<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1999
-----------------
Commission file number 0-15956
-------
BANK OF GRANITE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1550545
- ------------------------------------ ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. BOX 128, GRANITE FALLS, N.C. 28630
- -------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (828) 496-2000
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
COMMON STOCK NASDAQ
- -------------------------------------- --------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
-----------------------------
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of March 6, 2000, 11,407,601 shares of common stock, $1 par value, were
outstanding and the aggregate market value of the voting stock held by
non-affiliates was $200,459,229.
Documents Incorporated by Reference
PARTS I AND II: Annual Report to Shareholders for the fiscal year ended
December 31, 1999 (with the exception of those portions which are specifically
incorporated by reference in this Form 10-K, the Annual Report to Shareholders
is not deemed to be filed as part of this report).
PART III: Definitive Proxy Statement dated March 23, 2000 as filed
pursuant to Section 14 of the Securities Exchange Act of 1934 in connection
with the 2000 Annual Meeting of Shareholders.
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Exhibit Index begins on page 13
<PAGE> 2
FORM 10-K CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
1999 2000
1999 Annual Proxy
Form 10-K Report Statement
Page Page Page
------------------------------------------
<S> <C> <C> <C>
PART I
Item 1 - Business 3 n/a n/a
Item 2 - Properties 7 n/a n/a
Item 3 - Legal Proceedings 9 n/a n/a
Item 4 - Submission of Matters to a
Vote of Security Holders 9 n/a n/a
PART II
Item 5 - Market for the Registrant's
Common Equity and
Related Shareholder Matters 9 4 & 18 I-2
Item 6 - Selected Financial Data 9 22
Item 7 - Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 9 17 II-1 - II-11
Item 8 - Financial Statements and
Supplementary Data 9 21, 23 & 24 II-12 - II-35
Item 9 - Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 9 n/a n/a
PART III
Item 10 - Directors and Executive
Officers of the Registrant 10 n/a I-4
Item 11 - Executive Compensation 10 n/a I-5 - I-9
Item 12 - Security Ownership of Certain
Beneficial Owners and
Management 10 n/a I-2 & I-4
Item 13 - Certain Relationships and
Related Transactions 10 n/a I-12
PART IV
Item 14 - Exhibits, Financial Statement
Schedules and Reports on
Forms 8-K 11 n/a II-12 - II-35
</TABLE>
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PART I
ITEM 1 - BUSINESS
Bank of Granite Corporation (the "Registrant") is a Delaware Corporation
organized January 30, 1987 as a holding company. The Registrant currently
engages in no operations other than ownership and operation of Bank of Granite
(the "Bank"), a state bank chartered under the laws of North Carolina on August
2, 1906 and GLL & Associates, Inc. ("GLL"), a mortgage bank chartered under the
laws of North Carolina on June 24, 1985. GLL merged with the Registrant on
November 5, 1997. The Registrant conducts its banking business from 14 offices
located in Caldwell, Catawba, and Burke counties in North Carolina. According to
the North Carolina Banking Commission, the Bank ranked 14th and 13th among North
Carolina commercial banks based on assets and deposits, respectively, as of
December 31, 1999. The Registrant conducts its mortgage banking business from 8
offices in the Central and Southern Piedmont and Catawba Valley regions of North
Carolina.
GENERAL BUSINESS
The Bank's principal activities include the taking of demand and time deposits
and the making of loans, secured and unsecured, to individuals, associations,
partnerships and corporations. Bank of Granite is an independent community bank.
The majority of its customers are individuals and small businesses. No material
part of its business is dependent upon a single customer or a few customers
whose loss would have an adverse effect on the business of the Bank. No material
portion of the business of the Bank is seasonal.
GLL's principal activities include the origination and underwriting of mortgage
loans to individuals. GLL also sells mortgage servicing rights and appraisal
services. GLL specializes in government guaranteed mortgage products. The
majority of its customers are individuals. No material part of its business is
dependent upon a single customer or a few customers whose loss would have an
adverse effect on the business of GLL. The mortgage business is sensitive to
changes in interest rates in the market. When rates decline, GLL experiences an
increase in its mortgage business. When rates rise, GLL's business declines.
TERRITORY SERVED AND COMPETITION
The Bank operates banking offices in Granite Falls and the Baton section of
Granite Falls; Lenoir and the Hibriten and Whitnel sections of Lenoir; Hudson;
Newton; Morganton; Hickory and the Springs Road, Viewmont, Long View and
Mountain View sections of Hickory; and Vale for a total of 14 offices. Banking
laws of North Carolina allow statewide branching, resulting in commercial
banking in the state being extremely competitive.
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The Federal Deposit Insurance Corporation (the "FDIC") collects deposit data
from insured depository institutions as of June 30 of each year.
According to June 30, 1999 data provided by the FDIC, there were six other
commercial banks in the Bank's Caldwell County market. As of June 30, 1999, the
Bank of Granite had $198.8 million, or 30.3%, of total county deposits of $655.3
million, compared with $176 million, or 27.6%, of total county deposits of
$638.1 million as of June 30, 1998.
According to the FDIC data, in the Bank's Catawba County market, there were ten
other commercial banks as of June 30, 1999. The Bank of Granite had $240.8
million, or 14.2%, of total county deposits of $1.7 billion, compared with
$249.8 million, or 15.2%, of total county deposits of $1.6 billion as of June 30
of the previous year. The Bank's deposits in the previous year included a $24.4
million deposit by one of the Bank's trustee account customers on June 30 that
was paid out by the trustee on July 3. Excluding these temporarily deposited
funds, the Bank had $225.4 million, or 13.7%, of Catawba County's total deposits
as of June 30, 1998.
In the Bank's Burke County market, there were five other commercial banks and
one savings institution as of June 30, 1999 according to the FDIC. The Bank of
Granite had $26.5 million, or 4.4%, of total county deposits of $600.6 million,
compared with $25.1 million, or 4.3%, of $588.4 million in total Burke County
deposits as of June 30, 1998.
The mortgage banking business is also highly competitive, with both bank and
nonbank mortgage originators. GLL conducts its mortgage banking business from
eight offices in the North Carolina cities of Winston-Salem, Charlotte, Hickory,
High Point, Lenoir, Morganton, Newton and Salisbury. In 1998, the Bank merged
its mortgage department with GLL, extending GLL's services to the Catawba Valley
region of North Carolina with the offices in Hickory, Lenoir, Morganton, Newton
and Shelby, which opened in 1999.
EMPLOYEES
As of December 31, 1999, the Bank had 194 and GLL had 36 full-time equivalent
employees. Both the Bank and GLL consider its relationship with its employees to
be excellent.
SUPERVISION AND REGULATION
The following summaries of statutes and regulations affecting bank holding
companies, banks and mortgage banks do not purport to be complete. Such
summaries are qualified in their entirety by reference to such statutes and
regulations.
The Bank Holding Company Act
The Registrant is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"), and is
required to register as such with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board" or "FRB").
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A bank holding company is required to file with the FRB annual reports and other
information regarding its business operations and those of its subsidiaries. It
is also subject to examination by the Federal Reserve Board and is required to
obtain Federal Reserve Board approval prior to acquiring, directly or
indirectly, more than 5% of the voting stock of such bank, unless it already
owns a majority of the voting stock of such bank. Furthermore, a bank holding
company must engage, with limited exceptions, in the business of banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiary banks. One of the exceptions to this prohibition is the
ownership of shares of a company the activities of which the FRB has determined
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
The FRB has cease-and-desist powers over parent bank holding companies and
non-banking subsidiaries where their action would constitute a serious threat to
the safety, soundness or stability of a subsidiary bank.
While the Registrant is not presently subject to any regulatory restrictions on
dividends, the Registrant's ability to pay dividends will depend to a large
extent on the amount of dividends paid by the Bank and any other subsidiaries.
The Bank, as a North Carolina banking corporation, may pay dividends only out of
undivided profits as determined pursuant to North Carolina General Statutes
Section 53-87. As of December 31, 1999, the Bank had undivided profits of
approximately $96.5 million. Additionally, current federal regulations require
that the Bank maintain a ratio of total capital to assets, as defined by
regulatory authorities, in excess of 6%. As of December 31, 1999, this ratio was
18.01%, leaving approximately $72.4 million of the Bank's undivided profits
available for the payment of dividends. The Bank is, and such other subsidiaries
may be, subject to regulatory restrictions on the payment of dividends.
In an effort to achieve a measurement of capital adequacy that is more sensitive
to the individual risk profiles of financial institutions, the various financial
institution regulators mandate minimum capital regulations and guidelines that
categorize various components of capital and types of assets and measure capital
adequacy in relation to a particular institution's relative levels of those
capital components and the level of risk associated with various types of assets
of that financial institution. The FDIC and the FRB statements of policy on
"risk-based capital" require the Registrant to maintain a level of capital
commensurate with the risk profile assigned to its assets in accordance with the
policy statements. The capital standards call for minimum total capital of 8
percent of risk-adjusted assets. At December 31, 1999, the Registrant's tier 1
ratio and total capital ratio to risk-adjusted assets was 26.5% and 27.6%
respectively. The Registrant's leverage ratio at December 31, 1999 was 18.7%.
The Registrant is in compliance with all regulatory capital requirements.
The Registrant cannot predict what other legislation might be enacted or what
other regulation might be adopted or, if enacted or adopted, the effect thereof.
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The Bank is subject to supervision and regulation, of which regular bank
examinations are a part, by the FDIC and North Carolina State Banking Commission
(the "Banking Commission"). The Bank is a member of the FDIC, which currently
insures the deposits of each member bank to a maximum of $100,000 per depositor.
