<PAGE>   1

 Exhibit 13 -- Annual Report To Shareholders

 F I N A N C I A L   O V E R V I E W

 NET INCOME INCREASED FOR 44TH CONSECUTIVE YEAR

 In 1997, Bank of Granite Corporation produced its 44th year of record earnings.
 We know of no other publicly owned bank with a comparable consistency in
 earnings growth. Net income increased 8% to $14,431,187. Diluted earnings per
 share grew 7.5% to $1.57 compared to $1.46 for the previous year. For sixty
 consecutive quarters (15 years), quarterly earnings have exceeded those of the
 comparable quarter of the preceding year. We believe this to be a record for
 any publicly owned company.

 Even though 1997 continued the series of record earnings, it also brought a
 number of "first's" for the Company. In the second quarter, total assets
 reached $500 million for the first time. In the third quarter, Bank of Granite
 installed a check imaging system, which will enable the Bank to process and
 store digital images of checking items rather than retaining actual paper
 items. This should enable the Bank to realize efficiencies in the areas of
 document storage and research as well as to create a database of information
 for use in the Bank's marketing of products and services. In the fourth
 quarter, the Company completed its first acquisition, GLL & Associates, Inc., a
 mortgage banking firm specializing in government guaranteed mortgages in the
 central and southern Piedmont region of North Carolina.

 Factors that contributed to the 1997 earnings growth:

   *  Net interest income increased $3,037,752 or 11.9%

   *  Loans outstanding grew by $28,101,441 or 8.5%, supported
      in part by a $16,878,193, or 4.2%, growth in deposits

   *  GLL & Associates contributed net earnings in its first quarter as a
      subsidiary, even after merger-related expenses.

   *  Noninterest income increased $870,514 or 12%

   *  Operating efficiency ratio of 36.7%






                                     Page 57

<PAGE>   2

 NET INTEREST INCOME INCREASED 11.9% PERCENT

 Net interest income increased $3,037,752, or 11.9%, compared to 1996. Interest
 income grew $3,363,791, or 8.3%, resulting primarily from a 6.9% growth in
 average interest earning assets. Interest expense increased only $326,039, or
 2.2%, which was attributable to the 3.7% growth in average interest-bearing
 deposits. Bank of Granite'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, rates on the Bank's loans
 change a little more quickly than the rates on its deposits. Therefore, when
 rates rise, the Bank's interest income rises at a faster pace than the interest
 expense it pays on its deposits. Likewise, when rates fall, the Bank's interest
 income on loans declines at a faster pace than the interest it pays on
 deposits. The Company manages the maturities and pricing of its interest
 earning assets and interest-bearing liabilities so as to maximize net interest
 income, regardless of whether rates rise or fall in the market.

 For 1998, we expect to operate in a relatively stable interest rate environment
 in which market rates may fall. As a result, our net interest margin could
 tighten. We have other services that thrive when rates fall, such as our new
 mortgage banking subsidiary. We anticipate that loan demand in 1998 will remain
 strong with a continued highly competitive market for quality loans.

 ACQUISITION COMPLETED IN FOURTH QUARTER

 On November 5, 1997, the Company completed its acquisition of GLL & Associates,
 Inc., a mortgage bank. The acquisition was accounted for as a pooling of
 interests, so all amounts throughout this annual report have been restated to
 include GLL as if the two companies were merged for all periods presented or
 discussed. Prior to the date of merger, GLL had elected to be taxed as a
 "Subchapter S" corporation under the federal tax laws, therefore GLL provided
 no income taxes on the pre-merger earnings taxable to GLL's former owners. The
 Company recorded income tax expenses on GLL's earnings subsequent to the merger
 date because such earnings will be included in the Company's taxable income.
 GLL, with pre-merger assets of $13 million, originates approximately $120-130
 million in mortgages per year and specializes in government guaranteed mortgage
 products.

