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Bank to hold merger meetings

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Shareholders to meet May 24

Staff Report

The Board of Directors of Grayson Bankshares Inc. and Grayson National Bank announced that a special shareholder meeting will be held May 24, at the Independence Volunteer Fire Department at 529 Davis Street at 1 p.m.

As in the past, small group informational meetings will also be held in advance on May 9 and May 11.

Board Chairman Tom Jackson said, “We look forward to seeing our shareholders, reviewing our recent results and our plans for the future, including our planned combination with the Bank of Floyd.”

Cardinal Bankshares Corporation, parent company of Bank of Floyd, and Grayson Bankshares Inc., parent company of Grayson National Bank, announced last November that they had entered into a definitive agreement to combine their companies.

“With [more than] 200 years of combined history as independent community banks, Bank of Floyd and Grayson National Bank recognize the unique opportunity of joining together to enhance their shared mission of providing outstanding banking services in the communities where they do business,” said a news release from the companies last year.

Under the terms of the agreement, both companies will merge with and into Parkway Acquisition Corp., a new bank holding company formed for the purpose of the combination.

Both Cardinal and Grayson shareholders will receive shares of stock in the newly formed company. Based on the approximate equity contributions of Cardinal and Grayson to the newly formed company, Cardinal shareholders will receive approximately 40 percent of the newly issued shares and Grayson shareholders will receive approximately 60 percent.

Cardinal shareholders will receive 1.30 shares of Parkway common stock for each share of Cardinal common stock. Grayson shareholders will receive 1.76 shares of Parkway common stock for each share of Grayson common stock. The companies expect to apply for quotation of the new holding company shares on the OTCQX as the transaction is completed.

The subsidiary banks of Bank of Floyd and Grayson National Bank will combine to form one national bank regulated by the Office of the Comptroller of the Currency, the November release said. The newly formed bank holding company and its subsidiary bank will select a new name following the closing of the transaction.

The combination is subject to approval by Cardinal’s and Grayson’s shareholders, banking regulators and other customary closing conditions.

In November, the companies stated that the transaction should be completed during the second quarter of this year.

The combined organization will have 17 full-service banking offices, assets of more than $600 million, deposits of more than $500 million and shareholders’ equity of more than $50 million. The combined company will be governed by a board of directors comprised of each of the current directors of Cardinal and Grayson.

Jackson, the current Grayson chairman of the board, will serve as chairman of the board of the company and its subsidiary bank; and current Cardinal Chairman, John Paul Houston, will serve as vice chairman of the company and subsidiary bank.

Allan Funk, currently president and CEO of Grayson; and Blake Edwards, currently chief financial officer of Grayson, will serve in the same capacities with the new company. Both Bank of Floyd and Grayson executives will make up the balance of the management team.

“This combination will create a new dynamic community bank dedicated to serving our very important hometown communities in Grayson and Floyd Counties. Working together, we can offer enhanced products and services to an extended market area in a more efficient manner,” said Funk.

“All businesses seek to find the ideal size that creates better operating efficiencies and maximizes the bottom-line potential. With our combined assets and cost-saving efficiencies, we believe our customers and shareholders will significantly benefit from this transaction. The costs associated with new banking legislation have put an enormous strain on small banks, and by joining forces we believe we are well positioned for improved operating results for years to come. We are fortunate to have found Bank of Floyd at the same crossroad,” said Jackson.

Houston said, “We have been looking for ways to strategically advance our community bank mission while improving our bottom line. This combination improves our near-term and long-term financial performance for shareholders, and enhances our ability to offer the products and services our customers need. This also ensures that all of our customers — in both banks’ footprints — have a locally-owned community bank for years to come. “

In connection with the transaction, Raymond James & Associates Inc. is acting as financial advisor and has provided a fairness opinion to Grayson, and Williams Mullen provided legal advice to Grayson. Gentry Locke served as legal advisor to Cardinal, and Banks Street Partners rendered a fairness opinion to Cardinal. In addition, CCG Consulting Group acted as a strategic advisor to Cardinal.

Cardinal Bankshares Corporation is a bank holding company headquartered in Floyd. Bank of Floyd is a community bank, also headquartered in Floyd, that serves the Roanoke and New River valleys, as well as Floyd and Carroll counties. It operates seven locations in Floyd, Hillsville, Roanoke, Salem, Christiansburg, Fairlawn and Willis.

Bank of Floyd serves consumers and small businesses with a wide range of banking services, delivered in person, online and on mobile devices. Bank of Floyd had $263 million in assets as of Sept. 30, 2015.

Grayson Bankshares Inc. is a bank holding company headquartered in Independence. Grayson’s wholly-owned subsidiary, Grayson National Bank, was founded in 1900 and serves Grayson County and the surrounding areas of Virginia and North Carolina through 10 banking offices and one loan production office. Grayson National Bank had $332 million in assets as of September 30, 2015.

Grayson National Bank provides individuals and small to medium-sized businesses with a wide range of banking services including checking and savings accounts, commercial, installment, mortgage and personal loans, credit and debit cards, internet banking, mobile banking and other associated services.

A presentation regarding this transaction is available for download on the “Investor Relations” pages of www.graysonnationalbank.com and www.bankoffloyd.com. Contact Linda Eller at (276) 773-2811 for more information about the upcoming shareholder meetings.