AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 2005
REGISTRATION NO. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

INTERVEST BANCSHARES CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE
--------
(State or other jurisdiction of incorporation or organization)

6021
----
(Primary Standard Industrial Classification Code Number)

13-3699013
----------
(I.R.S. Employer Identification Number)

ONE ROCKEFELLER PLAZA SUITE 400
NEW YORK, NEW YORK 10020-2002
(212) 218-2800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

LAWRENCE G. BERGMAN, VICE PRESIDENT
INTERVEST BANCSHARES CORPORATION
ONE ROCKEFELLER PLAZA (SUITE 400)
NEW YORK, NEW YORK 10020-2002
(212) 218-2800

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
THOMAS E. WILLETT, ESQ. BARRY H. GENKIN, ESQ.
HARRIS BEACH PLLC BLANK ROME LLP
99 GARNSEY ROAD ONE LOGAN SQUARE
PITTSFORD, NEW YORK 14534 PHILADELPHIA, PA 19103
(585) 419-8646 (215) 569-5514

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED(1) SHARE(2) PRICE FEE(2)
- -------------------- ------------- ----------- ----------- --------------

CLASS A COMMON STOCK 1,265,000 $ 18.20 $23,023,000 $ 2,709.81
- -----------------------------------------------------------------------------

(1) INCLUDES 165,000 SHARES OF CLASS A COMMON STOCK THAT THE UNDERWRITERS HAVE
THE OPTION TO PURCHASE TO COVER OVER-ALLOTMENTS, IF ANY.
(2) COMPUTED BASED ON RULE 457(C). REPRESENTS THE AVERAGE OF THE HIGH AND LOW
PRICES AS REPORTED ON THE NASDAQ STOCK MARKET ON JULY 1, 2005.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

SUBJECT TO COMPLETION, DATED JULY 8, 2005

PROSPECTUS

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

1,100,000 SHARES

INTERVEST BANCSHARES CORPORATION
Class A Common Stock

We are offering for sale 1,100,000 shares of our Class A common stock in an
underwritten public offering. Our Class A common stock is listed on the NASDAQ
National Market under the symbol "IBCA." The last reported sales price of our
Class A common stock on June 30, 2005, was $18.20 per share.

We are the financial holding company for Intervest National Bank and
Intervest Mortgage Corporation.

Investing in our Class A common stock involves risks. We urge you to
carefully read the "Risk Factors" beginning on page 8 before making your
investment decision.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

PER SHARE TOTAL
--------- -----

PUBLIC OFFERING PRICE
UNDERWRITING COMMISSION TO BE PAID BY US(1)
NET PROCEEDS BEFORE EXPENSES TO US

_________________

(1) This is a firm commitment underwriting. We will pay underwriting
commissions for the sale of the shares of Class A common stock to the
public. The underwriters have been granted a 30-day option to purchase up
to an additional 165,000 shares of Class A common stock to cover
over-allotments, if any, at the public offering price less the underwriting
discount. See "Underwriting."

RYAN BECK & CO. Sandler O'Neill & Partners, L.P.

The date of this prospectus is ________, 2005.

PROSPECTUS SUMMARY

This summary highlights information contained in this prospectus. Because
this is a summary, it may not contain all of the information that is important
to you. Therefore, you should read the entire prospectus carefully, especially
the risks of investing in our Class A common stock discussed under "Risk
Factors," as well as our consolidated financial statements included in this
prospectus. Unless otherwise indicated, the information in this prospectus
assumes that the underwriters will not exercise their option to purchase
additional shares of Class A common stock to cover over-allotments. References
in this prospectus to "we," "us," "our," the "holding company," and "Intervest"
refer to Intervest Bancshares Corporation and its consolidated subsidiaries,
unless otherwise specified. References to the "bank" and our "mortgage lending
subsidiary" refer to our principal operating subsidiaries, Intervest National
Bank and Intervest Mortgage Corporation, respectively.

WHO WE ARE

Intervest Bancshares Corporation is a financial holding company with two
primary operating subsidiaries, Intervest National Bank and Intervest Mortgage
Corporation. Intervest National Bank is a nationally chartered bank with a
full-service banking office in New York City and five full-service offices in
Pinellas County, Florida and which focuses on multi-family and commercial real
estate lending. Intervest Mortgage Corporation is a mortgage investment company
engaged in the origination of commercial and multi-family real estate mortgage
loans and the provision of loan origination services to the bank. We are
headquartered at One Rockefeller Plaza in New York City, New York. At March 31,
2005, we had total consolidated assets of $1.4 billion, net loans of $1.1
billion, total deposits of $1.1 billion and stockholders' equity of $93.4
million.

The bank emphasizes multi-family and commercial real estate lending.
Commercial real estate and multi-family mortgage loans represented 99.8% of the
bank's loan portfolio at March 31, 2005 and the portfolio included rental and
cooperative apartment buildings, mix-used properties, shopping centers, hotels,
industrial properties and vacant land. The bank's borrowers are attracted to
the bank's products due to the personalized service provided by our officers and
our timely response to loan requests and loan processing. The bank's management
team has extensive experience in commercial and multifamily real estate lending
activities.

The bank attracts deposits from the areas served by its banking offices.
It also provides internet banking services through its web site which attracts
deposit customers from outside its primary market areas. The deposits, together
with funds derived from other sources are used to originate primarily commercial
and multi-family real estate loans and to purchase investment securities.

Intervest Mortgage Corporation's business focuses on the origination of
multi-family and commercial real estate mortgage loans, consisting of first
mortgage and junior mortgage loans. It also provides loan origination services
to the bank. Intervest Mortgage Corporation funds its lending business through
the issuance of subordinated debentures in public offerings.

Intervest Mortgage Corporation was organized in April 1987. Intervest
Bancshares Corporation was incorporated in 1993 for the purposes of acquiring
Intervest Bank, a Florida state-chartered commercial bank with offices in
Pinellas County, Florida. Intervest National Bank, a nationally chartered
commercial bank, opened for business on April 1, 1999 as a de novo bank and a
wholly-owned subsidiary of Intervest Bancshares Corporation. In July of 2001,
Intervest Bank merged with and into Intervest National Bank. In March of 2000,
Intervest Bancshares Corporation acquired Intervest Mortgage Corporation.
Intervest Mortgage Corporation and Intervest Bancshares Corporation were
affiliated in that certain of the officers and directors of Intervest Bancshares
Corporation and their family members owned all of the shares of Intervest
Mortgage Corporation.

OUR GROWTH

Our business has experienced significant balance sheet growth primarily in
our commercial real estate and multifamily loan portfolio. Our deposit
generation efforts have focused on certificates of deposit and money market
accounts. From December 31, 2000 to December 31, 2004, our total assets have
grown from $416.9 million to $1.3 billion, our total loans have increased from
$266.3 million to $1.0 billion, and our total deposits have increased from
$300.0 million to $993.9 million. During the same period, our net income has
increased from $2.6 million to $11.5 million and our diluted earnings per share
have grown from $0.67 to $1.71.

For the year ended December 31, 2004, our growth over the prior year was as
follows:

- Total assets increased 42.6 % from $911.5 million to $1.3
billion.

- Total loans increased 49.0% from $671.1 million to $1.0 billion.

- Total deposits increased 47.1%from $675.5 million to $993.9
million.

- Net income increased 26.4% from $9.1 million to $11.5 million.

- Diluted earnings per share increased 11.8% from $1.53 to $1.71.

OUR MARKET AREA

Our primary market area for our New York deposit operations is the New York
City metropolitan area. The primary market area for our Florida operations is
Pinellas County, which is the most populous county in the Tampa Bay area of
Florida. The Tampa Bay area is located on the west coast of central Florida and
includes the cities of Tampa, St. Petersburg and Clearwater.

Our mortgage lending activities have been concentrated in the New York City
metropolitan area where real estate securing approximately 69% of our loan
portfolio at March 31, 2005 was located. Of the remaining loan portfolio,
approximately 21% was collateralized by properties located in our Florida
market, with the remainder of our portfolio geographically dispersed throughout
a variety of other states including Alabama, Connecticut, Georgia, Indiana,
Kentucky, Massachusetts, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and
Washington D.C.

OUR BUSINESS STRATEGY

Our goal is to continue to enhance our earnings through asset-driven growth
of our banking operations, while maintaining the combination of efficient
customer service and loan underwriting that have characterized our success to
date. Our strategy for achieving this goal is as follows:

DEVELOP AND MAINTAIN BROKER AND BORROWER RELATIONSHIPS - We seek to continue to
utilize the strong relationships we have developed both with our borrowers and
with the mortgage brokers with whom we have done business. Our experience
indicates that, by focusing on serving the commercial and multi-family mortgage
loan market, offering customized loan products and timely loan processing and
underwriting decisions, we believe we can continue to maintain and grow our
portfolio and be successful in our market areas.

CONTINUE TO FOCUS ON OUR CORE COMPETENCIES - We are committed to serving our
market and growing our commercial real estate and multi-family mortgage loan
portfolios by providing custom loan products and high quality and timely service
to our borrowers. The bank's market areas have provided a stable flow of
originations. We believe our ability to understand our borrowers' businesses
and to accurately evaluate the underlying collateral combined with our
established underwriting standards enables us to mitigate the higher credit risk
typically associated with commercial real estate and multifamily lending.

MAINTAIN OUR ASSET QUALITY - While our loan portfolio has experienced rapid
growth, we have experienced only one loan chargeoff from our lending activities,
which totaled $150,000, during the past five years. We believe this experience
is the result of our underwriting standards, our timely follow-up on
delinquencies and the expertise of our senior management. At March 31, 2005,
$4.6 million of loans were on non-accrual status, representing 0.4% of our total
loans.

FOCUS ON INTEREST RATE RISK MANAGEMENT - The relatively short-term nature of our
commercial real estate and multifamily loans reduces the interest rate risk
inherent in traditional mortgage lending which tends to be of longer term. To
further reduce the impact of fluctuations in interest rates, interest rate
floors are often included in our loan documents which mitigate the impact of
decreases in market interest rates. We also invest in highly liquid U.S.
government agency bonds and notes until we are able to reinvest these assets
into loans. Our securities portfolio includes primarily government agency
securities, which are held for the purpose of providing the bank with necessary
liquidity.

STRATEGIC EXPANSION - We believe that our centralized underwriting and
administration functions can be expanded to enable us to support continued
growth in the demand for our commercial real estate and

multi-family loan products, while maintaining operating efficiencies. We may
explore and evaluate opportunistic controlled expansion of our franchise within
and outside of our primary market areas through de novo branch expansion or
strategic acquisitions, although none are currently contemplated.

We believe that we are well positioned to capitalize on the opportunities that
our marketplace, expertise and customer base afford us.

CORPORATE INFORMATION

Our headquarters is located on the fourth floor of One Rockefeller Plaza,
New York, New York, 10020-2002. Our telephone number is (212) 218-2800. Our
subsidiary, Intervest National Bank, has a website at www.intervestnatbank.com.
The information on that website should not be considered part of this prospectus
and is not incorporated into this prospectus by reference.

THE OFFERING

Class A common stock offered for sale . . . . . . 1,100,000 shares

Common Stock to be outstanding after the offering

- - Shares of Class A common stock outstanding
after the offering . . . . . . . . . . . . . 6,988,843 shares(1)

- - Shares of Class B common stock outstanding
after the offering . . . . . . . . . . . . . 385,000 shares(1)

Offering price. . . . . . . . . . . . . . . . . . $_______ per share

Market for the Class A common stock . . . . . . . Our Class A common stock is listed on the
NASDAQ National Market under the
symbol "IBCA."

Dividends . . . . . . . . . . . . . . . . . . . . We have never paid any cash or stock
dividends on our capital stock and do not
anticipate paying any dividends for the
foreseeable future. Holders of our Class A
and Class B common stock will share
ratably in any cash or stock dividends when
and if declared by our board of directors,
subject to applicable provisions of Delaware
law and preferences that might apply to any
shares of preferred stock that may hereafter
be issued.

Voting and Conversion Rights. . . . . . . . . . . Both classes of our common stock have equal
voting rights, except that the holders of
Class B common stock are entitled to vote
for the election of two-thirds of the number
of directors constituting our board of
directors, and the holders of Class A
common stock are entitled to elect the
remaining directors. Messrs. Jerome
Dansker, Lowell Dansker and Lawrence
Bergman together with persons affiliated
with them are the sole holders of our Class B
common stock. The shares of Class B
common stock are convertible on a share for
share basis into shares of Class A common
stock.

Use of proceeds . . . . . . . . . . . . . . . . . The proceeds of the offering will be added to
our working capital and will be available for
general corporate purposes. Portions of the
proceeds may be invested in the bank and
our mortgage lending subsidiary. We may
also explore the possible acquisition of, or
investments in, banks or permissible
non-bank entities, although no such
transactions are currently contemplated.

Risk factors. . . . . . . . . . . . . . . . . . . Investment in our Class A common stock
involves certain risks, including the risk of
loss of your entire investment. You should
read the "Risk Factors" section beginning on
page 8 before deciding to purchase our
Class A common stock.

(1) Share information is given as of March 31, 2005 and excludes 5,658 shares
issued after that date upon conversion of our convertible debentures. Amount
also excludes: (a) 501,465 shares of Class A common stock issuable upon exercise
of outstanding Class A common stock warrants; (b) 345,000 shares of Class A
common stock currently issuable upon conversion of outstanding convertible
debentures; (c) 385,000 shares of Class A common stock issuable upon conversion
of shares of Class B common stock; and (d) 195,000 shares of Class A common
stock issuable upon conversion of shares of Class B common stock issuable upon
exercise of outstanding Class B common stock warrants.

SUMMARY FINANCIAL DATA

The following table should be read in conjunction with our consolidated
financial statements, together with the related notes thereto, and Management's
Discussion and Analysis of Financial Condition and Results of Operation, all of
which are contained elsewhere in this prospectus.

The information as of and for the three months ended March 31, 2005 and
2004 is unaudited, but, in the opinion of our management, contains all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of our financial condition and results of operations for those
periods. The results of operations for the three month periods is not
necessarily indicative of the results to be expected for the remainder of the
year or any other period.

- ----------------------------------------------------------------------------------------------------------------------------------
At or for the Quarter
Ended March 31, At or For The Year Ended December 31,
-----------------------------------------------------------------------------------------
($in thousands, except per share data) 2005 2004 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------

FINANCIAL CONDITION DATA:
Total assets (1). . . . . . . . . . . . $1,427,439 $ 993,010 $1,316,751 $ 911,523 $ 686,443 $ 513,086 $ 416,927
Cash and cash equivalents . . . . . . . 49,347 65,376 24,599 64,128 30,849 24,409 42,938
Securities available for sale . . . . . - - - - - 6,192 74,789
Securities held to maturity, net. . . . 254,754 142,116 248,888 152,823 145,694 99,157 20,970
Loans receivable, net of deferred fees. 1,095,161 763,108 1,015,396 671,125 489,912 368,526 266,326
Deposits. . . . . . . . . . . . . . . . 1,123,657 737,150 993,872 675,513 505,958 362,437 300,241
Borrowed funds and related accrued
interest payable (1). . . . . . . . . 177,995 155,034 202,682 140,383 114,032 100,374 72,813
Stockholders' equity. . . . . . . . . . 93,376 78,751 90,094 75,385 53,126 40,395 36,228
Nonaccrual loans. . . . . . . . . . . . 4,607 1,036 4,607 8,474 - 1,243 -
Foreclosed real estate. . . . . . . . . - - - - 1,081 - -
Allowance for loan losses . . . . . . . 12,139 7,657 11,106 6,580 4,611 3,380 2,768
Loan chargeoffs . . . . . . . . . . . . - - - - 150 - -
Loan recoveries . . . . . . . . . . . . - - - - 107 - -
Loans, net of unearned income to
deposits. . . . . . . . . . . . . . . 97% 104% 102% 99% 97% 102% 89%
Loans, net of unearned income to
deposits (bank only)(2) . . . . . . . 85% 84% 86% 79% 76% 79% 67%
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OPERATIONS DATA:
Interest and dividend income. . . . . . $ 20,568 $ 14,593 $ 66,549 $ 50,464 $ 43,479 $ 35,462 $ 31,908
Interest expense (3). . . . . . . . . . 12,283 8,215 38,683 28,564 26,325 24,714 23,707
-----------------------------------------------------------------------------------------
Net interest and dividend income. . . . 8,285 6,378 27,866 21,900 17,154 10,748 8,201
Provision for loan losses . . . . . . . 1,033 1,077 4,526 1,969 1,274 612 275
-----------------------------------------------------------------------------------------
Net interest and dividend income after
provision for loan losses . . . . . . 7,252 5,301 23,340 19,931 15,880 10,136 7,926
Noninterest income. . . . . . . . . . . 878 1,456 5,140 3,321 2,218 1,655 983
Noninterest expenses. . . . . . . . . . 2,374 1,918 8,251 7,259 6,479 5,303 4,568
-----------------------------------------------------------------------------------------
Earnings before income taxes. . . . . . 5,756 4,839 20,229 15,993 11,619 6,488 4,341
Provision for income taxes (3). . . . . 2,508 2,104 8,776 6,873 4,713 2,710 1,733
-----------------------------------------------------------------------------------------
Net earnings. . . . . . . . . . . . . . $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906 $ 3,778 $ 2,608
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PER COMMON SHARE DATA (4):
Basic earnings per share. . . . . . . . $ 0.52 $ 0.45 $ 1.89 $ 1.85 $ 1.71 $ 0.97 $ 0.67
Diluted earnings per share. . . . . . . $ 0.48 $ 0.41 $ 1.71 $ 1.53 $ 1.37 $ 0.97 $ 0.67
Book value per share. . . . . . . . . . $ 14.88 $ 13.02 $ 14.37 $ 12.59 $ 11.30 $ 10.36 $ 9.29
Market price per share. . . . . . . . . $ 18.00 $ 18.00 $ 19.74 $ 14.65 $ 10.80 $ 7.40 $ 3.75
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA AND RATIOS:
Total Class A and Class B common
stock outstanding . . . . . . . . . . 6,273,843 6,048,075 6,271,433 5,988,377 4,703,087 3,899,629 3,899,629
Common stock warrants outstanding (5) . 696,465 696,465 696,465 738,975 1,750,010 2,650,218 2,650,218
Average common shares used to
calculate:
Basic earnings per share. . . . . . . 6,273,843 6,042,847 6,068,755 4,938,995 4,043,619 3,899,629 3,884,560
Diluted earnings per share. . . . . . 6,871,769 6,888,488 6,828,176 6,257,720 5,348,121 3,899,629 3,884,560
Adjusted net earnings for diluted
earnings per share(6) . . . . . . . . $ 3,303 $ 2,817 $ 11,707 $ 9,572 $ 7,342 $ 3,778 $ 2,608
Net interest margin . . . . . . . . . . 2.47% 2.75% 2.52% 2.90% 2.88% 2.47% 2.34%
Return on average assets. . . . . . . . 0.94% 1.15% 1.02% 1.19% 1.13% 0.85% 0.69%
Return on average equity. . . . . . . . 14.25% 14.32% 14.14% 15.34% 15.56% 9.94% 7.48%
Noninterest income to average
assets. . . . . . . . . . . . . . . . 0.06% 0.15% 0.46% 0.43% 0.36% 0.37% 0.26%
Noninterest expenses to average
assets. . . . . . . . . . . . . . . . 0.17% 0.20% 0.74% 0.95% 1.06% 1.19% 1.20%
Total nonperforming assets to total
assets. . . . . . . . . . . . . . . . 0.32% 0.10% 0.35% 0.93% 0.16% 0.24% 0.00%
Total nonperforming loans to
total loans . . . . . . . . . . . . . 0.42% 0.14% 0.45% 1.26% 0.00% 0.34% 0.00%
Allowance for loan losses to total
net loans . . . . . . . . . . . . . . 1.11% 1.00% 1.09% 0.98% 0.94% 0.92% 1.04%
Efficiency ratio. . . . . . . . . . . . 26.00% 24.00% 25.00% 29.00% 33.00% 43.00% 50.00%
Average stockholders' equity to
average total assets. . . . . . . . . 6.62% 8.06% 7.23% 7.74% 7.27% 8.50% 9.18%
Stockholders' equity to total assets. . 6.54% 7.93% 6.84% 8.27% 7.74% 7.87% 8.69%
Tier 1 capital to average assets. . . . 8.67% 10.75% 9.03% 11.31% 9.88% 10.67% 8.75%
Tier 1 capital to risk weighted assets. 10.05% 12.28% 10.49% 13.28% 12.21% 12.89% 11.72%
Total capital to risk weighted assets . 13.51% 15.47% 14.23% 14.84% 13.06% 14.11% 12.63%
Trust preferred securities -
subordinated debentures(7). . . . . . $ 61,856 $ 46,392 $ 61,856 $ 30,928 $ 15,464 $ 15,464 -
- ----------------------------------------------------------------------------------------------------------------------------------

