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, 2003
[ ] 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 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.
There were 1,718,968 shares of Common Stock, par value
$1.25 per share, outstanding as of May 12, 2003
GRAYSON BANKSHARES, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets--Three Months Ended March 31, 2003 and December
31, 2003 2
Consolidated Statements of Income--Three Months Ended March 31, 2003 and
March 31, 2002 3
Consolidated Statements of Stockholders' Equity--Three Months Ended March
31, 2003 and Year Ended December 31, 2002 4
Consolidated Statements of Cash Flows--Three Months Ended March 31, 2003
and March 31, 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 10
Item 4. Controls and Procedures 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
Part I: Financial Information
Item 1: Financial Statements
Grayson Bankshares, Inc. and Subsidiary
Consolidated Balance Sheets
March 31, 2003 and December 31, 2002
- -------------------------------------------------------------------------------
March 31, December 31,
Assets 2003 2002
----------------- ------------------
(Unaudited) (Audited)
Cash and due from banks $ 9,675,470 $ 11,265,444
Interest-bearing deposits with banks - -
Federal funds sold 25,754,612 19,740,228
Investment securities available for sale 40,771,281 40,120,124
Investment securities held to maturity 2,745,396 3,906,401
Restricted equity securities 883,800 845,450
Loans, net of allowance for loan losses of $2,212,332
at March 31, 2003 and $2,189,028 at December 31, 2002 155,577,196 154,190,005
Property and equipment, net 4,521,918 4,126,234
Accrued income 1,870,156 1,798,906
Other assets 5,322,461 5,289,797
--------------- ----------------
$ 247,122,290 $ 241,282,589
=============== ================
Liabilities and Stockholders' Equity
Liabilities
Demand deposits $ 23,228,482 $ 22,950,583
Interest-bearing demand deposits 16,784,724 18,079,169
Savings deposits 40,396,877 37,822,606
Large denomination time deposits 36,352,449 35,232,988
Other time deposits 94,485,717 92,823,178
--------------- ----------------
Total deposits 211,248,249 206,908,524
FHLB Advances 10,000,000 10,000,000
Accrued interest payable 682,129 328,975
Other liabilities 1,030,655 815,573
--------------- ----------------
222,961,033 218,053,072
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 2003 and 2002 2,148,710 2,148,710
Surplus 521,625 521,625
Retained earnings 20,907,751 19,967,611
Accumulated other comprehensive income (loss) 583,171 591,571
--------------- ----------------
24,161,257 23,229,517
--------------- ----------------
$ 247,122,290 $ 241,282,589
=============== ================
See Notes to Consolidated Financial Statements
2
Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Income
For the Three Months ended March 31, 2003 and 2002
- -------------------------------------------------------------------------------
Three Months Ended
March 31,
2003 2002
------------- --------------
Interest income: (Unaudited) (Unaudited)
Loans and fees on loans $ 2,815,234 $ 2,939,966
Federal funds sold 70,079 61,871
Investment securities:
Taxable 469,670 392,650
Exempt from federal income tax 114,797 106,639
Deposits with banks - -
------------- --------------
3,469,780 3,501,126
Interest expense:
Deposits 1,416,177 1,588,003
Interest on borrowings 114,001 94,767
------------- --------------
1,530,178 1,682,770
Net interest income 1,939,602 1,818,356
Provision for loan losses 90,000 105,000
------------- --------------
Net interest income after
provision for loan losses 1,849,602 1,713,356
------------- --------------
Noninterest income:
Service charges on deposit accounts 91,030 71,380
Other income 1,013,305 73,757
------------- --------------
1,104,335 145,137
------------- --------------
Noninterest expense:
Salaries and employee benefits 840,442 688,807
Occupancy expense 35,169 29,916
Equipment expense 107,441 104,140
Other expense 337,469 278,222
------------- --------------
1,320,521 1,101,085
Income before income taxes 1,633,416 757,408
Income tax expense 487,000 199,000
------------- --------------
Net income $ 1,146,416 $ 558,408
============= ==============
Basic earnings per share $ .67 $ .32
============= ==============
Weighted average shares outstanding 1,718,968 1,718,968
============= ==============
