- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
____
of 1934 For the quarterly period ended June 30, 1996
____ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from____________ to _____________________
Commission file number 33-82246
INTERVEST BANCSHARES CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3699013
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
10 Rockefeller Plaza, Suite 1015
New York, New York 10020-1903
-----------------------------
(Address of Principal Executive Offices)
(212)757-7300
-------------
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
YES X NO
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date;
Class A Common stock, par value $1.00 per share 900,000
- ----------------------------------------------- ------------------------
(class) Outstanding at July 31, 1996
Class B Common stock, par value $1.00 per share 200,000
- ----------------------------------------------- ------------------------
(class) Outstanding at July 31, 1996
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CONFORMED COPY
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
June 30, 1996 (unaudited) and December 31, 1995........................2
Condensed Consolidated Statements of Earnings -
Three and Six Months ended June 30, 1996 and 1995 (unaudited)..........3
Condensed Consolidated Statement of Stockholders' Equity -
Six Months Ended June 30, 1996 (unaudited).............................4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 (unaudited)....................5
Notes to Condensed Consolidated Financial Statements (unaudited).......6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................8-10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders...............11
Item 6. Exhibits and Reports on Form 8-K..................................11
SIGNATURES...................................................................11
1
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
Assets 1996 1995
---- ----
(unaudited)
Cash and cash equivalents:
Cash and due from banks $ 1,590 1,805
Federal funds sold 2,374 5,707
Investment securities, short-term 508 1,039
--- -----
Total cash and cash equivalents 4,472 8,551
Interest-bearing deposits with banks 99 298
Investment securities held-to-maturity,at cost 21,474 19,630
Loans, net 49,731 36,465
Premises and equipment, net 2,459 2,449
Federal Reserve Bank stock, at cost 203 203
Deferred income tax assets 427 593
Accrued income and other assets 769 753
--- ---
Total $ 79,634 68,942
======== ======
Liabilities and Stockholders' Equity
Deposits:
Demand deposits 2,252 2,729
NOW deposits 2,968 2,705
Money market deposits 3,955 3,518
Savings deposits 722 595
Other time deposits 58,382 49,054
------ ------
Total deposits 68,279 58,601
Advance payments by borrowers for taxes and insurance 782 194
Other liabilities 828 613
--- ---
Total liabilities 69,889 59,408
------ ------
Minority interest 314 345
--- ---
Stockholders' Equity:
Class A common stock 900 900
Class B common stock 200 200
Additional paid-in capital 7,655 7,655
Retained earnings 676 434
--- ---
Total stockholders' equity 9,431 9,189
----- -----
Total $ 79,634 68,942
======== ======
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
(Dollars in thousands, except per share figures)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 1,112 682 2,087 1,274
Investment securities 339 289 675 494
Federal funds sold 28 13 92 70
Deposits in banks 1 5 3 9
-------- -------- --------- --------
Total interest income 1,480 989 2,857 1,847
------- ------- -------- -------
Interest expense:
Deposits 838 515 1,626 933
Short term borrowings 2 1 2 1
--------- -------- -------- --------
Total interest expense 840 516 1,628 934
-------- -------- -------- -------
Net interest income 640 473 1,229 913
Provision for credit losses 55 55 128 105
-------- -------- -------- --------
Net interest income after provision
for credit losses 585 418 1,101 808
-------- -------- -------- --------
Other income:
Customer service charges 39 15 60 35
Miscellaneous 9 6 18 6
--------- -------- -------- --------
Total other income 48 21 78 41
-------- -------- -------- --------
Other expense:
Employee compensation and benefits 180 141 351 266
Occupancy and equipment 90 94 179 172
Advertising and promotion 1 7 3 8
Professional fees 45 28 87 65
Federal insurance premiums - 17 1 35
Miscellaneous 88 54 144 114
-------- -------- -------- --------
Total other expense 404 341 765 660
-------- -------- -------- --------
Earnings before income taxes 229 98 414 189
Provision for income taxes 97 34 172 63
-------- -------- -------- --------
Net earnings $ 132 64 242 126
======== ======== ======== ========
Earnings per share $ .15 .07 .27 .14
======== ======== ======== ========
Weighted average number of shares outstanding 900,000 900,000 900,000 900,000
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders' Equity
For the Six Months Ended June 30, 1996
(In thousands)
Class A Class B Additional Total
Common Common Paid-In Retained Stockholders'