(1) Amounts at December 31, 2003 and prior have been adjusted where applicable
from those previously reported for the effect of adopting FASB
Interpretation No. 46-R, "Consolidation of Variable Interest Entities".
(2) The computation of loans, net of unearned income to deposits relates to the
bank only and excludes loans held by us directly and by our mortgage
lending subsidiary, net of unearned income. Our total loans and deposits,
on a consolidated basis, are set forth in this table and the computation of
loans, net of unearned income to deposits for the bank only excludes loans
of $102,391, and $108,285 for the quarters ended March 31, 2005 and 2004,
respectively, and of $114,598, $104,889, $82,784, $72,271 and $185,480 for
the years ended December 31, 2004, 2003, 2002, 2001 and 2000, respectively.
(3) A charge of $206,000, net of taxes, from the early retirement of debentures
that was previously reported in 2000 as an extraordinary item has been
reclassified (a $382,000 increase to interest expense and a $176,000
decrease to the provision for income taxes) to give effect to SFAS No. 145,
"Rescission of SFAS Statements No. 4, 44, and 64, Amendment of SFAS
Statement No. 13, and Technical Corrections."
(4) We have never paid any dividends on our Class A or Class B common stock.
(5) As of March 31, 2005, includes warrants to purchase 501,465 shares of our
Class A common stock and 195,000 shares of our Class B common stock.
(6) As adjusted for interest expense, net of taxes, that would no longer occur
if our outstanding convertible debentures were converted.
(7) These amounts are included above in borrowed funds and related accrued
interest payable.

RISK FACTORS

Investment in our Class A common stock involves a number of risks. We urge
you to read all of the information contained in this prospectus. In addition, we
urge you to consider carefully the following risk factors in evaluating an
investment in our Class A common stock before you purchase any shares of our
Class A common stock offered by this prospectus. An investment in our Class A
common stock should be undertaken only by persons who can afford an investment
involving such risks.

Risks Relating to Our Business

WE DEPEND ON OUR EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES TO IMPLEMENT OUR
BUSINESS STRATEGY AND OUR BUSINESS MAY SUFFER IF WE LOSE THEIR SERVICES.

Our success is largely dependent on the business expertise and
relationships of a small number of our executive officers and other key
employees. Our chairman and chief executive officer, who has been and remains
instrumental to our success, is 86 years of age. If the services of any of our
executive officers or other key employees were to become unavailable for any
reason, the growth, performance and operation of our company and its
subsidiaries might be adversely affected because of their skills, knowledge of
the markets in which we operate, years of real estate lending experience and the
difficulty of promptly finding qualified replacement personnel. As a result, our
ability to successfully grow our business will depend, in part, on our ability
to attract and retain additional qualified officers and employees.

OUR LOANS ARE HIGHLY CONCENTRATED IN COMMERCIAL REAL ESTATE AND MULTIFAMILY
MORTGAGE LOANS, INCREASING THE RISK ASSOCIATED WITH OUR LOAN PORTFOLIO.

Substantially all (over 99%) of our loan portfolio is comprised of
commercial real estate (including land loans) and multifamily mortgage loans.
This lack of diversity increases the risk associated with our loan portfolio.
Commercial real estate and multifamily loans are generally considered riskier
than many other kinds of loans, like single family residential real estate
loans, since these loans tend to involve larger loan balances to single
borrowers and repayment of loans secured by income-producing property is
typically dependent upon the successful operation of the underlying real estate.
In addition, loans on vacant land typically do not have income streams. Our
average real estate loan size was $2.1 million at March 31, 2005 and we expect
that it will continue to increase in the future. Regardless of the underwriting
criteria we utilize, losses may be experienced as a result of various factors
beyond our control, including, among other things, changes in market and
economic conditions affecting the value of our loan collateral and problems
affecting the credit and business of our borrowers.

AN ECONOMIC DOWNTURN IN NEW YORK OR FLORIDA COULD HINDER OUR ABILITY TO OPERATE
PROFITABLY AND HAVE AN ADVERSE IMPACT ON OUR OPERATIONS.

Our assets are heavily concentrated in mortgages on properties located in
New York City and Florida, our two primary market areas. Accordingly, our
business and operations are vulnerable to downturns in the economies of those
geographic areas. At March 31, 2005, mortgages representing approximately 69%
of the principal balance of our total loan portfolio were on properties located
in New York City and mortgages representing approximately 21% of the principal
balance of our loan portfolio were on properties located in Florida. The
concentration of our loans in these areas subjects us to risk that a downturn in
the economy or recession in those areas could result in a decrease in loan
originations and increases in delinquencies and foreclosures, which would more
greatly affect us than if our lending were more geographically diversified. Many
of the properties located in the New York City area underlying our mortgage
loans are subject to rent control and rent stabilization laws, which limit the
ability of property owners to increase rents, which may in turn limit the
borrowers' ability to repay those mortgage loans. In addition, since a large
portion of our portfolio is secured by properties located in Florida, the
occurrence of a natural disaster, such as a hurricane, could result in a decline
in loan originations, a decline in the value or destruction of mortgaged
properties and an increase in the risk of delinquencies, foreclosures or loss on
loans originated by us in that state. We may suffer losses if there is a decline
in the value of the properties underlying our mortgage loans which would have an
adverse impact on our operations. See "-- If the properties underlying many of
our mortgage loans lose value, we may suffer loan losses."

OUR HISTORICAL LEVELS OF BALANCE SHEET GROWTH AND FINANCIAL PERFORMANCE TRENDS
MAY NOT CONTINUE IF OUR GROWTH STRATEGY IS NOT SUCCESSFUL.

A key component of our strategy has been and will continue to be our
growth, including the attraction of additional deposits and the origination of
additional loans. Our ability to sustain continued growth depends upon several
factors outside of our control, including economic conditions generally and in
our market areas in particular, as well as interest rate trends. We can provide
no assurance that we will continue to be successful in increasing the volume of
our loans and deposits at acceptable risk and asset quality levels and upon
acceptable terms, while managing the costs and implementation risks associated
with this growth strategy. There can be no assurance that any further expansion
will be profitable or that we will continue to be able to sustain our historical
rate of growth, either through internal growth or through other expansion of our
banking markets. In addition, we have relied historically on a relatively small
number of key executives in relation to the size of our company, and there can
be no assurance that we will be able to manage anticipated future growth without
additional management staff. Our growth strategy may also limit short-term
increases in our profitability, as we dedicate resources to the building of our
infrastructure. See "--We depend on our executive officers and other key
employees to implement our business strategy and our business may suffer if we
lose their services."

OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL SUFFER IF WE DO
NOT CONTINUALLY IDENTIFY AND INVEST IN MORTGAGE LOANS OR OTHER INSTRUMENTS WITH
RATES OF RETURN ABOVE OUR COST OF FUNDS.

Our profitability depends primarily on the generation of net interest
income which is dependent on the interest rate spread, which is the difference
between yields earned on interest-earning assets and the rates paid on
interest-bearing liabilities. As a result, our success, in large part, depends
on our ability to invest a substantial percentage of our assets in mortgage
loans with rates of return that exceed our cost of funds. We may also experience
lower rates of return from investment of our assets, including, but not limited
to, proceeds from prepaid loans, in liquid assets such as government securities
and overnight funds, which would have a material adverse effect on our business,
financial condition or results of operations. Our net interest margin has ranged
from a low of 2.34% for 2000 to a high of 2.90% for 2003, and was 2.47% for the
quarter ended March 31, 2005.

CHANGES IN INTEREST RATES COULD ADVERSELY IMPACT OUR EARNINGS.

Like many financial institutions, we are subject to the risk of
fluctuations in interest rates. A significant change in interest rates could
have a material adverse effect on our net income. Fluctuations in interest
rates are not predictable or controllable and, therefore, there can be no
assurance of our ability to maintain a consistent positive interest rate spread
between the yield earned on our interest-earning assets and the rates paid on
our interest-bearing liabilities. Our one-year positive interest rate
sensitivity gap was $242.4 million, or 17.0% of total assets, at March 31, 2005.
For purposes of computing the gap, all deposits with no stated maturities are
treated as readily accessible accounts. However, if such deposits were treated
differently, the one-year gap would then change. The behavior of core depositors
may not necessarily result in the immediate withdrawal of funds in the event
deposit rates offered by the bank did not change as quickly and uniformly as
changes in general market rates. Notwithstanding all of the above, there can be
no assurances that a sudden and substantial increase in interest rates may not
adversely impact our 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.

IF THE PROPERTIES UNDERLYING MANY OF OUR MORTGAGE LOANS LOSE VALUE, WE MAY
SUFFER LOAN LOSSES.

Our ability to recover our investment in mortgage loans is solely or
primarily dependent on the value derived from the sale of the property
underlying our mortgage loans because many of our mortgages that we have
originated, or will originate in the future, are non-recourse or limited
recourse. Under the terms of non-recourse mortgages, the owner of the property
subject to the mortgage has no personal obligation to repay the mortgage note
which the mortgage secures. In some circumstances, we may have limited recourse
against the owner with respect to liabilities related to tenant security
deposits, proceeds from insurance policies, losses arising under environmental
laws and/or losses resulting from waste or acts of malfeasance. In addition, our
losses from delinquent and foreclosed loans may be particularly pronounced
because most of our loans do not require repayment of a substantial part of the
original principal amount until maturity, and if borrowers default on their
balloon payments or if we have a junior lien position, it may

have a material adverse effect on our business, financial condition and results
of operations. Additionally, since we tend to lend in areas that are in the
process of being revitalized, properties securing our loans in these
revitalizing neighborhoods may be more susceptible to fluctuations in property
values than in more established areas. In the event we are required to foreclose
on a property securing one of our mortgage loans or otherwise pursue our
remedies in order to protect our investment, there can be no assurance that we
will recover funds in an amount equal to our projected return on our investment
or in an amount sufficient to prevent a loss to us due to prevailing economic
conditions, real estate values and other factors associated with the ownership
of real property. As a result, the market value of the real estate or other
collateral underlying our loans may not, at any given time, be sufficient to
satisfy the outstanding principal amount of the loans.

WE MAY HAVE HIGHER LOAN LOSSES THAN WE HAVE ALLOWED FOR, IN WHICH CASE OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION WILL BE ADVERSELY AFFECTED.

We maintain an allowance for loan losses in order to mitigate the effect of
possible losses inherent in our loan portfolio. There is a risk that we may
experience losses which could exceed the allowance for loan losses we have set
aside. In determining the size of the allowance, our management makes various
assumptions and judgments about the collectibility of our loan portfolio,
including the diversification of our loan portfolio, the effect of changes in
the local real estate market on collateral values, the results of recent
regulatory examinations, the effects on the loan portfolio of current economic
indicators and their probable impact on borrowers, the amount of chargeoffs for
the period, the amount of nonperforming loans and related collateral security,
and the evaluation of our loan portfolio by an external loan review. At March
31, 2005, we had a net loan portfolio of approximately $1.1 billion and the
allowance for loan losses was approximately $12.1 million, which represented
1.11% of the total amount of the loans. If our assumptions and judgments prove
to be incorrect or federal regulators require us to increase our provision for
loan losses or recognize further loan chargeoffs, we may have to increase our
allowance for loan losses or loan chargeoffs which could have an adverse effect
on our operating results and financial condition. There can be no assurances
that our allowance for loan losses will be adequate to protect us against loan
losses that we may incur.

WE ARE A HIGHLY LEVERAGED COMPANY AND OUR INDEBTEDNESS COULD ADVERSELY AFFECT
OUR FINANCIAL CONDITION AND PREVENT US FROM CONTINUING TO GROW OUR BALANCE
SHEET.

At March 31, 2005, our borrowed funds (exclusive of deposits) and related
interest payable was approximately $178.0 million, consisting of $61.9 million
principal amount of trust preferred securities, $91.8 million principal amount
of subordinated debentures, $9.1 million of accrued interest payable on borrowed
funds, $15.0 million of advances from the Federal Home Loan Bank, referred to in
this prospectus as the FHLB, and $0.2 million of a mortgage note payable. This
level of indebtedness could make it difficult for us to satisfy all of our
obligations to the holders of our debt and could limit our ability to obtain
additional debt financing to fund our working capital requirements. In addition,
the indentures underlying the subordinated debentures of our mortgage lending
subsidiary contain financial and other restrictive covenants that may limit its
ability to incur additional indebtedness. The inability to incur additional
indebtedness could adversely affect our business and financial condition by,
among other things, limiting our flexibility in planning for, or reacting to,
changes in our industry; placing us at a competitive disadvantage with respect
to our competitors who may operate on a less leveraged basis. As a result, this
may make us more vulnerable to changes in economic conditions and require us to
dedicate a substantial portion of our cash flow from operations to the repayment
of our indebtedness, which would reduce the funds available for other purposes
which, in turn, could have a negative impact on our profitability and our stock
price.

WE OPERATE IN A HIGHLY REGULATED INDUSTRY AND GOVERNMENT REGULATIONS
SIGNIFICANTLY AFFECT OUR BUSINESS.

The banking industry is extensively regulated. Banking regulations are
intended primarily to protect depositors, consumers and the Bank Insurance Fund
of the Federal Deposit Insurance Corporation, referred to in this prospectus as
the FDIC, and not stockholders. We are subject to regulation and supervision by
the Board of Governors of the Federal Reserve System, or Federal Reserve Board,
referred to in this prospectus as the FRB, and the bank is subject to regulation
and supervision by the Office of the Comptroller of the Currency, referred to in
this prospectus as the OCC. Regulatory requirements affect our lending
practices, capital structure, investment practices, dividend policy and growth.
The bank regulatory agencies have broad authority to prevent or remedy unsafe or
unsound practices or violations of law. We are subject to

regulatory capital requirements, and a failure to meet minimum capital
requirements or to comply with other regulations could result in actions by
regulators that could adversely affect our ability to pay dividends or otherwise
adversely impact our operations. In addition, changes in law, regulations and
regulatory practices affecting the banking industry may limit the manner in
which we may conduct our business.

WE DEPEND ON BROKERS AND OTHER SOURCES FOR OUR MORTGAGE LENDING ACTIVITIES AND
ANY REDUCTION IN REFERRALS COULD LIMIT OUR ABILITY TO GROW.

We rely significantly on referrals from mortgage brokers for our loan
originations. Our ability to maintain our history of growth may depend, in part,
on our ability to continue to attract referrals from mortgage brokers. If those
referrals were to decline or did not continue to expand, there can be no
assurances that other sources of loan originations would be available to assure
our ability to maintain a level of growth consistent with our historical
performance.

SINCE WE ENGAGE IN COLLATERAL-BASED LENDING AND MAY BE FORCED TO FORECLOSE ON
THE COLLATERAL PROPERTY AND OWN THE UNDERLYING REAL ESTATE, WE MAY BE SUBJECT TO
THE INCREASED COSTS ASSOCIATED WITH THE OWNERSHIP OF REAL PROPERTY WHICH COULD
RESULT IN REDUCED REVENUES.

Since we are primarily a collateral-based lender, we may have to foreclose
on the collateral property to protect our investment and may thereafter own and
operate such property, in which case we are exposed to the risks inherent in the
ownership of real estate. The amount that we, as a mortgagee, may realize after
a default, is dependent upon factors outside of our control, including, but not
limited to:

- general or local economic conditions;
- neighborhood values;
- interest rates;
- real estate tax rates;
- operating expenses of the mortgaged properties;
- supply of and demand for rental units or properties;
- ability to obtain and maintain adequate occupancy of the
properties;
- zoning laws;
- governmental rules, regulations and fiscal policies; and
- acts of God.

Certain expenditures associated with the ownership of real estate,
principally real estate taxes and maintenance costs, may adversely affect the
income from the real estate. Therefore, the cost of operating a real property
may exceed the rental income earned from such property, and we may have to
advance funds in order to protect our investment or we may be required to
dispose of the real property at a loss. The foregoing expenditures and costs
could adversely affect our ability to generate revenues, resulting in reduced
levels of profitability.

THE EMPLOYMENT AGREEMENTS OF OUR EXECUTIVE OFFICERS PERMIT THEM TO ENGAGE IN
ACTIVITIES THAT MAY BE CONSIDERED TO BE COMPETING WITH OUR SUBSIDIARIES, WHICH
MAY HAVE AN ADVERSE EFFECT ON THE BUSINESS OF OUR SUBSIDIARIES.

