IBCA (MM)

Intervest Bancshares Corporation (NASDAQ-GS: IBCA) (the "Company") today reported net earnings for the third quarter of 2008 ("Q3-08") of $2.6 million, or $0.32 per diluted share, compared to $4.8 million, or $0.58 per diluted share, for the third quarter of 2007 ("Q3-07"). For the first nine months of 2008 ("9mths-08"), net earnings were $6.8 million, or $0.82 per diluted share, compared to $15.6 million, or $1.83 per diluted share, for the first nine months of 2007 ("9mths-07"). The Company reported that its nonperforming assets decreased from June 30, 2008 by $18.5 million to $107.9 million and its book value per common share increased to $22.52 at September 30, 2008. The Company's capital ratios, at both the holding company level and at Intervest National Bank, continue to be in excess of "well-capitalized" levels as defined by the regulatory agencies. Net earnings for Q3-08 as compared to Q3-07 decreased by $2.2 million due to a $2.1 million increase in noninterest expenses, a $1.9 million increase in the provision for loan losses and a $1.3 million decrease in noninterest income. These items were partially offset by a $1.5 million increase in net interest and dividend income and a $1.6 million decrease in the provision for income tax expense. Net interest and dividend income increased to $11.1 million in Q3-08 from $9.6 million in Q3-07, reflecting the receipt of approximately $1.4 million of past due interest from the payoff of $22.2 million of nonaccrual loans. The Company's net interest margin (excluding prepayment income) increased to 2.04% in Q3-08, from 1.88% in Q3-07. The margin benefited from a lower level of interest income not recorded on nonaccrual loans ($1.4 million in Q3-08, compared to a $2.0 million in Q3-07) and decreases in deposit and borrowing costs, partially offset by repayments of higher yielding loans, lower competitive pricing for new loans and lower yields earned on investment securities and short-term investments. The Company's cost of funds decreased to 4.57% in Q3-08 from 5.00% in Q3-07 reflecting lower deposit costs as well as early repayment of higher cost borrowings. Intervest National Bank nonetheless continues to experience strong competition in attracting deposits, which has not allowed its deposit rates to decrease fully in step with the Federal Reserve's rate reductions. The provision for loan losses increased to $3.4 million in Q3-08, from $1.5 million in Q3-07 due to credit downgrades on nonaccrual loans and lower estimated real estate values on certain collateral properties. Noninterest expenses increased to $5.3 million in Q3-08, from $3.2 million in Q3-07 due to an increase in expenses associated with nonaccrual loans and foreclosed real estate. Excluding expenses associated with nonperforming assets, the Company's operating expenses remained relatively unchanged. Noninterest income decreased to $2.3 million in Q3-08, from $3.6 million in Q3-07 due to a decrease in income from loan prepayments. The Company's effective income tax rate was 44% in Q3-08, compared to 43% in Q3-07. The Company had 70 employees at September 30, 2008 and 2007. As a result of the negative effects of nonperforming assets 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 39% in Q3-08 from 24% in Q3-07. Return on average assets and equity decreased to 0.48% and 5.69% in Q3-08, from 0.95% and 10.96% in Q3-07, respectively. Net earnings for 9mths-08 as compared to 9mths-07 decreased by $8.8 million due to a $3.7 million decrease in net interest and dividend income, a $5.4 million increase in the provision for loan losses, a $3.9 million increase in noninterest expenses and $2.7 million decrease in noninterest income, partially offset by a $6.9 million decrease in the provision for income tax expense. Total assets at September 30, 2008 increased