Stock Stock Capital Earnings Equity
Balance, December 31, 1995 $900 200 7,655 434 9,189
Net earnings for the six months
ended June 30, 1996
(unaudited) - - - 242 242
----- ----- ------- --- ------
Balance, June 30, 1996
(unaudited) $900 200 7,655 676 9,431
=== === ===== === =====
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 242 126
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation 121 68
Provision for deferred taxes 166 63
Decrease in other assets 1 19
Increase in accrued interest payable 1 7
Increase in other liabilities 9 145
Increase (decrease) in official checks 205 (267)
Increase in accrued interest receivable (17) (159)
Net amortization of fees, premiums and discounts 107 (105)
Provision for credit losses 128 105
------- -------
Net cash provided by operating activities 963 2
------- -------
Cash flows from investing activities:
Purchase of Federal Reserve Bank stock - (31)
Purchase of investment securities (9,937) (10,645)
Maturity of interest-bearing deposits 199 99
Purchase of property and equipment (107) (1,111)
Loans originated, net of principal collected (13,426) (4,016)
Maturities of investment securities 8,000 3,550
Purchase of minority shares in subsidiary (37) -
------- ------
Net cash used in investing activities (15,308) (12,154)
------ ------
Cash flows from financing activities:
Net increase in deposits 9,678 10,451
Stock issuance costs - (13)
Increase in advance payments by borrowers for taxes and insurance 588 96
----- ------
Net cash provided by financing activities 10,266 10,534
Net decrease in cash and cash equivalents (4,079) (1,618)
Cash and cash equivalents at beginning of period 8,551 6,088
------ ------
Cash and cash equivalents at end of period $ 4,472 4,470
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,627 927
===== ======
Income taxes $ 23 -
====== ======
See Accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General. In the opinion of the management of ntervest Bancshares
Corporation (the "Holding Company"), the accompanying condensed
consolidated financial statements contain all adjustments (consisting
principally of normal recurring accruals) necessary to present fairly
the financial position at June 30, 1996, the results of operations for
the three and six-month periods ended June 30, 1996 and 1995 and cash
flows for the six-month periods ended June 30, 1996 and 1995. The
results of operations for the three and six months ended June 30, 1996
are not necessarily indicative of the results to be expected for the
full year.
The Holding Company's condensed consolidated financial statements
include the accounts of its majority-owned subsidiary, Intervest Bank
(the "Bank") (collectively the "Company"). The Holding Company's
primary business activity is the ownership of the Bank. All
intercompany accounts and transactions have been eliminated in
consolidation.
2. Loan Impairment and Credit Losses. The Company has identified loans
totaling $246,000 as impaired at June 30, 1996 and has recorded an
allowance of $61,000 relating to these loans. No loans were identified
as impaired at June 30, 1995. The activity in the allowance for credit
losses is as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
-------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Balance, beginning of period $ 677 422 593 369
Provision charged to earnings 55 55 128 105
Recoveries, net of charge-offs 20 1 31 4
--- --- ---- ---
Balance, end of period $ 752 478 752 478
=== === === ===
3. Earnings Per Common Share. Earnings per common share were computed by
dividing the net earnings for the period by the weighted average number
of shares outstanding. The effect of the outstanding warrants was not
material.
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at June 30,
1996 of the regulatory capital requirements and the Bank's capital on a
percentage basis:
Ratios of Regulatory
the Bank Requirement
-------- -----------
Total capital to risk-weighted assets 13.42% 8.00%
Tier I capital to risk-weighted assets 12.17% 4.00%
Tier I capital to total assets - leverage ratio 9.39% 4.00%
6
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
5. Impact of New Accounting Issues. On January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 122 ("SFAS No.
122"), which requires mortgage banking enterprises that acquire
mortgage servicing through either the purchase or origination of
mortgage loans and sells or securitizes those loans with servicing
retained to allocate the total cost of the mortgage loans to the
mortgage servicing rights and the loans based on their relative fair
values. Mortgage banking enterprises include commercial banks and
thrift institutions that conduct operations substantially similar to
the primary operations of a mortgage banking enterprise. The adoption
of SFAS No. 122 has no effect on the Company's financial position at
June 30, 1996 or results of operations for the six months then ended.
This Statement will be superseded at December 31, 1996 by SFAS 125
discussed below.
