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Intervest Bancshares Corporation Reports 2010 Fourth Quarter Earnings

Date : 01/18/2011 @ 9:00AM
Source : Business Wire
Stock : Intervest Bancshares Corp. (MM) (IBCA)
Quote : 8.01  0.0 (0.00%) @ 1:17PM
Intervest Bancshares share price Chart

Intervest Bancshares Corporation Reports 2010 Fourth Quarter Earnings

Intervest Bancshares (NASDAQ:IBCA)
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Intervest Bancshares Corporation (NASDAQ-GS: IBCA), parent company of Intervest National Bank, today reported its financial results for the fourth quarter of 2010.

Financial Highlights:

  • Net earnings for the fourth quarter of 2010 ("Q4-10") amounted to $0.4 million, or $0.02 per diluted common share, compared to a net loss of $0.7 million, or $0.07 per share, for the third quarter of 2010 ("Q3-10"), and net earnings of $0.3 million, or $0.04 per share, for the same quarter a year ago ("Q4-09").
  • Pre-tax earnings before deducting provisions for loan and real estate losses and real estate expenses amounted to $6.6 million in Q4-10, compared to $4.9 million in Q3-10 and $7.8 million in Q4-09.
  • Net interest margin for Q4-10 was 2.06%, compared to 1.98% in Q3-10 and 2.04% in Q4-09.
  • Nonaccrual loans and real estate owned totaled $80 million at December 31, 2010, up only slightly from $77 million at September 30, 2010 despite one loan for $14 million being placed on nonaccrual status in Q4-10, and down substantially from $156 million at December 31, 2009.
  • The allowance for loan losses increased to 2.61% of total outstanding loans at December 31, 2010, up from 2.37% at September 30, 2010 and 1.94% at December 31, 2009.
  • The Company continued to control its non-interest expenses despite substantial increases in FDIC deposit insurance premiums and regulatory compliance costs. Inclusive of these higher costs, noninterest expense amounted to $4.9 million in Q4-10, compared to $5.2 million in Q3-10 and $4.4 million in Q4-09.
  • The Company completed the sale of common stock in a public offering in Q4-10 that raised $21 million of new capital, most of which was down streamed to Intervest National Bank to strengthen its capital. At December 31, 2010, the Bank's regulatory capital ratios were well in excess of its regulatory minimums and were as follows: total capital to risk-weighted assets – 14.22%; Tier 1 capital to risk-weighted assets – 12.96%; and Tier 1 capital to total average assets (leverage ratio) – 9.61%. The Bank's regulatory minimum capital ratios are 12%, 10% and 9%, respectively.
  • Common book value per share was $7.61 at December 31, 2010.

Net earnings in Q4-10 increased by $0.1 million over Q4-09. The results were favorably impacted by a $0.9 million decrease in real estate expenses (due to a lower level of nonperforming assets), a $0.8 million decrease in the total provision for loan and real estate losses (reflecting a lower level of problem loans and credit rating downgrades), and a $1.0 million increase in noninterest income (due to $0.4 million of non-recurring fees and a $0.5 million decrease in security impairment charges). The aggregate of these items was nearly offset by a $1.7 million decrease in net interest and dividend income, a $0.5 million increase in noninterest expenses (primarily due to higher FDIC insurance premiums) and a $0.4 million increase in income tax expense (primarily due to higher pre-tax income).

The decrease in net interest and dividend income reflected the impact of the planned reduction in the size of the Company's balance sheet as well as the sale of performing loans as part of a bulk sale in May 2010, partially offset by an improved net interest margin as noted above. The increased margin resulted from lower rates paid on deposits, largely offset by calls of higher yielding U.S. government agency security investments (coupled with the reinvestment of the proceeds into similar securities with lower interest rates) and the sale of loans yielding approximately 5%. The yield on average interest-earning assets decreased by 36 basis points to 4.89% in Q4-10, from 5.25% in Q4-09, while the average cost of funds decreased at a greater pace or by 51 basis points to 3.03% in Q4-10, from 3.54% in Q4-09.

For the full year 2010, the Company had a net loss of $55.0 million, or $4.95 per diluted common share, compared to net earnings of $1.5 million, or $0.18 per share, for 2009. The net loss for 2010 was driven primarily by a bulk sale of assets and additional loan and real estate loss provisions due to declining commercial real estate values and continued weakness in the economy. As previously reported, in May 2010, the Company sold in bulk certain nonperforming and underperforming loans (including restructured loans or TDRs) aggregating to $192.6 million and other real estate owned of $14.4 million. The assets were sold at a substantial discount to their net carrying values for a total purchase price of $121.5 million. The transaction contributed approximately $44 million to the net loss. The Company recorded a $34 million deferred tax asset related to this transaction.

