IBCA (MM)

Intervest Bancshares Corporation (NASDAQ-GS:IBCA), parent company of Intervest National Bank, today reported that its net earnings for the fourth quarter of 2012 increased to $3.1 million, or $0.14 per common share, from $2.7 million, or $0.13 per share, for the fourth quarter of 2011, and net earnings for the full year 2012 increased to $10.4 million, or $0.48 per share, from $9.5 million, or $0.45 per share, for 2011.

Key Points Follow:

• Intervest National Bank's regulatory capital ratios continued to increase through the retention of earnings and a planned gradual reduction in the size of its balance sheet. The Bank's ratios at December 31, 2012 were as follows: Tier One Leverage - 14.44%; Tier One Risk-Based - 19.80%; and Total Risk-Based Capital - 21.06%; well above its minimum requirements of 9%, 10% and 12%, respectively. The Bank's Tier One capital amounted to $244 million and was $92 million in excess of the required minimum for the Tier One Leverage ratio.
• The net interest margin (exclusive of loan prepayment income) increased to 2.47% in Q4-12 and 2.29% for 2012, from 2.22% in Q4-11 and 2.18% for 2011.
• Net interest and dividend income, which was affected by a smaller balance sheet, decreased to $9.7 million in Q4-12 from $10.6 million in Q4-11, and to $39.2 million in 2012 from $42.3 million in 2011.
• New loan originations increased to $242 million in 2012, from $82 million in 2011, while total repayments increased to $291 million in 2012 from $243 million in 2011.
• Nonaccrual loans decreased to $46 million at December 31, 2012, from $57 million at December 31, 2011. Nonaccrual loans include certain restructured loans (TDRs) that are current as to payments and performing in accordance with their renegotiated terms, but are required to be classified nonaccrual based on regulatory guidance. At December 31, 2012, such loans totaled $36 million compared to $46 million at December 31, 2011. These loans were yielding approximately 5% at December 31, 2012.
• Real estate owned through foreclosure (REO) decreased to $15.9 million at December 31, 2012, from $28.3 million at December 31, 2011, reflecting $12.9 million of sales and $4.1 million of writedowns in carrying value, partially offset by $4.6 million of additions.
• Provisions for loan and real estate losses decreased to a total of $1.1 million in Q4-12 from $1.4 million in Q4-11, and to $4.1 million in 2012 from $8.4 million in 2011.
• Operating expenses increased to $4.2 million in Q4-12, from $3.8 million in Q4-11, and to $16.7 million in 2012, from $15.9 million in 2011. Despite the increases, the Company's efficiency ratio (which measures its ability to control expenses as a percentage of revenues) continued to be favorable and was 35% for Q4-12 and 37% for 2012.
• Book value per common share (after subtracting preferred dividends in arrears) increased to $8.44 at December 31, 2012.

Net earnings for Q4-12 increased by $0.4 million from Q4-11 due to the following: a $1.5 million increase in noninterest income (due to a $1.9 million increase in loan prepayment income partially offset by a $0.4 million security impairment charge); a $0.3 million decrease in the provision for loan and real estate losses; and a $0.3 million decrease in real estate expenses associated with REO. The sum of these items was partially offset by a $0.9 million decrease in net interest and dividend income (as detailed below), a $0.4 million increase in operating expenses (primarily due to a $0.3 million aggregate increase in salaries, benefits and stock compensation expense including the impact of several new officer positions filled during 2012) and a $0.3 million increase in income tax expense (due to higher pre-tax income).

Net interest and dividend income for Q4-12 decreased due to a smaller balance sheet. In Q4-12, average interest-earning assets decreased by $339 million from Q4-11, reflecting decreases of $79 million in loans and $260 million in total securities and overnight investments. At the same time, average deposits and borrowed funds decreased by $272 million and $15 million, respectively, while stockholders' equity increased by $13 million. The net interest margin benefited from a 31 basis point improvement in the interest rate spread, partially offset by a $52 million decrease in net average interest-earning assets (due to a higher level of cash on hand). The spread increased due to a steady reduction in rates paid on deposits and run off of higher-cost CDs and borrowings, largely offset by payoffs of higher yielding loans and calls of security investments, coupled with the re-investment of a large portion of these cash inflows into new loans and securities at lower market interest rates. Overall, the average cost of funds decreased by 40 basis points to 2.22% in Q4-12, from 2.62% in Q4-11, while the average yield on earning assets decreased at a slower pace or by 9 basis points to 4.54% in Q4-12, from 4.63% in Q4-11.

