- --------------------------------------------------------------------------------
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, 1997
- ---- 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, 1997
Class B Common stock, par value $1.00 per share 200,000
- ----------------------------------------------- ---------------------
(class) Outstanding at July 31, 1997
- --------------------------------------------------------------------------------
CONFORMED COPY
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
June 30, 1997 (unaudited) and December 31, 1996.........................2
Condensed Consolidated Statements of Earnings -
Three and Six Months ended June 30, 1997 and 1996 (unaudited)...........3
Condensed Consolidated Statement of Stockholders' Equity -
Six Months ended June 30, 1997 (unaudited)..............................4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1997 and 1996 (unaudited).....................5
Notes to Condensed Consolidated Financial Statements (unaudited)........6-7
Item 2. Management's Discussion and Analysis or Plan of Operation........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
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
Assets 1997 1996
-------- --------
(unaudited)
Cash and due from banks $ 1,863 2,868
Federal funds sold 1,973 3,452
-------- --------
Total cash and cash equivalents 3,836 6,320
-------- --------
Interest-bearing deposits with banks 99 99
Securities held to maturity 38,296 34,507
Loans receivable, net 69,540 59,499
Accrued interest receivable 997 842
Premises and equipment, net 3,967 2,940
Restricted securities, Federal Reserve Bank stock, at cost 203 203
Foreclosed real estate -- 185
Deferred income tax asset 495 526
Other assets 104 75
-------- --------
Total $117,537 105,196
======== ========
Liabilities and Stockholders' Equity
Deposits:
Demand deposits 2,204 2,401
Savings deposits 9,177 4,742
NOW deposits 3,441 4,536
Money-market deposits 14,381 7,507
Time deposits 75,659 74,261
-------- --------
Total deposits 104,862 93,447
Other liabilities 2,249 1,676
-------- --------
Total liabilities 107,111 95,123
-------- --------
Minority interest 332 326
-------- --------
Stockholders' Equity:
Class A common stock 900 900
Class B common stock 200 200
Additional paid-in capital 7,655 7,655
Retained earnings 1,339 992
-------- --------
Total stockholders' equity 10,094 9,747
-------- --------
Total $117,537 105,196
======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
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,
--------------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- ----
(unaudited) (unaudited)
Interest income:
Loans $ 1,569 1,112 3,003 2,087
Securities held to maturity 636 339 1,234 675
Other interest earning assets 14 29 67 95
---------- ---------- ---------- ----------
Total interest income 2,219 1,480 4,304 2,857
---------- ---------- ---------- ----------
Interest expense-
Deposits 1,379 840 2,688 1,628
---------- ---------- ---------- ----------
Net interest income 840 640 1,616 1,229
Provision for loan losses 92 55 184 128
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 748 585 1,432 1,101
---------- ---------- ---------- ----------
Noninterest income:
Customer service charges 29 40 56 61
Other 8 8 12 17
---------- ---------- ---------- ----------
Total noninterest income 37 48 68 78
---------- ---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits 222 180 438 351
Occupancy and equipment 101 90 191 179
Advertising and promotion 31 1 42 3
Professional fees 50 45 64 58
Deposit insurance premiums 3 -- 5 1
Other 72 88 200 173
---------- ---------- ---------- ----------
Total noninterest expense 479 404 940 765
---------- ---------- ---------- ----------
Earnings before income taxes 306 229 560 414
Income taxes 119 97 213 172
---------- ---------- ---------- ----------
Net earnings $ 187 132 347 242
========== ========== ========== ==========
Earnings per share $ .17 .12 .32 .22
========== ========== ========== ==========
Weighted-average number of shares
outstanding 1,100,000 1,100,000 1,100,000 1,100,000
========= ========= ========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders' Equity
For the Six-Month Period Ended June 30, 1997
(In thousands)
Class A Class B Additional Total
Common Common Paid-In Retained Stockholders'
Stock Stock Capital Earnings Equity
----- ----- ------- -------- ------
Balance at December 31, 1996 $ 900 200 7,655 992 9,747
Net earnings for the six months
ended June 30, 1997 (unaudited) -- -- -- 347 347
------ ------ ------ ------ ------
Balance at June 30, 1997 (unaudited) $ 900 200 7,655 1,339 10,094
====== ====== ====== ====== ======
See Accompanying Notes to Condensed Consolidated Financial Statements
4
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
----------------
1997 1996
---- ----
(unaudited)
Cash flows from operating activities:
Net earnings $ 347 242
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 108 121
Provision for deferred income taxes 31 166
(Increase) decrease in other assets (29) 1
Increase in other liabilities 579 766
Increase in accrued interest receivable (155) (17)
Net amortization of fees, premiums and discounts 12 107
Write-down on foreclosed real estate 8 --
Net gain on sale of foreclosed real estate (7) --
Provision for loan losses 184 128
-------- --------
Net cash provided by operating activities 1,078 1,514
-------- --------
Cash flows from investing activities:
Proceeds from sale of foreclosed real estate 184 --
