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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
Commission File No. 000-23377
INTERVEST BANCSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3699013
- --------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation) (I.R.S. employer
identification no.)
10 Rockefeller Plaza, Suite 1015
New York, New York 10020-1903
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(Address of principal executive offices)
(212) 218-2800
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 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 XX NO .
-- --
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Title of Each Class: Shares Outstanding:
- ------------------- ------------------
Class A Common Stock, $1.00 par
- --------------------------------
value per share 3,544,629 Outstanding at May 1, 2001
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Class B Common Stock, $1.00 par
- --------------------------------
value per share 355,000 Outstanding at May 1, 2001
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INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 2001
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 2001 (Unaudited) and December 31, 2000................. 2
Condensed Consolidated Statements of Earnings (Unaudited)
for the Quarters Ended March 31, 2001 and 2000 ........................ 3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
for the Quarters Ended March 31, 2001 and 2000 ........................ 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Unaudited) for the Quarters Ended March 31, 2001 and 2000...... 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Quarters Ended March 31, 2001 and 2000......................... 6
Notes to Condensed Consolidated Financial Statements (Unaudited).......... 7
Review by Independent Certified Public Accountants ....................... 9
Report on Review by Independent Certified Public Accountants ............. 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................... 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 19
Item 2. Changes in Securities and Use of Proceeds...................... 19
Item 3. Defaults Upon Senior Securities................................ 19
Item 4. Submission of Matters to a Vote of Security Holders............ 19
Item 5. Other Information.............................................. 19
Item 6. Exhibits and Reports on Form 8-K .................................. 19
Signatures................................................................... 19
Private Securities Litigation Reform Act Safe Harbor Statement
The Company is making this statement in order to satisfy the "Safe Harbor"
provision contained in the Private Securities Litigation Reform Act of 1995. The
statements contained in this report on Form 10-Q that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and economic environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: changes in general economic, market and regulatory conditions, the
development of an interest rate environment that may adversely affect the
Company's interest rate spread, other income or cash flow anticipated from the
Company's operations, investment and lending activities; and changes in laws and
regulations affecting banks and bank holding companies.
1
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. Financial Statements
- ----------------------------
Intervest Bancshares Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
($ in thousands, except par value) 2001 2000
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ASSETS
Cash and due from banks $ 5,114 $ 5,016
Federal funds sold 57,398 20,268
Short-term investments 17,289 17,654
---------------------------
Total cash and cash equivalents 79,801 42,938
Securities available for sale at estimated fair value 38,094 74,789
Securities held to maturity, net
(estimated fair value of $16,958 and $20,978, respectively) 16,926 20,970
Federal Reserve Bank stock, at cost 639 605
Loans receivable (net of allowance for loan losses of $2,768 at each date) 273,933 263,558
Accrued interest receivable 2,480 2,961
Premises and equipment, net 5,691 5,731
Deferred income tax asset 913 1,105
Deferred debenture offering costs 2,915 2,835
Other assets 1,689 1,435
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Total assets $423,081 $416,927
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LIABILITIES
Deposits:
Noninterest-bearing demand deposit accounts $ 4,675 $ 5,035
Interest-bearing deposit accounts:
Checking (NOW) accounts 6,337 9,188
Savings accounts 17,197 15,743
Money-market accounts 59,634 52,619
Certificate of deposit accounts 213,981 217,656
---------------------------
Total deposit accounts 301,824 300,241
Subordinated debentures payable 66,180 64,080
Accrued interest payable on debentures 9,286 8,733
Mortgage escrow funds payable 4,841 3,397
Official checks outstanding 1,776 2,281
Other liabilities 2,048 1,967
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Total liabilities 385,955 380,699
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STOCKHOLDERS' EQUITY
Preferred stock (300,000 shares authorized, none issued) - -
Class A common stock ($1.00 par value, 9,500,000 shares authorized,
3,544,629 shares issued and outstanding at each date) 3,545 3,545
Class B common stock ($1.00 par value, 700,000 shares authorized,
355,000 shares issued and outstanding at each date) 355 355
Additional paid-in-capital, common 18,981 18,975
Retained earnings 14,186 13,605
Accumulated other comprehensive income:
Net unrealized gain (loss) on securities available for sale, net of tax 59 (252)
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Total stockholders' equity 37,126 36,228
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Total liabilities and stockholders' equity $423,081 $416,927
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See accompanying notes to condensed consolidated financial statements.
2
Intervest Bancshares Corporation and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
Quarter Ended
March 31,
---------------------------
($ in thousands, except per share data) 2001 2000
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INTEREST AND DIVIDEND INCOME
Loans receivable $6,603 $5,646
Securities 1,496 1,520
Other interest-earning assets 585 90
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Total interest and dividend income 8,684 7,256
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INTEREST EXPENSE
Deposits 4,606 2,844
Federal funds purchased - 146
Debentures payable 2,015 2,422
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Total interest expense 6,621 5,412
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Net interest and dividend income 2,063 1,844
Provision for loan loss reserves - 155
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Net interest and dividend income after provision for loan loss reserves 2,063 1,689
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NONINTEREST INCOME
Customer service fees 38 35
Income from lending activities 183 127
All other 3 -
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 224 162
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NONINTEREST EXPENSES
Salaries and employee benefits 626 676
Occupancy and equipment, net 304 271
Advertising and promotion 8 13
Professional fees and services 97 104
Stationery, printing and supplies 33 38
All other 256 149
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Total noninterest expenses 1,324 1,251
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Earnings before income taxes 963 600
Provision for income taxes 382 210
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Net earnings $ 581 $ 390
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Basic earnings per share $ 0.15 $ 0.10
Diluted earnings per share $ 0.15 $ 0.10
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See accompanying notes to condensed consolidated financial statements.
