Bank Of Granite 8-K Results of Operations and Financial Condition

Exhibit 99 (a)

Bank of Granite
— C O R P O R A T I O N —
NEWS FOR IMMEDIATE RELEASE: NEWS

July 29, 2009

BANK OF GRANITE CORPORATION
REPORTS SECOND QUARTER RESULTS

GRANITE FALLS, NORTH CAROLINA—Bank of Granite Corporation (NASDAQ: GRAN) 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

PO Box 128
Granite Falls, NC 28630 www.bankofgranite.com

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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.

Contacts for this release:

Scott Anderson, Chief Executive Officer, 828.345.6866 or sanderson@bankofgranite.com

Jerry Felts, Chief Operating Officer, 828.322.5343 or jfelts@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 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 onForm 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
	June 30,									June 30,
(In thousands except per share data)	2009			2008			% change			2009			2008			% change
Consolidated earnings summary:
Interest income, taxable equivalent	$	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 benefit		10,995			10,409			5.6	%		20,457			20,068			1.9	%
Loss before income tax		(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.

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Bank of Granite Corporation
Supplemental Quarterly Financial Data

	Quarters Ended
	Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
(In thousands except per 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.

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