Purchase of securities held to maturity (15,128) (9,937)
Maturity of interest-bearing deposits -- 199
Net purchase of premises and equipment (1,135) (107)
Net increase in loans (10,256) (13,426)
Maturities of securities held to maturity 11,358 8,000
-------- --------
Net cash used in investing activities (14,977) (15,271)
-------- --------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market deposits 10,017 350
Net increase in time deposits 1,398 9,328
-------- --------
Net cash provided by financing activities 11,415 9,678
-------- --------
Net decrease in cash and cash equivalents (2,484) (4,079)
Cash and cash equivalents at beginning of period 6,320 8,551
-------- --------
Cash and cash equivalents at end of period $ 3,836 4,472
======== ========
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 2,684 1,627
======== ========
Income taxes $ 397 23
======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
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 June 30, 1997, the results of operations for the
three- and six-month periods ended June 30, 1997 and 1996 and cash flows
for the six-month periods ended June 30, 1997 and 1996. The results of
operations for the three and six months ended June 30, 1997 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 Loan Losses. No loans were identified as being
impaired during the six-month period ended June 30, 1997. The activity in
the allowance for loan losses is as follows (in thousands):
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------ -------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
Balance, beginning of period $906 677 811 593
Provision charged to earnings 92 55 184 128
Recoveries, net of charge-offs 1 20 4 31
---- ---- ---- ----
Balance, end of period $999 752 999 752
==== ==== ==== ====
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,
1997 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 11.90% 8.00%
Tier I capital to risk-weighted assets 10.67% 4.00%
Tier I capital to total assets - leverage ratio 7.57% 4.00%
(continued)
6
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
5. Impact of New Accounting Principle. On January 1, 1997, the Company
adopted Statement of Financial Accounting Standards No. 125 "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS 125") which 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. The adoption of SFAS 125
has no effect on the Company's financial statements during the six-month
period ended June 30, 1997.
6. Future Accounting Requirements. The FASB has issued Statement of Financial
Accounting Standards No. 128 ("SFAS 128"). This Statement specifies the
computation, presentation and disclosure requirements for earnings per
share (EPS) for entities with publicly-held common stock. SFAS 128 is
effective for both interim and annual periods ending after December 15,
1997 and upon adoption, all periods will be presented to conform with SFAS
128. Management believes the effect of adopting this Statement will not
have a material effect on earnings per share.
7
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
or Plan of Operation
Comparison of June 30, 1997 and December 31, 1996
Liquidity and Capital Resources
The Company's primary source of cash during the six months ended June
30, 1997 was from the maturity of securities totaling $11.4 million and
net deposit inflows of $11.4 million. Cash was used primarily for net
loan originations of $10.3 million and the purchase of securities
totaling $15.1 million. At June 30, 1997, the Company had outstanding
commitments to originate loans of $1.0 million. It is expected that
these requirements will be funded from the sources described above. At
June 30, 1997, 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,
1997 1996 1996
---- ---- ----
Average equity as a percentage
of average assets 8.49% 11.29% 12.35%
Equity to total assets at end of period 8.59% 9.27% 11.84%
Return on average assets (1) .60% .67% .64%
Return on average equity (1) 7.12% 5.91% 5.20%
Noninterest expense to average assets (1) 1.64% 1.85% 1.99%
Nonperforming loans and foreclosed real estate to
total assets at end of period - % .18% .31%
- ----------------------------------
(1) Annualized for the six months ended June 30, 1997 and 1996.
8
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Comparison of the Three-Month Periods Ended June 30, 1997 and 1996
Results of Operations:
General. Net earnings for the three months ended June 30, 1997 were $187,000
or $.17 per share compared to net earnings of $132,000 or $.12 per share
for the three months ended June 30, 1996. 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 $739,000 from
$1,480,000 for the three months ended June 30, 1996 to $2,219,000 for the
three months ended June 30, 1997. Interest income on loans increased by
$457,000 due to an increase in the average loan portfolio balance for the
three months ended June 30, 1997 to $68.4 million compared to $47.4
million during the 1996 period partially offset by a decrease in the
weighted-average yield from 9.37% in 1996 to 9.18% in 1997. Interest on
securities increased by $297,000 due to an increase in the average
securities portfolio during the three months ended June 30, 1997 to $40.8
million from $22.8 million during 1996 as well as an increase in the
weighted-average yield from 5.97% in 1996 to 6.24% in 1997. Interest on
other interest-earning assets decreased by $15,000 due to a decrease in
the average balance of such assets from 1996 to 1997.