Net earnings for 2012 increased by $0.9 million over 2011 due to a $5.0 million decrease in the provision for loan losses (primarily due to fewer loans outstanding and fewer credit rating downgrades) and a $1.8 million increase in noninterest income (primarily due to a $2.6 million increase in loan prepayment income partially offset by a $0.4 million increase in security impairment charges). The sum of these items was partially offset by: a $3.1 million decrease in net interest and dividend income (due to a smaller balance sheet); a $0.7 million increase in the provision for real estate losses (due to lower estimated values on REO); a $0.5 million increase in real estate expenses associated with REO; a $0.8 million increase in operating expenses (primarily due to a $1.4 million aggregate increase in salaries, benefits and stock compensation expense including the impact of increased officers during 2012, partially offset by a $0.7 million decrease in FDIC insurance expense); and a $0.8 million increase in income tax expense (due to higher pre-tax income).

Total assets at December 31, 2012 decreased to $1.67 billion from $1.97 billion at December 31, 2011, primarily reflecting a $257 million decrease in security investments and a $56 million decrease in loans, partially offset by a $31 million increase in cash and short-term investments.

Securities held to maturity decreased to $444 million at December 31, 2012 from $700 million at December 31, 2011, reflecting calls of securities exceeding new purchases. The bulk of the resulting proceeds were used to fund planned deposit outflow and repayments of borrowings and a portion was being held temporarily in cash and short-term investments. At December 31, 2012, the securities portfolio, which represented 27% of total assets and was comprised almost entirely of U.S. government agency debt ($355 million) and residential mortgage-backed pass through securities ($84 million), had a weighted-average expected yield, remaining life and remaining contractual maturity of 1.05%, 2.0 years and 7.1 years, respectively.

Loans totaled $1.11 billion at December 31, 2012, compared to $1.16 billion at December 31, 2011. The decrease reflected $249 million of payoffs, $42 million of amortization, $2.3 million of net chargeoffs and $4.7 million of transfers to REO, mostly offset by $242 million of new loans. Loans paid off had a weighted-average yield of 6.15%. New loans, nearly all with fixed interest rates, had a weighted-average yield, term and loan-to-value ratio of 4.87%, 5.8 years and 56%, respectively.

Nonaccrual loans and REO aggregated to $62 million, or 3.7% of total assets, at December 31, 2012, compared to $86 million, or 4.3%, at December 31, 2011. Nonaccrual loans totaled $46 million at December 31, 2012, down from $57 million at December 31, 2011. Nonaccrual loans included $36 million (10 loans) and $46 million (12 loans) of TDRs that were current at each date, respectively. All the TDRs classified as nonaccrual have performed as agreed under their renegotiated terms and interest income is being recorded on a cash basis. Based on annual updated appraisals received on the underlying collateral properties, a portion of five TDRs (or $2.0 million of aggregate principal) was charged off for financial statement purposes during 2012. The borrowers remain obligated to pay all contractual principal due on the TDRs.

The allowance for loan losses at December 31, 2012 was $28.1 million, representing 2.54% of total net loans, compared to $30.4 million, or 2.61%, at December 31, 2011. The allowance included specific reserves for impaired loans (comprised of all nonaccrual loans as well as accruing TDRs) at each date totaling $6 million and $8 million, respectively.

At December 31, 2012, the Company had a deferred tax asset totaling $29 million, which included remaining unused NOL and AMT credit carryforwards totaling $17 million for Federal tax purposes and $47 million for State and Local tax purposes. These carryforwards are available to reduce taxes payable on the Company's future taxable income.

Deposits at December 31, 2012 decreased to $1.36 billion from $1.66 billion at December 31, 2011, primarily reflecting a $262 million decrease in CD accounts, of which $50 million were brokered. At December 31, 2012, there were $78 million of brokered CDs outstanding with a rate of 4.91%, of which $38 million mature within one year.