 In the fourth quarter, GLL sold two mortgage servicing portfolios that resulted
 in a nonrecurring gain, included in other noninterest income, of $601,135, or
 $360,681 after-tax. Also in the fourth quarter, nonrecurring expenses related
 to the merger, included in noninterest expenses, totaled $405,678, or $258,162
 after-tax.


                                     Page 58

<PAGE>   3

 DIVERSIFICATION CONTINUED IN NONINTEREST INCOME GROWTH

 Bank of Granite Corporation continues to seek additional sources of noninterest
 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
 continue 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 annuity
 sales activity may increase significantly when interest rates decline.
 Noninterest income for 1997 was $8,110,184, an increase of 12%. Income from
 nontraditional banking services was $3,318,663 and accounted for 40.9% of all
 noninterest income in 1997. Noninterest income in 1997 included $601,135 in
 nonrecurring gains from the sale of mortgage servicing rights by the Company's
 new subsidiary, GLL & Associates.

 If, as anticipated, interest rates remain flat or decline slightly in 1998, we
 expect demand for mortgage loans, small business loans and annuity products to
 strengthen. Service charges on deposit accounts will continue to grow relative
 to deposit growth.

 NONINTEREST EXPENSE REFLECTS TREND IN FEE INCOME

 The growth in fee income largely results from receiving value for services
 provided. Costs are usually incurred to provide such services. Although
 noninterest expenses increased 14.2% in 1997, the Company still achieved a
 36.74% efficiency ratio, which we believe to be among the best in the country.
 Expressed another way, it costs the Company 36.74 cents for every dollar of
 taxable-equivalent net interest and other revenues earned. In 1997, the Company
 began to incur costs for a new office, a new department that supports a
 profitable new cash flow manager product for selected businesses and a
 significant investment in new imaging technology. In addition, nonrecurring
 expenses related to the merger of GLL & Associates totaling $405,678 were
 recorded in the fourth quarter.

 In 1998, we anticipate continued growth in operating expenses as we continue to
 invest in technology and alternative delivery systems, new offices and new or
 expanded services to generate fee income. Over the next one-to-two years, we
 are committing significant resources (1) to assure that the technology of the
 Company, its customers and its vendors will be ready for the year 2000, (2) to
 automate our teller stations and upgrade our ATM network, and (3) to identify
 innovative ways in which to serve our existing and future customers. As always,
 we will continue to evaluate investments relative to the value they will
 generate.

                                     Page 59

<PAGE>   4

 ASSET QUALITY

 In 1997, both the furniture and hosiery manufacturing industries experienced an
 economically challenging period. Furniture and hosiery manufacturing are
 important industries to the Company's Catawba Valley market area. In addition,
 consumer loan customers continue to struggle, resulting in higher than normal
 levels of past dues and bankruptcies. Nonperforming assets totaled $2,705,733,
 or 0.51% of average assets. Our credit administration and collections
 departments continue to monitor problem loans in an effort to minimize losses
 and delinquencies. In spite of net charge-offs increasing to $766,311, the
 ratio of net charge-offs to average loans outstanding remained under 0.25%. As
 a matter of prudence, we continued to contribute to our loan loss reserves. The
 total allowance for loan losses increased to $5,202,578 as of December 31,
 1997, yet remained at 1.48% of net loans outstanding due to growth in loans. At
 year-end 1997, the allowance for loan losses covered 198% of nonperforming
 loans.

 We anticipate asset quality in 1998 to approximate that of 1997. Assuming we
 continue to operate in a similar economic climate, we expect nonperforming
 assets and net charge-offs to remain at levels somewhat similar to those
 experienced in 1997. We plan to continue prudent additions to our reserve for
 loan losses, and to continue our emphasize on conservative lending practices.

 FORWARD LOOKING STATEMENTS

 The foregoing discussion may contain forward looking statements within the
 meaning of the Private Securities Litigation Reform Act. The accuracy of such
 forward looking statements could be affected by such factors as, including but
 not limited to, the financial success or changing strategies of the Company's
 customers, actions of government regulators, or general economic conditions.





