Intervest Bancshares Corporation (NASDAQ-GS:IBCA) (the "Company")
today reported net earnings for the second quarter of 2008
("Q2-08") of $1.8 million, or $0.22 per diluted share, compared to
$5.4 million, or $0.63 per diluted share, for the second quarter of
2007 ("Q2-07"). For the first half of 2008 ("6mths-08"), net
earnings amounted to $4.1 million, or $0.50 per diluted share,
compared to $10.7 million, or $1.25 per diluted share, for the
first half of 2007 ("6mths-07"). The Company's book value per
common share increased to $22.19 at June 30, 2008, from $21.25 at
June 30, 2007. Net earnings for Q2-08 decreased by $3.5 million
from Q2-07 due to the following: a $2.5 million decrease in net
interest and dividend income; a $2.0 million increase in the
provision for loan losses; a $1.1 million increase in noninterest
expenses; and a $0.7 million decrease in noninterest income;
partially offset by a $2.8 million decrease in the provision for
income tax expense. Net interest and dividend income decreased to
$9.1 million in Q2-08 from $11.6 million in Q2-07 largely due to a
$101 million increase in average nonaccrual loans. Interest income
that was not recorded on nonaccrual loans amounted to $2.6 million
in Q2-08, compared to a $0.4 million in Q2-07. The Company's net
interest margin (excluding income from loan prepayments) decreased
to 1.69% in Q2-08, from 2.29% in Q2-07. The margin was negatively
affected by the increase in nonaccrual loans, repayments of higher
yielding loans coupled with lower competitive pricing for new
loans, lower yields earned on investment securities and short-term
investments and strong competition for deposits. The Company's cost
of funds decreased to 4.70% in Q2-08 from 4.97% in Q2-07. The
Company was not able to lower its deposit rates in step with the
Federal Open Market Committee's rate reductions due to strong
competition for deposits from larger banks. The provision for loan
losses increased to $2.7 million in Q2-08, from $0.7 million in
Q2-07 due to a higher level of nonaccrual loans and lower estimated
real estate values. Noninterest expenses increased to $4.2 million
in Q2-08, from $3.1 million in Q2-07 nearly all of which was due to
a $0.9 million increase in expenses associated with nonaccrual
loans/foreclosed real estate. Noninterest income decreased to $1.1
million in Q2-08, from $1.8 million in Q2-07 primarily due to a
$0.8 million decrease in income from loan prepayments. The
Company's effective income tax rate was 43% in Q2-08, compared to
44% in Q2-07. As a result of the factors described above, the
Company's efficiency ratio, which is a measure of its ability to
control expenses as a percentage of its revenues, increased to 41%
in Q2-08 from 23% in Q2-07. Return on average assets and equity
also decreased to 0.34% and 4.04% in Q2-08, from 1.05% and 12.09%
in Q2-07, respectively. The Company had 71 employees at June 30,
2008, compared to 72 employees at June 30, 2007. Net earnings for
6mths-08 decreased by $6.6 million from 6mths-07 due to a $5.2
million decrease in net interest and dividend income, a $3.5
million increase in the provision for loan losses, a $1.8 million
increase in noninterest expenses and $1.4 million decrease in
noninterest income, partially offset by a $5.3 million decrease in
the provision for income taxes. The reasons for the changes are
essentially due to the same factors discussed above for the
quarterly period. Total assets at June 30, 2008 increased to $2.2
billion, from $2.0 billion at December 31, 2007, reflecting growth
in the loan portfolio and a higher level of security investments.