3
Intervest Bancshares Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Quarter Ended
March 31,
--------------------------
($ in thousands) 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings $581 $ 390
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Net unrealized holding gains on securities arising during the period 499 -
Provision for income taxes related to unrealized holding gains on securities 188 -
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Other comprehensive income, net of tax 311 -
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Total comprehensive income, net of tax $892 $ 390
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See accompanying notes to condensed consolidated financial statements.
4
Intervest Bancshares Corporation and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Quarter Ended
March 31,
-----------------------------
($ in thousands) 2001 2000
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CLASS A COMMON STOCK
Balance at beginning of period $ 3,545 $ 3,532
Issuance of 3,750 shares upon the exercise of warrants in 2000 - 4
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Balance at end of period 3,545 3,536
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CLASS B COMMON STOCK
Balance at beginning of period 355 305
Issuance of 50,000 shares of restricted stock compensation in 2000 - 50
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Balance at end of period 355 355
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ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period 18,975 18,770
Compensation related to issuance of Class B stock warrants 6 6
Issuance of 50,000 shares of restricted Class B stock compensation in 2000 - 109
Issuance of 3,750 shares upon the exercise of Class A stock warrants in 2000 - 22
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of period 18,981 18,907
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RETAINED EARNINGS
Balance at beginning of period 13,605 10,997
Net earnings for the period 581 390
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Balance at end of period 14,186 11,387
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ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
Balance at beginning of period (252) -
Net change in accumulated other comprehensive income, net 311 -
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Balance at end of period 59 -
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Total stockholders' equity at end of period $37,126 $34,185
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See accompanying notes to condensed consolidated financial statements.
5
Intervest Bancshares Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Quarter Ended
March 31,
--------------------------
($ in thousands) 2001 2000
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OPERATING ACTIVITIES
Net earnings $ 581 $ 390
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 114 115
Provision for loan loss reserves - 155
Deferred income tax expense (benefit) 4 (14)
Amortization of deferred debenture offering costs 176 230
Compensation expense from awards of common stock and warrants 6 165
Amortization of premiums, fees and discounts, net (394) (262)
Net increase (decrease) in accrued interest payable on debentures 553 (666)
Net (decrease) increase in official checks outstanding (505) 561
Net decrease (increase) in all other assets and liabilities 692 (6)
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Net cash provided by operating activities 1,227 668
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INVESTING ACTIVITIES
Maturities and calls of securities available for sale 37,194 -
Maturities and calls of securities held to maturity 9,096 4,015
Purchases of securities held to maturity (5,077) (3,972)
Net increase in loans receivable (10,340) (28,852)
Purchases of Federal Reserve Bank stock, net (34) -
Purchases of premises and equipment, net (74) (66)
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Net provided by (used in) investing activities 30,765 (28,875)
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FINANCING ACTIVITIES
Net increase in demand, savings, NOW and money market deposits 5,258 6,982
Net (decrease) increase in certificates of deposit (3,675) 31,308
Net increase in mortgage escrow funds payable 1,444 1,415
Repayments of Federal funds purchased, net - (6,955)
Principal repayments of debentures (1,400) (7,000)
Proceeds from issuance of debentures, net of issuance costs 3,244 -
Proceeds from issuance of common stock, net of issuance costs - 26
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Net cash provided by financing activities 4,871 25,776
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Net increase (decrease) in cash and cash equivalents 36,863 (2,431)
Cash and cash equivalents at beginning of period 42,938 32,095
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Cash and cash equivalents at end of period $ 79,801 $ 29,664
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SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 5,887 $ 5,744
Income taxes 557 80
Noncash activities:
Accumulated other comprehensive income,
change in unrealized gain (loss) on securities available for sale, net of tax 311 -
------------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
6
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the Quarters Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
Note 1 - General
The condensed consolidated financial statements of Intervest Bancshares
Corporation and Subsidiaries in this report have not been audited except for the
information derived from the audited Consolidated Balance Sheet as of December
31, 2000. The financial statements in this report should be read in conjunction
with the consolidated financial statements and related notes thereto included in
the Company's Annual Report to Stockholders on Form 10-K for the year ended
December 31, 2000.
The condensed consolidated financial statements include the accounts of
Intervest Bancshares Corporation (a bank holding company referred to by itself
as the "Holding Company") and its subsidiaries, Intervest National Bank,
Intervest Bank, and Intervest Corporation of New York. The banks are referred to
together as the "Banks." The Holding Company and its subsidiaries are referred
to as the "Company" on a consolidated basis. The Holding Company's primary
business activity is the ownership of the aforementioned subsidiaries.
