Intervest Bancshares Corporation (IBC) (NASDAQ-GS:IBCA), parent company of Intervest National Bank (INB), today announced that its earnings for the fourth quarter of 2013 (Q4-13) increased 37% to $4.2 million, or $0.19 per share, from $3.1 million, or $0.14 per share, for the fourth quarter of 2012 (Q4-12). Net earnings for the full year 2013 increased 29% to $13.4 million, or $0.61 per share, from $10.4 million, or $0.48 per share, for 2012. Since 1993, Intervest has been primarily engaged in commercial and multifamily real estate mortgage lending with an emphasis on cash flowing properties located on the East Coast of the U.S. Its lending operation is highly personalized and targeted to provide customized financing solutions for real estate acquisitions and operations. Intervest does not make construction or land development loans or single family home loans. Financial Operating Highlights
- Net interest income increased to $10.1 million in Q4-13, from $9.7 million in Q4-12, reflecting a higher net interest margin. For 2013, net interest income decreased to $36.5 million from $39.2 million in 2012, reflecting a smaller average balance sheet. The net interest margin improved to 2.57% in Q4-13 from 2.47% in Q4-12, and to 2.39% for 2013 from 2.29% for 2012.
- The provision for loan losses increased to $1.0 million in Q4-13 from no provision in Q4-12, reflecting primarily the impact of $27 million of net loan growth and the downgrade of one performing loan (of $7.8 million) to substandard in Q4-13. For 2013, a net credit of $0.5 million was recorded compared to no provision in 2012. The credit was primarily a function of $2.2 million of cash recoveries of prior charge offs exceeding current chargeoffs of $1.9 million and an improvement in the qualitative factors used in the determination of the allowance for loan losses.
- Noninterest income increased to $2.6 million in Q4-13 from $2.5 million in Q4-12 due to a $1.5 million gain from the sale of impaired investment securities (TRUPs) and a $0.4 million decrease in security impairment charges, mostly offset by a $1.7 million decrease in loan prepayment income. For 2013, noninterest income decreased to $4.9 million from $6.2 million in 2012, primarily due to $2.5 million of lower prepayment income, partially offset by the gain from the sale of TRUPs.
- The provision for real estate losses decreased to $0.1 million in Q4-13 from $1.1 million in Q4-12, and to $1.1 million in 2013 from $4.1 million in 2012, reflecting fewer write-downs in the carrying value of real estate owned through foreclosure (REO).
- Real estate expenses, net of rental and other income, totaled $0.3 million in Q4-13, unchanged from Q4-12. For 2013, REO activities produced net income of $0.8 million compared to $2.1 million of net expenses in 2012, largely due to $0.9 million of net gains from sales of REO and $1.6 million of cash recoveries of expenses associated with previously owned properties.
- Operating expenses decreased to $3.6 million in Q4-13 from $4.2 million in Q4-12, and to $15.6 million in 2013 from $16.7 million in 2012, primarily due to decreases in FDIC insurance expense, professional fees and stock compensation expense.
- Our efficiency ratio (which measures our ability to control expenses as a percentage of revenues) improved to 29% in Q4-13 from 35% in Q4-12.
- Income tax expense increased to $3.5 million in Q4-13 from $3.0 million in Q4-12, and to $11.7 million in 2013 from $10.3 million in 2012, reflecting higher pre-tax income.
- Preferred dividend requirements decreased to none in Q4-13 from $0.5 million in Q4-12, and to $1.1 million in 2013 from $1.8 million in 2012, reflecting the repurchase of TARP preferred stock during June and August of 2013.
- Assets totaled $1.57 billion at December 31, 2013 compared to $1.67 billion at December 31, 2012, reflecting decreases of $60 million in security investments and $36 million in cash and short-term investments.
- Loans outstanding increased by $20 million and totaled $1.13 billion at December 31, 2013, compared to $1.11 billion at December 31, 2012. Loan originations increased to $303 million in 2013 from $242 million in 2012. Loan repayments increased to $279 million in 2013 from $249 million in 2012.
- Nonaccrual loans decreased to $35.9 million at December 31, 2013 from $45.9 million at December 31, 2012, and included restructured loans (TDRs) of $33.2 million and $36.3 million, respectively. All the TDRs were current and have performed in accordance with their restructured terms. The TDRs had a weighted-average yield of 4.56% at December 31, 2013.
- The allowance for loan losses was $27.8 million, or 2.47% of total loans, at December 31, 2013, compared to $28.1 million, or 2.54%, at December 31, 2012. The allowance included specific reserves for impaired loans at each date (totaling $6.1 million and $5.9 million, respectively). Impaired loans (which include all nonaccrual loans and TDRs) totaled $57.2 million at December 31, 2013, compared to $66.0 million at December 31, 2012.
