Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Principles of Consolidation, Basis of Presentation, Use of Estimates and Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements (the financial statements) in this report on Form 10-Q have not been audited except for
information derived from our audited 2011 consolidated financial statements and notes thereto and should be read in conjunction with our 2011 Annual Report on Form 10-K (2011 10-K). Certain information and note disclosures normally
included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted in this report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange
Commission.
Use of Estimates
In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of
the financial statements, and revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change currently relate to the determination of our
allowance for loan losses, valuation allowance for real estate losses, other than temporary impairment assessments of our security investments and the need for and amount of a valuation allowance for our deferred tax asset. These estimates involve a
higher degree of complexity and subjectivity and may require assumptions about highly uncertain matters. Current market conditions increase the risk and complexity of the judgments in these estimates.
In our opinion, all material adjustments necessary for a fair presentation of our financial condition and results of operations for the interim periods
presented in this report have been made. These adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Our results of operations for the interim periods are not
necessarily indicative of results that may be expected for the entire year or any other interim period.
Summary of Significant Accounting Policies
Our accounting and reporting policies conform to GAAP and general practices within the banking industry and are consistent with those described in note 1
to the financial statements included in our 2011 10-K, as updated by the information in this Form 10-Q.
Allowance for Loan Losses and Loan Chargeoffs
The allowance for loan losses, which also includes a valuation allowance for impaired loans, is netted against loans receivable and is increased by
provisions charged to operations and decreased by chargeoffs (net of recoveries). The adequacy of the allowance is evaluated at least quarterly with consideration given to our historical lending loss rate for each major loan type (exclusive of the
impact of any transaction that is unusual and deemed not reflective of normal charge-off history), which rate is then adjusted either upward or downward based on a review of the following qualitative factors and their estimated impact to the
historical loss rate: the nature and size of our loan portfolio; overall portfolio quality; loan concentrations by type and location of the collateral property; specific problem loans and estimates of fair value of the related collateral; historical
chargeoffs and recoveries; trends in nonaccrual loans; adverse situations which may affect the borrowers ability to repay; our perception of the current and anticipated economic conditions in our lending areas as well as national economic
conditions; trends in our loan volume and associated terms; changes in our risk selection, underwriting standards, and policies and procedures in making new loans; the experience, ability and depth of our lending staff; and for the current
evaluation of collateral value.
We fully or partially charge off a loan when such amount has been deemed uncollectible and confirmed as a
loss. In the case of impaired collateral dependent loans, we normally charge-off the portion of the loans recorded investment that exceeds the appraised value (net of estimated selling costs) of its underlying collateral. The remaining portion
of the valuation allowance that we have provided and maintain on all of our impaired loans for the difference between the net appraised value and our internal estimate of fair value of the collateral is charged off only when such amount has been
confirmed as a loss, either through the receipt of future appraisals or through our quarterly evaluation of the factors described below.
7
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Principles of Consolidation, Basis of Presentation, Use of Estimates and Summary of
Significant Accounting Policies, Continued
Consistent with regulatory guidance, we normally maintain a specific valuation allowance on each of our
impaired loans. We believe it is prudent to do so because the process of estimating real estate values is imprecise and subject to changing market conditions which could cause fluctuations in estimated values. Estimates are subjective in nature,
involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in any of the market assumptions could cause fair value estimates to deviate substantially. Furthermore, commercial real estate
markets and national and local economic conditions remain weak; unemployment rates and vacancy rates in retail and office properties continue to be high; and the timing of the resolution of impaired loans in many cases remains uncertain, which
increases the negative impact to the portfolio from further declines in real estate values.
Regulatory guidelines require that the appraised
value of collateral should be used as a starting point for determining its estimated fair value. An institution should also consider other factors and events in the environment that may affect the current fair value of the collateral since the
appraisal was performed. The institutions experience with whether the appraised values of impaired collateral-dependent loans are actually realized should also be taken into account. In addition, the timing of when the cash flows are expected
to be received from the underlying collateral could affect the fair value of the collateral if the timing was not contemplated in the appraisal. The consideration of all the above generally results in the appraised value of the collateral being
greater than the institutions estimate of the collaterals fair value, less estimated costs to sell. As a consequence, an institution may necessarily still have a specific reserve on an impaired loan (whether or not a charge off has been
taken) for the amount by which the institutions estimated fair value of the collateral, less estimated costs to sell, is believed to be lower than its appraised value. As a result, we maintain a specific valuation allowance on all of our
impaired loans for the reasons described above.
We estimate the fair value of the properties that collateralize our impaired loans based on a
variety of information, including third party appraisals and our managements judgment of other factors. Our internal policy is to obtain externally prepared appraisals (or in limited cases indications of value from licensed appraisers or local
real estate brokers): for all impaired loans; for restructured or renewed loans; upon classification or downgrade of a loan; upon accepting a deed in lieu of foreclosure; upon transfer of a loan to foreclosed real estate; and at least annually
thereafter for all of our impaired and substandard rated loans and real estate owned through foreclosure.
In addition to obtaining
appraisals, we also consider the knowledge and experience of our two senior lending officers (our Chairman and our President) and our Chief Credit Officer related to values of properties in our geographical market areas. These officers take into
account various information, including: local and national real estate market data provided by third parties; the consideration of the type, condition, location and occupancy of the specific collateral property as well as the current economic
conditions and demand for the specific property in the area the property is located in assessing our internal estimates of fair value.
Our
regulators, as an integral part of their examination process, also periodically review our allowances for loan and real estate losses. Accordingly, we may be required to take chargeoffs and/or recognize additions to these allowances based on the
regulators judgment concerning information available to them during their examination. There were no changes to our methodology for the allowance for loan loss during the nine-months ended September 30, 2012.
Impaired Loans
We normally deem loans to be impaired when, based upon current information and events, it is probable that we will be unable to collect both principal and interest due according to the loans
contractual terms. Impairment for larger balance loans can be measured based on either the present value of expected future cash flows, discounted at the loans effective interest rate; the observable market price of the loan; or the estimated
fair value of the loans collateral, if payment of the principal and interest is dependent upon the collateral. When the fair value of the property is less than the recorded investment in the loan, this deficiency is recognized as a specific
valuation allowance (recorded as part of the allowance for loan losses) with a charge to expense through the provision for loan losses.
8
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Principles of Consolidation, Basis of Presentation, Use of Estimates and Summary of
Significant Accounting Policies, Continued
We consider a variety of factors in determining whether a loan is impaired, including (i) any
notice from the borrower that the borrower will be unable to repay all principal and interest amounts contractually due under the loan agreement, (ii) any delinquency in the principal and/or interest payments other than minimal delays or
shortfalls in payments, and (iii) other information known by us that would indicate the full repayment of principal and interest is not probable. We generally consider delinquencies of 60 days or less to be minimal delays, and accordingly we do
not consider such delinquent loans to be impaired in the absence of other indications. Our impaired loans normally consist of loans on nonaccrual status and those classified as troubled debt restructurings (TDRs).
Generally, impairment for all of our impaired loans is calculated on a loan-by-loan basis using either the estimated fair value of the loans
collateral less estimated selling costs (for collateral dependent loans) or the present value of the loans cash flows (for non-collateral dependent loans). Any calculated impairment is recognized as a valuation allowance within the overall
allowance for loan losses and a charge through the provision for loan losses. We may charge off any portion of the impaired loan with a corresponding decrease to the valuation allowance when such impairment is deemed uncollectible. The net carrying
amount of an impaired loan (net of the valuation allowance) does not at any time exceed the recorded investment in the loan.
A TDR is a loan
that we have restructured, for economic or legal reasons related to a borrowers financial difficulties, and for which we have granted certain concessions to the borrower that we would not otherwise have considered. These concessions are made
to provide payment relief generally consisting of the deferral of principal and or interest payments for a period of time, or a partial reduction in interest payments. In determining if a concession has been made, we also consider if the borrower is
able to access funds in the general market place at a market rate for debt with similar risk characteristics as the restructured debt. A loan that is extended or renewed at a stated interest rate equal to the current interest rate for a new loan
originated by us with similar risk is not reported as a restructured loan. A TDR that is on nonaccrual status is returned to an accrual status if ultimate collectability of all the contractual principal is assured, and the borrower has demonstrated
satisfactory payment performance either before or after the restructuring, usually consisting of a six-month period.
Note 2 - Description of Business
Intervest Bancshares Corporation (IBC) is the parent company of Intervest National Bank (INB) and IBC owns 100% of INBs capital
stock. INB is a nationally chartered commercial bank that opened on April 1, 1999. References to we, us and our in these footnotes refer to IBC and INB on a consolidated basis, unless otherwise specified.
For a detailed description of our business, see note 1 to the financial statements included in our 2011 10-K.
9
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3 - Securities Held to Maturity
The carrying value (amortized cost) and estimated fair value of securities held to maturity are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Number of
Securities
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
Wtd-Avg
Yield
|
|
|
Wtd-Avg
Expected
Life
|
|
|
Wtd-Avg
Remaining
Maturity
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies (1)
|
|
|
155
|
|
|
$
|
346,572
|
|
|
$
|
1,518
|
|
|
$
|
13
|
|
|
$
|
348,077
|
|
|
|
1.17
|
%
|
|
|
0.6 Yrs
|
|
|
|
4.3 Yrs
|
|
Residential mortgage-backed (2)
|
|
|
46
|
|
|
|
88,675
|
|
|
|
961
|
|
|
|
17
|
|
|
|
89,619
|
|
|
|
1.87
|
%
|
|
|
3.2 Yrs
|
|
|
|
17.9 Yrs
|
|
State and municipal
|
|
|
1
|
|
|
|
534
|
|
|
|
|
|
|
|
1
|
|
|
|
533
|
|
|
|
1.25
|
%
|
|
|
4.5 Yrs
|
|
|
|
4.5 Yrs
|
|
Corporate (3)
|
|
|
8
|
|
|
|
4,221
|
|
|
|
|
|
|
|
3,740
|
|
|
|
481
|
|
|
|
2.17
|
%
|
|
|
20.5 Yrs
|
|
|
|
21.2 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210
|
|
|
$
|
440,002
|
|
|
$
|
2,479
|
|
|
$
|
3,771
|
|
|
$
|
438,710
|
|
|
|
1.32
|
%
|
|
|
1.3 Yrs
|
|
|
|
7.2 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies (1)
|
|
|
345
|
|
|
$
|
696,066
|
|
|
$
|
2,381
|
|
|
$
|
153
|
|
|
$
|
698,294
|
|
|
|
1.38
|
%
|
|
|
1.2 Yrs
|
|
|
|
4.8 Yrs
|
|
Corporate (3)
|
|
|
8
|
|
|
|
4,378
|
|
|
|
|
|
|
|
3,868
|
|
|
|
510
|
|
|
|
2.09
|
%
|
|
|
21.9 Yrs
|
|
|
|
21.9 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
$
|
700,444
|
|
|
$
|
2,381
|
|
|
$
|
4,021
|
|
|
$
|
698,804
|
|
|
|
1.39
|
%
|
|
|
1.2 Yrs
|
|
|
|
5.0 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consist of debt obligations of U.S. government sponsored agencies (GSEs) - FHLB, FNMA, FHLMC or FFCB. GSEs are federally chartered corporations privately owned by
shareholders. GSE securities carry no explicit U.S. government guarantee of creditworthiness. Neither principal nor interest payments are guaranteed by the U.S. government nor do they not constitute a debt or obligation of the U.S. government or any
of its agencies or instrumentalities other than the applicable GSE. In September 2008, FNMA and FHLMC were placed under U.S. government conservatorship.
|
(2)
|
Consist of $19.9 million of Government National Mortgage Association (GNMA) pass-through certificates and $68.8 million of Federal National Mortgage Association (FNMA)
participation certificates. The GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the U.S. government while the FNMA certificates have an implied guarantee by such agency as to
principal and interest payments.