Intervest National Bank is a nationally chartered commercial bank located in
Rockefeller Plaza in New York City. Intervest Bank is a Florida state chartered
commercial bank with four banking offices in Clearwater, Florida and one in
South Pasadena, Florida. The Banks conduct a full-service commercial banking
business, which consists of attracting deposits from the general public and
investing those funds, together with other sources of funds, primarily through
the origination of commercial and multifamily real estate loans, and through the
purchase of security investments. Intervest National Bank also provides Internet
banking services at its Web Site: www.intervestnatbank.com. Intervest
Corporation of New York is located in Rockefeller Plaza in New York City and is
in the business of originating and acquiring commercial and multifamily
residential loans. On March 5, 2001, the Banks agreed to merge into one
nationally chartered bank. The resulting institution, Intervest National Bank,
will retain its headquarters and full-service banking office at One Rockefeller
Plaza, in New York City and will have a total of five full-service banking
offices in Clearwater and Pinellas County, Florida. The consummation of the
merger, which is subject to the receipt of approvals from regulatory
authorities, is expected to close in the third quarter of 2001.
In the opinion of management, all material adjustments necessary for a fair
presentation of financial condition and results of operations for the interim
periods presented in this report have been made. These adjustments are of a
normal recurring nature. The results of operations for the interim periods are
not necessarily indicative of results that may be expected for the entire year
or any other interim period. In preparing the condensed consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. Actual
results could differ from those estimates.
Note 2 - Allowance for Loan Loss Reserves
The Company monitors its loan portfolio to determine the appropriate level of
the allowance for loan loss reserves based on various factors. These factors
include: the type and level of loans outstanding; volume of loan originations;
overall portfolio quality; loan concentrations; specific problem loans,
historical chargeoffs and recoveries; adverse situations which may affect the
borrowers' ability to repay; and management's assessment of the current and
anticipated economic conditions in the Company's lending regions. No loans were
classified as nonaccrual or impaired during the 2001 and 2000 reporting periods
in this report.
Activity in the allowance for loan loss reserves for the periods indicated is
summarized as follows:
Quarter Ended
March 31,
---------------------------
($ in thousands)
2001 2000
- -----------------------------------------------------------------------
Balance at beginning of period $2,768 $2,493
Provision charged to operations - 155
- -----------------------------------------------------------------------
Balance at end of period $2,768 $2,648
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7
Intervest Bancshares Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the Quarters Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
Note 3 - Earnings Per Share (EPS)
Basic EPS is calculated by dividing net earnings by the weighted-average number
of shares of common stock outstanding. Diluted EPS is calculated by dividing
adjusted net earnings by the weighted-average number of shares of common stock
outstanding and dilutive potential common stock shares that may be outstanding
in the future. Potential common stock shares may arise from outstanding dilutive
common stock warrants (as computed by the "treasury stock method") and
convertible debentures (as computed by the "if converted method").
Diluted EPS considers the potential dilution that could occur if the Company's
outstanding stock warrants and convertible debentures were converted into common
stock that then shared in the Company's adjusted earnings (as adjusted for
interest expense, net of tax, that would no longer occur if the debentures were
converted).
Net earnings applicable to common stock and the weighted-average number of
shares used for basic and diluted earnings per share computations are summarized
in the table that follows:
Quarter Ended
March 31,
--------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Net earnings applicable to common stockholders $581,000 $390,000
Average number of common shares outstanding 3,899,629 3,851,384
- ----------------------------------------------------------------------------------------------------
Basic earnings per share amount $0.15 $0.10
- ----------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Net earnings applicable to common stockholders $581,000 $390,000
Average number of common shares outstanding:
Common shares outstanding per above 3,899,629 3,851,384
Potential dilutive shares resulting from exercise of warrants (1) - -
Potential dilutive shares resulting from conversion of debentures(1) - -
-------------------------
Total average number of common shares outstanding used for dilution 3,899,629 3,851,384
- ----------------------------------------------------------------------------------------------------
Diluted earnings per share amount $0.15 $0.10
- ----------------------------------------------------------------------------------------------------
<FN>
(1) A total of 2,650,000 of common stock warrants with exercise prices ranging
from $6.67 to $16.00 were not considered in the computation of diluted EPS
for the 2001 period because they were not dilutive. A total of 2,659,000
common stock warrants with exercise prices ranging from $6.67 to $15.00
were not considered in the computation of diluted EPS for the 2000 period
because they were not dilutive. Additionally, convertible debentures
totaling $6,930,000 and convertible (at $14.00 per share in 2001 and $12.50
per share in 2000) into Class A common stock were excluded from all diluted
EPS computations because they were not dilutive.
</FN>
Note 4 - Regulatory Capital
The Banks are required to maintain certain minimum regulatory capital
requirements. The following is a summary at March 31, 2001 of those regulatory
capital requirements and the actual capital of each Bank on a percentage basis:
Actual Minimum To Be Considered
Ratios Requirement Well Capitalized
------ ----------- ----------------
Intervest Bank
Total capital to risk-weighted assets 10.93% 8.00% 10.00%
Tier 1 capital to risk-weighted assets 9.68% 4.00% 6.00%
Tier 1 capital to total average assets - leverage ratio 6.55% 4.00% 5.00%
Intervest National Bank
Total capital to risk-weighted assets 16.05% 8.00% 10.00%
Tier 1 capital to risk-weighted assets 15.17% 4.00% 6.00%
Tier 1 capital to total average assets - leverage ratio 11.51% 4.00% 5.00%
8
Intervest Bancshares Corporation and Subsidiaries
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of March 31,
2001, and for the three-month periods ended March 31, 2001 and March 31, 2000
presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
9
Report on Review by Independent Certified Public Accountants
The Board of Directors and Stockholders
Intervest Bancshares Corporation
New York, New York:
We have reviewed the condensed consolidated balance sheet of Intervest
Bancshares Corporation and Subsidiaries (the "Company") as of March 31, 2001,
and the related condensed consolidated statements of earnings, comprehensive
income, changes in stockholders' equity and cash flows for the three-month
periods ended March 31, 2001 and 2000 included in this report. These financial
statements are the responsibility of the Company's management.