The long-term employment agreements between us or our subsidiaries and our
executive officers expressly permit them to engage in outside activities,
including activities competitive with our subsidiaries. This may have a material
adverse effect on the business and financial condition of our subsidiaries.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL
REPORTING, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR
PREVENT FRAUD. AS A RESULT, CURRENT AND POTENTIAL STOCKHOLDERS, DEPOSITORS AND
SUBORDINATED DEBENTURE HOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL REPORTING,
WHICH COULD ADVERSELY AFFECT OUR BUSINESS, THE TRADING PRICE OF OUR STOCK AND
OUR ABILITY TO SELL SUBORDINATED DEBENTURES AND ATTRACT ADDITIONAL DEPOSITS.

Beginning with our annual report for the fiscal year ending December 31,
2006, we will have to include in our annual reports filed with the SEC a report
of our management regarding internal control over

financial reporting. As a result, we have recently begun a process to document
and evaluate our internal control over financial reporting in order to satisfy
the requirements of Section 404 of the Sarbanes-Oxley Act and SEC rules and
regulations, which require an annual management report on our internal control
over financial reporting, including, among other matters, management's
assessment of the effectiveness of our internal control over financial
reporting, and an attestation report by our independent auditors addressing
these assessments. In this regard, management has recently begun dedicating
internal resources toward the adoption of a detailed work plan, which will
involve the retention of outside consultants. This process is designed to (i)
assess and document the adequacy of our internal control over financial
reporting, (ii) take steps to improve control processes, where appropriate, and
(iii) verify through testing that controls are functioning as documented. To
date, we have identified certain deficiencies in the design and operating
effectiveness of our internal control over financial reporting. We believe that
we have corrected or are in the process of correcting such identified
deficiencies and will continue to correct any identified issues as well as any
issues that may be identified in the future. Although we have just begun this
process, we are not aware of any "significant deficiencies" or "material
weaknesses" in our internal control over financial reporting, as defined in
applicable SEC rules and regulations. If we fail to identify and correct any
significant deficiencies in the design or operating effectiveness of our
internal control over financial reporting or fail to prevent fraud, current and
potential stockholders, subordinated debenture holders and depositors could lose
confidence in our financial reporting, which could adversely affect our
business, financial condition and results of operations, the trading price of
our stock, and our ability to sell subordinated debentures and attract
additional deposits.

ENVIRONMENTAL LIABILITY ASSOCIATED WITH COMMERCIAL LENDING COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In the course of our business, we may acquire, through foreclosure,
properties securing loans that are in default. There is a risk that hazardous
substances could be discovered on those properties. In this event, we may be
required to remove the substances from and remediate the properties at our cost
and expense. The cost of removal and environmental remediation could be
substantial. We may not have adequate remedies against the owners of the
properties or other responsible parties and could find it difficult or
impossible to sell the affected properties. These events could have a material
adverse effect on our business, financial condition and operating results.

WE FACE STRONG COMPETITION IN OUR MARKET AREAS, WHICH MAY LIMIT OUR GROWTH AND
PROFITABILITY.

Our market areas, which primarily consist of the New York City area and the
Tampa Bay area of Florida, are very competitive, and the level of competition
facing us may increase further, which may limit our growth and profitability. We
experience competition in both lending and attracting deposits from other banks
and nonbanks located within and outside our market areas, some of which are
significantly larger institutions or institutions with greater resources, lower
cost of funds or a more established market presence. Nonbank competitors for
deposits and deposit-type accounts include savings associations, credit unions,
securities firms, money market funds, life insurance companies and the mutual
funds industry. For loans, we encounter competition from other banks, savings
associations, finance companies, mortgage bankers and brokers, insurance
companies, credit card companies, credit unions, pension funds and securities
firms.

TERRORIST ACTS AND ARMED CONFLICTS MAY ADVERSELY AFFECT OUR BUSINESS.

Terrorist acts, such as those that occurred on September 11, 2001, may have
an adverse impact on our results of operations and on the economy in general.
Since the properties underlying a high concentration of our mortgage loans are
located in New York City, we may be more vulnerable to the adverse impact of
such occurrences than other institutions.

Risks Relating to this Offering

BECAUSE OUR SECURITIES ARE NOT FDIC INSURED, YOU RISK A LOSS OF YOUR ENTIRE
INVESTMENT.

Our Class A common stock is not a savings or deposit account or other
obligation of the bank, it is not insured by the FDIC or any other governmental
agency and it is subject to investment risk, including the loss of your entire
investment.

THERE IS NOT PRESENTLY AN ACTIVE MARKET FOR OUR SHARES OF CLASS A COMMON STOCK,
AND THEREFORE YOU MAY NOT BE ABLE TO SELL ANY SHARES OF CLASS A COMMON STOCK IN
THE EVENT THAT YOU NEED A SOURCE OF LIQUIDITY.

Although our Class A common stock became listed for trading on the NASDAQ
National Market on June 27, 2005, and was previously traded on the NASDAQ
SmallCap Market, the trading in our Class A common stock has substantially less
liquidity than the trading in the stock of many other companies listed on that
market. A public trading market in our Class A common stock that has the desired
characteristics of depth, liquidity and orderliness depends on the presence in
the market of willing buyers and sellers of our Class A common stock at any
time. This presence depends on the individual decisions of investors and general
economic and market conditions over which we have no control. In the event an
active market for our Class A common stock does not develop, you may be unable
to sell your shares of Class A common stock at or above the public offering
price.

MANAGEMENT HAS DISCRETIONARY USE OF THE PROCEEDS FROM THIS OFFERING AND YOU MAY
NOT AGREE WITH THE USES WE CHOOSE TO MAKE WITH THE PROCEEDS.

Management will have broad discretion with respect to the deployment of the
net proceeds from this offering. As of June 30, 2005, we have not specified uses
of the net proceeds. All determinations concerning the use of the net proceeds
will be made by our management. Accordingly, there is a greater degree of
uncertainty concerning the return on any investments we may make, than would be
the case if specific investments were identified, and there is no assurance that
you will agree with the uses that we choose to make of these net proceeds.

WE HAVE NEVER PAID CASH DIVIDENDS TO OUR STOCKHOLDERS AND HAVE NO PRESENT PLANS
TO PAY CASH DIVIDENDS.

Since our formation, we have not paid any cash dividends to our
stockholders, and we have no present intention to pay cash dividends in the
foreseeable future. Dividends, if and when paid by us, are subject to our
financial condition and the financial condition of our subsidiaries, as well as
other business considerations, including restrictions on the payment of
dividends contained in the documents governing our trust preferred securities.
In addition, applicable federal banking regulations and Delaware law limit our
ability to pay dividends. Accordingly, there can be no assurance that any
dividends will be paid in the future. See "Dividend Policy."

VOTING CONTROL OF OUR BOARD OF DIRECTORS IS HELD BY A LIMITED NUMBER OF
STOCKHOLDERS, WHOSE INTERESTS MAY NOT ALWAYS BE ALIGNED WITH YOURS.

As of June 30, 2005, five stockholders, three of whom are executive
officers and directors of our company and the other two of whom are related
parties of those individuals, together beneficially owned approximately 43% of
the outstanding Class A common stock (including shares issuable upon exercise of
Class A common stock warrants) and all of the outstanding Class B common stock.
The holders of our Class B common stock, as a separate class, can elect
two-thirds of our directors. As a result, voting control continues to rest with
those persons. Therefore, the holders of our Class A common stock are not able
to replace current management, since they only elect one-third of our directors.
As the interests of the controlling stockholders might not always be aligned
with your interests, these persons may exercise control over us in a manner
detrimental to your interests. For example, the holders of Class B common stock
could delay, deter or prevent a change in control or other business combination
that might otherwise be deemed beneficial to our other stockholders.

"ANTI-TAKEOVER" PROVISIONS AND THE REGULATIONS TO WHICH WE MAY BE SUBJECT MAY
MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE CONTROL OF US, EVEN IF THE
CHANGE IN CONTROL WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

We are a holding company incorporated in Delaware. Anti-takeover provisions
in Delaware law and our certificate of incorporation and bylaws, as well as
regulatory approvals required under federal banking laws, could make it more
difficult for a third party to acquire control of us and may prevent
stockholders from receiving a premium for their shares of Class A common stock.
Our certificate of incorporation provides that our board of directors may issue
up to 300,000 shares of preferred stock, in one or more series, without
stockholder approval and with such terms, preferences, rights and privileges as
the board of directors may deem appropriate. These and other factors may hinder
or prevent a change in control, even if the change in control would be
beneficial to our stockholders. See "Description of Our Securities - Certain
Provisions Having Potential Anti-Takeover Effects."

FORWARD-LOOKING STATEMENTS

Certain statements contained in or incorporated by reference into this
prospectus constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for
purposes of invoking these safe harbor provisions. Such forward-looking
statements are made based on our management's expectations and beliefs
concerning future events impacting our company and are subject to uncertainties
and factors relating to our operations and economic environment, all of which
are difficult to predict and many of which are beyond our control. You can
identify these statements from our use of the words "estimate," "project,"
"believe," "intend," "anticipate," "expect," "target," "may" and similar
expressions. These forward-looking statements may include, among other things:

- statements relating to projected growth, anticipated improvements in
earnings, earnings per share, and other financial performance
measures, and management's long term performance goals;

- statements relating to the anticipated effects on results of
operations or our financial condition from expected developments or
events;

- statements relating to our business and growth strategies, including
potential acquisitions; and

- any other statements which are not historical facts.

Forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause our actual results, performance or
achievements, or industry results, to differ materially from our expectations of
future results, performance or achievements expressed or implied by these
forward-looking statements. In addition, our past results of operations do not
necessarily indicate our future results. We discuss these and other
uncertainties in the "Risk Factors" section of this prospectus beginning on page
8.

You should not place undue reliance on any forward-looking statement. We
undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.

USE OF PROCEEDS

We anticipate that the net proceeds to us from the sale of our Class A
common stock, assuming the underwriters do not exercise their option to cover
over-allotments, will be approximately $18.5 million, after deducting offering
expenses and underwriting commissions, estimated to be $1.6 million.

We intend to use the net proceeds for our general corporate purposes. This
could include investments in the bank to fund its operations and its continued
expansion, and to maintain the bank's status as a "well capitalized" bank under
applicable regulations. Any proceeds invested in the bank will increase the
bank's regulatory legal lending limit. We may also make investments in our
mortgage lending subsidiary. We may also explore the possible acquisition of, or
investments in, bank or permissible non-bank entities, by either us or our
subsidiary bank (although no agreements or understandings presently exist with
respect to any such acquisitions and we are not presently engaged in any
negotiations related to any acquisitions). Before we apply any of the proceeds
for any uses, they likely will be temporarily invested in short-term investment
securities. The precise amounts and timing of the application of proceeds has
yet to be determined by our management.

MARKET FOR CLASS A COMMON STOCK
AND RELATED STOCKHOLDER
MATTERS

Our Class A common stock is currently listed for trading on the NASDAQ
National Market under the symbol "IBCA." On June 27, 2005, our stock commenced
trading on the NASDAQ National Market. Prior to that date, our Class A common
stock had traded on the NASDAQ SmallCap Market. There is no public trading
market for our Class B common stock. At March 31, 2005, there were 5,888,843 and
385,000 shares of Class A and Class B common stock outstanding, respectively. At
March 31, 2005, there were

approximately 1,200 holders of record of our Class A common stock, which
includes persons or entities that hold their stock in nominee or in street name
through various brokerage firms, and five holders of record of our Class B
common stock.

The last reported sales price of our Class A common stock on June 30, 2005
was $18.20 per share. The following table shows the high and low bid prices per
share for our Class A common stock by calendar quarter for the periods
indicated. The quotations set forth below reflect inter-dealer quotations that
do not include retail markups, markdowns or commissions and may not represent
actual transactions.

2003 High Low
- ---- ---- ---

First Quarter . . . . . . . . . . . $11.48 $10.05
Second Quarter. . . . . . . . . . . $12.77 $10.38
Third Quarter . . . . . . . . . . . $13.75 $12.05
Fourth Quarter. . . . . . . . . . . $15.48 $12.86

2004
- ----
First Quarter . . . . . . . . . . . $18.48 $14.42
Second Quarter. . . . . . . . . . . $17.76 $14.75
Third Quarter . . . . . . . . . . . $17.15 $14.45
Fourth Quarter. . . . . . . . . . . $19.74 $16.50

2005
- ----
First Quarter . . . . . . . . . . . $20.15 $17.51
Second Quarter. . . . . . . . . . . $19.25 $17.25
Third Quarter (through _____, 2005) $ $

DIVIDEND POLICY

Class A and Class B common stockholders are entitled to receive cash
dividends when and if declared by our board of directors from funds legally
available for such purposes. We have never paid any cash or stock dividends on
our capital stock and we do not currently contemplate the payment of cash or
stock dividends.

Our ability to pay cash dividends is limited to an amount equal to the
surplus which represents the excess of our net assets over paid-in-capital or,
if there is no surplus, our net earnings for the current and/or immediately
preceding fiscal year. The primary source of funds for any cash dividends
payable to our stockholders would be the dividends received from our
subsidiaries. The payment of cash dividends by a subsidiary is determined by
that subsidiary's board of directors and is dependent upon a number of factors,
including the subsidiary's capital requirements, applicable regulatory
limitations, results of operations, financial condition and any restrictions
arising from outstanding indentures. See "Supervision and Regulation" and
"Description of Our Securities" for a description of the restrictions on our
payment of dividends under federal banking laws and the Delaware General
Corporation Law.

Our ability to pay cash dividends is further impacted by the funding
requirements of the $60.0 million of trust preferred securities issued by our
statutory trusts, all of the common stock of which is owned by us. These
statutory trusts were formed for the sole purpose of issuing trust preferred
securities. The bank pays a monthly cash dividend to the holding company in
order to provide funds for the debt service on our trust preferred securities.
Dividends paid to us by the bank in the quarters ended March 31, 2005 and March
31, 2004 amounted to $1.1 million and $0.6 million, respectively. Dividends
paid to us by the bank in fiscal years 2004, 2003 and 2002 amounted to $3.4
million, $1.7 million and $1.5 million, respectively.

CAPITALIZATION

The following table sets forth our consolidated capitalization as of March
31, 2005 on an actual basis and on a pro-forma basis to give effect to this
offering. We have assumed proceeds of approximately $18.5 million will result
from the sale of Class A common stock offered by this prospectus, after
deducting estimated offering expenses and assuming no exercise of the
underwriters' over-allotment option. You should read this information together
with our consolidated financial statements and related notes, which are included
elsewhere in this prospectus.

Actual(1) As Adjusted(1)(2)
At March 31, At March 31,
2005 2005
-------------- ------------------
($ in thousands) (unaudited) (unaudited)
-------------- ------------------

LONG TERM DEBT:
Debenture interest payable(3). . . . . . . . . . . . . . $ 9,090 $ 9,090
Debentures payable(1). . . . . . . . . . . . . . . . . . 91,810 91,810
Debentures payable - trust preferred securities. . . . . 61,856 61,856
Mortgage note payable. . . . . . . . . . . . . . . . . . 239 239
-------------- ------------------
Total indebtedness . . . . . . . . . . . . . . . . . . . $ 162,995 $ 162,995
============== ==================

STOCKHOLDERS' EQUITY
Preferred stock, 300,000 shares authorized, none issued. $ - $ -
Class A common stock, $1.00 par value, 9,500,000 shares
authorized, 5,888,843 shares issued and outstanding
before the offering (6,988,843 shares pro forma)(2). . 5,889 6,989
Class B common stock, $1.00 par value, 700,000 shares
authorized, 385,000 shares issued and outstanding. . . 385 385
Additional paid-in capital . . . . . . . . . . . . . . . 38,992 56,342
Retained earnings. . . . . . . . . . . . . . . . . . . . 48,110 48,110
-------------- ------------------
Stockholders' equity . . . . . . . . . . . . . . . . . . 93,376 111,826
-------------- ------------------
Total capitalization . . . . . . . . . . . . . . . . . . $ 256,371 $ 274,821
============== ==================

(1) Excludes the effect of the April 2005 issuance of $14.0 million principal
amount of Series 3/21/05 subordinated debentures and the repayment of $14.1
million principal amount and accrued interest of debentures which matured
on April 30, 2005. Also excludes 5,658 shares of Class A common stock
issued upon conversion of our convertible debentures.

(2) Assumes the sale of 1,100,000 shares of Class A common stock in this
offering, generating net proceeds of $18.5 million, after deducting
offering expenses.

(3) Substantially all of this amount is payable at the maturity of the
debentures.