to $2.2 billion, from $2.0 billion at December 31, 2007, primarily reflecting growth in the loan portfolio and a higher level of security investments. Total loans, net of unearned fees, increased to $1.69 billion at September 30, 2008, from $1.61 billion at December 31, 2007. The increase was due to $327 million of new originations secured by commercial and multi-family real estate exceeding the aggregate of: $221 million of principal repayments; $25 million of loans transferred to foreclosed real estate; and $4.3 million of loan chargoffs. Nearly all of the new loans have fixed-rates with a weighted-average yield and term of 6.34% and 5.3 years, respectively. New loans totaled $101 million for Q3-08 and $327 million for 9mths-08, compared to $157 million for Q3-07 and $467 million for 9mths-07. Principal repayments totaled $111 million for Q3-08 and $221 million for 9mths-08, compared to $147 million for Q3-07 and $329 million for 9mths-07. Total nonperforming assets at September 30, 2008 amounted to $107.9 million, or 4.95% of total assets, compared to $126.4 million, or 5.72%, at June 30, 2008 and $90.8 million, or 4.49%, at December 31, 2007. At September 30, 2008, nonperforming assets were comprised of $82.8 million of nonaccrual loans, or 19 loans, and $25.1 million of real estate acquired through foreclosure, or 4 properties. During Q3-08, a total of $24.6 million (outstanding principal) of nonaccrual loans were satisfied through sales of collateral properties and a $10.9 million loan was restored to accrual status. In Q3-08, loan charge offs amounted to $4.3 million and new nonaccrual loans totaled $21.4 million. At September 30, 2008 and in accordance with SFAS No. 114, a specific valuation allowance in the aggregate amount of $5.4 million (included as part of the overall allowance for loan losses) was maintained on nonaccrual loans, which are considered impaired. Bankruptcy filings by borrowers continue to delay the Company's ability to complete foreclosure or other proceedings to acquire and sell the collateral properties. Timing of the resolution/disposition of nonperforming assets cannot be predicted with certainty. There can be no assurance that the Company will not incur additional loan loss provisions, additional loan charge offs or additional significant expenses in connection with the ultimate collection of nonaccrual loans or in carrying and disposing of properties acquired through foreclosure. Although the Company has never originated or acquired subprime loans nor invested in securities collateralized by subprime loans, the current world financial crisis 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 does not own or originate construction/development loans. The total allowance for loan losses was $25.8 million at September 30, 2008, compared to $26.6 million at June 30, 2008 and $21.6 million at December 31, 2007. The allowance represented 1.53% of total loans (net of deferred fees) outstanding at September 30, 2008, 1.54% at June 30, 2008 and 1.34% at December 31, 2007. The increase in the allowance from December 31, 2007 was due to provisions totaling $8.5 million, of which $7.5 million was attributable to credit downgrades on various loans and lower real estate values, and $1.0 million due to net loan growth of $76.4 million from December 31, 2007, partially offset by loan charge offs of $4.3 million. Total securities held to maturity at September 30, 2008 increased to $411 million, from $344 million at December 31, 2007. The portfolio had a weighted-average remaining contractual maturity and a yield of 4.6 years and 4.21%, respectively, at September 30, 2008. Total deposits at September 30, 2008 increased to $1.73 billion, from $1.66 billion at December 31, 2007, reflecting an increase in money market accounts. Total borrowed funds and related