We were furnished with the report of other accountants on their review of
the interim financial statements of Intervest Corporation of New York, whose
total assets as of March 31, 2001 constituted 17.4% of the related consolidated
total, and whose net interest income, noninterest income and net loss for the
three-month periods ended March 31, 2001 and 2000, constituted 2.9%, 17.0%, and
9.5%, respectively, in the 2001 period, and 6.1%, 16.0%, and 9.0%, respectively,
in the 2000 period, of the related consolidated totals for each period.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews and the report of other accountants, we are not aware
of any material modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2000, and the
related consolidated statements of earnings, comprehensive income, changes in
stockholder's equity and cash flows for the year then ended (not presented
herein); and in our report dated January 18, 2001, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2000 is fairly stated in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ HACKER, JOHNSON & SMITH PA
- ------------------------------
HACKER, JOHNSON & SMITH PA
Tampa, Florida
April 25, 2001
10
Report on Review by Independent Certified Public Accountants
Board of Directors and Stockholder
Intervest Corporation of New York
New York, New York:
We have reviewed the accompanying condensed consolidated balance sheet of
Intervest Corporation of New York and Subsidiaries (the "Company") as of March
31, 2001, and the related condensed consolidated statements of operations,
changes in stockholder's equity and cash flows for the three-month periods ended
March 31, 2001 and March 31, 2000. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2000 and the
related consolidated statements of operations, changes in stockholder's equity
and cash flows for the year then ended (not presented herein), and in our report
dated January 18, 2001, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2000 is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
Richard A. Eisner & Company, LLP
New York, New York
April 25, 2001
11
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
- -------
Intervest Bancshares Corporation has three wholly owned subsidiaries - Intervest
National Bank, Intervest Bank and Intervest Corporation of New York (hereafter
referred to collectively as the "Company" on a consolidated basis). Intervest
Bank and Intervest National Bank may be referred to collectively as the "Banks,"
and Intervest Bancshares Corporation may be referred to by itself as the
"Holding Company."
The Holding Company's primary business is the operation of its subsidiaries. It
does not engage in any other substantial business activities other than a
limited amount of real estate mortgage lending. From time to time, the Holding
Company sells debentures to raise funds for working capital purposes.
Intervest National Bank is a nationally chartered, full-service commercial bank
located in Rockefeller Center in New York City and Intervest Bank is a Florida
state-chartered commercial bank with four banking offices in Clearwater, Florida
and one in South Pasadena, Florida. Intervest Corporation of New York is located
in Rockefeller Center in New York City and is in the business of originating and
acquiring commercial and multifamily loans.
The Banks conduct a personalized commercial and consumer banking business, which
consists of attracting deposits from the areas served by their banking offices.
Intervest National Bank also provides Internet banking services through its Web
Site: www.intervestnatbank.com, which can attract deposit customers from outside
its primary market area. The deposits, together with funds derived from other
sources, are used to originate a variety of real estate, commercial and consumer
loans and to purchase investment securities. The Banks emphasize multifamily and
commercial residential lending. On March 5, 2001, the Banks agreed to merge into
one nationally chartered bank. The resulting institution, Intervest National
Bank, will retain its headquarters and full-service banking office at One
Rockefeller Plaza, in New York City and will have a total of five full-service
banking offices in Clearwater and Pinellas County, Florida. The consummation of
the merger, which is subject to the receipt of approvals from regulatory
authorities, is expected to close in the third quarter of 2001.
The Company's profitability depends primarily on net interest income, which is
interest income generated from its interest-earning assets less the interest
expense incurred on its interest-bearing liabilities. Net interest income is
dependent upon the interest-rate spread, which is the difference between the
average yield earned on interest-earning assets and the average rate paid on
interest-bearing liabilities. When interest-earning assets approximate or exceed
interest-bearing liabilities, any positive interest rate spread will generate
net interest income. The interest rate spread is impacted by interest rates,
deposit flows and loan demand.
The Company's profitability is also affected by the level of its noninterest
income and expenses, the provision for loan loss reserves, and its effective
income tax rate. Noninterest income consists primarily of loan and other banking
fees. Noninterest expense consists of compensation and benefits, occupancy and
equipment related expenses, data processing expenses, advertising expense,
deposit insurance premiums and other operating expenses. The Company's
profitability is also significantly affected by general economic and competitive
conditions, changes in market interest rates, government policies and actions of
regulatory authorities.
Comparison of Financial Condition at March 31, 2001 and December 31, 2000
- -------------------------------------------------------------------------
Overview
- --------
Total assets at March 31, 2001 increased to $423,081,000, from $416,927,000 at
December 31, 2000. The growth primarily reflected an increase in commercial real
estate and multifamily mortgage loans. Total liabilities at March 31, 2001
increased to $385,955,000, from $380,699,000 at December 31, 2000, primarily due
to the sale of new debentures and an increase in deposits. Stockholders' equity
increased to $37,126,000 at March 31, 2001, from $36,228,000 at year-end 2000.