|
(3)
|
Consist of variable-rate pooled trust preferred securities backed by obligations of companies in the banking industry. Amortized cost at September 30, 2012 and
December 31, 2011 is reported net of other than temporary impairment charges of $3.8 million and $3.7 million, respectively.
|
The estimated fair values of securities with gross unrealized losses segregated between securities that have been in a continuous
unrealized loss position for less than twelve months at the respective dates and those that have been in a continuous unrealized loss position for twelve months or longer are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Number of
Securities
|
|
|
Less Than Twelve Months
|
|
|
Twelve Months or Longer
|
|
|
Total
|
|
|
|
Estimated
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
Gross
Unrealized
Losses
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
|
5
|
|
|
$
|
8,655
|
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,655
|
|
|
$
|
13
|
|
Residential mortgage-backed
|
|
|
1
|
|
|
|
1,526
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
1,526
|
|
|
|
17
|
|
State and municipal
|
|
|
1
|
|
|
|
533
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
533
|
|
|
|
1
|
|
Corporate
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
481
|
|
|
|
3,740
|
|
|
|
481
|
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
$
|
10,714
|
|
|
$
|
31
|
|
|
$
|
481
|
|
|
$
|
3,740
|
|
|
$
|
11,195
|
|
|
$
|
3,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
|
49
|
|
|
$
|
100,058
|
|
|
$
|
153
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100,058
|
|
|
$
|
153
|
|
Corporate
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
510
|
|
|
|
3,868
|
|
|
|
510
|
|
|
|
3,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
$
|
100,058
|
|
|
$
|
153
|
|
|
$
|
510
|
|
|
$
|
3,868
|
|
|
$
|
100,568
|
|
|
$
|
4,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nearly all of the securities we own have either fixed
interest rates or have predetermined scheduled interest rate increases and nearly all have call or prepayment features that allow the issuer to repay all or a portion of the security at par before its stated maturity without penalty. In general, as
interest rates rise, the estimated fair value of fixed-rate securities will decrease; as interest rates fall, their value will increase. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent
with our experience. INB, which holds the portfolio, has the ability and intent to hold all of these investments for a period of time sufficient for the estimated fair value of the securities with unrealized losses to recover, which may be at the
time of maturity. Historically, INB has always recovered the cost of its investments in U.S. government agency securities upon maturity, and expects to do so with its mortgage backed security investments. We view all the gross unrealized losses
related to the agency and mortgaged-backed securities portfolio to be temporary for the reasons noted above. The estimated fair values disclosed in the table above for U.S. government agency and mortgage-backed securities are obtained from
third-party brokers who provide quoted prices derived from active markets for identical or similar securities.
10
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3 - Securities Held To Maturity, Continued
INB also owns trust preferred securities that are also classified as held to maturity. The investments
in these debt securities represent beneficial interests in securitized financial assets that have contractual cash flows. They consist of mezzanine-class, variable-rate (indexed to 3 month libor) pooled trust preferred securities backed by debt
obligations of companies in the banking industry. At the time of purchase, these securities were investment grade rated. The current estimated fair values of these securities are depressed due to various reasons, including the weak economy, the
financial condition of a large number of the issuing banks, a number of issuing banks that are no longer in business and restrictions that have been or can be placed on the payment of interest by regulatory agencies, all of which have severely
reduced the demand for these securities and rendered their trading market inactive. There has been an adverse change in the estimated future cash flows from these securities due to the reasons cited above that all of these securities have been other
than temporarily impaired (OTTI) to varying degrees as denoted in the table that follows.
11
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3 - Securities Held to Maturity, Continued
The following table provides various information regarding trust preferred securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
|
|
|
|
|
Write
|
|
|
Adj.
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
# of
|
|
|
|
|
|
|
|
|
PV of
|
|
|
|
Credit
|
|
Cost
|
|
|
Downs
|
|
|
Cost
|
|
|
Fair
|
|
|
Unrealized
|
|
|
% of Collateral
|
|
|
Banks
|
|
|
Discount (4)
|
|
|
Expected
|
|
Cusip # (1)
|
|
Rating
|
|
Basis
|
|
|
(2)
|
|
|
Basis
|
|
|
Value (3)
|
|
|
Loss
|
|
|
Defaulted
|
|
|
Deferred
|
|
|
in Pool
|
|
|
Margin
|
|
|
Rate
|
|
|
Cash Flows
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74041PAEO
|
|
C
|
|
$
|
999
|
|
|
$
|
(765
|
)
|
|
$
|
234
|
|
|
$
|
2
|
|
|
$
|
(232
|
)
|
|
|
35.90
|
%
|
|
|
12.53
|
%
|
|
|
39
|
|
|
|
1.92
|
%
|
|
|
4.03
|
%
|
|
$
|
314
|
|
74040XAD6
|
|
C+
|
|
|
1,016
|
|
|
|
(264
|
)
|
|
|
752
|
|
|
|
148
|
|
|
|
(604
|
)
|
|
|
15.33
|
%
|
|
|
10.55
|
%
|
|
|
54
|
|
|
|
1.64
|
%
|
|
|
3.87
|
%
|
|
|
930
|
|
74040XAE4
|
|
C+
|
|
|
994
|
|
|
|
(241
|
)
|
|
|
753
|
|
|
|
148
|
|
|
|
(605
|
)
|
|
|
15.33
|
%
|
|
|
10.55
|
%
|
|
|
54
|
|
|
|
1.85
|
%
|
|
|
4.08
|
%
|
|
|
903
|
|
74040XAE4
|
|
C+
|
|
|
994
|
|
|
|
(241
|
)
|
|
|
753
|
|
|
|
148
|
|
|
|
(605
|
)
|
|
|
15.33
|
%
|
|
|
10.55
|
%
|
|
|
54
|
|
|
|
1.85
|
%
|
|
|
4.08
|
%
|
|
|
903
|
|
74040YAF9
|
|
C
|
|
|
981
|
|
|
|
(676
|
)
|
|
|
305
|
|
|
|
6
|
|
|
|
(299
|
)
|
|
|
25.71
|
%
|
|
|
12.53
|
%
|
|
|
58
|
|
|
|
1.88
|
%
|
|
|
3.96
|
%
|
|
|
649
|
|
74040YAE2
|
|
C
|
|
|
1,000
|
|
|
|
(695
|
)
|
|
|
305
|
|
|
|
6
|
|
|
|
(299
|
)
|
|
|
25.71
|
%
|
|
|
12.53
|
%
|
|
|
58
|
|
|
|
1.70
|
%
|
|
|
3.78
|
%
|
|
|
662
|
|
74041UAE9
|
|
C+
|
|
|
1,022
|
|
|
|
(463
|
)
|
|
|
559
|
|
|
|
11
|
|
|
|
(548
|
)
|
|
|
7.78
|
%
|
|
|
32.30
|
%
|
|
|
64
|
|
|
|
1.36
|
%
|
|
|
3.57
|
%
|
|
|
594
|
|
74041UAE9
|
|
C+
|
|
|
1,023
|
|
|
|
(463
|
)
|
|
|
560
|
|
|
|
12
|
|
|
|
(548
|
)
|
|
|
7.78
|
%
|
|
|
32.30
|
%
|
|
|
64
|
|
|
|
1.39
|
%
|
|
|
3.60
|
%
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,029
|
|
|
$
|
(3,808
|
)
|
|
$
|
4,221
|
|
|
$
|
481
|
|
|
$
|
(3,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74041PAEO
|
|
C
|
|
$
|
999
|
|
|
$
|
(652
|
)
|
|
$
|
347
|
|
|
$
|
33
|
|
|
$
|
(314
|
)
|
|
|
35.36
|
%
|
|
|
10.55
|
%
|
|
|
39
|
|
|
|
1.90
|
%
|
|
|
4.50
|
%
|
|
$
|
369
|
|
74040XAD6
|
|
C+
|
|
|
1,016
|
|
|
|
(264
|
)
|
|
|
752
|
|
|
|
146
|
|
|
|
(606
|
)
|
|
|
14.74
|
%
|
|
|
16.28
|
%
|
|
|
54
|
|
|
|
1.80
|
%
|
|
|
4.39
|
%
|
|
|
784
|
|
74040XAE4
|
|
C+
|
|
|
994
|
|
|
|
(241
|
)
|
|
|
753
|
|
|
|
146
|
|
|
|
(607
|
)
|
|
|
14.74
|
%
|
|
|
16.28
|
%
|
|
|
54
|
|
|
|
1.80
|
%
|
|
|
4.39
|
%
|
|
|
784
|
|
74040XAE4
|
|
C+
|
|
|
994
|
|
|
|
(241
|
)
|
|
|
753
|
|
|
|
145
|
|
|
|
(608
|
)
|
|
|
14.74
|
%
|
|
|
16.28
|
%
|
|
|
54
|
|
|
|
1.80
|
%
|
|
|
4.39
|
%
|
|
|
784
|
|
74040YAF9
|
|
C
|
|
|
981
|
|
|
|
(676
|
)
|
|
|
305
|
|
|
|
5
|
|
|
|
(300
|
)
|
|
|
24.27
|
%
|
|
|
25.71
|
%
|
|
|
58
|
|
|
|
1.70
|
%
|
|
|
4.40
|
%
|
|
|
307
|
|
74040YAE2
|
|
C
|
|
|
1,000
|
|
|
|
(695
|
)
|
|
|
305
|
|
|
|
5
|
|
|
|
(300
|
)
|
|
|
24.27
|
%
|
|
|
25.71
|
%
|
|
|
58
|
|
|
|
1.70
|
%
|
|
|
4.40
|
%
|
|
|
307
|
|
74041UAE9
|
|
C+
|
|
|
1,022
|
|
|
|
(441
|
)
|
|
|
581
|
|
|
|
15
|
|
|
|
(566
|
)
|
|
|
7.62
|
%
|
|
|
24.97
|
%
|
|
|
64
|
|
|
|
1.57
|
%
|
|
|
4.17
|
%
|
|
|
752
|
|
74041UAE9
|
|
C+
|
|
|
1,023
|
|
|
|
(441
|
)
|
|
|
582
|
|
|
|
15
|
|
|
|
(567
|
)
|
|
|
7.62
|
%
|
|
|
24.97
|
%
|
|
|
64
|
|
|
|
1.57
|
%
|
|
|
4.17
|
%
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,029
|
|
|
$
|
(3,651
|
)
|
|
$
|
4,378
|
|
|
$
|
510
|
|
|
$
|
(3,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All of these securities were on cash basis accounting because INB is currently not receiving all scheduled contractual interest payments on these securities. A large
portion of the contractual cash flows for the interest payments on these securities are being redirected to a more senior class of bondholders to pay down the principal balance on the more senior class faster. This occurs when deferral and default
activity reduces the securitys underlying performing collateral to a level where a predetermined coverage test fails and requires cash flows from interest payments to be redirected to a senior class of security holders. If no additional
deferrals or defaults occur, such test will eventually be met again through the redirection of the cash flow and cash interest payments would resume on INBs bonds, although no such assurance can be given as to the amount and timing of the
resumption, if any. In January, April, July and October 2012, INB received payments on cusip# 74040XAD6 and 74040XAE4 totaling $52,000.
|
(2)
|
Writedowns are derived from the difference between the book value of the security and the projected present value of the securitys cash flows as indicated per an
analysis performed using guidance prescribed by GAAP.
|
(3)
|
Obtained from Moodys pricing service, which uses a complex valuation model that factors in numerous assumptions and data, including anticipated discounts related
to illiquid trading markets, credit and interest rate risk, which under GAAP would be considered Level 3 inputs. INB believes that the actual values that would be realized in an orderly market under normal credit conditions between a willing buyer
and seller would approximate the projected present value (PV) of the securities cash flows and therefore, these estimated fair values are used for disclosure purposes only and are not used for calculating and recording impairment. INB also has
the intent and the ability to retain these trust preferred securities until maturity and currently has no intention of selling them.
