INTERVEST BANCSHARES CORPORATION Reports 2008 Second Quarter Earnings of $1.8 Million

July 14, 2008 10:49 AM EDT

NEW YORK--(BUSINESS WIRE)--

Intervest Bancshares Corporation (NASDAQ-GS: IBCA) (the "Company") today reported net earnings for the second quarter of 2008 ("Q2-08") of $1.8 million, or $0.22 per diluted share, compared to $5.4 million, or $0.63 per diluted share, for the second quarter of 2007 ("Q2-07"). For the first half of 2008 ("6mths-08"), net earnings amounted to $4.1 million, or $0.50 per diluted share, compared to $10.7 million, or $1.25 per diluted share, for the first half of 2007 ("6mths-07"). The Company's book value per common share increased to $22.19 at June 30, 2008, from $21.25 at June 30, 2007.

Net earnings for Q2-08 decreased by $3.5 million from Q2-07 due to the following: a $2.5 million decrease in net interest and dividend income; a $2.0 million increase in the provision for loan losses; a $1.1 million increase in noninterest expenses; and a $0.7 million decrease in noninterest income; partially offset by a $2.8 million decrease in the provision for income tax expense.

Net interest and dividend income decreased to $9.1 million in Q2-08 from $11.6 million in Q2-07 largely due to a $101 million increase in average nonaccrual loans. Interest income that was not recorded on nonaccrual loans amounted to $2.6 million in Q2-08, compared to a $0.4 million in Q2-07. The Company's net interest margin (excluding income from loan prepayments) decreased to 1.69% in Q2-08, from 2.29% in Q2-07. The margin was negatively affected by the increase in nonaccrual loans, repayments of higher yielding loans coupled with lower competitive pricing for new loans, lower yields earned on investment securities and short-term investments and strong competition for deposits. The Company's cost of funds decreased to 4.70% in Q2-08 from 4.97% in Q2-07. The Company was not able to lower its deposit rates in step with the Federal Open Market Committee's rate reductions due to strong competition for deposits from larger banks. The provision for loan losses increased to $2.7 million in Q2-08, from $0.7 million in Q2-07 due to a higher level of nonaccrual loans and lower estimated real estate values. Noninterest expenses increased to $4.2 million in Q2-08, from $3.1 million in Q2-07 nearly all of which was due to a $0.9 million increase in expenses associated with nonaccrual loans/foreclosed real estate. Noninterest income decreased to $1.1 million in Q2-08, from $1.8 million in Q2-07 primarily due to a $0.8 million decrease in income from loan prepayments. The Company's effective income tax rate was 43% in Q2-08, compared to 44% in Q2-07. As a result of the factors described above, the Company's efficiency ratio, which is a measure of its ability to control expenses as a percentage of its revenues, increased to 41% in Q2-08 from 23% in Q2-07. Return on average assets and equity also decreased to 0.34% and 4.04% in Q2-08, from 1.05% and 12.09% in Q2-07, respectively. The Company had 71 employees at June 30, 2008, compared to 72 employees at June 30, 2007.

Net earnings for 6mths-08 decreased by $6.6 million from 6mths-07 due to a $5.2 million decrease in net interest and dividend income, a $3.5 million increase in the provision for loan losses, a $1.8 million increase in noninterest expenses and $1.4 million decrease in noninterest income, partially offset by a $5.3 million decrease in the provision for income taxes. The reasons for the changes are essentially due to the same factors discussed above for the quarterly period.

Total assets at June 30, 2008 increased to $2.2 billion, from $2.0 billion at December 31, 2007, reflecting growth in the loan portfolio and a higher level of security investments. Total loans, net of unearned fees, increased to $1.72 billion at June 30, 2008, from $1.61 billion at December 31, 2007. The increase was due to new originations secured by commercial and multi-family real estate exceeding principal repayments. The new loans are predominantly fixed-rate with a weighted-average yield and term of 6.36% and 5.3 years, respectively. New loan originations totaled $129 million for Q2-08 and $226 million for 6mths-08, compared to $165 million for Q2-07 and $310 million for 6mths-07. Principal repayments totaled $80 million for Q2-08 and $111 million for 6mths-08, compared to $97 million for Q2-07 and $183 million for 6mths-07.