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

FINANCIAL CONDITION DATA:
Total assets (1). . . . . . . . . . . . $1,427,439 $ 993,010 $1,316,751 $ 911,523 $ 686,443 $ 513,086 $ 416,927
Cash and cash equivalents . . . . . . . 49,347 65,376 24,599 64,128 30,849 24,409 42,938
Securities available for sale . . . . . - - - - - 6,192 74,789
Securities held to maturity, net. . . . 254,754 142,116 248,888 152,823 145,694 99,157 20,970
Loans receivable, net of deferred fees. 1,095,161 763,108 1,015,396 671,125 489,912 368,526 266,326
Deposits. . . . . . . . . . . . . . . . 1,123,657 737,150 993,872 675,513 505,958 362,437 300,241
Borrowed funds and related accrued
interest payable (1). . . . . . . . . 177,995 155,034 202,682 140,383 114,032 100,374 72,813
Stockholders' equity. . . . . . . . . . 93,376 78,751 90,094 75,385 53,126 40,395 36,228
Nonaccrual loans. . . . . . . . . . . . 4,607 1,036 4,607 8,474 - 1,243 -
Foreclosed real estate. . . . . . . . . - - - - 1,081 - -
Allowance for loan losses . . . . . . . 12,139 7,657 11,106 6,580 4,611 3,380 2,768
Loan chargeoffs . . . . . . . . . . . . - - - - 150 - -
Loan recoveries . . . . . . . . . . . . - - - - 107 - -
Loans, net of unearned income to
deposits. . . . . . . . . . . . . . . 97% 104% 102% 99% 97% 102% 89%
Loans, net of unearned income to
deposits (bank only)(2) . . . . . . . 85% 84% 86% 79% 76% 79% 67%
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS DATA:
Interest and dividend income. . . . . . $ 20,568 $ 14,593 $ 66,549 $ 50,464 $ 43,479 $ 35,462 $ 31,908
Interest expense (3). . . . . . . . . . 12,283 8,215 38,683 28,564 26,325 24,714 23,707
-----------------------------------------------------------------------------------------
Net interest and dividend income. . . . 8,285 6,378 27,866 21,900 17,154 10,748 8,201
Provision for loan losses . . . . . . . 1,033 1,077 4,526 1,969 1,274 612 275
-----------------------------------------------------------------------------------------
Net interest and dividend income after
provision for loan losses . . . . . . 7,252 5,301 23,340 19,931 15,880 10,136 7,926
Noninterest income. . . . . . . . . . . 878 1,456 5,140 3,321 2,218 1,655 983
Noninterest expenses. . . . . . . . . . 2,374 1,918 8,251 7,259 6,479 5,303 4,568
-----------------------------------------------------------------------------------------
Earnings before income taxes. . . . . . 5,756 4,839 20,229 15,993 11,619 6,488 4,341
Provision for income taxes (3). . . . . 2,508 2,104 8,776 6,873 4,713 2,710 1,733
-----------------------------------------------------------------------------------------
Net earnings. . . . . . . . . . . . . . $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906 $ 3,778 $ 2,608
- ----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA (4):
Basic earnings per share. . . . . . . . $ 0.52 $ 0.45 $ 1.89 $ 1.85 $ 1.71 $ 0.97 $ 0.67
Diluted earnings per share. . . . . . . $ 0.48 $ 0.41 $ 1.71 $ 1.53 $ 1.37 $ 0.97 $ 0.67
Book value per share. . . . . . . . . . $ 14.88 $ 13.02 $ 14.37 $ 12.59 $ 11.30 $ 10.36 $ 9.29
Market price per share. . . . . . . . . $ 18.00 $ 18.00 $ 19.74 $ 14.65 $ 10.80 $ 7.40 $ 3.75
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA AND RATIOS:
Total Class A and Class B common
stock outstanding . . . . . . . . . . 6,273,843 6,048,075 6,271,433 5,988,377 4,703,087 3,899,629 3,899,629
Common stock warrants outstanding (5) . 696,465 696,465 696,465 738,975 1,750,010 2,650,218 2,650,218
Average common shares used to
calculate:
Basic earnings per share. . . . . . . 6,273,843 6,042,847 6,068,755 4,938,995 4,043,619 3,899,629 3,884,560
Diluted earnings per share. . . . . . 6,871,769 6,888,488 6,828,176 6,257,720 5,348,121 3,899,629 3,884,560
Adjusted net earnings for diluted
earnings per share(6) . . . . . . . . $ 3,303 $ 2,817 $ 11,707 $ 9,572 $ 7,342 $ 3,778 $ 2,608
Net interest margin . . . . . . . . . . 2.47% 2.75% 2.52% 2.90% 2.88% 2.47% 2.34%
Return on average assets. . . . . . . . 0.94% 1.15% 1.02% 1.19% 1.13% 0.85% 0.69%
Return on average equity. . . . . . . . 14.25% 14.32% 14.14% 15.34% 15.56% 9.94% 7.48%
Noninterest income to average
assets. . . . . . . . . . . . . . . . 0.06% 0.15% 0.46% 0.43% 0.36% 0.37% 0.26%
Noninterest expenses to average
assets. . . . . . . . . . . . . . . . 0.17% 0.20% 0.74% 0.95% 1.06% 1.19% 1.20%
Total nonperforming assets to
total assets. . . . . . . . . . . . . 0.32% 0.10% 0.35% 0.93% 0.16% 0.24% 0.00%
Total nonperforming loans to
total loans . . . . . . . . . . . . . 0.42% 0.14% 0.45% 1.26% 0.00% 0.34% 0.00%
Allowance for loan losses to
total net loans . . . . . . . . . . . 1.11% 1.00% 1.09% 0.98% 0.94% 0.92% 1.04%
Efficiency ratio. . . . . . . . . . . . 26.00% 24.00% 25.00% 29.00% 33.00% 43.00% 50.00%
Average stockholders' equity to
average total assets. . . . . . . . . 6.62% 8.06% 7.23% 7.74% 7.27% 8.50% 9.18%
Stockholders' equity to total assets. . 6.54% 7.93% 6.84% 8.27% 7.74% 7.87% 8.69%
Tier 1 capital to average assets. . . . 8.67% 10.75% 9.03% 11.31% 9.88% 10.67% 8.75%
Tier 1 capital to risk weighted assets. 10.05% 12.28% 10.49% 13.28% 12.21% 12.89% 11.72%
Total capital to risk weighted assets . 13.51% 15.47% 14.23% 14.84% 13.06% 14.11% 12.63%
Trust preferred securities -
subordinated debentures(7). . . . . . $ 61,856 $ 46,392 $ 61,856 $ 30,928 $ 15,464 $ 15,464 -
- ----------------------------------------------------------------------------------------------------------------------------------

(2) The computation of loans, net of unearned income to deposits relates to the
bank only and excludes loans held by us directly and by our mortgage
lending subsidiary, net of unearned income. Our total loans and deposits,
on a consolidated basis, are set forth in this table and the computation of
loans, net of unearned income to deposits for the bank only excludes loans
of $102,391, and $108,285 for the quarters ended March 31, 2005 and 2004,
respectively, and of $114,598, $104,889, $82,784, $72,271 and $185,480 for
the years ended December 31, 2004, 2003, 2002, 2001 and 2000, respectively.

(3) A charge of $206,000, net of taxes, from the early retirement of debentures
that was previously reported in 2000 as an extraordinary item has been
reclassified (a $382,000 increase to interest expense and a $176,000
decrease to the provision for income taxes) to give effect to SFAS No. 145,
"Rescission of SFAS Statements No. 4, 44, and 64, Amendment of SFAS
Statement No. 13, and Technical Corrections."

(4) We have never paid any dividends on our Class A or Class B common stock.

(5) As of March 31, 2005, includes warrants to purchase 501,465 shares of our
Class A common stock and 195,000 shares of our Class B common stock.

(6) As adjusted for interest expense, net of taxes, that would no longer occur
if our outstanding convertible debentures were converted.

(7) These amounts are included above in borrowed funds and related accrued
interest payable.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

Intervest Bancshares Corporation is a financial holding company and serves
as the holding company for its three wholly owned subsidiaries - Intervest
National Bank, Intervest Mortgage Corporation and Intervest Securities
Corporation. We sometimes refer to Intervest Bancshares Corporation in this
prospectus as the "holding company," to Intervest National Bank as the "bank,"
and to Intervest Mortgage Corporation as our "mortgage lending subsidiary." The
holding company also has four wholly owned unconsolidated subsidiaries,
Intervest Statutory Trust I, II, III and IV. These entities were formed in
connection with our issuance of trust preferred securities, which is discussed
elsewhere in this prospectus.

Our revenues are derived primarily from interest and fees earned on
mortgage loans, and from interest and dividends earned on securities and our
other short-term investments. The principal sources of funds for the bank's
lending activities are deposits, repayments of loans, maturities and calls of
securities and the cash flow generated from its operations. Its principal
expenses are the interest paid on deposits and operating and general expenses.
The principal sources of funds for the lending activities of Intervest Mortgage
Corporation are the proceeds it receives from the issuance of its subordinated
debentures, together with repayments of loans and the cash flow generated from
its operations, which includes fees received from the bank for services
performed for the bank. Its principal expenses are the interest paid on its
debentures and its operating and general expenses.

Our profitability depends primarily on our net interest income, which is
the difference between interest income generated from our interest-earning
assets and the interest expense incurred on our 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 earned on
interest-earning assets exceeds interest paid on 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.

Our profitability is also affected by the level of our noninterest income
and expenses, provision for loan losses and income tax expense. Noninterest
income consists mostly of loan and other banking fees as well as income from
loan prepayments. Noninterest expense consists of compensation and benefits
expense, occupancy and equipment expenses, data processing expenses, advertising
expense, professional fees, insurance expense and other operating expenses.

Our profitability is significantly affected by general economic and
competitive conditions, changes in market interest rates, government policies
and actions of regulatory authorities. Our loan portfolio has historically been
concentrated in commercial real estate and multifamily mortgage loans, which
represented 99.8% of the total loan portfolio at March 31, 2005. The properties
underlying our mortgages are also concentrated in New York State (69%) and the
State of Florida (21%). Many of the New York properties are located in New York
City and are subject to rent control and rent stabilization laws, which limit
the ability of the property owners to increase rents. Credit risk, which
represents the possibility of us not recovering amounts due from our borrowers,
is significantly impacted by local economic conditions in the areas the
properties are located, as well as our underwriting standards. Economic
conditions affect the market value of the underlying collateral as well as the
levels of occupancy of income-producing properties. Additionally, terrorist
acts, such as those that occurred on September 11, 2001, armed conflicts, such
as the war on terrorism, and natural disasters, such as hurricanes, may have an
adverse impact on economic conditions. See "Risk Factors."

CRITICAL ACCOUNTING POLICIES

The preparation of our audited consolidated financial statements and the
information included in Management's Discussion and Analysis is governed by
policies that are based on accounting principles generally accepted in the
United States, referred to in this prospectus as GAAP, and general practices
within the banking industry. The financial information contained in our
financial statements is, to a significant extent, financial information that is
based on measures of the financial effects of transactions and events that have
already occurred. A variety of factors could affect the ultimate value that is
obtained either when earning income, recognizing an expense, recovering an asset
or relieving a liability. In addition, GAAP itself may change from one
previously acceptable method to another method. Although the economics of our
transactions would be the same, the timing of events that would impact our
transactions could change. Among the more significant policies are those that
govern accounting for loans and allowance for loan losses. These policies are
discussed in Note 1 to our "Notes to Consolidated Financial Statements" included
in this prospectus.

An accounting policy is deemed to be "critical" if it is important to a
company's results of operations and financial condition, and requires
significant judgment and estimates on the part of management in its application.
The preparation of financial statements and related disclosures in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect certain amounts reported in the financial
statements and related disclosures. Actual results could differ from these
estimates and assumptions. We believe that the estimates and assumptions used
in connection with the amounts reported in our financial statements and related
disclosures are reasonable and made in good faith.

We believe that currently our only significant critical accounting policy
relates to the determination of our allowance for loan losses. The allowance for
loan losses reflects management's estimated losses that may result from defaults
in our loan portfolio. The allowance for loan losses is established through a
provision charged to operations. Loans are charged against the allowance when
management believes that the collectability of the principal is unlikely.
Subsequent recoveries are added to the allowance. The adequacy of the allowance
is evaluated monthly or more frequently when necessary with consideration given
to: the nature and size of the loan portfolio; overall portfolio quality; loan
concentrations; specific problem loans and commitments and estimates of fair
value thereof; historical chargeoffs and recoveries; adverse situations which
may affect the borrowers' ability to repay; and management's perception of the
current and anticipated economic conditions in our lending areas. For
calculation purposes, the allowance for loan losses is comprised of an
unallocated portion (which is derived from an estimated loss factor currently
ranging from 0.30% to 1.35% multiplied by the principal amount of loans rated
acceptable and higher percentages for loans that are assigned a credit grade of
special mention or lower) and, from time to time, an allocated (or specific)
portion on certain loans (particularly for loans that have been identified as
being impaired as discussed below). Although management believes it uses the
best information available to make determinations with respect to the allowance
for loan losses, future adjustments may be necessary if economic conditions, or
other factors, differ from those previously assumed in the determination of the
level of the allowance.

In addition, SFAS No. 114 specifies the manner in which the portion of the
allowance for loan losses related to impaired loans is computed. A loan is
normally deemed impaired when, based upon current information and events, it is
probable that we will be unable to collect both full principal and interest due
according to the contractual terms of the loan agreement. Impairment for larger
balance loans such as commercial real estate and multifamily loans are measured
based on: the present value of expected future cash flows, discounted at the
loan's effective interest rate; or the observable market price of the loan; or
the estimated fair value of the loan's collateral, if payment of the principal
and interest is dependent upon the collateral. When the fair value of the
property is less than the recorded investment in the loan, this deficiency is
recognized as a valuation allowance within the overall allowance for loan losses
and a charge through the provision for loan losses. Our policy is to charge off
any portion of the recorded investment in the loan that exceeds the fair value
of the collateral.

We consider a variety of factors in determining whether a loan is impaired,
including (i) any notice from the borrower that the borrower will be unable to
repay all principal and interest amounts contractually due under the loan
agreement, (ii) any delinquency in the principal and/or interest payments other
than minimum delays or shortfalls in payments, and (iii) other information known
by management that would indicate the full repayment of principal and interest
is not probable. In evaluating loans for impairment, management generally
considers delinquencies of 60 days or less to be minimum delays, and accordingly
does not consider such delinquent loans to be impaired in the absence of other
indications. Impaired loans normally consist of loans on nonaccrual status.
Generally, all loans are evaluated for impairment on a loan-by-loan basis.

Finally, our regulators, as an integral part of their examination process,
periodically review the allowance for loan losses. Accordingly, we may be
required to take certain chargeoffs and/or recognize additions to the allowance
based on the regulators' judgment concerning information available to them
during their examination.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2005 AND DECEMBER 31, 2004

Overview
- --------

Our total assets at March 31, 2005 increased to $1.4 billion, from $1.3
billion at December 31, 2004. Our total liabilities at March 31, 2005 increased
to $1.3 billion, from $1.2 billion at December 31, 2004 and stockholders' equity
increased to $93.4 million at March 31, 2005, from $90.1 million at December 31,
2004. Book value per common share increased to $14.88 per share at March 31,
2005, from $14.37 at December 31, 2004.

Selected balance sheet information as of March 31, 2005 follows:

Intervest Intervest Intervest Inter-
Holding National Mortgage Securities Company
($ in thousands) Company Bank Corp. Corp. Amounts(1) Consolidated
- ---------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents $ 5,657 $ 28,804 $ 26,500 $ 468 $ (12,082) $ 49,347
Security investments - 259,846 - - - 259,846
Loans receivable, net of deferred fees 13,975 992,770 88,416 - - 1,095,161
Allowance for loan losses (85) (11,722) (332) - - (12,139)
Investment in consolidated subsidiaries 138,067 - - - (138,067) -
All other assets 5,601 25,205 4,871 14 (467) 35,224
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $163,215 $1,294,903 $ 119,455 $ 482 $ (150,616) $ 1,427,439
- ---------------------------------------------------------------------------------------------------------------------------
Deposits $ - $1,135,770 $ - $ - $ (12,113) $ 1,123,657
Borrowed funds and related interest payable 69,779 15,242 92,974 - - 177,995
All other liabilities 60 30,456 2,328 3 (436) 32,411
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 69,839 1,181,468 95,302 3 (12,549) 1,334,063
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 93,376 113,435 24,153 479 (138,067) 93,376
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $163,215 $1,294,903 $ 119,455 $ 482 $ (150,616) $ 1,427,439
- ---------------------------------------------------------------------------------------------------------------------------

(1) All significant intercompany balances and transactions have been eliminated
in consolidation. Such amounts arise largely from intercompany deposit
accounts and investments.

A comparison of selected balance sheet information as of March 31, 2005 and
December 31, 2004 follows:

At March 31, 2005 At December 31, 2004
------------------------- -------------------------
Carrying % of Carrying % of
($ in thousands) Value Total Assets Value Total Assets
- ---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents $ 49,347 3.4% $ 24,599 1.9%
Security investments 259,846 18.2 253,980 19.3
Loans receivable, net of deferred fees and loan loss allowance 1,083,022 75.9 1,004,290 76.3
All other assets 35,224 2.5 33,882 2.5
- ---------------------------------------------------------------------------------------------------------------------
Total assets $1,427,439 100.0% $1,316,751 100.0%
- ---------------------------------------------------------------------------------------------------------------------
Deposits $1,123,657 78.7% $ 993,872 75.5%
Borrowed funds and related interest payable 177,995 12.5 202,682 15.4
All other liabilities 32,411 2.3 30,103 2.3
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 1,334,063 93.5 1,226,657 93.2
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity 93,376 6.5 90,094 6.8
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,427,439 100.0% $1,316,751 100.0%
- ---------------------------------------------------------------------------------------------------------------------

Cash and Cash Equivalents
- -------------------------

Our cash and cash equivalents increased to $49.3 million at March 31, 2005,
from $24.6 million at December 31, 2004. 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. On April 1, 2005, $14.1 million was used for the
payment of principal and interest due on Intervest Mortgage Corporation's
debentures that matured on April 1, 2005 and $1.1 million was used for normal
quarterly interest payments due on Intervest Mortgage Corporation's other
outstanding debentures.

Security Investments
- --------------------

Securities for which we have the intent and ability to hold to maturity are
classified as held to maturity and carried at amortized cost. Such securities
increased to $254.8 million at March 31, 2005, from $248.9 million at December
31, 2004. The increase was due to new purchases exceeding maturities and early
calls during the quarter ended March 31, 2005. We continue to invest in
short-term (up to 5 years) U.S. government agency debt obligations to emphasize
liquidity and to maintain the bank's loan-to-deposit ratio at approximately 80%.
The investment portfolio at March 31, 2005 had a weighted-average remaining
maturity of 1.3 years and a weighted-average yield of 2.53%, compared to 1.4
years and 2.33%, respectively, at December 31, 2004. At March 31, 2005 and
December 31 2004, the portfolio's estimated fair value was $251.8 million and
$247.2 million, respectively.

The bank's total investment in the Federal Reserve Bank and the Federal
Home Loan Bank of New York stock was unchanged and amounted to $5.1 million at
March 31, 2005 and December 31, 2004.

Loans Receivable, Net of Deferred Fees and Allowance for Loan Losses
- --------------------------------------------------------------------

Loans receivable, net of deferred fees and the allowance for loan losses,
increased to $1.1 billion at March 31, 2005 from $1.0 billion at December 31,
2004. The growth in loans receivable reflected new originations of commercial
real estate mortgage loans, multifamily mortgage loans and land loans, partially
offset by principal repayments. New loan originations totaled $151.4 million in
the quarter ended March 31, 2005 compared to $162.7 million in the quarter ended
March 31, 2004.

At March 31, 2005 and December 31, 2004, $4.6 million of loans were on a
nonaccrual status. These loans were considered impaired under the criteria of
SFAS No.114, but no valuation allowance has been established because we believe
that the estimated fair value of the underlying properties exceeded our
recorded investment. At March 31, 2005 and December 31, 2004, there were no
other impaired loans or loans 90 days past due and still accruing interest. In
April 2005, a nonaccrual loan with a principal balance of $3.9 million was paid
in full and the bank recovered all amounts due to it thereunder.

At March 31, 2005, the allowance for loan losses amounted to $12.1 million,
compared to $11.1 million at December 31, 2004. The allowance represented 1.11%
of total loans (net of deferred fees) outstanding at March 31, 2005 and 1.09% at
December 31, 2004. The increase in the allowance was due to a provision for loan
losses aggregating $1.0 million during the quarter ended March 31, 2005
resulting largely from loan growth, which reflected an increase in loans
receivable of $79.9 million during the quarter.

