Letter from Chief Executive Officer Directors and Executive Officers I. Notice of 2009 Annual Meeting II. Proxy Statement III. Annual Report on Form 10-K For the year ended December 31, 2008 Stockholder Information Bank of Granite ——— C O R P O R A T I O N ——— To our Stockholders, Customers, Employees & Friends, Two thousand eight posed unprecedented challenges for the banking industry. Asset valuations and reduced net interest margins have brought all banks under earnings performance pressure. Accordingly, 2008 was a very disappointing year for Bank of Granite. I will discuss the primary issues and how your team of dedicated employees is working to resolve them. In the fourth quarter of 2008, Bank of Granite Corporation posted a loss of $34.3 million, or $2.22 per share. For the full-year ended December 31, 2008, we reported a net loss of $36.3 million, or $2.35 per share. Of that loss, $25.7 million in noncash charges were related to the establishment of reserves against deferred tax benefits, the impairment of goodwill, and the impairment of securities values. An additional $8 million was related to loss provisions on loans to two real estate development borrowers. We have been aggressive in our loan loss provisions as economic conditions continue to bring stress to our markets. Net interest margin compression also contributed to a 29% decline in net interest income for the year. The margin decline was precipitated by a sharp decline in the prime rate coupled with strong deposit competition. Our increase in nonperforming assets also contributed materially to the decline in our net interest income. Here is what we have done to try to change the recent course of our earnings. On the front of problem asset resolution, we have a new Portfolio Management Department manned by a dedicated group of professionals charged with reducing our special assets as efficiently as possible. Our job number one is the resolution of, and in some cases the liquidation of, our problem loans. Expense control was important in 2008 and continues to be a priority in 2009. Expense savings in the fourth quarter of 2008 were approximately $1.1 million. Many cost saving initiatives took hold in the second half of 2008, so our new expense run rate is even lower. As previously stated we have committed tremendous resources to problem loan resolution. As this work eventually subsides, the expense burden of these activities will be reduced, and our considerable talent will be redirected to production and growth. We believe we have a valuable franchise. Through this difficult period our loyal depositors have validated that community bank customers “stay for service” as our total deposits grew slightly in 2008 despite the recession. We have a solid core of business in the Unifour Area and will defend our share vigorously with superior client service and exceptional community involvement. We continue to look for good loan opportunities throughout our footprint. We will continue to add resources to our successful new markets such as the Charlotte Metro Region that have been a key to our growth since our entry in 2003. We intend to emerge from this difficult economic environment stronger, leaner, and smarter having fought through these hard times. The commitment and dedication of our employees are stronger than ever, as the recession has demanded more from us. We appreciate so much the support of every customer and stockholder who believes that our 103 years continue with the promise of a bright future for Bank of Granite. Bank of Granite R. Scott Anderson Chief Executive Officer ————— C O R P O R A T I O N ————— March 31, 2009 Board of Directors James Y. Preston Leila N. Erwin Chairman Owner, More Lace Gift Shop, Morganton, NC; Bank of Granite Corporation; President, Morris Investment Company Of Counsel, Parker Poe Adams & (investment and real estate management), Bernstein, LLP, Charlotte, NC Charlotte, NC John N. Bray Paul M. Fleetwood, III Vice Chairman, President, Corporate Management Bank of Granite Corporation; Chairman, Services, Inc. (real estate management); Director & Chief Executive Officer, Treasurer, Catawba Valley Building Supply, Vanguard Furniture, Inc. Hickory, NC Hickory, NC Hugh R. Gaither R. Scott Anderson President & Chief Executive Officer, Chief Executive Officer & President Flagship Brands, LLC (performance socks) Bank of Granite Corporation Conover, NC Granite Falls, NC Boyd C. Wilson, Jr., CPA Joseph D. Crocker Executive Vice President, Broyhill Assistant Secretary for Community Investments, Inc. (investment