- Securities held to maturity decreased to $384 million at December 31, 2013 from $444 million at December 31, 2012, due to calls exceeding new purchases.
- REO decreased to $10.6 million at December 31, 2013 from $15.9 million at December 31, 2012, reflecting $7.2 million of sales and $1.1 million of write-downs in carrying value, partially offset by the addition of one property for $3.0 million.
- Deposits decreased to $1.28 billion at December 31, 2013 from $1.36 billion at December 31, 2012, reflecting net deposit outflow for the year.
- Borrowed funds and related accrued interest payable decreased to a total of $57.6 million at December 31, 2013 from $62.9 million at December 31, 2012, reflecting the payment of accrued interest on outstanding debentures.
- Stockholders' equity decreased to $197 million at December 31, 2013 from $211 million at December 31, 2012, reflecting primarily the repurchase of $25 million of TARP preferred stock and payment of $5.1 million of accumulated preferred dividends, partially offset by earnings (before preferred dividend requirements) of $14.5 million.
- INB was well-capitalized at December 31, 2013 with regulatory capital ratios as follows: Tier One Leverage - 15.23%; Tier One Risk-Based - 19.65%; and Total Risk-Based Capital - 20.91%.
- Book value per common share increased to $8.99 at December 31, 2013 from $8.44 at December 31, 2012.
The $2.7 million decrease in year over year net interest income was due to a smaller average balance sheet, partially offset by a higher net interest margin. In 2013, total average interest-earning assets decreased by $187 million from 2012 (reflecting decreases of $57 million in loans and $130 million in total securities and overnight investments) while average deposits and borrowed funds decreased by $223 million and $9 million, respectively. The net interest margin improved to 2.39% in 2013 from 2.29% in 2012, reflecting a 6 basis point improvement in our interest rate spread and a $44 million increase in net interest-earning assets. Overall, our average cost of funds decreased by 40 basis points to 2.00% in 2013 from 2.40% in 2012, while our average yield on earning assets decreased by 34 basis points to 4.17% in 2013 from 4.51% in 2012. The reasons for the changes in the average yield and cost of funds were the same as those for the quarterly variance.The $60 million decrease in securities held to maturity was due to calls exceeding new purchases. At December 31, 2013, the HTM portfolio represented 24.5% of our total assets and was comprised of U.S. government agency debt ($306 million) and residential mortgage-backed pass-through securities ($78 million). The entire portfolio had a weighted-average expected yield, remaining life and contractual maturity of 1.11%, 3.3 years and 6.0 years, respectively. In December 2013, in advance of the requirements of the "Volcker Rule" of the Dodd-Frank Act, INB transferred to available for sale and subsequently sold all (or $2.6 million in carrying value) of its investments in corporate TRUPs (which were non-investment grade and other than temporarily impaired by varying degrees since 2008) for a net gain on sale of $1.5 million. The $20 million increase in loans receivable reflected $302.7 million of new loans and $2.2 million of recoveries of prior charge offs, largely offset by $243.8 million of payoffs, $35.7 million of amortization, $1.9 million of chargeoffs and a $3.0 million transfer to REO. New originations were comprised of $204 million of commercial real estate loans, $59 million of multifamily loans and $36 million of loans secured by investor owned 1-4 family condominiums. New loans in 2013 had a weighted-average rate, term and loan-to-value ratio of 4.53%, 6.8 years and 60%, respectively, compared to 4.87%, 5.8 years and 56%, respectively, for new loans in 2012. Nearly all of the new loans in both periods had fixed interest rates. Loans paid off in 2013 and 2012 had a weighted-average rate of 5.85% and 6.15%, respectively. At December 31, 2013, the loan portfolio was comprised of 75% of loans secured by commercial real estate, 19% secured by multifamily properties and 6% by investor owned 1-4 family condominiums.