See Notes to Consolidated Financial Statements
3
Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
For the Three Months ended March 31, 2003, (unaudited)
and the Year ended December 31, 2002, (audited)
- -------------------------------------------------------------------------------
Accumulated
Other
Common Stock Retained Comprehensive
Shares Amount Surplus Earnings Income (Loss) Total
------ ------ ------- -------- ------------- -----
Balance, December 31, 2001 1,718,968 $ 2,148,710 $ 521,625 $ 18,221,877 $ 193,561 $ 21,085,773
Comprehensive income
Net income - - - 2,536,459 - 2,536,459
Net change in unrealized
appreciation on investment
securities available for
sale, net of taxes of $202,495 - - - - 398,010 398,010
------------
Total comprehensive income 2,934,469
Dividends paid
($.46 per share) - - - (790,725) - (790,725)
Balance, December 31, 2002 1,718,968 2,148,710 521,625 19,967,611 591,571 23,229,517
Comprehensive income
Net income - - - 1,146,416 - 1,146,416
Net change in unrealized
appreciation on investment
securities available for
sale, net of taxes of $(4,327) - - - - (8,400) (8,400)
------------
Total comprehensive income 1,138,016
Dividends paid
($.12 per share) - - - (206,276) - (206,276)
---------- ---------- ---------- ------------- ------------- --------------
Balance, March 31, 2003 1,718,968 $2,148,710 $ 521,625 $ 20,907,751 $ 583,171 $ 24,161,257
========== ========== ========== ============= ============= ==============
See Notes to Consolidated Financial Statements
4
Grayson Bankshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Three Months ended March 31, 2003 and 2002
- --------------------------------------------------------------------------------
Three Months Ended
March 31,
2003 2002
------------- --------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 1,146,416 $ 558,408
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 90,000 88,500
Provision for loan losses 90,000 105,000
Deferred income taxes 43,000 (42,000)
Net realized gains on securities (869,597) (750)
Accretion of discount on securities, net of
amortization of premiums 50,070 26,767
Deferred compensation 2,153 962
Changes in assets and liabilities:
Accrued income (71,250) (53,236)
Other assets (71,337) (56,588)
Accrued interest payable 353,154 487,619
Other liabilities 212,929 222,828
------------- --------------
Net cash provided by operating activities 975,538 1,337,510
------------- --------------
Cash flows from investing activities:
(Increase) decrease in interest-bearing deposits with banks - -
Net (increase) decrease in federal funds sold (6,014,384) (657,819)
Purchases of investment securities (12,531,389) (11,645,014)
Sales of investment securities 10,998,533 -
Maturities of investment securities 2,931,254 2,036,711
Purchases of restricted equity securities (120,100) (19,700)
Net increase in loans (1,477,191) (3,710,239)
Purchases of bank-owned life insurance - (4,000,000)
Purchases of property and equipment, net of sales (485,684) (205,884)
------------- --------------
Net cash used in investing activities (6,698,961) (18,201,945)
------------- --------------
Cash flows from financing activities:
Net increase (decrease) in demand,
savings and NOW deposits 1,557,725 1,694,648
Net increase in time deposits 2,782,000 4,456,270
Dividends paid (206,276) -
Net increase (decrease) in other borrowings - 10,000,000
------------- --------------
Net cash provided by financing activities 4,133,449 16,150,918
------------- --------------
Net increase (decrease) in cash and cash equivalents (1,589,974) (713,517)
Cash and cash equivalents, beginning 11,265,444 8,715,457
------------- --------------
Cash and cash equivalents, ending $ 9,675,470 $ 8,001,940
============= ==============
Supplemental disclosure of cash flow information:
Interest paid $ 1,177,024 $ 1,195,151
============= ==============
Taxes paid $ 51,147 $ 7,940
============= ==============
See Notes to Consolidated Financial Statements
5
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
six banking offices. As a Federal Deposit Insurance Corporation 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, 2003 and for the periods
ended March 31, 2003 and 2002 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, 2002, included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
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, 2003 and 2002.
