EX-99
2
exh99_1.txt
EXHIBIT 99.1

                                                                    Exhibit 99.1

================================================================================



                            Grayson Bankshares, Inc.
                                Financial Report
                                December 31, 2004


================================================================================
================================================================================


                   113 West Main Street o Post Office Box 186
                          Independence, Virginia 24348
                                 (276) 773-2811

                           --------------------------


     East Independence                   (276) 773-2811
     Elk Creek                           (276) 655-4011
     Galax                               (276) 238-2411
     Troutdale                           (276) 677-3722
     Sparta                              (336) 372-2811
     Carroll                             (276) 238-8112
     Hillsville                          (276) 728-2810


Message to Shareholders
--------------------------------------------------------------------------------

Dear Fellow Shareholders,

It is our pleasure to present our 4th Quarter 2004 financial Report to you.

Our total  assets are  $269,668,938,  up  $5,804,010  or 2.20% over the previous
year.  Net loans  have  increased  by  $20,757,140,  or 11.78%,  while  deposits
increased by $2,840,195,  or 1.24%, during the last twelve months. Federal funds
sold and investment  securities  decreased as balances were allocated to funding
the increased loan demand.

Stockholder's  equity at December  31,  2004 was  $26,177,047,  representing  an
increase  of  $1,576,251,  or 6.41% for the year then  ended.  A fourth  quarter
dividend of 21 cents per share was declared and paid in December  bringing total
dividends  paid in 2004 to $0.60 per share.  The book value of our stock at year
end was $15.23 per share.

Net income totaled  $766,817 for the three-month  period ended December 31, 2004
and  $3,241,468  for the year then  ended.  The  slight  decrease  in the yearly
results is due to a decrease in "other  income" which was higher in 2003 because
of securities  gains and a  nonrecurring  gain realized upon  termination  of an
interest  rate  swap.  An  increase  in the Bank's  net  interest  margin led to
increases in net interest  income of 18.87% and 23.86% for the  three-month  and
twelve-month  periods ended  December 31, 2004,  compared to the same periods in
2003.

Thanks to everyone who attended the grand opening of our new  Hillsville  office
on December 17 and helped to make it such a success.  We are especially grateful
to the many employees who worked so diligently to make the day possible.

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

 Sincerely,


Jacky K. Anderson
President and CEO



Consolidated Balance Sheets
--------------------------------------------------------------------------------
                                                    December 31,   December 31,
                                                        2004           2003
                                                   ------------    ------------

Assets
   Cash and due from banks                         $  10,032,398   $  11,748,140
   Federal funds sold                                  8,833,069      15,305,544
   Investment securities                              37,909,290      46,281,768

   Loans                                             199,521,629     178,550,117
     Less allowance for loan losses                    2,609,759       2,395,387
                                                   -------------   -------------
       Net loans                                     196,911,870     176,154,730
   Properties and equipment                            7,316,750       6,228,192
   Accrued interest receivable                         1,833,728       1,891,116
   Other assets                                        6,831,833       6,255,438
                                                   -------------   -------------
       Total assets                                $ 269,668,938   $ 263,864,928
                                                   =============   =============

Liabilities
   Demand deposits                                 $  31,569,179   $  26,708,360
   Interest-bearing demand deposits                   21,352,600      19,359,587
   Savings deposits                                   51,489,408      53,415,745
   Large denomination time deposits                   36,668,682      34,695,733
   Other time deposits                                89,979,474      94,039,723
                                                   -------------   -------------
       Total deposits                                231,059,343     228,219,148

   FHLB Advances                                      12,000,000      10,000,000
   Accrued interest payable                              253,652         264,640
   Other liabilities                                     178,896         780,344
                                                   -------------   -------------
       Total liabilities                             243,491,891     239,264,132
                                                   -------------   -------------