Borrowed funds and related interest payable at December 31, 2012 decreased to $62.9 million, from $78.6 million at December 31, 2011, due to the repayment of $17.5 million of FHLB borrowings, partially offset by a $1.9 million increase in accrued interest payable on trust preferred securities (TRUPs). Stockholders' equity increased to $211 million at December 31, 2012 from $198 million at December 31, 2011, primarily due to $12.2 million of net earnings before preferred dividend requirements.

Since February 2010, as required by its regulator and as permitted by the underlying documents, the Company has suspended the payment of interest on $55 million of its debt in the form of TRUPs and the declaration and payment of dividends on $25 million of its preferred stock held by the U.S. Treasury (TARP). Late last year, the Treasury announced that it will continue to conduct periodic, individual auctions of TARP securities, including those of 53 named institutions, one of which was the Company. Although the precise timing of any auction is not known, the Company and its subsidiary bank have applied for the necessary approvals from their respective regulators to permit the Company to bid for the preferred stock in any such auction. There is no assurance that such approvals will be granted.

Intervest Bancshares Corporation (IBC) is a bank holding company. Its operating subsidiary is Intervest National Bank (INB), a nationally chartered commercial bank that has its headquarters and full-service banking office at One Rockefeller Plaza, in New York City, and a total of six full-service banking offices in Clearwater and Gulfport, Florida. IBC's Common Stock is listed on the NASDAQ Global Select Market: Trading Symbol IBCA. This release may contain forward-looking information. Words such as "may," "will," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," "project," "assume," "indicate," "continue," "target," "goal," and similar words or expressions of the future are intended to identify forward-looking statements. Except for historical information, the matters discussed herein are subject to certain risks and uncertainties that may adversely affect our business, financial condition and results of operations. The following factors, among others, could cause actual results to differ materially from those set forth in forward looking statements: the regulatory agreements to which IBC and INB are currently subject to and any operating restrictions arising therefrom including availability of regulatory approvals or waivers; changes in economic conditions and real estate values both nationally and in our market areas; changes in our borrowing facilities, volume of loan originations and deposit flows; changes in the levels of our non-interest income and provisions for loan and real estate losses; changes in the composition and credit quality of our loan portfolio; legislative or regulatory changes, including increased expenses arising therefrom; changes in interest rates which may reduce our net interest margin and net interest income; increases in competition; technological changes which we may not be able to implement; changes in accounting or regulatory principles, policies or guidelines; changes in tax laws and our ability to utilize our deferred tax asset, including NOL and AMT carryforwards; and our ability to attract and retain key members of management. Reference is made to IBC's filings with the SEC for further discussion of risks and uncertainties regarding our business. We assume no obligation to update any forward looking statements. Historical results are not necessarily indicative of our future prospects.

Selected Consolidated Financial Information Follows.

 

INTERVEST BANCSHARES CORPORATION

Selected Consolidated Financial Information (Dollars in thousands, except per share amounts)   Quarter Ended   Year Ended December 31,   December 31, Selected Operating Data:   2012   2011   2012   2011 Interest and dividend income $17,798   $22,166 $77,284   $92,837 Interest expense 8,103   11,524   38,067   50,540 Net interest and dividend income 9,695 10,642 39,217 42,297 Provision for loan losses - 40 - 5,018 Noninterest income 2,476 974 6,194 4,308 Noninterest expenses: Provision for real estate losses 1,135 1,370 4,068 3,349 Real estate expenses 324 619 2,146 1,619 Operating expenses 4,195   3,774   16,668   15,861 Earnings before income taxes 6,517 5,813 22,529 20,758 Provision for income taxes 2,987   2,679   10,307   9,512 Net earnings before preferred dividend requirements 3,530 3,134 12,222 11,246 Preferred dividend requirements (1) 456   440   1,801   1,730 Net earnings available to common stockholders $ 3,074   $ 2,694   $ 10,421   $ 9,516 Basic and diluted earnings per common share   $0.14   $0.13   $0.48   $0.45 Average shares used for basic earnings per share 21,589,589 21,125,289 21,566,009 21,126,187 Average shares used for diluted earnings per share (2) 21,594,468 21,125,289 21,568,196 21,126,187 Common shares outstanding at end of period 21,589,589 21,125,289 21,589,589 21,125,289 Common stock options/warrants outstanding at end of period (2)   1,078,122   1,085,622   1,078,122   1,085,622 Yield on interest-earning assets 4.54% 4.63% 4.51% 4.80% Cost of funds 2.22% 2.62% 2.40% 2.83% Net interest margin (3)   2.47%   2.22%   2.29%   2.18% Return on average assets (annualized) 0.82% 0.63% 0.66% 0.56% Return on average common equity (annualized) 7.67% 7.31% 6.82% 6.74% Effective income tax rate 46% 46% 46% 46% Efficiency ratio (4)   35%   32%   37%   34% Average loans outstanding $1,112,357 $1,191,177 $1,149,689 $1,258,454 Average securities outstanding 437,604 700,221 555,777 665,608 Average short-term investments outstanding 10,350 7,658 8,273 11,806 Average assets outstanding   1,712,892   1,984,615   1,839,727   2,023,957 Average interest-bearing deposits outstanding $1,395,622 $1,668,111 $1,522,625 $1,707,150 Average borrowings outstanding 59,452 74,202 65,789 78,298 Average stockholders' equity   208,691   195,576   203,647   190,954