management); Development, North Carolina Vice President & Chief Financial Officer, Department of Commerce BMC Fund, Inc. (regulated investment Raleigh, NC company), Lenoir, NC Executive Management R. Scott Anderson Jerry A. Felts Kirby A. Tyndall Chief Executive Officer Chief Operating Officer Executive Vice President, & President Chief Financial Officer, Secretary & Treasurer 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, which 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 “expects,” “anticipates,” “believes,” “estimates,” “plans,” “projects,” or other statements concerning our opinions or judgments 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 our customers, our success operating in new markets that we enter, actions of government regulators, the level of market interest rates, and general economic conditions. For additional factors that could affect the matters discussed in forward looking statements, see the “Risk Factors” section of the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which is included in this mailing. Bank of Granite ——— C O R P O R A T I O N ——— 23 NORTH MAIN STREET GRANITE FALLS, NORTH CAROLINA 28630 (828) 496-2000 Notice of Annual Meeting of Stockholders - April 27, 2009 TO OUR STOCKHOLDERS: The Annual Meeting of Stockholders of Bank of Granite Corporation will be held on Monday, April 27, 2009 at 10:30 a.m. local time. The meeting will be held at the Crowne Plaza (formerly Holiday Inn - Select), 1385 Lenoir Rhyne Boulevard, S.E. (at Interstate 40, Exit #125), Hickory, North Carolina for the following purposes: 1. To elect eight directors to hold office until the next annual stockholders meeting or until their respective successors are elected and qualified; 2. To ratify the selection of Dixon Hughes PLLC as our independent accountants for the fiscal year ending December 31, 2009; and 3. To transact such other business as may properly be brought before the meeting or any adjournment thereof. Information about these matters is included in the Proxy Statement accompanying this notice. Only stockholders of record at the close of business on March 2, 2009 are entitled to receive notice of, and to vote at, this meeting. Bank of Granite Corporation’s 2009 Annual Stockholders Meeting Proxy Ballot, Proxy Statement and 2008 Annual Report on Form 10-K are enclosed with this Notice. These documents are also available at www.cfpproxy.com/3843. YOUR VOTE AND PROMPT RESPONSE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. YOUR PROMPT RESPONSE WILL SAVE YOUR COMPANY THE EXPENSES AND EXTRA WORK OF ADDITIONAL SOLICITATION. By order of the Board of Directors Bank of Granite Corporation Granite Falls, North Carolina R. Scott Anderson March 31, 2009 Chief Executive Officer Important Notice Regarding The Availability Of Proxy Materials For The Shareholder Meeting To Be Held On April 27, 2009: The Proxy Statement and 2008 Annual Report on Form 10-K are also available at www.cfpproxy.com/3843. I Directions to Bank of Granite Corporation’s Annual Meeting To Granite Falls, Lenoir, Boone & Hickory points north 321 Lenoir Rhyne To Winston-Salem, Greensboro, Boulevard Statesville & points east 70 EXIT 125 INTERSTATE INTERSTATE 40 40 To Asheville, 70 Morganton & points west To Charlotte, 321 Lincolnton, Gastonia Crowne Plaza & points south (Formerly Holiday Inn - Select) 1385 Lenoir Rhyne Boulevard, S.E. Directions to the Crowne Plaza in Hickory: 1. Take Exit 125 from Interstate 40. 2. If exiting from eastbound Interstate 40, turn right onto Lenoir Rhyne Boulevard. If exiting from westbound Interstate 40, turn left onto Lenoir Rhyne Boulevard. 3. The Crowne Plaza will be 1 block on the left. If needed, telephone numbers are: Bank of Granite in Hickory - 828 345-6800 Crowne Plaza in Hickory - 828 323-1000 Bank of Granite ——— C O R P O R A T I O N ——— PROXY STATEMENT SOLICITATION, VOTING AND REVOCABILITY OF PROXY General The accompanying Proxy is solicited by the Board of Directors of Bank of Granite Corporation (the “Company”) for use at the Annual Meeting of Stockholders to be held on April 27, 2009, and any adjournment thereof. The time and place of the meeting is set forth in the accompanying Notice of Meeting. The approximate date on which this Proxy Statement and the accompanying Proxy are first being mailed or given to stockholders of the Company is April 6, 2009. Copies of the Company’s Annual Report on Form 10-K for 2008 are provided with this Proxy Statement and have been sent to each stockholder with this Proxy Statement. These documents are also available at www.cfpproxy.com/3843.