                                     Page 60

<PAGE>   5

 FINANCIAL HIGHLIGHTS (1)

<TABLE>
<CAPTION>
                                          1997 (2)       1996       % change
<S>                                    <C>          <C>                   <C> 
 Earnings
   Interest income                     $ 44,027,854 $ 40,664,063          8.3%
   Interest expense                      15,459,548   15,133,509          2.2%
   Net income                            14,431,187   13,365,872          8.0%
   Cash dividends paid                    3,340,932    3,058,856          9.2%
 Per share
   Net income
     - Basic                           $       1.58 $       1.47          7.5%
     - Diluted                                 1.57         1.46          7.5%
   Cash dividends                              0.37         0.35          5.7%
   Book value                                 10.41         9.22         12.9%
 Average shares outstanding
     - Basic                              9,140,088    9,104,832          0.4%
     - Diluted                            9,183,840    9,152,564          0.3%
 At Year-end
   Assets                              $528,979,733 $498,192,379          6.2%
   Deposits                             414,576,184  397,697,991          4.2%
   Loans (gross)                        357,845,513  329,744,072          8.5%
   Allowance for loan losses              5,202,578    4,793,889          8.5%
   Shareholders' equity                  95,216,723   84,018,569         13.3%
 Ratios
   Return on average assets                    2.81%        2.76%
   Return on average equity                   16.21%       16.98%
   Average capital to average assets          17.36%       16.24%
</TABLE>
 (1)    All amounts reflect the Corporation's November 1997 merger with GLL &
        Associates, Inc. ("GLL"), which was accounted for as a pooling of
        interests.

 (2)    Nonrecurring items related to GLL: Fourth quarter 1997 - gain on sale of
        mortgage servicing rights of $360,681 (after-tax) and merger expenses of
        $258,162 (after-tax).


 MARKET AND DIVIDEND SUMMARY

<TABLE>
<CAPTION>
 1997                        Quarter 1    Quarter 2    Quarter 3    Quarter 4
   Price Range
<S>                       <C>          <C>          <C>          <C>       
     High                 $   30 1/4   $   30 5/8   $   33 1/8   $   33 1/2
     Low                      27 1/4       27 1/8       28 3/4       29 1/4
     Close                    29 1/2       30 1/4       32 3/4       30 3/4
     Dividend             $    0.09    $    0.09    $    0.09    $    0.10

 1996                        Quarter 1    Quarter 2    Quarter 3    Quarter 4
   Price Range
     High                 $  20 43/64  $   26 3/4   $   29 1/2   $     33
     Low                     18 21/64        20         23 1/2       27 1/4
     Close                   20 11/64      25 1/2       27 1/2         29
     Dividend             $    0.08    $    0.08    $    0.09    $    0.09
</TABLE>

