- Intervest National Bank's regulatory capital ratios continued to increase through the retention of earnings and a gradual reduction in the size of its balance sheet. The Bank's ratios at June 30, 2012 were as follows: Tier One Leverage - 12.40%; Tier One Risk-Based - 17.79%; and Total Risk-Based Capital - 19.05%; well above its minimum requirements of 9%, 10% and 12%, respectively. Tier 1 capital amounted to $230 million and was $63 million in excess of the required minimum for the Tier One Leverage ratio.
- New loan originations increased to $97 million in the 6mths-12 period from $28 million in the 6mths-11 period.
- Nonaccrual loans decreased to $51 million at June 30, 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 June 30, 2012, such loans totaled $39 million compared to $46 million at December 31, 2011. These loans were yielding approximately 5%.
- Real estate owned through foreclosure (REO) decreased to $26.4 million at June 30, 2012, from $28.3 million at December 31, 2011, reflecting $1.9 million of writedowns since year end. The bulk of the writedowns, or $1.3 million, is associated with two properties in Florida that were in the process of being sold as of June 30, 2012, with closings expected early in the third quarter. The net carrying value of these properties totaled $3.3 million at June 30, 2012, which approximated their contractual net selling prices.
- Provisions for loan and real estate losses decreased to $1.4 million in Q2-12 from $2.0 million in Q2-11, and to $1.9 million in 6mths-12 from $4.1 million in 6mths-11.
- Operating expenses for Q2-12 were $4.1 million, unchanged from Q2-11, and $8.3 million in 6mths-12, down from $8.5 million in 6mths-11. The Company's efficiency ratio (which measures its ability to control expenses as a percentage of revenues) continued to be favorable and was 37% for Q2-12 and 6mths-12.
- Net interest and dividend income, which was affected by a smaller balance sheet, amounted to $9.7 million in Q2-12, compared to $10.9 million in Q2-11, and $19.7 million in 6mths-12 compared to $21.2 million in 6mhs-11. The net interest margin was 2.23% in Q2-12 and 2.19% in 6mths-12, compared to 2.24% and 2.19%, respectively, for the same periods of 2011.
- Book value per common share increased to $8.16 at June 30, 2012, from $8.07 at December 31, 2011.
The decrease in net interest and dividend income was largely due to a planned reduction in the size of the Bank's balance sheet. In Q2-12, total average interest-earning assets decreased by $191 million from Q2-11, reflecting a $128 million decrease in average loans and a $63 million decrease in average securities and overnight investments. At the same time, average deposits and borrowed funds decreased by $142 million and $12 million, respectively, while average stockholders' equity increased by $13 million. The net interest margin was nearly unchanged as a $37 million decrease in net average interest-earning assets (due to a higher level of cash on hand) was offset by a slight increase in the interest rate spread. The spread improved by 4 basis points due to the 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 in new loans and securities at lower market interest rates. Overall, the average cost of funds decreased by 46 basis points to 2.46% in Q2-12, from 2.92% in Q2-11, while the average yield on earning assets decreased at a slower pace by 42 basis points to 4.52% in Q2-12, from 4.94% in Q2-11.Net earnings for 6mths-12 increased by $0.9 million over 6mths-11 due to the following: a $2.1 million decrease in the total provision for loan and real estate losses; a $1.2 million increase in noninterest income; and a $0.2 million decrease in operating expenses, partially offset by a $1.6 million decrease in net interest and dividend income and a $1.0 million increase in income tax expense. The reasons for these changes were essentially the same as the factors that caused the quarterly variances.
