- The provision for real estate losses decreased to $0.2 million in Q3-13 from $1.0 million in Q3-12, and to $0.9 million in 9mths-13 from $2.9 million in 9mths-12, reflecting fewer write-downs in the carrying value of real estate owned through foreclosure (REO).
- Real estate expenses, net of rental and other income, decreased to $0.2 million in Q3-13 from $0.9 million in Q3-12, reflecting a lower level of REO. For 9mths-13, REO activities produced net income of $1.1 million, compared to $1.8 million of net expenses in 9mths-12, largely due to $0.8 million of gains from the sale of three properties and $1.6 million of cash recoveries of expenses associated with previously owned properties. Exclusive of these income items, net real estate expenses would have been $1.3 million in 9mths-13.
- The provision for loan losses was $0.3 million in Q3-13 compared to no provision in Q3-12. The increase was driven primarily by growth in the loan portfolio. For 9mths-13, a net credit for loan losses of $1.5 million was recorded compared to no provisions or credits for loan losses in 9mths-12. The credit was largely a function of partial cash recoveries of prior loan charge offs during the first and second quarters of 2013.
- Net interest and dividend income decreased to $8.8 million in Q3-13, from $9.8 million in Q3-12, and to $26.4 million in 9mths-13 from $29.5 million in 9mths-12. The net interest margin was 2.32% in Q3-13 and Q3-12, and 2.33% in 9mths-13 and 2.23% in 9mths-12.
- Noninterest income decreased to $0.9 million in Q3-13 from $1.2 million in Q3-12, and to $2.3 million in 9mths-13 from $3.7 million in 9mths-12. The decreases for both periods were due to less income from loan prepayments and a higher level of security impairment charges.
- Operating expenses decreased to $3.9 million in Q3-13 from $4.2 million in Q3-12, and to $12.0 million in 9mths-13 from $12.5 million in 9mths-12, primarily due to a decrease in FDIC insurance expense resulting from a smaller balance sheet and improved risk assessment rating.
- Our efficiency ratio (which measures our ability to control expenses as a percentage of revenues) continued to be favorable but increased slightly to 40% in Q3-13, from 38% in Q3-12, due to lower revenues.
- Income tax expense amounted to $2.3 million in both Q3-13 and Q3-12. For 9mths-13, income tax expense increased to $8.2 million from $7.3 million in 9mths-12 due to higher pre-tax income.
- Assets at September 30, 2013 totaled $1.58 billion compared to $1.67 billion at December 31, 2012, primarily reflecting decreases of $27 million in security investments and $30 million in cash and short-term investments.
- Loans outstanding increased by $44 million during Q3-13 and totaled $1.10 billion at September 30, 2013, compared to $1.11 billion at December 31, 2012. New loan originations for 9mths-13 increased to $221 million, from $159 million for 9mths-12, while loan repayments also increased to $225 million in 9mths-13, from $165 million in 9mths-12.
- Nonaccrual loans decreased to $39.5 million at September 30, 2013, from $45.9 million at December 31, 2012. Nonaccrual loans included restructured loans (TDRs) of $35.8 million at September 30 and $36.3 million at December 31 that were current and have performed in accordance with their renegotiated terms. At September 30, 2013, such loans had a weighted-average yield of 4.57%.
- The allowance for loan losses at September 30, 2013 was $26.8 million, or 2.43% of total loans, compared to $28.1 million, or 2.54%, at December 31, 2012. The allowance included specific reserves for impaired loans (comprised of all nonaccrual loans and TDRs) at each date totaling $4.8 million and $5.9 million, respectively.
- Securities held to maturity decreased to $416 million at September 30, 2013 from $444 million at December 31, 2012.
- Deposits at September 30, 2013 decreased to $1.30 billion from $1.36 billion at December 31, 2012.
- Borrowed funds and related interest payable at September 30, 2013 decreased to $57.2 million, from $62.9 million at December 31, 2012, reflecting the payment in Q2-13 of accrued interest payable on outstanding debentures.
- REO decreased to $12.0 million at September 30, 2013, from $15.9 million at December 31, 2012. The decrease reflected $6.0 million of sales and $0.9 million of write-downs in carrying value, partially offset by the addition of one property in the amount of $3.0 million.
- Stockholders' equity decreased to $192 million at September 30, 2013, from $211 million at December 31, 2012, reflecting the redemption of $25 million of preferred stock and the payment of $5.1 million of preferred dividends in arrears, partially offset by $10 million of earnings.
- INB's regulatory capital ratios at September 30, 2013 were well above the minimum requirements to be considered a well-capitalized institution and were as follows: Tier One Leverage - 14.97%; Tier One Risk-Based - 19.21%; and Total Risk-Based Capital - 20.48%.