Total loans, net of unearned fees, increased to $1.72 billion at
June 30, 2008, from $1.61 billion at December 31, 2007. The
increase was due to new originations secured by commercial and
multi-family real estate exceeding principal repayments. The new
loans are predominantly fixed-rate with a weighted-average yield
and term of 6.36% and 5.3 years, respectively. New loan
originations totaled $129 million for Q2-08 and $226 million for
6mths-08, compared to $165 million for Q2-07 and $310 million for
6mths-07. Principal repayments totaled $80 million for Q2-08 and
$111 million for 6mths-08, compared to $97 million for Q2-07 and
$183 million for 6mths-07. Total nonperforming assets at June 30,
2008 aggregated to $126.4 million, or 5.72% of the Company's total
assets, an increase of $35.6 million from December 31, 2007. At
June 30, 2008, nonperforming assets were comprised of $119.1
million of nonaccrual loans, or 23 loans, and $7.3 million of real
estate acquired through foreclosure, or 2 properties. Although the
Company has never originated or acquired subprime loans nor
invested in securities collateralized by subprime loans, the
subprime loan crisis and resulting impact to the credit markets has
affected the Company indirectly through reductions in overall real
estate values, reduced home sales and construction, and a weakening
of the overall economy, particularly in the State of Florida. The
Company has also experienced the effects of misconduct committed by
certain of its borrowers, which required the Company to place
certain loans that are collateralized by income producing
properties on nonaccrual status, in some instances due to
involuntary bankruptcy filings filed by third parties against the
borrowers. Such filings resulted in the cessation of monthly loan
payments to the Company and also delay the Company's ability to
move forward with foreclosure or other proceedings to acquire and
sell the collateral property. Although the Company has not
experienced any loan chargeoffs in connection with its nonaccrual
loans to date, it has incurred increased provisions for loan
losses, expenses associated with credit collections as well as
protecting its interest in nonperforming assets, and the loss of
interest income on such assets, all of which has adversely affected
the Company's results of operations. At June 30, 2008, two
nonaccrual loans totaling $32.9 million have a specific valuation
allowance in the aggregate amount of $2.5 million (recorded as part
of the overall allowance for loan losses) in accordance with SFAS
No. 114. The Company believes that the estimated fair value of each
of the remaining properties that collateralize its nonaccrual loans
continues to exceed its net recorded investment in each related
nonaccrual loan as of June 30, 2008, and as such a specific SFAS
No. 114 valuation allowance was not maintained on those loans. The
Company expects $22.2 million (outstanding principal) of nonaccrual
loans to be repaid in full in the third quarter of 2008 through the
scheduled sale of various collateral properties by the bankruptcy
court. In addition, properties acquired through foreclosure are
being marketed for sale, although the timing of the disposition is
uncertain. There can be no assurance that the Company will not
incur additional loan loss provisions, loan chargeoffs or
significant expenses in connection with the ultimate collection of
its nonaccrual loans, which collection is anticipated to be through
the eventual sale of the collateral property in most cases, or
incur significant expenses in carrying and disposing of properties
acquired through foreclosure. The total allowance for loan losses
amounted to $26.6 million at June 30, 2008, compared to $21.6
million at December 31, 2007. The allowance represented 1.54% of
total loans (net of deferred fees) outstanding at June 30, 2008,
compare to 1.34% at December 31, 2007. The increase in the
allowance was due to provisions totaling $5.0 million, of which
$3.9 million was attributable to credit downgrades on nonaccrual
loans and lower estimated values of certain collateral properties,
and $1.1 million was due to net loan growth of $108 million from
December 31, 2007. Total securities held to maturity at June 30,
2008 increased to $431 million, from $344 million at December 31,
2007, due to new purchases exceeding maturities and calls. The
portfolio is held by Intervest National Bank and had a
weighted-average remaining contractual maturity and a yield of 4.7
years and 4.26%, respectively, at June 30, 2008. Total deposits at
June 30, 2008 increased to $1.81 billion, from $1.66 billion at
December 31, 2007, reflecting a $61 million increase in certificate
of deposit accounts and a $90 million increase in money market
accounts. Total borrowed funds and related interest payable at June
30, 2008 increased to $168 million, from $136 million at December
31, 2007, reflecting primarily a $40 million increase in short-term
FHLBNY advances. Total stockholders' equity at June 30, 2008
increased to $183.5 million, from $179.6 million at December 31,
2007. The increase was due to the following: $4.1 million from net
earnings; $1.8 million from the issuance of 195,000 shares of Class
B common stock upon the exercise of outstanding Class B warrants in
January; and $0.1 million from stock-based compensation, partially
offset by a $2.1 million cash dividend paid in June. Intervest
Bancshares Corporation is a financial holding company. Its
operating subsidiaries are: Intervest National Bank, a nationally
chartered commercial bank that has its headquarters and
full-service banking office at One Rockefeller Plaza, in New York
City, and a total of six full-service banking offices in Clearwater
and Gulfport, Florida; and Intervest Mortgage Corporation, a
mortgage investment company. Intervest National Bank maintains
capital ratios in excess of the regulatory requirements to be
designated as a well-capitalized institution. Intervest Bancshares
Corporation's Class A Common Stock is listed on the NASDAQ Global
Select Market: Trading Symbol IBCA. This press release may contain
forward-looking information. Except for historical information, the
matters discussed herein are subject to certain risks and
uncertainties that may affect the Company's actual results of
operations. The following important factors, among others, could
cause actual results to differ materially from those set forth in
forward looking statements: changes in general economic conditions
and real estate values in the Company's market areas; changes in
policies by regulatory agencies; fluctuations in interest rates;
demand for loans and deposits; and competition. Reference is made
to the Company's filings with the SEC for further discussion of
risks and uncertainties regarding the Company's business.