All Other Assets
- ----------------

The following table sets forth the composition of the caption "All other
assets":

At March 31, At December 31,
------------- ----------------
($ in thousands) 2005 2004
- ---------------------------------------------------------------------------

Accrued interest receivable $ 7,098 $ 6,699
Loans fee receivable 8,732 8,208
Premises and equipment, net 6,610 6,636
Deferred income tax asset 5,547 5,095
Deferred debenture offering costs, net 4,664 4,929
Investment in unconsolidated subsidiaries 1,856 1,856
All other assets 717 459
- ---------------------------------------------------------------------------
$ 35,224 $ 33,882
- ---------------------------------------------------------------------------

Accrued interest receivable fluctuates based on the amount of loans,
investments and other interest-earning assets outstanding and the timing of
interest payments received. The increase was due to the growth in all of these
assets.

Loan fees receivable are fees due to us 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 as a yield
adjustment. The increase was due to an increase in mortgage loan originations.

Premises and equipment remained relatively unchanged as net additions of
$0.1 million during the quarter were offset by normal depreciation and
amortization.

The deferred income tax asset relates primarily to the unrealized tax
benefit on our allowance for loan losses. The allowance has been expensed for
financial statement purposes, but it is currently not deductible for income tax
purposes until the loans are charged off. The increase in the deferred tax asset
is a function of the increase in the allowance for loan losses during the
quarter ended March 31, 2005.

Deferred debenture offering costs consist primarily of underwriters'
commissions and are amortized over the terms of the debentures. The decrease in
costs was due to normal amortization during the quarter ended March 31, 2005.

The investment in unconsolidated subsidiaries consists of our $0.5 million
common stock investment in each of its unconsolidated subsidiaries, Intervest
Statutory Trust I, II, III and IV.

Deposits
- --------

Deposits increased to $1.1 billion at March 31, 2005, from $993.9 million
at December 31, 2004. The increase reflected an increase in certificate of
deposit accounts of $143.6 million, partially offset by a decrease in checking,
savings and money market accounts aggregating $13.8 million. At March 31, 2005,
certificate of deposit accounts totaled $888.3 million and checking, savings and
money market accounts aggregated $235.3 million. The same categories of deposit
accounts totaled $744.8 million and $249.1 million, respectively, at December
31, 2004. Certificate of deposit accounts represented 79% of total deposits at
March 31, 2005 and 75% at December 31, 2004.

Borrowed Funds and Related Interest Payable
- -------------------------------------------

At March 31, 2005, borrowed funds and related interest payable decreased to
$178.0 million, from $202.7 million at December 31, 2004. The decrease primarily
reflected a $21.0 million reduction in short-term borrowings from the Federal
Home Loan Bank of New York, referred to in this prospectus as the FHLBNY, by the
bank and the payment of principal and interest totaling $4.5 million of our
mortgage lending subsidiary's debentures that matured on January 1, 2005.

All Other Liabilities
- ---------------------

The table below sets forth the composition of the caption "All other
liabilities":

At March 31, At December 31,
------------- ----------------
($ in thousands) 2005 2004
- ----------------------------------------------------------------------

Mortgage escrow funds payable $ 19,914 $ 14,533
Official checks outstanding 6,578 12,061
Accrued interest payable on deposits 2,131 1,718
All other 3,788 1,791
- ----------------------------------------------------------------------
$ 32,411 $ 30,103
- ----------------------------------------------------------------------

Mortgage escrow funds payable represent advance payments made by borrowers
for taxes and insurance that are remitted to third parties. The increase
reflected the growth in the loan portfolio. Official checks outstanding varies
and fluctuates based on banking activity. Accrued interest payable on deposits
fluctuates based on total deposits and timing of interest payments. The increase
reflected the growth in deposits. All other is comprised mainly of accrued
expenses, income taxes payable (which fluctuates based on our earnings,
effective tax rate and timing of tax payments) and fees received on loan
commitments that have not yet been funded. The increase reflected a higher level
of income taxes payable.

Stockholders' Equity
- --------------------

Stockholders' equity increased to $93.4 million at March 31, 2005 from $90.1
million at December 31, 2004 as follows:

($ in thousands) Amount Shares
- --------------------------------------------------------------------------------------

Stockholders' equity at December 31, 2004 $90,094 6,271,433
Net earnings for the period 3,248 -
Convertible debentures converted at election of debenture holders 34 2,410
- --------------------------------------------------------------------------------------
Stockholders' equity at March 31, 2005 $93,376 6,273,843
- --------------------------------------------------------------------------------------

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2004 AND DECEMBER 31, 2003

Overview
- --------

Our total assets at December 31, 2004 increased to $1.3 billion, from
$911.5 million at December 31, 2003. Total liabilities at December 31, 2004
increased to $1.2 billion, from $836.1 million at December 31, 2003, and
stockholders' equity increased to $90.1 million at December 31, 2004, from $75.4
million at December 31, 2003. Book value per common share increased to $14.37
per share at December 31, 2004, from $12.59 at December 31, 2003.

Selected balance sheet information as of December 31, 2004 follows:

Intervest Intervest Intervest Inter-
Holding National Mortgage Securities Company
($ in thousands) Company Bank Corp. Corp. Amts(1) Consolidated
- --------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents $ 4,862 $ 15,836 $ 17,151 $ 476 $ (13,726) $ 24,599
Security investments - 253,980 - - - 253,980
Loans receivable, net of deferred fees 14,078 900,798 100,520 - - 1,015,396
Allowance for loan losses (85) (10,689) (332) - - (11,106)
Investment in consolidated subsidiaries 135,351 - - - (135,351) -
All other assets 5,316 23,584 5,112 8 (138) 33,882
- --------------------------------------------------------------------------------------------------------------------------
Total assets $159,522 $1,183,509 $ 122,451 $ 484 $(149,215) $ 1,316,751
- --------------------------------------------------------------------------------------------------------------------------
Deposits $ - $1,007,862 $ - $ - $ (13,990) $ 993,872
Borrowed funds and related interest payable 69,350 36,263 97,069 - - 202,682
All other liabilities 78 28,041 1,855 3 126 30,103
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 69,428 1,072,166 98,924 3 (13,864) 1,226,657
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 90,094 111,343 23,527 481 (135,351) 90,094
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $159,522 $1,183,509 $ 122,451 $ 484 $(149,215) $ 1,316,751
- --------------------------------------------------------------------------------------------------------------------------

(1) All significant intercompany balances and transactions are eliminated in
consolidation. Such amounts arise largely from intercompany deposit accounts and
investments in subsidiaries.

A comparison of our consolidated balance sheet as of December 31, 2004 and 2003
follows:

At December 31, 2004 At December 31, 2003
------------------------- -------------------------
Carrying % of Carrying % of
($ in thousands) Value Total Assets Value Total Assets
- ---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents $ 24,599 1.9% $ 64,128 7.0%
Security investments 253,980 19.3 155,898 17.1
Loans receivable, net of deferred fees and loan loss allowance 1,004,290 76.3 664,545 72.9
All other assets 33,882 2.5 26,952 3.0
- ---------------------------------------------------------------------------------------------------------------------
Total assets $1,316,751 100.0% $ 911,523 100.0%
- ---------------------------------------------------------------------------------------------------------------------
Deposits $ 993,872 75.5% $ 675,513 74.1%
Borrowed funds and related interest payable 202,682 15.4 140,383 15.4
All other liabilities 30,103 2.3 20,242 2.2
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 1,226,657 93.2 836,138 91.7
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity 90,094 6.8 75,385 8.3
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,316,751 100.0% $ 911,523 100.0%
- ---------------------------------------------------------------------------------------------------------------------

Cash and Cash Equivalents
- -------------------------

Our cash and cash equivalents decreased to $24.6 million at December 31, 2004,
from $64.1 million at December 31, 2003, primarily due to a lower level of
overnight federal fund investments. The decrease reflected the deployment of a
portion of those funds into loans and securities. Cash and cash equivalents
include federal funds sold and interest-bearing and noninterest-bearing cash
balances with banks, and other short-term investments that have original
maturities of three months or less. The 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.

Security Investments
- --------------------

We invest in securities after satisfying our liquidity objectives and
lending commitments. We have historically only purchased debt securities that
are issued by the U.S. government or one of its agencies. Our investment policy
is designed to provide and maintain liquidity, without incurring undue interest
and

credit risk. As a result, our security investments have lower yields than our
loan portfolio. To manage interest rate risk, we normally purchase securities
that have adjustable rates or securities with fixed rates that have short to
intermediate maturity terms. We do not engage in trading or hedging activities.
We continue to invest in short-term (up to 5 years) U.S. government agency debt
obligations to emphasize liquidity and to target the bank's loan-to-deposit
ratio at approximately 80%.

Securities that are held for indefinite periods of time which our
management intends to use as part of our 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. There
were no securities classified as available for sale at December 31, 2004 or
2003.

Securities for which we have the intent and ability to hold to maturity are
classified as held to maturity and carried at amortized cost. Such securities
totaled $248.9 million at December 31, 2004, compared to $152.8 million at
December 31, 2003. The increase was due to new purchases exceeding maturities
and calls of securities during the year. At December 31, 2004, the portfolio
consisted of short-term debt obligations of the FHLB, Federal Farm Credit Bank,
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
with a weighted-average yield of 2.33% and a weighted-average remaining maturity
of 1.4 years, compared to 1.75% and 1.1 years, respectively, at December 31,
2003. The securities are fixed rate or have predetermined scheduled rate
increases, and some have call features that allow the issuer to call the
security before its stated maturity without penalty. At December 31, 2004 and
2003, the portfolio's estimated fair value was $247.2 million and $153.0
million, respectively.

In order for the bank to be a member of the FRB and the FHLB, the bank
maintains an investment in their capital stock. The investments in the FRB and
FHLB totaled $2.5 million and $2.6 million, respectively, at December 31, 2004.
The FRB stock currently pays a dividend of 6%, while the FHLB stock dividend
fluctuates. The most recent FHLB stock dividend, paid on April 29, 2005, was
4.7%. The total investment, which amounted to $5.1 million at December 31, 2004,
compared to $3.1 million at December 31, 2003, fluctuates based on the bank's
capital level for the FRB and the bank's loans and borrowings from the FHLB.

Loans Receivable, Net of Deferred Fees and Allowance for Loan Losses
- --------------------------------------------------------------------

Loans receivable, net of deferred fees and the allowance for loan losses,
increased to $1.0 billion at December 31, 2004, from $664.5 million at December
31, 2003. The growth reflected new originations of commercial real estate and
multifamily mortgage loans, partially offset by principal repayments.

Substantially all of our loan portfolio at December 31, 2004 was comprised
of 504 loans with aggregate principal balances totaling $1.0 billion, which were
secured by commercial and multifamily real estate, including rental and
cooperative apartment buildings, office buildings, mix-used properties, shopping
centers, industrial properties and vacant land. At December 31, 2004, these
loans had an average principal size of $2.0 million. The portfolio had 40 loans
with outstanding principal balances of $5.0 million or more which aggregated
$302.3 million, with the largest loan amounting to $14.9 million.

The following table sets forth information concerning our loan portfolio:

At December 31, 2004 At December 31, 2003
---------------------------- ---------------------------
# of % of # of % of
($ in thousands) Loans Amount Total Loans Amount Total
- -------------------------------------------------------------------------------------------------

Commercial real estate loans 244 $ 601,512 58.6% 184 $ 344,071 50.7%
Residential multifamily loans 249 403,613 39.3 210 310,650 45.8
Land development and other land loans 11 19,198 1.9 6 20,526 3.0
Residential 1-4 family loans 4 984 0.1 26 1,628 0.2
Commercial loans 23 1,215 0.1 28 1,662 0.2
Consumer loans 12 221 - 16 319 0.1
- -------------------------------------------------------------------------------------------------
Total gross loans receivable 543 1,026,743 100.0% 470 678,856 100.0%
Deferred loan fees (11,347) (7,731)
- -------------------------------------------------------------------------------------------------
Loans, net of deferred fees 1,015,396 671,125
Allowance for loan losses (11,106) (6,580)
- -------------------------------------------------------------------------------------------------
Loans receivable, net $1,004,290 $ 664,545
- -------------------------------------------------------------------------------------------------

The following table sets forth the scheduled contractual principal repayments of
the loan portfolio:

At December 31,
---------------------
($ in thousands) 2004(1) 2003
- -------------------------------------------------

Within one year $ 227,889 $133,137
Over one to five years (2) 645,050 430,783
Over five years(2) 153,804 114,936
- -------------------------------------------------
$1,026,743 $678,856
- -------------------------------------------------

(1) As indicated in the preceding table, 98% of the loans in this table
represented commercial real estate and multifamily loans at December 31,
2004.

(2) At December 31, 2004, $485.7 million of loans with adjustable rates and
$313.1 million of loans with fixed rates were due after one year.

The following table sets forth the activity in the loan portfolio:

For the Year Ended December 31,
-----------------------------------------
($ in thousands) 2004 2003 2002
- ---------------------------------------------------------------------------------------

Loans receivable, net, at beginning of year $ 664,545 $ 485,301 $ 365,146
Loans originated 626,252 378,630 233,689
Principal repayments (278,365) (195,076) (110,661)
Recoveries - - (107)
Chargeoffs - - 150
Increase in deferred loan fees (3,616) (2,341) (1,642)
Provision for loan losses (4,526) (1,969) (1,274)
- ---------------------------------------------------------------------------------------
Loans receivable, net, at end of year $1,004,290 $ 664,545 $ 485,301
- ---------------------------------------------------------------------------------------

At December 31, 2004, $4.6 million of loans were on a nonaccrual status,
compared to $8.5 million at December 31, 2003. These loans were considered
impaired under the criteria of Statement of Accounting Financial Standards,
referred to in this prospectus as SFAS No.114, but no valuation allowance was
maintained at any time since we believe that the estimated fair value of the
underlying properties exceeded our recorded investment. At December 31, 2004 and
2003, there were no other impaired loans or loans 90 days past due and still
accruing interest.

Allowance for Loan Losses
- -------------------------

The allowance for loan losses increased to $11.1 million at December 31,
2004, from $6.6 million at December 31, 2003 and represented 1.09% of total
loans (net of deferred fees) outstanding at December 31, 2004, compared to 0.98%
at December 31, 2003. The increase in the allowance was due to provisions
totaling $4.5 million resulting from loan growth and a decrease in the credit
grade of two loans during the

year ended December 31, 2004. At December 31, 2004 and 2003, the allowance was
almost entirely allocated to commercial real estate loans, multifamily loans and
land loans.

The following table sets forth information with respect to the allowance for
loan losses:

For the Year Ended December 31,
-----------------------------------------
($ in thousands) 2004 2003 2002
- ---------------------------------------------------------------------------------------------------

Allowance at beginning of year $ 6,580 $ 4,611 $ 3,380
Provision charged to operations 4,526 1,969 1,274
Chargeoffs - - (150)
Recoveries - - 107
- ---------------------------------------------------------------------------------------------------
Allowance at end of year $ 11,106 $ 6,580 $ 4,611
- ---------------------------------------------------------------------------------------------------
Ratio of allowance to total loans, net of deferred fees 1.09% 0.98% 0.94%
Total loans, net of deferred fees at year end $1,015,396 $ 671,125 $ 489,912
Average loans outstanding during the year $ 867,724 $ 585,556 $ 439,241
- ---------------------------------------------------------------------------------------------------

All Other Assets
- ----------------

The following table sets forth the composition of the caption "All other
assets":

At December 31,
--------------------
($ in thousands) 2004 2003
- ----------------------------------------------------------------

Accrued interest receivable $ 6,699 $ 4,995
Loan fees receivable 8,208 5,622
Premises and equipment, net 6,636 5,752
Deferred income tax asset 5,095 2,960
Deferred debenture offering costs, net 4,929 4,023
Investment in unconsolidated subsidiaries 1,856 928
All other assets 459 2,672
- ----------------------------------------------------------------
$ 33,882 $ 26,952
- ----------------------------------------------------------------

Premises and equipment, which is detailed in note 5 to our consolidated
financial statements for the year ended December 31, 2004, increased due to net
additions of $1.5 million (almost all of which were leasehold improvements
associated with new office space), partially offset by depreciation and
amortization.

The deferred debenture offering costs consist primarily of underwriters'
commissions and are amortized over the terms of the debentures. The increase was
due to a total of $2.2 million of costs associated with issuing new debentures,
partially offset by normal amortization during the year ended December 31, 2004.

The investment in unconsolidated subsidiaries at December 31, 2004,
consists of our $0.5 million common stock investment in each of our
unconsolidated subsidiaries, Intervest Statutory Trust I, II, III and IV.

The decrease in all other assets was due to the receipt of $2.5 million in
January 2004 from the exercise of Class A common stock warrants at December 31,
2003, the amount of which was recorded as a receivable at December 31, 2003.

Deposits
- --------

Deposits increased to $993.9 million at December 31, 2004, from $675.5
million at December 31, 2003, reflecting increases in money market and
certificate of deposit accounts of $38.3 million and $277.6 million,
respectively. For further information on our deposits, including the
distribution of deposit accounts by type, certificates of deposit by maturity,
maturities of certificates of deposit in denominations of $100,000 or more, and
net deposit flows, see "Business - Sources of Funds."

Borrowed Funds and Related Interest Payable
- -------------------------------------------

The following table summarizes borrowed funds and related interest payable:

At December 31, 2004 At December 31, 2003
------------------------ ------------------------
Accrued Accrued
($ in thousands) Principal Interest Principal Interest
- ------------------------------------------------------------------------------------------------------

Debentures - Intervest Mortgage Corporation $ 88,850 $ 8,219 $ 87,350 $ 12,052
Debentures - Holding Company 5,580 1,749 7,340 2,361
Debentures - Capital Securities - Holding Company 61,856 165 30,928 97
FHLB advances - Intervest National Bank 36,000 21 - -
Mortgage note payable - Intervest National Bank 242 - 255 -
- ------------------------------------------------------------------------------------------------------
$ 192,528 $ 10,154 $ 125,873 $ 14,510
- ------------------------------------------------------------------------------------------------------

Our subsidiary, Intervest Mortgage Corporation, had $88.9 million of
debentures outstanding at December 31, 2004, compared to $87.4 million at
December 31, 2003. The slight increase was due to the issuance of Series
11/28/03 and 6/7/04 debentures totaling $21.5 million (with fixed rates ranging
from 6.25% to 6.75% and maturing at various times through January 1, 2012),
largely offset by the repayments of Series 5/12/95 6.00% (prime based)
debentures due April 1, 2004 ($9.0 million of principal and $2.8 million of
accrued interest), Series 6/28/99 8.50% debentures due July 1, 2004 ($2.0
million of principal and $1.0 million of accrued interest), and Series 10/19/95
6.25% (prime based) debentures due October 1, 2004 ($9.0 million of principal
and $2.2 million of accrued interest). Proceeds from the issuance of debentures,
after underwriters' commissions and other issuance costs, amounted to $19.9
million.

