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

Exhibit 99 (a)

Bank of Granite Corporation
     News

For Release: October 12, 2004

BANK OF GRANITE REPORTS DECLINE IN EARNINGS FOR THIRD QUARTER
COMPARED TO THIRD QUARTER OF 2003 — ASSETS TOP $1 BILLION

     Bank of Granite Corporation reported earnings for the third quarter and nine month periods, both ending September 30, 2004.

     For the third quarter of 2004, net income was $3,117,918 compared with $4,231,091 earned in the third quarter of 2003, a decline of 26.3%. Quarterly per share income was 23¢ vs. 31¢ for 2003’s third quarter, a decline of 25.8%.

     For the nine month period, also ending on September 30, 2004, net income was $9,424,935 compared with $11,987,431 for 2003’s nine month period, a decline 21.4%. On a per share basis, this equates to 69¢ vs. 89¢ in 2003, a decline of 22.5%.

     According to John A. Forlines, Jr., Chairman and CEO of Bank of Granite Corporation, the primary reason for the decline in net income for the Company was the significant drop in income from mortgage originations of its subsidiary, Granite Mortgage. The mortgage company earned $122,448 for the third quarter vs. $878,794 in 2003’s third quarter and earned $386,262 for the nine-month period in 2004 compared with $2,050,801 for the comparable period in 2003. In addition, a decline in net interest margin during the quarter and year-to-date periods and increased overhead as a result of the bank’s new offices were factors in the earnings decline. Forlines said he was optimistic about the future of the Company’s long term earnings. He said substantial investments in fiscal and human resources would produce profitability down the road. He said recent Federal Reserve action to increase short term rates should help the net interest margin situation.

     As he usually does, Forlines thanked all members of the Bank of Granite family for their hard work during a very difficult period.

     Balance sheet activity showed positive results. For the first time in the bank’s history, assets moved above $1 billion, closing at $1,004,006,156 on September 30, up 3.3%. Deposits ended the quarter at $772,672,227 up 6.1% and loans totaled $753,334,505, up 8.5%. The quarterly dividend was increased, from 12¢ to 13¢, during the quarter, making 2004 the 51st consecutive year of increased dividends, a record for any bank in the country.

     Bank of Granite Corporation is the parent company of Bank of Granite and Granite Mortgage, Inc. (formerly GLL & Associates). The bank operates twenty full-service banking offices in Caldwell, Catawba, and Burke Counties—the “Unifour” area of North Carolina, and in Mecklenburg, Watauga, Forsyth, and Wilkes counties. Granite Mortgage, headquartered in Winston-Salem, originates home mortgages in the Catawba Valley and the Central and Southern Piedmont regions of North Carolina, in addition to Boone and Wilkesboro, and in Hilton Head, South Carolina. Bank of Granite Corporation has an estimated 6,700 shareholders with approximately 13,382,000 shares of common stock outstanding as September 30, 2004. Its stock trades on the national NASDAQ Stock Market® under the symbol GRAN. The closing price of the stock on September 30, 2004 was $19.41.

* * * * *

Please see “Financial Data” tables, which are attached.
For further information, contact Kirby Tyndall, Chief Financial Officer
Voice (828) 496-2026, Fax (828) 496-2010 or Internet: ktyndall@bankofgranite.com.