For this protection, each bank pays a semi-annual statutory assessment and is
subject to the rules and regulations of the FDIC.
Federal banking laws applicable to all depository financial institutions, among
other things, (I) afford federal bank regulatory agencies with powers to prevent
unsafe and unsound banking practices; (II) restrict preferential loans by bands
to "insiders" of banks; (III) require banks to keep information on loans to
major shareholders and executive officers, and (IV) bar certain directory and
officer interlocks between financial institutions. The prohibitions against
preferential loans and certain director and officer interlocks may inhibit the
ability of the Bank and the Registrant to obtain experienced and capable
officers and directors, to replace presently proposed officers and directors, or
to add to their number.
The Registrant is an "affiliate" of the Bank within the meaning of the Federal
Reserve Act, which imposes restrictions on loans by the Bank to the Registrant,
on investments by the Bank in the stock or securities of the security for loans
by the Bank to any borrower. The Registrant is also subject to certain
restrictions with respect to engaging in the business of issuing, underwriting
and distributing securities.
Shareholders of banks (including bank holding companies which own stock in
banks) may be compelled by bank regulatory authorities to invest additional
capital in the event their banks experience either significant loan losses or
rapid growth of loans or deposits. In addition, the Registrant may also be
required to provide additional capital to any additional banks which it acquires
as a condition to obtaining the approvals and consents of regulatory authorities
in connection with such acquisitions.
GLL, as a mortgage bank, is regulated by the Banking Commission. Because GLL is
a nonbank subsidiary of a bank holding company, it is also regulated by both the
Banking Commission and the FRB. In addition, because GLL underwrites mortgages
guaranteed by the government, it is subject to other audits and examinations as
required by the government agencies or the investors who purchase the mortgages.
Effects of Governmental Monetary Policy and Economic Controls
The Registrant is directly affected by governmental monetary policy and by
regulatory measures affecting the banking industry in general. Of primary
importance is the FRB, whose actions directly affect the money supply and, in
general, affect banks' lending abilities by increasing or decreasing the cost
and availability of bank credit in order to combat recession and curb
inflationary pressures in the economy by open market operations in the United
States government securities, changes in the discount rate on the member bank
borrows, and changes in reserve requirements against bank deposits.
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Deregulation of interest rates paid by banks on deposits and the types of
deposits that may be offered by banks have eliminated minimum balance
requirements and rate ceilings on various types of time deposit accounts. The
effect of these specific actions and, in general, the deregulation of deposit
interest rates have increased banks' costs of funds and made the more sensitive
to fluctuations in money market rates.
In view of changing conditions in the national economy and money markets, as
well as the effect of actions by monetary and fiscal authorities, no prediction
can be made as to possible future changes in interest rates, deposit levels,
loan demand or the business and earnings of the Registrant.
ITEM 2 - PROPERTIES
Bank of Granite owns all of its facilities, except for the leased grocery store
offices in Baton and Vale, which are listed below.
GRANITE FALLS, NC
Granite Falls office (home office) - 8,735 square foot building located on a 1.2
acre lot.
Storage building - 735 square foot building with an adjoining 0.6 acre lot.
Operations Center - 11,769 square foot building located on a 1.1 acre lot.
Print shop - 375 square foot building.
Baton office - 430 square office area located inside a supermarket.
LENOIR, NC
Lenoir office - 7,400 square foot building.
Whitnel office - 2,530 square foot building located on a 1 acre lot.
Hibriten office - 2,480 square foot building located on a 2.1 acre lot.
HUDSON, NC
Hudson office - 4,235 square foot building located on a 4.1 acre lot.
HICKORY, NC
Hickory office - 9,515 square foot building located on a 0.5 acre lot.
Bank of Granite Plaza - two story building with two sections containing 7,520
square feet and 7,572 square feet.
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Springs Road office - 3,612 square foot building located on a 1.6 acre lot.
Viewmont office - 4,200 square foot building located on a 2 acre lot.
Longview office - 2,440 square foot building located on a 1.1 acre lot.
Mountain View office - 2,480 square foot building located on a 1.8 acre lot.
NEWTON, NC
Newton office - 3,612 square foot building located on a 0.9 acre lot.
MORGANTON, NC
Morganton office - 5,400 square foot building located on a 0.8 acre lot.
VALE, NC
Vale office - 400 square foot office area located inside a supermarket.
GLL leases all of its facilities which are listed below.
Winston-Salem office (home office) - 8,353 square foot building.
Hickory office - 1,080 square foot office in the 15,092 square foot Bank of
Granite Plaza office building.
High Point office - 830 square foot office in a 7,200 square foot office
building.
Lenoir office - 200 square foot office in the 7,400 square foot Bank of Granite
office building.
Morganton office - 196 square foot office in the 5,400 square foot Bank of
Granite office building.
Newton office - 64 square foot office in the 3,612 square foot Bank of Granite
office building.
Salisbury office - 457 square foot office in a 6,500 square foot office
building.
Shelby office - 400 square foot office in a 12,000 square foot office building.
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ITEM 3 - LEGAL PROCEEDINGS
There were no significant legal proceedings as of December 31, 1999.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders in the fourth quarter
of 1999.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER'S MATTERS
The information required by this item is set forth on pages 4 & 18 of the
Registrant's 1999 ANNUAL REPORT TO SHAREHOLDERS under the headings "Market and
Dividend Summary" and "Shareholder Information", and respectively, and on page
I-2 of the 2000 PROXY STATEMENT under the heading "Principal Holders of Voting"
Securities". The above information is incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is set forth on page 22 in the
Registrant's 1999 ANNUAL REPORT TO SHAREHOLDERS under the heading "Selected
Financial Data" of which information is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is set forth on pages II-1 - II-11 of the
Registrant's 2000 PROXY STATEMENT for the heading "Management's Discussion and
Analysis", which is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
The Consolidated financial statements, the notes thereto and the independent
auditors' report is set forth on pages II-12 - II-35 of the 2000 PROXY STATEMENT
for the year ended December 31, 1999 are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no disagreement with accountants on accounting and financial
disclosure as defined by Item 304 of Regulation S-K.
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on page I-4 under the heading
"Directors and Executive Officers of Bank of Granite Corporation" in the
definitive proxy materials of the Company filed in connection with its 2000
ANNUAL MEETING OF SHAREHOLDERS. The information required by this item contained
in such definitive proxy materials is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is set forth on pages I-5 - I-9 in the
definitive proxy materials of the Company filed in connection with its 2000
ANNUAL MEETING OF SHAREHOLDERS, which information is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is set forth on pages I-2 & I-4 in the
definitive proxy materials of the Company filed in connection with its 2000
ANNUAL MEETING OF SHAREHOLDERS, which information is incorporated herein by
reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on page I-12 under the
heading "Transactions with Officers and Directors" in the definitive proxy
materials of the Company filed in connection with its 2000 ANNUAL MEETING OF
SHAREHOLDERS, which information is incorporated herein by reference.
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PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORMS 8-K
a. 1. Financial Statements
The information required by this item is set forth on pages II-12
- II-35 of the Registrant's 2000 PROXY STATEMENT TO SHAREHOLDERS,
which is incorporated herein by reference.
2. Financial Statement Schedules
None
3. Exhibits
10. Material Contracts
None
13. Annual Report to Shareholders
21. Subsidiaries of the Registrant
27. Financial Data Schedule (for SEC use only)
b. No reports on Form 8-K were filed for the quarter ended
December 31, 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on behalf
by the undersigned, thereunto duly authorized.
BANK OF GRANITE CORPORATION
By: /s/ John A. Forlines, Jr.
---------------------------------------
John A. Forlines, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John A. Forlines, Jr. Chairman and Chief March 13, 2000
- -------------------------- Executive Officer
John A. Forlines, Jr.
/s/ Kirby A. Tyndall Secretary/Treasurer, March 13, 2000
- -------------------------- Chief Financial
Kirby A. Tyndall Officer and Principal
Accounting Officer
/s/ John N. Bray Director March 13, 2000
- -------------------------
John N. Bray
/s/ Paul M. Fleetwood, III Director March 13, 2000
- --------------------------
Paul M. Fleetwood, III
/s/ John A. Forlines, Jr. Director March 13, 2000
- --------------------------
John A. Forlines, Jr.
/s/ Barbara F. Freiman Director March 13, 2000
- --------------------------
Barbara F. Freiman
/s/ Hugh R. Gaither Director March 13, 2000
- --------------------------
Hugh R. Gaither
/s/ Charles M. Snipes Director March 13, 2000
- --------------------------
Charles M. Snipes
/s/ Boyd C. Wilson, Jr. Director March 13, 2000
- --------------------------
Boyd C. Wilson, Jr.
</TABLE>
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Bank of Granite Corporation
Exhibit Index
<TABLE>
<CAPTION>
Begins
on Page
<S> <C>
Exhibit 13 -- Annual Report To Shareholders 14
Exhibit 21 -- Subsidiaries of the Registrant 41
Exhibit 27 -- Financial Data Schedules 42
</TABLE>
Page 13
<PAGE> 1
EXHIBIT 13
[front cover]
BANK OF GRANITE
CORPORATION
1999 ANNUAL REPORT
Page 14
<PAGE> 2
[photograph depicting a mother and her young child]
PROMISE
IN A WORLD INCREASINGLY OBSESSED WITH NUMERIC EQUATIONS,
OUR BOTTOM LINE IS PEOPLE. WHEN WE PAY ATTENTION TO
OUR CUSTOMERS, SHAREHOLDERS AND EMPLOYEES,
THE NUMBERS NATURALLY FOLLOW.
