,580
Investment securities:
Taxable 507,887 294,072
Exempt from federal income tax 72,044 114,883
Deposits with banks - -
------------- --------------
3,698,044 3,469,013
Interest expense:
Deposits 1,542,586 1,804,636
Interest on borrowings 116,534 -
------------- --------------
1,659,120 1,804,636
Net interest income 2,038,924 1,664,377
Provision for loan losses 105,000 70,000
------------- --------------
Net interest income after
provision for loan losses 1,933,924 1,594,377
------------- --------------
Noninterest income:
Service charges on deposit accounts 92,121 83,717
Other income 126,401 27,545
------------- --------------
218,522 111,262
------------- --------------
Noninterest expense:
Salaries and employee benefits 760,286 637,905
Occupancy expense 31,928 33,128
Equipment expense 114,296 90,669
Other expense 318,084 230,562
------------- --------------
1,224,594 992,264
------------- --------------
Income before income taxes 927,852 713,375
Income tax expense 249,000 203,500
------------- --------------
Net income $ 678,852 $ 509,875
============= ==============
Basic earnings per share $ .39 $ .30
============= ==============
Weighted average shares outstanding 1,718,968 1,718,968
============= ==============
See Notes to Consolidated Financial Statements
5
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Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
For the Nine Months ended September 30, 2002 (unaudited) and
the Year ended December 31, 2001 (audited)
- --------------------------------------------------------------------------------
Accumulated
Other
Common Stock Retained Comprehensive
Shares Amount Surplus Earnings Income (Loss) Total
------ ------ ------- -------- ------------- -----
Balance, December 31, 2000 1,718,968 $ 2,148,710 $ 521,625 $ 16,986,754 $ (19,428) $ 19,637,661
Comprehensive income
Net income - - - 1,939,900 - 1,939,900
Net change in unrealized
appreciation on investment
securities available for
sale, net of taxes of $109,722 - - - - 212,989 212,989
----------
Total comprehensive income 2,152,889
Dividends paid
($.41 per share) - - - (704,777) - (704,777)
Balance, December 31, 2001 1,718,968 2,148,710 521,625 18,221,877 193,561 21,085,773
--------- --------- ------- ---------- ------- ----------
Comprehensive income
Net income - - - 1,824,170 - 1,824,170
Net change in unrealized
appreciation on investment
securities available for
sale, net of taxes of $259,111 - - - - 502,980 502,980
---------
Total comprehensive income 2,327,150
Dividends paid
($.22 per share) - - - (378,173) - (378,173)
--------- --------- ------- ---------- ------- ----------
Balance, September 30, 2002 1,718,968 $2,148,710 $ 521,625 $ 19,667,874 $ 696,541 $ 23,034,750
========== ========== ========== ============= ============= ==============
See Notes to Consolidated Financial Statements
6
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Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months ended September 30, 2002 and 2001
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
2002 2001
------------- ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 1,824,170 $ 1,402,545
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 277,500 223,200
Provision for loan losses 315,000 205,000
Deferred income taxes (52,000) 36,500
Net realized gains on securities (1,750) (2,792)
Accretion of discount on securities, net of
amortization of premiums 84,946 24,444
Deferred compensation 4,318 7,547
Changes in assets and liabilities:
Accrued income (232,558) (247,823)
Other assets (156,638) (93,850)
Accrued interest payable 484,382 426,472
Other liabilities (174,747) (147,888)
------------- --------------
Net cash provided by operating activities 2,372,623 1,833,355
------------- --------------
Cash flows from investing activities:
(Increase) decrease in interest-bearing deposits with banks - -
Net (increase) decrease in federal funds sold (513,354) (3,125,472)
Purchases of investment securities (16,561,165) (10,573,226)
Sales of investment securities - 2,401,407
Maturities of investment securities 5,682,453 6,775,494
Purchases of restricted equity securities (19,700) -
Net increase in loans (12,560,104) (7,344,825)
Purchases of bank-owned life insurance (4,000,000) -
Purchases of property and equipment, net of sales (979,353) (216,233)
------------- --------------
Net cash used in investing activities (28,951,223) (12,082,855)
------------- --------------
Cash flows from financing activities:
Net increase (decrease) in demand,
savings and NOW deposits 9,204,290 1,349,801
Net increase in time deposits 10,047,716 10,838,505
Dividends paid (378,173) (343,794)
Net increase (decrease) in other borrowings 10,000,000 -
------------- --------------
Net cash provided by financing activities 28,873,833 11,844,512
------------- --------------
Net increase (decrease) in cash and cash equivalents 2,295,233 1,595,012
Cash and cash equivalents, beginning 8,715,457 4,993,526
------------- --------------
Cash and cash equivalents, ending $ 11,010,690 $ 6,588,538
============= ==============
Supplemental disclosure of cash flow information:
Interest paid $ 4,528,301 $ 5,065,895
============= ==============
Taxes paid $ 731,219 $ 507,290
============= ==============
See Notes to Consolidated Financial Statements
7
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Grayson Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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). 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 six 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 Federal Reserve.