                                     Page 61

<PAGE>   6

 SELECTED FINANCIAL DATA (1)
 Bank of Granite Corporation and Subsidiaries

<TABLE>
<CAPTION>
 For the Years Ended
 December 31,                         1997 (2)       1996         1995         1994         1993          
<S>                                <C>          <C>          <C>          <C>          <C>                
 Total interest income             $ 44,027,854 $ 40,664,063 $ 38,264,504 $ 31,783,764 $ 28,818,066       
 Total interest expense              15,459,548   15,133,509   13,998,536   10,225,632   10,062,659       
                                   ----------------------------------------------------------------       
 Net interest income                 28,568,306   25,530,554   24,265,968   21,558,132   18,755,407       
 Provision for loan losses            1,175,000      820,000    1,117,000      704,000      575,000       
                                   ----------------------------------------------------------------       
 Net interest income after                                                                                
   provision for loan losses         27,393,306   24,710,554   23,148,968   20,854,132   18,180,407       
 Other income                         8,110,184    7,239,670    6,145,112    6,712,147    7,271,879       
 Other expense                       14,119,050   12,363,995   11,650,576   12,711,683   11,367,477       
                                   ----------------------------------------------------------------       
 Income before income taxes                                                                               
   and cumulative effect of                                                                               
   a change in accounting                                                                                 
   for income taxes                  21,384,440   19,586,229   17,643,504   14,854,596   14,084,809       
 Income taxes                         6,953,253    6,220,357    5,598,532    4,622,525    3,984,532       
                                   ----------------------------------------------------------------       
 Income before cumulative                                                                                 
   effect of a change in                                                                                  
   accounting for income                                                                                  
   taxes                             14,431,187   13,365,872   12,044,972   10,232,071   10,100,277       
 Cumulative effect on                                                                                     
   prior years of a change                                                                                
   in accounting for income                                                                              
   taxes                                     --           --           --           --     (125,926)      
                                   ----------------------------------------------------------------       
 Net income                        $ 14,431,187 $ 13,365,872 $ 12,044,972 $ 10,232,071 $  9,974,351       
                                   ----------------------------------------------------------------       
 Per share:                                                                                               
   Net income -                                                                                           
     Basic                         $       1.58 $       1.47 $       1.33 $       1.13 $       1.11       
     Diluted                       $       1.57 $       1.46 $       1.32 $       1.13 $       1.10       
                                   ----------------------------------------------------------------       
 Cash dividends                    $       0.37 $       0.35 $       0.29 $       0.25 $       0.23       
                                   ----------------------------------------------------------------       
 Book value                        $      10.41 $       9.22 $       8.19 $       7.05 $       6.31       
                                   ----------------------------------------------------------------       
 Average shares                                                                                           
   outstanding -                                                                                          
     Basic                            9,140,088    9,104,832    9,069,217    9,034,076    8,983,795       
     Diluted                          9,183,840    9,152,564    9,102,539    9,086,397    9,048,659       
                                   ----------------------------------------------------------------       
 Performance ratios:                                                                                      
   Return on average assets                2.81%        2.76%        2.70%        2.47%        2.55%      
   Return on average equity               16.21%       16.98%       17.42%       16.94%       18.70%      
   Average equity to                                                                                      
     average assets                       17.36%       16.24%       15.50%       14.56%       13.65%      
   Dividend payout                        23.15%       22.89%       21.82%       21.87%       19.94%      
                                   ----------------------------------------------------------------       
 Balance at year end                                                                                      
   Assets                          $528,979,733 $498,192,379 $468,139,374 $423,098,161 $410,729,692       
   Securities                       131,109,218  128,661,064  124,283,449  112,932,093  113,304,074       
   Loans (gross)                    357,845,513  329,744,072  312,779,662  279,942,537  265,755,180       
   Allowance for loan losses          5,202,578    4,793,889    4,644,725    3,996,491    3,603,430       
   Liabilities                      433,763,010  414,173,810  393,768,044  359,313,211  353,841,159       
   Deposits                         414,576,184  397,697,991  377,043,144  343,330,048  327,514,920       
   Shareholders' equity              95,216,723   84,018,569   74,371,330   63,784,950   56,888,533       
                                   ----------------------------------------------------------------       
</TABLE>                           
 (1)    All amounts reflect the Corporation's November 1997 merger with GLL &
        Associates, Inc. ("GLL"), which was accounted for as a pooling of
        interests.

 (2)    Nonrecurring items related to GLL: Fourth quarter 1997 - gain on sale of
        mortgage servicing rights of $360,681 (after-tax) and merger expenses of
        $258,162 (after-tax).

