IBCA (MM)

Intervest Bancshares Corporation (NASDAQ-GS: IBCA) (the "Company") today reported net earnings for the fourth quarter of 2009 ("Q4-09") of $0.3 million, or $0.04 per diluted common share, compared to $0.5 million, or $0.05 per share, for the fourth quarter of 2008 ("Q4-08"). The decrease in net earnings was due to a $1.4 million increase in noninterest expenses, a $1.2 million increase in the provision for loan losses, a $0.5 million decrease in noninterest income and $0.4 million of dividend requirements related to outstanding preferred stock held by the U.S. Treasury under the TARP program. The aggregate of these items was partially offset by a $2.9 million increase in net interest and dividend income and a $0.4 million decrease in the provision for income tax expense.

Net interest and dividend income increased to $12.1 million in Q4-09 from $9.2 million in Q4-08, reflecting an improved net interest margin. The margin (excluding loan prepayment income) increased to 2.04% in Q4-09 from 1.70% in Q4-08 due to lower rates paid on deposits and adjustable-rate borrowings, the early retirement of higher cost borrowings, a decrease in interest income not recorded on nonaccrual loans and a $16 million increase in net interest earning assets. These factors were partially 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). The yield on the Company's interest-earning assets decreased by 58 basis points to 5.25% in Q4-09, while its cost of funds decreased by 102 basis points to 3.54% in Q4-09.

The provision for loan losses increased to $3.9 million in Q4-09 from $2.7 million in Q4-08. The increase was attributable to downgrades of internal risk ratings on both accrual and nonaccrual loans and lower estimates of real estate values on certain collateral properties. The Company continues to be negatively impacted by the weak economy, high rates of unemployment, increased office and retail vacancy rates and lower commercial real estate values, all of which have resulted in a higher level of nonperforming assets and related carrying expenses, increased loan and real estate loss provisions and foregone interest income.

Noninterest income decreased to $0.1 million in Q4-09 from $0.6 million in Q4-08, primarily due to a $0.9 million other than temporary impairment charge on trust preferred security investments, partially offset by a $0.3 million increase in income from the early repayment of loans. The impairment charge is based on an assessment that it is unlikely that a portion of the contractual principal and interest will be received on those securities experiencing increased payment defaults. At December 31, 2009, trust preferred security investments totaled $5.8 million.

Noninterest expenses increased to $7.3 million in Q4-09 from $5.9 million in Q4-08. The increase was primarily due to a $0.8 million (208%) increase in FDIC insurance premiums due to higher rates imposed on all FDIC insured banks and a $1.1 million increase in writedowns of foreclosed real estate due to declining commercial real estate values. These items were partially offset by a $0.2 million decrease in expenses associated with nonperforming assets and $0.3 million of expense from the early retirement of higher-cost, fixed-rate debentures in Q4-08 that did not recur in Q4-09. The Company had 72 employees at both December 31, 2009 and 2008.

The provision for income tax expense decreased to $0.3 million in Q4-09 from $0.7 million in Q4-08. The decrease was primarily due to a $0.4 million refund of state income taxes paid in years prior to 2008. The effective tax rate was 29% in Q4-09, compared to 59% in Q4-08. The 2009 rate was positively impacted by the tax refund, while the 2008 rate was negatively impacted by the recording of a full year's impact of a deductibility limit on contractually obligated executive compensation of the Chairman resulting from the Company's subsequent participation in TARP.

Net earnings for the full year 2009 as compared to 2008 decreased by $5.7 million due to a $8.2 million increase in noninterest expenses, a $4.7 million decrease in noninterest income and $1.6 million of preferred stock dividend requirements, partially offset by a $4.1 million decrease in the provision for income taxes, a $4.4 million increase in net interest and dividend income and a $0.3 million decrease in the provision for loan losses.

Total assets at December 31, 2009 were $2.40 billion compared to $2.27 billion at December 31, 2008, reflecting an increase in security investments, foreclosed real estate and prepaid FDIC insurance premiums, partially offset by a decrease in overnight investments and loans receivable.

Securities held to maturity increased by $159 million to $635 million at December 31, 2009 and the portfolio had a weighted-average remaining contractual maturity and a yield of 4.5 years and 2.73%, respectively.

