Intervest Bancshares Corporation Reports 2009 Third Quarter Earnings of $0.3 Million

• Press Release
• Source: Intervest Bancshares Corporation
• On 8:30 am EDT, Friday October 16, 2009

NEW YORK--(BUSINESS WIRE)--Intervest Bancshares Corporation (NASDAQ-GS: IBCA) (the "Company") today reported net earnings for the third quarter of 2009 ("Q3-09") of $0.3 million, or $0.04 per diluted common share, compared to $2.6 million, or $0.32 per share, for the third quarter of 2008 ("Q3-08"). The decrease in net earnings was due a $2.1 million increase in noninterest expenses, a $2.2 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 $1.4 million decrease in the provision for income tax expense and a $1.0 million decrease in the provision for loan losses.

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Symbol	Price	Change
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Noninterest expenses increased to $7.4 million in Q3-09 from $5.3 million in Q3-08 primarily due to a $0.8 million (204%) increase in FDIC insurance premiums due to higher rates for all FDIC insured banks, a $0.6 million increase in expenses associated with nonperforming assets resulting from $0.9 million related to one property that is not expected to recur, a $0.4 million increase in expense from the early retirement of higher-cost, fixed-rate debentures and a $0.2 million increase in compensation and benefits expense. The Company had 72 employees at September 30, 2009, compared to 70 at September 30, 2008.

Noninterest income decreased to $0.1 million in Q3-09 from $2.3 million in Q3-08 primarily due to a $0.9 million decrease in income from early repayment of loans, a $0.5 million decrease in deposit and loan service charge income and a $0.7 million impairment charge on trust preferred security investments due to the underlying collateral of these securities experiencing decreased interest payments.

Net interest and dividend income remained relatively unchanged at $11.0 million in Q3-09, compared to $11.1 million in Q3-08, as a lower net interest margin (1.86% in Q3-09 compared to 2.04% in Q3-08) was largely offset by a $23 million increase in net interest earning assets from the investment of TARP proceeds. The margin decreased primarily due to calls of $428 million of higher yielding U.S. government agency security investments (coupled with the reinvestment of the proceeds at lower market rates of 91 basis points) and a higher level ($1.3 million) of interest income not recorded on nonaccrual loans. These factors were partially offset by lower rates paid for deposits and adjustable-rate borrowings as well as the early retirement of all of the Company's higher cost debentures. The yield on interest-earning assets decreased by 92 basis points to 5.24% in Q3-09, while the cost of funds decreased by 82 basis points to 3.75% in Q3-09.

The provision for loan losses decreased to $2.4 million in Q3-09, from $3.4 million in Q3-08. The decrease was largely a function of the full repayment of an $11.3 million impaired loan whose specific valuation allowance of $1.7 million was no longer required. The Company continues to be negatively impacted by the weak economy, increased vacancy rates and lower real estate values, all of which have resulted in a higher level of nonperforming assets. The Company's effective income tax rate was 46% in Q3-09, compared to 44% in Q3-08.

Net earnings for the nine-months ended September 30, 2009 decreased by $5.6 million from the same period of 2008 due to a $6.8 million increase in noninterest expenses, a $4.2 million decrease in noninterest income and $1.2 million of preferred stock dividend requirements, partially offset by a $3.6 million decrease in the provision for income taxes, a $1.5 million increase in net interest and dividend income and a $1.5 million decrease in the provision for loan losses.

Total assets at September 30, 2009 were $2.38 billion, compared to $2.27 billion at December 31, 2008, reflecting an increase in security investments and foreclosed real estate, partially offset by a decrease in overnight investments and loans receivable. Securities held to maturity increased by $122 million to $598 million at September 30, 2009 and the portfolio had a weighted-average remaining contractual maturity and a yield of 4.6 years and 2.86%, respectively. The Company has never invested in CDOs, CMOs or stock of FNMA or FHLMC.

Total loans receivable, net of unearned fees, amounted to $1.70 billion at September 30, 2009, a $10 million decrease from $1.71 billion at December 31, 2008. The decrease was due to the aggregate of $143 million of principal repayments, $27.2 million of loans transferred to foreclosed real estate and $4.9 million of loan chargeoffs exceeding $165 million of new loan originations, primarily secured by commercial real estate. The originations were nearly all fixed-rate with a weighted-average yield and term of 6.71% and 5.1 years, respectively. New loan originations for the first nine-months of 2008 amounted to $327 million. The lower level of originations this year reflects a decrease in suitable lending opportunities for the Company.

Total nonperforming assets at September 30, 2009 amounted to $164.6 million, or 6.91% of total assets, compared $148.0 million, or 6.22% of total assets at June 30, 2009 and $117.7 million, or 5.18%, at December 31, 2008. At September 30, 2009, nonperforming assets were comprised of $131.7 million of nonaccrual loans, or 38 loans, and $32.9 million of real estate acquired through foreclosure, or 9 properties. At September 30, 2009, the Company also had $71.2 million of accruing restructured loans 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 is taking 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. In Q3-09, nonperforming assets with an original carrying value of $23.3 million were repaid or sold for total proceeds of $22.8 million. The Company believes that concentrating its effort towards the individual collection of nonaccrual loans either through the restructure of certain loans or through the acquisition and eventual sale of the collateral properties will in most cases maximize the recovery of its investment. The ability to complete foreclosure or other proceedings to acquire and sell certain collateral properties however continues to be delayed by various factors including bankruptcy proceedings and an overloaded court system. As a result of these delays, the timing and amount of the resolution/disposition of nonaccrual loans as well as foreclosed real estate cannot be predicted with certainty. In addition, if the current downturn in commercial real estate values and local economic conditions in both New York and Florida as well as other factors noted above continue for an additional extended period, it could have an adverse impact on the Company's future asset quality and level of nonperforming assets, charge offs and profitability. There can be no assurance that the Company will not have significant additional loan loss provisions or expenses in connection with the ultimate collection of nonaccrual loans or in carrying and disposing of foreclosed real estate. The Company does not own or originate construction/development loans or condominium conversion loans.

The total allowance for loan losses increased to $31.8 million at September 30, 2009, from $28.5 million at December 31, 2008, due to $6.9 million of loan loss provisions and a $1.3 million partial recovery of a prior chargeoff, partially offset by $4.9 million of new chargeoffs. The allowance represented 1.88% of total loans (net of deferred fees) at September 30, 2009, compared to 1.67% at December 31, 2008. At each date, a SFAS No. 114 specific valuation allowance (included as part of the overall allowance for loan losses) in the aggregate amount of $13.5 million and $8.2 million, respectively, was maintained on nonaccrual and restructured loans.

Total deposits at September 30, 2009 increased to $2.01 billion, from $1.86 billion at December 31, 2008, reflecting an increase of $140 million in money market accounts and a $6 million increase in interest checking and savings deposit accounts. Total borrowed funds and related interest payable at September 30, 2009 decreased to $107 million, from $149 million at December 31, 2008, reflecting the early repayment of $40 million of higher cost debentures. Total stockholders' equity at September 30, 2009 increased to $213.6 million, from $212.0 million at December 31, 2008 primarily due to net earnings of $1.2 million for the period. At September 30, 2009, Intervest National Bank's regulatory capital ratios were as follows: total capital to risk-weighted assets - 13.96%, Tier 1 capital to risk-weighted assets - 12.71% and Tier 1 capital to total average assets (leverage ratio) - 10.22%.

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 Corporation
Lowell S. Dansker, 212-218-2800
Fax 212-218-2808
Chairman