Total nonperforming assets at June 30, 2008 aggregated to $126.4 million, or 5.72% of the Company's total assets, an increase of $35.6 million from December 31, 2007. At June 30, 2008, nonperforming assets were comprised of $119.1 million of nonaccrual loans, or 23 loans, and $7.3 million of real estate acquired through foreclosure, or 2 properties. Although the Company has never originated or acquired subprime loans nor invested in securities collateralized by subprime loans, the subprime loan crisis and resulting impact to the credit markets has affected the Company indirectly through reductions in overall real estate values, reduced home sales and construction, and a weakening of the overall economy, particularly in the State of Florida. The Company has also experienced the effects of misconduct committed by certain of its borrowers, which required the Company to place certain loans that are collateralized by income producing properties on nonaccrual status, in some instances due to involuntary bankruptcy filings filed by third parties against the borrowers. Such filings resulted in the cessation of monthly loan payments to the Company and also delay the Company's ability to move forward with foreclosure or other proceedings to acquire and sell the collateral property. Although the Company has not experienced any loan chargeoffs in connection with its nonaccrual loans to date, it has incurred increased provisions for loan losses, expenses associated with credit collections as well as protecting its interest in nonperforming assets, and the loss of interest income on such assets, all of which has adversely affected the Company's results of operations. At June 30, 2008, two nonaccrual loans totaling $32.9 million have a specific valuation allowance in the aggregate amount of $2.5 million (recorded as part of the overall allowance for loan losses) in accordance with SFAS No. 114. The Company believes that the estimated fair value of each of the remaining properties that collateralize its nonaccrual loans continues to exceed its net recorded investment in each related nonaccrual loan as of June 30, 2008, and as such a specific SFAS No. 114 valuation allowance was not maintained on those loans. The Company expects $22.2 million (outstanding principal) of nonaccrual loans to be repaid in full in the third quarter of 2008 through the scheduled sale of various collateral properties by the bankruptcy court. In addition, properties acquired through foreclosure are being marketed for sale, although the timing of the disposition is uncertain. There can be no assurance that the Company will not incur additional loan loss provisions, loan chargeoffs or significant expenses in connection with the ultimate collection of its nonaccrual loans, which collection is anticipated to be through the eventual sale of the collateral property in most cases, or incur significant expenses in carrying and disposing of properties acquired through foreclosure.

The total allowance for loan losses amounted to $26.6 million at June 30, 2008, compared to $21.6 million at December 31, 2007. The allowance represented 1.54% of total loans (net of deferred fees) outstanding at June 30, 2008, compare to 1.34% at December 31, 2007. The increase in the allowance was due to provisions totaling $5.0 million, of which $3.9 million was attributable to credit downgrades on nonaccrual loans and lower estimated values of certain collateral properties, and $1.1 million was due to net loan growth of $108 million from December 31, 2007.

Total securities held to maturity at June 30, 2008 increased to $431 million, from $344 million at December 31, 2007, due to new purchases exceeding maturities and calls. The portfolio is held by Intervest National Bank and had a weighted-average remaining contractual maturity and a yield of 4.7 years and 4.26%, respectively, at June 30, 2008. Total deposits at June 30, 2008 increased to $1.81 billion, from $1.66 billion at December 31, 2007, reflecting a $61 million increase in certificate of deposit accounts and a $90 million increase in money market accounts. Total borrowed funds and related interest payable at June 30, 2008 increased to $168 million, from $136 million at December 31, 2007, reflecting primarily a $40 million increase in short-term FHLBNY advances. Total stockholders' equity at June 30, 2008 increased to $183.5 million, from $179.6 million at December 31, 2007. The increase was due to the following: $4.1 million from net earnings; $1.8 million from the issuance of 195,000 shares of Class B common stock upon the exercise of outstanding Class B warrants in January; and $0.1 million from stock-based compensation, partially offset by a $2.1 million cash dividend paid in June.

