Bank of Granite Corporation Reports Second Quarter Results

• Press Release
• Source: Bank of Granite Corporation
• On 3:59 pm EDT, Wednesday July 29, 2009

GRANITE FALLS, NC--(Marketwire - 07/29/09) - Bank of Granite Corporation (NASDAQ:GRAN - News) reported a net loss of $4.52 million, or $0.29 per share, for the quarter ended June 30, 2009, compared to a net loss of $3.36 million, or $0.22 per share, reported for the second quarter of 2008. For the six months ended June 30, 2009, the Company reported a net loss of $8.75 million, or $0.57 per share, compared to a net loss of $1.65 million, or $0.11 per share, for the comparable period of 2008.

The Company continued to operate in a very difficult economic environment in the six months ended June 30, 2009. Unemployment continued to rise throughout the Company's footprint, and the effect was evidenced in the declining ability of small businesses to service their debt. Real estate sales activity has slowed dramatically which has caused a continued decline in real estate values. Additionally, the Company has taken an aggressive position on resolving problem loan issues. Short-sale and other asset disposition activities have resulted in continued elevated credit loss costs and charge-off levels. Such activity has been significant in the reduction of loans by approximately $75.7 million in the period.

The Company's earnings decreased in both the three and six-month periods ended June 30, 2009 when compared to the same periods in 2008, primarily due to decreases in interest and fee income from loans. The decline in loan income was principally due to the continuing impact of the Federal Reserve Bank's reduction of overnight rates through January 2009 as well as higher levels of nonperforming assets. The decline in loan loss provisions was partially offset by the decrease in net interest income for the same periods compared to 2008. Income tax benefits relating to the net losses for the first two quarters of 2009 were not recorded. The most significant regulatory impact to the Company has been elevated FDIC assessments, which totaled $2.4 million for the six-month period, including a special assessment of all banks in the second quarter that totaled $520 thousand for the Company.

Scott Anderson, CEO, said, "The recessionary costs cited above continue to outweigh the areas of improvement we see. While operating results continue to disappoint, we are making progress. Our personnel costs are down almost $1 million compared to the first six months of 2008. Our banking subsidiary's net interest margin improved for the first quarter in a year." Anderson continued, "We are encouraged that a reduction in early stage delinquencies may be an indication of a slowdown in new problem loans. That said, the economic headwinds prevent too much optimism. Lastly, the improvement of the Company's capital position is a challenge that we are pursuing daily."

As of June 30, 2009, consolidated total assets were $1.11 billion, total loans were $0.87 billion, and total deposits were $0.97 billion. Nonperforming assets increased to $60.00 million as of June 30, 2009 compared to $57.51 million as of December 31, 2008 and $42.10 million as of June 30, 2008. 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 June 30, 2009. For the total risk-based capital ratio measure, the Company and its banking subsidiary ended the quarter with capital ratios of 8.74% and 8.41%, respectively, as compared to the 8% threshold needed to be categorized as "adequately" capitalized. The banking subsidiary continues the process of restructuring its balance sheet to reduce its risk-weighted assets with a goal of improving its total risk-based capital position as quickly as possible.

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. 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.

Please see the attached supplemental "Financial Data" tables.

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 the Company and its 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 the Company's 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 filed with the Securities and Exchange Commission.

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Bank of Granite Corporation
Selected
 Financial Data     Three Months Ended             Six Months Ended
 (in                    June 30,                       June 30,
  thousands   -----------------------------  -----------------------------
  except per                           %                              %
  share data)    2009        2008    change     2009        2008    change
              ==========  ========== ======  ==========  ========== ======