Total loans receivable, net of unearned fees, amounted to $1.69 billion at December 31, 2009, a $20 million decrease from $1.71 billion at December 31, 2008. The decrease was due to the aggregate of $185 million of principal repayments, $27.7 million of loans transferred to foreclosed real estate and $8.1 million of loan chargeoffs exceeding $200 million of new loan originations, nearly all of which are secured by commercial real estate. The new loans are nearly all fixed-rate with a weighted-average yield and term of 6.69% and 5.2 years, respectively. New loan originations for 2008 amounted to $387 million.

Total nonperforming assets at December 31, 2009 amounted to $155.8 million, or 6.49% of total assets, compared $164.6 million, or 6.91% of total assets at September 30, 2009 and $117.7 million, or 5.18%, at December 31, 2008. At December 31, 2009, nonperforming assets were comprised of $123.9 million of nonaccrual loans, or 34 loans, and $31.9 million of real estate acquired through foreclosure, or 10 properties. At December 31, 2009, the Company also had $97.3 million of accruing restructured loans (with a weighted average interest rate of 5.08%) on which the Company has granted certain concessions to provide payment relief generally consisting of the deferral of principal payments and/or a partial reduction in interest payments for a period of time. The Company continues to take various steps to resolve its nonaccrual loans, including proceeding with foreclosures on many of the collateral properties, working with certain borrowers to provide payment relief and, in limited cases, accepting partial payment as full satisfaction of a nonaccrual loan.

The total allowance for loan losses increased to $32.6 million at December 31, 2009 from $28.5 million at December 31, 2008, due to $10.9 million of loan loss provisions and a $1.3 million partial recovery of a prior chargeoff, partially offset by $8.1 million of new chargeoffs. The allowance represented 1.94% of total loans (net of deferred fees) at December 31, 2009, compared to 1.67% at December 31, 2008. At each date, a SFAS 114 specific valuation allowance (included as part of the overall allowance for loan losses) in the aggregate amount of $13.8 million and $8.2 million, respectively, was maintained on total nonaccrual and restructured loans.

Total deposits at December 31, 2009 increased to $2.03 billion from $1.86 billion at December 31, 2008, reflecting an increase of $167 million in money market accounts. Total borrowed funds and related interest payable at December 31, 2009 decreased to $118 million, from $149 million at December 31, 2008, reflecting the early repayment of $40 million of higher cost debentures, partially offset by an $11 million increase in lower cost short-term borrowings from the FHLBNY.

Total stockholders' equity at December 31, 2009 increased to $214.1 million from $212.0 million at December 31, 2008, primarily due to net earnings of $1.5 million. At December 31, 2009, Intervest National Bank's regulatory capital ratios were as follows: total capital to risk-weighted assets – 14.04%, Tier 1 capital to risk-weighted assets – 12.79% and Tier 1 capital to total average assets (leverage ratio) – 10.05%. INB maintains capital ratios in excess of its current regulatory requirements as well as those necessary to be designated as a well-capitalized institution under applicable regulations.

Intervest Bancshares Corporation is a 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 National Bank maintains capital ratios in excess of the regulatory requirements to be designated as a well-capitalized institution. Intervest Bancshares Corporation's Class A Common Stock is listed on the NASDAQ Global Select Market: Trading Symbol IBCA. This press release may contain forward-looking information. Except for historical information, the matters discussed herein are subject to certain risks and uncertainties that may affect the Company's actual results of operations. The following important factors, among others, could cause actual results to differ materially from those set forth in forward looking statements: changes in general economic conditions and real estate values in the Company's market areas; changes in policies by regulatory agencies; fluctuations in interest rates; demand for loans and deposits; and competition. Reference is made to the Company's filings with the SEC for further discussion of risks and uncertainties regarding the Company's business. Historical results are not necessarily indicative of the future prospects of the Company.

Selected Consolidated Financial Information Follows.

