Exhibit 99.1

GRAYSON

BANKSHARES, INC.

June 1, 2012

Dear Fellow Shareholders,

In these days when good news and bad news about the economy seem to fluctuate almost hourly we know you are interested in recent developments at Grayson National Bank. We are proud to be part of an institution that has weathered the ups and downs for 112 years, and we can never thank you enough for the confidence you have expressed in the bank and for the commitment we all share in serving our community

First thanks to all who turned out for the Annual Shareholders Meeting earlier this month. With 117 people in attendance, this meeting was larger than any of us can remember from prior years. Our management team shared valuable information about where our bank has been, the progress we have made, and where we are going in the future. We cannot begin to express our gratitude for the support we have received from shareholders as we continue to navigate very tough economic conditions.

Our earnings are up. We are pleased to report positive earnings of $490,403 for the first quarter of 2012. This represents an increase of $793,589 compared to the loss of $303,186 in the first quarter of 2011. Our net interest income continued to decline as interest rates and loan balances continue their downward trend. However, we did see a decrease in loan loss provisions, or bad debt expense, of $990,392 from the first quarter of 2011 to the first quarter of 2012. This is a positive indicator that we are beginning to make some progress with regards to our non-performing assets. Further evidence of this lies in the fact that all categories of non-performing assets actually decreased in the first quarter of 2012, as compared to the fourth quarter of 2011. This masked the first quarter since the economic downturn began that we saw such a decrease in non-performing assets. We know that we still have challenges ahead and the numbers may continue to fluctuate as we go, but this is definitely a good sign. Past due loan indicators continued to show improvement compared to the prior quarter as well. Other income increased due to securities gains which resulted from a tax planning strategy to reduce our level of tax-exempt investment securities.

Finally some relief on the regulatory front: We are also pleased with the fact that the community banking industry has achieved a significant victory on the regulatory front. In April of this year the President signed into law the JOBS Act of 2012. One key provision of this law was an increase in the number of shareholders required for registration with the Securities and Exchange Commission, ("SEC"). The law allows community banks with less than 1,200 shareholders to effectively de-register from the SEC and therefore not be subject to many overly burdensome reporting requirements that we have been subject to since our initial required registration in 2000. In passing this legislation congress recognized the fact that small community banks are sufficiently regulated by the various banking agencies and therefore additional oversight by the SEC is simply not warranted. This will result in immediate cost savings to the Bank not to mention the managerial resources that will now be available to focus on more productive pursuits. For the past two years the community banking industry has lobbied extensively in support of this legislation and now community banks nationwide are acting to take advantage of this opportunity.

Our current initiatives include growing our markets and keeping our communications with customers and prospective customers in line with their expectations as to technological capabilities. You may be interested to know that:

We've launched our new website. Here our customers, as well as businesses and individuals who are shopping for business services, will find clear and easily navigated descriptions of exactly what Grayson offers, and how our culture and approach differ from other financial institutions. See for yourself at www.graysonnationalbank.com

·	We've made online banking really convenient. More and more customers prefer to do their banking from their home or office, and this is definitely the way of the future. We've upgraded this capability to make it easy for customers to understand, access and use.

As always, we appreciate the opportunity to serve you. We invite you to review the following financial report which will fill in the details of our ongoing story. You will see that even in these challenging times, we remain a healthy, forward-looking institution. We invite your questions, observations or concerns.

Sincerely,

/s/ Jacky K. Anderson		/s/ Thomas M. Jackson, Jr.

Jacky K. Anderson		Thomas M. Jackson, Jr.
President and CEO		Chairman of the Board

Condensed Consolidated Balance Sheets							Condensed Consolidated Statements of Operations