- Book value per common share was $8.77 at September 30, 2013.
The decrease in net interest and dividend income of $3.1 million in 9mths-13 compared to 9mths-12 was also due to a smaller balance sheet, partially offset by an improved net interest margin for the period. In 9mths-13, total average interest-earning assets decreased by $250 million from 9mths-12, reflecting decreases of $84 million in loans and $166 million in total securities and overnight investments. At the same time, average deposits and borrowed funds decreased by $265 million and $11 million, respectively, while average stockholders' equity increased by $8 million. The net interest margin improved to 2.33% in 9mths-13, from 2.23% in 9mths-12, reflecting a 6 basis point improvement in our interest rate spread and a $26 million increase in net interest-earning assets. The average cost of funds decreased by 37 basis points to 2.08% in 9mths-13, from 2.45% in 9mths-12, while the average yield on earning assets decreased by 31 basis points to 4.19% in 9mths-13, from 4.50% in 9mths-12. The reasons for the changes in the average yield and cost of funds were the same as those noted above in the quarterly variance.The decrease in securities held to maturity was due to calls exceeding new purchases. At September 30, 2013, the portfolio represented 26% of total assets and was comprised almost entirely of U.S. government agency debt ($333 million) and residential mortgage-backed pass-through securities ($80 million), with a weighted-average expected yield, remaining life and contractual maturity of 1.14%, 3.3 years and 6.3 years, respectively. The change in loans receivable reflected $198.3 million of payoffs, $26.9 million of amortization, $1.9 million of chargeoffs and a $3.0 million transfer to REO, largely offset by $221.1 million of new loans and $2.1 million of recoveries of prior loan charge offs. New originations were comprised of $139 million of commercial real estate loans, $50 million of multifamily loans and $32 million of loans made on investor owned 1-4 family condominiums. Loans paid off in 9mths-13 had a weighted-average rate of 5.96%. New loans in 9mths-13 had a weighted-average rate, term and loan-to-value ratio of 4.40%, 6.6 years and 61%, respectively, compared to 4.64%, 6.0 years and 58%, respectively, in 9mths-12. Nearly all of the new loans in both periods had fixed interest rates. At September 30, 2013, the loan portfolio was comprised of approximately 74% of commercial real estate loans and 25% of multifamily loans (inclusive of loans on investor owned 1-4 family condominiums).
The decrease in deposits reflected a $39 million decrease in CD accounts, of which $29 million were brokered, and a $25 million decrease in money market accounts. At September 30, 2013, there were $85 million of brokered CDs outstanding with a weighted-average rate of 3.48%, of which $32 million (with a weighted-average rate of 4.76%) mature within one year.On June 24, 2013, IBC repurchased 6,250 shares of its Series A Preferred Stock (Preferred Stock) from the U.S. Treasury for $6.1 million, plus an additional $1.2 million in accrued and unpaid dividends, for a total of $7.3 million. On August 15, 2013, IBC redeemed the remaining 18,750 shares of Preferred Stock (which were purchased by unrelated third parties from the Treasury) for a purchase price equaling the stated liquidation value of $1,000 per share, plus accumulated and unpaid dividends. The total cost of redeeming these shares was $22.6 million, which included $3.9 million of preferred dividends. All 25,000 shares of Preferred Stock were cancelled and IBC had no preferred stockholders at September 30, 2013. As of the date of this release, the Treasury continues to hold a warrant to purchase 691,882 shares of IBC's common stock at an exercise price of $5.42 per share. 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 agreement to which IBC is subject 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. Forward looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise forward looking information, whether as a result of new, updated information, future events, or otherwise. 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||Nine-Months Ended|
|September 30,||September 30,|
|Selected Operating Data:||2013||2012||2013||2012|
|Interest and dividend income||$15,624||$19,082||$47,496||$59,486|
|Net interest and dividend income||8,830||9,859||26,409||29,522|