|
(4)
|
In determining whether there is OTTI, INB relies on a cash flow analysis as prescribed under GAAP (ASC 320-10-35) and prepared by a third party specialist to determine
whether conditions are such that the projected cash flows are insufficient to recover INBs principal investment. The basic methodology under GAAP is to compare the present value of the cash flows that are derived from assumptions made with
respect to deferrals, defaults and prepayments from quarter to quarter. A decline in the present value versus that for the previous quarter is considered to be an adverse change. The discount margin in the table above represents the incremental
credit spread used to derive the discount rate for present value computations. Consistent with GAAP, we analyze the specific credit characteristics of the collateral underlying each individual security to develop the deferral/default assumptions for
estimated cash flows. This analysis consists of examining available data regarding trends in earnings and capital and problem asset ratios of each bank in the collateral pool in order to estimate their capacity to continue principal and interest
payments on the investments we own. In order to estimate the expected cash flows, we focused on each banks Texas ratio, which is defined as nonperforming assets plus 90 day past due loans divided by tangible equity plus loan loss reserves. We
concluded that banks with Texas ratios of 75% or more may experience greater difficulties in making payments. As a result, we assigned a default rate of 50% to banks with a Texas ratio of 100% or more and a default rate of 25% to banks with a Texas
ratio of 75% to 99%. The assignment of these rates was based on our judgment. Using these parameters, we also determined and used the following assumptions in measuring cash flows; payments of 1% annually and 100% at maturity and annual defaults of
75 basis points with a 15% recovery after a 2 year lag. It should be noted that the results of any discounted cash flow analysis are significantly affected by variables such as the estimate of the probability of default, discount rates, prepayment
rates and the creditworthiness of the underlying issuers. Therefore, changes in any of these assumptions could cause the results of our cash flow models and OTTI assessments to deviate.
|
12
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 3 - Securities Held to Maturity, Continued
The table below provides a cumulative roll forward of credit losses recognized on securities for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine-Months Ended
September
30,
|
|
($ in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Balance at beginning of period
|
|
$
|
3,808
|
|
|
$
|
3,555
|
|
|
$
|
3,651
|
|
|
$
|
3,450
|
|
Credit losses on debt securities for which OTTI was not previously recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional credit losses on debt securities for which OTTI was previously recognized
|
|
|
|
|
|
|
96
|
|
|
|
157
|
|
|
|
201
|
|
Less: sale of securities for which OTTI was previously recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,808
|
|
|
$
|
3,651
|
|
|
$
|
3,808
|
|
|
$
|
3,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the carrying value (amortized cost) and fair value of securities held to maturity as of
September 30, 2012, by remaining period to contractual maturity (ignoring earlier call dates, if any). Actual maturities may differ from contractual maturities because certain security issuers have the right to call or prepay their obligations.
The table below does not consider the effects of possible prepayments or unscheduled repayments.
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
|
Wtd-Avg
Yield
|
|
Due in one year or less
|
|
$
|
|
|
|
$
|
|
|
|
|
|
%
|
Due after one year through five years
|
|
|
253,508
|
|
|
|
254,634
|
|
|
|
1.03
|
|
Due after five years through ten years
|
|
|
104,030
|
|
|
|
104,469
|
|
|
|
1.53
|
|
Due after ten years
|
|
|
82,464
|
|
|
|
79,607
|
|
|
|
1.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
440,002
|
|
|
$
|
438,710
|
|
|
|
1.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4 - Loans Receivable
Major classifications of loans receivable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
($ in thousands)
|
|
# of Loans
|
|
|
Amount
|
|
|
# of Loans
|
|
|
Amount
|
|
Commercial real estate loans
|
|
|
373
|
|
|
$
|
870,938
|
|
|
|
347
|
|
|
$
|
864,470
|
|
Multifamily loans
|
|
|
155
|
|
|
|
277,101
|
|
|
|
161
|
|
|
|
290,011
|
|
Land loans
|
|
|
7
|
|
|
|
7,210
|
|
|
|
9
|
|
|
|
11,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
535
|
|
|
|
1,155,249
|
|
|
|
517
|
|
|
|
1,165,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family loans
|
|
|
2
|
|
|
|
1,824
|
|
|
|
1
|
|
|
|
25
|
|
Commercial business loans
|
|
|
19
|
|
|
|
1,496
|
|
|
|
19
|
|
|
|
1,520
|
|
Consumer loans
|
|
|
14
|
|
|
|
371
|
|
|
|
12
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
3,691
|
|
|
|
32
|
|
|
|
1,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, gross
|
|
|
570
|
|
|
|
1,158,940
|
|
|
|
549
|
|
|
|
1,167,573
|
|
Deferred loan fees
|
|
|
|
|
|
|
(3,769
|
)
|
|
|
|
|
|
|
(3,783
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net of deferred fees
|
|
|
|
|
|
|
1,155,171
|
|
|
|
|
|
|
|
1,163,790
|
|
Allowance for loan losses
|
|
|
|
|
|
|
(28,382
|
)
|
|
|
|
|
|
|
(30,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
|
|
|
$
|
1,126,789
|
|
|
|
|
|
|
$
|
1,133,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012 and December 31, 2011, there were $48.0 million and $57.2 million of loans, respectively, on nonaccrual
status, and $14.2 million and $9.0 million, respectively, of loans classified as accruing troubled debt restructured loans (TDRs). The total of these loans represented all of our impaired loans as of those dates.
At September 30, 2012, there were four loans totaling $6.5 million, compared to one loan in the amount of $1.9 million at December 31, 2011,
that were 90 days past due and still accruing interest. The balance at September 30, 2012 represents loans that have matured and the borrowers continue to make monthly payments of principal and interest. These loans were in the process of being
extended as of September 30, 2012.
13
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4 - Loans Receivable, Continued
The recorded investment, corresponding specific impairment valuation allowance and unpaid principal
balance of our impaired loans at the dates indicated are summarized follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment (1) by State
|
|
|
Specific
Valuation
Allowance
(2)
|
|
|
Total
Unpaid
Principal
(3)
|
|
|
# of
Loans
|
|
($ in thousands)
|
|
NY
|
|
|
FL
|
|
|
NC
|
|
|
NJ
|
|
|
OH
|
|
|
Total
|
|
|
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
8,396
|
|
|
$
|
9,005
|
|
|
$
|
3,232
|
|
|
$
|
|
|
|
$
|
1,373
|
|
|
$
|
22,006
|
|
|
$
|
1,700
|
|
|
$
|
27,386
|
|
|
|
6
|
|
Office Building
|
|
|
|
|
|
|
14,833
|
|
|
|
|
|
|
|
893
|
|
|
|
|
|
|
|
15,726
|
|
|
|
490
|
|
|
|
16,476
|
|
|
|
2
|
|
Warehouse
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
950
|
|
|
|
28
|
|
|
|
950
|
|
|
|
1
|
|
Mixed Use
|
|
|
5,594
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
6,094
|
|
|
|
577
|
|
|
|
6,393
|
|
|
|
5
|
|
Multifamily
|
|
|
1,805
|
|
|
|
12,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,728
|
|
|
|
1,837
|
|
|
|
16,335
|
|
|
|
7
|
|
Land
|
|
|
518
|
|
|
|
2,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,620
|
|
|
|
515
|
|
|
|
2,620
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
17,263
|
|
|
$
|
38,863
|
|
|
$
|
3,232
|
|
|
$
|
1,393
|
|
|
$
|
1,373
|
|
|
$
|
62,124
|
|
|
$
|
5,147
|
|
|
$
|
70,160
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
9,285
|
|
|
$
|
9,504
|
|
|
$
|
|
|
|
$
|
500
|
|
|
$
|
2,304
|
|
|
$
|
21,593
|
|
|
$
|
2,741
|
|
|
$
|
26,018
|
|
|
|
7
|
|
Office Building
|
|
|
888
|
|
|
|
14,834
|
|
|
|
|
|
|
|
1,065
|
|
|
|
|
|
|
|
16,787
|
|
|
|
884
|
|
|
|
17,733
|
|
|
|
3
|
|
Warehouse
|
|
|
950
|
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,750
|
|
|
|
299
|
|
|
|
3,251
|
|
|
|
2
|
|
Mixed Use
|
|
|
5,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,508
|
|
|
|
944
|
|
|
|
5,796
|
|
|
|
4
|
|
Multifamily
|
|
|
3,730
|
|
|
|
13,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,776
|
|
|
|
2,137
|
|
|
|
18,122
|
|
|
|
8
|
|
Land
|
|
|
290
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,855
|
|
|
|
1,009
|
|
|
|
2,855
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
20,651
|
|
|
$
|
41,749
|
|
|
$
|
|
|
|
$
|
1,565
|
|
|
$
|
2,304
|
|
|
$
|
66,269
|
|
|
$
|
8,014
|
|
|
$
|
73,775
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents contractual unpaid principal balance less any partial principal chargeoffs and interest received and applied as a reduction of principal.
|
(2)
|
Represents a specific valuation allowance against the recorded investment included as part of the overall allowance for loan losses. All of our impaired loans have a
specific valuation allowance.
|
(3)
|
Represents contractual unpaid principal balance (for informational purposes only).
|
Other information related to impaired loans is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine-Months Ended
September 30,
|
|
($ in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Average recorded investment in nonaccrual loans
|
|
$
|
49,788
|
|
|
$
|
48,853
|
|
|
$
|
53,809
|
|
|
$
|
49,002
|
|
Total cash basis interest income recognized on nonaccrual loans
|
|
|
633
|
|
|
|
736
|
|
|
|
2,055
|
|
|
|
1,704
|
|
|
|
|
|
|
Average recorded investment in accruing TDR loans
|
|
|
14,380
|
|
|
|
5,611
|
|
|
|
10,341
|
|
|
|
5,022
|
|
Total interest income recognized on accruing TDR loans under modified terms
|
|
|
233
|
|
|
|
74
|
|
|
|
493
|
|
|
|
211
|
|
Age analysis of our loan portfolio by segment at September 30, 2012 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Current
|
|
|
Past Due
31-59
Days
|
|
|
Past Due
60-89
Days
|
|
|
Past Due
90 or more
Days
|
|
|
Total
Past Due
|
|
|
Total
Classified
Nonaccrual
|
|
Accruing Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
815,102
|
|
|
$
|
|
|
|
$
|
15,477
|
|
|
$
|
4,580
|
|
|
$
|
20,057
|
|
|
$
|
|
|
Multifamily
|
|
|
264,038
|
|
|
|
|
|
|
|
|
|
|
|
1,171
|
|
|
|
1,171
|
|
|
|
|
|
Land
|
|
|
6,172
|
|
|
|
|
|
|
|
|
|
|
|
752
|
|
|
|
752
|
|
|
|
|
|
All other
|
|
|
3,641
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accruing loans
|
|
|
1,088,953
|
|
|
|
50
|
|
|
|
15,477
|
|
|
|
6,503
|
|
|
|
22,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual Loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
31,675
|
|
|
|
|
|
|
|
|
|
|
|
4,104
|
|
|
|
4,104
|
|
|
|
35,779
|
|
Multifamily
|
|
|
9,093
|
|
|
|
|
|
|
|
|
|
|
|
2,799
|
|
|
|
2,799
|
|
|
|
11,892
|
|
Land
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
41,054
|
|
|
|
|
|
|
|
|
|
|
|
6,903
|
|
|
|
6,903
|
|
|
|
47,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
1,130,007
|
|
|
$
|
50
|
|
|
$
|
15,477
|
|
|
$
|
13,406
|
|
|
$
|
28,933
|
|
|
$
|
47,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See footnote 1 to table that follows on the next page for an explanation.