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

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Bank of Granite Corporation	Three Months Ended									Nine Months Ended
Selected Financial Data	September 30,									September 30,
(in thousands except per share data)	2004			2003			% change			2004			2003			% change
Consolidated earnings summary:
Interest income, taxable equivalent	$	14,100		$	14,052			0.3	%	$	41,795		$	38,257			9.2	%
Interest expense		3,259			3,173			2.7	%		9,411			8,234			14.3	%
Net interest income, taxable equivalent		10,841			10,879			-0.3	%		32,384			30,023			7.9	%
Taxable equivalent adjustment		321			369			-13.0	%		1,026			1,137			-9.8	%
Net interest income		10,520			10,510			0.1	%		31,358			28,886			8.6	%
Loan loss provision		1,678			1,139			47.3	%		4,027			3,424			17.6	%
Noninterest income		2,850			4,284			-33.5	%		8,374			11,434			-26.8	%
Noninterest expense		7,075			7,171			-1.3	%		21,759			18,677			16.5	%
Income before income taxes		4,617			6,484			-28.8	%		13,946			18,219			-23.5	%
Income taxes		1,499			2,253			-33.5	%		4,521			6,232			-27.5	%
Net income	$	3,118		$	4,231			-26.3	%	$	9,425		$	11,987			-21.4	%
Earnings per share — Basic	$	0.23		$	0.31			-25.8	%	$	0.70		$	0.90			-22.2	%
Earnings per share — Diluted		0.23			0.31			-25.8	%		0.69			0.89			-22.5	%
Average shares — Basic		13,426			13,617			-1.4	%		13,523			13,370			1.1	%
Average shares — Diluted		13,468			13,692			-1.6	%		13,573			13,437			1.0	%
Consolidated balance sheet data at September 30:
Total assets										$	1,004,006		$	971,644			3.3	%
Total deposits											772,672			728,334			6.1	%
Loans (gross)											753,335			694,465			8.5	%
Shareholders’ equity											140,993			141,762			-0.5	%
Consolidated average balance sheet data:
Total assets	$	1,000,360		$	959,980			4.2	%	$	985,160		$	825,563			19.3	%
Total deposits		763,643			610,300			25.1	%		742,164			610,300			21.6	%
Loans (gross)		745,999			671,057			11.2	%		732,873			589,463			24.3	%
Shareholders’ equity		140,111			139,294			0.6	%		141,112			131,865			7.0	%
Consolidated performance ratios:
Return on average assets*		1.24	%		1.75	%					1.28	%		1.94	%
Return on average equity*		8.85	%		12.05	%					8.92	%		12.15	%
Efficiency ratio		51.68	%		47.29	%					53.39	%		45.05	%
Consolidated asset quality data and ratios:
Nonaccruing loans										$	5,533		$	6,690			-17.3	%
Accruing loans 90 days past due											3,927			4,061			-3.3	%
Nonperforming loans											9,460			10,751			-12.0	%
Foreclosed properties											1,352			2,819			-52.0	%
Nonperforming assets											10,812			13,570			-20.3	%
Allowance for loan losses											12,801			11,238			13.9	%
Loans charged off											2,350			3,214			-26.9	%
Recoveries of loans charged off											326			331			-1.5	%
Net loan charge-offs (recoveries)											2,024			2,883			-29.8	%
Net charge-offs to average loans*											0.37	%		0.65	%
Nonperforming loans to total assets											0.94	%		1.11	%
Allowance coverage of nonperforming loans											135.32	%		104.53	%
Allowance for loan losses to gross loans											1.70	%		1.62	%
Allowance for loan losses to net loans											1.73	%		1.64	%
Subsidiary earnings summary:
Bank of Granite
Net interest income	$	9,728		$	8,990			8.2	%	$	28,794		$	24,952			15.4	%
Loan loss provision		1,676			1,139			47.1	%		4,025			3,424			17.6	%
Noninterest income		1,926			1,878			2.6	%		5,544			5,626			-1.5	%
Noninterest expense		5,401			4,607			17.2	%		16,541			12,179			35.8	%
Income taxes		1,417			1,667			-15.0	%		4,263			4,865			-12.4	%
Net income		3,160			3,455			-8.5	%		9,509			10,110			-5.9	%
Granite Mortgage
Net interest income	$	859		$	1,553			-44.7	%	$	2,747		$	3,909			-29.7	%
Loan loss provision		2			—			n/a			2			—			n/a
Noninterest income		924			2,408			-61.6	%		2,830			5,824			-51.4	%
Noninterest expense		1,579			2,496			-36.7	%		4,933			6,315			-21.9	%
Income taxes		82			586			-86.0	%		258			1,367			-81.1	%
Net income		122			879			-86.1	%		386			2,051			-81.2	%