interest payable at September 30, 2008 increased to $211 million, from $136 million at December 31, 2007, reflecting a $95 million increase in short-term FHLBNY advances, partially offset by the early repayment of $21 million of higher rate subordinated debentures. Total stockholders' equity at September 30, 2008 increased to $186.2 million, from $179.5 million at December 31, 2007 due to: $6.8 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 $0.2 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. Selected Consolidated Financial Information Follows. � INTERVEST BANCSHARES CORPORATION Selected Consolidated Financial Information � (Dollars in thousands, except per share amounts) � Quarter EndedSeptember 30, � Nine-Months EndedSeptember 30, � � 2008 � 2007 � 2008 � 2007 Selected Operating Data: � � � Interest and dividend income $ 33,508 $ 32,384 $ 97,072 $ 99,731 Interest expense � 22,424 � � � 22,834 � � � 68,069 � � � 67,018 � Net interest and dividend income 11,084 9,550 29,003 32,713 Provision for loan losses � 3,446 � � � 1,523 � � � 8,462 � � � 3,092 � Net interest and dividend income after provision for loan losses 7,638 8,027 20,541 29,621 Noninterest income 2,318 3,677 4,400 7,121 Noninterest expenses � 5,276 � � � 3,216 � � � 12,991 � � � 9,102 � Earnings before income taxes 4,680 8,488 11,950 27,640 Provision for income taxes � 2,054 � � � 3,647 � � � 5,182 � � � 12,079 � Net earnings $ 2,626 � � $ 4,841 � � $ 6,768 � � $ 15,561 � Basic earnings per share $ 0.32 $ 0.59 $ 0.82 $ 1.87 Diluted earnings per share $ 0.32 $ 0.58 $ 0.82 $ 1.83 Cash dividends paid per share $ - $ - $ 0.25 $ 0.25 Adjusted net earnings for diluted earnings per share (1) $ 2,626 $ 4,841 $ 6,768 $ 15,605 Weighted-average common shares and common equivalent shares outstanding for computing: Basic earnings per share 8,270,812 8,232,899 8,255,155 8,340,234 Diluted earnings per share (2) 8,270,812 8,314,099 8,257,204 8,511,381 Common shares outstanding at end of period 8,270,812 8,148,151 8,270,812 8,148,151 Common stock options/warrants outstanding at end of period � � 132,040 � � � 195,000 � � � 132,040 � � � 195,000 � Yield on interest-earning assets 6.16 % 6.36 % 6.08 % 6.65 % Cost of funds 4.57 % 5.00 % 4.73 % 4.98 % Net interest margin (3) � � 2.04 % � � 1.88 % � � 1.82 % � � 2.18 % Return on average assets (annualized) 0.48 % 0.95 % 0.42 % 1.02 % Return on average equity (annualized) 5.69 % 10.96 % 4.92 % 11.83 % Effective income tax rate 43.89 % 42.97 % 43.36 % 43.70 % Efficiency ratio (4) � � 39 % � � 24 % � � 39 % � � 23 % Total average loans outstanding $ 1,720,596 $ 1,629,037 $ 1,689,846 $ 1,590,114 Total average securities outstanding $ 437,463 $ 378,495 $ 422,457 $ 397,908 Total average short-term investments outstanding $ 5,642 $ 12,408 $ 20,961 $ 17,734 Total average interest-earning assets outstanding $ 2,163,701 $ 2,019,940 $ 2,133,264 $ 2,005,756 Total average assets outstanding � $ 2,188,594 � � $ 2,039,384 � � $ 2,154,650 � � $ 2,024,935 � Total average interest-bearing deposits outstanding $ 1,775,307 $ 1,637,611 $ 1,766,829 $ 1,636,582 Total average borrowings outstanding $ 177,270 $ 173,673 $ 154,456 $ 163,507 Total average interest-bearing liabilities outstanding $ 1,952,577 $ 1,811,284 $ 1,921,285 $ 1,800,089 Total average stockholders' equity � $ 184,496 � � $ 176,732 � � $ 183,561 � � $ 175,435 � � Selected Financial Condition Information: � At Sep 30, 2008 At Jun 30, 2008 At Mar 31, 2008 At Dec 31, 2007 At Sep 30, 2007 Total assets � $ 2,180,746 $ 2,207,170 $ 2,165,017 $ 2,021,392 $ 2,033,662 Total cash and short-term investments $ 21,969 $ 16,726 $ 47,229 $ 33,086 $ 24,081 Total securities held to maturity $ 410,844 $ 430,934 $ 406,727 $ 344,105 $ 347,001 Total FRB and FHLB stock $ 10,912 $ 8,428 $ 7,368 $ 6,351 $ 6,351 Total loans, net of unearned fees $ 