Consolidated
 earnings
 summary:
  Interest
   income,
   taxable
   equiva-
   lent     $   13,122  $   17,254   -23.9% $   27,276  $   36,355   -25.0%
  Interest
   expense       5,582       7,190   -22.4%     12,053      15,801   -23.7%
            ----------  ----------          ----------  ----------
  Net
   interest
   income,
   taxable
   equivalent    7,540      10,064   -25.1%     15,223      20,554   -25.9%
  Taxable
   equivalent
   adjustment
   (1)              35         182   -80.8%        196         379   -48.3%
            ----------  ----------          ----------  ----------
  Net
   interest
   income        7,505       9,882   -24.1%     15,027      20,175   -25.5%
  Loan loss
   provision     4,333       8,445   -48.7%      8,103       9,856   -17.8%
  Noninterest
   income        3,302       3,103     6.4%      4,787       6,381   -25.0%
  Noninterest
   expense      10,995      10,409     5.6%     20,457      20,068     1.9%
            ----------  ----------          ----------  ----------
  Loss before
   income tax
   benefit      (4,521)     (5,869)  -23.0%     (8,746)     (3,368)  159.7%
  Income tax
   benefit           -      (2,507) -100.0%          -      (1,721) -100.0%
            ----------  ----------          ----------  ----------
  Net loss  $   (4,521) $   (3,362)   34.5% $   (8,746) $   (1,647)  431.0%
            ==========  ==========          ==========  ==========
  Loss per
   share -
   Basic    $    (0.29) $    (0.22)   31.8% $    (0.57) $    (0.11)  418.2%
  Loss per
   share -
   Diluted       (0.29)      (0.22)   31.8%      (0.57)      (0.11)  418.2%
  Tangible
   book value
   per share      4.18        6.38   -34.5%       4.18        6.38   -34.5%
            ----------  ----------          ----------  ----------
  Average
   shares -
   Basic        15,454      15,446     0.1%     15,454      15,442     0.1%
  Average
   shares -
   Diluted      15,454      15,446     0.1%     15,454      15,442     0.1%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 balance sheet
 data at
 June 30:
  Total
   assets                                   $1,107,504  $1,187,696    -6.8%
  Total
   deposits                                    974,604     982,213    -0.8%
  Loans
   (gross)                                     872,459     955,497    -8.7%
  Stockholders�
   equity                                       64,750     109,458   -40.8%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 average
 balance
 sheet data:
  Total
   assets   $1,138,662  $1,205,959    -5.6% $1,153,163  $1,210,053    -4.7%
  Total
   deposits    991,904     989,560     0.2%    997,642     989,093     0.9%
  Loans
   (gross)     899,705     958,754    -6.2%    919,225     953,743    -3.6%
  Stockholders�
   equity       70,100     115,545   -39.3%     72,266     116,613   -38.0%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 performance
 ratios:
  Return
   on average
   assets*       -1.59%      -1.12%              -1.53%      -0.27%
  Return on
   average
   equity*      -25.87%     -11.70%             -24.41%      -2.84%
  Net interest
   margin*        2.83%       3.66%               2.84%       3.73%
  Efficiency
   ratio (2)    101.41%      79.05%             102.23%      74.51%
            ==========  ==========  ======  ==========  ==========  ======
Consolidated
 asset quality
 data and
 ratios:
  Nonaccruing
   loans                                    $   38,531  $   39,629    -2.8%
  Restructured
   loans                                         5,679           -     n/a
  Accruing
   loans 90
   days past
   due                                             355         297    19.5%
                                            ----------  ----------
  Nonperforming
   loans                                        44,565      39,926    11.6%
  Foreclosed
   properties                                   15,437       2,172   610.7%
                                            ----------  ----------
  Nonperforming
   assets                                       60,002      42,098    42.5%
                                            ----------  ----------
  Allowance for
   loan losses                                  22,787      18,833    21.0%
                                            ----------  ----------
  Loans charged
   off                                          12,578      10,701    17.5%
  Recoveries of
   loans charged
   off                                           2,456       2,005    22.5%
                                            ----------  ----------
  Net loan
    charge-
    -offs                                       10,122       8,696    16.4%
                                            ----------  ----------
  Net
   charge-offs
   to average
   loans*                                         2.22%       1.83%
  Nonperforming
   loans to
   total assets                                   4.02%       3.36%
  Allowance
   coverage of
   nonperforming
   loans                                         51.13%      47.17%
  Allowance for
   loan losses
   to gross
   loans                                          2.61%       1.97%
  Allowance for
   loan losses
   to net
   loans                                         2.68%       2.01%
            ==========  ==========  ======  ==========  ==========  ======
Subsidiary
 earnings
 summary:
  Bank of Granite
   Net
    interest
    income  $    7,245  $    9,003   -19.5% $   13,704  $   18,546   -26.1%
   Loan loss
    provision    4,309       8,421   -48.8%      8,055       9,820   -18.0%
   Noninterest
    income       2,905       2,117    37.2%      4,250       4,352    -2.3%
   Noninterest
     expense     9,779       8,421    16.1%     17,038      16,268     4.7%
   Income tax
     (benefit)       -      (2,539) -100.0%          -      (1,828) -100.0%
   Net loss     (3,938)     (3,183)   23.7%     (7,139)     (1,362)  424.2%
            ----------  ----------  ------  ----------  ----------  ------
  Granite
   Mortgage
   Net
    interest
    income  $      266  $      996   -73.3% $    1,328  $    1,838   -27.7%
   Loan loss
    provision       24          24     0.0%         48          36    33.3%
   Noninterest
    income         225         986   -77.2%        849       2,029   -58.2%
    Noninterest
    expense      1,123       1,878   -40.2%      3,300       3,563    -7.4%
   Income
    taxes            -          32  -100.0%          -         107  -100.0%
   Net income
    (loss)        (656)         48     n/m      (1,171)        161  -827.3%
            ==========  ==========  ======  ==========  ==========  ======