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"), which establishes financial accounting and reporting
standards for stock-based employee compensation plans. The Statement
requires certain disclosures about stock-based compensation
arrangements, regardless of the method used to account for them, and
defines a fair value based method of accounting for an employee stock
option or similar equity instrument and encourages all entities to
adopt that method of accounting for all of their employee stock
compensation plans. However, SFAS No. 123 also allows an entity to
continue to measure compensation cost for stock-based compensation
plans using the intrinsic value method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Entities
electing to continue using the accounting method in APB Opinion No. 25
must make pro forma disclosures of net earnings and earnings per share
as if the fair value method of accounting defined in SFAS No. 123 had
been applied. Under the fair value method, compensation cost is
measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting
period. Under the intrinsic value method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date
or other measurement date over the amount an employee must pay to
acquire the stock. The Company had elected to continue to utilize the
intrinsic value method of accounting defined in APB Opinion No. 25, and
accordingly, the adoption of SFAS No. 123 had no effect on the
Company's financial position at June 30, 1996 or results of operations
for the six months then ended. The pro forma disclosures required under
SFAS No. 123, for stock warrants granted to employees during 1995 and
thereafter, are not required for interim condensed financial
statements.
6. Future Accounting Requirements. Statement of Financial Accounting
Standards No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" ("SFAS 125") provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. This Statement
also provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996. Management of the Company does not expect SFAS 125
to have a material effect on the Company's financial statements.
7
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Comparison of June 30, 1996 and December 31, 1995
Liquidity and Capital Resources
The Company's primary source of cash during the six months ended June
30, 1996 was from the maturity of investment securities totaling $8.0
million, net deposit inflows of $9.7 million and net cash provided by
operating activities of $1.0 million. Cash was used primarily for net
loan originations of $13.4 million and the purchase of investment
securities totaling $10.0 million. At June 30, 1996, the Company had
outstanding commitments to originate loans of $2.3 million. It is
expected that these requirements will be funded from the sources
described above. At June 30, 1996, the Bank exceeded its regulatory
liquidity requirements.
The following table shows selected ratios for the periods ended or at
the dates indicated:
Six Months Six Months
Ended Year Ended Ended
June 30, December 31, June 30,
1996 1995 1995
-------------- --------------- ---------
Average equity as a percentage
of average assets 12.35% 16.89% 19.02%
Equity to total assets at end of period 11.84% 13.33% 17.83%
Return on average assets (1) .64% .51% .53%
Return on average equity (1) 5.20% 3.01% 2.81%
Noninterest expense to average assets (1) 1.99% 2.66% 2.80%
Nonperforming loans and real estate owned to
total assets at end of period .31% - % .18%
- ----------------------------------------------
(1) Annualized for the six months ended June 30, 1996 and 1995.
8
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Comparison of the Three-Month Periods Ended June 30, 1996 and 1995
Results of Operations:
General. Net earnings for the three months ended June 30, 1996 were $132,000
or $.15 per share compared to net earnings of $64,000 or $.07 per share for
the three months ended June 30, 1995. This increase in the Company's net
earnings was primarily due to an increase in net interest income, partially
offset by an increase in other expenses and an increase in the provision for
income taxes.
Interest Income and Expense. Interest income increased by $491,000 from
$989,000 for the three months ended June 30, 1995 to $1.5 million for the
three months ended June 30, 1996. Interest income on loans increased $430,000
due to an increase in the average loan portfolio balance for the three months
ended June 30, 1996 to $47.4 million compared to $26.1 million during the
1995 period partially offset by a decrease in the weighted average yield from
10.42% in 1995 to 9.37% in 1996. Interest on investment securities increased
$50,000 due to an increase in the average investment securities portfolio
during the three months ended June 30, 1996 to $22.8 million from $18.1
million during 1995 partially offset by a decrease in the weighted average
yield from 6.38% in 1995 to 5.97% in 1996. Interest on federal funds sold and
other interest-earning assets increased $11,000 due to an increase in the
average balance of such assets from 1995 to 1996.
Interest expense on deposit accounts increased to $838,000 for the three
months ended June 30, 1996 from $515,000 for the three months ended June 30,
1995. Interest expense increased primarily because of an increase in the
average balance from 1995 to 1996. The average balance for the three months
ended June 30, 1996 was $63.7 million compared to $35.2 million during 1995.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they relate
to the Company's market areas, and other factors related to the
collectibility of the Company's loan portfolio. The provision for the three
months ended June 30, 1996 and 1995 was $55,000.
Other Expense. Total other expense increased $63,000 to $404,000 for the
three months ended June 30, 1996 from $341,000 for the three months ended
June 30, 1995, primarily due to an increase in employee compensation and
benefits related to the opening of a branch office in September, 1995.
9
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Comparison of the Six-Month Periods Ended June 30, 1996 and 1995
Results of Operations:
General. Net earnings for the six months ended June 30, 1996 were $242,000 or
$.27 per share compared to net earnings of $126,000 or $.14 per share for the
six months ended June 30, 1995. This increase in the Company's net earnings
was primarily due to an increase in net interest income, partially offset by
an increase in other expenses and an increase in the provision for income
taxes.