* Annualized based on number of days in the period. More

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Bank of Granite Corporation Supplemental Quarterly Financial Data	Quarters Ended
	Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
(in thousands except per share data)	2004			2004			2004			2003			2003
Consolidated earnings summary:
Interest income, taxable equivalent	$	14,100		$	14,018		$	13,676		$	13,948		$	14,052
Interest expense		3,259			3,073			3,078			3,155			3,173
Net interest income, taxable equivalent		10,841			10,945			10,598			10,793			10,879
Taxable equivalent adjustment		321			340			365			372			369
Net interest income		10,520			10,605			10,233			10,421			10,510
Loan loss provision		1,678			1,104			1,245			1,340			1,139
Noninterest income		2,850			2,875			2,649			3,004			4,284
Noninterest expense		7,075			7,475			7,209			7,187			7,171
Income before income taxes		4,617			4,901			4,428			4,898			6,484
Income taxes		1,499			1,585			1,437			1,578			2,253
Net income	$	3,118		$	3,316		$	2,991		$	3,320		$	4,231
Earnings per share — Basic	$	0.23		$	0.25		$	0.22		$	0.24		$	0.31
Earnings per share — Diluted		0.23			0.24			0.22			0.24			0.31
Average shares — Basic		13,426			13,522			13,623			13,640			13,617
Average shares — Diluted		13,468			13,569			13,683			13,740			13,692
Consolidated ending balance sheet data:
Total assets	$	1,004,006		$	993,985		$	977,445		$	971,383		$	971,644
Total deposits		772,672			744,541			740,846			735,099			728,334
Loans (gross)		753,335			740,932			726,375			715,845			694,465
Shareholders’ equity		140,993			140,077			142,300			141,815			141,762
Consolidated average balance sheet data:
Total assets	$	1,000,360		$	987,822		$	967,298		$	970,788		$	959,980
Total deposits		763,643			738,039			724,811			730,181			707,876
Loans (gross)		745,999			732,768			719,853			704,721			671,057
Shareholders’ equity		140,111			140,739			142,486			141,615			139,294
Consolidated performance ratios:
Return on average assets*		1.24	%		1.35	%		1.24	%		1.36	%		1.75	%
Return on average equity*		8.85	%		9.48	%		8.44	%		9.30	%		12.05	%
Efficiency ratio		51.68	%		54.09	%		54.42	%		52.09	%		47.29	%
Consolidated asset quality data and ratios:
Nonaccruing loans	$	5,533		$	4,192		$	4,229		$	8,115		$	6,690
Accruing loans 90 days past due		3,927			6,274			2,568			3,218			4,061
Nonperforming loans		9,460			10,466			6,797			11,333			10,751
Foreclosed properties		1,352			1,462			1,709			1,775			2,819
Nonperforming assets		10,812			11,928			8,506			13,108			13,570
Allowance for loan losses		12,801			11,864			11,583			10,799			11,238
Loans charged off		875			920			556			1,874			735
Recoveries of loans charged off		135			96			95			95			116
Net loan charge-offs (recoveries)		740			824			461			1,779			619
Net charge-offs to average loans*		0.39	%		0.45	%		0.26	%		1.00	%		0.37	%
Nonperforming loans to total assets		0.94	%		1.05	%		0.70	%		1.17	%		1.11	%
Allowance coverage of nonperforming loans		135.32	%		113.36	%		170.41	%		95.29	%		104.53	%
Allowance for loan losses to gross loans		1.70	%		1.60	%		1.59	%		1.51	%		1.62	%
Allowance for loan losses to net loans		1.73	%		1.63	%		1.62	%		1.53	%		1.64	%
Subsidiary earnings summary:
Bank of Granite
Net interest income	$	9,728		$	9,595		$	9,472		$	9,410		$	8,990
Loan loss provision		1,676			1,104			1,245			1,340			1,139
Noninterest income		1,926			1,895			1,722			1,940			1,878
Noninterest expense		5,401			5,538			5,602			5,300			4,607
Income taxes		1,417			1,492			1,354			1,449			1,667
Net income		3,160			3,356			2,993			3,261			3,455
Granite Mortgage
Net interest income	$	859		$	1,081		$	807		$	1,060		$	1,553
Loan loss provision		2			—			—			—			—
Noninterest income		924			980			927			1,069			2,408
Noninterest expense		1,579			1,828			1,527			1,806			2,496
Income taxes		82			93			83			129			586
Net income		122			140			124			194			879

* Annualized based on number of days in the period.

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