|
14
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4 - Loans Receivable, Continued
Age analysis of our loan portfolio by segment at December 31, 2011 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Current
|
|
|
Past Due
31-59
Days
|
|
|
Past Due
60-89
Days
|
|
|
Past Due
90 or more
Days
|
|
|
Total
Past Due
|
|
|
Total
Classified
Nonaccrual
|
|
Accruing Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
794,196
|
|
|
$
|
21,807
|
|
|
$
|
3,500
|
|
|
$
|
1,925
|
|
|
$
|
27,232
|
|
|
$
|
|
|
Multifamily
|
|
|
272,640
|
|
|
|
3,069
|
|
|
|
394
|
|
|
|
|
|
|
|
3,463
|
|
|
|
|
|
Land
|
|
|
10,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
|
|
|
1,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accruing loans
|
|
|
1,079,638
|
|
|
|
24,876
|
|
|
|
3,894
|
|
|
|
1,925
|
|
|
|
30,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual Loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
39,854
|
|
|
|
|
|
|
|
|
|
|
|
3,188
|
|
|
|
3,188
|
|
|
|
43,042
|
|
Multifamily
|
|
|
7,378
|
|
|
|
|
|
|
|
2,792
|
|
|
|
3,738
|
|
|
|
6,530
|
|
|
|
13,908
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290
|
|
|
|
290
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
47,232
|
|
|
|
|
|
|
|
2,792
|
|
|
|
7,216
|
|
|
|
10,008
|
|
|
|
57,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
1,126,870
|
|
|
$
|
24,876
|
|
|
$
|
6,686
|
|
|
$
|
9,141
|
|
|
$
|
40,703
|
|
|
$
|
57,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amount of nonaccrual loans in the current column included $38.7 million of TDRs at September 30, 2012 and $45.7 million of TDRs at December 31, 2011 for
which payments are being made in accordance with their restructured terms, but the loans were maintained on nonaccrual status in accordance with regulatory guidance. The remaining portion at both dates was comprised of certain paying loans
classified nonaccrual due to concerns regarding the borrowers ability to continue making payments. Interest income from loan payments on all loans in nonaccrual status is recognized on a cash basis, provided the remaining principal balance is
deemed collectable.
|
Information regarding the credit quality of the loan portfolio based on internally assigned grades follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard (1)
|
|
|
Doubtful (1)
|
|
|
Total
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
789,377
|
|
|
$
|
17,881
|
|
|
$
|
63,680
|
|
|
$
|
|
|
|
$
|
870,938
|
|
Multifamily
|
|
|
259,984
|
|
|
|
2,389
|
|
|
|
14,728
|
|
|
|
|
|
|
|
277,101
|
|
Land
|
|
|
4,590
|
|
|
|
|
|
|
|
2,620
|
|
|
|
|
|
|
|
7,210
|
|
All other
|
|
|
3,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
1,057,642
|
|
|
$
|
20,270
|
|
|
$
|
81,028
|
|
|
$
|
|
|
|
$
|
1,158,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of allowance for loan losses
|
|
$
|
20,392
|
|
|
$
|
424
|
|
|
$
|
7,566
|
|
|
$
|
|
|
|
$
|
28,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
791,295
|
|
|
$
|
13,108
|
|
|
$
|
59,355
|
|
|
$
|
712
|
|
|
$
|
864,470
|
|
Multifamily
|
|
|
270,281
|
|
|
|
2,954
|
|
|
|
16,776
|
|
|
|
|
|
|
|
290,011
|
|
Land
|
|
|
8,100
|
|
|
|
|
|
|
|
3,118
|
|
|
|
|
|
|
|
11,218
|
|
All other
|
|
|
1,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
1,071,550
|
|
|
$
|
16,062
|
|
|
$
|
79,249
|
|
|
$
|
712
|
|
|
$
|
1,167,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of allowance for loan losses
|
|
$
|
20,353
|
|
|
$
|
392
|
|
|
$
|
9,314
|
|
|
$
|
356
|
|
|
$
|
30,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Substandard and doubtful loans consist of $47.9 million of nonaccrual loans, $14.2 million of accruing TDRs and $18.9 million of other performing loans at
September 30, 2012, compared to $57.2 million of nonaccrual loans, $9.0 million of accruing TDRs and $13.7 million of other performing loans at December 31, 2011. For a discussion regarding the rating criteria we use, see note 1 to the
financial statements included in our 2011 10-K.
|
The geographic distribution of the loan portfolio by state follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
|
Amount
|
|
|
% of Total
|
|
|
Amount
|
|
|
% of Total
|
|
New York
|
|
$
|
751,112
|
|
|
|
64.8
|
%
|
|
$
|
763,770
|
|
|
|
65.4
|
%
|
Florida
|
|
|
297,524
|
|
|
|
25.7
|
|
|
|
291,797
|
|
|
|
25.0
|
|
New Jersey
|
|
|
26,615
|
|
|
|
2.3
|
|
|
|
30,807
|
|
|
|
2.6
|
|
Pennsylvania
|
|
|
18,892
|
|
|
|
1.6
|
|
|
|
22,548
|
|
|
|
1.9
|
|
North Carolina
|
|
|
13,928
|
|
|
|
1.2
|
|
|
|
10,466
|
|
|
|
0.9
|
|
Georgia
|
|
|
11,806
|
|
|
|
1.0
|
|
|
|
11,175
|
|
|
|
1.0
|
|
Connecticut
|
|
|
11,285
|
|
|
|
1.0
|
|
|
|
11,569
|
|
|
|
1.0
|
|
Virginia
|
|
|
9,514
|
|
|
|
0.8
|
|
|
|
8,203
|
|
|
|
0.7
|
|
Kentucky
|
|
|
7,554
|
|
|
|
0.7
|
|
|
|
7,674
|
|
|
|
0.7
|
|
South Carolina
|
|
|
5,036
|
|
|
|
0.4
|
|
|
|
3,315
|
|
|
|
0.3
|
|
Ohio
|
|
|
2,642
|
|
|
|
0.2
|
|
|
|
3,138
|
|
|
|
0.3
|
|
All other states
|
|
|
3,032
|
|
|
|
0.3
|
|
|
|
3,111
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,158,940
|
|
|
|
100.0
|
%
|
|
$
|
1,167,573
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4 - Loans Receivable, Continued
We have certain loans that we have restructured (which are identified as TDRs in this report), due to
economic or legal reasons related to a borrowers financial difficulties, and for which we have granted certain concessions to the borrower that we would not otherwise have considered. These concessions generally consist of one or more of the
following: deferral of principal and/or interest payments for a period of time; a partial reduction in interest payments; or an extension of the loans maturity date. In determining if a concession has been made, we also consider if the
borrower is able to access funds in the general market place at a market rate for debt with similar risk characteristics as the restructured debt. A loan that is extended or renewed at a stated interest rate equal to the current interest rate for a
new loan originated by us with similar risk is not reported as a restructured loan.
All TDRs are considered impaired loans. Normally, TDRs
are classified nonaccrual if at the time of restructuring the loan was on nonaccrual status. Once a sufficient amount of time has passed, generally six months, if the restructured loan has performed under the modified terms and the collectability of
all contractual principal (including principal partially charged off) and interest is reasonably assured, the TDR is normally returned to an accruing status. In addition to the passage of time, we also consider the loans payment performance
prior to restructure, collateral value and the ability of the borrower to make principal and interest payments in accordance with the modified terms. Normally, a TDR continues to be considered a TDR until it is paid in full. During the nine-months
ended September 30, 2012, there were two loans restructured and one existing TDR in the amount of $5.5 million returned to accrual status. There were no TDRs modified within the previous 12 months that subsequently defaulted during the three-
and nine-months period ended September 30, 2012 and 2011.
Information regarding loans restructured during the nine-months ended
September 30, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Recorded Investment
|
|
($ in thousands)
|
|
of Loans
|
|
|
Pre-Modification
|
|
|
Post-Modification
|
|
Land extended maturity date
|
|
|
2
|
|
|
$
|
520
|
|
|
$
|
520
|
|
The distribution of TDRs by accruing versus non-accruing, by segment and by geographic distribution follows:
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
Non-accruing
|
|
$
|
38,749
|
|
|
$
|
45,705
|
|
Accruing
|
|
|
14,167
|
|
|
|
9,030
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,916
|
|
|
$
|
54,735
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
40,172
|
|
|
$
|
41,923
|
|
Multifamily
|
|
|
10,124
|
|
|
|
10,247
|
|
Land
|
|
|
2,620
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,916
|
|
|
$
|
54,735
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
$
|
14,586
|
|
|
$
|
14,216
|
|
Florida
|
|
|
36,064
|
|
|
|
37,149
|
|
New Jersey
|
|
|
893
|
|
|
|
1,066
|
|
Ohio
|
|
|
1,373
|
|
|
|
2,304
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,916
|
|
|
$
|
54,735
|
|
|
|
|
|
|
|
|
|
|
Note 5 - Allowance for Loan Losses
Activity in the allowance for loan losses by segment for the periods indicated is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Commercial
Real Estate
|
|
|
Multifamily
|
|
|
Land
|
|
|
All
Other
|
|
|
Total
|
|
Quarter Ended September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
18,343
|
|
|
$
|
8,982
|
|
|
$
|
1,509
|
|
|
$
|
10
|
|
|
$
|
28,844
|
|
Loan chargeoffs
|
|
|
(548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(548
|
)
|
Loan recoveries
|
|
|
63
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
Provision (credit) for loan losses
|
|
|
468
|
|
|
|
(145
|
)
|
|
|
(337
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
18,326
|
|
|
$
|
8,860
|
|
|
$
|
1,172
|
|
|
$
|
24
|
|
|
$
|
28,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
19,103
|
|
|
$
|
11,067
|
|
|
$
|
1,588
|
|
|
$
|
14
|
|
|
$
|
31,772
|
|
Loan chargeoffs
|
|
|
(946
|
)
|
|
|
(721
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,667
|
)
|
Loan recoveries
|
|
|
54
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Provision (credit) for loan losses
|
|
|
2,426
|
|
|
|
(65
|
)
|
|
|
(167
|
)
|
|
|
(3
|
)
|
|
|
2,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
20,637
|
|
|
$
|
10,296
|
|
|
$
|
1,421
|
|
|
$
|
11
|
|
|
$
|
32,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 5 - Allowance for Loan Losses, Continued
Activity in the allowance for loan losses by segment for the periods indicated is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Commercial
Real Estate
|
|
|
Multifamily
|
|
|
Land
|
|
|
All
Other
|
|
|
Total
|
|
Nine-Months Ended September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
19,156
|
|
|
$
|
9,180
|
|
|
$
|
2,069
|
|
|
$
|
10
|
|
|
$
|
30,415
|
|
Loan chargeoffs
|
|
|
(2,215
|
)
|
|
|
(261
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,476
|
)
|
Loan recoveries
|
|
|
383
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
443
|
|
Provision (credit) for loan losses
|
|
|
1,002
|
|
|
|
(119
|
)
|
|
|
(897
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
18,326
|
|
|
$
|
8,860
|
|
|
$
|
1,172
|
|
|
$
|
24
|
|
|
$
|
28,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
21,919
|
|
|
$
|
11,356
|
|
|
$
|
1,553
|
|
|
$
|
12
|
|
|
$
|
34,840
|
|
Loan chargeoffs
|
|
|
(5,446
|
)
|
|
|
(2,108
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,554
|
)
|
Loan recoveries
|
|
|
54
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
Provision (credit) for loan losses
|
|
|
4,110
|
|
|
|
1,001
|
|
|
|
(132
|
)
|
|
|
(1
|
)
|
|
|
4,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
20,637
|
|
|
$
|
10,296
|
|
|
$
|
1,421
|
|
|
$
|
11
|
|
|
$
|
32,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables sets forth the balances of our loans receivable by segment and impairment evaluation and the allowance for loan
losses associated with such loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Commercial
Real Estate
|
|
|
Multifamily
|
|
|
Land
|
|
|
All
Other
|
|
|
Total
|
|
At September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
44,776
|
|
|
$
|
14,728
|
|
|
$
|
2,620
|
|
|
$
|
|
|
|
$
|
62,124
|
|
Collectively evaluated for impairment
|
|
|
826,162
|
|
|
|
262,373
|
|
|
|
4,590
|
|
|
|
3,691
|
|
|
|
1,096,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
870,938
|
|
|
$
|
277,101
|
|
|
$
|
7,210
|
|
|
$
|
3,691
|
|
|
$
|
1,158,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment (1)
|
|
$
|
2,795
|
|
|
$
|
1,837
|
|
|
$
|
515
|
|
|
$
|
|
|
|
$
|
5,147
|
|
Collectively evaluated for impairment
|
|
|
15,531
|
|
|
|
7,024
|
|
|
|
656
|
|
|
|
24
|
|
|
|
23,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
18,326
|
|
|
$
|
8,861
|
|
|
$
|
1,171
|
|
|
$
|
24
|
|
|
$
|
28,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Commercial
Real Estate
|
|
|
Multifamily
|
|
|
Land
|
|
|
All
Other
|
|
|
Total
|
|
At December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
46,638
|
|
|
$
|
16,776
|
|
|
$
|
2,855
|
|
|
$
|
|
|
|
$
|
66,269
|
|
Collectively evaluated for impairment
|
|
|
817,832
|
|
|
|
273,235
|
|
|
|
8,363
|
|
|
|
1,874
|
|
|
|
1,101,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
864,470
|
|
|
$
|
290,011
|
|
|
$
|
11,218
|
|
|
$
|
1,874
|
|
|
$
|
1,167,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment (1)
|
|
$
|
4,868
|
|
|
$
|
2,137
|
|
|
$
|
1,009
|
|
|
$
|
|
|
|
$
|
8,014
|
|
Collectively evaluated for impairment
|
|
|
14,288
|
|
|
|
7,043
|
|
|
|
1,060
|
|
|
|
10
|
|
|
|
22,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
19,156
|
|
|
$
|
9,180
|
|
|
$
|
2,069
|
|
|
$
|
10
|
|
|
$
|
30,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At September 30, 2012 and December 31, 2011, a specific impairment valuation allowance (included as part of the allowance for loan losses) totaling $5.2
million and $8.0 million, respectively, was maintained on impaired loans (which is detailed in note 4 to financial statements in this report).