We had a total of $67.4 million of other debentures outstanding at December
31, 2004, compared to $38.3 million outstanding at December 31, 2003. The
increase was due to the issuance of a total of $30.9 million of our debentures
to our wholly owned unconsolidated subsidiaries, Intervest Statutory Trust III
and IV, partially offset by the conversion of our convertible debentures. In
2004, $2.9 million of convertible debentures ($1.8 million of principal and $1.1
million of related accrued interest) were converted into shares of Class A
common stock at the election of the debenture holders.

The bank from time to time may borrow funds on an overnight or short-term
basis to manage its liquidity needs. At December 31, 2004, the bank had $36.0
million of FHLB borrowings outstanding, of which $19.0 million were due in
January 2005 and $17.0 million were due in February 2005. These borrowings were
repaid through deposit inflows. The bank also has a mortgage note payable
outstanding amounting to $0.2 million at December 31, 2004, compared to $0.3
million at December 31, 2003. The note was issued in connection with the bank's
purchase of property located across from its Court Street branch office in 2002.

Accrued interest payable on borrowed funds amounted to $10.2 million at
December 31, 2004, compared to $14.5 million at December 31, 2003. The decrease
was due to repayments of interest as well as the decrease resulting from the
conversion of debentures, partially offset by new accruals. A large portion of
the accrued interest payable is due and payable at the maturity of various
debentures. For a further discussion of borrowed funds, see notes 7 and 9 to our
consolidated financial statements for the year ended December 31, 2004 included
in this prospectus.

All Other Liabilities
- ---------------------

The table below sets forth the composition of "All other liabilities":

At December 31,
-------------------
($ in thousands) 2004 2003
- ----------------------------------------------------------

Mortgage escrow funds payable $ 14,533 $ 10,540
Official checks outstanding 12,061 6,122
Accrued interest payable on deposits 1,718 1,080
Income taxes payable 81 807
All other liabilities 1,710 1,693
- ----------------------------------------------------------
$ 30,103 $ 20,242
- ----------------------------------------------------------

Mortgage escrow funds payable represent advance payments made by borrowers
for taxes and insurance that are remitted to third parties. The increase
reflected the growth in the loan portfolio. Official checks outstanding varies
and fluctuates based on banking activity. Accrued interest payable on deposits
fluctuates based on total deposits and timing of interest payments. Income taxes
payable fluctuates based on our earnings, effective tax rate and timing of tax
payments. All other is comprised mainly of accrued expenses, as well as fees
received on loan commitments that have not yet been funded.

Stockholders' Equity
- --------------------

Stockholders' equity increased to $90.1 million at December 31, 2004 from $75.4
million at December 31, 2003 as follows:

($ in thousands) Amount Shares Per Share
- --------------------------------------------------------------------------------------------------

Stockholders' equity at December 31, 2003 $75,385 5,988,377 $ 12.59
Net earnings for the year 11,453 - -
Class A common stock warrants exercised 426 42,510 10.01
Convertible debentures converted at election of debenture holders 2,821 240,546 11.73
Compensation expense on warrants held by the Chairman(1) 9 - -
- --------------------------------------------------------------------------------------------------
Stockholders' equity at December 31, 2004 $90,094 6,271,433 $ 14.37
- --------------------------------------------------------------------------------------------------

(1) For a discussion of compensation related to warrants to purchase
shares of our Class A or Class B common stock, see note 14 to our consolidated
financial statements included in this prospectus.

COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 2005 AND
2004

Overview
- --------

Consolidated net earnings for the quarter ended March 31, 2005 increased by
19% to $3.2 million, or $0.48 per diluted share, from $2.7 million, or $0.41 per
diluted share, reported in the quarter ended March 31, 2004. The results for the
quarter ended March 31, 2005 represented the highest quarterly earnings ever
reported by us. The improvement in quarterly earnings was due to the continued
growth in our lending activities.

The increase in consolidated earnings of $0.5 million was due a $1.9
million increase in net interest and dividend income and a $44,000 decrease in
the provision for loan losses, partially offset by a $0.6 million decrease in
noninterest income, a $0.5 million increase in noninterest expenses and a $0.4
million increase in income tax expense.

Our efficiency ratio, which is a measure of our ability to control expenses
as a percentage of our revenues, continues to be favorable at 26% for the
quarter ended March 31, 2005. Our return on average assets and equity was 0.94%
and 14.25%, respectively, for the quarter ended March 31, 2005, compared to
1.15% and 14.32%, respectively, for the quarter ended March 31, 2004.

The following table sets forth selected information regarding results of
operations for the quarter ended March 31, 2005:

Intervest Intervest Intervest Inter-
National Mortgage Securities Holding Company
($ in thousands) Bank Corp. Corp. Company Amounts(2) Consolidated
- ------------------------------------------------------------------------------------------------------------------------

Interest and dividend income $ 18,048 $ 2,392 $ 2 $ 229 $ (103) $ 20,568
Interest expense 9,236 1,897 - 1,253 (103) 12,283
----------------------------------------------------------------------------
Net interest and dividend income 8,812 495 2 (1,024) - 8,285
Provision for loan losses 1,033 - - - - 1,033
Noninterest income 769 1,402 - 113 (1,406) 878
Noninterest expenses 2,920 732 6 122 (1,406) 2,374
----------------------------------------------------------------------------
Earnings before taxes 5,628 1,165 (4) (1,033) - 5,756
Provision for income taxes 2,447 539 (2) (476) - 2,508
- ------------------------------------------------------------------------------------------------------------------------
Net earnings $ 3,181 $ 626 $ (2) $ (557) $ - $ 3,248
- ------------------------------------------------------------------------------------------------------------------------
Intercompany dividends(1) (1,089) - - 1,089 - -
- ------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends $ 2,092 $ 626 $ (2) 532 $ - $ 3,248
- ------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
for the same period of 2004 $ 1,907 $ 513 $ 10 $ 305 $ - $ 2,735
- ------------------------------------------------------------------------------------------------------------------------

(1) Dividends paid to the holding company provide funds for the debt service on
its trust preferred securities, which is included in the holding company's
interest expense.

(2) All significant intercompany balances and transactions are eliminated in
consolidation. Such amounts arise from intercompany deposit accounts and
management and service agreements.

Net Interest and Dividend Income
- --------------------------------

Net interest and dividend income is our primary source of earnings and is
influenced primarily by the amount, distribution and repricing characteristics
of our interest-earning assets and interest-bearing liabilities as well as by
the relative levels and movements of interest rates.

Net interest and dividend income increased to $8.3 million for the quarter
ended March 31, 2005, from $6.4 million in the quarter ended March 31, 2004. The
improvement was attributable to a $430.5 million increase in average
interest-earning assets resulting from continued growth in loans of $346.1
million and a higher level of security and short-term investments aggregating
$84.4 million. The growth in average assets was funded by $379.2 million of
additional interest-bearing deposits, $28.3 million of additional borrowed funds
and a $14.7 million increase in stockholders' equity (resulting from earnings
and issuance of shares upon the exercise of Class A common stock warrants and
conversion of convertible debentures).

Our net interest margin decreased to 2.47% for the quarter ended March 31,
2005, from 2.75% for the quarter ended March 31, 2004. The lower margin was due
to a decrease in the yield on our interest-earning assets and a slight increase
in our cost of funds.

The yield on interest-earning assets decreased 18 basis points to 6.12% for
the quarter ended March 31, 2005 due to lower rates on new mortgage loans
originated and the effect of loan prepayments during the year ended December 31,
2004, partially offset by higher yields earned on security and other short-term
investments. The cost of funds increased by 7 basis points to 3.98% for the
quarter ended March 31, 2005 due to higher rates paid on deposit accounts,
largely offset by a decrease in the cost of borrowed funds resulting primarily
from the addition of debentures with lower rates than existing ones.

Interest income that was not recorded on nonaccrual loans under their
contractual terms amounted to $0.1 million for the quarter ended March 31, 2005,
compared to $28,000 for the quarter ended March 31, 2004. The average balance of
nonaccrual loans for the quarter ended March 31, 2005 and 2004 was $4.6 million
and $5.3 million, respectively.

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 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, 2005 March 31, 2004
-------------------------------- ------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate(2) Balance Inc./Exp. Rate(2)
- -------------------------------------------------------------------------------------------------------------------

ASSETS
Interest-earning assets:
Loans (1) $1,071,862 $ 18,811 7.12% $725,785 $ 13,792 7.64%
Securities 258,037 1,563 2.46 165,475 705 1.71
Other interest-earning assets 32,433 194 2.43 40,555 96 0.95
- -------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 1,362,332 $ 20,568 6.12% 931,815 $ 14,593 6.30%
- -------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 15,153 16,436
- -------------------------------------------------------------------------------------------------------------------
Total assets $1,377,485 $948,251
- -------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest checking deposits $ 13,441 $ 52 1.57% $ 10,366 $ 40 1.55%
Savings deposits 25,268 113 1.81 30,993 137 1.78
Money market deposits 194,375 1,059 2.21 167,766 742 1.78
Certificates of deposit 844,031 7,815 3.76 488,813 4,393 3.61
- -------------------------------------------------------------------------------------------------------------------
Total deposit accounts 1,077,115 9,039 3.40 697,938 5,312 3.06
- -------------------------------------------------------------------------------------------------------------------
Fed funds purchased and FHLB advances 13,911 90 2.62 - - -
Debentures and related interest payable 99,197 2,060 8.42 113,159 2,233 7.94
Debentures - capital securities 61,856 1,090 7.15 33,477 666 8.00
Mortgage note payable 241 4 7.00 253 4 7.04
- -------------------------------------------------------------------------------------------------------------------
Total borrowed funds 175,205 3,244 7.51 146,889 2,903 7.95
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,252,320 $ 12,283 3.98% 844,827 $ 8,215 3.91%
- -------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 6,186 6,179
Noninterest-bearing liabilities 27,820 20,822
Stockholders' equity 91,159 76,423
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,377,485 $948,251
- -------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread $ 8,285 2.14% $ 6,378 2.39%
- -------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 110,012 2.47% $ 86,988 2.75%
- -------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.09 1.10
- -------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
Return on average assets (2) 0.94% 1.15%
Return on average equity (2) 14.25% 14.32%
Noninterest expense to average assets (2) 0.69% 0.81%
Efficiency ratio (3) 26% 24%
Average stockholders' equity to average assets 6.62% 8.06%
- -------------------------------------------------------------------------------------------------------------------

(1) Includes nonaccrual loans.
(2) Annualized.
(3) Defined as noninterest expenses (excluding the provision for loan losses)
as a percentage of net interest and dividend income plus noninterest
income.

The following table provides information regarding changes in interest and
dividend income and interest expense. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to (1) changes in rate (change in rate multiplied by prior volume),
(2) changes in volume (change in volume multiplied by prior rate) and (3)
changes in rate-volume (change in rate multiplied by change in volume).

For the Quarter Ended March 31, 2005 vs. 2004
----------------------------------------------------------
Increase (Decrease) Due To Change In:
----------------------------------------------------------
($ in thousands) Rate Volume Rate/Volume Total
- -------------------------------------------------------------------------------------------------------

Interest-earning assets:
Loans $ (944) $ 6,610 $ (647) $ 5,019
Securities 310 396 152 858
Other interest-earning assets 150 (19) (33) 98
- -------------------------------------------------------------------------------------------------------
Total interest-earning assets (484) 6,987 (528) 5,975
- -------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking deposits 1 12 (1) 12
Savings deposits 2 (25) (1) (24)
Money market deposits 180 118 19 317
Certificates of deposit 183 3,206 33 3,422
- -------------------------------------------------------------------------------------------------------
Total deposit accounts 366 3,311 50 3,727
- -------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances - - 90 90
Debentures and accrued interest payable 136 (277) (32) (173)
Debentures - capital securities (71) 555 (60) 424
Mortgage note payable - - - -
- -------------------------------------------------------------------------------------------------------
Total borrowed funds 65 278 (2) 341
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 431 3,589 48 4,068
- -------------------------------------------------------------------------------------------------------
Net change in interest and dividend income $ (915) $ 3,398 $ (576) $ 1,907
- -------------------------------------------------------------------------------------------------------

Provision for Loan Losses
- -------------------------

The provision for loan losses decreased by $44,000 to $1.0 million for the
quarter ended March 31, 2005, from $1.1 million for the quarter ended March 31,
2004. The lower provision was a function of a decrease in the amount of loan
growth, which amounted to $79.9 million for the quarter ended March 31, 2005
compared to $92.9 million for the quarter ended March 31, 2004.

Noninterest Income
- ------------------

Noninterest income decreased by $0.6 million to $0.9 million for the
quarter ended March 31, 2005, from $1.5 million for the quarter ended March 31,
2004. The lower income was primarily due to a $0.5 million decrease in income
from the prepayment of mortgage loans. Income from the prepayment of mortgage
loans consists largely of the recognition of unearned fees associated with such
loans at the time of payoff and the receipt of prepayment penalties and interest
in certain cases. Our income from loan prepayments, which fluctuates and cannot
be predicted, tends to increase during periods of declining interest rates and
tends to decrease during periods of increasing interest rates.

Noninterest Expenses
- --------------------

Noninterest expenses increased by $0.5 million to $2.4 million for the
quarter ended March 31, 2005, from $1.9 million for the quarter ended March 31,
2004. The increase was primarily due to increases in salary and employee
benefits expense of $0.3 million; professional fees expense of $36,000;
advertising expense of $34,000; and director and committee fees expense of
$34,000.

Salaries and employee benefits expense increased primarily due to $0.2
million from salary increases, a higher cost of employee benefits and additional
staff, and a $0.1 million increase in bonus payments to certain of our
executives. These items were partially offset by a $28,000 decrease in
commission expense. We had 67 full-time employees at March 31, 2005 compared to
62 at March 31, 2004.

Professional fees expense increased $18,000 due to the growth in assets as
well as additional accruals of $18,000 for consulting expense associated with
the ongoing compliance associated with the Sarbanes-Oxley Act of 2002.

Advertising expense increased due to additional advertising to support loan
growth.

Director and committee fees increased due to higher fees paid to directors
for each board and committee meeting attended. The fees were increased in
October 2004.

Provision for Income Taxes
- --------------------------

The provision for income taxes increased by $0.4 million to $2.5 million
for the quarter ended March 31, 2005, from $2.1 million for the quarter ended
March 31, 2004, due to an increase in pre-tax income. Our effective tax rate
(inclusive of state and local taxes) amounted to 43.6% for the quarter ended
March 31, 2005, compared to 43.5% for the quarter ended March 31, 2004.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004 AND
2003

Overview
- --------

Consolidated net earnings for the year ended December 31, 2004 increased by
$2.3 million, or 26%, to $11.5 million, or $1.71 per diluted share, from $9.1
million, or $1.53 per diluted share, reported in 2003. The $2.3 million increase
in earnings was due to growth in net interest and dividend income of $6.0
million and an increase of $1.8 million in noninterest income. These revenue
increases were partially offset by a $2.6 million increase in the provision for
loan losses, a $1.9 million increase in income tax expense and a $1.0 million
increase in noninterest expenses. Our return on average assets and equity was
1.02% and 14.14%, respectively, in 2004, compared to 1.19% and 15.34% in 2003,
and our efficiency ratio (which is a measure of our ability to control expenses
as a percentage of our revenues) stood at 25% for 2004.

Selected information regarding results of operations by entity for 2004 follows:

Intervest Intervest Intervest Inter-
National Mortgage Securities Holding Company
($ in thousands) Bank Corp. Corp. Company Amts(2) Consolidated
- ----------------------------------------------------------------------------------------------------------------------

Interest and dividend income $ 55,770 $ 9,896 $ 6 $ 1,087 $ (210) $ 66,549
Interest expense 26,597 7,945 - 4,351 (210) 38,683
--------------------------------------------------------------------------
Net interest and dividend income 29,173 1,951 6 (3,264) - 27,866
Provision for loan losses 4,379 140 - 7 - 4,526
Noninterest income 4,272 4,915 119 389 (4,555) 5,140
Noninterest expenses 9,935 2,347 84 440 (4,555) 8,251
--------------------------------------------------------------------------
Earnings before taxes 19,131 4,379 41 (3,322) - 20,229
Provision for income taxes 8,266 2,025 19 (1,534) - 8,776
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 10,865 $ 2,354 $ 22 $ (1,788) $ - $ 11,453
- ----------------------------------------------------------------------------------------------------------------------
Intercompany dividends(1) (3,429) - - 3,429 $ - -
- ----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends $ 7,436 $ 2,354 $ 22 $ 1,641 $ 11,453
- ----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany
dividends for 2003 $ 6,972 $ 1,759 $ (6) $ 395 $ - $ 9,120
- ----------------------------------------------------------------------------------------------------------------------

(1) Dividends to the holding company provide funds for the debt service on its
trust preferred securities, which is included in the holding company's
interest expense.
(2) All significant intercompany balances and transactions are eliminated in
consolidation. Such amounts arise from intercompany deposit accounts and
management and service agreements.

Net Interest and Dividend Income
- --------------------------------

Net interest and dividend income increased by $6.0 million to $27.9 million
in 2004, from $21.9 million in 2003. The improvement was attributable to a
$350.7 million increase in average interest-earning assets resulting from
continued growth in loans of $282.2 million and a higher level of security and
short-term investments which totaled $68.6 million. The growth in average assets
was funded by $287.4 million of new deposits, $34.4 million of additional
borrowed funds and a $21.6 million increase in stockholders' equity (resulting
from earnings and the issuance of shares upon the exercise of Class A common
stock warrants and conversion of convertible debentures).

Our net interest margin decreased to 2.52% in 2004 from 2.90% in 2003. The
decrease was due to our yield on interest-earning assets decreasing at a faster
pace than our cost of funds. In a low interest rate environment, the yield on
interest-earning assets decreased 67 basis points to 6.02% in 2004 due to lower
rates on new mortgage loans originated and prepayments of higher-yielding loans.
The cost of funds decreased 33 basis points to 3.84% in 2004 due to lower rates
paid on deposit accounts and the addition of new debentures with lower rates
than existing ones, partially offset by rate increases on floating-rate
debentures. These floating-rate debentures are indexed to the JPMorgan Chase
Bank prime rate, which increased by a total of 125 basis points from December
31, 2003.

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 2004 and 2003. The yields and rates shown
are based on a computation of income/expense (including any related fee income
or expense) for each year divided by average interest-earning
assets/interest-bearing liabilities during each year. Average balances are
derived 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 year.