Page 15
<PAGE> 3
[photograph depicting a retired couple]
SECURITY
WE ARE PROUD OF 46 YEARS
OF INCREASED CASH DIVIDENDS.
OUR JOB IS TO MAINTAIN
THIS REMARKABLE RECORD.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Highlights 5- 6
Letter to Shareholders 7-10
A Look at 1999 11-12
Board of Directors 13
Bank Officers 14
Local Boards of Directors 15-16
Financial Overview 17-21
Financial Data 22-26
</TABLE>
Page 16
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CONFIDENCE
[photograph of John
Forlines receiving
award from Charles
Snipes]
N.C Business Hall of Fame award:
Charles Snipes, who introduced his
friend and associate, hands John
Forlines the prestigious award.
This chart reflects a record-breaking 46 years of increased cash dividends to
our shareholders. Beginning in 1954, when the dividend was $3,000, it has
increased each year and in 1999 totaled $4,361,793.
Bank of Granite Corporation stock is traded on The Nasdaq Stock Market(R) under
the symbol GRAN. Investment firms making a market in Bank of Granite
Corporation stock include Herzog, Heine, Geduld, Inc., First Union Capital
Markets, Wachovia Securities, Spear, Leeds & Kellogg, Sherwood Securities
Corporation, and Scott & Stringfellow, Inc. There were 11,439,201 shares
outstanding as of December 31, 1999 owned by approximately 2,200 shareholders
of record and an estimated 3,000 holders of shares registered in street name or
as beneficial owners. The summary on page six reflects quarterly market and
dividend information for the two years in the period ended December 31, 1999.
CASH DIVIDENDS PAID
$ IN MILLIONS
[bar chart of cash dividends 1954-1999]
[chart data]
<TABLE>
<CAPTION>
Year Cash dividends paid Year Cash dividends paid
<S> <C> <C> <C>
1954 $ 0.003 1977 $ 0.112
1955 0.004 1978 0.133
1956 0.011 1979 0.150
1957 0.013 1980 0.163
1958 0.014 1981 0.172
1959 0.014 1982 0.199
1960 0.018 1983 0.221
1961 0.020 1984 0.317
1962 0.024 1985 0.492
1963 0.026 1986 0.708
1964 0.029 1987 0.818
1965 0.030 1988 1.048
1966 0.033 1989 1.200
1967 0.039 1990 1.503
1968 0.043 1991 1.655
1969 0.044 1992 1.772
1970 0.046 1993 1.989
1971 0.052 1994 2.237
1972 0.053 1995 2.628
1973 0.058 1996 3.059
1974 0.072 1997 3.341
1975 0.079 1998 3.895
1976 0.092 1999 4.362
</TABLE>
Stock splits or stock dividends in these years: 1956, 1959, 1962, 1964, 1966,
1968, 1971, 1974, 1977, 1982, 1983, 1984, 1985, 1987, 1989, 1992, 1994, 1996
and 1998.
A RECORD-BREAKING 46
YEARS OF INCREASED CASH
DIVIDENDS TO OUR
SHAREHOLDERS
Page 17
<PAGE> 5
[photograph depicting a young couple with their child]
SUCCESS
US BANKER MAGAZINE NAMED THE BANK OF GRANITE THE MOST
EFFICIENT MID-SIZED BANK IN AMERICA.
MARKET VALUE
VERSUS
EQUITY GROWTH
$ in millions
[bar chart of market value
versus equity]
[chart data]
<TABLE>
<CAPTION>
Market Value Equity
<S> <C> <C>
1995 $ 175.679 $ 74.371
1996 264.380 84.019
1997 281.248 95.217
1998 316.718 105.442
1999 245.943 113.451
</TABLE>
Page 18
<PAGE> 6
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1999 1998 % change
<S> <C> <C> <C>
EARNINGS
Interest income $ 48,005,534 $ 47,577,090 0.9%
Interest expense 15,752,467 16,075,876 -2.0%
==============================
Net interest income 32,253,067 31,501,214 2.4%
Provision for loan losses 1,862,585 4,321,740 -56.9%
Other income 8,209,542 8,663,553 -5.2%
Other expense 16,536,075 15,835,803 4.4%
-------------------------------
Income before income taxes 22,063,949 20,007,224 10.3%
Income taxes 7,327,157 6,558,789 11.7%
-------------------------------
Net income $ 14,736,792 $ 13,448,435 9.6%
==============================
Cash dividends paid $ 4,361,793 $ 3,895,419 12.0%
PER SHARE
Net income
- Basic $ 1.28 $ 1.17 9.4%
- Diluted 1.28 1.17 9.4%
Cash dividends 0.38 0.34 11.8%
Book value 9.92 9.20 7.8%
AVERAGE SHARES OUTSTANDING
- Basic 11,477,971 11,461,607 0.1%
- Diluted 11,499,518 11,509,529 -0.1%
AT YEAR-END
Assets $610,726,599 $ 606,175,042 0.8%
Deposits 471,659,198 458,697,169 2.8%
Loans (gross) 390,189,234 385,590,204 1.2%
Allowance for loan losses 4,746,692 4,619,586 2.8%
Shareholders' equity 113,451,109 105,441,971 7.6%
RATIOS
Return on average assets 2.46% 2.39%
Return on average equity 13.42% 13.35%
Average capital to average assets 18.35% 17.90%
Efficiency ratio 39.04% 37.70%
</TABLE>
MARKET AND DIVIDEND SUMMARY
<TABLE>
<CAPTION>
1999 QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
<S> <C> <C> <C> <C>
PRICE RANGE
HIGH $ 29.00 $ 29.50 $ 32.38 $ 27.50
LOW 22.00 21.88 20.06 18.50
CLOSE 22.13 24.63 28.50 21.50
DIVIDEND 0.09 0.09 0.10 0.10
1998 Quarter 1 Quarter 2 Quarter 3 Quarter 4
Price Range
High $ 25.80 $ 35.00 $ 34.50 $ 47.00
Low 24.00 24.80 26.91 25.00
Close 25.60 31.50 28.88 27.63
Dividend 0.08 0.08 0.09 0.09
</TABLE>
Page 19
<PAGE> 7
To our Shareholders, Customers and Friends --
As Bank of Granite enters the new century, we remain dedicated to providing the
very best banking service to the many friends and neighbors in our market area.
2000 will mark our 93rd year as an independent community bank. It will be a
challenging year, but we expect it to be a year in which our well-trained
professional bankers continue to provide caring personal service, far exceeding
the expectations of our customers. To us, banking remains a "people" business
and, at the outset of this report, we want once again to thank our dedicated
employees for their faithful service. They are a great team and are responsible
for our considerable accomplishments this past year with a greater effort than
ever before. Let's mention a few significant highlights of which we are
especially proud:
[photograph of
John Forlines and
Charles Snipes]
- - Cash dividends to our shareholders increased for the 46th consecutive
year;
- - For the 14th consecutive year, our return on average assets exceeded 2%
-- a considerable achievement for the banking industry;
- - Assets, loans, deposits, and earnings reached all-time highs at
year-end;
- - Bank of Granite became a "Bank of Promise" a partnership with General
Colin Powell, USA (Ret) to improve the lives of young people in our
area;
- - Named by Small Business Administration as "friendliest bank to small
business" in North Carolina;
[photograph of
John Williams and
Nickey Mathes]
New Titles:
John R. Williams, Auditor
Nickey H. Mathes, Senior Auditor
Page 20
<PAGE> 8
- - US Banker magazine named Bank of Granite the most efficient mid-sized
bank in America;
- - North Carolina Housing Finance Agency recognized GLL & Associates as
North Carolina's largest producer of affordable mortgages.
We invite your attention to our financial highlights on Page 6 and to additional
financial details in the Financial Overview Section of this report. Also, once
again our external accountants, Deloitte & Touche, LLP, have given us an
unqualified "clean" opinion and this is found on Page 26.
TO US, BANKING REMAINS
A PEOPLE BUSINESS . . .
WE WANT ONCE AGAIN TO
THANK OUR DEDICATED
EMPLOYEES FOR THEIR
FAITHFUL SERVICE
After nearly three years of planning and hard work, we greeted the year 2000
with "business as usual." We are grateful to Mark Stephens, our Year 2000 Team
and all of those who played a critical role in making our transition uneventful.
In November, the Congress finally repealed depression-era banking regulations
with the adoption of the new Financial Services Modernization Act. On balance,
we believe that all banks both large and small will benefit from this
legislation. Banks should be able to operate with fewer restrictions and be
allowed to offer a wider variety of products and services to benefit their
customers.
[photograph of
Alan Sims,
Mike Holland,
and Danny Duggan]
New Officers from left to right:
R. Alan Sims, Banking Officer
Mike L. Holland, Assistant Vice President
Daniel T. Duggan, Sales & Marketing Officer
Page 21
<PAGE> 9
shareholders, customers and friends letter (continued)
The biggest disappointment in 1999 was the poor performance of our stock
(Nasdaq: GRAN). Despite our splendid earnings, our stock declined 22.2% for the
year. It is small consolation that most bank stocks did poorly regardless of how
well the banks themselves performed. Investors simply were not focused on value
during 1999. We are expecting significant improvement when bank stocks return to
favor and we hope it will be soon. We believe that if we continue to focus on
shareholder value by profitably leveraging our capital, the markets will, over
time, recognize that value.
