Exhibit 99.1

BankShares, Inc.

Financial Report
December 31, 2010

113 West Main Street s Post Office Box 186
Independence, Virginia  24348
(276) 773-2811
East Independence
(276) 773-2811
Elk Creek
(276) 655-4011
(276) 238-2411
(276) 677-3722
(336) 372-2811
(276) 238-8112
(276) 728-2810
(276) 388-3811
(276) 228-6050



Message to Shareholders

Dear Fellow Shareholders,

It is our pleasure to present our 4th Quarter, 2010 Financial Report to you.

Our total assets are $368,217,088, down $1,384,833, or 0.37% for the year.  Net loans have decreased by $18,115,092, or 6.79% as economic conditions continue to negatively impact loan demand.  Deposits decreased by $1,666,358, or 0.53% for the year   as management has not sought to aggressively grow deposits given the continued weakness in loan demand.

Total stockholders’ equity decreased by $130,175 or 0.43% in 2010 due primarily to a decrease in the market value of available-for-sale investment securities.  Retained earnings increased by $478,274 or 1.68% for the year.  The increase in retained earnings was the result of net income of $1,165,861 less the payment of dividends totaling $687,587.  Total stockholders’ equity at December 31, 2010 was $30,409,770, which represents a book value of $17.69 per share.  Dividends of 10 cents per share were declared and paid in December, for a total of 40 cents per share in 2010.

The Company recorded net income of $164,972 for the quarter ended December 31, 2010 compared to net income of $50,941 for the same quarter in 2009.  Our total 2010 net income increased by $283,142 or 32.08% over 2009 despite an annual increase in loan loss provisions of $1,018,721.  Total other expenses decreased for both the forth quarter and the year as management continued efforts to contain and reduce operating costs as we continue to navigate a weak economy.

Despite the challenges of a deep recession we are pleased by the fact that your bank has continued to generate positive earnings throughout the economic downturn.  Even though some challenges remain, we are confident that our strong capital position will allow us to take full advantage of the opportunities that arise when economic conditions begin to improve.

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


Jacky K. Anderson
President and CEO



Condensed Consolidated Balance Sheets

December 31,
December 31,
Cash and due from banks
  $ 9,200,552     $ 8,637,123  
Interest-bearing deposits in banks
    3,305,724       300,000  
Federal funds sold
    27,745,592       19,356,999  
Investment securities
    49,309,137       43,817,701  
    253,055,378       270,183,323  
  Less allowance for loan losses
    4,542,420       3,555,273  
Net loans
    248,512,958       266,628,050  
Cash Value of Life Insurance
    8,433,596       8,098,134  
Foreclosed Assets
    3,256,725       2,808,885  
Properties and equipment
    10,575,133       11,133,834  
Accrued interest receivable
    2,131,943       2,626,164  
Other assets
    5,745,728       6,195,031  
Total assets
  $ 368,217,088     $ 369,601,921  
  $ 42,487,778     $ 44,924,699  
    269,329,080       268,558,517  
Total deposits
    311,816,858       313,483,216  
FHLB Advances
    15,000,000       15,000,000  
Other Borrowings
    10,000,000       10,000,000  
Accrued interest payable
    311,647       382,653  
Other liabilities
    678,813       196,107  
Total liabilities
    337,807,318       339,061,976  
Stockholders’ equity
Preferred stock, $25 par value; 500,000
shares authorized; none outstanding
    -       -  
Common stock, $1.25 par value; 2,000,000
shares authorized; 1,718,968 shares
issued and outstanding
    2,148,710       2,148,710  
    521,625       521,625  
Retained earnings
    28,975,488       28,497,214  
Accumulated other comprehensive income (loss)
    (1,236,053 )     (627,604 )
Total stockholders’ equity
    30,409,770       30,539,945  
Total liabilities and stockholders’ equity
  $ 368,217,088     $ 369,601,921  

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



Condensed Consolidated Statements of Operations 

Three Months Ended December 31,
Year Ended December 31,
Interest income
Loans and fees on loans
  $ 3,987,362     $ 4,395,694     $ 16,648,016     $ 17,813,275  
Interest on securities
    350,549       480,764       1,654,677       2,066,558  
Federal funds sold
    18,292       9,807       49,383       37,187  
Interest-bearing deposits
    3,190       -       6,826       -  
Total interest income
    4,359,393       4,886,265       18,358,902       19,917,020  
Interest expense
    1,209,499       1,614,323       5,450,236       7,271,248  
FHLB Advances
    144,347       145,519       568,906       657,503  
Other Borrowings
    123,182       123,182       488,694       488,694  
Total interest expense
    1,477,028       1,883,024       6,507,836       8,417,445  
Net interest income
    2,882,365       3,003,241       11,851,066       11,499,575  
Provision for loan losses
    946,836       628,517       2,509,569       1,490,848  
Net interest income after provision
  for loan losses
    1,935,529       2,374,724       9,341,497       10,008,727  
Other income
Service charges on deposit accounts
    299,581       295,183       1,098,135       1,031,306  
Other income (loss)
    708,925       350,348       1,863,477       1,211,539  
Total other income (loss)
    1,008,506       645,531       2,961,612       2,242,845  
Other expenses
Salaries and employee benefits
    1,586,322       1,630,262       6,280,437       6,553,441  
Occupancy expense
    136,978       135,257       485,097       494,863  
Equipment expense
    176,079       199,112       760,313       830,877  
Other expense
    864,164       1,064,382       3,344,881       3,389,371  
Total other expense
    2,763,543       3,029,013       10,870,728       11,268,552  
Net income before income taxes
    180,492       (8,758 )     1,432,381       983,020  
Income taxes
    15,520       (59,699 )     266,520       100,301  
Net income
  $ 164,972     $ 50,941     $ 1,165,861     $ 882,719  
Net income per share
  $ .10     $ .03     $ .68     $ .51  
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
Jacky K. Anderson
Grayson BankShares, Inc. and The Grayson National Bank
Jean W. Lindsey
Walters’ Drug, Inc.
Dennis B. Gambill
Grayson BankShares, Inc. and The Grayson National Bank
Jack E. Guynn, Jr.
Guynn Enterprises, Inc.
Charles T. Sturgill
 Retired Grayson County Clerk of Court
J. David Vaughan
Vaughan Furniture
Thomas M. Jackson, Jr.
Bryan L. Edwards
Sparta Town Manager
Hayden H. Horney
Wythe County Clerk of Court
Member Federal Deposit Insurance Corporation

The following information was filed by Grayson Bankshares Inc (GSON) on Monday, March 14, 2011 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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