|
17
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 6 - Foreclosed Real Estate and Valuation Allowance for Real Estate Losses
Real estate acquired through foreclosure by property type is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
($ in thousands)
|
|
# of Properties
|
|
|
Amount (1)
|
|
|
# of Properties
|
|
|
Amount (1)
|
|
Commercial real estate
|
|
|
3
|
|
|
$
|
8,125
|
|
|
|
4
|
|
|
$
|
11,542
|
|
Multifamily
|
|
|
3
|
|
|
|
12,600
|
|
|
|
3
|
|
|
|
13,727
|
|
Land
|
|
|
1
|
|
|
|
1,133
|
|
|
|
2
|
|
|
|
3,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired through foreclosure
|
|
|
7
|
|
|
$
|
21,858
|
|
|
|
9
|
|
|
$
|
28,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reported net of any associated valuation allowance.
|
Activity in the valuation allowance for real estate losses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine-Months Ended
September 30,
|
|
($ in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Balance at beginning of period
|
|
$
|
7,945
|
|
|
$
|
3,966
|
|
|
$
|
6,037
|
|
|
$
|
2,688
|
|
Provision for real estate losses
|
|
|
1,025
|
|
|
|
701
|
|
|
|
2,933
|
|
|
|
1,979
|
|
Real estate chargeoffs
|
|
|
(3,642
|
)
|
|
|
|
|
|
|
(3,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
5,328
|
|
|
$
|
4,667
|
|
|
$
|
5,328
|
|
|
$
|
4,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7 - Deposits
Scheduled maturities of certificates of deposit accounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
($ in thousands)
|
|
Amount
|
|
|
Wtd-Avg
Stated Rate
|
|
|
Amount
|
|
|
Wtd-Avg
Stated Rate
|
|
Within one year
|
|
$
|
441,072
|
|
|
|
2.42
|
%
|
|
$
|
514,667
|
|
|
|
2.83
|
%
|
Over one to two years
|
|
|
310,292
|
|
|
|
3.71
|
|
|
|
397,394
|
|
|
|
3.58
|
|
Over two to three years
|
|
|
93,035
|
|
|
|
2.97
|
|
|
|
136,226
|
|
|
|
3.43
|
|
Over three to four years
|
|
|
52,362
|
|
|
|
3.30
|
|
|
|
67,855
|
|
|
|
3.27
|
|
Over four years
|
|
|
92,664
|
|
|
|
2.98
|
|
|
|
83,029
|
|
|
|
3.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total certificates of deposit
|
|
$
|
989,425
|
|
|
|
2.98
|
%
|
|
$
|
1,199,171
|
|
|
|
3.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDs of $100,000 or more totaled $489 million at September 30, 2012 and $600 million at December 31, 2011 and included
brokered CDs of $85 million and $128 million, respectively. At September 30, 2012, all CDs of $100,000 or more (inclusive of brokered CDs) by remaining maturity were as follows: $207 million due within one year; $164 million due over one to two
years; $38 million due over two to three years; $25 million due over three to four years; and $55 million due thereafter. At September 30, 2012, brokered CDs had a weighted average rate of 4.89% and their remaining maturities were as follows:
$36 million due within one year; $31 million due over one to two years; none due over two to three years and over three to four years; and $18 million due thereafter.
Note 8 - FHLB Advances and Lines of Credit
At September 30, 2012, INB had $30 million of unsecured credit lines that were cancelable at any time. As a member of the Federal
Home Loan Bank of New York (FHLB) and the Federal Reserve Bank of New York (FRB), INB can borrow from these institutions on a secured basis. At September 30, 2012, INB had available collateral consisting of investment securities and certain
loans that could be pledged to support additional total borrowings of approximately $481 million from the FHLB and FRB if needed.
The
following is a summary of certain information regarding FHLB advances in the aggregate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Quarter Ended
September 30,
|
|
|
At or For the Nine-Months Ended
September 30,
|
|
($ in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Balance at period end
|
|
$
|
7,000
|
|
|
$
|
17,500
|
|
|
$
|
7,000
|
|
|
$
|
17,500
|
|
Maximum amount outstanding at any month end for the period
|
|
$
|
10,500
|
|
|
$
|
22,500
|
|
|
$
|
13,500
|
|
|
$
|
25,500
|
|
Average outstanding balance for the period
|
|
$
|
9,511
|
|
|
$
|
21,446
|
|
|
$
|
11,215
|
|
|
$
|
22,947
|
|
Weighted-average interest rate paid for the period
|
|
|
4.31
|
%
|
|
|
4.08
|
%
|
|
|
4.26
|
%
|
|
|
4.09
|
%
|
Weighted-average interest rate at period end
|
|
|
4.22
|
%
|
|
|
4.10
|
%
|
|
|
4.22
|
%
|
|
|
4.10
|
%
|
18
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 8 - FHLB Advances and Lines of Credit, Continued
Scheduled contractual maturities of outstanding FHLB advances as of September 30, 2012 were as
follows:
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Amount
|
|
|
Rate
|
|
Due March 11, 2013
|
|
$
|
3,000
|
|
|
|
4.17
|
%
|
Due September 9, 2013
|
|
|
4,000
|
|
|
|
4.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,000
|
|
|
|
4.22
|
%
|
|
|
|
|
|
|
|
|
|
Note 9 - Subordinated Debentures - Capital Securities
Capital Securities (commonly referred to as trust preferred securities) outstanding are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
($ in thousands)
|
|
Principal
|
|
|
Accrued
Interest
Payable
|
|
|
Interest
Rate
|
|
|
Principal
|
|
|
Accrued
Interest
Payable
|
|
|
Interest
Rate
|
|
Capital Securities II - debentures due September 17, 2033
|
|
$
|
15,464
|
|
|
$
|
1,516
|
|
|
|
3.34
|
%
|
|
$
|
15,464
|
|
|
$
|
1,079
|
|
|
|
3.50
|
%
|
Capital Securities III - debentures due March 17, 2034
|
|
|
15,464
|
|
|
|
1,440
|
|
|
|
3.18
|
%
|
|
|
15,464
|
|
|
|
1,025
|
|
|
|
3.35
|
%
|
Capital Securities IV - debentures due September 20, 2034
|
|
|
15,464
|
|
|
|
1,252
|
|
|
|
2.78
|
%
|
|
|
15,464
|
|
|
|
889
|
|
|
|
2.96
|
%
|
Capital Securities V - debentures due December 15, 2036
|
|
|
10,310
|
|
|
|
1,559
|
|
|
|
2.04
|
%
|
|
|
10,310
|
|
|
|
1,368
|
|
|
|
2.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,702
|
|
|
$
|
5,767
|
|
|
|
|
|
|
$
|
56,702
|
|
|
$
|
4,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The securities are obligations of IBCs wholly owned statutory business trusts, Intervest Statutory Trust II, III, IV and V,
respectively. Each Trust was formed with a capital contribution from IBC and for the sole purpose of issuing and administering the Capital Securities. The proceeds from the issuance of the Capital Securities together with the capital contribution
for each Trust were used to acquire IBCs Junior Subordinated Debentures that are due concurrently with the Capital Securities. The Capital Securities, net of IBCs capital contributions of $1.7 million, total $55 million and qualify as
regulatory Tier 1 capital up to certain limits. IBC has guaranteed the payment of distributions on, payments on any redemptions of, and any liquidation distribution with respect to the Capital Securities. Issuance costs associated with Capital
Securities II to IV were capitalized and are being amortized over the contractual life of the securities using the straight-line method. The unamortized balance totaled approximately $0.7 million at September 30, 2012 and $0.8 million at
December 31, 2011. There were no issuance costs associated with Capital Securities V.
Interest payments on the Junior Subordinated
Debentures (and the corresponding distributions on the Capital Securities) are payable in arrears as follows:
|
|
|
Capital Securities II - quarterly at the rate of 2.95% over 3 month libor;
|
|
|
|
Capital Securities III - quarterly at the rate of 2.79% over 3 month libor;
|
|
|
|
Capital Securities IV- quarterly at the rate of 2.40% over 3 month libor; and
|
|
|
|
Capital Securities V - quarterly at the rate of 1.65% over 3 month libor.
|
Interest payments may be deferred at any time and from time to time during the term of the Junior Subordinated Debentures at IBCs election for up to 20 consecutive quarterly periods, or 5 years.
There is no limitation on the number of extension periods IBC may elect, provided, however, no deferral period may extend beyond the maturity date of the Junior Subordinated Debentures. During an interest deferral period, interest will continue to
accrue on the Junior Subordinated Debentures and interest on such accrued interest will accrue at an annual rate equal to the interest rate in effect for such deferral period, compounded quarterly from the date such interest would have been payable
were it not deferred. At the end of the deferral period, IBC will be obligated to pay all interest then accrued and unpaid. During the deferral period, among other restrictions, IBC and any affiliate cannot, subject to certain exceptions:
(i) declare or pay any dividends or distributions on, or redeem, purchase or acquire any capital stock of IBC or its affiliates (other than payment of dividends to IBC); or (ii) make any payment of principal or interest or premium on, or
repay, repurchase or redeem any debt securities of IBC or its affiliates that rank pari passu with or junior to the Junior Subordinated Debentures. In February 2010, as required by its primary regulator, IBC exercised its right to defer interest
payments. This deferral does not constitute a default under the indentures governing the securities. At September 30, 2012, IBC had accrued and expensed a total of $5.8 million of interest payments on the Junior Subordinated Debentures.