BANK OF GRANITE CORPORATION VS. THE DOW JONES INDUSTRIALS
[line chart of stock performance Bank of Granite Corporation versus the Dow
Jones Industrials 1984 - 1999]
[chart data]
<TABLE>
<CAPTION>
Bank of Granite Dow Jones
Corporation Industrials
<S> <C> <C>
June 1984 0.00% 0.00%
1984 45.11% 7.76%
1985 155.64% 37.56%
1986 215.79% 68.63%
1987 300.75% 72.44%
1988 401.50% 92.87%
1989 436.09% 144.87%
1990 375.94% 134.24%
1991 531.58% 181.84%
1992 822.56% 193.60%
1993 887.22% 233.89%
1994 902.26% 241.04%
1995 1063.16% 355.12%
1996 1644.36% 473.51%
1997 1749.62% 603.36%
1998 1977.44% 716.60%
1999 1516.54% 922.56%
</TABLE>
The year 2000 is shaping up as an exciting and challenging year for Bank of
Granite. By the time this report reaches you, we will have launched our online
banking product, Granite Online(sm). In addition, we will be well on our way
toward automating our teller stations enabling our tellers to improve further
upon the already superb service they render to our customers. For the year 2000,
our great team has committed to grow our loans and deposits more aggressively.
We have also committed resources to strengthen further the loan training and
underwriting necessary to support the growth in loans.
OUR BANK BECAME A
"BANK OF PROMISE"
[photograph of
Colin Powell with
John Forlines and
Charles Snipes]
In partnership with Colin Powell, our Bank is committed to supporting Powell's
educational efforts to improve the lives of our young people.
Left to right: Charles Snipes, General Colin Powell and John Forlines.
Page 22
<PAGE> 10
Finally, our industry is changing rapidly and our people are enthusiastically
embracing the changes. We see more opportunities to serve than ever before, ways
that were not even possible or imaginable in the past. We appreciate the fact
that you are joining us in this exciting journey.
We thank you for your steadfast support and friendship.
/s/ John A. Forlines, Jr. /s/ Charles M. Snipes
John A. Forlines, Jr. Charles M. Snipes
Chairman & Chief Executive Officer President
February 10, 2000 February 10, 2000
[map depicting the
locations of the offices of
Bank of Granite and
GLL & Associates]
<TABLE>
<S> <C>
BANK OF GRANITE GLL & ASSOCIATES
Granite Falls* Winston-Salem*
Granite Falls/Baton Greensboro
Hickory Hickory
Hickory/Viewmont High Point
Hickory/Springs Road Lenoir
Hickory/Long View Morganton
Hickory/Mt. View Newton
Hudson Salisbury
Lenoir/Uptown Shelby
Lenoir/Hibriten
Lenoir/Whitnel * denotes home office
Morganton
Newton
Vale
</TABLE>
[photograph of
Clarence Beach]
IN MEMORIUM
Clarence E. Beach, a respected furniture executive and civic leader in Lenoir,
served as a dedicated member of our Board of Directors for 30 years from 1959 to
1989. His sense of humor, calm assurance, wisdom and candor will be greatly
missed.
CLARENCE E. BEACH 1909 - 2000
Page 23
<PAGE> 11
COMPATIBILITY
[photograph
depicting a
father and
daughter
sitting at a
personal
computer]
Approval. Confidence. Success. The buzz words featured in our current
advertising campaign are remarkably appropriate as we look back on 1999.
It was with enthusiastic approval that we promoted and added to our ranks a
number of new officers and managers. Pictured throughout this report are some of
the people who will be instrumental as our bank addresses the demands of the
21st century. A special nod of approval goes to Jeff Prince, this year's
Distinguished Service Award winner. A customer sales and service representative
in the Granite Falls office, Jeff sold in excess of $1,000,000 in annuities this
year alone.
GRANITE ONLINE BANKING
LAUNCHED IN FEBRUARY 2000
The community at large voiced its approval of our Bank in many ways. Another
area bank awarded Bank of Granite its Gold Apple award for our contribution to
the educational programs in Caldwell County. Bank employees actively partner
with several area schools and regularly volunteer for the Communities in Schools
program. We have been a key supporter of the Caldwell Community College Career
Center's program for cooperative training offered to area high school students.
Additionally, our Bank's Associate's Award annually recognizes a support staff
person from the Caldwell County school system. This year, Beverly Banner of West
Lenoir Elementary School was awarded the $1,000 prize to reinvest at her school.
[photograph of
Beverly Banner]
Caldwell County School System's
Associate of the Year
BEVERLY BANNER
In November, Chairman John Forlines was inducted into the North Carolina
Business Hall of Fame. Selected and recommended by the North Carolina Citizens
for Business and Industry, Mr. Forlines was one of five prestigious North
Carolinians so recognized.
At the annual convention of the North Carolina Bankers Association (NCBA),
peer bankers expressed their appreciation to Chairman Forlines by pledging over
$40,000 to the NCBA Scholarship Foundation, naming a scholarship in his honor
and in memory of his wife, Julia.
[photograph of
Jeff Prince]
Distinguished Service Award:
JEFF PRINCE
Volunteerism within the community exceeded the very high standards we have set
over the years: 70 bank employees joined a wintry March of Dimes Walk America.
Employees raised
FRIENDSHIP
SUCCESS
FREEDOM
CONFIDENCE
Page 24
<PAGE> 12
[photograph depicting
a mother and her
teenage daughter]
[photograph depicting
a young woman]
[photograph depicting
a businessperson]
[photograph depicting
a young boy]
X / % + =
NO MATTER HOW YOU DO THE
MATH, IT ADDS UP TO PERSONAL
RELATIONSHIPS -- THE ANSWER TO
OUR PAST SUCCESS AND THE
KEY TO OUR FUTURE.
$22,779 throughout Burke, Caldwell and Catawba counties. The 16th annual
Hospice/ACC Basketball Benefit Luncheon, so dependent on Forlines' leadership
and the support of so many of our bank employees, raised in excess of $80,000 to
assist terminally ill patients and their families in our area. We approached
year 2000 with confidence, well prepared by the diligent three-year effort of
our year 2000 Task Force, efficiently headed by Mark Stephens. Our customers
were equally confident having been educated and informed through a series of
seminars and mailings. We launched online banking in February 2000 and are
fine-tuning our Marketing Customer Information Files (MCIF) which enable us to
identify and target potential cross- selling opportunities within our customer
database. MCIF will provide us with the tools for solid, planned growth in the
new century. Our employees are eager and ready for the opportunity.
A P P R O V A L
S E C U R I T Y
C O M P A T A B I L I T Y
P R O M I S E
Page 25
<PAGE> 13
B O A R D O F D I R E C T O R S
<TABLE>
<S> <C> <C> <C>
BOARD OF DIRECTORS
[photograph of John N. Bray
[photograph of Charles Snipes] President, Vanguard Furniture Co., Inc.
John Forlines]
Paul M. Fleetwood, III
President & Owner, Corporate
Charles M. Snipes Management Services, Inc.
John A. Forlines, Jr.
John A. Forlines, Jr.
Chairman, Bank of Granite
[photograph of Chairman & CEO, Bank
[photograph of Paul Fleetwood] of Granite Corporation
John Bray]
Barbara F. Freiman
Executive Director, Foundation of
Paul M. Fleetwood, III Caldwell Community College and
John N. Bray Technical Institute
[photograph of Hugh R. Gaither
[photograph of Hugh Gaither] President & CEO, Ridgeview, Inc.
Barbara Freiman]
Charles M. Snipes
President & CEO, Bank of Granite
Hugh R. Gaither President, Bank of Granite Corporation
Barbara F. Freiman
Boyd C. Wilson, Jr.
[photograph of Vice President & Controller
Boyd Wilson] Kincaid Furniture Co.
DIRECTORS EMERITI
Boyd C. Wilson, Jr. Robert E. Cline
President, Cline Realty Co., Inc.
Robert A. Gibbons
Retired Electrical Contractor
Gibbons Electrical Co.
Myron L. Moore, Jr.
Treasurer, Lenoir Mirror Co.
Floyd C. Wilson
Partner
Wilson-Abernethy Hardware Co.
CORPORATION OFFICERS
John A. Forlines, Jr.
Chairman & CEO
Charles M. Snipes
President
Kirby A. Tyndall
Secretary/Treasurer
Melodie R. Mathes
Assistant Secretary/Treasurer
</TABLE>
Page 26
<PAGE> 14
<TABLE>
<S> <C> <C>
BANK OFFICERS
Dan F. Stewart [photograph of
John A. Forlines, Jr. Vice President Janet Winkler,
Chairman Rahn Chase,
Kelly D. Stroud Teresa Martin and
Charles M. Snipes Vice President Peter Whitener]
President & CEO
Sheila R. Taylor
Ben L. Davis Vice President
Senior Vice President
Peter W. Whitener, Jr.
John S. Gabriel, Jr. Vice President
Senior Vice President
Janet H. Winkler
Kim T. Hutchens Vice President Pictured from left to right: Janet H.
Senior Vice President & Winkler, T. Rahn Chase, Teresa F.
Director of Human Resources Martin and Peter W. Whitener, Jr.
Diane L. Cannoles
D. Mark Stephens Assistant Vice President [photograph of
Senior Vice President & Sherry Robertson,
Chief Information Officer Mike L. Holland Kris Siemer,
Assistant Vice President David Paul,
Kirby A. Tyndall Kathy McMasters
Senior Vice President & Trudy S. Morton and Donna Mull]
Chief Financial Officer Assistant Vice President
Wyman C. (Corky) Upchurch David J. Paul
Senior Vice President & Assistant Vice President
Office Administrator
Kathy L. McMasters
T. Rahn Chase Banking Officer
Vice President
Donna D. Mull
Judy R. Hendrix Banking Officer Pictured from left to right: Sherry E.
