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, 2004 [ ] 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) (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 __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 the latest practicable date: 1,718,968 shares of Common Stock, par value $1.25 per share, outstanding as of April 30, 2004. PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets--March 31, 2004 and December 31, 2003 ...............................................3 Consolidated Statements of Income--Three Months Ended March 31, 2004 and March 31, 2003 ...................................4 Consolidated Statements of Stockholders' Equity--Three Months Ended March 31, 2004 and Year Ended December 31, 2003 ...............5 Consolidated Statements of Cash Flows--Three Months Ended March 31, 2004 and March 31, 2003 ...................................6 Notes to Consolidated Financial Statements............................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...........................................9 Item 3. Quantitative and Qualitative Disclosures about Market Risk. .........11 Item 4. Controls and Procedures.. ...........................................12 PART II OTHER INFORMATION Item 1. Legal Proceedings.. .................................................13 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities...................................................13 Item 3. Defaults Upon Senior Securities.. ...................................13 Item 4. Submission of Matters to a Vote of Security Holders..................13 Item 5. Other Information... ................................................13 Item 6. Exhibits and Reports on Form 8-K ....................................13 Signatures ...................................................................14 2 Part I: Financial Information Item 1: Financial Statements Grayson Bankshares, Inc. and Subsidiary Consolidated Balance Sheets March 31, 2004 and December 31, 2003 - ------------------------------------------------------------------------------- March 31, December 31, Assets 2004 2003 ----------------- ----------------- (Unaudited) (Audited) Cash and due from banks $ 6,435,887 $ 11,748,140 Federal funds sold 16,847,364 15,305,544 Investment securities available for sale 41,601,585 41,239,131 Investment securities held to maturity 3,766,247 3,960,887 Restricted equity securities 1,081,750 1,081,750 Loans, net of allowance for loan losses of $2,412,176 at March 31, 2004 and $2,395,387 at December 31, 2003 181,319,052 176,154,730 Cash value of life insurance 4,737,731 4,677,731 4,521,918 4,126,234 Property and equipment, net 6,144,837 6,228,192 Accrued income 1,839,888 1,891,116 Other assets 2,042,893 1,577,707 --------------- ---------------- $ 265,817,234 $ 263,864,928 =============== ================ Liabilities and Stockholders' Equity Liabilities Demand deposits $ 25,314,457 $ 26,708,360 Interest-bearing demand deposits 19,164,777 19,359,587 Savings deposits 52,088,836 53,415,745 Large denomination time deposits 34,872,176 34,695,733 Other time deposits 92,795,052 94,039,723 --------------- ---------------- Total deposits 224,235,298 228,219,148 FHLB advances 15,000,000 10,000,000 Accrued interest payable 548,272 264,640 Other liabilities 601,527 780,344 --------------- ---------------- 240,385,097 239,264,132 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 2004 and 2003 2,148,710 2,148,710 Surplus 521,625 521,625 Retained earnings 22,112,793 21,587,202 Accumulated other comprehensive income 649,009 343,259 --------------- ---------------- 25,432,137 24,600,796 --------------- ---------------- $ 265,817,234 $ 263,864,928 =============== ================ See Notes to Consolidated Financial Statements. 3 Grayson Bankshares, Inc. and Subsidiary Consolidated Statements of Income For the Three Months ended March 31, 2004 and 2003 - ------------------------------------------------------------------------------- Three Months Ended March 31, 2004 2003 ---------- ---------- Interest income: (Unaudited) (Unaudited) Loans and fees on loans $3,075,099 $2,815,234 Federal funds sold 33,043 70,079 Investment securities: Taxable 349,608 469,670 Exempt from federal income tax 118,899 114,797 ---------- ---------- 3,576,649 3,469,780 Interest expense: Deposits 1,036,532 1,416,177 Interest on borrowings 115,268 114,001 ---------- ---------- 1,151,800 1,530,178 Net interest income 2,424,849 1,939,602 Provision for loan losses 90,000 90,000 ---------- ---------- Net interest income after provision for loan losses 2,334,849 1,849,602 ---------- ---------- Noninterest income: Service charges on deposit accounts 116,619 91,030 Other income 157,596 1,013,305 ---------- ---------- 274,215 1,104,335 Noninterest expense: Salaries and employee benefits 1,021,995 840,442 Occupancy expense 58,477 35,169 Equipment expense 155,113 107,441 Other expense 362,422 337,469 ---------- ---------- 1,598,007 1,320,521 Income before income taxes 1,011,057 1,633,416 Income tax expense 262,000 487,000 ---------- ---------- Net income $ 749,057 $1,146,416 ========== ========== Basic earnings per share $ .44 $ .67 ========== ========== Weighted average shares outstanding 1,718,968 1,718,968 ========== ========== See Notes to Consolidated Financial Statements. 