                                     Page 62

<PAGE>   7

 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, 1997 and
 1996, and the related consolidated statements of income, changes in
 shareholders' equity, and cash flows for each of the three years in the period
 ended December 31, 1997. Such consolidated financial statements and our report
 thereon dated January 23, 1998, expressing an unqualified opinion (which are
 not included herein) are included in the proxy statement for the 1998 annual
 meeting of shareholders. The accompanying consolidated balance sheets and
 consolidated statements of income 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 in the accompanying consolidated
 balance sheets as of December 31, 1997 and 1996 and the related consolidated
 statements of income for each of the three years in the period ended December
 31, 1997 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 23, 1998






                                     Page 63

<PAGE>   8

 BANK OF GRANITE
 CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
 Consolidated Balance Sheets (1)                                        December 31,
                                                                      1997         1996
 ASSETS:
<S>                                                              <C>          <C>         
 Cash and cash equivalents:
   Cash and due from banks                                       $ 27,707,850 $ 24,870,352
   Interest-bearing deposits                                          157,507      274,825
   Federal funds sold                                                      --    4,500,000
                                                                 -------------------------
 Total cash and cash equivalents                                   27,865,357   29,645,177
                                                                 -------------------------
 Investment Securities:
   Available for sale, at fair value
     (amortized cost of $51,285,077 and $50,906,209
     at December 31, 1997 and 1996, respectively)                  52,072,834   51,211,956
   Held to maturity, at amortized cost
     (fair value of $80,733,959 and $78,728,117
     at December 31, 1997 and 1996, respectively)                  79,036,384   77,449,108
 Loans                                                            357,845,513  329,744,072
   Allowance for loan losses                                       (5,202,578)  (4,793,889)
                                                                 -------------------------
   Net loans                                                      352,642,935  324,950,183
                                                                 -------------------------
 Premises and equipment, net                                        9,583,429    8,254,712
 Accrued interest receivable                                        4,972,654    4,290,350
 Other assets                                                       2,806,140    2,390,893
                                                                 -------------------------
 TOTAL                                                           $528,979,733 $498,192,379
                                                                 =========================

 LIABILITIES AND SHAREHOLDERS' EQUITY:
 Deposits:
   Demand                                                        $ 80,637,746 $ 78,010,962
   NOW accounts                                                    62,792,730   60,575,240
   Money market accounts                                           25,697,397   27,290,026
   Savings                                                         23,848,043   22,271,033
   Time deposits of $100,000 or more                               92,588,469   88,267,044
   Other time deposits                                            129,011,799  121,283,686
                                                                 -------------------------
   Total deposits                                                 414,576,184  397,697,991
                                                                 -------------------------
 Federal funds purchased and
   securities sold under agreements to repurchase                   8,882,016    2,955,234
 Other borrowings                                                   6,287,700    9,636,259
 Accrued interest payable                                           2,138,430    1,978,712
 Other liabilities                                                  1,878,680    1,905,614
                                                                 -------------------------
 Total liabilities                                                433,763,010  414,173,810
                                                                 -------------------------
 Shareholders' equity:
 Common stock, $1 par value,
   authorized - 15,000,000 shares;
   issued and outstanding - 9,146,272 shares in 1997 and
   9,116,552 shares in 1996                                         9,146,272    9,116,552
 Capital surplus                                                   22,234,753   21,913,629
 Retained earnings                                                 63,362,060   52,800,932
 Net unrealized gain on securities available
   for sale, net of deferred income taxes                             473,638      187,456
                                                                 -------------------------
 Total shareholders' equity                                        95,216,723   84,018,569
                                                                 -------------------------
 TOTAL                                                           $528,979,733 $498,192,379
                                                                 =========================
</TABLE>

 (1)    All amounts reflect the Corporation's November 1997 merger with GLL &
        Associates, Inc. ("GLL"), which was accounted for as a pooling of
        interests.