Total assets at December 31, 2010 decreased to $2.07 billion from $2.40 billion at December 31, 2009, primarily reflecting a decrease in loans receivable and security investments, partially offset by an increase in the deferred tax asset and overnight investments.

Total loans receivable, net of unearned fees, amounted to $1.33 billion at December 31, 2010, a $349 million decrease from $1.68 billion at December 31, 2009. The decrease was due to an aggregate of $286 million of principal repayments (resulting from the bulk sale of loans, other loan payoffs and normal amortization), $41 million of loans transferred to real estate owned and $100 million of loan chargeoffs (which included approximately $80 million of chargeoffs related to the bulk sale), partially offset by $77 million of new loan originations. The Company does not own or originate construction/development loans.

Total nonaccrual loans and real estate owned aggregated $80 million, or 3.9% of total assets, at December 31, 2010, compared to $77 million, or 3.7%, at September 30, 2010 and $156 million, or 6.5%, at December 31, 2009. The decrease in the size of the loan portfolio during 2010 negatively impacted the percentages. Nonaccrual loans at September 30, 2010 and December 31, 2010 also included $21 million of performing TDRs that are classified as nonaccrual based on regulatory guidance. These TDRs continue to pay as agreed under their renegotiated terms.

The allowance for loan losses at December 31, 2010 was $34.8 million, representing 2.61% of total net loans, compared to $32.3 million, or 2.37%, at September 30, 2010 and $32.6 million, or 1.94%, at December 31, 2009. The overall allowance included specific reserves for impaired loans (comprised of nonaccrual loans and TDRs) at each date of $7.2 million, $4.0 million and $13.8 million, respectively.

Total securities held to maturity decreased by $20.5 million to $614.3 million at December 31, 2010 from $634.8 million at December 31, 2009, primarily due to calls exceeding new purchases. The securities portfolio is comprised mainly of U.S. government agency securities. At December 31, 2010, the Company had a net deferred tax asset totaling $47.1 million, of which $27 million related to an unused gross operating loss carryforward of $61 million.

Total deposits at December 31, 2010 decreased to $1.77 billion from $2.03 billion at December 31, 2009, reflecting a $204.7 million decrease in time deposits and a $59.3 million decrease in money market deposit accounts resulting from Intervest National Bank's planned shrinkage through a reduction in its deposit rates. Total borrowed funds and related interest payable at December 31, 2010 decreased to $85 million, from $119 million at December 31, 2009, due to the maturity and repayment of FHLBNY borrowings. Total stockholders' equity decreased to $186 million at December 31, 2010 from $214 million at December 31, 2009, primarily due to the 2010 net loss before preferred dividend requirements of $53.3 million, partially offset by the private placement in May of 850,000 shares of common stock at $5 per share for net proceeds of approximately $4.0 million and a public offering of common stock in October of 11,686,377 shares at $1.95 per share for net proceeds of approximately $21.0 million.

Intervest Bancshares Corporation is a bank holding company. Its principal operating subsidiary is Intervest National Bank, a nationally chartered commercial bank that has its headquarters and full-service banking office at One Rockefeller Plaza, in New York City, and a total of six full-service banking offices in Clearwater and Gulfport, Florida. Intervest Bancshares Corporation's Class A Common Stock is listed on the NASDAQ Global Select Market: Trading Symbol IBCA. This press release may contain forward-looking information. 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 affect the Company's actual results of operations. The following important factors, among others, could cause actual results to differ materially from those set forth in forward looking statements: changes in general economic conditions and real estate values in the Company's market areas; changes in regulatory policies and enforcement actions; fluctuations in interest rates; demand for loans and deposits; changes in tax laws or the availability of net operating losses, the effects of additional capital, the availability of regulatory waivers; and competition. Reference is made to the Company's filings with the SEC for further discussion of risks and uncertainties regarding the Company's business. Historical results are not necessarily indicative of the future prospects of the Company.

Selected Consolidated Financial Information Follows.