Total assets at June 30, 2012 decreased to $1.86 billion from $1.97 billion at December 31, 2011, primarily reflecting a $165 million decrease in security investments and a $26 million decrease in loans, partially offset by a $92 million increase in cash and short-term investments. The Bank expects to utilize a large portion of the increase in cash to fund new loans. At June 30, 2012, the Bank had $77 million of potential new real estate loans in its origination pipeline.Securities held to maturity decreased to $535 million at June 30, 2012 from $700 million at December 31, 2011, reflecting calls of securities exceeding new purchases. A portion of the resulting proceeds was used to fund planned deposit outflow and a portion was being held temporarily in cash and short-term investments as denoted above. At June 30, 2012, the securities portfolio, which represented 29% of total assets and was comprised mostly of U.S. government agency debt ($434 million) and residential mortgage-backed pass through securities ($96 million), had a weighted-average expected yield, remaining life and remaining contractual maturity of 1.37%, 1.4 years and 7.1 years, respectively. Loans totaled $1.14 billion at June 30, 2012, compared to $1.16 billion at December 31, 2011. The decrease reflected $97 million of payoffs, $24 million of amortization and $1.9 million of chargeoffs, partially offset by $97 million of new loans. Loans paid off had a weighted-average yield of 6.21%. New loans, nearly all with fixed interest rates, had a weighted-average yield, term and loan-to-value ratio of 4.85%, 5.4 years and 58%, respectively. Nonaccrual loans and REO aggregated to $77 million, or 4.1% of total assets, at June 30, 2012, compared to $86 million, or 4.3%, at December 31, 2011. Nonaccrual loans totaled $51 million at June 30, 2012 and $57 million at December 31, 2011, and included $39 million (12 loans) and $46 million (12 loans) of TDRs that were current at each date, respectively. One loan ($5.5 million) was upgraded and classified as an accruing TDR in Q2-12. 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 three TDRs (or $1.4 million of aggregate principal) was charged off for financial statement purposes in Q1-12. The borrowers remain obligated to pay all contractual principal due on the TDRs.
The allowance for loan losses at June 30, 2012 was $28.8 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 June 30, 2012, the Company had a deferred tax asset totaling $34.1 million, which included remaining unused NOL and AMT credit carryforwards totaling $25 million for Federal tax purposes and $56 million for State and Local tax purposes. These carryforwards are available to reduce taxes payable on the Company's future taxable income. Deposits at June 30, 2012 decreased to $1.55 billion from $1.66 billion at December 31, 2011, primarily reflecting a $102 million decrease in CD accounts, of which $16.5 million were brokered. At June 30, 2012, there were $33 million of scheduled maturities of brokered CDs through December 31, 2012, which the Bank expects to repay as they mature. Borrowed funds and related interest payable at June 30, 2012 decreased to $72.5 million, from $78.6 million at December 31, 2011, due to the maturity and repayment of $7 million of FHLB borrowings, partially offset by a $0.9 million increase in accrued interest payable on trust preferred securities (TRUPs). 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 as well as the declaration and payment of dividends on $25 million of TARP preferred stock held by the U.S.Treasury. Stockholders' equity increased to $204 million at June 30, 2012 from $198 million at December 31, 2011, primarily due to $6 million of net earnings before preferred dividend requirements. 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. 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||Six-Months Ended|
|June 30,||June 30,|
|Selected Operating Data:||2012||2011||2012||2011|
|Interest and dividend income||$19,706||$23,917||$40,404||$47,511|
|Net interest and dividend income||9,705||10,873||19,663||21,224|
|Provision for loan losses||-||742||-||2,787|
|Provision for real estate losses||1,397||1,278||1,908||1,278|
|Real estate expenses||479||554||939||879|
|Earnings before income taxes||5,086||5,207||11,034||9,101|