Intervest Bancshares Corporation is a financial holding company. Its operating subsidiaries are: 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; and Intervest Mortgage Corporation, a mortgage investment company. 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.

                   INTERVEST BANCSHARES CORPORATION
             Selected Consolidated Financial Information
----------------------------------------------------------------------

(Dollars in thousands,        Quarter Ended      Six-Months Ended June
 except per share amounts)       June 30,                 30,
                              2008       2007       2008       2007
----------------------------------------------------------------------
Selected Operating Data:
Interest and dividend
 income                       $31,776    $34,082    $63,564    $67,347
Interest expense               22,712     22,489     45,645     44,184
                           -------------------------------------------
Net interest and dividend
 income                         9,064     11,593     17,919     23,163
Provision for loan losses       2,753        715      5,016      1,569
                           -------------------------------------------
Net interest and dividend
 income after provision
 for loan losses                6,311     10,878     12,903     21,594
Noninterest income              1,139      1,842      2,082      3,444
Noninterest expenses            4,197      3,117      7,715      5,886
                           -------------------------------------------
Earnings before income
 taxes                          3,253      9,603      7,270     19,152
Provision for income taxes      1,392      4,236      3,128      8,432
                           -------------------------------------------
Net earnings                   $1,861     $5,367     $4,142    $10,720
                           ===========================================
Basic earnings per share        $0.22      $0.64      $0.50      $1.28
Diluted earnings per share      $0.22      $0.63      $0.50      $1.25
Cash dividends paid per
 share                          $0.25      $0.25      $0.25      $0.25
Adjusted net earnings for
 diluted earnings per
 share (1)                     $1,861     $5,378     $4,142    $10,764
Weighted-average common
 shares and common
 equivalent shares
 outstanding for
 computing:
    Basic earnings per
     share                  8,270,812  8,416,248  8,247,241  8,394,791
    Diluted earnings per
     share (2)              8,270,812  8,578,039  8,251,589  8,586,818
Common shares outstanding
 at end of period           8,270,812  8,364,951  8,270,812  8,364,951
Common stock
 options/warrants
 outstanding at end of
 period                       132,140    195,000    132,140    195,000
----------------------------------------------------------------------
Yield on interest-earning
 assets                         5.92%      6.75%      6.04%      6.80%
Cost of funds                   4.70%      4.97%      4.82%      4.97%
Net interest margin (3)         1.69%      2.29%      1.70%      2.34%
----------------------------------------------------------------------
Return on average assets
 (annualized)                   0.34%      1.05%      0.39%      1.06%
Return on average equity
 (annualized)                   4.04%     12.09%      4.52%     12.27%
Effective income tax rate      42.79%     44.11%     43.03%     44.03%
Efficiency ratio (4)              41%        23%        39%        22%
----------------------------------------------------------------------
Total average loans
 outstanding               $1,701,949 $1,600,360 $1,674,302 $1,570,330
Total average securities
 outstanding                 $428,601   $407,788   $414,872   $407,775
Total average short-term
 investments outstanding      $28,201    $18,235    $28,704    $20,442
Total average interest-
 earning assets
 outstanding               $2,158,751 $2,026,383 $2,117,878 $1,998,547
Total average assets
 outstanding               $2,179,331 $2,044,083 $2,137,491 $2,017,591
----------------------------------------------------------------------
Total average interest-
 bearing deposits
 outstanding               $1,802,455 $1,663,757 $1,762,543 $1,636,058
Total average borrowings
 outstanding                 $141,383   $149,675   $142,925   $158,341
Total average interest-
 bearing liabilities
 outstanding               $1,943,838 $1,813,432 $1,905,468 $1,794,399
Total average
 stockholders' equity        $184,185   $177,569   $183,088   $174,776
----------------------------------------------------------------------