For the Year Ended December 31,
----------------------------------------------------------------
2004 2003
-------------------------------- ------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- -------------------------------------------------------------------------------------------------------------------

Assets
Interest-earning assets:
Loans (1) $ 867,724 $ 61,928 7.14% $585,556 $ 47,223 8.06%
Securities 207,557 4,259 2.05 143,766 2,965 2.06
Other interest-earning assets 29,766 362 1.22 24,983 276 1.10
- -------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 1,105,047 $ 66,549 6.02% 754,305 $ 50,464 6.69%
- -------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 15,505 13,686
- -------------------------------------------------------------------------------------------------------------------
Total assets $1,120,552 $767,991
- -------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest checking deposits $ 12,052 $ 187 1.55% $ 11,120 $ 182 1.64%
Savings deposits 30,803 550 1.79 31,782 601 1.89
Money market deposits 191,495 3,583 1.87 146,509 2,763 1.89
Certificates of deposit 612,735 22,010 3.59 370,235 14,891 4.02
- -------------------------------------------------------------------------------------------------------------------
Total deposit accounts 847,085 26,330 3.11 559,646 18,437 3.29
- -------------------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances 1,914 40 2.09 - - -
Debentures and accrued interest payable 109,697 8,801 8.02 105,347 8,316 7.89
Debentures - capital securities 47,533 3,495 7.35 19,356 1,793 9.26
Mortgage note payable 249 17 7.00 261 18 7.00
- -------------------------------------------------------------------------------------------------------------------
Total borrowed funds 159,393 12,353 7.75 124,964 10,127 8.10
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,006,478 $ 38,683 3.84% 684,610 $ 28,564 4.17%
- -------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 6,599 5,666
Noninterest-bearing liabilities 26,471 18,264
Stockholders' equity 81,004 59,451
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,120,552 $767,991
- -------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread $ 27,866 2.18% $ 21,900 2.52%
- -------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 98,569 2.52% $ 69,695 2.90%
- -------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.10 1.10
- -------------------------------------------------------------------------------------------------------------------
Other Ratios:
Return on average assets 1.02% 1.19%
Return on average equity 14.14% 15.34%
Noninterest expense to average assets 0.74% 0.95%
Efficiency ratio (2) 25.00% 28.78%
Average stockholders' equity to average assets 7.23% 7.74%
- -------------------------------------------------------------------------------------------------------------------

(1) Includes nonaccrual loans.
(2) Defined as noninterest expenses (excluding the provision for loan losses) as
a percentage of net interest and dividend income plus noninterest income.

For the Year Ended December 31, 2004 vs. 2003
-----------------------------------------------------------
Increase (Decrease) Due To Change In:
-----------------------------------------------------------
($ in thousands) Rate Volume Rate/Volume Total
- --------------------------------------------------------------------------------------------------------

Interest-earning assets:
Loans $ (5,387) $ 22,743 $ (2,651) $ 14,705
Securities (14) 1,314 (6) 1,294
Other interest-earning assets 30 53 3 86
- --------------------------------------------------------------------------------------------------------
Total interest-earning assets (5,371) 24,110 (2,654) 16,085
- --------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking deposits (10) 15 - 5
Savings deposits (32) (19) - (51)
Money market deposits (29) 850 (1) 820
Certificates of deposit (1,592) 9,749 (1,038) 7,119
- --------------------------------------------------------------------------------------------------------
Total deposit accounts (1,663) 10,595 (1,039) 7,893
- --------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances - - 40 40
Debentures and accrued interest payable 137 343 5 485
Debentures - capital securities (370) 2,609 (537) 1,702
Mortgage note payable - (1) - (1)
- --------------------------------------------------------------------------------------------------------
Total borrowed funds (233) 2,951 (492) 2,226
- --------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities (1,896) 13,546 (1,531) 10,119
- --------------------------------------------------------------------------------------------------------
Net change in interest and dividend income (3,475) $ 10,564 $ (1,123) $ 5,966
- --------------------------------------------------------------------------------------------------------

Provision for Loan Losses
- -------------------------

The provision for loan losses increased to $4.5 million in 2004 from $2.0
million in 2003. The higher provision was a function of loan growth, which
amounted to $347.9 million in 2004 compared to $183.6 million in 2003, as well
as a decrease in the credit grade of two loans during the third quarter of 2004.

Noninterest Income
- ------------------

Noninterest income increased by $1.8 million to $5.1 million in 2004 and is
summarized as follows:

For the Year Ended December 31,
------------------------------------
($ in thousands) 2004 2003
- ----------------------------------------------------------------------------------------------

Customer service fees $ 252 $ 187
Income from mortgage lending activities (1) 1,221 824
Income from the early repayment of mortgage loans (2) 3,546 2,317
Commissions and fees 119 38
Gain (loss) from early call of investment securities (3) 2 (51)
All other noninterest income - 6
- ----------------------------------------------------------------------------------------------
$ 5,140 $ 3,321
- ----------------------------------------------------------------------------------------------

(1) Consists mostly of fees from expired loan commitments and loan servicing,
maintenance and inspections charges.
(2) Consists of the recognition of any unearned fees at the time of payoff and
the receipt of prepayment income in certain cases.
(3) Consists of the recognition of any unamortized premium or discount at time
of call.

The increase of $1.8 million was primarily due to higher income of $1.2
million from the prepayment of mortgage loans, a $0.3 million increase in loan
service charges and $76,000 of additional fee income from loan commitments that
expired and were not funded.

Noninterest Expenses
- --------------------

Noninterest expenses increased by $1.0 million to $8.3 million in 2004 and is
summarized as follows:

For the Year Ended December 31,
-----------------------------------
($ in thousands) 2004 2003
- -----------------------------------------------------------------------

Salaries and employee benefits $ 4,046 $ 3,655
Occupancy and equipment, net 1,659 1,270
Data processing 428 533
Professional fees and services 411 364
Stationery, printing and supplies 180 152
Postage and delivery 111 101
FDIC and general insurance 264 225
Director and committee fees 397 229
Advertising and promotion 110 35
All other expenses 645 695
- -----------------------------------------------------------------------
$ 8,251 $ 7,259
- -----------------------------------------------------------------------

Salaries and employee benefits expense increased due to $0.6 million in
salary increases, a higher cost of employee benefits and additional staff; $0.4
million in bonus payments to certain executives in connection with the sale of
capital securities and leasing of new space; and $41,000 of additional
commission expense. The increases were partially offset by a $0.4 million
decrease in compensation from common stock warrants and a $0.2 million decrease
in compensation resulting from a higher level of SFAS No. 91 direct fee income
(due to more loan originations). We had 64 full-time employees at December 31,
2004 compared to 61 at December 31, 2003. See note 14 to our consolidated
financial statements included in this prospectus for additional information on
common stock warrants.

Occupancy and equipment expense increased due to the leasing of larger
office space. In May, the holding company and all of our wholly owned
subsidiaries, Intervest National Bank (New York office), Intervest Mortgage
Corporation and Intervest Securities Corporation, completed a move to newly
constructed offices on the entire fourth floor at One Rockefeller Plaza in New
York City. Intervest Mortgage Corporation's lease obligation of approximately
$22,000 per month on its former space at 10 Rockefeller Plaza expired in
September 2004.

Professional fees and services, stationery, printing and supplies, postage
and delivery, and FDIC and general insurance expenses increased largely due to
our growth.

Data processing expense decreased due to lower fees incurred by the bank
despite an increase in its assets. The bank renegotiated its data processing
contract during late 2003 by extending the expiration date to 2010 and reducing
the processing fee to a fixed amount until its assets reach $1.1 billion.
Thereafter, the fee becomes variable and is calculated based on total assets.
Previously, the data processing fee was entirely variable and a function of the
bank's total assets.

Director and committee fees increased due to higher fees paid to directors
for each board and committee meeting attended. The fees were increased in June
2003 and October 2004.

Advertising expense increased due to additional advertising to support loan
and deposit growth.

All other expenses were lower due to a decrease of $49,000 in losses from
transactional accounts and a decrease in foreclosed real estate expenses of
$64,000, partial offset by increased travel, telephone and franchise tax
expense.

Provision for Income Taxes
- --------------------------

The provision for income taxes increased by $1.9 million to $8.8 million in
2004, from $6.9 million in 2003, due to higher pre-tax income. Our effective tax
rate (inclusive of state and local taxes) amounted to 43.4% in 2004, compared to
43.0% in 2003.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND
2002

Overview
- --------

Consolidated net earnings for 2003 increased 32% to $9.1 million, or $1.53
per fully diluted share, from $6.9 million, or $1.37 per fully diluted share,
for 2002. The growth in earnings was due to a $4.7 million increase in net
interest and dividend income and a $1.1 million increase in noninterest income,
partially offset by a $2.2 million increase in the provision for income taxes, a
$0.8 million increase in noninterest expenses, and a $0.7 million increase in
the provision for loan losses.

The diluted per share computation for 2003 included a higher number of
common shares outstanding resulting from the exercise of common stock warrants,
conversion of debentures and a higher stock price. Return on average assets and
equity was 1.19% and 15.34%, respectively, for 2003, compared to 1.13% and
15.56% for 2002.

Selected information regarding results of operations by entity for 2003 follows:

Intervest Intervest Intervest Inter-
National Mortgage Securities Holding Company
($ in thousands) Bank Corp Corp(2) Company Amts(3) Consolidated
- ----------------------------------------------------------------------------------------------------------------------

Interest and dividend income $ 40,232 $ 9,269 $ 3 $ 1,125 $ (165) $ 50,464
Interest expense 18,620 7,140 - 3,024 (220) 28,564
--------------------------------------------------------------------------
Net interest and dividend income 21,612 2,129 3 (1,899) 55 21,900
Provision for loan losses 1,846 91 - 32 - 1,969
Noninterest income 2,687 2,799 38 346 (2,549) 3,321
Noninterest expenses 7,372 1,582 51 748 (2,494) 7,259
--------------------------------------------------------------------------
Earnings before taxes 15,081 3,255 (10) (2,333) - 15,993
Provision for income taxes 6,414 1,496 (4) (1,033) - 6,873
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 8,667 $ 1,759 $ (6) $ (1,300) $ - $ 9,120
- ----------------------------------------------------------------------------------------------------------------------
Intercompany dividends(1) (1,695) - - 1,695 - -
- ----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends $ 6,972 $ 1,759 $ (6) $ 395 $ - $ 9,120
- ----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany
dividends for 2002 $ 4,959 $ 1,566 $ - $ 381 $ - $ 6,906
- ----------------------------------------------------------------------------------------------------------------------

(1) Dividends to the holding company provide funds for the debt service on its
trust preferred securities, which is included in the holding company's
interest expense.
(2) Results are from date of acquisition, June 2, 2003 through December 31,
2003.
(3) All significant intercompany balances and transactions are eliminated in
consolidation. Such amounts arise from intercompany deposit accounts and
management and service agreements.

Net Interest and Dividend Income
- --------------------------------

Net interest and dividend income increased by $4.7 million to $21.9 million
in 2003, from $17.2 million in 2002. The increase was attributable to growth of
$158.2 million in average interest-earning assets and a slightly higher net
interest margin. The growth in assets is reflected in new mortgage loans of
$146.3 million and new security and short-term investments aggregating $11.9
million. The growth in assets was

funded primarily by $118.6 million of interest-bearing deposits, $18.8 million
of additional borrowed funds and a $15.1 million increase in stockholders'
equity (resulting from earnings and the issuance of shares upon the exercise of
common stock warrants and conversion of convertible debentures).

Our net interest margin increased to 2.90% in 2003 from 2.88% in 2002. The
increase was due to our cost of funds decreasing at a faster pace than our yield
on interest-earning assets in a declining interest rate environment. The yield
on interest-earning assets decreased 60 basis points to 6.69% in 2003 primarily
due to lower rates on new mortgage loans originated, prepayments of
higher-yielding loans and lower yields earned on security and other short-term
investments (including the effect of early calls of securities with the
resulting proceeds being invested in lower yielding securities). The cost of
funds decreased 64 basis points to 4.17% in 2003 largely due to lower rates paid
on deposit accounts and $41.5 million of floating-rate debentures. The
debentures are indexed to the JPMorgan Chase Bank prime rate, which decreased by
a total of 25 basis points from December 31, 2002.

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 2003 and 2002. The yields and rates shown
are based on a computation of income/expense (including any related fee income
or expense) for each year divided by average interest-earning
assets/interest-bearing liabilities during each year. Average balances are
derived 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 year.

For the Year Ended December 31,
--------------------------------------------------------------
2003 2002
------------------------------ ------------------------------
Average Interest Yield/ Average Interest Yield/
($ in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- -----------------------------------------------------------------------------------------------------------------

Assets
Interest-earning assets:
Loans (1) $585,556 $ 47,223 8.06% $439,241 $ 39,273 8.94%
Securities 143,766 2,965 2.06 142,840 3,964 2.78
Other interest-earning assets 24,983 276 1.10 14,001 242 1.73
- -----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 754,305 $ 50,464 6.69% 596,082 $ 43,479 7.29%
- -----------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 13,686 14,586
- -----------------------------------------------------------------------------------------------------------------
Total assets $767,991 $610,668
- -----------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest checking deposits $ 11,120 $ 182 1.64% $ 9,521 $ 221 2.32%
Savings deposits 31,782 601 1.89 29,221 762 2.61
Money market deposits 146,509 2,763 1.89 119,582 3,082 2.58
Certificates of deposit 370,235 14,891 4.02 282,720 13,304 4.71
- -----------------------------------------------------------------------------------------------------------------
Total deposit accounts 559,646 18,437 3.29 441,044 17,369 3.94
- -----------------------------------------------------------------------------------------------------------------
Federal funds purchased - - - 116 2 1.87
Debentures and accrued interest payable 105,347 8,316 7.89 90,777 7,440 8.20
Debentures - capital securities 19,356 1,793 9.26 15,000 1,497 9.98
Mortgage note payable 261 18 7.00 239 17 7.00
- -----------------------------------------------------------------------------------------------------------------
Total borrowed funds 124,964 10,127 8.10 106,132 8,956 8.44
- -----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 684,610 $ 28,564 4.17% 547,176 $ 26,325 4.81%
- -----------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits 5,666 5,277
Noninterest-bearing liabilities 18,264 13,831
Stockholders' equity 59,451 44,384
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $767,991 $610,668
- -----------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread $ 21,900 2.52% $ 17,154 2.48%
- -----------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 69,695 2.90% $ 48,906 2.88%
- -----------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.10 1.09
- -----------------------------------------------------------------------------------------------------------------
Other Ratios:
Return on average assets 1.19% 1.13%
Return on average equity 15.34% 15.56%
Noninterest expense to average assets 0.95% 1.06%
Efficiency ratio(2) 28.78% 33.45%
Average stockholders' equity to average assets 7.74% 7.27%
- -----------------------------------------------------------------------------------------------------------------

(1) Includes nonaccrual loans.
(2) Defined as noninterest expenses (excluding the provision for loan losses)
as a percentage of net interest and dividend income plus noninterest
income.

For the Year Ended December 31, 2003 vs. 2002
----------------------------------------------------------
Increase (Decrease) Due To Change In:
----------------------------------------------------------
($ in thousands) Rate Volume Rate/Volume Total
- -------------------------------------------------------------------------------------------------------

Interest-earning assets:
Loans $ (3,850) $ 13,082 $ (1,282) $ 7,950
Securities (1,018) 26 (7) (999)
Other interest-earning assets (87) 190 (69) 34
- -------------------------------------------------------------------------------------------------------
Total interest-earning assets (4,955) 13,298 (1,358) 6,985
- -------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking deposits (65) 37 (11) (39)
Savings deposits (209) 67 (19) (161)
Money market deposits (827) 694 (186) (319)
Certificates of deposit (1,933) 4,118 (598) 1,587
- -------------------------------------------------------------------------------------------------------
Total deposit accounts (3,034) 4,916 (814) 1,068
- -------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances (2) (2) 2 (2)
Debentures and accrued interest payable (274) 1,194 (44) 876
Debentures - capital securities (108) 435 (31) 296
Mortgage note payable - 2 (1) 1
- -------------------------------------------------------------------------------------------------------
Total borrowed funds (384) 1,629 (74) 1,171
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities (3,418) 6,545 (888) 2,239
- -------------------------------------------------------------------------------------------------------
Net change in interest and dividend income $ (1,537) $ 6,753 $ (470) $ 4,746
- -------------------------------------------------------------------------------------------------------

Provision for Loan Losses
- -------------------------

The provision for loan losses increased to $2.0 million in 2003 from $1.3
million in 2002. The higher provision was a function of loan growth ($183.6
million in 2003 compared to $123.0 million in 2002).

Noninterest Income
- ------------------

Noninterest income increased by $1.1 million to $3.3 million in 2003 and is
summarized as follows:

For the Year Ended December 31,
------------------------------------
($ in thousands) 2003 2002
- ----------------------------------------------------------------------------------------------

Customer service fees $ 187 $ 171
Income from mortgage lending activities (1) 824 485
Income from the early repayment of mortgage loans (2) 2,317 1,435
Gain from the sale of securities available for sale - 120
Commissions and fees 38 -
(Loss) gain from early call of investment securities (3) (51) 7
All other noninterest income 6 -
- ----------------------------------------------------------------------------------------------
$ 3,321 $ 2,218
- ----------------------------------------------------------------------------------------------

The increase of $1.1 million was due to higher income of $0.9 million from the
prepayment of mortgage loans and increases in fees earned on expired loan
commitments and loan service charge income aggregating $0.3 million. These items
were partially offset by a gain of $0.1 million from the sale of securities in
2002.

Noninterest Expenses
- --------------------

Noninterest expenses increased by $0.8 million to $7.3 million in 2003 and is
summarized as follows:

For the Year Ended December 31,
-----------------------------------
($ in thousands) 2003 2002
- -----------------------------------------------------------------------

Salaries and employee benefits $ 3,655 $ 3,016
Occupancy and equipment, net 1,270 1,318
Data processing 533 564
Professional fees and services 364 350
Stationery, printing and supplies 152 141
Postage and delivery 101 93
FDIC and general insurance 225 179
Director and committee fees 229 95
Advertising and promotion 35 69
All other expenses 695 654
- -----------------------------------------------------------------------
$ 7,259 $ 6,479
- -----------------------------------------------------------------------

Salaries and employee benefits expense increased by $0.6 million due to
additional staff (61 employees at December 31, 2003 compared to 56 at December
31, 2002), salary increases and a higher cost of employee benefits; and $0.3
million in expenses related to the issuance of common stock warrants. These
items were partially offset by a $0.1 million increase in SFAS No. 91 direct fee
income (due to more loan originations as well as a higher amount recognized per
loan) and bonus payments totaling $0.2 million to our Chairman in 2002 that did
not recur in 2003. See note 14 to our consolidated financial statements included
in this prospectus for additional information on warrants to purchase our Class
A and Class B common stock.

Occupancy and equipment expense was lower due to a $40,000 increase in
sublease rental income from the bank's Florida branches as well as $50,000 in
depreciation expense recorded in 2002 in connection with the disposal of various
equipment by the bank that did not recur in 2003. These items were partially
offset by rent expense incurred by Intervest Mortgage Corporation from leasing
additional space in 2003.

