SOURCE: Granite Community Bank, NA

August 18, 2005 19:32 ET

Granite Community Bank Announces Second Quarter Results

GRANITE BAY, CA -- (MARKET WIRE) -- August 18, 2005 -- Granite Community Bank, N.A. (the "Company") (OTC BB: GCBK) today announced results for the quarter ended June 30, 2005. Net income for the three months ended June 30, 2005 increased $59 thousand or 69% to $144 thousand, compared to net income of $85 thousand in the second quarter of 2004. Earnings per diluted share decreased 8.3 % to $0.11 in the second quarter of 2005, compared to $0.12 in the second quarter of 2004. The Bank's secondary stock offering in 2004 caused the total average shares outstanding (fully diluted) for the quarter to increase to 557,484 or 79% over the prior period. Earnings per share (fully diluted) for the quarter, based on the prior years shares outstanding would have been $0.21 per share. See also note on tax computation for periods in prior years.

Net income for the six months ended June 30, 2005 increased $168 thousand or 122% to $306 thousand, compared to net income of $138 thousand for the six months ended June 30, 2004. Earnings per diluted share increased 20% to $0.24 for the six months ended June 30, 2005, compared to $0.20 for the six months ended June 30, 2004.

Net interest income was $1.15 million and $2.15 million in the second quarter and first six months of 2005, respectively, compared to $0.73million and $1.34 million for the same periods in 2004. The net interest margin for the second quarter and first six months of 2005 was 4.72% and 4.70%, respectively. This is a decrease of 21 basis points and 16 basis points compared to the same periods in 2004. Increases in market rates in 2005 have helped to increase the Company's yield on earning assets by 6 basis points in the second quarter of 2005 compared to 2004 however, a change in the earnings assets mix resulted in a decrease of 1 basis point for the six months ended June 30, 2005 compared to the same period in 2004. Partially offsetting the rise in earning asset yields were increases in the Company's cost of funds. The cost of funds rose 27 basis points to 1.45% in the second quarter of 2005 compared to 1.18% in 2004 and 17 basis points to 1.35% for the six months ended June 30, 2005 compared to 1.18% in 2004.

Non-interest income increased $19 thousand or 19% in the second quarter of 2005, compared to the second quarter of 2004. For the six months ended June 30, 2005 non-interest income increased $47 thousand or 31% compared to the same period in 2004.

Non-interest expense increased $316 thousand or 52% in the second quarter of 2005, compared to the second quarter of 2004 and $550 thousand or 47% for the six months ended June 30, 2005 compared to the six months ended June 30, 2004. The increase in non-interest expense in 2005 compared to 2004 was primarily the result of increased staffing and other related costs associated with the strengthening of the Company's internal infrastructure.

At June 30, 2005, the Company's total assets were $103 million, an increase of $37 million or 56%, compared to June 30, 2004. Total loans and leases were $74 million at June 30, 2005, an increase of $23 million or 45%, compared to June 30, 2004. Total deposits were $89 million at June 30, 2005, an increase of $33 million or 59%, compared to June 30, 2004.

David R. Kaiser, President and CEO, stated, "We are pleased with our results midway through 2005. We continue to focus on providing quality service to our clients, shareholders and community while simultaneously building shareholder value."

ABOUT GRANITE COMMUNITY BANK, N.A.

Granite Community Bank, N.A. was founded in June of 2002 and is headquartered in Granite Bay, California. A full service community bank serving Placer County, California, Granite Community Bank offers a full array of financial products and services through two offices located in Granite Bay and Auburn, California. The Bank also operates a mortgage loan production office in Paradise, Butte County, California.

This report contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those reflected in these statements. The forward-looking statements are made pursuant to the safe harbor provisions of Section 21D of the Securities Exchange Act of 1934, as amended. Those forward-looking statements are based on management's assumptions and projections, and are sometimes identifiable by the use of the words, 'expect to,' 'plan,' 'will,' 'believe' and words of similar predictive nature. Because management's assumptions and projections are based on anticipation of future events, you should not place undue emphasis on forward-looking statements, and you should recognize that those statements are effective only as of the date of this release. You should anticipate that our actual performance may vary from those projections, and variations may be material and adverse. You should not rely solely on forward-looking statements in evaluating an investment or prospective investment, and you should consider all uncertainties and risks typical of the banking industry. Risks that may cause our results to differ materially and adversely from management's expectations discussed here include: unanticipated additional expenses associated with opening additional facilities; higher than expected costs of regulatory compliance, the impact on reported financial results that may occur with the adoption of new accounting rules and tax regulations; the inability to grow earning assets or the inability to fund loan growth through traditional deposit gathering; as well as general economic conditions in our market area and broader economic changes regionally and nationally, and the effect of bank regulatory changes. Granite Community Bank, N.A. undertakes no obligation to update any forward-looking statements contained herein.


                      Granite Community Bank, N.A.
                         FINANCIAL HIGHLIGHTS
    (Dollar amounts in thousands, except share and per share data)
                              (Unaudited)


                   Three Months Ended             Six Months Ended
               ---------------------------- --------------------------
FOR THE          June 30,   June 30,   %     June 30,  June 30,   %
 PERIOD:           2005      2004    Change    2005     2004    Change
               ----------  ---------------- ---------- ---------------

Net interest
 income         $ 1,150     $   729   58%    $ 2,151     $ 1,343   60%
Provision for
 loan and
 lease losses        97          80   21%        138         120   15%
Noninterest
 income             118          99   19%        199         152   31%
Noninterest
 expense            918         602   52%      1,688       1,138   47%
               --------    --------         --------    --------
Income before
 provision for
 income taxes       253         146   73%        524         237  121%
Provision for
 income taxes       109          61*  79%        218          99* 120%
               --------    --------         --------    --------
Net  income     $   144     $    85   69%    $   306     $   138  122%
               ========    ========         ========    ========

*Does not include tax credit of $51 for three months and $73 for six
 months.

Net income per
 basic share    $  0.11     $  0.12 -8.3%    $  0.24     $  0.20  20%
Net income per
 diluted share  $  0.11     $  0.12 -8.3%    $  0.24     $  0.20  20%

Average
 shares
 outstanding    1,256,667   700,000        1,253,333     700,000

(fully diluted) 1,259,732   702,248        1,256,731     702,248

SELECTED
 FINANCIAL RATIOS
 (Annualized):

Return on
 average assets   0.56%        0.55%            0.63%       0.48%
Return on
 average equity   4.35%        5.11%            4.65%       4.25%
Average
 shareholders'
 equity to
 average assets  12.91%       10.74%           13.54%      11.24%
Net interest
 margin           4.72%        4.93%            4.70%       4.86%

AT PERIOD END:

Loans and leases                            $ 73,692    $ 51,372
Allowance for
 loan and
 lease losses                               $    739    $    500
Assets                                      $103,247    $ 66,052
Shareholders'
 equity                                     $ 13,215    $ 12,473
Deposits                                    $ 89,195    $ 56,219
Total risk-based
 capital ratio                                 11.07%      12.01%
Allowance for
 loan and lease
 losses to total
 loans and leases                               1.00%       0.99%
Shares
 outstanding                               1,260,000     700,000

Contact Information