Vice President Robertson, Kris A. Siemer, David J.
Sherry E. Robertson Paul, Kathy McMasters and Donna D.
W. David Keller Banking Officer Mull.
Vice President
Kris A. Siemer [photograph of
Teresa F. Martin Banking Officer Judy Hendrix,
Vice President David Keller and
R. Alan Sims Mark Stephens]
Donald D. McSwain Banking Officer
Vice President
Daniel T. Duggan
David L. Phillips, Jr. Sales & Marketing Officer
Vice President
Nickey H. Mathes
Gary D. Prewitt Senior Auditor
Vice President Pictured from left to right:
John R. Williams Judy R. Hendrix, W. David Keller and D. Mark Stephens.
C.L. (Ruben) Sipe, Jr. Auditor
Vice President
</TABLE>
<TABLE>
<S> <C> <C> <C>
Gary L. Lackey Ginger M. Nelson Donna T. Newton
President, CEO Senior Vice President Assistant Vice President
& Director & Assistant Treasurer & Assistant Secretary
MORTGAGE Pat L. Beyersdorfer Arthur S. Newton, III Charles M. Snipes
BANK Senior Vice President Senior Vice President Chairman & Director
OFFICERS
AND Lisa N. Clayton Ann C. Tucker Kirby A. Tyndall
DIRECTORS Senior Vice President Senior Vice President Secretary/Treasurer & Director
Ruth A. Hudspeth Natalie J. Dillard
Senior Vice President Vice President
Brenda P. Jurney Dixie L. Jones
Senior Vice President Assistant Vice President
</TABLE>
Page 27
<PAGE> 15
LOCAL BOARDS
OF DIRECTORS
<TABLE>
<S> <C> <C> <C>
GRANITE FALLS Rudy L. Snow* Larry L. Huffman Dr. Dan N. Stallings
Divisional Manager Pharmacist & Owner Real Estate Development
ECR Pharmaceuticals Granite Drug Center
Linda K. Story
Claudia D. Bujold Michael M. Mackie Town Manager,
Civic & Community Leader Vice President & Granite Falls
General Manager
Dr. T. Eugene Carpenter Mackie Furniture Co. Mary Frances B. Sullivan
Career Center Coordinator Civic & Community Leader
Caldwell County Career Center Trudy S. Morton
Assistant Vice President
Barry C. Hayes Bank of Granite
Owner, Hayes & Co.
HICKORY Landon B. Lane, Jr.* Betsey M. Haymond David H. Sain
Private Investor Realtor, Prudential Hickory Retired Area General Manager
Metro Real Estate Lowe's Companies, Inc.
J. Steven Brackett
Attorney Frances R. Hilton Wyman C. (Corky) Upchurch
Rudisill & Brackett, P.A. Retired President & Owner Senior Vice President
Chapter One Booksellers, Ltd. Bank of Granite
Lee G. Brown
President James L. Houston, Jr. Reverend E. B. Wilkerson, Sr.
LB Enterprises, Inc. Retired Senior Vice President Minister
Wheat First Butcher Singer Friendship Baptist Church
Forest M. Gaines
President Dr. J. Ward Kurad Rosemary Bass Young
Gaines Motor Lines President President
Vantage SeniorCare Services Bass-Smith Funeral Home
Kathryn T. Greathouse
Partner Steve M. Mull
Greathouse Construction Co. Owner & Operator
Fresh Air Galaxy/Viewmont
HUDSON W. Barry Spicer* Judy R. Hendrix Bryce H. Sherrill
Corporate Risk Manager, Vice President Retired Vice President
Hickory Springs Manufacturing Bank of Granite Bank of Granite
James K. Hawkins Carolyn A. Icard Tim R. Sigmon
Owner & Manager Literacy Specialist Manager
Western Electronics Co. Burke County Schools Sigmon's Fashions, Inc.
Dr. Allen R. Hefner William M. Lovelace, Jr. J. C. Sullivan
Dentist Retired President President,
Hudson Drug Co. Bost Lumber Co.
Jimmy D. Hemphill
Assistant to the President Dr. Paul Moss
Caldwell Community College Retired Physician
</TABLE>
* Denotes Chairman of Local Board
Page 28
<PAGE> 16
LOCAL BOARDS
OF DIRECTORS
<TABLE>
<S> <C> <C> <C>
LENOIR
NEW BOARD
Margaret (Peg) Broyhill* Clarence A. Holden Joan G. Rogers MEMBERS
Branch Manager Retired Furniture Executive Civic & Community Leader JOINING LENOIR
First Vice President/Investments
IJL Wachovia William F. Howard III Scott R. Ross [photograph
Vice President Vice President & of Houston
H. Houston Groome, Jr. of Human Resources General Manager Groome, Jr.]
Attorney Bernhardt Furniture Company Autumn House, Inc.
Groome, Tuttle, Pike & Blair
Dr. Parker T. Williamson
Helen P. Hall Douglas W. Johnson Executive Editor of
Retired School Administrator Chief Executive Officer PLC Publications
Adjunct Instructor Blue Ridge Electric Chief Operating Officer H. Houston
Appalachian State University Membership Corporation Presbyterian Laymen's Groome, Jr.
Committee Lenoir
Leslie D. Hines, Jr. W. David Keller
Chairman Vice President [photograph
Nelson Oil Company Bank of Granite of William
Howard, III]
Dr. F. Ted Holcher Dr. Donald W. Lackey
Dentist Retired Veterinarian
MORGANTON
Dr. Alfred W. Hamer, Jr.* Sharon S. Marlow Gary D. Prewitt
Obstetrician/Gynecologist Owner & Managing Broker Vice President
Sharon Marlow Realty Bank of Granite
Daniel A. Boggs
Partner Robert T. McGimsey Peggy M. Saunders
Bowman, Boggs & Crump CPAs Certified Public Accountant Attorney
Byrd, Byrd, Ervin, Whisnant,
Frank G. Bowers W. F. (Mac) McIntosh McMahon & Ervin, P.A. William F.
Owner Retired Educator Howard III
Bowers Insurance Agency Burke County Public Schools Lenoir
NEWTON
EASTERN CATAWBA [photograph
of Parker
Bob J. McCreary* Carolyn V. Isenhower C. Leon Robinson Williamson]
President & Owner Civic & Community Leader President
McCreary Modern, Inc. Robinson Builder's Mart
Jerry T. Hodge
Larry A. Bowman Publisher Sybil B. Stewart
Civic & Community Leader Observer News Enterprise Civic & Community Leader
George W. Clark David L. Phillips, Jr. Dr. Gerald F. Wooten
President & CEO Vice President Optometrist
Catawba Sox, Inc. Bank of Granite
Dr. Parker T.
R. Gary Corne David B. Radke Williamson
Attorney President Lenoir
Corne, Pitts, Corne & Grant InterContinental Corp.
</TABLE>
* Denotes Chairman of Local Board
Page 29
<PAGE> 17
FINANCIAL OVERVIEW
RECORD EARNINGS IN 1999
Lower loan loss provisions coupled with higher fourth quarter loan demand and
higher interest rates helped Bank of Granite Corporation (the "Company") post
record earnings for 1999. The earnings, which totaled $14,736,792, or $1.28 per
diluted share, were a 9.6% increase over the $13,448,435, or $1.17 per diluted
share, earned in 1998.
In addition to the record earnings, the Company earned 2.46% on average assets,
marking the 14th consecutive year of returns on assets in excess of 2%. The
Company also returned 13.42% on average equity.
Factors that significantly affected 1999 earnings:
- Earnings from banking activities increased by $1,928,967, or 15.4%, while
net income from mortgage origination activities decreased by $346,530, or
33.8%;
- Net interest income increased slightly by $751,853, or 2.4%;
- Average interest-earning assets grew 6.8%, supported by a 5.5% growth in
average deposits;
- Asset quality improved significantly;
- Loan loss provisions decreased $2,459,155 or 56.9%;
- Lower mortgage originations led to a decline in fee income;
- Cost controls contributed to an operating efficiency ratio of 39%, believed
to be among the best in the United States banking industry.
EARNINGS FROM BANKING ACTIVITIES MORE THAN COMPENSATE FOR LOWER MORTGAGE
ORIGINATIONS
Primarily because of lower loan loss provisions, loan growth and higher interest
rates in the second half of the year, 1999 earnings from the Company's banking
subsidiary, Bank of Granite (the "Bank"), were $14,473,559, an increase of
$1,928,967, or 15.4% over the Bank's earnings in 1998. The same higher interest
rates that helped the Bank's earnings substantially lowered the earnings of the
Company's mortgage subsidiary, GLL & Associates, Inc. ("GLL"). GLL earned
$678,743, a decrease of $346,530, or 33.8%, from GLL's 1998 earnings of
$1,025,273, primarily because of lower mortgage activity due to rising mortgage
rates.
14TH CONSECUTIVE YEAR
THAT THE RETURNS ON
AVERAGE ASSETS
EXCEEDED 2%
RETURN ON ASSETS
[bar chart of return on
assets for 1995 - 1999]
[chart data]
<TABLE>
<CAPTION>
Return on assets
<S> <C>
1995 2.70%
1996 2.76%
1997 2.81%
1998 2.39%
1999 2.46%
</TABLE>
Page 30
<PAGE> 18
NET INTEREST INCOME INCREASED SLIGHTLY BY 2.4%
Net interest income increased $751,853, or 2.4%, in 1999 compared to 1998.