INTERVEST BANCSHARES CORPORATIONSelected Consolidated Financial Information

(Dollars in thousands, except per share amounts)       Quarter Ended   Year Ended December 31,   December 31, Selected Operating Data:         2009       2008       2009       2008   Interest and dividend income $ 31,176   $ 31,425 $ 123,598   $ 128,497 Interest expense   19,080     22,266     81,000     90,335   Net interest and dividend income 12,096 9,159 42,598 38,162 Provision for loan losses   3,926     2,696     10,865     11,158   Net interest and dividend income after provision for loan losses 8,170 6,463 31,733 27,004 Noninterest income 72 626 297 5,026 Noninterest expenses   7,255     5,882     27,084     18,873   Earnings before income taxes 987 1,207 4,946 13,157 Provision for income taxes   281     709     1,816     5,891   Net earnings before preferred dividend requirements 706 498 3,130 7,266 Preferred dividend requirements (1)   409     41     1,632     41   Net earnings available to common stockholders $ 297   $ 457   $ 1,498   $ 7,225   Basic earnings per common share $ 0.04 $ 0.05 $ 0.18 $ 0.87 Diluted earnings per common share 0.04 0.05 0.18 0.87 Cash dividends paid per common share         -       -       -       0.25   Average common shares used to calculate: Basic earnings per common share 8,270,812 8,270,812 8,270,812 8,259,091 Diluted earnings per common share (2) 8,270,812 8,270,812 8,270,812 8,267,781 Common shares outstanding at end of period 8,270,812 8,270,812 8,270,812 8,270,812 Common stock options/warrants outstanding at end of period         1,019,722       959,512       1,019,722       959,512   Yield on interest-earning assets 5.25 % 5.83 % 5.32 % 6.01 % Cost of funds 3.54 % 4.56 % 3.87 % 4.69 % Net interest margin (3)         2.04 %     1.70 %     1.83 %     1.79 % Return on average assets (annualized) 0.12 % 0.09 % 0.13 % 0.34 % Return on average common equity (annualized) 1.49 % 1.07 % 1.65 % 3.94 % Effective income tax rate 28.47 % 58.74 % 36.72 % 44.77 % Efficiency ratio (4)         36 %     40 %     46 %     33 % Total average loans outstanding $ 1,698,251 $ 1,705,375 $ 1,721,688 $ 1,693,749 Total average securities outstanding 641,616 422,053 586,344 422,356 Total average short-term investments outstanding 17,652 18,320 14,544 20,297 Total average interest-earning assets outstanding 2,357,519 2,145,748 2,322,576 2,136,402 Total average assets outstanding         2,408,538       2,186,753       2,357,422       2,162,719   Total average interest-bearing deposits outstanding $ 2,031,381 $ 1,783,380 $ 1,972,982 $ 1,770,989 Total average borrowings outstanding 108,067 160,664 117,856 156,017 Total average interest-bearing liabilities outstanding 2,139,448 1,944,044 2,090,838 1,927,006 Total average stockholders' equity         213,595       189,066       212,877       184,944           At Dec 31,   At Sep 30,   At Jun 30,   At Mar 31,   At Dec 31, Selected Financial Condition Information:         2009       2009       2009       2009       2008   Total assets $ 2,401,204 $ 2,382,170 $ 2,380,044 $ 2,317,613 $ 2,271,833 Total cash and short-term investments 7,977 30,660 23,441 30,203 54,903 Total securities held to maturity 634,856 598,313 566,722 544,702 475,581 Total FRB and FHLB stock 10,708 9,929 9,929 9,657 8,901 Total loans, net of unearned fees 1,686,164 1,696,064 1,746,087 1,708,752 1,705,711 Total deposits 2,029,984 2,012,995 1,995,165 1,938,123 1,864,135 Total borrowed funds and accrued interest payable 118,552 107,547 118,035 122,194 149,566 Total preferred equity 23,466 23,370 23,273 23,177 23,080 Total common equity 190,588 190,249 189,864 189,440 188,894 Book value per common share         23.04       23.00       22.96       22.90       22.84   Total allowance for loan losses $ 32,640 $ 31,815 $ 32,054 $ 30,371 $ 28,524 Total loan recoveries for the quarter 25 - 1,329 - - Total loan chargeoffs for the quarter 3,126 2,635 2,332 10 - Total accruing troubled debt restructurings (5) 97,311 71,156 76,210 30,586 - Total loans ninety days past due and still accruing. 6,800 1,947 6,367 1,958 1,964 Total nonaccrual loans 123,877 131,742 129,784 119,305 108,610 Total foreclosed real estate 31,866 32,915 18,214 9,742 9,081 Allowance for loan losses/net loans         1.94 %     1.88 %     1.84 %     1.78 %     1.67 % (1)   Represents accrued dividends on $25 million of 5% cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount. (2) Diluted EPS includes shares that would be outstanding if dilutive common stock options/warrants were assumed to be exercised during the period. Outstanding options/warrants are dilutive when their exercise price is above the average market price of the Class A common stock during 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 provisions for loan and real estate losses & real estate expenses) as a percentage of net interest and dividend income plus noninterest income. (5) Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments.