Historical results are not necessarily indicative of the future
prospects of the Company. INTERVEST BANCSHARES CORPORATION Selected
Consolidated Financial Information � � (Dollars in thousands,
except per share amounts) Quarter Ended June 30, Six-Months Ended
June 30, � � 2008 � 2007 � 2008 � 2007 Selected Operating Data: � �
Interest and dividend income $31,776 $34,082 $63,564 $67,347
Interest expense 22,712 � 22,489 � 45,645 � 44,184 Net interest and
dividend income 9,064 11,593 17,919 23,163 Provision for loan
losses 2,753 � 715 � 5,016 � 1,569 Net interest and dividend income
after provision for loan losses 6,311 10,878 12,903 21,594
Noninterest income 1,139 1,842 2,082 3,444 Noninterest expenses
4,197 � 3,117 � 7,715 � 5,886 Earnings before income taxes 3,253
9,603 7,270 19,152 Provision for income taxes 1,392 � 4,236 � 3,128
� 8,432 Net earnings $ 1,861 � $ 5,367 � $ 4,142 � $ 10,720 Basic
earnings per share $ 0.22 $ 0.64 $ 0.50 $ 1.28 Diluted earnings per
share $ 0.22 $ 0.63 $ 0.50 $ 1.25 Cash dividends paid per share $
0.25 $ 0.25 $ 0.25 $ 0.25 Adjusted net earnings for diluted
earnings per share (1) $ 1,861 $ 5,378 $ 4,142 $ 10,764
Weighted-average common shares and common equivalent shares
outstanding for computing: � Basic earnings per share 8,270,812
8,416,248 8,247,241 8,394,791 Diluted earnings per share (2)
8,270,812 8,578,039 8,251,589 8,586,818 Common shares outstanding
at end of period 8,270,812 8,364,951 8,270,812 8,364,951 Common
stock options/warrants outstanding at end of period � 132,140 �
195,000 � 132,140 � 195,000 Yield on interest-earning assets 5.92%
6.75% 6.04% 6.80% Cost of funds 4.70% 4.97% 4.82% 4.97% Net
interest margin (3) � 1.69% � 2.29% � 1.70% � 2.34% Return on
average assets (annualized) 0.34% 1.05% 0.39% 1.06% Return on
average equity (annualized) 4.04% 12.09% 4.52% 12.27% Effective
income tax rate 42.79% 44.11% 43.03% 44.03% Efficiency ratio (4) �
41% � 23% � 39% � 22% Total average loans outstanding $1,701,949
$1,600,360 $1,674,302 $1,570,330 Total average securities
outstanding $ 428,601 $ 407,788 $ 414,872 $ 407,775 Total average
short-term investments outstanding $ 28,201 $ 18,235 $ 28,704 $
20,442 Total average interest-earning assets outstanding $2,158,751
$2,026,383 $2,117,878 $1,998,547 Total average assets outstanding �
$2,179,331 � $2,044,083 � $2,137,491 � $2,017,591 Total average
interest-bearing deposits outstanding $1,802,455 $1,663,757
$1,762,543 $1,636,058 Total average borrowings outstanding $
141,383 $ 149,675 $ 142,925 $ 158,341 Total average
interest-bearing liabilities outstanding $1,943,838 $1,813,432
$1,905,468 $1,794,399 Total average stockholders' equity � $
184,185 � $ 177,569 � $ 183,088 � $ 174,776 � Selected Financial
Condition Information: � At Jun 30, 2008 At Mar 31, 2008 � At Dec
31, 2007 � At Sep 30, 2007 At Jun 30, 2007 � Total assets
$2,207,170 $2,165,017 $2,021,392 $2,033,662 $2,052,831 Total cash
and short-term investments $ 16,726 $ 47,229 $ 33,086 $ 24,081 $
39,321 Total securities held to maturity $ 430,934 $ 406,727 $
344,105 $ 347,001 $ 359,687 Total FRB and FHLB stock $ 8,428 $
7,368 $ 6,351 $ 6,351 $ 8,511 Total loans, net of unearned fees