                                     Page 64

<PAGE>   9

 BANK OF GRANITE
 CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
 Consolidated Statements of Income (1)               For the Years Ended December 31,
                                                       1997 (2)       1996         1995
<S>                                                 <C>          <C>          <C>         
 INTEREST INCOME:
 Interest and fees on loans                         $ 36,246,226 $ 33,006,697 $ 31,538,067
 Federal funds sold                                      197,939      312,516      251,047
 Interest-bearing deposits                                10,766        6,732        6,945
 Investments:
   U.S. Treasury                                       1,208,692    1,144,098      961,701
   U.S. Government agencies                            2,200,475    2,442,745    2,033,620
   States and political subdivisions                   3,253,315    3,022,204    2,845,134
   Other                                                 910,441      729,071      627,990
                                                    --------------------------------------
 Total interest income                                44,027,854   40,664,063   38,264,504
                                                    --------------------------------------
 INTEREST EXPENSE:
 Time deposits of $100,000 or more                     5,132,118    4,973,875    4,748,413
 Other time and savings deposits                       9,465,803    9,192,464    8,276,096
 Federal funds purchased and securities
   sold under agreements to repurchase                   217,916      188,176      175,549
 Other borrowed funds                                    643,711      778,994      798,478
                                                    --------------------------------------
 Total interest expense                               15,459,548   15,133,509   13,998,536
                                                    --------------------------------------
 NET INTEREST INCOME                                  28,568,306   25,530,554   24,265,968
 PROVISION FOR LOAN LOSSES                             1,175,000      820,000    1,117,000
                                                    --------------------------------------
 NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                          27,393,306   24,710,554   23,148,968
                                                    --------------------------------------
 OTHER INCOME:
 Service charges on deposit accounts                   3,273,187    3,107,378    2,843,085
 Other service fees and commissions                    3,690,047    3,296,063    3,001,198
 Securities gains (losses)                                 3,695      174,086      (40,952)
 Other                                                 1,143,255      662,143      341,781
                                                    --------------------------------------
 Total other income                                    8,110,184    7,239,670    6,145,112
                                                    --------------------------------------
 OTHER EXPENSES:
 Salaries and wages                                    6,916,428    6,231,710    5,565,407
 Employee benefits                                     1,344,946    1,273,246    1,074,896
 Occupancy expense, net                                  603,298      610,683      607,987
 Equipment rentals, depreciation,
   and maintenance                                     1,187,293    1,050,971    1,000,887
 Other                                                 4,067,085    3,197,385    3,401,399
                                                    --------------------------------------
 Total other expenses                                 14,119,050   12,363,995   11,650,576
                                                    --------------------------------------
 INCOME BEFORE INCOME TAXES                           21,384,440   19,586,229   17,643,504
 INCOME TAXES                                          6,953,253    6,220,357    5,598,532
                                                    --------------------------------------
 NET INCOME                                         $ 14,431,187 $ 13,365,872 $ 12,044,972
                                                    ======================================
 PER SHARE AMOUNTS:
   Net income -
     Basic                                          $       1.58 $       1.47 $       1.33
     Diluted                                        $       1.57 $       1.46 $       1.32
   Cash dividends                                   $       0.37 $       0.35 $       0.29
</TABLE>

 (1)    All amounts reflect the Corporation's November 1997 merger with GLL &
        Associates, Inc. ("GLL"), which was accounted for as a pooling of
        interests.
 (2)    Nonrecurring items related to GLL: Fourth quarter 1997 - gain on sale of
        mortgage servicing rights of $360,681 (after-tax) and merger expenses of
        $258,162 (after-tax).



                                     Page 65

<PAGE>   10

 QUARTERLY FINANCIAL SUMMARY (1)
 Unaudited

<TABLE>
<CAPTION>
 1997                                Quarter 1    Quarter 2    Quarter 3   Quarter 4 (2)
                                                                                        