Interest income grew by only $428,444, or 0.9%, which was restricted by both
lower interest rates in the first half of 1999 and the planned maintenance of
higher liquidity in the second half of 1999. The Bank maintained higher
liquidity in the last two quarters of 1999 as a year 2000 precautionary measure
because customer demands for cash reserves were unpredictable. Higher liquidity
for the Bank meant less income because of investments in lower yielding
overnight funds. Interest expense decreased $323,409, or 2%. The Bank
experienced a $16 million, or 7.9%, increase in its noninterest-bearing demand
and lower rate savings, NOW and money market account average balances. The
Bank's higher rate time deposit average balances grew by only $8 million, or
3.5%. The Bank's customers sometimes choose more liquid deposit products during
periods of rising rates and revert to time deposits when rates peak. The lower
mortgage activity decreased GLL's funding cost by $137,651, or 17.3%.
The Bank's balance sheet remains moderately asset-sensitive because of its high
level of variable rate loans. "Asset- sensitive" means that when interest rates
in the overall economy change, interest rates on the Bank's loans change more
quickly than the interest rates on its deposits. Therefore, when interest rates
rise, the Bank's interest income rises at a faster pace than the interest
expense it pays on its deposits and other borrowings. Likewise, when interest
rates fall, the Bank's interest income on loans declines at a faster pace than
the interest it pays on deposits and other borrowings. For 2000, the Company
anticipates operating in a relatively stable interest rate environment in which
market interest rates may rise further. The Bank also plans to grow loans more
aggressively in 2000. Because the Bank operates in a highly competitive market,
it expects that more aggressive loan growth will require more aggressive pricing
of both the loans and the deposit growth to fund them. As a result, net interest
margins are expected to tighten even while market interest rates are anticipated
to rise.
AVERAGE INTEREST-EARNINGS ASSETS GROW 6.8%
Average assets grew 6.3% in 1999 while average interest-earning assets grew by
6.8%. Average interest-earning assets were 93.9% of average assets in 1999
compared to 93.5% in 1998. Average loans grew 1.9%, comprised of the Bank's
growth in average loans of 2.7% partially offset by a 13% decline in GLL's
average loans. Because of the low loan growth, the rise in interest-earning
assets was mostly reflected in the levels of investments in securities and
overnight funds. The asset growth was supported by a 5.8% increase in average
funding liabilities. As stated above, the Bank plans more aggressive loan growth
in 2000.
FOR 2000, THE COMPANY ANTICIPATES
OPERATING IN A RELATIVELY STABLE
INTERESTRATE ENVIRONMENT ...
THE BANK ALSO PLANS TO GROW LOANS
MORE AGGRESSIVELY.
Page 31
<PAGE> 19
LOWER MORTGAGE ORIGINATIONS LEAD TO A DECLINE IN FEE INCOME
In recent years, nontraditional banking services, such as fees from the
origination of mortgage loans, sales of the guaranteed portions of small
business administration loans, and sales of annuities and life insurance
continued to grow in importance to the Company's product lines. Unlike
traditional banking services, these nontraditional sources of income bring
greater volatility to earnings. For example, mortgage origination and fixed-rate
annuity sales activity may increase significantly when interest rates decline
and decrease significantly when interest rates rise. Although fee income
remained a high priority in 1999, mortgage originations decreased substantially
when interest rates began to rise in the summer. With the lower mortgage
activity, GLL's mortgage fees decreased $421,454, or 12%, to $3,090,820 in 1999
from $3,512,274 in 1998. The Bank's income from the sale of government
guaranteed loans also declined by $108,747 to $312,502 in 1999 from $421,249 in
1998. Because of these two declines, total noninterest income decreased 5.2% in
1999. Income from nontraditional banking services accounted for 43.3% of all
noninterest income in 1999. If, as anticipated, interest rates rise in 2000,
demand for mortgage loans, small business loans and annuity products may remain
weak. Service charges on deposit accounts should grow somewhat relative to
deposit growth.
EFFICIENCY RATIO REMAINS AMONG THE BEST
The generation of fee income largely results from receiving value for services
provided. Costs are usually incurred to provide such services. Although
noninterest expenses increased 4.4% in 1999, the Company still achieved a 39%
efficiency ratio, which is believed to be among the best in the country.
Expressed another way, the Company spends 39 cents for every dollar of
taxable-equivalent net interest and other revenues earned. In 2000, growth in
operating expenses remains likely as investments continue in technology and
alternative delivery systems, new offices and new or expanded services to
generate fee income. In 2000, the Bank will complete the automation of its
teller stations and launch its Internet banking products, both of which will
better serve existing and future customers. As in the past, investments will be
evaluated relative to the anticipated value they will generate.
EFFICIENCY
RATIO
[bar chart of efficiency ratios
for 1995 - 1999]
[chart data]
<TABLE>
<CAPTION>
Efficiency
Ratio
<S> <C>
1995 36.47%
1996 35.94%
1997 36.74%
1998 37.70%
1999 39.04%
</TABLE>
Page 32
<PAGE> 20
ASSET QUALITY
In 1999, both the furniture and hosiery manufacturing industries continued to
experience economically challenging periods. While furniture and hosiery
manufacturing remain important industries to the Bank's Catawba Valley market,
the area economy has diversified in recent years with significant new industries
such as coaxial and fiber optic cable manufacturing. Although commercial and
consumer loans past-due and in bankruptcy remained higher throughout 1999 and
1998 than previous historical levels, they reached lower levels at the end of
1999 than such levels at the end of 1998. Nonperforming assets totaled
$2,114,416, or 0.35% of assets, at the end of 1999 compared with $3,884,082, or
0.64% of assets, at the end of 1998. The Bank's credit administration and
collections departments continue to monitor problem loans in an effort to
minimize losses and delinquencies. Net loans charged- off decreased to
$1,735,479 in 1999. During 1999, the Bank continued to provide loan loss
reserves, ending the year with reserves of $4,746,692, or 1.23% of net loans
outstanding. At December 31, 1999, the allowance for loan losses covered 230% of
nonperforming loans.
The Bank anticipates continued improvement in asset quality in 2000, assuming an
economic climate similar to 1999. The Bank plans to make prudent additions to
its loan loss reserves and to sustain its emphasis on conservative lending
practices.
LOAN LOSS PROVISIONS DECREASED $2,459,155 OR 56.9%
Loan loss provisions significantly declined in 1999 to $1,862,585 from
$4,321,740 in 1998. Loan loss provisions in 1998, the previous year, included
$3,046,425 related to loans to one of the Bank's customers, which proved to be
uncollectible. Including the write-off of accrued interest of $91,900 on the
loans, the Bank recorded expenses of $3,138,325 before tax, or $1,882,995 after
tax, or $0.16 per share.
A WORD ABOUT THE YEAR 2000 TRANSITION
As was the case with most businesses, the Company committed significant time and
effort to ensuring that its technology systems were year 2000 compliant. Largely
due to such preparations, the Company's transition into the year 2000 was
uneventful, which was the Company's desired outcome.
NONPERFORMING
LOANS AS A %
OF TOTAL LOANS
[bar chart of nonperforming
loans as a % of total loans
for 1995 - 1999]
[chart data]
<TABLE>
<CAPTION>
Nonperforming
Loans as a %
of Total Loans
<S> <C>
1995 0.21%
1996 0.32%
1997 0.73%
1998 0.93%
1999 0.53%
</TABLE>
Page 33
<PAGE> 21
During 1999, the Company spent approximately $45,650 on its year 2000
preparations, of which it capitalized new equipment and software of
approximately $11,000 and expensed approximately $34,650 against 1999 earnings.
The Company estimates that its total cumulative costs of year 2000 compliance
were $131,650, of which it capitalized approximately $33,000 and expensed
approximately $98,650 against earnings. In providing these amounts, the Company
has excluded the technology upgrade costs that were planned in the normal course
of business and not necessarily in response to its year 2000 compliance plan.
For example, the Company's routine technology upgrades for 1997, 1998 and 1999
included a new imaging system to replace its aging item processing system, new
ATM's and personal computer file servers throughout those respective networks, a
new teller automation system throughout its offices, Internet banking software
and numerous personal computer hardware and software systems previously
scheduled for replacement. The Company routinely makes investments in technology
in its efforts to improve customer service and to manage efficiently its product
and service delivery systems.
FORWARD LOOKING STATEMENTS
The discussions presented in this annual report contain statements that could be
deemed forward looking statements within the meaning of the Securities Exchange
Act of 1934 and the Private Securities Litigation Reform Act of 1995. These
statements are inherently subject to risks and uncertainties. Forward looking
statements are statements that include projections, predictions, expectations or
beliefs about future events or results or otherwise are not statements of
historical fact. Such statements are often characterized by the use of
qualifying words (and their derivatives) such as "expect," "believe,"
"estimate," "plan," "project," or other statements concerning opinions or
judgments of the Company and its management about future events. Factors that
could influence the accuracy of such forward looking statements include, but are
not limited to, the financial success or changing strategies of the Company's
customers or vendors, actions of government regulators, the level of market
interest rates, and general economic conditions.