|Provision for income taxes||2,326||2,321||5,020||4,062|
|Net earnings before preferred dividend requirements||2,760||2,886||6,014||5,039|
|Preferred dividend requirements (1)||448||428||892||855|
|Net earnings available to common stockholders||$ 2,312||$ 2,458||$ 5,122||$ 4,184|
|Basic and diluted earnings per common share||$0.11||$0.12||$0.24||$0.20|
|Average shares used for basic earnings per share (2)||21,590,689||21,126,489||21,542,103||21,126,489|
|Average shares used for diluted earnings per share (2)||21,591,648||21,126,489||21,542,103||21,126,489|
|Common shares outstanding at end of period||21,590,689||21,126,489||21,590,689||21,126,489|
|Common stock options/warrants outstanding at end of period||1,082,322||1,045,422||1,082,322||1,045,422|
|Yield on interest-earning assets||4.52||%||4.94||%||4.51||%||4.91||%|
|Cost of funds||2.46||%||2.92||%||2.50||%||2.94||%|
|Net interest margin||2.23||%||2.24||%||2.19||%||2.19||%|
|Return on average assets (annualized)||0.58||%||0.57||%||0.63||%||0.49||%|
|Return on average common equity (annualized)||6.22||%||7.00||%||6.83||%||6.15||%|
|Effective income tax rate||46||%||45||%||46||%||45||%|
|Efficiency ratio (3)||37||%||35||%||37||%||38||%|
|Average loans outstanding||$1,159,305||$1,287,029||$1,162,318||$1,308,104|
|Average securities outstanding||586,814||640,194||632,829||627,844|
|Average short-term investments outstanding||7,071||16,497||7,368||16,774|
|Average assets outstanding||1,887,668||2,029,339||1,916,410||2,037,623|
|Average interest-bearing deposits outstanding||$1,570,674||$1,712,380||$1,601,169||$1,722,225|
|Average borrowings outstanding||67,202||79,334||68,779||80,455|
|Average stockholders' equity||201,873||188,993||200,319||187,914|
|At Jun 30,||At Mar 31,||At Dec 31,||At Sep 30,||At Jun 30,|
|Selected Financial Condition Information:||2012||2012||2011||2011||2011|
|Cash and short-term investments||122,378||89,839||29,863||36,798||14,461|
|Securities held to maturity||535,056||590,959||700,444||678,118||691,334|
|Loans, net of unearned fees||1,137,780||1,155,437||1,163,790||1,199,770||1,252,128|
|Allowance for loan losses||28,844||29,169||30,415||32,365||31,772|
|Allowance for loan losses/net loans||2.54||%||2.52||%||2.61||%||2.70||%||2.54||%|
|Borrowed funds and accrued interest payable||72,528||72,064||78,606||78,156||82,634|
|Preferred stockholder's equity||24,431||24,335||24,238||24,141||24,045|
|Common stockholders' equity||179,690||176,716||173,293||170,164||167,109|
|Common book value per share (4)||8.16||8.04||8.07||7.94||7.81|
|Loan chargeoffs for the quarter||$498||$1,430||$2,044||$1,667||$ 1,374|
|Loan recoveries for the quarter||173||184||54||69||4|
|Real estate chargeoffs for the quarter||-||-||-||-||-|
|Security impairment writedowns for the quarter||-||157||-||96||-|
|Nonaccrual loans (5)||$50,643||$53,208||$57,240||$59,707||$45,352|
|Real estate owned, net of valuation allowance||26,370||27,767||28,278||27,005||25,786|
|Investment securities on a cash basis||4,222||4,222||4,379||4,379||4,475|
|Accruing troubled debt restructured (TDR) loans (6)||14,596||8,980||9,030||5,601||5,619|
|Loans 90 days past due and still accruing||5,290||2,798||1,925||8,571||4,594|
|Loans 60-89 days past due and still accruing||1,902||6,303||3,894||939||7,704|
|Loans 31-59 days past due and still accruing||-||11,840||24,876||-||-|
(2) For the 2012 quarterly and six-month periods, outstanding options/warrants to purchase 1,043,322 shares and 1,082,322 shares, respectively, were not dilutive. For both 2011 periods, outstanding options/warrants to purchase 1,045,422 shares were not dilutive.(3) Represents operating expenses as a percentage of net interest and dividend income plus noninterest income. (4) Represents common stockholders' equity less preferred dividends in arrears of $3.5 million, $3.1 million, $2.8 million, $2.4 million and $2.1 million, respectively, divided by common shares outstanding. (5) Include performing TDRs maintained on nonaccrual status of $39 million, $44 million, $46 million, $37 million and $33 million, respectively. (6) Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments, or extension of maturity date. All loans were performing and current as of June 30, 2012 and were yielding approximately 6.1%.