<S>                                <C>          <C>          <C>          <C>           
 Total interest income             $ 10,361,843 $ 11,033,537 $ 11,319,840 $ 11,312,634  
 Total interest expense               3,662,081    3,840,653    3,990,624    3,966,190  
 Net interest income                  6,699,762    7,192,884    7,329,216    7,346,444  
 Provision for loan losses              255,000      320,000      300,000      300,000  
 Net interest income after                                                              
   provision for loan losses          6,444,762    6,872,884    7,029,216    7,046,444  
 Other income                         1,781,254    1,759,434    1,847,100    2,722,396  
 Other expense                        3,127,528    3,489,025    3,656,814    3,845,683  
 Income before income taxes           5,098,488    5,143,293    5,219,502    5,923,157  
 Income taxes                         1,728,758    1,558,410    1,580,380    2,085,705  
 Net income                        $  3,369,730 $  3,584,883 $  3,639,122 $  3,837,452  
 Net income per share                                                                   
   Basic                           $       0.37 $       0.39 $       0.40 $       0.42  
   Diluted                         $       0.37 $       0.39 $       0.40 $       0.42  
 Average shares outstanding                                                             
   Basic                              9,129,715    9,141,926    9,145,114    9,146,160  
   Diluted                            9,202,009    9,184,282    9,193,258    9,191,002  
                                                                                        
                                                                                        
<CAPTION>                                                                               
 1996                                Quarter 1    Quarter 2    Quarter 3    Quarter 4   
                                                                                        
<S>                                <C>          <C>          <C>          <C>           
 Total interest income             $  9,842,616 $ 10,108,320 $ 10,318,767 $ 10,394,360  
 Total interest expense               3,692,115    3,799,631    3,850,520    3,791,243  
 Net interest income                  6,150,501    6,308,689    6,468,247    6,603,117  
 Provision for loan losses              185,000      100,000      260,000      275,000  
 Net interest income after                                                              
   provision for loan losses          5,965,501    6,208,689    6,208,247    6,328,117  
 Other income                         1,810,914    1,741,980    1,754,964    1,931,812  
 Other expense                        3,093,501    3,165,350    3,033,414    3,071,730  
 Income before income taxes           4,682,914    4,785,319    4,929,797    5,188,199  
 Income taxes                         1,515,000    1,495,000    1,545,000    1,665,357  
 Net income                        $  3,167,914 $  3,290,319 $  3,384,797 $  3,522,842  
 Net income per share                                                                   
   Basic                           $       0.35 $       0.36 $       0.37 $       0.39  
   Diluted                         $       0.35 $       0.36 $       0.37 $       0.38  
 Average shares outstanding                                                             
   Basic                              9,086,206    9,104,405    9,112,999    9,116,271  
   Diluted                            9,124,384    9,151,330    9,158,206    9,171,801  
</TABLE>                           

 (1)    All amounts reflect the Corporation's November 1997 merger with GLL &
        Associates, Inc. ("GLL"), which was accounted for as a pooling of
        interests.

 (2)    Nonrecurring items related to GLL: Fourth quarter 1997 - gain on sale of
        mortgage servicing rights of $360,681 (after-tax) and merger expenses of
        $258,162 (after-tax).






                                     Page 66

<PAGE>   11

 SHAREHOLDER INFORMATION

 COMMON STOCK

      Bank of Granite Corporation's common stock is traded on the
 over-the-counter (OTC) market and quoted in the NASDAQ (National Association of
 Securities Dealers Automated Quotations) National Market System, where the
 symbol is GRAN. Price and volume information is contained in the Wall Street
 Journal and most major daily newspapers in the "Over-the-Counter Markets"
 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 27, 1998, 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 writing:  Kirby A. Tyndall, Secretary/Treasurer,
 Bank of Granite Corporation, Post Office Box 128, Granite Falls, North
 Carolina 28630.

 STOCK TRANSFER AGENT AND REGISTRAR

 Registrar and Transfer Company
 10 Commerce Drive
 Cranford, New Jersey 07016
 908/272-8511 or 800/368-5948

 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 at
 the address above.
                                     Page 67


<PAGE>   12

 SHAREHOLDER INFORMATION

      For additional information, contact Melodie R. Mathes, Shareholder
 Relations, Bank of Granite Corporation, Post Office Box 128, Granite Falls,
 North Carolina 28630, 704/496-2022.

 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 200,000 citizens. The area is also
 known as a manufacturing capital for furniture, hosiery and fiber optic
 telecommunications.






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