----------------------------------------------------------------------
Selected        At Jun 30, At Mar 31, At Dec 31, At Sep 30, At Jun 30,
 Financial         2008       2008       2007       2007       2007
 Condition
 Information:
                ---------- ---------- ---------- ---------- ----------
Total assets    $2,207,170 $2,165,017 $2,021,392 $2,033,662 $2,052,831
Total cash and
 short-term
 investments       $16,726    $47,229    $33,086    $24,081    $39,321
Total
 securities
 held to
 maturity         $430,934   $406,727   $344,105   $347,001   $359,687
Total FRB and
 FHLB stock         $8,428     $7,368     $6,351     $6,351     $8,511
Total loans,
 net of
 unearned fees  $1,723,213 $1,677,119 $1,614,032 $1,628,387 $1,618,491
Total deposits  $1,809,683 $1,781,188 $1,659,174 $1,673,443 $1,636,287
Total borrowed
 funds and
 accrued
 interest
 payable          $168,063   $159,189   $136,434   $136,247   $190,007
Total
 stockholders'
 equity           $183,549   $183,703   $179,561   $177,182   $177,720
Total allowance
 for loan
 losses            $26,609    $23,856    $21,593    $20,925    $19,402
Total loan
 chargeoffs             $-         $-         $-         $-         $-
Total loans
 ninety days
 past due and
 still
 accruing.          $3,051       $837    $11,853         $-    $16,314
Total
 nonaccrual
 loans            $119,078    $97,692    $90,756    $74,526    $22,076
Total
 foreclosed
 real estate        $7,272     $4,022         $-       $975       $975
Book value per
 common share       $22.19     $22.21     $22.23     $21.75     $21.25
Allowance for
 loan
 losses/net
 loans               1.54%      1.42%      1.34%      1.29%      1.20%
----------------------------------------------------------------------

(1) Represents net earnings plus interest expense on dilutive convertible debentures, net of taxes, that would not occur if the convertible debentures were assumed to be converted during the period they were outstanding for purposes of computing diluted earnings per share.

(2) Diluted EPS includes shares that would be outstanding if dilutive common stock options/warrants and convertible debentures were assumed to be exercised/converted during the period. All outstanding options/warrants were considered for the EPS computations, except for 132,140 options, which were not dilutive because the exercise price was above the average market price of the Class A common stock during the 2008 periods.

(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 1.79% and 2.57% for the quarters ended June 30, 2008 and 2007, respectively, and 1.77% and 2.60% for the six-months ended June 30, 2008 and 2007, respectively.

(4) Represents noninterest expenses (excluding the provision for loan losses) as a percentage of net interest and dividend income plus noninterest income.

                   INTERVEST BANCSHARES CORPORATION
                  Consolidated Financial Highlights
----------------------------------------------------------------------

                              At or For The Period Ended
                ------------------------------------------------------