Interest expense on deposit accounts increased to $1,379,000 for the three
months ended June 30, 1997 from $840,000 for the three months ended June
30, 1996. Interest expense increased primarily because of an increase in
the average balance of deposits from 1996 to 1997. The average balance of
deposits for the three months ended June 30, 1997 was $102.2 million
compared to $63.7 million during 1996.
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 for the
three months ended June 30, 1997 and 1996 was $92,000 and $55,000,
respectively. Management believes the balance in the allowance for loan
losses of $999,000 at June 30, 1997 is adequate.
Noninterest Expense. Total noninterest expense increased by $75,000 to
$479,000 for the three months ended June 30, 1997 from $404,000 for the
three months ended June 30, 1996, primarily due to an increase in employee
compensation and benefits as well as advertising and promotion due to
overall growth of the Company.
Provision for Income Taxes. The income tax provision for the three months
ended June 30, 1997 was $119,000 (an effective rate of 38.9%) compared to
$97,000 (an effective rate of 42.4%) for the comparable 1996 period. In
1996, a greater portion of the consolidated earnings was generated by the
Holding Company which has a higher state income tax rate.
9
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
Comparison of the Six-Month Periods Ended June 30, 1997 and 1996
Results of Operations:
General. Net earnings for the six months ended June 30, 1997 were $347,000 or
$.32 per share compared to net earnings of $242,000 or $.22 per share for the
six months ended June 30, 1996. 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 an increase in the provision for
income taxes.
Interest Income and Expense. Interest income increased by $1,447,000 from
$2,857,000 for the six months ended June 30, 1996 to $4,304,000 for the
six months ended June 30, 1997. Interest income on loans increased by
$916,000 due to an increase in the average loan portfolio balance for the
six months ended June 30, 1997 to $65.9 million compared to $43.5 million
during the 1996 period partially offset by a decrease in the
weighted-average yield from 9.61% in 1996 to 9.12% in 1997. Interest on
securities increased by $559,000 due to an increase in the average
securities portfolio during the six months ended June 30, 1997 to $40.7
million from $22.7 million during 1996 and an increase in the
weighted-average yield from 5.94% in 1996 to 6.06% in 1997. Interest on
other interest-earning assets decreased by $28,000 primarily due to a
decrease in the average balance of these assets from 1996 to 1997.
Interest expense on deposit accounts increased to $2,688,000 for the six
months ended June 30, 1997 from $1,628,000 for the six months ended June
30, 1996. Interest expense increased primarily because of an increase in
the average balance of deposits from 1996 to 1997. The average balance of
deposits for the six months ended June 30, 1997 was $100.4 million
compared to $60.6 million during 1996.
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 $128,000 for the six months ended June 30, 1996 to $184,000 for the
six months ended June 30, 1997. The increase was deemed appropriate by
management due to the growth in the loan portfolio in 1997.
Noninterest Expense. Total noninterest expense increased by $175,000 to
$940,000 for the six months ended June 30, 1997 from $765,000 for the six
months ended June 30, 1996, primarily due to an increase in employee
compensation and benefits of $87,000, an increase in advertising and
promotion of $39,000 and an increase in other noninterest expense of
$27,000 due to the overall growth of the Company.
Provision for Income Taxes. The income tax provision for the six months ended
June 30, 1997 was $213,000 (an effective rate of 38.0%) compared to
$172,000 (an effective rate of 41.5%) for the comparable 1996 period. In
1996, a greater portion of the consolidated earnings was generated by the
Holding Company which has a higher state income tax rate.
10
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 3, 1997 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 809,500 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"
--------- ----------
Milton F. Gidge 804,500 5,000
Wesley T. Wood 804,500 5,000
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
William F. Holly 200,000 0
David J. Willmott 200,000 0
Item 6. Exhibits and Reports on Form 8-K
On June 24, 1997, a proposal to amend the Company's Certificate of Incorporation
to increase the number of shares of Class A Common Stock that the Company is
authorized to issue from 2,600,000 to 4,000,000, was approved by written consent
of shareholders owning 200,000 shares of Class B Common Stock (constituting all
of the issued and outstanding shares of Class B Common Stock) and 600,000 shares
of Class A Common Stock (constituting two-thirds of the issued and outstanding
shares of Class A Common Stock).
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B)
3. Restated Certificate of Incorporation
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the period covered by this report.
11
INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
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, 1997 By: /s/ Lowell S. Dansker
------------- ----------------------
Lowell S. Dansker, President
and Treasurer
(Chief Financial Officer)
Date: July 31, 1997 By: /s/ Lawrence G. Bergman
------------- ------------------------
Lawrence G. Bergman, Vice President
and Secretary
12