The increase reflected earnings of $581,000 for the first quarter of 2001 and an
increase in unrealized gains, net of tax, of $311,000 from securities available
for sale. Book value per common share increased to $9.52 per share at March 31,
2001, from $9.29 at December 31, 2000.
12
Selected balance sheet information for the Holding Company and its subsidiaries
as of March 31, 2001 follows:
Intervest Intervest Inter-
Holding Intervest National Corporation company
($ in thousands) Company Bank Bank of New York Balances Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
Assets $49,464 $216,971 $122,597 $74,106 $(40,057) $423,081
Cash and cash equivalents 3,149 41,624 20,110 16,074 (1,156) 79,801
Securities available for sale - 38,094 - - - 38,094
Securities held to maturity, net - - 16,926 - - 16,926
Loans receivable, net of deferred fees 6,659 131,373 83,894 54,775 - 276,701
Allowance for loan loss reserves 35 1,913 820 - - 2,768
Deposits - 198,347 104,758 - (1,281) 301,824
Debentures and accrued interest payable 12,136 - - 63,330 - 75,466
Stockholders' equity 37,126 15,271 14,310 9,215 (38,796) 37,126
- ---------------------------------------------------------------------------------------------------------------------------------
A comparison of the Company's consolidated balance sheet as of March 31, 2001
and December 31, 2000 follows:
At March 31, 2001 At December 31, 2000
----------------- --------------------
Carrying % of Carrying % of
($ in thousands) Value Total Assets Value Total Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $79,801 18.9% $42,938 10.3%
Securities available for sale 38,094 9.0 74,789 17.9
Securities held to maturity, net 16,926 4.0 20,970 5.0
Federal Reserve Bank stock 639 0.2 605 0.2
Loans receivable, net of deferred fees and loan loss reserves 273,933 64.7 263,558 63.2
All other assets 13,688 3.2 14,067 3.4
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $423,081 100.0% $416,927 100.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Deposits $301,824 71.3% $300,241 72.0%
Debentures payable 66,180 15.6 64,080 15.4
Accrued interest payable on debentures 9,286 2.2 8,733 2.1
All other liabilities 8,665 2.1 7,645 1.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 385,955 91.2 380,699 91.3
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 37,126 8.8 36,228 8.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $423,081 100.0% $416,927 100.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents increased to $79,801,000 at March 31, 2001, from
$42,938,000 at December 31, 2000. The increase was due to early redemptions by
various agencies of Intervest Bank's holdings of U.S Government agencies
securities. The redemptions were brought about by a decrease in market interest
rates during the quarter. The resulting proceeds from the redemptions were
temporarily invested in the overnight Federal funds market pending investment in
mortgages as opportunities arise.
In addition to Federal funds investments, cash and cash equivalents include
interest-bearing and noninterest-bearing cash balances with banks, and other
short-term investments that have original maturities of three months or less.
These short-term investments are normally comprised of commercial paper issued
by large commercial banks, certificates of deposit and U.S. government
securities. The level of cash and cash equivalents fluctuates based on various
factors, including liquidity needs, loan demand, deposit flows, calls of
securities, repayments of borrowed funds and alternative investment
opportunities.
Securities Available for Sale
- -----------------------------
Securities that are held for indefinite periods of time which management intends
to use as part of its asset/liability management strategy, or that may be sold
in response to changes in interest rates or other factors, are classified as
available for sale and are carried at estimated fair value. Securities available
for sale amounted to $38,094,000 at March 31, 2001, compared to $74,789,000 at
December 31, 2000. The decrease was due to the early redemptions discussed
above. At March 31, 2001, the portfolio consisted of Intervest Bank's remaining
holdings of U.S. government agency securities. Most of the securities have terms
that allow the issuer the right to call or prepay its obligation without
prepayment penalty. In April 2001, approximately $10,000,000 of additional
securities were redeemed early by the issuers.
13
At March 31, 2001, the portfolio had a unrealized gain, net of tax, of $59,000,
compared to an unrealized loss, net of tax, of $252,000 at December 31, 2000.
Unrealized gains and losses on securities available for sale, net of related
income taxes, are reported as a separate component of comprehensive income and
included in stockholders' equity.
Securities Held to Maturity
- ---------------------------
Securities for which the Company has the intent and ability to hold to maturity
are classified as held to maturity and carried at amortized cost. Securities
held to maturity totaled $16,926,000 at March 31, 2001, compared to $20,970,000
at December 31, 2000. The decrease was due to maturities exceeding new purchases
during the quarter. The portfolio consists of Intervest National Bank's holdings
of short-term U.S. government agency securities.
Federal Reserve Bank Stock
- --------------------------
In order for the Banks to be members of the Federal Reserve Banking System, the
Banks maintain an investment in the capital stock of the Federal Reserve Bank,
which pays a dividend that is currently 6%. The investment, which amounted to
$639,000 at March 31, 2001 and $605,000 at December 31, 2000, fluctuates based
on each Bank's capital level.