2003 2002
------------- --------------
Balance, beginning $ 2,189,028 $ 1,821,966
Provision charged to expense 90,000 105,000
Recoveries of amounts charged off 9,455 74,408
Amounts charged off (76,151) (132,753)
------------- --------------
Balance, ending $ 2,212,332 $ 1,868,621
============= ==============
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, 2003 and 2002 follows:
2003 2002
------------- --------------
Tax at statutory federal rate $ 555,361 $ 257,519
Tax exempt interest income (47,359) (43,703)
Other tax exempt income (27,200) (16,320)
Other 6,198 1,504
------------- --------------
$ 487,000 $ 199,000
============= ==============
6
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, 2003 and 2002 is as follows:
2003 2002
------------- --------------
Commitments to extend credit $ 6,533,667 $ 5,277,627
Standby letters of credit - -
------------- --------------
$ 6,533,667 $ 5,277,627
============= ==============
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.
7
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.
Results of Operations
Total interest income decreased by $31,346 for the quarter ended March 31, 2003
compared to the quarter ended March 31, 2002, while interest expense on deposits
and other borrowings decreased by $152,592 over the same period. The decreases
in both interest income and expense came as a result of the general decreases in
interest rates which have occurred over the past year. The result was an
increase in net interest income of $121,246 or 6.67%.
Other income was up $959,198 in the first quarter of 2003 compared to the first
quarter of 2002. This is a result of increases in the cash value of bank-owned
life insurance policies, which were purchased in 2002, as well as increases in
mortgage-origination fees and securities gains resulting from the restructuring
of a leveraging strategy that was implemented in the first quarter of 2002.
Securities gains from this transaction totaled approximately $870,000.
The provision for credit losses was $90,000 for the quarter ended March 31, 2003
and $105,000 for the quarter ended March 31, 2002. The reserve for loan losses
at March 31, 2003 was approximately 1.40% of total loans. Management believes
the provision and the resulting allowance for loan losses are adequate.
Total other expenses increased by $219,436, or 19.93% for the quarter ended
March 31, 2003 compared to the quarter ended March 31, 2002. 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.
The increases in net interest income and other income resulted in an increase in
net income before taxes of $876,008, for the quarter ended March 31, 2003,
compared to the same quarter in 2002. Net income increased by $588,008, or
105.30% to $1,146,416 for the first quarter of 2003 compared to net income of
$558,408 for the same period in 2002. The significant increase in net income was
due primarily to the securities gains noted above in the discussion of other
income.
Financial Condition
Total assets increased by $5,839,701, or 2.42% from December 31, 2002 to March
31, 2003. Net loans increased by $1,387,191 and federal funds sold increased by
$6,014,384, while investment securities decreased by $471,498.
Total deposits increased by $4,339,725, or 2.10% from December 31, 2002 to March
31, 2003. FHLB advances were $10,000,000 at March 31, 2003 and 2002.
Shareholders' equity totaled $24,161,257 at March 31, 2003 compared to
$23,229,517 at December 31, 2002. The $931,740 increase was the result of
earnings for the three months, less the payment of dividends of $206,276 and a
decrease in the market value of securities classified as available for sale of
$8,400.
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
Grayson National Bank (a wholly owned subsidiary of Grayson Bankshares, Inc.)
exceeds all regulatory capital guidelines and is considered to be well
capitalized.
Critical Accounting Policies
See Note 1 of the Notes to Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002 (the "Form
10-K").
8
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.
9
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 $592,000, or 6.64%, while a similar decrease in rates would
result in an increase in net interest income of $551,000, or 6.18%. 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.
10
Part I: Financial Information
Item 4: Controls and Procedures
- -------------------------------------------------------------------------------
Within the 90 days prior to the date of 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-14. 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.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.
11
Part II: Other Information
Grayson Bankshares, Inc and Subsidiary
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
There are no 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 Statement of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350
(b) Reports on 8-K None
12
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 12, 2003 By: /s/ Jacky K. Anderson
-------------------------
Jacky K. Anderson
President and CEO
Date: May 12, 2003 By: /s/ Blake M. Edwards
-------------------------
Blake M. Edwards
Chief Financial Officer
13
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
we 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: May 12, 2003
------------
/s/ Jacky K. Anderson
--------------------------
Jacky K. Anderson
President and Chief Executive Officer
14
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
we 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: May 12, 2003
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/s/ Blake M. Edwards
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Blake M. Edwards
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
99 Statement of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350