4 Grayson Bankshares, Inc. and Subsidiary Consolidated Statements of Stockholders' Equity For the Three Months ended March 31, 2004 (unaudited) and the Year ended December 31, 2003 (audited) - -------------------------------------------------------------------------------- Accumulated Other Common Stock Retained Comprehensive Shares Amount Surplus Earnings Income (Loss) Total ------ ------ ------- -------- ------------- ----- Balance, December 31, 2002 1,718,968 $ 2,148,710 $ 521,625 $ 19,967,611 $ 591,571 $ 23,229,517 Comprehensive income Net income - - - 3,338,559 - 3,338,559 Net change in unrealized appreciation on investment securities available for sale, net of taxes of $(127,918) - - - - (248,312) (248,312) ---------- Total comprehensive income 3,090,247 Dividends paid ($1.00 per share) - - - (1,718,968) - (1,718,968) Balance, December 31, 2003 1,718,968 2,148,710 521,625 21,587,202 343,259 24,600,796 --------- --------- ------- ---------- ------- ---------- Comprehensive income Net income - - - 749,057 - 749,057 Net change in unrealized appreciation on investment securities available for sale, net of taxes of $157,508 - - - - 305,750 305,750 ---------- Total comprehensive income 1,054,807 Dividends paid ($.13 per share) - - - (223,466) - (223,466) Balance, March 31, 2004 1,718,968 $2,148,710 $ 521,625 $ 22,112,793 $ 649,009 $ 25,432,137 ========== ========== ========== ============= ============= ============== See Notes to Consolidated Financial Statements. 5 Grayson Bankshares, Inc. and Subsidiary Consolidated Statements of Cash Flows For the Three Months ended March 31, 2004 and 2003 - -------------------------------------------------------------------------------- Three Months Ended March 31, 2004 2003 ------------- -------------- (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 749,057 $ 1,146,416 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 137,500 90,000 Provision for loan losses 90,000 90,000 Deferred income taxes 311,000 43,000 Net realized gains on securities (33,015) (869,597) Accretion of discount on securities, net of amortization of premiums 63,921 50,070 Deferred compensation 1,361 2,153 Changes in assets and liabilities: Cash value of life insurance (60,000) (60,000) Accrued income 51,228 (71,250) Other assets (933,694) (11,337) Accrued interest payable 283,632 353,154 Other liabilities (180,178) 212,929 ------------- -------------- Net cash provided by operating activities 480,812 975,538 ------------- -------------- Cash flows from investing activities: Net (increase) decrease in federal funds sold (1,541,820) (6,014,384) Purchases of investment securities (4,190,011) (12,531,389) Sales of investment securities 2,639,145 10,998,533 Maturities of investment securities 1,815,404 2,931,254 Purchases of restricted equity securities - (120,100) Net increase in loans (5,254,322) (1,477,191) Purchases of property and equipment, net of sales (54,145) (485,684) ------------- -------------- Net cash used in investing activities (6,585,749) (6,698,961) ------------- -------------- Cash flows from financing activities: Net increase (decrease) in demand, savings and NOW deposits (1,393,903) 1,557,725 Net increase (decrease) in time deposits (2,589,947) 2,782,000 Dividends paid (223,466) (206,276) Net increase in other borrowings 5,000,000 - ------------- -------------- Net cash provided by financing activities 792,684 4,133,449 ------------- -------------- Net increase (decrease) in cash and cash equivalents (5,312,253) (1,589,974) Cash and cash equivalents, beginning 11,748,140 11,265,444 ------------- -------------- Cash and cash equivalents, ending $ 6,435,887 $ 9,675,470 ============= ============== Supplemental disclosure of cash flow information: Interest paid $ 868,168 $ 1,177,024 ============= ============== Taxes paid $ 2,535 $ 51,147 ============= ============== See Notes to Consolidated Financial Statements. 6 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 Grayson National Bank was organized under the laws of the United States in 1900 and currently serves Grayson County, Virginia and surrounding areas through seven 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 March 31, 2004 and for the periods ended March 31, 2004 and 2003 included herein, have been prepared by Grayson Bankshares, Inc., 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, 2003, included in the Company's Form 10-K for the fiscal year ended December 31, 2003. The results of operations for the three month periods ended March 31, 2004 and 2003 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. Note 2. Allowance for Loan Losses The following is an analysis of the allowance for loan losses for the three months ended March 31, 2004 and 2003. 2004 2003 ----------- ----------- Balance, beginning $ 2,395,387 $ 2,189,028 Provision charged to expense 90,000 90,000 Recoveries of amounts charged off 10,213 9,455 Amounts charged off (83,424) (76,151) ----------- ----------- Balance, ending $ 2,412,176 $ 2,212,332 =========== =========== 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 three months ended March 31, 2004 and 2003 follows: 2004 2003 --------- --------- Tax at statutory federal rate $ 343,759 $ 555,361 Tax exempt interest income (47,205) (47,359) Other tax exempt income (40,294) (27,200) Other 5,740 6,198 --------- --------- $ 262,000 $ 487,000 ========= ========= 7 Grayson Bankshares, Inc. and Subsidiary Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 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 March 31, 2004 and 2003 is as follows: 2003 2002 ---------- ---------- Commitments to extend credit $7,807,626 $6,533,667 Standby letters of credit -- -- ---------- ---------- $7,807,626 $6,533,667 ========== ========== 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 that the Bank deems necessary. 