1,691,851 $ 1,723,213 $ 1,677,119 $ 1,614,032 $ 1,628,387 Total deposits $ 1,734,820 $ 1,809,683 $ 1,781,188 $ 1,659,174 $ 1,673,443 Total borrowed funds and accrued interest payable $ 210,551 $ 168,063 $ 159,189 $ 136,434 $ 136,247 Total stockholders' equity $ 186,230 $ 183,549 $ 183,703 $ 179,561 $ 177,182 Total allowance for loan losses $ 25,828 $ 26,609 $ 23,856 $ 21,593 $ 20,925 Total loan chargeoffs $ 4,227 $ - $ - $ - $ - Total loans ninety days past due and still accruing. $ - $ 3,051 $ 837 $ 11,853 $ - Total nonaccrual loans $ 82,759 $ 119,078 $ 97,692 $ 90,756 $ 74,526 Total foreclosed real estate $ 25,099 $ 7,272 $ 4,022 $ - $ 975 Book value per common share $ 22.52 $ 22.19 $ 22.21 $ 22.23 $ 21.75 Allowance for loan losses/net loans � � 1.53 % � 1.54 % � 1.42 % � 1.34 % � 1.29 % (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 132,040 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 2.31% and 2.51% for the quarters ended September 30, 2008 and 2007, respectively, and 1.95% and 2.57% for the nine-months ended September 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) � Nine-Months Ended Sep 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 $ 2,180,746 $ 2,021,392 $ 1,971,753 $ 1,706,423 $ 1,316,751 Asset growth rate 8 % 3 % 16 % 30 % 44 % Total loans, net of unearned fees $ 1,691,851 $ 1,614,032 $ 1,490,653 $ 1,367,986 $ 1,015,396 Loan growth rate 5 % 8 % 9 % 35 % 51 % Total deposits $ 1,734,820 $ 1,659,174 $ 1,588,534 $ 1,375,330 $ 993,872 Deposit growth rate 5 % 4 % 16 % 38 % 47 % Loans/deposits (Intervest National Bank) 89 % 88 % 84 % 88 % 86 % Borrowed funds and accrued interest payable $ 210,551 $ 136,434 $ 172,909 $ 155,725 $ 202,682 Stockholders' equity $ 186,230 $ 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 $ 22.52 $ 22.23 $ 20.31 $ 17.41 $ 14.37 Market price per common share � $ 7.63 � $ 17.22 � $ 34.41 � $ 24.04 � $ 19.74 � Asset Quality Highlights Nonaccrual loans $ 82,759 $ 90,756 $ 3,274 $ 750 $ 4,607 Loans ninety days past due and still accruing $ - $ 11,853 $ - $ 2,649 $ - Foreclosed real estate $ 25,099 $ - $ - $ - $ - Allowance for loan losses $ 25,828 $ 21,593 $ 17,833 $ 15,181 $ 11,106 Loan recoveries $ - $ - $ - $ - $ - Loan chargeoffs $ 4,227 $ - $ - $ - $ - Allowance for loan losses / net loans � � 1.53 % � 1.34 % � 1.20 % � 1.11 % � 1.09 % Statement of Operations Highlights: Interest and dividend income $ 97,072 $ 131,916 $ 128,605 $ 97,881 $ 66,549 Interest expense � 68,069 � � 89,653 � � 78,297 � � 57,447 � � 38,683 � Net interest and dividend income 29,003 42,263 50,308 40,434 27,866 Provision for loan losses 8,462 3,760 2,652 4,075 4,526 Noninterest income 4,400 8,825 6,855 6,594 5,140 Noninterest expenses � 12,991 � � 12,876 � � 13,027 � � 10,703 � � 8,251 � Earnings before income taxes 11,950 34,452 41,484 32,250 20,229 Provision for income taxes � 5,182 � � 15,012 � � 17,953 � � 14,066 � � 8,776 � Net earnings $ 6,768 � $ 19,440 � $ 23,531 � $ 18,184 � $ 11,453 � Basic earnings per share $ 0.82 $ 2.35 $ 2.98 $ 2.65 $ 1.89 Diluted earnings per share $ 0.82 $ 2.31 $ 2.82 $ 2.47 $ 1.71 Adjusted net earnings used to calculate diluted earnings per share � $ 6,768 $ 19,484 $ 23,679 $ 18,399 $ 11,707 Average common shares used to calculate: Basic earnings per share 8,255,155 8,275,539 7,893,489 6,861,887 6,068,755 Diluted earnings per share 8,257,204 8,422,017 8,401,379 7,449,658 6,826,176 Net interest margin (2) 1.82 % 2.11 % 2.75 % 2.70 % 2.52 % Return on average assets 0.42 % 0.96 % 1.28 % 1.20 % 1.02 % Return on average equity 4.92 % 11.05 % 15.82 % 16.91 % 14.14 % Effective income tax rate 43.36 % 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 1.95% for the nine-months ended September 30, 2008, 2.57% for 2007, 3.11% for 2006, 2.94% for 2005 and 2.93% 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.