Loans Receivable, Net of Deferred Fees and Loan Loss Reserves
- -------------------------------------------------------------
Loans receivable, net of deferred fees and the allowance for loan loss reserves,
increased to $273,933,000 at March 31, 2001, from $263,558,000 at December 31,
2000. The growth primarily reflected new originations of commercial real estate
and multifamily mortgage loans, partially offset by principal repayments.
Commercial real estate and multifamily real estate properties collateralized
almost all of the loans in the Company's loan portfolio.
At March 31, 2001 and December 31, 2000, the allowance for loan loss reserves
amounted to $2,768,000. The allowance represented 1.00% of total loans
outstanding at March 31, 2001, compared to 1.04% at December 31, 2000. At March
31, 2001 and December 31, 2000, the Company did not have any loans on a
nonaccrual status or classified as impaired. The Company monitors its loan
portfolio to determine the appropriate level of the allowance for loan loss
reserves based on various factors. These factors include: the type and level of
loans outstanding; volume of loan originations; overall portfolio quality; loan
concentrations; specific problem loans, historical chargeoffs and recoveries;
adverse situations which may affect the borrowers' ability to repay; and
management's assessment of the current and anticipated economic conditions in
the Company's lending regions.
All Other Assets
- ----------------
The following table sets forth the composition of all other assets in the table
on page 12:
At At
-- --
March 31, December 31,
-------- -----------
($ in thousands) 2001 2000
-----------------------------------------------------------------
Accrued interest receivable $ 2,480 $ 2,961
Loans fee receivable 1,354 1,276
Premises and equipment, net 5,691 5,731
Deferred income tax asset 913 1,105
Deferred debenture offering costs 2,915 2,835
All other 335 159
-----------------------------------------------------------------
$13,688 $14,067
------------------------------------------------------------------
Accrued interest receivable fluctuates based on the amount of loans, investments
and other interest-earning assets outstanding and the timing of interest
payments received.
14
Loan fees receivable are fees due to the Company in accordance with the terms of
mortgage loans. Such amounts are generally due upon the full repayment of the
loan. This fee is recorded as deferred income at the time a loan is originated
and is then amortized to interest income over the life of the loan. The increase
was due to an increase in mortgage loans outstanding.
The deferred income tax asset relates primarily to the unrealized tax benefit on
the Company's allowance for loan loss reserves and organizational start-up
costs. These charges have been expensed for financial statement purposes, but
are not all currently deductible for income tax purposes. The ultimate
realization of the deferred tax asset is dependent upon the generation of
sufficient taxable income by the Company during the periods in which these
temporary differences become deductible for tax purposes. Management believes
that it is more likely than not that the Company's deferred tax asset will be
realized and accordingly, a valuation allowance for deferred tax assets is not
maintained.
Deferred debenture offering costs consist primarily of underwriters' commissions
and are amortized over the terms of the debentures. The increase was due to
additional costs incurred with the sale of new debentures in the first quarter
of 2001, partially offset by normal amortization.
Deposit Liabilities
- -------------------
Deposit liabilities increased to $301,824,000 at March 31, 2001, from
$300,241,000 at December 31, 2000, due to growth in deposit accounts. At March
31, 2001, certificate of deposit accounts totaled $213,981,000 and demand
deposit, savings, NOW and money market accounts aggregated $87,843,000. The same
categories of deposit accounts totaled $217,656,000 and $82,585,000,
respectively, at December 31, 2000. Certificate of deposit accounts represented
71% of total deposits at March 31, 2001, compared to 72% at year-end 2000.
Debentures Payable and Related Accrued Interest Payable
- -------------------------------------------------------
At March 31, 2001, debentures payable amounted to $66,180,000, compared to
$64,080,000 at December 31, 2000. The increase was due to the sale of debentures
in the aggregate principal amount of $3,500,000 by the Holding Company. The sale
resulted in net proceeds of $3,260,000 after underwriter's commissions and other
issuance costs. From time to time, the Holding Company sells debentures and the
proceeds are used for working capital purposes. The sale of the aforementioned
debentures was partially offset by the maturity on January 1, 2001, of
$1,400,000 of Intervest Corporation of New York's debentures.
At March 31, 2001, Intervest Corporation of New York had $55,750,000 of
debentures payable outstanding and the Holding Company had $10,430,000 of
debentures payable outstanding, of which $6,930,000 were convertible into the
Holding Company's Class A common stock.
At March 31, 2001, accrued interest payable on debentures amounted to
$9,286,000, compared to $8,733,000 at year-end 2000. Nearly all of the accrued
interest payable at March 31, 2001 is due and payable at the maturity of various
debentures. For a further discussion of the debentures, including conversion
prices and redemption premiums, see note 8 to the consolidated financial
statements included in the Company's Annual Report to Stockholders on Form 10-K
for the year ended December 31, 2000.
All Other Liabilities
- ---------------------
The following table shows the composition of all other liabilities in the table
on page 12:
At At
-- --
March 31, December 31,
-------- ------------
($ in thousands) 2001 2000
------------------------------------------------------------------------
Mortgage escrow funds payable $4,841 $3,397
Accrued interest payable on deposits 861 856
Official checks outstanding 1,776 2,281
All other 1,187 1,111
------------------------------------------------------------------------
$8,665 $7,645
------------------------------------------------------------------------
15
Mortgage escrow funds payable represent advance payments made by borrowers for
taxes and insurance that are remitted by the Company to third parties. The
increase reflects the timing of payments to taxing authorities as well as the
growth in the loan portfolio. The level of official checks outstanding varies
and fluctuates based on banking activity.
