Bank of Granite Corporation Reports Fourth Quarter and Full-Year Results

GRANITE FALLS, NC--(MARKET WIRE)--Jan 30, 2009 -- Bank of Granite Corporation (NasdaqGS:GRAN - News) reported a net loss of $9.58 million, or $0.62 per share, for the quarter ended December 31, 2008, compared to net income of $1.93 million, or $0.12 per share, reported for the fourth quarter of 2007. For the full-year ended December 31, 2008, we reported a net loss of $11.50 million, or $0.74 per share, compared to a net loss of $15.30 million, or $0.97 per share, for 2007.

Credit actions we took in the fourth quarter of 2008 resulted in a $16.79 million loan loss provision for the quarter. The two primary reasons for these credit actions were the continued deterioration of a group of approximately $20 million of related watch list loans in the real estate development portfolio and non-performance related to one additional real estate development loan of $4.5 million. The current valuations of the collateral underlying these loans caused us to allocate approximately $8 million of loss reserves to these loans. Additionally, the overall decline in economic activity, which is stressing all sections of our loan portfolio, caused us to take action to build our allowances for loan loss to $29.95 million or 3.14% of gross loans. Our fourth quarter provision for losses exceeded our charge-offs by $7.63 million.

Another significant factor in our fourth quarter results was the continued decline in net interest income, down $1.98 million compared to the preceding quarter and down $15.30 million when comparing the twelve-month periods ended December 31, 2008 and 2007. The multiple rate reductions by the Federal Reserve in the fourth quarter and the continued aggressive competition for deposits in our market were the primary causes of the margin compression. Increasing levels of non-performing assets have also depressed the net interest margin throughout 2008. Our overhead expenses for the fourth quarter of 2008 were $1.13 million less than the same quarter of 2007 and reflect our ongoing efforts to be more efficient.

As of December 31, 2008, the Company's total assets were $1.17 billion, total loans were $0.95 billion, and total deposits were $0.99 billion. Nonperforming assets increased to $62.66 million as of December 31, 2008 compared to $54.84 million at September 30 and $39.10 million as of December 31, 2007. The Company's and its banking subsidiary's leverage and Tier I risk-based capital ratios met the regulatory capital measures of "well" capitalized as of December 31, 2008. For the total risk-based capital ratio measure, the Company and its banking subsidiary ended the year "adequately" capitalized with capital ratios of 9.96% and 9.41%, respectively, slightly below the 10% threshold needed to be categorized as "well" capitalized.

"These results are disappointing and are indicative of the severe credit crisis and the effect it has on businesses and customers in our markets," said Scott Anderson, CEO. "However, we are committed to doing the things we have always done -- serving our customers, striving to make good loans, and running our business for what we believe to be the long-term benefit of our shareholders." Mr. Anderson continued, "While we cannot control the ultimate severity of the current economic crisis, we believe our loyal customer base, the continued commitment of our employees, and our confidence in our current risk management and problem loan mitigation efforts are reasons to be optimistic about the Bank's future."

Bank of Granite Corporation's common stock trades on the NASDAQ Global Select Market(SM) under the symbol "GRAN." Bank of Granite Corporation is the parent company of Bank of Granite and Granite Mortgage, Inc. Bank of Granite operates twenty-two full-service banking offices in eight North Carolina counties -- Burke, Caldwell, Catawba, Forsyth, Iredell, Mecklenburg, Watauga, and Wilkes, as well as a loan production office in Guilford County. Granite Mortgage, a mortgage banking company headquartered in Winston-Salem, originates home mortgages in these counties as well as in Cumberland and Rowan counties.

 
Please see the attached supplemental "Financial Data" tables.
For further information, please contact:
Scott Anderson, Chief Executive Officer, 828.345.6866 or
sanderson@bankofgranite.com
Kirby Tyndall, Chief Financial Officer, 828.496.2026 or
ktyndall@bankofgranite.com

Disclosures about Forward Looking Statements

The discussions included in this document contain statements that may be deemed forward looking statements within the meaning of the Private Securities Litigation Act of 1995, including Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from these statements. For the purposes of these discussions, any statements that are not statements of historical fact may be deemed to be forward looking statements. Such statements are often characterized by the use of qualifying words such as "expects," "anticipates," "believes," "estimates," "plans," "projects," or other statements concerning opinions or judgments of our Company and our management about future events. The accuracy of such forward looking statements could be affected by certain factors, including but not limited to, the financial success or changing conditions or strategies of our customers or vendors, fluctuations in interest rates, actions of government regulators, the availability of capital and personnel, and general economic conditions. For additional factors that could affect the matters discussed in forward looking statements, see the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K/A filed with the Securities and Exchange Commission.