19
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 9 - Subordinated Debentures - Capital Securities, Continued
The Capital Securities are subject to mandatory redemption as follows: (i) in whole, but not in
part, upon repayment of the Junior Subordinated Debentures at stated maturity or earlier, at the option of IBC, within 90 days following the occurrence and continuation of certain changes in the tax or capital treatment of the Capital Securities, or
a change in law such that the statutory trust would be considered an investment company, contemporaneously with the redemption by IBC of the Junior Subordinated Debentures; and (ii) in whole or in part at any time contemporaneously with the
optional redemption by IBC of the Junior Subordinated Debentures in whole or in part. Any redemption would be subject to the receipt of regulatory approvals.
Note 10 - Stockholders Equity and Preferred Dividends in Arrears
Prior to May 24, 2012, IBC was authorized to issue up to 63,000,000 shares of its capital stock, consisting of 62,000,000 shares
of Class A common stock, 700,000 shares of Class B common stock and 300,000 shares of preferred stock. At IBCs 2012 Annual Meeting of Stockholders held on May 24, 2012, stockholders approved a proposal to amend and restate IBCs
Certificate of Incorporation to eliminate any and all references to Class B common stock and to rename its Class A common stock common stock. As a result, as of September 30, 2012, IBC was authorized to issue up to 62,300,000
shares of its capital stock, consisting of 62,000,000 shares of common stock and 300,000 shares of preferred stock. IBCs board of directors determines the powers, preferences and rights, and the qualifications, limitations, and restrictions
thereof on any series of preferred stock issued. A total of 25,000 shares of preferred stock are designated as Series A and are owned by the U.S. Treasury.
As described in note 11 to the financial statements included in our 2011 10-K, in February 2010, IBC ceased the declaration and payment of dividends on its Series A preferred stock held by the U.S.
Treasury as required by IBCs primary regulator. IBC has missed 11 dividend payments as of the date of filing of this report. At September 30, 2012, the amount of preferred dividends undeclared, unpaid and in arrears totaled $3.8 million.
The preferred stock carries a 5% per year cumulative preferred dividend rate, payable quarterly, which increases to 9% beginning in December 2013. Dividends compound if they accrue and are not paid and they also reduce earnings or increase
losses available to our common stockholders. A failure to pay a total of six preferred share dividend payments, whether or not consecutive, gives the holders of the shares the right to elect two directors to IBCs board of directors. That right
will continue until IBC pays all dividends in arrears. In March and October 2012, the Treasury exercised its right and appointed a director to IBCs Board for a total of two directors.
Note 11 - Common Stock Options and Restricted Common Stock
IBC has a shareholder-approved Long Term Incentive Plan (the Plan) under which stock options, restricted stock and other
forms of incentive compensation may be awarded from time to time to officers, employees and directors of IBC and its subsidiaries. The maximum number of shares of common stock that may be awarded under the Plan is 1,500,000. At September 30,
2012, 329,960 shares of common stock were available for award under the Plan. There were no grants of stock options in the first nine months of 2012 or 2011.
A summary of the activity in IBCs outstanding common stock warrant and options and related information follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price Per Warrant/Option
|
|
|
Total
|
|
|
Wtd-Avg
Exercise
Price
|
|
($ in thousands, except per share amounts)
|
|
$5.42 (1)
|
|
|
$17.10
|
|
|
$7.50
|
|
|
$4.02
|
|
|
$3.00
|
|
|
$2.55
|
|
|
|
Outstanding at December 31, 2011
|
|
|
691,882
|
|
|
|
117,840
|
|
|
|
121,390
|
|
|
|
70,510
|
|
|
|
39,900
|
|
|
|
44,100
|
|
|
|
1,085,622
|
|
|
$
|
6.62
|
|
Forfeited/expired (2)
|
|
|
|
|
|
|
(900
|
)
|
|
|
(900
|
)
|
|
|
(1,300
|
)
|
|
|
(1,300
|
)
|
|
|
(1,500
|
)
|
|
|
(5,900
|
)
|
|
$
|
5.95
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
|
$
|
3.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
691,882
|
|
|
|
116,940
|
|
|
|
120,490
|
|
|
|
69,210
|
|
|
|
38,500
|
|
|
|
42,600
|
|
|
|
1,079,622
|
|
|
$
|
6.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration date
|
|
|
12/23/18
|
|
|
|
12/13/17
|
|
|
|
12/11/18
|
|
|
|
12/10/19
|
|
|
|
12/09/20
|
|
|
|
12/08/21
|
|
|
|
|
|
|
|
|
|
Vested and exercisable (3)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
67
|
%
|
|
|
33
|
%
|
|
|
0
|
%
|
|
|
92
|
%
|
|
|
|
|
Wtd-avg remaining contractual term (in years)
|
|
|
6.2
|
|
|
|
5.2
|
|
|
|
6.2
|
|
|
|
7.2
|
|
|
|
8.2
|
|
|
|
9.2
|
|
|
|
6.4
|
|
|
|
|
|
Intrinsic value at September 30, 2012 (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31
|
|
|
$
|
53
|
|
|
$
|
84
|
|
|
|
|
|
(1)
|
Represents a warrant held by the U.S. Treasury as described in note 11 to the financial statements in our 2011 10-K.
|
(2)
|
Represent options forfeited or expired unexercised.
|
(3)
|
The $4.02 options become 100% vested and exercisable on December 10, 2012.
|
The $3.00 options further vest and become exercisable at the rate of 33.33% on December 9, 2012 and 2013.
The $2.55 options vest and become exercisable at the rate of 33.33% on December 8, 2012, 2013 and 2014.
Full vesting may occur earlier for all options upon the occurrence of certain events as defined in the option agreements.
(4)
|
Intrinsic value was calculated using the closing price of the common stock on September 30, 2012 of $ 3.80.
|
20
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 11 - Common Stock Options and Restricted Common Stock, Continued
On January 19, 2012, a total of 465,400 shares of restricted common stock were awarded under the
Plan as follows: a total of 175,000 shares to five executive officers; a total of 240,000 shares to six non-employee directors; and a total of 50,400 shares to 31 other officers and employees. For the executive officers, the restricted stock awards
vest in two installments, with two thirds vesting on the second anniversary of the grant and the remaining one third on the third anniversary of the grant. For the non-employee directors, the restricted stock awards vest 100% on the first
anniversary of the grant. For the other officers and employees, the restricted stock awards vest in three equal installments, with one third on each of the next three anniversary dates of the grant. Vesting is subject to the grantees continued
employment with us or, in the case of non-employee directors, the grantee continuing to serve as our director on the aforementioned anniversary dates. All of the awards are subject to accelerated vesting upon the death or disability of the grantee
or upon a change in control of our company, as defined in the restricted stock agreements. The grant date fair value for each restricted stock award was $2.90 per share, or a total fair value of $1.4 million, based on the closing market price of the
common stock on the grant date of January 19, 2012. There were no restricted stock awards made in 2011.
A summary of the activity in
IBCs outstanding restricted common stock follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Per Share
|
|
|
|
|
|
|
$2.35
|
|
|
$2.90
|
|
|
Total
|
|
Outstanding at December 31, 2011
|
|
|
318,100
|
|
|
|
|
|
|
|
318,100
|
|
Shares granted to executive officers
|
|
|
|
|
|
|
175,000
|
|
|
|
175,000
|
|
Shares granted to non-employee directors
|
|
|
|
|
|
|
240,000
|
|
|
|
240,000
|
|
Shares granted to other officers and employees
|
|
|
|
|
|
|
50,400
|
|
|
|
50,400
|
|
Shares forfeited by former employees
|
|
|
(600
|
)
|
|
|
(600
|
)
|
|
|
(1,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012 (1)
|
|
|
317,500
|
|
|
|
464,800
|
|
|
|
782.300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All outstanding shares of restricted common stock were unvested at September 30, 2012 and subject to forfeiture. Shares issued at a price of $2.35 on
December 9, 2010 will vest 100% on December 9, 2013. Shares issued at a price of $2.90 on January 19, 2012 will vest as follows: 256,600 on January 19, 2013, 133,267 on January 19, 2014 and 74,933 on January 19, 2015.
All shares may vest earlier upon the occurrence of certain events as defined in the restricted stock agreements. The record holder of the restricted shares possesses all the rights of a holder of our common stock, including the right to receive
dividends on and to vote the restricted shares. The restricted shares may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated until they become fully vested and transferable in accordance with the
agreements. Shares held by certain executive officers of IBC have further restrictions on transferability as long IBC is a participant in the TARP program.
|
Stock-based compensation expense is recognized on a straight-line basis with a corresponding increase to stockholders equity over
the vesting period of each award and is as follows: for the quarter ended September 30, 2012 and 2011, $309,000 and $78,000, respectively, and for the nine-months ended September 30, 2012 and 2011, $885,000 and $233,000, respectively. At
September 30, 2012, pre-tax, stock-based compensation cost related to all nonvested awards of options and restricted stock not yet recognized totaled $1.1 million and will be recognized over a weighted-average period of approximately 1.6 years.
Note 12 - Deferred Tax Asset
At September 30, 2012 and December 31, 2011, we had a deferred tax asset totaling $32.0 million and $38.8 million,
respectively. The tax asset relates to the unrealized benefit for net temporary differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases that will result in future income tax
deductions as well as an unused net operating loss carryforward (NOL) and Federal AMT credit carryforward, all of which can be applied against and reduce our future taxable income and tax liabilities. At September 30, 2012, the gross NOL
amounted to approximately $21 million for Federal purposes and $52 million for state and local purposes and the Federal AMT credit carryforward amounted to $1.3 million. The NOL carryforwards expire in 2030. The AMT credit carryforward has no
expiration date.
We have determined that a valuation allowance for the deferred tax asset was not required at any time during the reporting
periods in this report because we believe that it is more likely than not that our deferred tax asset will be fully realized.
21
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 12 - Deferred Tax Asset, Continued
This conclusion is based on our prior taxable earnings history (exclusive of the NOL generated in the
second quarter of 2010) coupled with positive evidence (such as taxable earnings generated in 2011 and the first nine months of 2012, and our future projections of taxable income) indicating that we will be able to generate an adequate amount of
future taxable income over a reasonable period of time to fully utilize the deferred tax asset. Our ability to realize our deferred tax asset could be reduced in the future if our estimates of future taxable income from our operations and tax
planning strategies do not support the realization of our deferred tax asset. In addition, the amount of our net operating loss carryforwards and certain other tax attributes realizable for income tax purposes may be reduced under Section 382
of the Internal Revenue Code as a result of future offerings of our capital securities, which could trigger a change in control as defined in Section 382. IBC currently has no plan to issue additional capital securities other than
the issuance of shares of common stock in connection with awards under the Plan discussed in note 11.
Note 13 - Earnings Per Common Share
Net earnings applicable to common stockholders and the weighted-average number of shares used for basic and diluted earnings per common
share computations are summarized in the table that follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine-Months Ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Basic Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings available to common stockholders
|
|
$
|
2,225,000
|
|
|
$
|
2,638,000
|
|
|
$
|
7,347,000
|
|
|
$
|
6,822,000
|
|
Weighted-Average number of common shares outstanding
|
|
|
21,589,744
|
|
|
|
21,126,489
|
|
|
|
21,558,092
|
|
|
|
21,126,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
|
$
|
0.34
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings applicable to common stockholders
|
|
$
|
2,225,000
|
|
|
$
|
2,638,000
|
|
|
$
|
7,347,000
|
|
|
$
|
6,822,000
|
|
Weighted-Average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
21,589,744
|
|
|
|
21,126,489
|
|
|
|
21,558,092
|
|
|
|
21,126,489
|
|
Potential dilutive shares resulting from exercise of warrants /options (1)
|
|
|
978
|
|
|
|
|
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average number of common shares outstanding used for dilution
|
|
|
21,590,722
|
|
|
|
21,126,489
|
|
|
|
21,558,368
|
|
|
|
21,126,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
|
$
|
0.34
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For both periods of 2011, outstanding options/warrants to purchase 1,045,422 shares were not dilutive and were not included in computing diluted earnings per share. For
both periods of 2012, outstanding options/warrants to purchase 1,041,122 shares were not dilutive and were not included in computing diluted earnings per share. Potential dilutive common stock shares consist of shares that may arise from the
exercise of outstanding dilutive common stock warrants and options (the number of which is computed using the treasury stock method).
|
Note 14 - Off-Balance Sheet Financial Instruments
We are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our
customers. These instruments can be in the form of commitments to extend credit, unused lines of credit and standby letters of credit, and may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized
in our financial statements. Our maximum exposure to credit risk is represented by the contractual amount of those instruments. Commitments to extend credit are agreements to lend funds to a customer as long as there is no violation of any condition
established in the contract.