|INTERVEST BANCSHARES CORPORATION Consolidated Financial Highlights|
|At or For The Period Ended|
|($ in thousands, except per share amounts)||Six-Months Ended June 30, 2012||Year Ended Dec 31, 2011||Year Ended Dec 31, 2010||Year Ended Dec 31, 2009||Year Ended Dec 31, 2008|
|Balance Sheet Highlights:|
|Cash and short-term investments||122,378||29,863||23,911||7,977||54,903|
|Securities held to maturity||535,056||700,444||614,335||634,856||475,581|
|Loans, net of unearned fees||1,137,780||1,163,790||1,337,326||1,686,164||1,705,711|
|Allowance for loan losses||28,844||30,415||34,840||32,640||28,524|
|Allowance for loan losses/net loans||2.54||%||2.61||%||2.61||%||1.94||%||1.67||%|
|Borrowed funds and accrued interest payable||72,528||78,606||84,676||118,552||149,566|
|Preferred stockholder's equity||24,431||24,238||23,852||23,466||23,080|
|Common stockholders' equity||179,690||173,293||162,108||190,588||188,894|
|Common book value per share (1)||8.16||8.07||7.61||23.04||22.84|
|Market price per common share||3.83||2.65||2.93||3.28||3.99|
|Asset Quality Highlights|
|Real estate owned, net of valuation allowance||26,370||28,278||27,064||31,866||9,081|
|Investment securities on a cash basis||4,222||4,379||2,318||1,385||-|
|Accruing troubled debt restructured loans (2)||14,596||9,030||3,632||97,311||-|
|Loans past due 90 days and still accruing||5,290||1,925||7,481||6,800||1,964|
|Loans past due 31-89 days and still accruing||1,902||28,770||11,364||5,925||18,943|
|Real estate chargeoffs||-||-||15,614||-||-|
|Impairment writedowns on security investments||157||201||1,192||2,258||-|
|Statement of Operations Highlights:|
|Interest and dividend income||$40,404||$92,837||$ 107,072||$123,598||$128,497|
|Net interest and dividend income||19,663||42,297||44,380||42,598||38,162|
|Provision for loan losses||-||5,018||101,463||10,865||11,158|
|Provision for real estate losses||1,908||3,349||15,509||2,275||518|
|Real estate expenses||939||1,619||4,105||4,945||4,281|
|Earnings (loss) before income taxes||11,034||20,758||(93,656||)||4,946||13,157|
|Provision (benefit) for income taxes||5,020||9,512||(40,348||)||1,816||5,891|
|Net earnings (loss) before preferred dividend requirements||6,014||11,246||(53,308||)||3,130||7,266|
|Preferred dividend requirements (3)||892||1,730||1,667||1,632||41|
|Net earnings (loss) available to common stockholders||$ 5,122||$ 9,516||$(54,975||)||$ 1,498||$ 7,225|
|Basic earnings (loss) per common share||$0.24||$0.45||$(4.95||)||$0.18||$0.87|
|Diluted earnings (loss) per common share||$0.24||$0.45||$(4.95||)||$0.18||$0.87|
|Average common shares used to calculate:|
|Basic earnings (loss) per common share||21,542,103||21,126,187||11,101,196||8,270,812||8,259,091|
|Diluted earnings (loss) per common share||21,542,103||21,126,187||11,101,196||8,270,812||8,267,781|
|Common shares outstanding||21,590,689||21,125,289||21,126,489||8,270,812||8,270,812|
|Net interest margin (4)||2.19||%||2.18||%||2.11||%||1.83||%||1.79||%|
|Return on average assets||0.63||%||0.56||%||-2.42||%||0.13||%||0.34||%|
|Return on average common equity||6.83||%||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||%|
(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 2.41%, 2.24%, 2.26%, 1.72% and 1.77%, respectively. (5) Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.