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

GRANITE BAY, CA -- (MARKET WIRE) -- 05/06/08 -- Granite Bancshares, Inc. (OTCBB: GBSI) today announced results for the quarter ended March 31, 2008 for its wholly owned subsidiary Granite Community Bank, N.A. (the "Company"). Net income for the three months ended March 31, 2008 decreased $144,000, or 41%, to $208,000, compared to net income of $352,000 in the first quarter of 2007. Earnings per diluted share decreased 40% to $0.15 in the first quarter of 2008, compared to $0.25 in the first quarter of 2007.

Net interest income was $1.42 million in the first quarter, compared to $1.66 million for the same period in 2007. The net interest margin for the first quarter was 3.89%. This is a decrease of 83 basis points compared to the same period in 2007. Decreases in market rates in 2008 have caused the decrease in the Company's yield on earning assets by 97 basis points in the first quarter of 2008 compared to 2007. Offsetting the decrease in earning asset yields were decreases in the Company's cost of funds. The cost of funds dropped 16 basis points to 3.93% in the first quarter of 2007 compared to 4.09% in 2008.

Non-interest income decreased $65,000 and 39% in the first quarter of 2008, compared to the first quarter of 2007.

Non-interest expense increased $65,000, or 5%, in the first quarter of 2008, compared to the first quarter of 2007.

At March 31, 2008, the Company's total assets were $152 million, a decrease of $4 million, or 3%, compared to March 31, 2007. Total loans and leases were $128.9 million at March 31, 2008, an increase of $0.5 million, or 0.4%, compared to March 31, 2007. Total deposits were $125.6 million at March 31, 2008, a decrease of $2.3 million, or 2%, compared to March 31, 2007.

"As a community bank we are impacted by the changing economic conditions within our South Placer County, California marketplace. The economic challenges facing our region at the end of 2007 and into 2008 include declining residential real estate values and resulting strains on credit quality along with continued pressure on portfolio yields and the net interest margin," reported David Kaiser, Granite Community Bank President/CEO.

"Thankfully, our strategy of building a solid foundation for the Bank over these nearly six years has prepared us well to weather this current economic storm," added Kaiser. "In this current environment we have chosen to forego growth in exchange for tighter management controls of our operations and stricter underwriting standards. The allowance for loan losses at 2.33% of outstanding loans is evidence of our aggressive recognition of problem and potential problem credits.

"By remaining focused on the execution of our strategic plan and the further enhancement of our core competencies, we are prepared to take advantage of the opportunities this market may present," concluded Kaiser.

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

Three months ended ---------------------------------- March 31, ----------------------------------FOR THE PERIOD: 2008 2007 Change ---------- ---------- ----------Net interest income 1,424 1,655 -14% Provision for loan and lease loss 25 50 -50% Noninterest income 100 165 -39% Noninterest expense 1,271 1,206 5% Pretax income 228 564 -60% Provision for tax 20 212 -91% Net income 208 352 -41% Net income per basic share 0.15 0.26 Net income per diluted share 0.15 0.25 Shares outstanding 1,357,634 1,355,500 Average 1,362,076 1,339,975 Fully diluted 1,386,747 1,408,252 SELECTED FINANCIAL RATIOS (Annualized): Return on average assets 0.54% 0.93% Return on average equity 5.20% 9.00% Average shareholder equity to average assets 10.31% 10.39% Net interest margin 3.89% 4.72%

AT PERIOD END:

Loans and leases 128,933 128,432 0.4% Allowance for loan and lease loss 3,006 1,509 99% Total assets 151,778 155,960 -3% Shareholder equity 15,977 15,792 1% Deposits 125,602 127,881 -2% Total risk based capital ratio 12.53 13.18 Allowance for loan and lease loss to total loans 2.33 1.17

Contact: Customer Service (916) 788-8200

2008-05-06 19:55:51 0354644 MARKETWIRE