Such commitments generally have fixed expiration dates or other termination clauses and normally require payment
of fees to us. Since some of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customers creditworthiness on a case-by-case
basis. INB from time to time issues standby letters of credit, which are conditional commitments issued by INB to guarantee the performance of a customer to a third party. The credit risk involved in the underwriting of letters of credit is
essentially the same as that involved in originating loans. We had no standby letters of credit outstanding at September 30, 2012 or December 31, 2011.
22
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 14 - Off-Balance Sheet Financial Instruments, Continued
The contractual amounts of off-balance sheet financial instruments are summarized as follows:
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
Unfunded loan commitments
|
|
$
|
27,606
|
|
|
$
|
18,199
|
|
Available lines of credit
|
|
|
693
|
|
|
|
826
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,299
|
|
|
$
|
19,025
|
|
|
|
|
|
|
|
|
|
|
Note 15 - Regulatory Matters and Regulatory Capital
IBC and INB are both currently operating under formal agreements with their primary regulators, including various restrictions arising
therefrom that affect our business. For a discussion of these formal agreements and restrictions, see note 20 the financial statements in our 2011 10-K. At September 30, 2012 and December 31, 2011, we believe that IBC and INB met all
regulatory capital adequacy requirements to which they were subject. As of the date of filing of this report, we are not aware of any conditions or events that would have changed the status of such compliance with those requirements from
September 30, 2012.
Information regarding our regulatory capital and related ratios is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INB
|
|
|
IBC Consolidated
|
|
|
|
At September 30,
|
|
|
At December 31,
|
|
|
At September 30,
|
|
|
At December 31,
|
|
($ in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Tier 1 Capital (1)
|
|
$
|
236,868
|
|
|
$
|
218,590
|
|
|
$
|
242,809
|
|
|
$
|
226,325
|
|
Tier 2 Capital
|
|
|
16,235
|
|
|
|
17,176
|
|
|
|
16,290
|
|
|
|
17,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital (2)
|
|
$
|
253,103
|
|
|
$
|
235,766
|
|
|
$
|
259,099
|
|
|
$
|
243,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net risk-weighted assets
|
|
$
|
1,286,615
|
|
|
$
|
1,360,811
|
|
|
$
|
1,291,033
|
|
|
$
|
1,365,322
|
|
Average assets for regulatory purposes
|
|
$
|
1,789,215
|
|
|
$
|
1,950,445
|
|
|
$
|
1,795,585
|
|
|
$
|
1,958,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
|
19.67
|
%
|
|
|
17.33
|
%
|
|
|
20.07
|
%
|
|
|
17.84
|
%
|
Tier 1 capital to risk-weighted assets
|
|
|
18.41
|
%
|
|
|
16.06
|
%
|
|
|
18.81
|
%
|
|
|
16.58
|
%
|
Tier 1 capital to average assets
|
|
|
13.24
|
%
|
|
|
11.21
|
%
|
|
|
13.52
|
%
|
|
|
11.56
|
%
|
(1)
|
IBCs consolidated Tier 1 capital included $55 million of IBCs outstanding qualifying trust preferred securities and $25 million of IBCs Series A
cumulative perpetual preferred stock held by the U.S. Treasury.
|
(2)
|
See note 10 for a discussion of preferred dividends in arrears totaling $3.8 million at September 30, 2012 and $2.8 million and December 31, 2011. Dividends
in arrears have not been deducted from capital and are recorded as reduction in capital only when they are declared and payable.
|
The table that follows presents information regarding our capital adequacy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Requirements
|
|
|
|
Actual Capital
|
|
|
Minimum Under
Prompt
Corrective
Action
Provisions
|
|
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
|
|
Minimum
Under
Agreement with
OCC
|
|
($ in thousands)
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
Consolidated at September 30, 2012: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
$
|
259,099
|
|
|
|
20.07
|
%
|
|
$
|
103,283
|
|
|
|
8.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Tier 1 capital to risk-weighted assets
|
|
$
|
242,809
|
|
|
|
18.81
|
%
|
|
$
|
51,641
|
|
|
|
4.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Tier 1 capital to average assets
|
|
$
|
242,809
|
|
|
|
13.52
|
%
|
|
$
|
71,823
|
|
|
|
4.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Consolidated at December 31, 2011
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
$
|
243,557
|
|
|
|
17.84
|
%
|
|
$
|
109,226
|
|
|
|
8.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Tier 1 capital to risk-weighted assets
|
|
$
|
226,325
|
|
|
|
16.58
|
%
|
|
$
|
54,613
|
|
|
|
4.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
Tier 1 capital to average assets
|
|
$
|
226,325
|
|
|
|
11.56
|
%
|
|
$
|
78,336
|
|
|
|
4.00
|
%
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
|
|
NA
|
|
INB at September 30, 2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
$
|
253,103
|
|
|
|
19.67
|
%
|
|
$
|
102,929
|
|
|
|
8.00
|
%
|
|
$
|
128,662
|
|
|
|
10.00
|
%
|
|
$
|
154,394
|
|
|
|
12.00
|
%
|
Tier 1 capital to risk-weighted assets
|
|
$
|
236,868
|
|
|
|
18.41
|
%
|
|
$
|
51,465
|
|
|
|
4.00
|
%
|
|
$
|
77,197
|
|
|
|
6.00
|
%
|
|
$
|
128,662
|
|
|
|
10.00
|
%
|
Tier 1 capital to average assets
|
|
$
|
236,868
|
|
|
|
13.24
|
%
|
|
$
|
71,569
|
|
|
|
4.00
|
%
|
|
$
|
89,461
|
|
|
|
5.00
|
%
|
|
$
|
161,029
|
|
|
|
9.00
|
%
|
INB at December 31, 2011
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
$
|
235,766
|
|
|
|
17.33
|
%
|
|
$
|
108,865
|
|
|
|
8.00
|
%
|
|
$
|
136,081
|
|
|
|
10.00
|
%
|
|
$
|
163,297
|
|
|
|
12.00
|
%
|
Tier 1 capital to risk-weighted assets
|
|
$
|
218,590
|
|
|
|
16.06
|
%
|
|
$
|
54,432
|
|
|
|
4.00
|
%
|
|
$
|
81,649
|
|
|
|
6.00
|
%
|
|
$
|
136,081
|
|
|
|
10.00
|
%
|
Tier 1 capital to average assets
|
|
$
|
218,590
|
|
|
|
11.21
|
%
|
|
$
|
78,018
|
|
|
|
4.00
|
%
|
|
$
|
97,522
|
|
|
|
5.00
|
%
|
|
$
|
175,540
|
|
|
|
9.00
|
%
|
(1)
|
Assuming IBC had excluded all of its eligible outstanding trust preferred securities (which totaled $55 million) from its Tier 1 capital and included the entire amount
in its Tier 2 capital, consolidated proforma capital ratios at September 30, 2012 would have been 20.07%, 14.55% and 10.46%, respectively.
|
23
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 15 - Regulatory Matters and Regulatory Capital, Continued
The table that follows presents additional information regarding our capital adequacy at
September 30, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
INB
|
|
|
|
Regulatory Capital
|
|
|
Regulatory Capital
|
|
($ in thousands)
|
|
Actual
|
|
|
Required
|
|
|
Excess
|
|
|
Actual
|
|
|
Required
|
|
|
Excess
|
|
Total capital to risk-weighted assets
|
|
$
|
259,099
|
|
|
$
|
103,283
|
|
|
$
|
155,816
|
|
|
$
|
253,103
|
|
|
$
|
154,394
|
|
|
$
|
98,709
|
|
Tier 1 capital to risk-weighted assets
|
|
$
|
242,809
|
|
|
$
|
51,641
|
|
|
$
|
191,168
|
|
|
$
|
236,868
|
|
|
$
|
128,662
|
|
|
$
|
108,206
|
|
Tier 1 capital to average assets
|
|
$
|
242,809
|
|
|
$
|
71,823
|
|
|
$
|
170,986
|
|
|
$
|
236,868
|
|
|
$
|
161,029
|
|
|
$
|
75,839
|
|
Note 16 - Contingencies
We are periodically a party to or otherwise involved in legal proceedings arising in the normal course of business, such as foreclosure
proceedings. Based on review and consultation with legal counsel, management does not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material effect on our business, results of
operations, financial position or liquidity.
Note 17 - Fair Value Measurements
We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value
disclosures. Currently, we have no assets or liabilities that are recorded at fair value on a recurring basis, such as a securities available for sale portfolio. From time to time, we are required to record at fair value other assets or liabilities
on a non-recurring basis, such as our impaired loans, impaired investment securities and foreclosed real estate. These nonrecurring fair value adjustments involve the application of lower-of-cost-or-market accounting or writedowns of individual
assets. In accordance with GAAP, we group our assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. For level 3, valuations are
generated from model-based techniques that use significant assumptions not observable in the market. These assumptions reflect our estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques
may include the use of discounted cash flow models. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. See note 21 to the financial statements in our 2011 10-K
for a further discussion of valuation levels 1 and 2. All of our assets measured at fair value on a nonrecurring basis use level 3 inputs.
24
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 17 - Fair Value Measurements, Continued
The following tables provide information regarding our assets measured at fair value on a nonrecurring
basis.
|
|
|
|
|
|
|
|
|
|
|
Outstanding Carrying Value
|
|
|
|
At September 30,
2012
|
|
|
At December 31,
2011
|
|
($ in thousands)
|
|
Level 3
|
|
|
Level 3
|
|
Impaired loans (1):
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
44,776
|
|
|
$
|
46,638
|
|
Multifamily
|
|
|
14,728
|
|
|
|
16,776
|
|
Land
|
|
|
2,620
|
|
|
|
2,855
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
|
62,124
|
|
|
|
66,269
|
|
Impaired securities (2)
|
|
|
4,221
|
|
|
|
4,378
|
|
Real estate acquired through foreclosure
|
|
|
21,858
|
|
|
|
28,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Losses (Gains) (3)
|
|
|
|
Accumulated Losses on
Outstanding Balance
as of
|
|
|
Quarter
Ended
September 30,
|
|
|
Nine-Months Ended
September
30,
|
|
($ in thousands)
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
8,624
|
|
|
$
|
10,593
|
|
|
$
|
(254
|
)
|
|
$
|
3,025
|
|
|
$
|
(241
|
)
|
|
$
|
3,267
|
|
Multifamily
|
|
|
3,356
|
|
|
|
3,455
|
|
|
|
(170
|
)
|
|
|
2,336
|
|
|
|
(100
|
)
|
|
|
4,027
|
|
Land
|
|
|
516
|
|
|
|
1,009
|
|
|
|
|
|
|
|
8
|
|
|
|
(493
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
|
12,496
|
|
|
|
15,057
|
|
|
|
(424
|
)
|
|
|
5,369
|
|
|
|
(834
|
)
|
|
|
7,302
|
|
Impaired securities
|
|
|
3,808
|
|
|
|
3,651
|
|
|
|
|
|
|
|
96
|
|
|
|
157
|
|
|
|
201
|
|
Foreclosed real estate
|
|
|
5,328
|
|
|
|
6,037
|
|
|
|
1,025
|
|
|
|
512
|
|
|
|
2,933
|
|
|
|
1,790
|
|
(1)
|
Comprised of all nonaccrual loans and accruing TDRs. Outstanding carrying value excludes a specific valuation allowance included in the overall allowance for loan
losses. See note 4 to the financial statements included in this report on Form 10-Q.
