<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, 1998
                                            -------------------------

                         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 8, 1999, 11,494,067 shares of common stock, $1 par value,
were outstanding and the aggregate market value of the voting stock held by
non-affiliates was $307,987,330.

                       Documents Incorporated by Reference

         PARTS I AND II: Annual Report to Shareholders for the fiscal year ended
December 31, 1998 (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 22, 1999 as filed
pursuant to Section 14 of the Securities Exchange Act of 1934 in connection with
the 1999 Annual Meeting of Shareholders.

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                         Exhibit Index begins on page 13


<PAGE>   2

                         FORM 10-K CROSS-REFERENCE INDEX

<TABLE>
<CAPTION>
                                                                      1998                1999
                                                    1998              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-13
Item 8 - Financial Statements and
         Supplementary Data                           9             21,23 & 24          II-14 - II-37
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-5
Item 11 - Executive Compensation                     10                    n/a             I-6 - I-10
Item 12 - Security Ownership of Certain
          Beneficial Owners and
          Management                                 10                    n/a              I-2 & I-5
Item 13 - Certain Relationships and
          Related Transactions                       10                    n/a                   I-13

PART IV

Item 14 - Exhibits, Financial Statement
          Schedules and Reports on
          Forms 8-K                                  11                    n/a          II-14 - II-37
</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, 1998. 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.



                                     Page 3
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According to June 30, 1998 data provided by the Federal Deposit Insurance
Corporation (the "FDIC"), there were six other commercial banks in the Bank's
Caldwell County market. The Bank of Granite had $176 million, or 27.6%, of the
$638.1 million in total deposits in Caldwell County 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, 1998. The Bank of Granite had $249.8
million, or 15.2%, of the $1,641.5 million in total deposits in Catawba County
as of June 30, 1998.

In the Bank's Burke County market, there were six commercial banks and one
savings institution as of June 30, 1998 according to the FDIC. The Bank of
Granite had $25.1 million, or 4.3%, of the $588.4 million in total deposits in
Burke County 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 and
Newton. GLL plans to open an office in Shelby in the first quarter of 1999.

EMPLOYEES

As of December 31, 1998, the Bank had 183 and GLL had 44 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").







                                     Page 4
<PAGE>   5

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 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, 1998, the Bank had undivided profits of
approximately $88.5 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, 1998, this ratio was
17.65%, leaving approximately $65.9 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, 1998, the Registrant's tier 1
ratio and total capital ratio to risk-adjusted assets was 25.1% and 26.2%
respectively. The Registrant's leverage ratio at December 31, 1998 was 17.8%.
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.



                                     Page 5
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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.

                                     Page 6
<PAGE>   7

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 100' x 221' lot.

Operations Center - 11,769 square foot building located on a 1.05 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 45,500 square foot lot.

Hibriten office - 2,480 square foot building located on a 2.10 acre lot.

HUDSON, NC

Hudson office - 4,235 square foot building located on a 4.10 acre lot.

HICKORY, NC

Hickory office - 9,515 square foot building located on a 20,000 square foot lot.

Bank of Granite Plaza - two story building with two sections containing 7,520
square feet and 7,572 square feet.


                                     Page 7

<PAGE>   8

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 1.81 acre lot.

NEWTON, NC

Newton office - 3,612 square foot building located on a 40,000 square foot lot.

MORGANTON, NC

Morganton office - 5,400 square foot building located on a 0.78 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) - 6,974 square foot building located on a
0.61 acre lot.

Charlotte office - 878 square foot office in a 150,000 square foot office
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 (opening in March 1999) - 400 square foot office in a 12,000
square foot office building.



                                     Page 8

<PAGE>   9

ITEM 3 - LEGAL PROCEEDINGS

There were no significant legal proceedings as of December 31, 1998.

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 1998.

                                     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 1998 ANNUAL REPORT TO SHAREHOLDERS under the headings "Market and
Dividend Summary" and "Shareholder Information", and respectively, and on page
I-2 of the 1999 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 1998 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-13 of the
Registrant's 1999 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-14 - II-37 of the 1999 PROXY STATEMENT
for the year ended December 31, 1998 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.




                                     Page 9
<PAGE>   10

                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is set forth on page I-5 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 1999
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-6 - I-10 in the
definitive proxy materials of the Company filed in connection with its 1999
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-5 in the
definitive proxy materials of the Company filed in connection with its 1999
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-13 under the
heading "Transactions with Officers and Directors" in the definitive proxy
materials of the Company filed in connection with its 1999 ANNUAL MEETING OF
SHAREHOLDERS, which information is incorporated herein by reference.

















                                     Page 10
<PAGE>   11

                                     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-14 - II-37 of the Registrant's 1999 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

                       
b.                       On December 18, 1998, the Company filed a report on
                         Form 8-K regarding its December 14, 1998 new release
                         in which it announced that its Board of Directors had
                         approved a plan to purchase up to $5 million of its
                         common stock on the open market or in privately
                         negotiated transactions as conditions warrant. The
                         repurchase plan is effective until December 2001. As
                         of November 30, 1998, the Company had 11,464,913
                         shares outstanding.


















                                     Page 11
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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 8, 1999
----------------------------------------------              Executive Officer
John A. Forlines, Jr.                                       

/s/ Kirby A. Tyndall                                       Secretary/Treasurer,                     March 8, 1999
----------------------------------------------               Chief Financial
Kirby A. Tyndall                                          Officer and Principal
                                                            Accounting Officer

/s/ John N. Bray                                                 Director                           March 8, 1999
----------------------------------------------
John N. Bray

/s/ Paul M. Fleetwood, III                                       Director                           March 8, 1999
----------------------------------------------
Paul M. Fleetwood, III

/s/ John A. Forlines, Jr.                                        Director                           March 8, 1999
----------------------------------------------
John A. Forlines, Jr.

/s/ Barbara F. Freiman                                           Director                           March 8, 1999
----------------------------------------------
Barbara F. Freiman

                                                                 Director                           March 8, 1999
----------------------------------------------
Hugh R. Gaither

/s/ Charles M. Snipes                                            Director                           March 8, 1999
----------------------------------------------
Charles M. Snipes

/s/ Boyd C. Wilson, Jr.                                          Director                           March 8, 1999
----------------------------------------------
Boyd C. Wilson, Jr.
</TABLE>


                                     Page 12
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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