At Dec 31,

At Sep 30,

At Jun 30,

At Mar 31,

At Dec 31,

Selected Financial Condition Information: 2012   2012   2012   2012   2011 Total assets $1,665,792 $1,751,880 $1,862,110 $1,909,052 $1,969,540 Cash and short-term investments 60,395 94,268 122,378 89,839 29,863 Securities held to maturity 443,777 440,002 535,056 590,959 700,444 Loans, net of unearned fees 1,107,466 1,155,171 1,137,780 1,155,437 1,163,790 Allowance for loan losses 28,103 28,382 28,844 29,169 30,415 Allowance for loan losses/net loans 2.54% 2.46% 2.54% 2.52% 2.61% Deposits 1,362,619 1,432,209 1,554,615 1,599,653 1,662,024 Borrowed funds and accrued interest payable 62,930 69,487 72,528 72,064 78,606 Preferred stockholder's equity 24,624 24,528 24,431 24,335 24,238 Common stockholders' equity 186,323 182,580 179,690 176,716 173,293 Common book value per share (5) 8.44   8.28   8.16   8.04   8.07 Loan chargeoffs for the quarter $ 676 $ 548 $498 $1,430 $2,044 Loan recoveries for the quarter 397 86 173 184 54 Real estate chargeoffs for the quarter 1,124 3,642 - - - Security impairment writedowns for the quarter 425   -   -   157   - Nonaccrual loans (6) $45,898 $47,957 $50,643 $53,208 $57,240 Real estate owned, net of valuation allowance 15,923 21,858 26,370 27,767 28,278 Investment securities on a cash basis 3,721 4,221 4,221 4,221 4,378 Accruing troubled debt restructured (TDR) loans (7). 20,076 14,167 14,596 8,980 9,030 Loans 90 days past due and still accruing 4,391 6,503 5,290 2,798 1,925 Loans 60-89 days past due and still accruing - 15,477 1,902 6,303 3,894 Loans 31-59 days past due and still accruing 15,497   50   -   11,840   24,876 (1)   Represents dividend requirements on cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount. (2) Outstanding options/warrants to purchase 997,622 shares and 1,085,622 shares were not dilutive for the 2012 and 2011 periods, respectively. (3) Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of such income, the margin would compute to 3.08%, 2.33%, 2.59% and 2.31%, respectively. (4) Represents operating expenses as a percentage of net interest and dividend income plus noninterest income. (5) Represents common stockholders' equity less preferred dividends in arrears of $4.2 million, $3.8 million, $3.5 million, $3.1 million and $2.8 million, respectively, divided by common shares outstanding. (6) Include performing TDRs maintained on nonaccrual status of $36 million, $39 million, $39 million, $44 million and $46 million, respectively. (7) Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments, or extension of maturity date. All loans were performing and current as of December 31, 2012 and were yielding approximately 5%.    