	March 31,			December 31,				Three Months Ended March 31,
Assets	2012			2011				2012		2011
							Interest income
Cash and due from banks	$	7,300,058		$	8,241,875		Loans and fees on loans	$	3,074,444	$	3,802,684
Interest-bearing deposits in banks		4,316,912			3,316,338		Interest on securities		281,290		375,061
Federal funds sold		36,233,175			39,013,090		Federal funds sold		17,578		16,750
Investment securities		59,718,013			50,888,070		Interest-bearing deposits		3,104		1,742
Loans		211,747,759			219,168,445		Total interest income		3.376,416		4,196,237
Less allowance for loan losses		5,002,236			4,941,645		Interest expense
Net loans		206,745,523			214,226,800		Deposits		735,446		1,089,694
Cash Value of Life Insurance		8,853,039			8,772,039		Interest on borrowings		220,293		260,463
Foreclosed Assets		2,822,673			3,351,861		Total interest expense		955,739		1,350,157
Properties and equipment		11,036,993			11,181,700		Net interest income		2,420,677		2,846,080
Accrued interest receivable		1,343,397			1,514,734		Provision for loan losses		315,995		1,306,387
Other assets		5,886,534			5,876,556		Net interest income after provision		2,104,682		1,539,693
Total assets	$	344,256,317		$	346,383,063		Other income
Liabilities							Service charges on deposit accounts		265,377		243,218
Deposits							Other income		1,410,908		357,357
Noninterest-bearing	$	52,303,239		$	50,180,058		Total other income		1,676,285		600,575
Interest-bearing		242,762,391			247,071,718		Other expenses
Total deposits		295,065,630			297,251,776		Salaries and employee benefits		1,720,939		1,507,080
Long-term debt		20,000,000			20,000,000		Occupancy expense		128,076		124,931
Accrued interest payable		531,064			230,723		Equipment expense		144,718		167,249
Other liabilities		512,059			560,658		Foreclosed asset expense, net		178,510		122,612
Total liabilities		316,108,753			318,043,157		Other expense		932,321		778,582
Stockholder's equity							Total other expense		3,104,564		2,700,454
Preferred stock, $25 par value; 500,000 shares authorized; none outstanding							Net income before income taxes		676,403		(560,186	)
Common stock, $1.25 par value; 2,000,000 shares authorized; 1,718,968 shares issued and outstanding		2,148,710			2,148,710		Income taxes		186,000		(257,000	)
Surplus		521,625			521,625		Net income	$	490,403	$	(303,186	)
Retained earnings		27,648,154			27,157,751		Net income per share	$	0.29	$	(0.18	)
Accumulated other comprehensive income (loss)		(2,170,925	)		(1,488,180	)	Weighted average shares outstanding		1,718,968		1,718,968
Total stockholder' equity		28,147,564			28,339,906
Total liabilities and stocltholder' equity	$	344,256,317		$	346,383,063

Member Federal Deposit Insurance Corporation

GRAYSON

BANKSHARES, INC.

Officers

Thomas M. Jackson, Jr.

Chairman of the Board

Jack E. Guynn, Jr.

Vice Chairman

Jacky K. Anderson

President & CEO

Brenda C. Smith

Secretary

Blake M. Edwards

Chief Financial Officer

Board of Directors

Jacky K. Anderson

Grayson BankShares, Inc. and

The Grayson National Bank

Bryan L Edwards

Sparta Town Manager

Jack E. Guynn, Jr.

Guynn Enterprises, Inc.

Hayden H. Horney

Wythe County Clerk of Court

Thomas M. Jackson, Jr.

Attorney

Theresa S. Lazo

Community Activist

Carl J. Richardson

Retired

Charles T. Sturgill

Retired Grayson County

Clerk of Court

J. David Vaughan

Vaughan Furniture

GRAYSON

BANKSHARES, INC.

Independence Headquarters} P.O.Box186,Independence, VA 24348 P}276/773.2811

Carroll} P.O. Box 1185, Galax, VA 24333 P}476/238.8112

Elk Creek} P.O. Box 17, Elk Creek, VA 2432.6 P}276/655.4011

Galex} P.O. Box 795, Galax, VA 24333 11276/238.2411

Hillsville} P.O. Box 1177, Hillsville, VA 24343 P}276/728.2810

Independence} P.O. Box 186, Independence, VA 24348 P}276/773.2821

Sparta} P.O. Box 1900, Sparta, NC 28675 P}336/372.2811

Troutdale} P.O. Box 26, Troutdale, VA 24378 P}1276/677.3722

Whitetop} P.O. Box 88, Whitetop, VA 24292 P}276/388.3811

Wytheville} P.O. Box 557, Wytheville, VA 24382 P}276/228.6050

GRAYSON BANKSHARES INC 8-K