- -------------------------------------------------------------------------------
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 March 31, 1998
Transition report under Section 13 or 15(d) of the Exchange Act
- ----
For the transition period from ________ to ________
Commission file number 000-23377
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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 2,150,125
- ----------------------------------------------- -----------------------------
(class) Outstanding at April 20, 1998
Class B Common stock, par value $1.00 per share 300,000
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(class) Outstanding at April 20, 1998
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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 -
March 31, 1998 (unaudited) and December 31, 1997.....................2
Condensed Consolidated Statements of Earnings -
Three Months ended March 31, 1998 and 1997 (unaudited)...............3
Condensed Consolidated Statement of Stockholders' Equity -
Three Months ended March 31, 1998 (unaudited).........................4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 1998 and 1997 (unaudited)................5
Notes to Condensed Consolidated Financial Statements (unaudited).......6-8
Item 2. Management's Discussion and Analysis or Plan of Operation........9-10
Part II. Other Information
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)
March 31, December 31,
Assets 1998 1997
---- ----
(unaudited)
Cash and due from banks $ 2,852 1,738
Federal funds sold - 162
Short-term investments 5,875 7,276
-------- --------
Total cash and cash equivalents 8,727 9,176
Interest-bearing deposits with banks 99 99
Securities held to maturity 65,977 58,821
Loans receivable, net 83,225 75,652
Accrued interest receivable 1,463 1,327
Premises and equipment, net 5,064 4,877
Restricted securities, Federal Reserve Bank stock, at cost 233 233
Deferred income tax asset 456 485
Other assets 174 85
-------- --------
Total $165,418 150,755
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits 2,877 3,490
Savings and NOW deposits 20,780 17,119
Money-market deposits 18,873 17,180
Time deposits 100,879 93,378
-------- --------
Total deposits 143,409 131,167
Federal funds purchased 1,160 -
Other liabilities 2,815 1,947
-------- --------
Total liabilities 147,384 133,114
-------- --------
Minority interest 21 21
-------- --------
Stockholders' Equity:
Preferred stock -- --
Class A common stock 2,136 2,124
Class B common stock 300 300
Additional paid-in capital 13,433 13,360
Retained earnings 2,144 1,836
-------- --------
Total stockholders' equity 18,013 17,620
-------- --------
Total $165,418 150,755
======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
(Dollars in thousands, except per share figures)
Three Months Ended
March 31,
---------------------
1998 1997
---- ----
(Unaudited)
Interest income:
Loans receivable $ 1,808 1,434
Securities 1,029 598
Other interest earning assets 70 53
---------- ----------
Total interest income 2,907 2,085
Interest expense on deposits 1,838 1,309
---------- ----------
Net interest income 1,069 776
Provision for loan losses 100 92
---------- ----------
Net interest income after
provision for loan losses 969 684
---------- ----------
Noninterest income:
Customer service charges 46 27
Other 4 4
---------- ----------
Total noninterest income 50 31
---------- ----------
Noninterest expenses:
Salaries and employee benefits 246 216
Occupancy and equipment 74 90
Advertising and promotion 7 11
Professional fees 43 20
Deposit insurance premiums 4 2
Other 135 122
---------- ----------
Total noninterest expenses 509 461
---------- ----------
Earnings before income taxes 510 254
Income taxes 202 94
---------- ----------
Net earnings $ 308 160
========== ==========
Basic earnings per share $ .13 .10
========== ==========
Diluted earnings per share $ .09 .09
========== ==========
Weighted-average number of shares
outstanding for basic earnings per share 2,426,457 1,650,000
========== ==========
Weighted-average number of shares
outstanding for diluted earnings per share 3,272,739 1,790,450
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders' Equity
For the Three Month Period Ended March 31, 1998
($ in thousands)
<TABLE>
<CAPTION>
Shares of
Class A Class A Class B Additional Total
Common Common Common Paid-In Retained Stockholders'
Stock Stock Stock Capital Earnings Equity
----- ----- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997 2,124,415 $ 2,124 300 13,360 1,836 17,620
Exercise of common stock
warrants (unaudited) 12,250 12 - 73 - 85
Earnings (unaudited) - - - - 308 308
--------- --------- --------- --------- --------- ---------
Balance at March 31,
1998 (unaudited) 2,136,665 $ 2,136 300 13,433 2,144 18,013
========= ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
March 31,
------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 308 160
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Depreciation 83 53
Decrease in deferred income tax asset 29 39
Increase in other assets (89) (55)
Increase (decrease) in other liabilities 868 (263)
Increase in accrued interest receivable (136) (133)
Net amortization of fees, premiums and discounts 4 8
Write-down of foreclosed real estate - 8
Provision for loan losses 100 92
-------- --------
Net cash provided by (used in) operating activities 1,167 (91)
-------- --------
Cash flows from investing activities:
Purchase of securities held to maturity (17,568) (13,600)
Maturities of securities held to maturity 10,426 7,025
Net purchases of premises and equipment (270) (480)
Net increase in loans (7,691) (5,358)
-------- --------
Net cash used in investing activities (15,103) (12,413)
-------- --------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money
market deposits 4,741 7,999
Net increase in time deposits 7,501 1,993
Proceeds from exercise of common stock warrants 85 -
Net increase in federal funds purchased 1,160 -
-------- --------
Net cash provided by financing activities 13,487 9,992
-------- --------