|Provision (credit) for loan losses||250||-||(1,500)||-|
|Provision for real estate losses||250||1,025||955||2,933|
|Real estate expenses (income), net||212||883||(1,120)||1,822|
|Earnings before income taxes||5,157||4,978||18,466||16,012|
|Provision for income taxes||2,300||2,300||8,179||7,320|
|Net earnings before preferred dividend requirements||2,857||2,678||10,287||8,692|
|Preferred dividend requirements (1)||269||453||1,057||1,345|
|Net earnings available to common stockholders||$ 2,588||$ 2,225||$ 9,230||$ 7,347|
|Basic and diluted earnings per common share||$0.12||$0.10||$0.42||$0.34|
|Preferred cash dividends paid||$3,840||-||$5,068||-|
|Average shares used for basic earnings per share||21,915,596||21,589,744||21,891,886||21,558,092|
|Average shares used for diluted earnings per share (2)||22,051,462||21,590,722||21,972,950||21,558,368|
|Common shares outstanding at end of period||21,916,623||21,589,589||21,916,623||21,589,589|
|Common stock options/warrants outstanding at end of period (2)||1,054,455||1,041,122||1,054,455||1,041,122|
|Yield on interest-earning assets||4.10%||4.48%||4.19%||4.50%|
|Cost of funds||2.02%||2.35%||2.08%||2.45%|
|Net interest margin (3)||2.32%||2.32%||2.33%||2.23%|
|Return on average assets (annualized)||0.72%||0.59%||0.85%||0.62%|
|Return on average common equity (annualized)||5.94%||5.93%||7.20%||6.53%|
|Effective income tax rate||45%||46%||44%||46%|
|Efficiency ratio (4)||40%||38%||42%||38%|
|Average loans outstanding||$1,077,578||$1,162,038||$1,078,483||$1,162,224|
|Average securities outstanding||422,234||524,000||426,153||595,455|
|Average short-term investments outstanding||11,027||7,987||11,080||7,576|
|Average assets outstanding||1,577,214||1,814,884||1,609,523||1,882,314|
|Average interest-bearing deposits outstanding||$1,278,867||$1,494,247||$1,300,465||$1,565,268|
|Average borrowings outstanding||56,702||66,213||56,702||67,918|
|Average stockholders' equity||201,401||205,206||209,847||201,953|
|At Sep 30,||At Jun 30,||At Mar 31,||At Dec 31,||At Sep 30,|
|Selected Financial Condition Information:||2013||2013||2013||2012||2012|
|Cash and short-term investments||30,253||86,977||83,945||60,395||94,268|
|Securities held to maturity||416,321||410,986||409,184||443,777||440,002|
|Loans, net of unearned fees||1,100,277||1,056,191||1,081,482||1,107,466||1,155,171|
|Allowance for loan losses||26,777||26,455||28,210||28,103||28,382|
|Allowance for loan losses/net loans||2.43%||2.50%||2.61%||2.54%||2.46%|
|Borrowed funds and accrued interest payable||57,165||56,760||63,373||62,930||69,487|
|Preferred stockholder's equity||-||18,620||24,720||24,624||24,528|
|Common stockholders' equity||192,288||193,155||190,545||186,323||182,580|
|Common book value per share (5)||8.77||8.64||8.48||8.44||8.28|
|Loan chargeoffs for the quarter||$ -||$1,823||$ 115||$ 676||$ 548|
|Loan recoveries for the quarter||72||818||1,222||397||86|
|Real estate chargeoffs for the quarter||4,171||-||-||1,124||3,642|
|Security impairment writedowns for the quarter||273||325||366||425||-|
|Nonaccrual loans (6)||$39,517||$39,069||$40,931||$45,898||$47,957|
|Real estate owned, net of valuation allowance||12,019||14,869||18,334||15,923||21,858|
|Investment securities on a cash basis||2,604||2,923||3,292||3,721||4,221|
|Accruing troubled debt restructured (TDR) loans (7)||11,381||11,464||13,906||20,076||14,167|
|Loans 90 days past due and still accruing (8)||18,403||5,285||5,916||4,391||6,503|
|Loans 60-89 days past due and still accruing||3,265||11,065||-||-||15,477|
|Loans 31-59 days past due and still accruing||-||-||12,998||15,497||50|
|(1)||Represents dividend requirements on cumulative preferred stock plus amortization of related preferred stock discount.|
|(2)||Outstanding options/warrants to purchase 234,430 shares and 1,041,122 shares were not dilutive for the 2013 and 2012 periods, respectively.|
|(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 2.48%, 2.49%, 2.50% and 2.44%, respectively.|
|(4)||Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.|
|(5)||Represents common stockholders' equity less preferred dividends in arrears of $0, $3.7 million, $4.6 million, $4.2 million and $3.8 million, respectively, divided by common shares outstanding.|
|(6)||Include performing TDRs maintained on nonaccrual status of $36 million, $36 million, $33 million, $36 million and $39 million, respectively.|