 
Bank of Granite
 Corporation
Selected Financial
 Data              Three Months Ended              Twelve Months Ended
                      December 31,                    December 31,
            ------------------------------  ------------------------------
(in thousands
 except per                            %                               %
 share data)   2008        2007     change     2008        2007     change
            ----------  ----------  ------  ----------  ----------  ------
Consolidated
 earnings
 summary:
 Interest
  income,
  taxable
  equivalent$   14,751  $   22,273   -33.8% $   67,642  $   90,172   -25.0%
 Interest
  expense        7,071       9,309   -24.0%     29,753      36,848   -19.3%
            ----------  ----------          ----------  ----------
 Net
  interest
  income,
  taxable
  equivalent     7,680      12,964   -40.8%     37,889      53,324   -28.9%
 Taxable
  equivalent
  adjustment
  (1)              171         205   -16.6%        719         857   -16.1%
            ----------  ----------          ----------  ----------
 Net
  interest
  income         7,509      12,759   -41.1%     37,170      52,467   -29.2%
 Loan
  loss
  provision     16,791       3,006   458.6%     30,228      55,131   -45.2%
 Noninterest
  income         2,640       3,535   -25.3%     11,515      13,179   -12.6%
 Noninterest
  expense        9,367      10,496   -10.8%     38,210      37,001     3.3%
            ----------  ----------          ----------  ----------
  Income
   (loss)
   before
   income
   taxes
   (benefits)  (16,009)      2,792  -673.4%    (19,753)    (26,486)  -25.4%
 Income
  tax
  expense
  (benefit)     (6,427)        860  -847.3%     (8,253)    (11,183)  -26.2%
            ----------  ----------          ----------  ----------
 Net
  income
  (loss)    $   (9,582) $    1,932  -596.0% $  (11,500) $  (15,303)  -24.9%
            ==========  ==========          ==========  ==========
 Earnings
  (loss)
  per
  share -
  Basic     $    (0.62) $     0.12  -616.7% $    (0.74) $    (0.97)  -23.7%
 Earnings
  (loss)
  per
  share -
  Diluted        (0.62)       0.12  -616.7%      (0.74)      (0.97)  -23.7%
            ----------  ----------          ----------  ----------
 Average
  shares
  - Basic       15,454      15,468    -0.1%     15,448      15,775    -2.1%
 Average
  shares
  - Diluted     15,454      15,490    -0.2%     15,448      15,775    -2.1%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 balance
 sheet data
 at December
 31:
 Total
  assets                                    $1,170,931  $1,219,148    -4.0%
 Total
  deposits                                     991,822     971,989     2.0%
 Loans
  (gross)                                      953,295     946,326     0.7%
 Stockholders'
  equity                                        98,413     115,265   -14.6%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 average
 balance
 sheet data:
 Total
  assets    $1,157,425  $1,198,879    -3.5% $1,189,759  $1,205,911    -1.3%
 Total
  deposits     971,033     971,663    -0.1%    982,463     969,911     1.3%
 Loans
  (gross)      957,037     929,342     3.0%    955,639     933,347     2.4%
 Stockholders'
  equity       109,422     117,042    -6.5%    113,316     139,764   -18.9%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 performance
 ratios:
 Return on
  average
  assets*        -3.29%       0.64%              -0.97%      -1.27%
 Return
  on
  average
  equity*       -34.84%       6.55%             -10.15%     -10.95%
 Net
  interest
  margin*         2.87%       4.69%               3.48%       4.77%
 Efficiency
  ratio (2)      90.77%      63.62%              77.34%      55.64%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 asset
 quality
 data and
 ratios:
 Nonaccruing
  loans                                     $   55,737  $   36,450    52.9%
 Accruing
  loans
  90 days
  past due                                         114         162   -29.6%
                                            ----------  ----------
 Nonperforming
  loans                                         55,851      36,612    52.5%
 Foreclosed
  properties                                     6,805       2,491   173.2%
                                            ----------  ----------
 Nonperforming
  assets                                        62,656      39,103    60.2%
                                            ----------  ----------
 Allowance
  for loan
  losses                                        29,952      17,673    69.5%
                                            ----------  ----------
 Loans
  charged
  off                                           21,568      53,663   -59.8%
 Recoveries
  of loans
  charged
  off                                            3,619         418   765.8%
                                            ----------  ----------
 Net loan
  charge-
  offs                                          17,949      53,245   -66.3%
                                            ----------  ----------
 Net
  charge-
  offs to
  average
  loans*                                          1.88%       5.70%
 Nonperforming
  loans to
  total
  assets                                          4.77%       3.00%
 Allowance
  coverage
  of
  nonperforming
  loans                                          53.63%      48.27%
 Allowance
  for loan
  losses
  to
  gross
  loans                                           3.14%       1.87%
 Allowance
  for loan
  losses
  to net
  loans                                           3.24%       1.90%
            ==========  ==========  ======  ==========  ==========  ======
Subsidiary
 earnings
 summary:

Bank of
 Granite
Net
 interest
 income     $    6,928  $   12,207   -43.2% $   34,345  $   50,093   -31.4%
Loan loss
 provision      16,767       2,994   460.0%     30,143      55,083   -45.3%
Noninterest
 income          2,109       2,619   -19.5%      8,809       9,263    -4.9%
Noninterest
 expense         7,863       8,777   -10.4%     31,009      30,105     3.0%
Income tax
 expense
 (benefit)      (6,355)        852  -845.9%     (8,158)    (11,437)  -28.7%
Net income
 (loss)         (9,238)      2,203  -519.3%     (9,840)    (14,395)  -31.6%
            ----------  ----------  ------  ----------  ----------  ------
Granite
 Mortgage
Net
 interest
 income     $      617  $      751   -17.8% $    3,158  $    3,249    -2.8%
Loan loss
 provision          24          12   100.0%         85          48    77.1%
Noninterest
 income            682         916   -25.5%      3,560       3,916    -9.1%
Noninterest
 expense         1,455       1,635   -11.0%      6,870       6,482     6.0%
Income tax
 expense
 (benefit)         (72)          8     n/m         (95)        254  -137.4%
Net income
 (loss)           (108)         12     n/m        (142)        381  -137.3%
            ==========  ==========  ======  ==========  ==========  ======
*   Annualized based on number of days in the period.
(1) Yields and interest income on tax-exempt investments have been
    adjusted to tax equivalent basis using a 35% tax rate.
(2) Calculated by dividing noninterest expense by the sum of tax
    equivalent net interest income and noninterest income.