($ in           Six-Months    Year       Year       Year       Year
 thousands,       Ended      Ended      Ended      Ended      Ended
 except per      June 30,   Dec 31,    Dec 31,    Dec 31,    Dec 31,
 share amounts)    2008       2007       2006       2005       2004
----------------------------------------------------------------------
Balance Sheet
 Highlights:
Total assets    $2,207,170 $2,021,392 $1,971,753 $1,706,423 $1,316,751
Asset growth
 rate                   9%         3%        16%        30%        44%
Total loans,
 net of
 unearned fees  $1,723,213 $1,614,032 $1,490,653 $1,367,986 $1,015,396
Loan growth
 rate                   7%         8%         9%        35%        51%
Total deposits  $1,809,683 $1,659,174 $1,588,534 $1,375,330   $993,872
Deposit growth
 rate                   9%         4%        16%        38%        47%
Loans/deposits
 (Intervest
 National Bank)        87%        88%        84%        88%        86%
Borrowed funds
 and accrued
 interest
 payable          $168,063   $136,434   $172,909   $155,725   $202,682
Stockholders'
 equity           $183,549   $179,561   $170,046   $136,178    $90,094
Common shares
 outstanding
 (1)             8,270,812  8,075,812  8,371,595  7,823,058  6,271,433
Common book
 value per
 share              $22.19     $22.23     $20.31     $17.41     $14.37
Market price
 per common
 share               $5.12     $17.22     $34.41     $24.04     $19.74
----------------------------------------------------------------------
Asset Quality
 Highlights
Nonaccrual
 loans            $119,078    $90,756     $3,274       $750     $4,607
Loans ninety
 days past due
 and still
 accruing           $3,051    $11,853         $-     $2,649         $-
Foreclosed real
 estate             $7,272         $-         $-         $-         $-
Allowance for
 loan losses       $26,609    $21,593    $17,833    $15,181    $11,106
Loan recoveries         $-         $-         $-         $-         $-
Loan chargeoffs         $-         $-         $-         $-         $-
Allowance for
 loan losses /
 net loans           1.54%      1.34%      1.20%      1.11%      1.09%
----------------------------------------------------------------------
Statement of
 Operations
 Highlights:
Interest and
 dividend
 income            $63,564   $131,916   $128,605    $97,881    $66,549
Interest
 expense            45,645     89,653     78,297     57,447     38,683
                ------------------------------------------------------
Net interest
 and dividend
 income             17,919     42,263     50,308     40,434     27,866
Provision for
 loan losses         5,016      3,760      2,652      4,075      4,526
Noninterest
 income              2,082      8,825      6,855      6,594      5,140
Noninterest
 expenses            7,715     12,876     13,027     10,703      8,251
                ------------------------------------------------------
Earnings before
 income taxes        7,270     34,452     41,484     32,250     20,229
Provision for
 income taxes        3,128     15,012     17,953     14,066      8,776
                ------------------------------------------------------
Net earnings        $4,142    $19,440    $23,531    $18,184    $11,453
                ------------------------------------------------------
Basic earnings
 per share           $0.50      $2.35      $2.98      $2.65      $1.89
Diluted
 earnings per
 share               $0.50      $2.31      $2.82      $2.47      $1.71
Adjusted net
 earnings used
 to calculate
diluted
 earnings per
 share              $4,142    $19,484    $23,679    $18,399    $11,707
Average common
 shares used to
 calculate:
     Basic
      earnings
      per share  8,247,241  8,275,539  7,893,489  6,861,887  6,068,755
     Diluted
      earnings
      per share  8,251,589  8,422,017  8,401,379  7,449,658  6,826,176
Net interest
 margin (2)          1.70%      2.11%      2.75%      2.70%      2.52%
Return on
 average assets      0.39%      0.96%      1.28%      1.20%      1.02%
Return on
 average equity      4.52%     11.05%     15.82%     16.91%     14.14%
Effective
 income tax
 rate               43.03%     43.57%     43.28%     43.62%     43.38%
Efficiency
 ratio (3)             39%        25%        23%        23%        25%
Full-service
 banking
 offices                 7          7          7          6          6
----------------------------------------------------------------------

(1) The increase in shares in 2008 is comprised of 195,000 shares from the exercise of Class B common stock warrants.

The decrease in shares in 2007 is comprised of 404,339 shares of Class A common stock repurchased, partially offset by the issuance of 108,556 shares of Class a common stock from the conversion of convertible debentures.

The increase in shares in 2006 is comprised of 501,465 shares from the exercise of Class A common stock warrants and 47,072 shares from the conversion of convertible debentures into Class A common stock.

The increase in shares in 2005 is comprised of 1,436,468 shares from a public offering of Class A common stock and 115,157 shares from the conversion of convertible debentures into Class A common stock.

The increase in shares in 2004 is comprised of 42,510 shares from the exercise of Class A common stock warrants and 240,546 shares from the conversion of convertible debentures into Class A common stock.

(2) 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 1.77% for the six-months ended June 30, 2008, 2.60% for 2007, 3.24% for 2006, 2.85% for 2005 and 3.03% for 2004.

(3) Represents noninterest expenses (excluding the provision for loan losses) 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.

Source: Intervest Bancshares Corporation

Related Categories

Press Releases

Stocks Mentioned

Related Entities

• Federal Open Market Committee

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?