The consolidated financial statements as of September 30, 2002 and for the
periods ended September 30, 2002 and 2001 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, 2001, included in the
Company's Form 10-K for the fiscal year ended December 31, 2001.
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.
Note 2. Allowance for Loan Losses
The following is an analysis of the allowance for loan losses for the nine
months ended September 30.
2002 2001
------------- --------------
Balance, beginning $ 1,821,966 $ 1,760,999
Provision charged to expense 315,000 205,000
Recoveries of amounts charged off 175,610 58,612
Amounts charged off (228,370) (282,328)
------------- --------------
Balance, ending $ 2,084,206 $ 1,742,283
============= ==============
Note 3. 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 nine
months ended September 30, 2002 and 2001 follows:
2002 2001
------------- --------------
Tax at statutory federal rate $ 846,658 $ 667,435
Tax exempt interest income (109,261) (119,541)
Tax exempt increase in cash value of insurance (54,400) -
Other (16,997) 12,606
------------- --------------
$ 666,000 $ 560,500
============= ==============
8
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Grayson Bankshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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Note 4. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
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 Septemer 30, 2002 and 2001 is as follows:
2002 2001
------------- --------------
Commitments to extend credit $ 6,222,286 $ 5,421,965
Standby letters of credit - -
------------- --------------
$ 6,222,286 $ 5,421,965
============= ==============
Commitments to extend credit are agreements to lend to a customer 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 which the Bank deems necessary.
9
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Part I: Financial Information
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Results of Operations
Total interest income increased by $229,031 for the quarter ended September 30,
2002 compared to the quarter ended September 30, 2001, while interest expense on
deposits and other borrowings decreased by $145,516 over the same period. This
resulted in an increase in net interest income of $374,547 or 22.50%. This
increase is due primarily to the stabilization of interest rates, which enabled
the Bank to recapture some of the interest margin that was lost during the rapid
rate declines of 2001.
Other income was up $107,260 in the second quarter of 2002 compared to the
second quarter of 2001. This is a result of increases in the cash value of
bank-owned life insurance policies which were purchased in January 2002.
The provision for credit losses was $105,000 for the quarter ended September 30,
2002 and $70,000 for the quarter ended September 30, 2001. An increase in the
provision was necessary based on overall loan growth as well as an increase in
the percentage of commercial credits. Management believes the provision and the
resulting allowance for loan losses are adequate.
Total other expenses increased by $232,330, or 23.41% for the quarter ended
September 30, 2002 compared to the quarter ended September 30, 2001. This is due
primarily to a cost increase of over twenty percent for employee medical
benefits and equipment costs associated with the upgrading of various computer
systems.
The significant increases in net interest income and other income resulted in an
increase in net income before taxes of $214,477, or 30.07% for the quarter ended
September 30, 2002, compared to the same quarter in 2001. Increased income
generated an increase in income tax expense, however our effective tax rate
decreased by approximately 1.69% due to increases in tax-exempt investments. Net
income increased by $168,977, or 33.14% to $678,852 for the second quarter of
2002 compared to net income of $509,875 for the same period in 2001.
For the nine months ended September 30, 2002, total interest income increased by
$382,745 compared to the nine-month period ended September 30, 2001, while
interest expense decreased by $479,684 over the same period. This resulted in an
increase in net interest income of $862,429, or 17.61%. As stated above, net
interest margins increased as interest rates began to stabilize.
Other income was up $239,458 for the nine-month period ended September 30, 2002
compared to the same period in 2001. Again this was the result of increases in
the cash value of bank-owned life insurance policies.
Normal cost increases, combined with the aforementioned costs of benefits and
equipment upgrades, resulted in an overall increase in other expenses of
$464,762 for the first nine months of 2002 compared to the first nine months of
2001. Net income for the nine-month period ended September 30, 2002 increased by
$421,625, or 30.06% compared to the nine-month period ended September 30, 2001.
Financial Condition
Total assets increased by $31,514,936, or 15.64% from December 31, 2001 to
September 30, 2002. Net loans increased by $12,245,104 and investment securities
increased by $11,557,307.
Total deposits increased by $19,252,006, or 10.74% from December 31, 2001 to
September 30, 2002. In the fourth quarter of 2001, the Bank applied for, and was
granted membership in the Federal Home Loan Bank of Atlanta. The Bank used this
membership in the first quarter of 2002 to borrow funds at a low fixed-interest
rate and in turn invest the funds in securities with similar maturities in order
to enhance earnings. FHLB advances were $10,000,000 at Septembre 30, 2002.
