SOURCE: Granite Community Bank, N.A.

August 06, 2008 20:00 ET

Granite Bancshares, Inc. Announces Second Quarter Results for Granite Community Bank, N.A.

GRANITE BAY, CA--(Marketwire - August 6, 2008) - Granite Bancshares, Inc. (OTCBB: GBSI) today announced results for the quarter ended June 30, 2008 for its wholly owned subsidiary Granite Community Bank, N.A. (the "Company").

Net income for the three months ended June 30, 2008 increased $241 thousand or 73% to $572 thousand, compared to net income of $331 thousand in the second quarter of 2007. Earnings per diluted share increased 75% to $0.42 in the second quarter of 2008, compared to $0.23 in the second quarter of 2007. Net income during the period was positively impacted by a non-recurring event. The Company was the beneficiary of proceeds under an insurance policy. Without the impact of this non-recurring event, the net income for the period would have been $40 thousand or $0.03 per share; this is a decrease of $201 thousand or 94% from the same period in the prior year.

Net income for the six months ended June 30, 2008 increased $95 thousand or 14% to $778 thousand, compared to net income of $683 thousand for the six months ended June 30, 2007. Earnings per diluted share increased 17% to $0.56 for the six months ended June 30, 2008, compared to $0.48 for the six months ended June 30, 2007. Without the impact of the non-recurring event as described earlier, the net income for the period would have been $246 thousand or $0.18 per fully diluted share.

Net interest income was $1.43 million and $2.81 million in the second quarter and first six months of 2008, respectively, compared to $1.68 million and $3.33 million for the same periods in 2007. The net interest margin for the second quarter and first six months of 2008 was 3.73% and 3.81%, respectively. This is a decrease of 88 basis points and 86 basis points compared to the same periods in 2007. Decreases in market rates in 2008 have contributed to a decrease in the Company's yield on earning assets by 168 basis points in the second quarter of 2008 compared to 2007 and a decrease of 138 basis points for the six months ended June 30, 2008 compared to the same period in 2007. Partially offsetting the drop in earning asset yields were decreases in the Company's cost of funds. The cost of funds decreased 79 basis points to 2.39% in the second quarter of 2008 compared to 3.18% in 2007 and 47 basis points to 2.65% for the six months ended June 30, 2008 compared to 3.12% in 2007.

Non-interest income increased $529 thousand or 490% in the second quarter of 2008, compared to the second quarter of 2007. For the six months ended June 30, 2008 non-interest income increased $464 thousand or 170% compared to the same period in 2007.

Non-interest expense increased $4 thousand or less than 1% in the second quarter of 2008, compared to the second quarter of 2007 and $61 thousand or 3% for the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

At June 30, 2008, the Company's total assets were $165 million, an increase of $13.5 million or 9%, compared to June 30, 2007. Total loans and leases were $130 million at June 30, 2008, an increase of $3.6 million or 2.9%, compared to June 30, 2007. Total deposits were $140 million at June 30, 2008, an increase of $17 million or 14%, compared to June 30, 2007.

During the second quarter of 2008 the Company made a $150,000 provision to its allowance for loan and lease losses. This compares to a provision of $40,000 made during the second quarter of 2007. As of June 30, 2008 the allowance for loan and lease losses is $2.9 million or 2.24% of total loans.

Non-performing assets, those defined as loans ninety days or more past due and/or placed on non-accrual status were $3.3 million as of June 30, 2008 compared to $0 as of June 30 2007 and $2.0 million as of December 31, 2007. The non-performing assets are directly related to three residential real estate development projects and management believes that it has adequately reserved for these assets.

In recognition of the rapidly changing economic conditions within the marketplace the Company has committed to, among other things, continuing to maintain capital levels well in excess of regulatory minimums and aggressive loan portfolio management practices. Management feels that these actions are both conservative and appropriate in this economic environment and are in the best interests of our clients and shareholders.

David R. Kaiser, President and CEO, stated, "We are pleased to report that the Bank remains profitable, our capital levels remain well in excess of regulatory minimums and we continue to control non-interest expenses. As a community bank our financial results are impacted by the economic conditions within our South Placer County, California marketplace. The economic challenges facing our region in the first half of 2008 include significant declines in residential real estate values which have increased the stress on many sectors of the economy. The overall loan portfolio continues to perform well in spite of the general economic conditions."

ABOUT GRANITE BANCSHARES, INC. and GRANITE COMMUNITY BANK, N.A.

Granite Bancorp, Inc. is the parent holding company of Granite Community Bank, N.A., which is headquartered in Granite Bay, California and has three offices serving the South Placer County region of Northern California. For further information, please contact David Kaiser, President CEO, at (916) 780-5605.

Cautionary Statement: This release may contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results and events to differ materially from those stated herein. Words such as "anticipate," "believe," "estimate," "expect," "should," "intend," "project," and words or phrases of similar meaning are intended to identify forward-looking statements. Management's assumptions and projections are based on their anticipation of future events and actual performance may differ materially from that projected.

      (Dollar amounts in thousands, except share and per share data)
                                (Unaudited)

                      Three months ended             Six months ended
                  ---------------------------  ---------------------------
                            June 30,                     June 30,
                  ---------------------------  ---------------------------
FOR THE PERIOD:     2007       2008     Change     2007       2008   Change
                  ---------  ---------  -----  ---------  ---------  -----

Net interest
 income               1,678      1,427    -15%     3,333      2,851    -14%
Provision for loan
 and lease loss          40        150    275%        90        175     94%
Non-interest
 income                 108        637    490%       273        737    170%
Non-interest
 expense              1,188      1,184      0%     2,394      2,455      3%
Pretax income           558        730     31%     1,122        958    -15%
Provision for tax       227        158    -30%       439        180    -59%
Net income              331        572     73%       683        778     14%
Net income per
 basic share           0.24       0.42              0.51       0.57
Net income per
 diluted share         0.23       0.41              0.48       0.56
Shares
 outstanding      1,359,066  1,362,884         1,359,066  1,362,884
Average           1,355,550  1,362,884         1,347,806  1,362,480
Fully diluted     1,410,286  1,386,903         1,409,233  1,396,152
SELECTED FINANCIAL
 RATIOS (Annualized):
Return on average
 assets                0.85%      1.40%             0.89%      0.98%
Return on average
 equity                8.26%      14.2%             8.62%      9.69%
Average shareholder
 equity to average
 assets               10.34%      9.94%            10.36%     10.12%
Net interest
 margin                4.61%      3.73%             4.67%      3.81%

AT PERIOD END:

Loans and leases                                 126,209    129,845
Allowance for
 loan and lease
 loss                                              1,549      2,904
Total assets                                     151,371    164,920
Shareholder equity                                16,134     16,491
Deposits                                         122,653    140,130
Total risk based
 capital ratio                                     11.92      12.65
Allowance for
 loan and lease
 loss to total
 loans                                              1.23       2.24

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