 * 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 net interest
    income and noninterest income.



Bank of Granite
 Corporation

Supplemental
 Quarterly
 Financial
 Data                                 Quarters Ended
 (In thousands  ----------------------------------------------------------
  except per      Jun 30,     Mar 31,     Dec 31,     Sep 30,     Jun 30,
  share data)      2009        2009        2008        2008        2008
                ==========  ==========  ==========  ==========  ==========
Consolidated
 earnings
 summary:
   Interest
    income,
    taxable
    equivalent  $   13,122  $   14,154  $   14,751  $   16,537  $   17,254
   Interest
    expense          5,582       6,471       7,071       6,881       7,190
                ----------  ----------  ----------  ----------  ----------
   Net interest
    income,
    taxable
    equivalent       7,540       7,683       7,680       9,656      10,064
   Taxable
    equivalent
    adjustment
    (1)                 35         161         171         170         182
                ----------  ----------  ----------  ----------  ----------
   Net interest
    income           7,505       7,522       7,509       9,486       9,882
   Loan loss
    provision        4,333       3,770      16,791       3,581       8,445
   Noninterest
    income           3,302       1,485       1,503       2,494       3,103
   Noninterest
    expense         10,995       9,462      20,131       8,775      10,409
                ----------  ----------  ----------  ----------  ----------
   Loss before
    income
    taxes
    (benefit)       (4,521)     (4,225)    (27,910)       (376)     (5,869)
   Income taxes
    (benefit)            -           -       6,423        (105)     (2,507)
                ----------  ----------  ----------  ----------  ----------
   Net loss     $   (4,521) $   (4,225) $  (34,333) $     (271) $   (3,362)
                ==========  ==========  ==========  ==========  ==========
   Loss per
    share -
    Basic       $    (0.29) $    (0.27) $    (2.22) $    (0.02) $    (0.22)
   Loss per
    share -
    Diluted          (0.29)      (0.27)      (2.22)      (0.02)      (0.22)
   Tangible
    book value
    per share         4.18        4.51        4.79        6.33        6.38
                ----------  ----------  ----------  ----------  ----------
   Average
    shares -
    Basic           15,454      15,454      15,454      15,454      15,446
   Average
    shares -
    Diluted         15,454      15,454      15,454      15,454      15,446
                ==========  ==========  ==========  ==========  ==========
Consolidated
 ending balance
 sheet data:
   Total assets $1,107,504  $1,164,369  $1,146,955  $1,159,917  $1,187,696
   Total
    deposits       974,604   1,009,593     991,822     969,172     982,213
   Loans
    (gross)        872,459     913,277     948,149     951,665     955,497
   Stockholders'
    equity          64,750      69,812      74,170     108,673     109,458
                ==========  ==========  ==========  ==========  ==========
Consolidated
 average balance
 sheet data:
   Total assets $1,138,662  $1,167,664  $1,157,189  $1,181,505  $1,205,959
   Total
    deposits       991,904   1,003,380     971,033     980,633     989,560
   Loans
    (gross)        899,705     938,745     956,981     958,033     958,754
   Stockholders'
    equity          70,100      74,432     109,178     110,616     115,545
                ==========  ==========  ==========  ==========  ==========
Consolidated
 performance
 ratios:
   Return on
    average
    assets*          -1.59%      -1.47%     -11.80%      -0.09%      -1.12%
   Return on
    average
    equity*         -25.87%     -23.02%    -125.10%      -0.97%     -11.70%
   Net interest
    margin*           2.83%       2.85%       2.87%       3.56%       3.66%