|
(2)
|
Comprised of certain held-to maturity investments in trust preferred securities considered other than temporarily impaired. See note 3 to the financial statements
included in this report on Form 10-Q.
|
(3)
|
Represents total losses recognized on all assets measured at fair value on a nonrecurring basis during the period indicated. The losses for impaired loans represent the
change (before net chargeoffs) during the period in the corresponding specific valuation allowance, while the losses for foreclosed real estate represent writedowns in carrying values subsequent to foreclosure (recorded as provisions for real estate
losses) adjusted for any gains or losses from the transfer/sale of the properties during the period. The losses on investment securities represent OTTI charges recorded as a component of noninterest income as described in note 3 to the financial
statements in this report on Form 10-Q.
|
The following table presents information regarding the change in assets measured at fair value on a nonrecurring basis for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Impaired
Securities
|
|
|
Impaired
Loans
|
|
|
Foreclosed
Real Estate
|
|
Quarter Ended September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2012
|
|
$
|
4,221
|
|
|
$
|
65,240
|
|
|
$
|
26,370
|
|
Net new impaired loans
|
|
|
|
|
|
|
872
|
|
|
|
|
|
Impaired loans transferred to foreclosed real estate
|
|
|
|
|
|
|
(1,457
|
)
|
|
|
1,457
|
|
Principal repayments/sales
|
|
|
|
|
|
|
(1,983
|
)
|
|
|
(4,944
|
)
|
Chargeoffs of impaired loans
|
|
|
|
|
|
|
(548
|
)
|
|
|
|
|
Writedowns of carrying value subsequent to foreclosure
|
|
|
|
|
|
|
|
|
|
|
(1,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2012
|
|
$
|
4,221
|
|
|
$
|
62,124
|
|
|
$
|
21,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months Ended September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
$
|
4,378
|
|
|
$
|
66,269
|
|
|
$
|
28,278
|
|
Net new impaired loans
|
|
|
|
|
|
|
8,254
|
|
|
|
|
|
Impaired loans transferred to foreclosed real estate
|
|
|
|
|
|
|
(1,457
|
)
|
|
|
1,457
|
|
Other than temporary impairment write downs
|
|
|
(157
|
)
|
|
|
|
|
|
|
|
|
Principal repayments/sales
|
|
|
|
|
|
|
(8,466
|
)
|
|
|
(4,944
|
)
|
Chargeoffs of impaired loans
|
|
|
|
|
|
|
(2,476
|
)
|
|
|
|
|
Writedowns of carrying value subsequent to foreclosure
|
|
|
|
|
|
|
|
|
|
|
(2,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2012
|
|
$
|
4,221
|
|
|
$
|
62,124
|
|
|
$
|
21,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 17 - Fair Value Measurements, Continued
The following table presents information regarding the change in assets measured at fair value on a
nonrecurring basis for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Impaired
Securities
|
|
|
Impaired
Loans
|
|
|
Foreclosed
Real Estate
|
|
Quarter Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011
|
|
$
|
4,475
|
|
|
$
|
50,971
|
|
|
$
|
25,786
|
|
Net new impaired loans
|
|
|
|
|
|
|
21,723
|
|
|
|
|
|
Other than temporary impairment writedowns
|
|
|
(96
|
)
|
|
|
|
|
|
|
|
|
Principal repayments/sales
|
|
|
|
|
|
|
(3,988
|
)
|
|
|
|
|
Chargeoffs of impaired loans
|
|
|
|
|
|
|
(1,667
|
)
|
|
|
|
|
Impaired loans transferred to foreclosed real estate
|
|
|
|
|
|
|
(1,731
|
)
|
|
|
1,731
|
|
Gain on transfers of impaired loans at estimate fair value
|
|
|
|
|
|
|
|
|
|
|
189
|
|
Writedowns of carrying value subsequent to foreclosure
|
|
|
|
|
|
|
|
|
|
|
(701
|
)
|
All other
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
4,378
|
|
|
$
|
65,308
|
|
|
$
|
27,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Months Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
4,580
|
|
|
$
|
56,555
|
|
|
$
|
27,064
|
|
Net new impaired loans
|
|
|
|
|
|
|
30,524
|
|
|
|
|
|
Other than temporary impairment writedowns
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
Principal repayments/sales
|
|
|
|
|
|
|
(12,603
|
)
|
|
|
|
|
Chargeoffs of impaired loans
|
|
|
|
|
|
|
(7,437
|
)
|
|
|
|
|
Impaired loans transferred to foreclosed real estate
|
|
|
|
|
|
|
(1,731
|
)
|
|
|
1,731
|
|
Gain on transfers of impaired loans at estimate fair value
|
|
|
|
|
|
|
|
|
|
|
189
|
|
Writedowns of carrying value subsequent to foreclosure
|
|
|
|
|
|
|
|
|
|
|
(1,979
|
)
|
All other
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
4,378
|
|
|
$
|
65,308
|
|
|
$
|
27,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We are required by GAAP to disclose the estimated fair value of each class of our financial instruments for which it is practicable to
estimate. The fair value of a financial instrument is the current estimated amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for our various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Additionally, the estimated fair
value of our non-financial instruments is excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented in the table that follows may not necessarily represent the underlying fair value of our Company.
The fair value estimates shown in the table that follows are made at a specific point in time based on available information. Where
available, quoted market prices are used, which are level 1 valuations. A significant portion of our financial instruments, such as our mortgage loans, do not have an active marketplace in which they can be readily sold or purchased to determine
fair value. Consequently, fair value estimates for such instruments are based on assumptions made by us that include the instruments credit risk characteristics and future estimated cash flows and prevailing interest rates, which are level 3
valuations. As a result, these fair value estimates are subjective in nature, involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Accordingly, changes in any of our assumptions could cause
the fair value estimates to deviate substantially.
A discussion regarding the assumptions used to compute the estimated fair values disclosed
in the table that follows can be found in note 21 to the financial statements in our 2011 10-K. Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of
anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
26
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 17 - Fair Value Measurements, Continued
The carrying and estimated fair values of our financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
|
At December 31, 2011
|
|
($ in thousands)
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1)
|
|
$
|
94,268
|
|
|
$
|
94,268
|
|
|
$
|
29,863
|
|
|
$
|
29,863
|
|
Time deposits with banks (1)
|
|
|
3,670
|
|
|
|
3,670
|
|
|
|
1,470
|
|
|
|
1,470
|
|
Securities held to maturity, net (2)
|
|
|
440,002
|
|
|
|
438,710
|
|
|
|
700,444
|
|
|
|
698,804
|
|
FRB and FHLB stock (3)
|
|
|
8,457
|
|
|
|
8,457
|
|
|
|
9,249
|
|
|
|
9,249
|
|
Loans receivable, net (3)
|
|
|
1,126,789
|
|
|
|
1,149,004
|
|
|
|
1,133,375
|
|
|
|
1,167,523
|
|
Loan fees receivable (3)
|
|
|
3,433
|
|
|
|
2,790
|
|
|
|
4,188
|
|
|
|
3,454
|
|
Accrued interest receivable (3)
|
|
|
6,117
|
|
|
|
6,117
|
|
|
|
7,216
|
|
|
|
7,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Assets
|
|
$
|
1,682,736
|
|
|
|
1,703,016
|
|
|
$
|
1,885,805
|
|
|
$
|
1,917,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits (3)
|
|
$
|
1,432,209
|
|
|
|
1,463,569
|
|
|
$
|
1,662,024
|
|
|
$
|
1,705,419
|
|
Borrowed funds plus accrued interest payable (3)
|
|
|
69,487
|
|
|
|
69,210
|
|
|
|
78,606
|
|
|
|
78,331
|
|
Accrued interest payable on deposits (3)
|
|
|
1,967
|
|
|
|
1,967
|
|
|
|
3,676
|
|
|
|
3,676
|
|
Off-Balance Sheet Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to lend (3)
|
|
|
599
|
|
|
|
599
|
|
|
|
589
|
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Liabilities
|
|
|
1,504,262
|
|
|
$
|
1,535,345
|
|
|
$
|
1,744,895
|
|
|
$
|
1,788,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Financial Assets
|
|
$
|
178,474
|
|
|
$
|
167,671
|
|
|
$
|
140,910
|
|
|
$
|
129,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We consider these fair value measurements to be Level 1.
|
(2)
|
We consider these fair value measurements to be Level 1, except for our trust preferred security investments held to maturity which are considered Level 3.
|
(3)
|
We consider these fair value measurements to be Level 3.
|
Note 18 - Recent Accounting Standards Update
In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2011-03 Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements, which applies to all public entities that enter into agreements to transfer financial assets that both entitle and obligate the
transferor to repurchase or redeem the financial assets before their maturity. The amendments do not affect other transfers of financial assets. ASU 2011-03 removes from the assessment of effective control the criterion relating to the
transferors ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. Consequently, it also eliminates the requirement to demonstrate that the transferor possesses
adequate collateral to fund substantially all the cost of purchasing replacement financial assets. ASU 2011-03 became effective January 1, 2012 and is to be applied prospectively to transactions or modifications of existing transactions that
occur on or after such date. We adopted ASU 2011-03 on January 1, 2012 and it had no impact on our consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04 Fair Value Measurement: Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 applies to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument
classified in a reporting entitys shareholders equity in the financial statements. ASU 2011-04 is expected to result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, it changes the
wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments clarify the application of existing fair value measurement requirements.
Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements, including the following: (1) measuring the fair value of financial instruments that are managed
within a portfolio; (2) application of premiums and discounts in a fair value measurement; and (3) additional disclosures about fair value measurements. ASU 2011-04 became effective for interim and annual periods beginning after
December 15, 2011 and is to be applied prospectively. We adopted ASU 2011-04 on January 1, 2012 and it had no impact on our consolidated financial statements other than to increase financial disclosures already provided.
27
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 18 - Recent Accounting Standards Update, Continued
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive
Income. ASU No. 2011-05 allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive
income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive
income, and a total amount for comprehensive income. The statement(s) are required to be presented with equal prominence as the other primary financial statements. ASU No. 2011-05 eliminates the option to present the components of other
comprehensive income as part of the statement of changes in shareholders equity but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
The provisions of ASU No. 2011-05 became effective for interim reporting periods beginning on or after December 15, 2011, with retrospective application required. We adopted ASU No. 2011-05 on January 1, 2012 and it had no impact
on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for
Impairment. ASU No. 2011-08 permits an entity an option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity
believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further impairment testing is
required. ASU No. 2011-08 includes examples of events and circumstances that may indicate that a reporting units fair value is less than its carrying amount. ASU No. 2011-08 became effective for annual and interim goodwill impairment
tests performed for fiscal years beginning after December 15, 2011. We adopted ASU No. 2011-08 on January 1, 2012 and it had no impact on our consolidated financial statements. We have never had any goodwill.
In December 2011, ASU No. 2011-12 Deferral of the Effective Date for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05 was issued. In order to defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this ASU
supersede certain pending paragraphs in ASU 2011-05. The amendments were made to allow the FASB time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive
income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial
statement users for additional information about reclassification adjustments, entities are required to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before
ASU 2011-05. All other requirements in ASU 2011-05 are not affected by this ASU, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The
provisions of ASU 2011-123 have no impact on our consolidated financial statements.
28
Intervest Bancshares Corporation and Subsidiaries
Review by Independent Registered Public Accounting Firm
Hacker, Johnson & Smith P.A., P.C., our independent registered public accounting firm, has made a limited review of our financial data as of September 30, 2012 and for the three- and
nine-month periods ended September 30, 2012 and 2011 presented in this document, in accordance with the standards established by the Public Company Accounting Oversight Board.
The report of Hacker, Johnson & Smith P.A., P.C. furnished pursuant to Article 10 of Regulation S-X is included on the following
page herein.
29