INTERVEST BANCSHARES CORPORATION

Consolidated Financial Highlights

At or For The Period Ended Year   Year   Year   Year   Year Ended Ended Ended Ended Ended

($ in thousands, except per share amounts)

Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,

 

2012   2011   2010   2009   2008 Balance Sheet Highlights: Total assets $1,665,792 $1,969,540 $2,070,868 $2,401,204 $2,271,833 Cash and short-term investments 60,395 29,863 23,911 7,977 54,903 Securities held to maturity 443,777 700,444 614,335 634,856 475,581 Loans, net of unearned fees 1,107,466 1,163,790 1,337,326 1,686,164 1,705,711 Allowance for loan losses 28,103 30,415 34,840 32,640 28,524 Allowance for loan losses/net loans 2.54% 2.61% 2.61% 1.94% 1.67% Deposits 1,362,619 1,662,024 1,766,083 2,029,984 1,864,135 Borrowed funds and accrued interest payable 62,930 78,606 84,676 118,552 149,566 Preferred stockholder's equity 24,624 24,238 23,852 23,466 23,080 Common stockholders' equity 186,323 173,293 162,108 190,588 188,894 Common book value per share (1) 8.44 8.07 7.61 23.04 22.84 Market price per common share 3.89   2.65   2.93   3.28   3.99 Asset Quality Highlights Nonaccrual loans $45,898 $57,240 $52,923 $123,877 $108,610 Real estate owned, net of valuation allowance 15,923 28,278 27,064 31,866 9,081 Investment securities on a cash basis 3,721 4,378 2,318 1,385 - Accruing troubled debt restructured loans (2) 20,076 9,030 3,632 97,311 - Loans past due 90 days and still accruing 4,391 1,925 7,481 6,800 1,964 Loans past due 31-89 days and still accruing 15,497 28,770 11,364 5,925 18,943 Loan chargeoffs 3,152 9,598 100,146 8,103 4,227 Loan recoveries 840 155 883 1,354 - Real estate chargeoffs 4,766 - 15,614 - - Impairment writedowns on security investments 582   201   1,192   2,258   - Statement of Operations Highlights: Interest and dividend income $77,284 $92,837 $107,072 $123,598 $128,497 Interest expense 38,067   50,540   62,692   81,000   90,335 Net interest and dividend income 39,217 42,297 44,380 42,598 38,162 Provision for loan losses - 5,018 101,463 10,865 11,158 Noninterest income 6,194 4,308 2,110 297 5,026 Noninterest expenses: Provision for real estate losses 4,068 3,349 15,509 2,275 518 Real estate expenses 2,146 1,619 4,105 4,945 4,281 Operating expenses 16,668   15,861   19,069   19,864   14,074 Earnings (loss) before income taxes 22,529 20,758 (93,656) 4,946 13,157 Provision (benefit) for income taxes 10,307   9,512   (40,348)   1,816   5,891 Net earnings (loss) before preferred dividend requirements 12,222 11,246 (53,308) 3,130 7,266 Preferred dividend requirements (3) 1,801   1,730   1,667   1,632   41 Net earnings (loss) available to common stockholders $10,421   $ 9,516   $(54,975)   $ 1,498   $ 7,225 Basic earnings (loss) per common share $0.48 $0.45 $(4.95) $0.18 $0.87 Diluted earnings (loss) per common share $0.48 $0.45 $(4.95) $0.18 $0.87 Average common shares used to calculate: Basic earnings (loss) per common share 21,566,009 21,126,187 11,101,196 8,270,812 8,259,091 Diluted earnings (loss) per common share 21,568,196 21,126,187 11,101,196 8,270,812 8,267,781 Common shares outstanding 21,589,589   21,125,289   21,126,489   8,270,812   8,270,812 Other ratios: Net interest margin (4) 2.29% 2.18% 2.11% 1.83% 1.79% Return on average assets 0.66% 0.56% -2.42% 0.13% 0.34% Return on average common equity 6.82% 6.74% -32.20% 1.65% 3.94% Effective income tax rate 46% 46% 43% 37% 45% Efficiency ratio (5) 37%   34%   41%   46%   33% (1)   Represents common stockholders' equity less preferred dividends in arrears ($4.2 million at December 31, 2012, $2.8 million at December 31, 2011 and $1.4 million at December 31, 2010) divided by common shares outstanding. (2) Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments. (3) Represents dividend requirements on cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount. (4) Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of such income, the margin would compute to 2.59%, 2.31%, 2.17%, 1.89% and 1.90%, respectively. (5) Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.