8 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, 2003. Results of Operations Total interest income increased by $106,869 for the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003, while interest expense on deposits and other borrowings decreased by $378,378 over the same period. The increase in interest income is attributable to an increase in average loans outstanding while the decrease in interest expense came as a result of the general decreases in interest rates that have occurred over the past year. The result was an increase in net interest income of $485,247 or 25.02%. Other income was down $830,120 in the first quarter of 2004 compared to the first quarter of 2003. This decrease was due to securities gains of approximately $870,000 that were realized in the first quarter of 2003. Those gains were the result of the restructuring of a leveraging strategy that was implemented in the first quarter of 2002 and were not recurring in nature. The provision for credit losses was $90,000 for each of the quarters ended March 31, 2004 and 2003. The reserve for loan losses at March 31, 2004 was approximately 1.31% of total loans. Management believes the provision and the resulting allowance for loan losses are adequate. Total other expenses increased by $277,486, or 21.01% for the quarter ended March 31, 2004 compared to the quarter ended March 31, 2003. Increases in salaries and employee benefits came as a result of employee additions as well as cost increases for employee medical benefits and defined-benefit retirement plans. Increases in occupancy, equipment and other expenses came as a result of branching activity in 2003. The increases in net interest income combined with the decrease in other income and increases in other expenses, resulted in a decrease in net income before taxes of $622,359, for the quarter ended March 31, 2004, compared to the same quarter in 2003. Net income decreased by $397,359, or 34.66% to $749,057 for the first quarter of 2004 compared to net income of $1,146,416 for the same period in 2003. The decrease in net income was due to the securities gains in 2003 that are noted above in the discussion of other income. Financial Condition Total assets increased by $1,952,306, or 0.74% from December 31, 2003 to March 31, 2004. Net loans increased by $5,164,322, federal funds sold increased by $1,541,820, and investment securities increased by $167,814. Total deposits decreased by $3,983,850, or 1.75% from December 31, 2003 to March 31, 2004. FHLB advances increased by $5,000,000, to $15,000,000 at March 31, 2004 compared to $10,000,000 at December 31, 2003. Shareholders' equity totaled $25,432,137 at March 31, 2004 compared to $24,600,796 at December 31, 2003. The $831,341 increase was the result of earnings for the three months combined with an increase in the market value of securities classified as available for sale of $305,750, less the payment of dividends of $223,466. 9 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 exceeds all regulatory capital guidelines and is considered to be well capitalized. Liquidity and Capital Resources Federal fund lines available from correspondent banks totaled $9,100,000 at March 31, 2004. No balances were outstanding on these lines at March 31, 2004, or December 31, 2003. Borrowings from the Federal Home Loan Bank totaled $10,000,000 at December 31, 2003 and $15,000,000 at March 31, 2004. The remaining unused credit line from the Federal Home Loan Bank as of March 31, 2004 is approximately $24,500,000. The liquidity ratio (the level of liquid assets divided by total deposits plus short-term liabilities) was 26.1% at March 31, 2004 and 28.9% at December 31, 2003. These ratios are considered to be adequate by management. 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 prefers to maintain a quiet investment security portfolio. 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 majority of investment security transactions consist of replacing securities that have been called or matured. The Bank keeps a significant portion of its investment portfolio in unpledged assets that are less than 18 months to maturity. These investments are a preferred source of funds in that they can be disposed of in any interest rate environment without causing significant damage to that quarter's profits. 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 "Caution About Forward Looking Statements" section in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. 10 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 $475,000, or 4.73%, while a similar decrease in rates would result in an increase in net interest income of $320,000, or 3.19%. 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. 11 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 along with the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company's President and Chief Executive Officer along with the Chief Financial Officer concluded that our 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 SEC filings. 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. 12 Part II: Other Information Grayson Bankshares, Inc. and Subsidiary - -------------------------------------------------------------------------------- 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 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 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 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. (b) Reports on 8-K None 13 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: May 13, 2004 By: /s/ Jacky K. Anderson ----------------------------- Jacky K. Anderson President and CEO By: /s/ Blake M. Edwards ---------------------------- Blake M. Edwards Chief Financial Officer 14 Exhibit Index Exhibit No. Description ----------- ----------- 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.