   Commitments and contingencies

Stockholders' equity
   Preferred stock, $25 par value; 500,000
     shares authorized; none outstanding                       -               -
   Common stock, $1.25 par value; 5,000,000
     shares authorized; 1,718,968 shares
     issued and outstanding                            2,148,710       2,148,710
   Surplus                                               521,625         521,625
   Retained earnings                                  23,797,290      21,587,202
   Accumulated other comprehensive income (loss)        (290,578)        343,259
                                                   -------------   -------------
       Total stockholders' equity                     26,177,047      24,600,796
                                                   -------------   -------------
       Total liabilities and stockholders' equity  $ 269,668,938   $ 263,864,928
                                                   =============   =============
--------------------------------------------------------------------------------

                                Officers
                                --------
Julian L. Givens..................................Chairman of the Board
Jacky K. Anderson.......................................President & CEO
Dennis B. Gambill........................................Vice President
Brenda C. Smith...............................................Secretary
Blake M. Edwards................................Chief Financial Officer

Consolidated Statements of Operations
--------------------------------------------------------------------------------
Three Months Ended December 31, Year Ended December 31, 2004 2003 2004 2003 -------------- ------------- ------------- ------------- Interest income Loans and fees on loans $ 3,440,672 $ 3,061,387 $ 12,985,131 $ 11,771,356 Interest on securities 395,017 474,683 1,729,116 2,000,501 Federal funds sold 46,477 35,892 139,300 245,840 ------------- ------------- ------------- ------------- Total interest income 3,882,166 3,571,962 14,853,547 14,017,697 Interest expense Deposits 986,468 1,120,211 3,954,159 5,123,483 FHLB Advances 125,028 120,815 519,247 513,639 ------------- ------------- ------------- ------------- Total interest expense 1,111,496 1,241,026 4,473,406 5,637,122 Net interest income 2,770,670 2,330,936 10,380,141 8,380,575 Provision for loan losses 105,000 120,000 390,000 410,000 ------------- ------------- ------------- ------------- Net interest income after provision for loan losses 2,665,670 2,210,936 9,990,141 7,970,575 ------------- ------------- ------------- ------------- Other income Service charges on deposit accounts 140,649 115,964 549,871 429,135 Other income 185,448 178,109 886,866 2,073,894 ------------- ------------- ------------- ------------- Total other income 326,097 294,073 1,436,737 2,503,029 ------------- ------------- ------------- ------------- Other expenses Salaries and employee benefits 1,076,120 908,173 4,296,445 3,633,502 Occupancy expense 70,112 57,978 232,506 169,858 Equipment expense 173,183 148,747 638,069 501,658 Other expense 596,410 451,635 1,803,265 1,524,492 ------------- ------------- ------------- ------------- Total other expense 1,915,825 1,566,533 6,970,285 5,829,510 ------------- ------------- ------------- ------------- Net income before income taxes 1,075,942 938,476 4,456,593 4,644,094 Income taxes 309,125 258,535 1,215,125 1,305,535 ------------- ------------- ------------- ------------- Net income $ 250,821 $ 448,063 $ 981,204 $ 1,140,507 ============= ============= ============= ============= Net income $ 766,817 $ 679,941 $ 3,241,468 $ 3,338,559 ============= ============= ============= ============= Net income per share $ .45 $ .40 $ 1.89 $ 1.94 ============= ============= ============= ============= Weighted average shares outstanding 1,718,968 1,718,968 1,718,968 1,718,968 ============= ============= ============= =============
-------------------------------------------------------------------------------- Board of Directors ------------------ Julian L. Givens..............................................Retired Physician Carl J. Richardson......................................................Retired Jacky K. Anderson........Grayson BankShares, Inc. and The Grayson National Bank Jean W. Lindsey.............................................Walters' Drug, Inc. Fred B. Jones............................................................Farmer Dennis B. Gambill........Grayson BankShares, Inc. and The Grayson National Bank Jack E. Guynn, Jr.......................................Guynn Enterprises, Inc. Charles T. Sturgill...............................Grayson County Clerk of Court J. David Vaughan..............................................Vaughan Furniture Thomas M. Jackson, Jr..................................................Attorney Member Federal Deposit Insurance Corporation --------------------------------------------------------------------------------

The following information was filed by Grayson Bankshares Inc (GSON) on Thursday, February 3, 2005 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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