Net decrease in cash and cash equivalents (449) (2,512)
Cash and cash equivalents at beginning of period 9,176 6,320
-------- ---------
Cash and cash equivalents at end of period $ 8,727 3,808
======== ========
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 1,822 1,303
======== ========
Income taxes $ 87 352
======== ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General. In the opinion of the management of Intervest 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
March 31, 1998 and the results of operations and cash flows for the
three-month periods ended March 31, 1998 and 1997. The results of
operations for the three months ended March 31, 1998 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. No loans were identified as being
impaired during the three- month period ended March 31, 1998. The activity
in the allowance for loan losses is as follows (in thousands):
For the Three
Months Ended
March 31,
--------------
1998 1997
---- ----
(In thousands)
Balance, beginning of period $1,173 811
Provision charged to earnings 100 92
Recoveries, net of charge-offs 1 3
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Balance, end of period $1,274 906
====== ======
(continued)
6
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
3. Earnings Per Share. Earnings per share ("EPS") of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding. Prior to the public stock offering in November, 1997,
there was no public market for the Company's common stock. For purposes of
calculating diluted EPS the $10 stock offering price is assumed to be the
market price for the three months ended March 31, 1997. For the three
months ended March 31, 1998 and 1997 outstanding warrants are considered
dilutive securities for purposes of calculating diluted EPS which is
computed using the treasury stock method. The following table presents the
calculations of EPS ($ in thousands, except per share amounts).
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------------------------------------------------------
1998 1997
------------------------------------------ -----------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings
available to
common
stockholders $ 308 2,426,457 $ .13 $ 160 1,650,000 $ .10
=== ===
Effect of dilutive
securities-
Incremental shares
from assumed
conversion
of warrants 846,282 140,450
---------- ---------
Diluted EPS:
Net earnings available
to common
stockholders
and assumed
conversions $ 308 3,272,739 $ .09 $ 160 1,790,450 $ .09
=== ========= === === ========= ===
</TABLE>
4. Regulatory Capital. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at March 31,
1998 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 10.90% 8.00%
Tier I capital to risk-weighted assets 9.65% 4.00%
Tier I capital to total assets - leverage ratio 6.15% 4.00%
(continued)
7
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
5. Impact of New Accounting Principle. On January 1, 1998, the Company
adopted Statement of Financial Accounting Standards 130 - Reporting
Comprehensive Income which establishes standards for reporting
comprehensive income. The Standard defines comprehensive income as the
change in equity of an enterprise except those resulting from stockholder
transactions. All components of comprehensive income are required to be
reported in a new financial statement that is displayed with equal
prominence as existing financial statements. The Company has no items of
other comprehensive income therefore a statement of comprehensive income is
not presented.
8
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
or Plan of Operation
Comparison of March 31, 1998 and December 31, 1997
Liquidity and Capital Resources
The Company's primary source of cash during the three months ended March 31,
1998 was from the maturity of securities totaling $10.4 million and net
deposit inflows of $12.2 million. Cash was used primarily for net loan
originations of $7.7 million and the purchase of securities totaling $17.6
million. At March 31, 1998, the Company had outstanding commitments to
originate loans of $3.3 million. It is expected that these requirements will
be funded from the sources described above. At March 31, 1998, the Bank
exceeded its regulatory liquidity requirements.
The Company recently registered $6.0 million aggregate principal amount of
convertible subordinated debentures due July 1, 2008. The offering relates
to a minimum of $5.0 million and a maximum of $6.0 million of debentures.
The estimated net proceeds to the Company from the sale of the debentures,
after deducting commissions and estimated offering expenses, is estimated to
be approximately $5.4 million, if the maximum amount is sold, or
approximately $4.5 million, if the minimum amount is sold. The net proceeds
of that offering will become a part of the Company's capital funds to be
used for general corporate purposes, including, without limitation, the
financing of the expansion of the Company's or the Bank's business through
acquisitions, the establishment of new branches or subsidiaries, and the
infusion of capital to the Bank and any future subsidiaries of the Bank. The
Company is presently in the process of preparing an application for the
chartering of a de novo national bank, which is expected to be a
wholly-owned subsidiary of the Company, with a principal office in the City
of New York and with initial capital of approximately $7.5 million.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Year Ended Ended
March 31, December 31, March 31,
1998 1997 1997
------------- -------------- -------------
<S> <C> <C> <C>
Average equity as a percentage
of average assets 11.11% 8.96% 8.95%
Equity to total assets at end of period 10.89% 11.69 8.61%
Return on average assets (1) .77% .68% .57%
Return on average equity (1) 6.94% 7.53% 6.32%
Noninterest expense to average assets (1) 1.27% 1.52% 1.63%
Nonperforming loans and foreclosed real estate to
total assets at end of period - % - % .15%
</TABLE>
-------------------------------------------------
(1) Annualized for the three months ended March 31, 1998 and 1997.