Interest Income and Expense. Interest income increased by $1,010,000 from
$1,847,000 for the six months ended June 30, 1995 to $2,857,000 for the six
months ended June 30, 1996. Interest income on loans increased $813,000 due
to an increase in the average loan portfolio balance for the six months ended
June 30, 1996 to $43.5 million compared to $24.9 million during the 1995
period partially offset by a decrease in the weighted average yield from
10.24% in 1995 to 9.60% in 1996. Interest on investment securities increased
$181,000 due to an increase in the average investment securities portfolio
during the six months ended June 30, 1996 to $22.7 million from $15.6 million
during 1995 partially offset by a decrease in the weighted average yield from
6.33% in 1995 to 5.94% in 1996. Interest on federal funds sold and other
interest-earning assets increased $16,000 due to an increase in the average
balance of these assets from 1995 to 1996, as well as an increase in the
weighted average yield.
Interest expense on deposit accounts increased to $1,626,000 for the six
months ended June 30, 1996 from $933,000 for the six months ended June 30,
1995. Interest expense increased because of an increase in the average
balance and weighted average rate from 1995 to 1996. The average balance for
the six months ended June 30, 1996 was $60.8 million compared to $35.1
million during 1995 and the weighted average rate was 5.35% in 1996 compared
to 5.31% in 1995.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they relate
to the Company's market areas, and other factors related to the
collectibility of the Company's loan portfolio. The provision increased from
$105,000 for the six months ended June 30, 1995 to $128,000 for the six
months ended June 30, 1996. The increase was deemed appropriate by management
due to the growth in the loan portfolio in 1996.
Other Expense. Total other expense increased $105,000 to $765,000 for the six
months ended June 30, 1996 from $660,000 for the six months ended June 30,
1995, primarily due to an increase in employee compensation and benefits
related to the opening of two branch offices in March, 1995 and a branch
office in September, 1995.
10
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on June 4, 1996 for
the purpose of electing directors. Pursuant to the charter and bylaws, two
directors are elected by the holders of Class A Common Stock and six directors
are elected by the holders of Class B Common Stock. A total of 826,500 shares of
Class A Common Stock and 200,000 shares of Class B Common Stock were represented
at the meeting. All of management's nominees for director were elected with the
following vote:
Class A Shares Shares
Voted For "Withheld"
--------- ----------
William F. Holly 826,500 0
David J. Willmott 826,500 0
Class B Shares Shares
Voted For "Withheld"
--------- ----------
Lawrence G. Bergman 200,000 0
Michael A. Callen 200,000 0
Jerome Dansker 200,000 0
Lowell S. Dansker 200,000 0
Milton F. Gidge 200,000 0
Wesley T. Wood 200,000 0
Item 6. Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended June 30,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERVEST BANCSHARES CORPORATION
AND SUBSIDIARY
(Registrant)
Date: July 31, 1996 By: /s/ Lowell S. Dansker
------------------------ ----------------------
Lowell S. Dansker, President, Treasurer and
Co-Chairman of the Board of Directors
(Chief Financial Officer)
Date: July 31, 1996 By: /s/ Lawrence G. Bergman
---------------------- ------------------------
Lawrence G. Bergman, Vice President,
Secretary and Co-Chairman of the Board
of Directors
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,590
<INT-BEARING-DEPOSITS> 607
<FED-FUNDS-SOLD> 2,374
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 21,474
<INVESTMENTS-MARKET> 21,226
<LOANS> 49,731
<ALLOWANCE> 752
<TOTAL-ASSETS> 79,634
<DEPOSITS> 68,279
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,924
<LONG-TERM> 0
0
0
<COMMON> 1,100
<OTHER-SE> 8,331
<TOTAL-LIABILITIES-AND-EQUITY> 79,634
<INTEREST-LOAN> 2,087
<INTEREST-INVEST> 675
<INTEREST-OTHER> 95
<INTEREST-TOTAL> 2,857
<INTEREST-DEPOSIT> 1,626
<INTEREST-EXPENSE> 2
<INTEREST-INCOME-NET> 1,229
<LOAN-LOSSES> 128
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 765
<INCOME-PRETAX> 414
<INCOME-PRE-EXTRAORDINARY> 414
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
<YIELD-ACTUAL> 8.20
<LOANS-NON> 246
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 593
<CHARGE-OFFS> 0
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 752
<ALLOWANCE-DOMESTIC> 61
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