Shareholders' equity totaled $23,034,750 at September 30, 2002 compared to
$21,085,773 at December 31, 2001. The $1,948,977 increase was the result of
earnings for the nine months combined with a $502,980 increase in the market
value of securities that are classified as available for sale, less the payment
of dividends of $378,173.
10
- --------------------------------------------------------------------------------
Part I: Financial Information
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
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
(a wholly owned subsidiary of the Company) exceeds all regulatory capital
guidelines and is considered to be well capitalized.
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.
11
- --------------------------------------------------------------------------------
Part I: Financial Information
Item 3: Quantitative and Qualitative Disclosures about Market Risk
- --------------------------------------------------------------------------------
The principal goals of the Bank's asset and liability management strategy are
the maintenance of adequate liquidity and the management of interest rate risk.
Liquidity is the ability to convert assets to cash to fund depositors'
withdrawals or borrowers' loans without significant loss. Interest rate risk
management balances the effects of interest rate changes on assets that earn
interest or liabilities on which interest is paid, to protect the Bank from wide
fluctuations in its net interest income which could result from interest rate
changes.
Management must ensure that adequate funds are available at all times to meet
the needs of its customers. On the asset side of the balance sheet, maturing
investments, loan payments, maturing loans, federal funds sold, and unpledged
investment securities are principal sources of liquidity. On the liability side
of the balance sheet, liquidity sources include core deposits, the ability to
increase large denomination certificates, federal fund lines from correspondent
banks, borrowings from the Federal Home Loan Bank and the Federal Reserve Bank,
as well as the ability to generate funds through the issuance of long-term debt
and equity.
Interest rate risk is the effect that changes in interest rates would have on
interest income and interest expense as interest-sensitive assets and
interest-sensitive liabilities either reprice or mature. Management attempts to
maintain the portfolios of interest-earning assets and interest-bearing
liabilities with maturities or repricing opportunities at levels that will
afford protection from erosion of net interest margin, to the extent practical,
from changes in interest rates.
The Bank uses a number of tools to manage its interest rate risk, including
simulating net interest income under various scenarios, monitoring the present
value change in equity under the same scenarios, and monitoring the difference
or gap between rate sensitive assets and rate sensitive liabilities over various
time periods.
The earnings simulation model forecasts annual net income under a variety of
scenarios that incorporate changes in the absolute level of interest rates,
changes in the shape of the yield curve and changes in interest rate
relationships. Management evaluates the effect on net interest income from
gradual changes in the Prime Rate of up to 300 basis points up or down over a
12-month period. The current model indicates that an increase in rates of 300
basis points over the next twelve months would result in a decrease in net
interest income of $621,000, or 8.64%, while a similar decrease in rates would
result in an increase in net interest income of $568,000, or 7.91%. The model
also incorporates Management's forecasts for balance sheet growth, noninterest
income and noninterest expense. The interest rate scenarios are used for
analytical purposes and do not represent Management's view of future market
movements. Rather, these are intended to provide a measure of the degree of
volatility interest rate movements may apply to the earnings of the Company.
Modeling the sensitivity of earnings to interest rate risk is highly dependent
on numerous assumptions embedded in the simulation model. While the earnings
sensitivity analysis incorporates Management's best estimate of interest rate
and balance sheet dynamics under various market rate movements, the actual
behavior and resulting earnings impact likely will differ from that projected.
12
- --------------------------------------------------------------------------------
Part I: Financial Information
Item 4: Controls and Procedures
- --------------------------------------------------------------------------------
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Officer along
with the Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to Rule
13a-14, under the Securities Exchange Act of 1934, as amended. Based upon that
evaluation, the Company's President and Chief Executive Officer along with the
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in our periodic filings with the Securities and Exchange Commission.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date that the Company carried out this evaluation.
13
Part II: Other Information
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company or
its subsidiary is a party or of which any of their property is subject.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Statement of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C.ss.1350
(b) Reports on 8-K
None
14
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRAYSON BANKSHARES, INC.
Date: November 12, 2002 By: /s/Jacky K. Anderson
President and CEO
By; /s/Blake M. Edwards
Chief Financial Officer
15
CERTIFICATIONS
I, Jacky K. Anderson certify that:
1. I have reviewed this quarterly report on Form 10-Q of Grayson
Bankshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Jacky K. Anderson
Jacky K. Anderson
President and Chief Executive Officer
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CERTIFICATIONS
I, Blake M. Edwards certify that:
1. I have reviewed this quarterly report on Form 10-Q of Grayson
Bankshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Blake M. Edwards
Blake M. Edwards
Chief Financial Officer
17