INTERVEST BANCSHARES CORPORATION

Selected Consolidated Financial Information

    (Dollars in thousands, except per share amounts) Quarter Ended Year Ended December 31,   December 31, Selected Operating Data:   2010   2009   2010   2009 Interest and dividend income $   24,747   $   31,176 $   107,072   $   123,598 Interest expense     14,307       19,080       62,692       81,000 Net interest and dividend income 10,440 12,096 44,380 42,598 Provision for loan losses 2,693 3,926 101,463 10,865 Noninterest income 1,073 72 2,110 297 Noninterest expenses: Provision for real estate losses 2,004 1,587 15,509 2,275 Real estate expenses 343 1,259 4,105 4,945 All other noninterest expenses     4,887       4,409       19,069       19,864 Earnings (loss) before income taxes 1,586 987 (93,656) 4,946 Provision (benefit) for income taxes     727       281       (40,348)       1,816 Net earnings (loss) before preferred dividend requirements 859 706 (53,308) 3,130 Preferred dividend requirements (1)     422       409       1,667       1,632 Net earnings (loss) available to common stockholders $   437   $   297   $   (54,975)   $   1,498 Basic earnings (loss) per common share $ 0.02 $ 0.04 $ (4.95) $ 0.18 Diluted earnings (loss) per common share   $   0.02   $   0.04   $   (4.95)   $   0.18 Average common shares used to calculate: Basic and diluted earnings (loss) per common share (2) 18,308,205 8,270,812 11,101,196 8,270,812 Common shares outstanding at end of period 21,126,489 8,270,812 21,126,489 8,270,812 Common stock options/warrants outstanding at end of period       1,045,422       1,019,722       1,045,422       1,019,722 Yield on interest-earning assets 4.89% 5.25% 5.08% 5.32% Cost of funds 3.03% 3.54% 3.20% 3.87% Net interest margin (3)       2.06%       2.04%       2.11%       1.83% Return on average assets (annualized) 0.16% 0.12% -2.42% 0.13% Return on average common equity (annualized) 2.19% 1.49% -32.20% 1.65% Effective income tax rate 45.84% 28.47% 43.08% 36.72% Efficiency ratio (4)       42%       36%       41%       46% Total average loans outstanding $ 1,357,549 $ 1,698,251 $ 1,489,004 $ 1,721,688 Total average securities outstanding 638,791 641,616 599,519 586,344 Total average short-term investments outstanding 11,170 17,652 18,502 14,544 Total average assets outstanding       2,102,186       2,408,538       2,200,436       2,357,422 Total average interest-bearing deposits outstanding $ 1,786,801 $ 2,031,381 $ 1,863,612 $ 1,972,982 Total average borrowings outstanding 86,229 108,067 97,031 117,856 Total average stockholders' equity       180,857       213,595       189,197       212,877   At Dec 31,   At Sep 30,   At Jun 30,   At Mar 31,   At Dec 31, Selected Financial Condition Information:   2010   2010   2010   2010   2009 Total assets $   2,070,868 $   2,104,098 $   2,164,442 $   2,284,257 $   2,401,204 Total cash and short-term investments 23,911 13,815 35,535 56,470 7,977 Total securities held to maturity 614,335 613,844 621,244 491,067 634,856 Total loans, net of unearned fees 1,337,326 1,363,312 1,395,564 1,634,140 1,686,164 Total deposits 1,766,083 1,806,834 1,852,356 1,926,772 2,029,984 Total borrowed funds and accrued interest payable 84,676 89,135 98,582 103,060 118,552 Total preferred equity 23,852 23,755 23,659 23,563 23,466 Total common equity 162,108 140,317 140,643 187,711 190,588 Common book value per share (5)       7.61       15.26       15.33       22.69       23.04 Total allowance for loan losses $ 34,840 $ 32,250 $ 30,350 $ 28,300 $ 32,640 Allowance for loan losses/net loans 2.61% 2.37% 2.17% 1.73% 1.94% Total loan recoveries for the quarter 283 600 - - 25 Total loan chargeoffs for the quarter 386 298 85,483 13,979 3,126 Total real estate chargeoffs for the quarter       2,970       912       11,732       -       -

Total loans ninety days past due and still accruing (6)

$ 7,481 $ 16,865 $ 8,788 $ 3,629 $ 6,800 Total accruing troubled debt restructured loans (7) 3,632 617 21,362 116,906 97,311 Total nonaccrual loans 52,923 38,560 18,927 96,248 123,877 Total real estate owned, net of valuation allowance       27,064       38,792       34,259       57,858       31,866 (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 were not dilutive for the reporting periods. (3) Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. (4) Represents noninterest expenses (excluding provision for real estate losses & real estate expenses) as a percentage of net interest and dividend income plus noninterest income. (5) Represents common stockholders' equity less preferred dividends in arrears ($1.4 million at December 31, 2010 only) divided by common shares outstanding. (6) At December 31, 2010, these were performing loans that were past their contractual maturity date. Extensions for the majority at market terms are pending. (7) Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments.