Bank of Granite
 Corporation
Supplemental
 Quarterly
 Financial Data                    Quarters Ended
(in thousands   ----------------------------------------------------------
 except per      Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,
 share data)       2008        2008        2008        2008        2007
                ----------  ----------  ----------  ----------  ----------
Consolidated
 earnings
 summary:
  Interest
   income,
   taxable
   equivalent   $   14,751  $   16,537  $   17,254  $   19,101  $   22,273
  Interest
   expense           7,071       6,881       7,190       8,611       9,309
                ----------  ----------  ----------  ----------  ----------
  Net interest
   income,
   taxable
   equivalent        7,680       9,656      10,064      10,490      12,964
  Taxable
   equivalent
   adjustment(1)       171         170         182         197         205
                ----------  ----------  ----------  ----------  ----------
  Net interest
   income            7,509       9,486       9,882      10,293      12,759
  Loan loss
   provision        16,791       3,581       8,445       1,411       3,006
  Noninterest
   income            2,640       2,494       3,103       3,278       3,535
  Noninterest
   expense           9,367       8,775      10,409       9,659      10,496
                ----------  ----------  ----------  ----------  ----------
  Income (loss)
   before income
   taxes
   (benefits)      (16,009)       (376)     (5,869)      2,501       2,792
  Income tax
   expense
   (benefit)        (6,427)       (105)     (2,507)        786         860
                ----------  ----------  ----------  ----------  ----------
  Net income
   (loss)       $   (9,582) $     (271) $   (3,362) $    1,715  $    1,932
                ==========  ==========  ==========  ==========  ==========
  Earnings
   (loss) per
   share -
   Basic        $    (0.62) $    (0.02) $    (0.22) $     0.11  $     0.12
  Earnings
   (loss) per
   share -
   Diluted           (0.62)      (0.02)      (0.22)       0.11        0.12
                ----------  ----------  ----------  ----------  ----------
  Average
   shares -
   Basic            15,454      15,454      15,446      15,438      15,468
  Average
   shares -
   Diluted          15,454      15,454      15,446      15,457      15,490
                ==========  ==========  ==========  ==========  ==========
Consolidated
 ending balance
 sheet data:
  Total assets  $1,170,931  $1,159,917  $1,187,696  $1,235,624  $1,219,148
  Total
   deposits        991,822     969,172     982,213   1,011,717     971,989
  Loans (gross)    953,295     951,665     955,497     949,065     946,326
  Stockholders'
   equity           98,413     108,673     109,458     115,434     115,265
                ==========  ==========  ==========  ==========  ==========
Consolidated
 average balance
 sheet data:
  Total assets  $1,157,425  $1,181,505  $1,205,959  $1,214,147  $1,198,879
  Total
   deposits        971,033     980,633     989,560     988,626     971,663
  Loans (gross)    957,037     958,033     958,754     948,732     929,342
  Stockholders'
   equity          109,422     110,616     115,545     117,681     117,042
                ==========  ==========  ==========  ==========  ==========
Consolidated
 performance
 ratios:
  Return on
   average
   assets*           -3.29%      -0.09%      -1.12%       0.57%       0.64%
  Return on
   average
   equity*          -34.84%      -0.97%     -11.70%       5.86%       6.55%
  Net interest
   margin*            2.87%       3.56%       3.66%       3.80%       4.69%
  Efficiency
   ratio (2)         90.77%      72.22%      79.05%      70.16%      63.62%
                ==========  ==========  ==========  ==========  ==========
Consolidated
 asset quality
 data and ratios:
  Nonaccruing
   loans        $   55,737  $   51,132  $   39,629  $   40,260  $   36,450
  Accruing
   loans 90
   days past
   due                 114         466         297         969         162
                ----------  ----------  ----------  ----------  ----------
  Nonperforming
   loans            55,851      51,598      39,926      41,229      36,612
  Foreclosed
   properties        6,805       3,237       2,172       2,511       2,491
                ----------  ----------  ----------  ----------  ----------
  Nonperforming
   assets           62,656      54,835      42,098      43,740      39,103
                ----------  ----------  ----------  ----------  ----------
  Allowance for
   loan losses      29,952      21,553      18,833      15,459      17,673
                ----------  ----------  ----------  ----------  ----------
  Loans
   charged off       9,158       1,711       6,097       4,602       3,140
  Recoveries of
   loans
   charged off         765         851       1,027         976         238
                ----------  ----------  ----------  ----------  ----------
  Net loan
   charge-offs       8,393         860       5,070       3,626       2,902
                ----------  ----------  ----------  ----------  ----------
  Net
   charge-offs
   to average
   loans*             3.49%       0.36%       2.13%       1.54%       1.24%
  Nonperforming
   loans to
   total assets       4.77%       4.45%       3.36%       3.34%       3.00%
  Allowance
   coverage of
   nonperforming
   loans             53.63%      41.77%      47.17%      37.50%      48.27%
  Allowance for
   loan losses
   to gross
   loans              3.14%       2.26%       1.97%       1.63%       1.87%
  Allowance for
   loan losses
   to net loans       3.24%       2.32%       2.01%       1.66%       1.90%
                ==========  ==========  ==========  ==========  ==========
Subsidiary
 earnings
 summary:
Bank of Granite
Net interest
 income         $    6,928  $    8,871  $    9,003  $    9,543  $   12,207
Loan loss
 provision          16,767       3,556       8,421       1,399       2,994
Noninterest
 income              2,109       2,348       2,117       2,235       2,619
Noninterest
 expense             7,863       6,878       8,421       7,847       8,777
Income tax
 expense
 (benefit)          (6,355)         25      (2,539)        711         852
Net income
 (loss)             (9,238)        760      (3,183)      1,821       2,203
                ----------  ----------  ----------  ----------  ----------
Granite
 Mortgage
Net interest
 income         $      617  $      703  $      996  $      842  $      751
Loan loss
 provision              24          25          24          12          12
Noninterest
 income                682         849         986       1,043         916
Noninterest
 expense             1,455       1,852       1,878       1,685       1,635
Income tax
 expense
 (benefit)             (72)       (130)         32          75           8
Net income
 (loss)               (108)       (195)         48         113          12
                ==========  ==========  ==========  ==========  ==========
* Annualized based on number of days in the period.
(1) Yields and interest income on tax-exempt investments have been
    adjusted to tax equivalent basis using a 35% tax rate.
(2) Calculated by dividing noninterest expense by the sum of tax
    equivalent net interest income and noninterest income.

     For further information, please contact:
      
     Scott Anderson
     Chief Executive Officer
     828.345.6866
     Email Contact
      
     Kirby Tyndall
     Chief Financial Officer
     828.496.2026
     Email Contact