EARNINGS RETAINED
VERSUS
DIVIDENDS PAID
$ in millions
[stacked bar chart of
earnings retained vs.
dividends paid
for 1995 - 1999]
[chart data]
<TABLE>
<CAPTION>
Earnings Dividends
Retained Paid
<S> <C> <C>
1995 $ 9.417 $ 2.628
1996 10.307 3.059
1997 11.090 3.341
1998 9.553 3.895
1999 10.375 4.362
</TABLE>
Page 34
<PAGE> 22
SELECTED FINANCIAL DATA
BANK OF GRANITE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Interest income $ 48,005,534 $ 47,577,090 $ 44,027,854 $ 40,664,063 $ 38,264,504
Interest expense 15,752,467 16,075,876 15,459,548 15,133,509 13,998,536
---------------------------------------------------------------------------------------------
Net interest income 32,253,067 31,501,214 28,568,306 25,530,554 24,265,968
Provision for loan losses 1,862,585 4,321,740 1,175,000 820,000 1,117,000
---------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 30,390,482 27,179,474 27,393,306 24,710,554 23,148,968
Other income 8,209,542 8,663,553 8,110,184 7,239,670 6,145,112
Other expense 16,536,075 15,835,803 14,119,050 12,363,995 11,650,576
---------------------------------------------------------------------------------------------
Income before income taxes 22,063,949 20,007,224 21,384,440 19,586,229 17,643,504
Income taxes 7,327,157 6,558,789 6,953,253 6,220,357 5,598,532
---------------------------------------------------------------------------------------------
Net income $ 14,736,792 $ 13,448,435 $ 14,431,187 $ 13,365,872 $ 12,044,972
=============================================================================================
Per share
Net income
Basic $ 1.28 $ 1.17 $ 1.26 $ 1.17 $ 1.06
Diluted $ 1.28 $ 1.17 $ 1.26 $ 1.17 $ 1.06
---------------------------------------------------------------------------------------------
Cash dividends $ 0.38 $ 0.34 $ 0.30 $ 0.28 $ 0.23
---------------------------------------------------------------------------------------------
Book value $ 9.92 $ 9.20 $ 8.33 $ 7.37 $ 6.55
=============================================================================================
Share price
High $ 32.38 $ 47.00 $ 26.80 $ 26.40 $ 15.47
Low $ 18.50 $ 24.00 $ 21.70 $ 14.67 $ 12.80
Close $ 21.50 $ 27.63 $ 24.60 $ 23.20 $ 15.47
---------------------------------------------------------------------------------------------
Average shares outstanding
Basic 11,477,971 11,461,607 11,425,110 11,381,040 11,336,521
Diluted 11,499,518 11,509,529 11,479,800 11,440,705 11,378,174
=============================================================================================
Performance ratios
Return on average assets 2.46% 2.39% 2.81% 2.76% 2.70%
Return on average equity 13.42% 13.35% 16.21% 16.98% 17.42%
Average equity to
average assets 18.35% 17.90% 17.36% 16.24% 15.50%
Dividend payout 29.60% 28.97% 23.15% 22.89% 21.82%
Efficiency ratio 39.04% 37.70% 36.74% 35.94% 36.47%
---------------------------------------------------------------------------------------------
Balances at year end
Assets $ 610,726,599 $ 606,175,042 $ 528,979,733 $ 498,192,379 $ 468,139,374
Securities 155,345,479 149,008,531 131,109,218 128,661,064 124,283,449
Loans (gross) 390,189,234 385,590,204 357,845,513 329,744,072 312,779,662
Allowance for loan losses 4,746,692 4,619,586 5,202,578 4,793,889 4,644,725
Liabilities 497,275,490 500,733,071 433,763,010 414,173,810 393,768,044
Deposits 471,659,198 458,697,169 414,576,184 397,697,991 377,043,144
Shareholders' equity 113,451,109 105,441,971 95,216,723 84,018,569 74,371,330
=============================================================================================
Asset quality ratios
Net charge-offs
to average loans 0.46% 1.31% 0.22% 0.21% 0.16%
Nonperforming assets
to total assets 0.35% 0.64% 0.51% 0.21% 0.14%
Allowance coverage of
nonperforming loans 230.38% 128.53% 198.07% 453.20% 690.83%
</TABLE>
Page 35
<PAGE> 23
BANK OF GRANITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 23,219,670 $ 19,518,740
Interest-bearing deposits 268,826 175,437
Federal funds sold 27,650,000 38,600,000
-----------------------------------
Total cash and cash equivalents 51,138,496 58,294,177
-----------------------------------
Investment securities:
Available for sale, at fair value
(amortized cost of $71,447,969 and $60,690,796
at December 31, 1999 and 1998, respectively) 70,205,689 61,954,639
Held to maturity, at amortized cost
(fair value of $84,030,013 and $89,541,513
at December 31, 1999 and 1998, respectively) 85,139,790 87,053,892
Loans 390,189,234 385,590,204
Allowance for loan losses (4,746,692) (4,619,586)
-----------------------------------
Net loans 385,442,542 380,970,618
-----------------------------------
Premises and equipment, net 9,673,010 10,095,628
Accrued interest receivable 5,456,567 5,104,174
Other assets 3,670,505 2,701,914
-----------------------------------
TOTAL $ 610,726,599 $ 606,175,042
-----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 91,100,910 $ 91,967,287
NOW accounts 73,907,404 69,804,107
Money market accounts 33,663,278 29,970,288
Savings 24,399,214 23,904,317
Time deposits of $100,000 or more 110,041,565 101,235,647
Other time deposits 138,546,827 141,815,523
-----------------------------------
Total deposits 471,659,198 458,697,169
Overnight borrowings 13,461,774 7,890,961
Other borrowings 8,626,481 30,004,405
Accrued interest payable 2,031,605 2,220,988
Other liabilities 1,496,432 1,919,548
-----------------------------------
Total liabilities 497,275,490 500,733,071
-----------------------------------
Shareholders' equity:
Common stock, $1 par value,
authorized - 25,000,000 shares;
issued - 11,495,897 shares in 1999 and 11,464,913 shares in 1998
outstanding - 11,439,201 shares in 1999 and 11,464,913 shares in 1998 11,495,897 11,464,913
Capital surplus 22,987,562 22,615,559
Retained earnings 80,976,641 70,601,642
Accumulated other comprehensive income (loss),
net of deferred income taxes (746,948) 759,857
Less: Cost of common shares held in treasury,
56,696 shares (1,262,043) --
-----------------------------------
Total shareholders' equity 113,451,109 105,441,971
-----------------------------------
TOTAL $ 610,726,599 $ 606,175,042
===================================
</TABLE>
Page 36
<PAGE> 24
BANK OF GRANITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998(1) 1997(1)
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 38,234,699 $ 38,894,447 $ 36,246,226
Federal funds sold 1,480,921 950,669 197,939
Interest-bearing deposits 17,072 12,652 10,766
Investments:
U.S. Treasury 716,294 1,095,055 1,208,692
U.S. Government agencies 3,266,514 2,384,251 2,200,475
States and political subdivisions 3,521,692 3,414,134 3,253,315
Other 768,342 825,882 910,441
------------------------------------------------------------
Total interest income 48,005,534 47,577,090 44,027,854
------------------------------------------------------------
INTEREST EXPENSE:
Time deposits of $100,000 or more 5,222,185 5,709,986 5,132,118
Other time and savings deposits 9,377,264 9,308,040 9,465,803
Overnight borrowings 495,568 263,088 217,916
Other borrowings 657,450 794,762 643,711
------------------------------------------------------------
Total interest expense 15,752,467 16,075,876 15,459,548
------------------------------------------------------------
NET INTEREST INCOME 32,253,067 31,501,214 28,568,306
PROVISION FOR LOAN LOSSES 1,862,585 4,321,740 1,175,000
------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 30,390,482 27,179,474 27,393,306
------------------------------------------------------------
OTHER INCOME:
Service charges on deposit accounts 3,532,646 3,552,422 3,273,187
Other service fees and commissions 3,907,961 4,359,295 3,690,047
Securities gains 675 1,733 3,695
Other 768,260 750,103 1,143,255
------------------------------------------------------------
Total other income 8,209,542 8,663,553 8,110,184
------------------------------------------------------------
OTHER EXPENSES:
Salaries and wages 8,449,941 8,181,895 6,916,428
Employee benefits 1,454,258 1,261,228 1,344,946
Occupancy expense, net 775,127 756,656 603,298
Equipment rentals, depreciation, and maintenance 1,331,106 1,407,846 1,187,293
Other 4,525,643 4,228,178 4,067,085
------------------------------------------------------------
Total other expenses 16,536,075 15,835,803 14,119,050
------------------------------------------------------------
INCOME BEFORE INCOME TAXES 22,063,949 20,007,224 21,384,440
INCOME TAXES 7,327,157 6,558,789 6,953,253
------------------------------------------------------------
NET INCOME $ 14,736,792 $ 13,448,435 $ 14,431,187
------------------------------------------------------------
PER SHARE AMOUNTS:
Net income
Basic $ 1.28 $ 1.17 $ 1.26
Diluted 1.28 1.17 1.26
Cash dividends 0.38 0.34 0.30
Book value 9.92 9.20 8.33
</TABLE>
(1) Certain amounts in 1998 and 1997 have been reclassified to conform with
classifications in 1999.