   Efficiency
    ratio (2)       101.41%     103.21%     219.22%      72.22%      79.05%
                ==========  ==========  ==========  ==========  ==========
Consolidated
 asset quality
 data and ratios:
   Nonaccruing
    loans       $   38,531  $   37,881  $   50,591  $   51,132  $   39,629
   Restructured
    loans            5,679       5,409           -           -           -
   Accruing
    loans 90
    days past
    due                355         434         114         466         297
                ----------  ----------  ----------  ----------  ----------
   Nonperforming
    loans           44,565      43,724      50,705      51,598      39,926
   Foreclosed
    properties      15,437      17,567       6,805       3,237       2,172
                ----------  ----------  ----------  ----------  ----------
   Nonperforming
    assets          60,002      61,291      57,510      54,835      42,098
                ----------  ----------  ----------  ----------  ----------
   Allowance
    for loan
    losses          22,787      26,485      24,806      21,553      18,833
                ----------  ----------  ----------  ----------  ----------
   Loans
    charged off      9,673       2,905      14,303       1,711       6,097
   Recoveries
    of loans
    charged off      1,642         814         763         851       1,026
                ----------  ----------  ----------  ----------  ----------
   Net loan
    charge-offs      8,031       2,091      13,540         860       5,071
                ----------  ----------  ----------  ----------  ----------
   Net
    charge-offs
    to average
    loans*            3.58%       0.90%       5.63%       0.36%       2.13%
   Nonperforming
    loans to
    total assets      4.02%       3.76%       4.42%       4.45%       3.36%
   Allowance
    coverage of
    nonperforming
    loans            51.13%      60.57%      48.92%      41.77%      47.17%
   Allowance
    for loan
    losses to
    gross loans       2.61%       2.90%       2.62%       2.26%       1.97%
   Allowance
    for loan
    losses to
    net loans         2.68%       2.99%       2.69%       2.32%       2.01%
                ==========  ==========  ==========  ==========  ==========
 Subsidiary
  earnings
  summary:
   Bank of Granite
    Net
     interest
     income     $    7,245  $    6,459  $    6,928  $    8,871  $    9,003
    Loan loss
     provision       4,309       3,746      16,767       3,556       8,421
    Noninterest
     income          2,905       1,345       1,288       2,348       2,117
    Noninterest
     expense         9,779       7,259      18,627       6,878       8,421
    Income taxes
     (benefit)           -           -       6,645          25      (2,539)
    Net income
     (loss)         (3,938)     (3,201)    (33,823)        760      (3,183)
                ----------  ----------  ----------  ----------  ----------
   Granite Mortgage
    Net
     interest
     income     $      266  $    1,062  $      617  $      703  $      996
    Loan loss
     provision          24          24          24          25          24
    Noninterest
     income            225         624         682         849         986
    Noninterest
     expense         1,123       2,177       1,455       1,852       1,878
    Income taxes
     (benefit)           -           -        (222)       (130)         32
    Net income
     (loss)           (656)       (515)         42        (195)         48
                ==========  ==========  ==========  ==========  ==========

 * 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 net interest
    income and noninterest income.

 
Contacts for this release:
Scott Anderson
Chief Executive Officer
828.345.6866
Email Contact
Jerry Felts
Chief Operating Officer
828.322.5343
Email Contact