$1,723,213 $1,677,119 $1,614,032 $1,628,387 $1,618,491 Total
deposits $1,809,683 $1,781,188 $1,659,174 $1,673,443 $1,636,287
Total borrowed funds and accrued interest payable $ 168,063 $
159,189 $ 136,434 $ 136,247 $ 190,007 Total stockholders' equity $
183,549 $ 183,703 $ 179,561 $ 177,182 $ 177,720 Total allowance for
loan losses $ 26,609 $ 23,856 $ 21,593 $ 20,925 $ 19,402 Total loan
chargeoffs $ - $ - $ - $ - $ - Total loans ninety days past due and
still accruing. $ 3,051 $ 837 $ 11,853 $ - $ 16,314 Total
nonaccrual loans $ 119,078 $ 97,692 $ 90,756 $ 74,526 $ 22,076
Total foreclosed real estate $ 7,272 $ 4,022 $ - $ 975 $ 975 Book
value per common share $ 22.19 $ 22.21 $ 22.23 $ 21.75 $ 21.25
Allowance for loan losses/net loans � 1.54% � 1.42% � 1.34% � 1.29%
� 1.20% (1) Represents net earnings plus interest expense on
dilutive convertible debentures, net of taxes, that would not occur
if the convertible debentures were assumed to be converted during
the period they were outstanding for purposes of computing diluted
earnings per share. (2) Diluted EPS includes shares that would be
outstanding if dilutive common stock options/warrants and
convertible debentures were assumed to be exercised/converted
during the period. All outstanding options/warrants were considered
for the EPS computations, except for 132,140 options, which were
not dilutive because the exercise price was above the average
market price of the Class A common stock during the 2008 periods.
(3) Net interest margin is reported exclusive of income from loan
prepayments, which is included as a component of noninterest
income. Inclusive of such income, the margin would compute to 1.79%
and 2.57% for the quarters ended June 30, 2008 and 2007,
respectively, and 1.77% and 2.60% for the six-months ended June 30,
2008 and 2007, respectively. (4) Represents noninterest expenses
(excluding the provision for loan losses) as a percentage of net
interest and dividend income plus noninterest income. INTERVEST
BANCSHARES CORPORATION Consolidated Financial Highlights � At or
For The Period Ended � ($ in thousands, except per share amounts) �
Six-Months Ended June 30, 2008 � Year Ended Dec 31, 2007 � Year
Ended Dec 31, 2006 � Year Ended Dec 31, 2005 � Year Ended Dec 31,
2004 Balance Sheet Highlights: � � � � Total assets $2,207,170
$2,021,392 $1,971,753 $1,706,423 $1,316,751 Asset growth rate 9% 3%
16% 30% 44% Total loans, net of unearned fees $1,723,213 $1,614,032
$1,490,653 $1,367,986 $1,015,396 Loan growth rate 7% 8% 9% 35% 51%
Total deposits $1,809,683 $1,659,174 $1,588,534 $1,375,330 $
993,872 Deposit growth rate 9% 4% 16% 38% 47% Loans/deposits
(Intervest National Bank) 87% 88% 84% 88% 86% Borrowed funds and
accrued interest payable $ 168,063 $ 136,434 $ 172,909 $ 155,725 $
202,682 Stockholders' equity $ 183,549 $ 179,561 $ 170,046 $
136,178 $ 90,094 Common shares outstanding (1) 8,270,812 8,075,812
8,371,595 7,823,058 6,271,433 Common book value per share $ 22.19 $
22.23 $ 20.31 $ 17.41 $ 14.37 Market price per common share � $
5.12 � $ 17.22 � $ 34.41 � $ 24.04 � $ 19.74 Asset Quality
Highlights Nonaccrual loans $119,078 $90,756 $ 3,274 $ 750 $ 4,607