Page 37
<PAGE> 25
QUARTERLY FINANCIAL SUMMARY
UNAUDITED
<TABLE>
<CAPTION>
1999 QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
<S> <C> <C> <C> <C>
INTEREST INCOME $ 11,790,449 $ 11,753,306 $ 12,099,239 $ 12,362,540
INTEREST EXPENSE 4,008,787 3,867,697 3,867,524 4,008,459
------------------------------------------------------------------------
NET INTEREST INCOME 7,781,662 7,885,609 8,231,715 8,354,081
PROVISION FOR LOAN LOSSES 164,579 316,002 616,002 766,002
------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,617,083 7,569,607 7,615,713 7,588,079
OTHER INCOME 2,432,386 2,021,828 1,876,651 1,878,677
OTHER EXPENSE 4,414,690 4,332,736 4,120,205 3,668,444
------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 5,634,779 5,258,699 5,372,159 5,798,312
INCOME TAXES 1,869,515 1,730,579 1,769,607 1,957,456
------------------------------------------------------------------------
NET INCOME $ 3,765,264 $ 3,528,120 $ 3,602,552 $ 3,840,856
------------------------------------------------------------------------
NET INCOME PER SHARE
BASIC $ 0.33 $ 0.31 $ 0.31 $ 0.34
DILUTED 0.33 0.31 0.31 0.33
AVERAGE SHARES OUTSTANDING
BASIC 11,483,161 11,486,667 11,480,156 11,461,900
DILUTED 11,515,068 11,506,248 11,496,091 11,477,531
1998 QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
Interest income $ 11,544,983 $ 11,977,498 $ 11,976,778 $ 12,077,831
Interest expense 3,818,347 3,935,564 4,075,771 4,246,194
------------------------------------------------------------------------
Net interest income 7,726,636 8,041,934 7,901,007 7,831,637
Provision for loan losses 333,410 313,410 3,361,510 313,410
------------------------------------------------------------------------
Net interest income after
provision for loan losses 7,393,226 7,728,524 4,539,497 7,518,227
Other income 2,000,217 2,250,438 2,121,845 2,291,053
Other expense 3,834,361 4,121,500 3,879,604 4,000,338
------------------------------------------------------------------------
Income before income taxes 5,559,082 5,857,462 2,781,738 5,808,942
Income taxes 1,845,741 1,963,426 817,827 1,931,795
------------------------------------------------------------------------
Net income $ 3,713,341 $ 3,894,036 $ 1,963,911 $ 3,877,147
------------------------------------------------------------------------
Net income per share
Basic $ 0.32 $ 0.34 $ 0.17 $ 0.34
Diluted 0.32 0.34 0.17 0.34
Average shares outstanding
Basic 11,453,110 11,462,930 11,465,034 11,465,354
Diluted 11,495,177 11,514,674 11,514,897 11,511,739
</TABLE>
Page 38
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Bank of Granite Corporation:
We have audited the consolidated balance sheets of Bank of Granite Corporation
and its subsidiaries (the "Company") as of December 31, 1999 and 1998, and the
related consolidated statements of income, comprehensive income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. Such consolidated financial statements and our report
thereon dated January 21, 2000, expressing an unqualified opinion (which are
not included herein) are included in the proxy statement for the 2000 annual
meeting of shareholders. The accompanying consolidated balance sheets and
consolidated statements of income as set forth on pages 23 and 24 are the
responsibility of the Company's management. Our responsibility is to express an
opinion on such consolidated balance sheets and consolidated statements of
income in relation to the complete consolidated financial statements.
In our opinion, the information set forth on pages 23 and 24 in the
accompanying consolidated balance sheets as of December 31, 1999 and 1998 and
the related consolidated statements of income for each of the three years in
the period ended December 31, 1999 is fairly stated in all material respects in
relation to the basic consolidated financial statements from which it has been
derived.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
January 21, 2000
SHAREHOLDER INFORMATION
COMMON STOCK
Bank of Granite Corporation's common stock trades on The Nasdaq Stock Market(R)
under the symbol GRAN. Price and volume information is contained in the Wall
Street Journal and most major daily newspapers in the Nasdaq section under the
National Market System listing.
ANNUAL MEETING
The Annual Meeting of the shareholders of the Bank of Granite Corporation will
be held at 10:30 am, Monday, April 24, 2000, at the Holiday Inn, 1385 Lenoir
Rhyne Boulevard Southeast, Hickory, North Carolina (located off Interstate 40
at Exit 125).
EQUAL OPPORTUNITY EMPLOYER
It is the policy of Bank of Granite Corporation to treat all employees and
applicants for employment without regard to race, creed, color, national
origin, sex or age.
COPIES OF FORM 10-K
Copies of the Bank of Granite Corporation's Annual Report to the Securities and
Exchange Commission on Form 10-K may be obtained by shareholders at no charge
by searching the "EDGAR" archives at the SEC's Internet site at www.sec.gov or
by writing: Kirby A. Tyndall, Secretary/Treasurer, Bank of Granite Corporation,
Post Office Box 128, Granite Falls, North Carolina 28630. (email:
[email protected]).
STOCK TRANSFER AGENT AND REGISTRAR
Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016,
908/272-8511 or 800/368-5948. For responses to Frequently Asked Questions
("FAQ's") about stock transfers, dividend payments and other issues, visit our
Transfer Agent's web site at www.rtco.com.
DIVIDEND REINVESTMENT
Registered holders of Bank of Granite Corporation stock are eligible to
participate in the Corporation's Dividend Reinvestment Plan, a convenient and
economical way to purchase additional shares of Bank of Granite Corporation
common stock. For an informational folder and authorization form or to receive
additional information on this plan, contact Registrar and Transfer Company
(see "STOCK TRANSFER AGENT AND REGISTRAR").
SHAREHOLDER INFORMATION
For additional information, contact Melodie R. Mathes, Shareholder Relations,
Bank of Granite Corporation, Post Office Box 128, Granite Falls, North Carolina
28630, 828/496-2022.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 200 1st Avenue NW, Post Office Box 9197, Hickory, North
Carolina 28603
MARKET INFORMATION
Bank of Granite serves the people and businesses of the Blue Ridge Foothills
and Catawba Valley of North Carolina, which is located approximately 70 miles
northwest of Charlotte. This region offers a remarkable quality of life, with
both scenic and cultural treasures, to over 300,000 citizens. The area is also
known as a manufacturing capital for furniture, hosiery and fiber optic
telecommunications.
Page 39
<PAGE> 27
[back cover]
<TABLE>
<S> <C> <C> <C> <C>
MAIN OFFICE MORTGAGE OFFICES
Granite Falls Hickory/Springs Road Lenoir/Hibriten Winston-Salem Lenoir
23 N Main St 2220 12th Ave NE 701 Wilkesboro Blvd NE 4550 Country Club Rd 707 College Ave SW
P O Box 128 828/345-6888 828/757-4070 336/760-4911 828/757-4046
Granite Falls, NC 28630 336/760-4915 Fax 828/754-8739 Fax
828/496-2000 Hickory/Viewmont Lenoir/Whitnel www.gll.net
www.bankofgranite.com 281 14th Ave NE 1351 Norwood St Morganton
828/345-6868 Southwest Greensboro 201 E Meeting St
BANKING OFFICES 828/757-4060 336/698-0091 828/439-2170
Granite Falls Hickory/Longview 336/698-0201 Fax 828/439-2171 Fax
23 N Main St 2637 1st Ave SW Morganton
828/496-2027 828/345-6848 201 E Meeting St Hickory Newton
828/439-2151 315 First Ave NW 311 N Main Ave
Granite Falls/Baton at Hickory/Mt. View 828/345-6850 828/466-5060
Ingles, 2630 Connelly 2900 Hwy 127 South Newton 828/345-6883 Fax 828/464-2322 Fax
Springs Rd 828/294-7000 311 N Main Ave
828/757-8990 828/466-5060 High Point Salisbury
Hudson 211 W Lexington Ave 315 N Main St
Hickory 537 Main St Vale at Honey's Suite 102 704/633-8007
25 3rd St NW 828/728-1850 9580 Hwy 10 West 336/887-5438 704/633-7803 Fax
828/345-6800 704/462-5180 336/887-5489 Fax
Lenoir/Uptown Shelby
707 College Ave SW 215 S Washington St
828/757-4040 Suite 102
704/471-0048
</TABLE>
[Nasdaq logo here]
GRAN
NASDAQ
LISTED
[Company logo here]
Bank of
Granite
CORPORATION
MEMBER FDIC
Page 40
<PAGE> 1
Exhibit 21 -- Subsidiaries of the Registrant
Bank of Granite Corporation has two subsidiaries as follows:
Date of State of
Name Incorporation Incorporation
Bank of Granite August 2, 1906 North Carolina
GLL & Associates, Inc. June 24, 1985 North Carolina
Page 41
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 23,219,670
<INT-BEARING-DEPOSITS> 268,826
<FED-FUNDS-SOLD> 27,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,205,689
<INVESTMENTS-CARRYING> 85,139,790
<INVESTMENTS-MARKET> 84,030,013
<LOANS> 390,189,234
<ALLOWANCE> 4,746,692
<TOTAL-ASSETS> 610,726,599
<DEPOSITS> 471,659,198
<SHORT-TERM> 22,088,255
<LIABILITIES-OTHER> 3,528,037
<LONG-TERM> 0
0
0
<COMMON> 11,495,897
<OTHER-SE> 101,955,212
<TOTAL-LIABILITIES-AND-EQUITY> 610,726,599
<INTEREST-LOAN> 38,234,699
<INTEREST-INVEST> 8,272,842
<INTEREST-OTHER> 1,497,993
<INTEREST-TOTAL> 48,005,534
<INTEREST-DEPOSIT> 14,599,449
<INTEREST-EXPENSE> 15,752,467
<INTEREST-INCOME-NET> 32,253,067
<LOAN-LOSSES> 1,862,585
<SECURITIES-GAINS> 675
<EXPENSE-OTHER> 16,536,075
<INCOME-PRETAX> 22,063,949
<INCOME-PRE-EXTRAORDINARY> 22,063,949
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,736,792
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.28
<YIELD-ACTUAL> 6.08
<LOANS-NON> 1,078,992
<LOANS-PAST> 981,345
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,619,586
<CHARGE-OFFS> 1,881,192
<RECOVERIES> 145,713
<ALLOWANCE-CLOSE> 4,746,692
<ALLOWANCE-DOMESTIC> 4,746,692
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 172,000
</TABLE>