INTERVEST BANCSHARES CORPORATION

Consolidated Financial Highlights

  At or For The Period Ended

 

($ in thousands, except per share amounts)

 

YearEndedDec 31,2010

 

YearEndedDec 31,2009

 

YearEndedDec 31,2008

 

YearEndedDec 31,2007

 

YearEndedDec 31,2006

Balance Sheet Highlights:         Total assets $ 2,070,868 $ 2,401,204 $ 2,271,833 $ 2,021,392 $ 1,971,753 Total cash and short-term investments 23,911 7,977 54,903 33,086 40,195 Total securities held to maturity 614,335 634,856 475,581 344,105 404,015 Total loans, net of unearned fees 1,337,326 1,686,164 1,705,711 1,614,032 1,490,653 Total deposits 1,766,083 2,029,984 1,864,135 1,659,174 1,588,534 Total borrowed funds and accrued interest payable. 84,676 118,552 149,566 136,434 172,909 Preferred stockholder's equity 23,852 23,466 23,080 - - Common stockholders' equity 162,108 190,588 188,894 179,561 170,046 Common book value per share (1) 7.61 23.04 22.84 22.23 20.31 Market price per common share     2.93       3.28       3.99       17.22       34.41   Asset Quality Highlights Nonaccrual loans $ 52,923 $ 123,877 $ 108,610 $ 90,756 $ 3,274 Real estate owned, net of valuation allowance 27,064 31,866 9,081 - - Accruing troubled debt restructured loans (2) 3,632 97,311 - - - Loans ninety days past due and still accruing 7,481 6,800 1,964 11,853 - Allowance for loan losses 34,840 32,640 28,524 21,593 17,833 Allowance for loan losses/net loans 2.61 % 1.94 % 1.67 % 1.34 % 1.20 % Loan chargeoffs 100,146 8,103 4,227 - - Real estate chargeoffs 15,614 - - - - Loan recoveries     883       1,354       -       -       -   Statement of Operations Highlights: Interest and dividend income $ 107,072 $ 123,598 $ 128,497 $ 131,916 $ 128,605 Interest expense   62,692       81,000       90,335       89,653       78,297   Net interest and dividend income 44,380 42,598 38,162 42,263 50,308 Provision for loan losses 101,463 10,865 11,158 3,760 2,652 Noninterest income 2,110 297 5,026 8,825 6,855 Noninterest expenses: Provision for real estate losses 15,509 2,275 518 - - Real estate expenses 4,105 4,945 4,281 489 - All other noninterest expenses   19,069       19,864       14,074       12,387       13,027   (Loss) earnings before income taxes (93,656 ) 4,946 13,157 34,452 41,484 (Benefit) provision for income taxes   (40,348 )     1,816       5,891       15,012       17,953   Net (loss) earnings before preferred dividend requirements (53,308 ) 3,130 7,266 19,440 23,531 Preferred dividend requirements (3)   1,667       1,632       41       -       -   Net (loss) earnings available to common stockholders $ (54,975 )   $ 1,498     $ 7,225     $ 19,440     $ 23,531   Basic (loss) earnings per common share $ (4.95 ) $ 0.18 $ 0.87 $ 2.35 $ 2.98 Diluted (loss) earnings per common share $ (4.95 ) $ 0.18 $ 0.87 $ 2.31 $ 2.82 Adjusted net (loss) earnings used to calculate

diluted (loss) earnings per common share

$

(54,975

)

$

1,498

$

7,225

$

19,484

$

23,679

Average common shares used to calculate: Basic (loss) earnings per common share 11,101,196 8,270,812 8,259,091 8,275,539 7,893,489 Diluted (loss) earnings per common share 11,101,196 8,270,812 8,267,781 8,422,017 8,401,379 Common shares outstanding   21,126,489       8,270,812       8,270,812       8,075,812       8,371,595   Net interest margin (4) 2.11 % 1.83 % 1.79 % 2.11 % 2.75 % Return on average assets -2.42 % 0.13 % 0.34 % 0.96 % 1.28 % Return on average common equity -32.20 % 1.65 % 3.94 % 11.05 % 15.82 % Effective income tax rate 43.08 % 36.72 % 44.77 % 43.57 % 43.28 % Efficiency ratio (5) 41 % 46 % 33 % 24 % 23 % Full-service banking offices     7       7       7       7       7   (1) Represents common stockholders' equity less preferred dividends in arrears ($1.4 million at December 31, 2010 only) 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 2.17% for 2010, 1.89% for 2009, 1.90% for 2008, 2.46% for 2007 and 3.02% for 2006. (5) Represents noninterest expenses (excluding provision for real estate losses and real estate expenses) as a percentage of net interest and dividend income plus noninterest income.



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