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Gloomy shareholders gathered for Bank of Granite's annual meeting yesterday in Hickory. The bank is one of North Carolina's oldest and was once known for its generous yearly stock dividends. But the dividend has dried up and Bank of Granite recently reported an annual loss of more than $25 million. Over the last hundred years, Bank of Granite has survived the Great Depression, two World Wars and numerous recessions. This latest downturn, though, has driven the bank to its knees. "Please bless this area with economic recovery," prayed Bank of Granite board member Le Erwin at the start of the annual shareholder meeting. "Bless each one employed by the Bank of Granite and their families. Bless our investors." Investors have always been like family at Bank of Granite: Many are past and present employees and their kin. It's the archetype of a community bank, with annual shareholder gatherings that are more reunion than business meeting. In a cozy hotel banquet room, about a hundred people shake hands and give hugs as they catch up over coffee and pastries. And their investment has paid handsomely. For fifty straight years - up until 2008 - Bank of Granite shareholders could count on an annual dividend. "It's really been great in the past and you know I'd love to see it turn around cause you know I was banking on that for my retirement," says Danny Prestwood. He first invested in Bank of Granite in the 80s when his daughter worked there. His six-thousand shares were once worth $20 a piece. Now they're hovering at a $1.50. The fall-off caught him by surprise. "By the time I started looking to cash out it was so low then I might as well just either lose it or try to let it regain, ride it out," says Prestwood. "So that's where I'm at." John Forlines is another Bank of Granite investor who's in it for the long haul. He was the bank's CEO for 52 years. Forlines retired in 2004, but remains one of its largest shareholders with five and a half percent of the common stock. "I felt like if I sold my shares, it was a reflection of a lack of confidence in the bank and might cause other people to sell theirs," says Forlines. "That's a big reason I've not sold. They've certainly gone down in value, though." Does he think they'll return to their former value? "Not in my lifetime," says Forlines with a chuckle. Keep in mind Forlines is 92. He's also an old buddy of mega-investor Warren Buffett, who once called Bank of Granite one of the best community banks in America. No longer. "Not really, sadly," laments Forlines. "But I think they're a lot better off than most people think they are, really." Meaning he doesn't think Bank of Granite is in danger of going bankrupt or being taken over by federal regulators. Other investors aren't so sure. Share prices plummeted last fall when the FDIC put Bank of Granite under serious sanctions with an order to get bad loans under control and raise more money to offset the losses. During brief prepared remarks at the shareholder meeting, current CEO Scott Anderson tried to put the bank's woes in perspective. "We're not alone," said Anderson. "Due to credit quality and economic challenges, two-thirds of our peers in North Carolina - those are banks between $600 million and $2.1 billion, the ones clustered around our size - 14 of 21 banks lost money last year." Bank of Granite's greatest challenge is that its health is tied to a handful of counties like Catawba, Caldwell and Burke where the furniture and textile industry has disintegrated and unemployment ranges from 14 to 16 percent. Customers are defaulting on their loans at an alarming rate, pushing Bank of Granite's balance sheet into the red. Anderson says Bank of Granite's first priority right now is "to try to operate as safe and soundly as possibly by maintaining what for us is historical high levels of liquidity." That means the bank is hanging onto its cash and making fewer loans. Anderson says he's also laid off a third of his employees in the last year and a half. But the bigger problem is raising capital to satisfy federal regulators. Normally a bank would sell some of its loans to another bank or do a stock offering to raise money. However, few banks or investors are willing to buying troubled loans or stock right now, leading Bank of Granite to declare in its latest SEC filing that there is "substantial doubt about our ability to continue as a going concern." In light of that dire statement, many investors view a merger as their main life line. A merger would give shareholders at least some return on their investment. Not so if the FDIC takes over. Anderson says he has spoken with potential suitors, "but at this point, we have nothing to announce. Don't anticipate anything any time soon." There is one thing Anderson says investors they can take heart in: the bank has a solid base of customers who are loyal and continue to deposit their money. But all that will matter in the end is whether Bank of Granite can find a way out of its financial hole before the clock runs out and federal regulators move in.