The $80 million decrease in deposits reflected a $55 million net decrease in CD accounts, of which $38 million were brokered CDs, and a $28 million decrease in money market accounts. At December 31, 2013, we had $91 million of brokered CDs outstanding with a weighted-average rate of 3.01%, of which $23 million (with a weighted-average rate of 4.76%) mature within one year.As previously reported, in June 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. In August 2013, IBC redeemed the remaining 18,750 shares of Preferred Stock (which were purchased from the U.S. Treasury by unrelated third parties) for the stated liquidation value of $1,000 per share. The total cost of redeeming these shares was $22.6 million, which included $3.9 million in accrued and unpaid dividends. All shares of Preferred Stock were cancelled and IBC no longer had any preferred stockholders as of August 31, 2013. The U.S. 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||Year Ended|
|December 31,||December 31,|
|Selected Operating Data:||2013||2012||2013||2012|
|Interest and dividend income||$16,120||$17,798||$63,616||$77,284|
|Net interest and dividend income||10,097||9,695||36,506||39,217|
|Provision (credit) for loan losses||950||-||(550)||-|
|Provision for real estate losses||150||1,135||1,105||4,068|
|Real estate expenses (income), net||284||324||(836)||2,146|
|Earnings before income taxes||7,683||6,517||26,149||22,529|
|Provision for income taxes||3,476||2,987||11,655||10,307|
|Net earnings before preferred dividend requirements||4,207||3,530||14,494||12,222|
|Preferred dividend requirements (1)||-||456||1,057||1,801|
|Net earnings available to common stockholders||$ 4,207||$ 3,074||$13,437||$10,421|
|Basic and diluted earnings per common share||$0.19||$0.14||$0.61||$0.48|
|Preferred cash dividends paid||-||-||$5,068||-|
|Average shares used for basic earnings per share||21,900,391||21,589,589||21,894,030||21,566,009|
|Average shares used for diluted earnings per share (2)||22,041,319||21,594,468||21,993,626||21,568,196|
|Common shares outstanding at end of period||21,918,623||21,589,589||21,918,623||21,589,589|
|Common stock options/warrants outstanding at end of period (2)||1,041,445||1,078,122||1,041,445||1,078,122|
|Yield on interest-earning assets||4.10%||4.54%||4.17%||4.51%|
|Cost of funds||1.76%||2.22%||2.00%||2.40%|
|Net interest margin (3)||2.57%||2.47%||2.39%||2.29%|
|Return on average assets (annualized)||1.06%||0.82%||0.90%||0.66%|
|Return on average common equity (annualized)||8.72%||7.67%||7.58%||6.82%|
|Effective income tax rate||45%||46%||45%||46%|
|Efficiency ratio (4)||29%||35%||38%||37%|
|Average loans outstanding||$1,133,017||$1,112,357||$1,092,229||$1,149,689|
|Average securities outstanding||415,858||437,604||423,558||555,777|
|Average short-term investments outstanding||10,648||10,350||10,972||8,273|
|Average assets outstanding||1,593,216||1,712,892||1,605,435||1,839,727|
|Average interest-bearing deposits outstanding||$1,298,646||$1,395,622||$1,299,998||$1,522,625|
|Average borrowings outstanding||57,873||59,452||56,997||65,789|
|Average stockholders' equity||193,064||208,691||205,635||203,647|
|At Dec 31,||At Sep 30,||At Jun 30,||At Mar 31,||At Dec 31,|
|Selected Financial Condition Information:||2013||2013||2013||2013||2012|
|Cash and short-term investments||24,700||30,253||86,977||83,945||60,395|
|Securities held to maturity||383,937||416,321||410,986||409,184||443,777|
|Loans, net of unearned fees||1,127,522||1,100,277||1,056,191||1,081,482||1,107,466|
|Allowance for loan losses||27,833||26,777||26,455||28,210||28,103|
|Allowance for loan losses/net loans||2.47%||2.43%||2.50%||2.61%||2.54%|
|Borrowed funds and accrued interest payable||57,570||57,165||56,760||63,373||62,930|
|Preferred stockholder's equity||-||-||18,620||24,720||24,624|
|Common stockholders' equity||196,991||192,288||193,155||190,545||186,323|
|Common book value per share (5)||8.99||8.77||8.64||8.48||8.44|
|Loan chargeoffs for the quarter||$ -||$ -||$1,823||$ 115||$ 676|
|Loan recoveries for the quarter||106||72||818||1,222||397|
|Real estate chargeoffs for the quarter||256||4,171||-||-||1,124|
|Security impairment writedowns for the quarter||-||273||325||366||425|
|Nonaccrual loans (6)||$35,903||$39,517||$39,069||$40,931||$45,898|
|Real estate owned, net of valuation allowance||10,669||12,019||14,869||18,334||15,923|
|Investment securities on a cash basis||-||2,604||2,923||3,292||3,721|
|Accruing troubled debt restructured (TDR) loans (7)||13,429||11,381||11,464||13,906||20,076|
|Loans 90 days past due and still accruing (8)||4,087||18,403||5,285||5,916||4,391|
|Loans 60-89 days past due and still accruing||-||3,265||11,065||-||-|
|Loans 31-59 days past due and still accruing||2,642||-||-||12,998||15,497|