Stockholders' Equity and Regulatory Capital
- -------------------------------------------
Stockholders equity increased to $37,126,000 at March 31, 2001, from $36,228,000
at December 31, 2000. The increase was due to net earnings of $581,000 and a
$311,000 increase in unrealized gains, net of tax, on securities available for
sale.
Intervest Bank and Intervest National Bank are both well-capitalized
institutions as defined by FDIC regulations. See note 4 to the condensed
consolidated financial statements in this report for their respective capital
ratios.
Liquidity and Capital Resources
- -------------------------------
The Company manages its liquidity position on a daily basis to assure that funds
are available to meet operations, loan and investment funding commitments,
deposit withdrawals and the repayment of borrowed funds. The Company's primary
sources of funds consist of: retail deposits obtained through the Banks'
offices; satisfactions and repayments of loans; the maturities and calls of
securities; and cash provided by operating activities. From time to time, the
Company may also borrow funds through the Federal funds market or sale of
debentures. For information about the cash flows from the Company's operating,
investing and financing activities, see the condensed consolidated statements of
cash flows in this report.
At March 31, 2001, the Company's total commitment to lend aggregated
approximately $41,500,000. Based on its cash flow projections, the Company
believes that it can fund all of its outstanding commitments from the
aforementioned sources of funds.
Interest Rate Risk
- ------------------
Interest rate risk arises from differences in the repricing of assets and
liabilities within a given time period. The primary objective of the Company's
asset/liability management strategy is to limit, within established guidelines,
the adverse impact of changes in interest rates on the Company's net interest
income and capital. The Company uses "gap analysis," which measures the
difference between interest-earning assets and interest-bearing liabilities that
mature or reprice within a given time period, to monitor its interest rate
sensitivity. At March 31, 2001, the Company's one-year interest-rate sensitivity
gap was a positive $17,057,000, or 4.0% of total assets, compared to a negative
$12,411,000, or 3%, at December 31, 2000. The change in the gap was largely due
to the early redemptions of securities available for sale by U.S. government
agencies and the resulting proceeds being invested in the overnight Federal
funds market.
In computing the gap, the Company treats its interest checking, money market and
savings deposit accounts as immediately repricing. For a further discussion of
interest rate risk and gap analysis, including all of the assumptions used in
developing the Company's one-year gap position, see the Company's 2000 Annual
Report to Stockholders on Form 10-K, pages 30 through 32.
Comparison of Results of Operations for the Quarters Ended March 31, 2001 and
- --------------------------------------------------------------------------------
2000
- ----
Overview
- --------
Consolidated net earnings for the first quarter of 2001 increased to $581,000,
or $0.15 per fully diluted share, from $390,000, or $0.10 per fully diluted
share, in the first quarter of 2000, or a 49% year-to-year increase. The
increase in net earnings was primarily due to a $219,000 increase in net
interest and dividend income and a $155,000 decrease in the provision for loan
losses. These items were partially offset by a $172,000 increase in the
provision for income taxes.
16
Net Interest and Dividend Income
- --------------------------------
Net interest and dividend income is the Company's primary source of earnings and
is influenced primarily by the amount, distribution and repricing
characteristics of its interest-earning assets and interest-bearing liabilities
as well as by the relative levels and movements of interest rates.
The following table provides information on average assets, liabilities and
stockholders' equity; yields earned on interest-earning assets; and rates paid
on interest-bearing liabilities for the periods indicated. The yields and rates
shown are based on a computation of income/expense (including any related fee
income or expense) for each period divided by average interest-earning
assets/interest-bearing liabilities during each period. Average balances are
derived mainly from daily balances. Net interest margin is computed by dividing
net interest and dividend income by the average of total interest-earning assets
during each period.
Quarter Ended
---------------------------------------------------------------------------
March 31, 2001 March 31, 2000
---------------------------------------------------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- -----------------------------------------------------------------------------------------------------------------------------
Assets
Interest-earning assets:
Loans $270,307 $6,603 9.91% $230,710 $5,646 9.84%
Securities 102,832 1,496 5.90 104,361 1,520 5.86
Other interest-earning assets 42,920 585 5.53 6,426 90 5.63
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 416,059 $8,684 8.46% 341,497 $7,256 8.55%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 12,312 14,429
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $428,371 $355,926
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest checking deposits $ 6,960 $ 53 3.09% $ 7,288 $ 55 3.04%
Savings deposits 16,308 208 5.17 17,357 215 4.98
Money market deposits 57,595 755 5.32 51,839 662 5.14
Certificates of deposit 224,633 3,590 6.48 130,444 1,912 5.90
---------------------------------------------------------------------------
Total deposit accounts 305,496 4,606 6.11 206,928 2,844 5.53
Federal funds purchased - - - 10,101 146 5.81
Debentures and accrued interest payable 73,542 2,015 11.11 91,033 2,422 10.70
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 379,038 $6,621 7.08% 308,062 $5,412 7.07%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 5,513 7,467
Noninterest-bearing liabilities 6,994 6,531
Stockholders' equity 36,826 33,866
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $428,371 $355,926
- -----------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread $2,063 1.38% $1,844 1.48%
- -----------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $37,021 2.01% $33,435 2.17%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.10x 1.11x
- -----------------------------------------------------------------------------------------------------------------------------
Other Ratios:
Return on average assets (1) 0.54% 0.44%
Return on average equity (1) 6.31% 4.61%
Noninterest expense to average assets (1) 1.24% 1.41%
Average stockholders' equity to average assets 8.60% 9.51%
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Annualized
Net interest and dividend income increased to $2,063,000 in the first quarter of
2001, from $1,844,000 in the first quarter of 2000. The increase was
attributable to growth in the Company's balance sheet, partially offset by a
decrease in the net interest margin from 2.17% in the first quarter of 2000, to
2.01% in the first quarter of 2001. The decrease in the margin was due to a
lower yield earned on interest-earning assets.