|(7)||Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments, or extension of maturity date. At September 30, 2013, all loans were performing and were yielding approximately 5%.|
|(8)||The amount at September 30, 2013 consisted of seven loans that matured and the borrowers were making monthly loan payments. The loans were in the process of being extended as of September 30, 2013.|
|INTERVEST BANCSHARES CORPORATION|
|Consolidated Financial Highlights|
|At or For The Period Ended|
|($ in thousands, except per share amounts)||Nine-Months Ended Sep 30, 2013||Year Ended Dec 31, 2012||Year Ended Dec 31, 2011||Year Ended Dec 31, 2010||Year Ended Dec 31, 2009|
|Balance Sheet Highlights:|
|Cash and short-term investments||30,253||60,395||29,863||23,911||7,977|
|Securities held to maturity||416,321||443,777||700,444||614,335||634,856|
|Loans, net of unearned fees||1,100,277||1,107,466||1,163,790||1,337,326||1,686,164|
|Allowance for loan losses||26,777||28,103||30,415||34,840||32,640|
|Allowance for loan losses/net loans||2.43%||2.54%||2.61%||2.61%||1.94%|
|Borrowed funds and accrued interest payable||57,165||62,930||78,606||84,676||118,552|
|Preferred stockholder's equity||-||24,624||24,238||23,852||23,466|
|Common stockholders' equity||192,288||186,323||173,293||162,108||190,588|
|Common book value per share (1)||8.77||8.44||8.07||7.61||23.04|
|Market price per common share||7.93||3.89||2.65||2.93||3.28|
|Asset Quality Highlights|
|Real estate owned, net of valuation allowance||12,019||15,923||28,278||27,064||31,866|
|Investment securities on a cash basis||2,604||3,721||4,378||2,318||1,385|
|Accruing troubled debt restructured loans (2)||11,381||20,076||9,030||3,632||97,311|
|Loans 90 days past due and still accruing (3)||18,403||4,391||1,925||7,481||6,800|
|Loans 31-89 days past due and still accruing||3,265||15,497||28,770||11,364||5,925|
|Real estate chargeoffs||4,171||4,766||-||15,614||-|
|Impairment writedowns on security investments||964||582||201||1,192||2,258|
|Statement of Operations Highlights:|
|Interest and dividend income||$47,496||$77,284||$92,837||$107,072||$123,598|
|Net interest and dividend income||26,409||39,217||42,297||44,380||42,598|
|(Credit) provision for loan losses||(1,500)||-||5,018||101,463||10,865|
|Provision for real estate losses||955||4,068||3,349||15,509||2,275|
|Real estate (income) expenses, net||(1,120)||2,146||1,619||4,105||4,945|
|Earnings (loss) before income taxes||18,466||22,529||20,758||(93,656)||4,946|
|Provision (benefit) for income taxes||8,179||10,307||9,512||(40,348)||1,816|
|Net earnings (loss) before preferred dividend requirements||10,287||12,222||11,246||(53,308)||3,130|
|Preferred dividend requirements (4)||1,057||1,801||1,730||1,667||1,632|
|Net earnings (loss) available to common stockholders||$9,230||$10,421||$ 9,516||$(54,975)||$ 1,498|
|Basic earnings (loss) per common share||$0.42||$0.48||$0.45||$(4.95)||$0.18|
|Diluted earnings (loss) per common share||$0.42||$0.48||$0.45||$(4.95)||$0.18|
|Average common shares used to calculate:|
|Basic earnings (loss) per common share||21,891,886||21,566,009||21,126,187||11,101,196||8,270,812|
|Diluted earnings (loss) per common share||21,972,950||21,568,196||21,126,187||11,101,196||8,270,812|
|Common shares outstanding||21,916,623||21,589,589||21,125,289||21,126,489||8,270,812|
|Net interest margin (5)||2.33%||2.29%||2.18%||2.11%||1.83%|
|Return on average assets||0.85%||0.66%||0.56%||-2.42%||0.13%|
|Return on average common equity||7.20%||6.82%||6.74%||-32.20%||1.65%|
|Effective income tax rate||44%||46%||46%||43%||37%|
|Efficiency ratio (6)||42%||37%||34%||41%||46%|
|(1)||Represents common stockholders' equity less preferred dividends in arrears (none at September 30, 2013, $4.2 million at December 31, 2012, $2.8 million at December 31, 2011 and $1.4 million at December 31, 2010) 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. At September 30, 2013, all loans were performing and were yielding approximately 5%.|
|(3)||The amount at September 30, 2013 consisted of seven loans that matured and the borrowers were making monthly loan payments. The loans were in the process of being extended as of September 30, 2013.|
|(4)||Represents dividend requirements on cumulative preferred stock plus amortization of related preferred stock discount.|
|(5)||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 2.50%, 2.59%, 2.31%, 2.17% and 1.89%, respectively.|
|(6)||Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.|