INTERVEST BANCSHARES CORPORATIONConsolidated Financial Highlights

      At or For The Period Ended

 

($ in thousands, except per share amounts)

      Year

Ended

Dec 31,

2009

  Year

Ended

Dec 31,

2008

  Year

Ended

Dec 31,

2007

  Year

Ended

Dec 31,

2006

  Year

Ended

Dec 31,

2005

Balance Sheet Highlights:         Total assets $ 2,401,204 $ 2,271,833 $ 2,021,392 $ 1,971,753 $ 1,706,423 Asset growth rate 6 % 12 % 3 % 16 % 30 % Total loans, net of unearned fees 1,686,164 1,705,711 1,614,032 1,490,653 1,367,986 Loan growth rate -1 % 6 % 8 % 9 % 35 % Total deposits 2,029,984 1,864,135 1,659,174 1,588,534 1,375,330 Deposit growth rate 9 % 12 % 4 % 16 % 38 % Loans/deposits (Intervest National Bank) 79 % 85 % 88 % 84 % 88 % Total borrowed funds and accrued interest payable. 118,552 149,566 136,434 172,909 155,725 Preferred equity 23,466 23,080 - - - Common equity 190,588 188,894 179,561 170,046 136,178 Common book value per share 23.04 22.84 22.23 20.31 17.41 Market price per common share         3.28       3.99       17.22       34.41       24.04   Asset Quality Highlights Nonaccrual loans $ 123,877 $ 108,610 $ 90,756 $ 3,274 $ 750 Foreclosed real estate 31,866 9,081 - - - Accruing troubled debt restructurings (1) 97,311 - - - - Loans ninety days past due and still accruing 6,800 1,964 11,853 - 2,649 Allowance for loan losses 32,640 28,524 21,593 17,833 15,181 Loan recoveries 1,354 - - - - Loan chargeoffs 8,103 4,227 - - - Allowance for loan losses/net loans         1.94 %     1.67 %     1.34 %     1.20 %     1.11 % Statement of Operations Highlights: Interest and dividend income $ 123,598 $ 128,497 $ 131,916 $ 128,605 $ 97,881 Interest expense   81,000     90,335     89,653     78,297     57,447   Net interest and dividend income 42,598 38,162 42,263 50,308 40,434 Provision for loan losses 10,865 11,158 3,760 2,652 4,075 Noninterest income 297 5,026 8,825 6,855 6,594 Noninterest expenses   27,084     18,873     12,876     13,027     10,703   Earnings before income taxes 4,946 13,157 34,452 41,484 32,250 Provision for income taxes   1,816     5,891     15,012     17,953     14,066   Net earnings before preferred dividend requirements 3,130 7,266 19,440 23,531 18,184 Preferred dividend requirements (2)   1,632     41     -     -     -   Net earnings available to common stockholders $ 1,498   $ 7,225   $ 19,440   $ 23,531   $ 18,184   Basic earnings per common share $ 0.18 $ 0.87 $ 2.35 $ 2.98 $ 2.65 Diluted earnings per common share $ 0.18 $ 0.87 $ 2.31 $ 2.82 $ 2.47 Adjusted net earnings used to calculate

diluted earnings per common share

$

1,498

$

7,225

$

19,484

$

23,679

$

18,399

Average common shares used to calculate: Basic earnings per common share 8,270,812 8,259,091 8,275,539 7,893,489 6,861,887 Diluted earnings per common share 8,270,812 8,267,781 8,422,017 8,401,379 7,449,658 Common shares outstanding   8,270,812     8,270,812     8,075,812     8,371,595     7,823,058   Net interest margin (3) 1.83 % 1.79 % 2.11 % 2.75 % 2.70 % Return on average assets 0.13 % 0.34 % 0.96 % 1.28 % 1.20 % Return on average common equity 1.65 % 3.94 % 11.05 % 15.82 % 16.91 % Effective income tax rate 36.72 % 44.77 % 43.57 % 43.28 % 43.62 % Efficiency ratio (4) 46 % 33 % 24 % 23 % 23 % Full-service banking offices         7       7       7       7       6   (1)   Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments. (2) Represents accrued dividends on $25 million of 5% cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount. (3) Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of such income, the margin would compute to 1.89% for 2009, 1.90% for 2008, 2.46% for 2007, 3.02% for 2006 and 3.04% for 2005. (4) Represents noninterest expenses (excluding provision for loan losses and real estate expenses) as a percentage of net interest and dividend income plus noninterest income. Noninterest expenses for 2006 included a one-time charge of $1.5 million.