|(1)||Represents dividend requirements on cumulative preferred stock outstanding during the period plus amortization of related preferred stock discount.|
|(2)||Outstanding options/warrants to purchase 224,630 shares and 997,622 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 be 2.74%, 3.08%, 2.56% and 2.59%, respectively.|
|(4)||Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.|
|(5)||Represents common stockholders' equity less any preferred dividends in arrears (none at December 31 and September 30, 2013, $3.7 million at June 30, 2013, $4.6 million at March 31, 2013 and $4.2 million at December 31, 2012) divided by common shares outstanding.|
|(6)||Include performing TDRs maintained on nonaccrual status, or cash basis, of $33 million, $36 million, $36 million, $33 million and $36 million, respectively.|
|(7)||Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments, or extension of maturity date. At December 31, 2013, all loans were performing and were yielding approximately 5% on a weighted average basis.|
|(8)||The amount at December 31, 2013 consisted of three loans that matured and as to which the borrowers were making monthly loan payments. The loans were in the process of being extended as of December 31, 2013.|
|INTERVEST BANCSHARES CORPORATION|
|Consolidated Financial Highlights|
|At or For The Period Ended|
|($ in thousands, except per share amounts)||Year Ended Dec 31, 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||24,700||60,395||29,863||23,911||7,977|
|Securities held to maturity||383,937||443,777||700,444||614,335||634,856|
|Loans, net of unearned fees||1,127,522||1,107,466||1,163,790||1,337,326||1,686,164|
|Allowance for loan losses||27,833||28,103||30,415||34,840||32,640|
|Allowance for loan losses/net loans||2.47%||2.54%||2.61%||2.61%||1.94%|
|Borrowed funds and accrued interest payable||57,570||62,930||78,606||84,676||118,552|
|Preferred stockholder's equity||-||24,624||24,238||23,852||23,466|
|Common stockholders' equity||196,991||186,323||173,293||162,108||190,588|
|Common book value per share (1)||8.99||8.44||8.07||7.61||23.04|
|Market price per common share||7.51||3.89||2.65||2.93||3.28|
|Asset Quality Highlights|
|Real estate owned, net of valuation allowance||10,669||15,923||28,278||27,064||31,866|
|Investment securities on a cash basis||-||3,721||4,378||2,318||1,385|
|Accruing troubled debt restructured loans||13,429||20,076||9,030||3,632||97,311|
|Loans 90 days past due and still accruing (2)||4,087||4,391||1,925||7,481||6,800|
|Loans 31-89 days past due and still accruing||2,642||15,497||28,770||11,364||5,925|
|Real estate chargeoffs||4,427||4,766||-||15,614||-|
|Impairment writedowns on security investments||964||582||201||1,192||2,258|
|Statement of Operations Highlights:|
|Interest and dividend income||$63,616||$77,284||$92,837||$107,072||$123,598|
|Net interest and dividend income||36,506||39,217||42,297||44,380||42,598|
|(Credit) provision for loan losses||(550)||-||5,018||101,463||10,865|
|Provision for real estate losses||1,105||4,068||3,349||15,509||2,275|
|Real estate (income) expenses, net||(836)||2,146||1,619||4,105||4,945|
|Earnings (loss) before income taxes||26,149||22,529||20,758||(93,656)||4,946|
|Provision (benefit) for income taxes||11,655||10,307||9,512||(40,348)||1,816|
|Net earnings (loss) before preferred dividend requirements||14,494||12,222||11,246||(53,308)||3,130|
|Preferred dividend requirements||1,057||1,801||1,730||1,667||1,632|
|Net earnings (loss) available to common stockholders||$13,437||$10,421||$ 9,516||$(54,975)||$ 1,498|
|Basic earnings (loss) per common share||$0.61||$0.48||$0.45||$(4.95)||$0.18|
|Diluted earnings (loss) per common share||$0.61||$0.48||$0.45||$(4.95)||$0.18|
|Average common shares used to calculate:|
|Basic earnings (loss) per common share||21,894,030||21,566,009||21,126,187||11,101,196||8,270,812|
|Diluted earnings (loss) per common share||21,993,626||21,568,196||21,126,187||11,101,196||8,270,812|
|Common shares outstanding||21,918,623||21,589,589||21,125,289||21,126,489||8,270,812|
|Net interest margin (3)||2.39%||2.29%||2.18%||2.11%||1.83%|
|Return on average assets||0.90%||0.66%||0.56%||-2.42%||0.13%|
|Return on average common equity||7.58%||6.82%||6.74%||-32.20%||1.65%|
|Effective income tax rate||45%||46%||46%||43%||37%|
|(1)||Represents common stockholders' equity less any preferred dividends in arrears (none at December 31, 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)||The amount at December 31, 2013 consisted of three loans that matured and as to which the borrowers were making monthly loan payments. The loans were in the process of being extended as of December 31, 2013.|
|(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 be 2.56%, 2.59%, 2.31%, 2.17% and 1.89%, respectively.|