9
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Comparison of the Quarters Ended March 31, 1998 and 1997
Results of Operations:
General. Net earnings for the three months ended March 31, 1998 were $308,000
or $.13 basic earnings per share ($.09 diluted earnings per share)
compared to net earnings of $160,000 or $.10 basic earnings per share
($.09 diluted earnings per share) for the three months ended March 31,
1997. This increase in the Company's net earnings was primarily due to an
increase in net interest income, partially offset by an increase in
noninterest expenses and the provision for income taxes.
Interest Income and Expense. Interest income increased by $822,000 from
$2,085,000 for the three months ended March 31, 1997 to $2,907,000 for the
three months ended March 31, 1998. Interest income on loans increased
$374,000 primarily due to an increase in the average loan portfolio
balance for the three months ended March 31, 1998 to $79.5 million
compared to $63.4 million during the 1997 period. Interest on securities
increased $431,000 primarily due to an increase in the average securities
portfolio during the three months ended March 31, 1998 to $67.0 million
from $40.7 million during the 1997 period. Interest on other
interest-earning assets increased $17,000 due to an increase in the
average balance of other interest earning assets from 1997 to 1998.
Interest expense on deposit accounts increased to $1,838,000 for the three
months ended March 31, 1998 from $1,309,000 for the three months ended
March 31, 1997. Interest expense on deposits increased due to an increase
in the average balance and in the weighted average rate from 1997 to 1998.
The average balance for the three months ended March 31, 1998 was $136.2
million compared to $98.5 million during 1997 and the weighted average
rate was 5.4% in 1998 compared to 5.3% in 1997.
Provision for Loan Losses. The provision for loan 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 $92,000 for the three months ended March 31, 1997 to $100,000 for the
three months ended March 31, 1998. The increase was deemed appropriate by
management due to the growth in the loan portfolio during the three months
ended March 31, 1998. Management believes the balance in the allowance for
loan losses of $1,274,000 at March 31, 1998 is adequate.
Noninterest Income. Customer service charges increased $19,000 for the three
months ended March 31, 1998 compared to the same period in 1997 primarily
due to the overall growth of the Company's deposits.
Noninterest Expenses. Total noninterest expenses increased $48,000 to
$509,000 for the three months ended March 31, 1998 from $461,000 for the
three months ended March 31, 1997, primarily due to an increase in
employee compensation and benefits and other expenses associated with the
overall growth of the Company.
Provision for Income Taxes. The income tax provision for the three months
ended March 31, 1998 was $202,000 (an effective rate of 39.6%) compared to
$94,000 (an effective rate of 36.9%) for the comparable 1997 period. In
1998, a greater portion of the consolidated earnings was generated by the
Holding Company which has a higher state income tax rate.
10
<PAGE>
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B)
27. Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the period covered by this report.
INTERVEST BANCSHARES CORPORATION
AND SUBSIDIARY
(Registrant)
Date: May 14, 1998 By: /s/ Lowell S. Dansker
--------------------- ------------------------------------------
Lowell S. Dansker, President and Treasurer
(Chief Financial Officer)
Date: May 14, 1998 By: /s/ Lawrence G. Bergman
--------------------- ------------------------------------------
Lawrence G. Bergman, Vice President and
Secretary
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
for the period ended March 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,852
<INT-BEARING-DEPOSITS> 5,974<F1>
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 65,977
<INVESTMENTS-MARKET> 66,087
<LOANS> 84,499
<ALLOWANCE> 1,274
<TOTAL-ASSETS> 165,418
<DEPOSITS> 143,409
<SHORT-TERM> 1,160
<LIABILITIES-OTHER> 2,836<F4>
<LONG-TERM> 0
0
0
<COMMON> 2,436
<OTHER-SE> 15,577
<TOTAL-LIABILITIES-AND-EQUITY> 165,418
<INTEREST-LOAN> 1,808
<INTEREST-INVEST> 1,029
<INTEREST-OTHER> 70
<INTEREST-TOTAL> 2,907
<INTEREST-DEPOSIT> 1,838
<INTEREST-EXPENSE> 1,838
<INTEREST-INCOME-NET> 1,069
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 509<F2>
<INCOME-PRETAX> 510
<INCOME-PRE-EXTRAORDINARY> 510
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308
<EPS-PRIMARY> .13
<EPS-DILUTED> .09
<YIELD-ACTUAL> 2.81
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,173
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 1,274
<ALLOWANCE-DOMESTIC> 0<F3>
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F3>
<FN>
<F1>Includes short-term investments and interest-bearing deposits with banks.
<F4>Includes minority interest.
<F2>Other expense includes: salaries and employee benefits of $246, occupancy and
equipment of $74, and other expenses which totaled $189,000.
<F3>Items are only disclosed on an annual basis in the Company's Form 10-K, and
are, therefore, not included in this Financial Data Schedule.
</FN>
</TABLE>