Loans ninety days past due and still accruing $ 3,051 $11,853 $ - $
2,649 $ - Foreclosed real estate $ 7,272 $ - $ - $ - $ - Allowance
for loan losses $ 26,609 $21,593 $17,833 $15,181 $11,106 Loan
recoveries $ - $ - $ - $ - $ - Loan chargeoffs $ - $ - $ - $ - $ -
Allowance for loan losses / net loans � 1.54% � 1.34% � 1.20% �
1.11% � 1.09% Statement of Operations Highlights: Interest and
dividend income $63,564 $131,916 $128,605 $97,881 $66,549 Interest
expense 45,645 � 89,653 � 78,297 � 57,447 � 38,683 Net interest and
dividend income 17,919 42,263 50,308 40,434 27,866 Provision for
loan losses 5,016 3,760 2,652 4,075 4,526 Noninterest income 2,082
8,825 6,855 6,594 5,140 Noninterest expenses 7,715 � 12,876 �
13,027 � 10,703 � 8,251 Earnings before income taxes 7,270 34,452
41,484 32,250 20,229 Provision for income taxes 3,128 � 15,012 �
17,953 � 14,066 � 8,776 Net earnings $ 4,142 � $ 19,440 � $ 23,531
� $18,184 � $11,453 Basic earnings per share $ 0.50 $ 2.35 $ 2.98 $
2.65 $ 1.89 Diluted earnings per share $ 0.50 $ 2.31 $ 2.82 $ 2.47
$ 1.71 Adjusted net earnings used to calculate diluted earnings per
share $ 4,142 $19,484 $ 23,679 $18,399 $11,707 Average common
shares used to calculate: Basic earnings per share 8,247,241
8,275,539 7,893,489 6,861,887 6,068,755 Diluted earnings per share
8,251,589 8,422,017 8,401,379 7,449,658 6,826,176 Net interest
margin (2) 1.70% 2.11% 2.75% 2.70% 2.52% Return on average assets
0.39% 0.96% 1.28% 1.20% 1.02% Return on average equity 4.52% 11.05%
15.82% 16.91% 14.14% Effective income tax rate 43.03% 43.57% 43.28%
43.62% 43.38% Efficiency ratio (3) 39% 25% 23% 23% 25% Full-service
banking offices � 7 � 7 � 7 � 6 � 6 (1) The increase in shares in
2008 is comprised of 195,000 shares from the exercise of Class B
common stock warrants. The decrease in shares in 2007 is comprised
of 404,339 shares of Class A common stock repurchased, partially
offset by the issuance of 108,556 shares of Class a common stock
from the conversion of convertible debentures. The increase in
shares in 2006 is comprised of 501,465 shares from the exercise of
Class A common stock warrants and 47,072 shares from the conversion
of convertible debentures into Class A common stock. The increase
in shares in 2005 is comprised of 1,436,468 shares from a public
offering of Class A common stock and 115,157 shares from the
conversion of convertible debentures into Class A common stock. The
increase in shares in 2004 is comprised of 42,510 shares from the
exercise of Class A common stock warrants and 240,546 shares from
the conversion of convertible debentures into Class A common stock.
(2) Net interest margin is reported exclusive of income from loan
prepayments, which is included as a component of noninterest
income. Inclusive of such income, the margin would compute to 1.77%
for the six-months ended June 30, 2008, 2.60% for 2007, 3.24% for
2006, 2.85% for 2005 and 3.03% for 2004. (3) Represents noninterest
expenses (excluding the provision for loan losses) as a percentage
of net interest and dividend income plus noninterest income.
Noninterest expenses for 2006 included a one-time charge of $1.5
million.
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