</FN>
17
The Company's yield on interest-earning assets decreased 9 basis points to 8.46%
in the first quarter of 2001, primarily due an increase in the average balance
of short-term investments, as well as a decrease in the yield earned on such
investments. The Company's short-term investments have a lower yield than its
loan portfolio. The Company's cost of funds remained relatively unchanged at
7.08% in the first quarter of 2001, compared to 7.07% in the same period of
2000.
Provision for Loan Loss Reserves
- --------------------------------
In the first quarter of 2001, the Company did not have a provision for loan
losses, compared to a provision of $155,000 in the first quarter of 2000. The
provision for loan loss reserves is based on management's ongoing assessment of
the adequacy of the allowance for loan loss reserves, which takes into
consideration a number of factors as discussed on page 13 of this report.
Noninterest Income
- ------------------
Noninterest income increased to $224,000 in the first quarter of 2001, from
$162,000 in the first quarter of 2000, primarily due to higher fee income from
the prepayment and servicing of loans. Noninterest income includes fees from
customer service charges and income from mortgage lending activities, which is
comprised of loan prepayment fees, fees earned on expired loan commitments, and
loan service, inspection and maintenance charges.
Noninterest Expenses
- --------------------
Noninterest expenses increased to $1,324,000 in the first quarter of 2001, from
$1,251,000 in the comparable quarter of 2000. Expenses for the 2001 period
include $65,000 of merger expenses associated with the proposed merger of
Intervest National Bank and Intervest Bank. Expenses for the 2000 period include
approximately $210,000 of nonrecurring expenses (consisting of attorney and
consulting fees, printing costs, and stock compensation) associated with the
acquisition of Intervest Corporation of New York. Absent the aforementioned
expenses, noninterest expenses totaled $1,259,000 in the first quarter of 2001,
compared to $1,041,000 in the first quarter of 2000. The increase was due to
higher compensation, occupancy and equipment expenses.
Provision for Income Taxes
- --------------------------
The provision for income taxes amounted to $382,000 in the first quarter of
2001, compared to $210,000 in the first quarter of 2000. The increase was
primarily due to higher pre-tax earnings. The Company's effective tax rate
(inclusive of state and local taxes) amounted to 39.7% in the 2001 period,
compared to 35.0% in the 2000 period.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's market risk arises primarily from interest rate
risk inherent in its lending and deposit-taking activities. The Company has no
risk related to trading accounts, commodities or foreign exchange.
Management actively monitors and manages the Company's interest rate risk
exposure. The primary objective in managing interest rate risk is to limit,
within established guidelines, the adverse impact of changes in interest rates
on the Company's net interest income and capital, while adjusting the Company's
asset-liability structure to obtain the maximum yield versus cost spread on that
structure. Management relies primarily on its asset-liability structure to
control interest rate risk. However, a sudden and substantial increase in
interest rates could adversely impact the Company's earnings, to the extent that
the interest rates borne by assets and liabilities do not change at the same
speed, to the same extent, or on the same basis. Management believes that there
have been no significant changes in the Company's market risk exposure since
December 31, 2000.
18
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds
(a) Not Applicable
(b) Not Applicable
(c) On February 1, 2001, the Company issued $3,500,000 principal amount of
its Series 12/15/00 Subordinated Debentures (the "Debentures"). The
Debentures were issued pursuant to an Indenture of Trust dated as of
January 1, 2001 between the Company and The Bank of New York, as
trustee. The Debentures were issued in three maturities, with
$1,000,000 principal amount due April 1, 2004; $1,250,000 principal
amount due April 1, 2006; and $1,250,000 principal amount due April 1,
2008. Sage, Rutty & Company acted as placement agent and the Company
paid an aggregate of $210,000 in commissions. The Debentures were
not registered under the Securities Act of 1933, as amended
(the "Act"), but were issued to accredited investors and a limited
number of additional investors who met the suitability standards
established by the Company. The Debentures were issued in reliance
upon an exemption from registration pursuant to Section 4(2) of the
Act and Rule 506 of Regulation D, promulgated under the Act.
(d) Not Applicable
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) Not Applicable.
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) No exhibits are filed with this report.
(b) No reports on Form 8-K were filed during the quarter ended March 31,
2001.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
Date: May 11, 2001 By: /s/ Lowell S. Dansker
----------------------------
Lowell S. Dansker, President and Treasurer
(Chief Financial Officer)
Date: May 11, 2001 By: /s/ Lawrence G. Bergman
----------------------------
Lawrence G. Bergman, Vice President and Secretary