Data processing expense decreased slightly to lower fees incurred by the
bank despite an increase in its assets. The bank renegotiated its data
processing contract during late 2003 by extending the expiration date to 2010
and reducing the processing fee to a fixed amount until its assets reach $1.1
billion. Thereafter the fee becomes variable and is calculated based on total
assets. Previously, the data processing fee was entirely variable and a function
of the bank's total assets.

Professional fees and services, stationery, printing and supplies, and
postage and delivery expenses increased largely due to our growth.

FDIC and general insurance expense increased due to higher FDIC premiums
(due to deposit growth) and general insurance premiums (due to rate increases).

Director and committee fees increased due to higher fees paid to directors
for each board and committee meeting attended. The fees were increased in June
2003.

Advertising and promotion expense decreased due to less advertising for
loans and deposits.

All other expenses were higher primarily due to an increase in operational
losses of $23,000 (resulting from growth in transactional deposit accounts).

Provision for Income Taxes
- --------------------------

The provision for income taxes increased by $2.2 million to $6.9 million in
2003, from $4.7 million in 2002, due to higher pre-tax income. Our effective tax
rate (inclusive of state and local taxes) amounted to 43.0% in 2003, compared to
40.6% in 2002. The higher rate is due to a larger portion of consolidated
taxable income being generated from New York operations, which has a higher
income tax rate than Florida.

OFF-BALANCE SHEET AND OTHER FINANCING ARRANGEMENTS

We are a party to financial instruments with off-balance sheet risk in the
normal course of our business to meet the financing needs of our customers. For
a further discussion of these financial instruments, see note 19 to our
consolidated financial statements included in this prospectus.

LIQUIDITY AND CAPITAL RESOURCES

We manage our liquidity position on a daily basis to assure that funds are
available to meet operations, loan and investment commitments, deposit
withdrawals and the repayment of borrowed funds. Our primary sources of funds
consist of: retail deposits obtained through the bank's branch offices and
through the mail; amortization, satisfactions and repayments of loans; the
maturities and calls of securities; issuance of debentures; borrowings from the
federal funds market, FHLB advances and cash provided by operating activities.
For additional information concerning our cash flows, see the consolidated
statements of cash flows included in this prospectus.

Total deposits were $1.1 billion and $993.9 million at March 31, 2005 and
December 31, 2004, respectively. The bank has relied heavily on time deposits as
a source of funds. Time deposits are the only deposit accounts that have stated
maturity dates and are generally considered to be rate sensitive. We need to pay
competitive rates to attract and retain time deposits.

The principal sources of funds for our mortgage lending subsidiary have
consisted of borrowings through the issuance of its subordinated debentures in
registered, best efforts offerings, mortgage repayments and cash flow generated
from its ongoing operations, including service fee income received by it from
the bank. As the bank's mortgage loan portfolio has grown, service fee income
has comprised an increasing percentage of our mortgage lending subsidiary's
income. Our mortgage lending subsidiary manages its liquidity position to assure
that sufficient funds are available to meet its operations, lending commitments
and the repayment of its debentures. Our mortgage lending subsidiary's growth is
dependent on its continuing ability to sell its debentures at rates which are
compatible with its asset-liability management policy and its ability to manage
interest rate "spread," which is the difference between yields earned on
interest-earning assets and the rates paid on interest-bearing liabilities. See
"--Asset and Liability Management." Our mortgage lending subsidiary's growth is
also dependent upon its ability to recover funds in an amount equal to its
projected return on its investment or sufficient to prevent a loss in the event
the mortgage lending subsidiary is required to foreclose on a property securing
one of its mortgage loans, which ability is dependent upon the value derived
from the sale of property underlying its mortgage loans. See "Risk Factors --If
the properties underlying many of our mortgage loans lose value, we may suffer
loan losses." The indentures underlying that subsidiary's debentures, moreover,
provide that the subsidiary may not declare or pay dividends to us if, at the
time of the proposed payment, or after giving effect thereto, an event of
default shall have occurred under the indenture. At March 31, 2005, $93.0 in
aggregate principal amount of our mortgage lending subsidiary's subordinated
debentures was outstanding. In April 2005, our mortgage lending subsidiary
issued $14.0 million principal amount of Series 3/21/05 subordinated debentures
and repaid $14.1 million principal amount and accrued interest of debentures
which matured on April 30, 2005, and in June 2005, our mortgage lending
subsidiary filed a Registration Statement on Form S-11 with respect to an
offering of up to $12.0 million in additional subordinated debentures. Detailed
information concerning the outstanding debentures of our mortgage lending
subsidiary, including the interest rates and maturity dates for each series can
be found in note 7 of the notes to our consolidated financial statements,
included in this prospectus.

In the past we have also relied, and we expect to continue to rely, upon
trust preferred securities as a source of funds. We have issued a total of $60.0
million of trust preferred securities issued by Intervest Statutory Trust I, II,
III and IV. The trust preferred securities were issued in November 2001,
September 2003, March 2004 and September 2004, respectively. Each trust
privately issued $15.0 million of trust preferred securities. Our trust
subsidiaries were formed with the sole purpose of issuing their trust preferred
securities, which qualify as regulatory capital. On March 1, 2005, the FRB
issued a final rule that retains trust preferred securities in Tier 1 capital of
bank holding companies, but with stricter quantitative limits and clearer
qualitative standards. The new rule provides for a transition period for bank
holding companies to meet the new, stricter limitations within regulatory
capital by allowing limits on restricted core capital elements to become fully
effective as of March 31, 2009. At March 31, 2005, approximately $31.1 million
of our $60.0 million in trust preferred securities qualified as Tier 1 capital,
and the remainder qualified as Tier 2 capital. We are required to make quarterly
or semi-annual payments of interest on the principal of those securities. These
payments are interest expense obligations and are required to be made before we
can consider the payment of any cash dividends on our Class A and Class B common
stock.

We believe that we can fund our contractual obligations included in the
table below from the aforementioned sources of funds. At December 31, 2004, the
bank had agreements with correspondent banks whereby it can borrow up to an
additional $16.0 million of federal funds on an unsecured basis. In addition, as
a member of the FHLB and the FRB, the bank can also borrow from these
institutions on a secured basis. At December 31, 2004, we had available
collateral to support borrowing of approximately $203.0 million.

CONTRACTUAL OBLIGATIONS

The table below summarizes our contractual obligations as of December 31, 2004.
There were no material changes to our contractual obligations in the quarter
ended March 31, 2005.

Payment due by period
------------------------------------------------
Less than 1 More than
($ in thousands) Total year 1-3 years 3-5 years 5 years
- ------------------------------------------------------------------------------------------------------------------

Subordinated debentures and mortgage note payable (1) $ 94,672 $ 29,116 $ 17,291 $ 25,635 $ 22,630
Subordinated debentures - capital securities 61,856 - - - 61,856
FHLB advances 36,000 36,000 - - -
Accrued interest payable on all borrowed funds 10,154 5,445 1,960 2,538 211
Deposits with no stated maturities 249,101 249,101 - - -
Deposits with stated maturities 744,771 269,553 254,189 204,100 16,929
Operating lease payments 8,243 907 1,763 1,734 3,839
Unfunded loan commitments (2) 159,697 154,085 5,612 - -
Available lines of credit (2) 789 789 - - -
Standby letters of credit (2) 750 750 - - -
- ------------------------------------------------------------------------------------------------------------------
$1,366,033 $ 745,746 $ 280,815 $ 234,007 $ 105,465
- ------------------------------------------------------------------------------------------------------------------

(1) See Note 7 to our consolidated financial statements included in this
prospectus for a more detailed description of these obligations by series.
Excludes the effect of the April 2005 issuance of $14.0 million principal
amount of Series 3/21/05 subordinated debentures and the repayment of $14.1
million principal amount and accrued interest of subordinated debentures
which matured on April 30, 2005.
(2) Since some of the commitments are expected to expire without being drawn
upon, the total commitment amount does not necessarily represent future
cash requirements.

REGULATORY CAPITAL

The bank is subject to various regulatory capital requirements. The FDIC
and other bank regulatory agencies use five capital categories ranging from well
capitalized to critically undercapitalized to determine various matters,
including prompt corrective action and each institution's FDIC deposit insurance
premiums. These categories involve quantitative measures of a bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classifications are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors. Failure to meet minimum capital requirements can result in
certain mandatory and possibly additional discretionary actions by the
regulators that, if undertaken, could have a direct material effect on our
consolidated financial statements.

The bank is required to maintain regulatory defined minimum Tier 1 leverage
and Tier 1 and total risk-based capital ratio levels of at least 4%, 4% and 8%,
respectively. At March 31, 2005, December 31, 2004 and 2003, management believes
the bank met its capital adequacy requirements and was a well-capitalized
institution as defined in the regulations, which require minimum Tier 1 leverage
and Tier 1 and total risk-based ratios of 5%, 6% and 10%, respectively.
Management is not aware of any conditions or events that would change the bank's
designation as a well-capitalized institution.

Information regarding the bank's regulatory capital and related ratios is
summarized as follows:

At March 31, At December 31,
-------------- ----------------------
($ in thousands) 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------

Tier 1 Capital: Stockholders' equity $ 113,435 $ 111,343 $ 73,907
Disallowed portion of deferred tax asset (5,116) (4,619) (2,508)
--------------------------------------
108,319 106,724 71,399
Tier 2 Capital: Allowable portion of allowance for loan losses 11,722 10,689 6,310
- ---------------------------------------------------------------------------------------------------------
Total risk-based capital $ 120,041 $ 117,413 $ 77,709
- ---------------------------------------------------------------------------------------------------------
Net risk-weighted assets $ 1,069,285 $ 971,823 $620,155
Average assets for regulatory purposes $ 1,250,181 $1,140,624 $739,234
- ---------------------------------------------------------------------------------------------------------
Tier 1 capital to average assets 8.66% 9.36% 9.66%
Tier 1 capital to risk-weighted assets 10.13% 10.98% 11.51%
Total capital to risk-weighted assets 11.23% 12.08% 12.53%
- ---------------------------------------------------------------------------------------------------------

The holding company, on a consolidated basis, is subject to minimum
regulatory capital requirements administered by the FRB. These guidelines
require a ratio of Tier 1 or Core Capital, as defined in the guidelines, to
total risk-weighted assets of at least 4% and a ratio of total capital to
risk-weighted assets of at least 8%. The guidelines also require a ratio of Tier
1 capital to adjusted total average assets of not less than 3%. At March 31,
2005, December 31, 2004 and 2003, management believes that the holding company
met its capital adequacy requirements.

Information regarding the holding company's regulatory capital and related
ratios is summarized below:

Tier 1 Capital: Stockholders' equity $ 93,376 $ 90,094 $ 75,385
Capital Securities limited to 25% of core capital 31,125 30,032 25,122
--------------------------------------
Total core capital elements 124,501 120,126 100,507
Disallowed portion of deferred tax asset (5,547) (5,095) (2,936)
- ------------------------------------------------------------------------------------------------------------
Total Tier 1 Capital 118,954 115,031 97,571
- ------------------------------------------------------------------------------------------------------------
Tier 2 Capital: Excess capital securities 28,875 29,968 4,878
Allowable portion of allowance for loan losses 12,139 11,106 6,580
- ------------------------------------------------------------------------------------------------------------
Total Tier 2 Capital $ 41,014 41,074 11,458
- ------------------------------------------------------------------------------------------------------------
Total risk-based capital 159,968 $ 156,105 $109,029
- ------------------------------------------------------------------------------------------------------------
Net risk-weighted assets $ 1,183,652 $1,096,711 $734,839
Average assets for regulatory purposes $ 1,571,938 $1,273,770 $862,873
- ------------------------------------------------------------------------------------------------------------
Tier 1 capital to average assets 8.67% 9.03% 11.31%
Tier 1 capital to risk-weighted assets 10.05% 10.49% 13.28%
Total capital to risk-weighted assets 13.51% 14.23% 14.84%
- ------------------------------------------------------------------------------------------------------------

On January 1, 2004, we adopted Financial Accounting Standards Board
Interpretation No. 46-R, referred to in this prospectus as FIN 46-R,
"Consolidation of Variable Interest Entities," which requires bank holding
companies that have used controlled business trusts to raise financing by
issuing trust preferred securities to deconsolidate their investments in those
trusts. For a further discussion of FIN 46-R and the regulatory implications,
see the section entitled "Recent Accounting and Regulatory Developments" in note
1 to our consolidated financial statements.

Our wholly-owned subsidiary, Intervest Securities Corporation, is subject
to the SEC's Uniform Net Capital Rules, which requires the maintenance of
minimum net capital of $5,000. At March 31, 2005, December 31, 2004 and 2003,
Intervest Securities Corporation's net capital was $479,000, $481,000 and
$459,000, respectively.

ASSET AND LIABILITY MANAGEMENT

Interest rate risk arises from differences in the repricing of assets and
liabilities within a given time period. We do not engage in trading or hedging
activities, nor do we invest in interest rate derivatives or enter into interest
rate swaps. The primary objective of our asset/liability management strategy is
to limit, within established guidelines, the adverse impact of changes in
interest rates on our net interest income and capital.

We use a "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 our interest rate sensitivity. An asset
or liability is normally considered to be interest-rate sensitive if it will
reprice or mature within one year or less. The interest-rate sensitivity gap is
the difference between interest-earning assets and interest-bearing liabilities
scheduled to mature or reprice within one-year. A gap is considered positive
when the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities. Conversely, a gap is considered negative when the
opposite is true.

In a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would tend to
increase net interest income. In a period of falling interest rates, a negative
gap would tend to increase net interest income, while a positive gap would tend
to adversely affect net interest income. If the repricing of our assets and
liabilities were equally flexible and moved concurrently, the impact of any
increase or decrease in interest rates on net interest income would be minimal.

A simple interest rate gap analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates for the following reasons. Income associated with interest-earning assets
and costs associated with interest-bearing liabilities may not be affected
uniformly by changes in interest rates. In addition, the magnitude and duration
of changes in interest rates may have a significant impact on net interest
income. For example, although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. Interest rates on certain types of assets and
liabilities fluctuate in advance of changes in general market interest rates,
while interest rates on other types may lag behind changes in market rates. In
addition, certain assets, such as adjustable-rate mortgage loans, may have
features generally referred to as "interest rate caps or collars," which limit
changes in interest rates on a short-term basis and over the life of the asset.
In the event of a change in interest rates, asset prepayment and early deposit
withdrawal levels also could deviate significantly from those assumed in
calculating the interest-rate gap. The ability of many borrowers to service
their debts also may decrease in the event of an interest-rate increase, and the
behavior of depositors may be different than those assumed in the gap analysis.

Our one-year positive interest rate sensitivity gap was $242.4 million, or
17.0% of total assets, at March 31, 2005, compared to $114.0 million, or 8.7% of
total assets, at December 31, 2004. The increase in the positive gap primarily
reflects an increase in loans that reprice or mature within one year funded by
time deposits with terms of more than one year. For purposes of computing the
gap, all deposits with no stated maturities are treated as readily accessible
accounts. However, if such deposits were treated differently, the one-year gap
would then change. The behavior of core depositors may not necessarily result in
the immediate withdrawal of funds in the event deposit rates offered by the bank
did not change as quickly and uniformly as changes in general market rates. For
example, if only 25% of deposits with no stated maturity were assumed to be
readily accessible, the one-year gap would have been a positive 28.9% at March
31, 2005, compared to a positive 22.5% at December 31, 2004.

Many of our floating-rate loans have a "floor," or minimum rate, that is
determined in relation to prevailing market rates on the date of origination.
This floor only adjusts upwards in the event of increases in the loan's interest
rate. This feature reduces the effect on interest income of a falling rate
environment because the interest rates on such loans do not reset downward.
Notwithstanding all of the above, there can be no assurances

that a sudden and substantial increase in interest rates may not adversely
impact our 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.

The table below summarizes interest-earning assets and interest-bearing
liabilities as of March 31, 2005, that are scheduled to mature or reprice within
the periods shown.

0-3 4-12 Over 1-4 Over 4
--------- --------- ---------- ---------
($ in thousands) Months Months Years Years Total
- ---------------------------------------------------------------------------------------------------

Loans (1) $331,027 $335,238 $ 291,007 $149,367 $1,106,639
Securities held to maturity (2) 39,620 94,147 119,876 1,111 254,754
Short-term investments 27,473 - - - 27,473
FRB and FHLB stock 2,628 - - 2,464 5,092
- ---------------------------------------------------------------------------------------------------
Total rate-sensitive assets $400,748 $429,385 $ 410,883 $152,942 $1,393,958
- ---------------------------------------------------------------------------------------------------
Deposit accounts (3):
Interest checking deposits $ 10,963 $ - $ - $ - $ 10,963
Savings deposits 23,313 - - - 23,313
Money market deposits 193,118 - - - 193,118
Certificates of deposit 77,391 233,801 390,526 186,626 888,344
- ---------------------------------------------------------------------------------------------------
Total deposits 304,785 233,801 390,526 186,626 1,115,738
- ---------------------------------------------------------------------------------------------------
FHLB advances 15,000 - - - 15,000
Debentures and mortgage note payable (1) 25,250 4,250 62,238 62,167 153,905
Accrued interest on all borrowed funds(1) 4,034 650 3,944 462 9,090
- ---------------------------------------------------------------------------------------------------
Total borrowed funds 44,284 4,900 66,182 62,629 177,995
- ---------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities $349,069 $238,701 $ 456,708 $249,255 $1,293,733
- ---------------------------------------------------------------------------------------------------
GAP (repricing differences) $ 51,679 $190,684 $ (45,825) $(96,313) $ 100,225
- ---------------------------------------------------------------------------------------------------
Cumulative GAP $ 51,679 $242,363 $ 196,538 $100,225 $ 100,225
- ---------------------------------------------------------------------------------------------------
Cumulative GAP to total assets 3.6% 17.0% 13.8% 7.0% 7.0%
- ---------------------------------------------------------------------------------------------------

Significant assumptions used in preparing the gap table are as follows:

(1) Floating-rate loans and debentures payable are included in the period in
which their interest rates are next scheduled to adjust rather than in the
period in which they mature. Fixed-rate loans and debentures payable are
scheduled, including repayments, according to their contractual maturities.
Deferred loan fees are excluded from this analysis.

(2) Securities are scheduled according to the earlier of their contractual
maturity or the date in which the interest rate is scheduled to increase. The
effects of possible prepayments that may result from the issuer's right to call
a security before its contractual maturity date are not considered.

(3) Interest checking, savings and money market deposits are regarded as ready
accessible withdrawable accounts; and certificates of deposit are scheduled
through their maturity dates.

RECENT ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR LOAN COMMITMENTS. In March 2004, the SEC issued Staff
Accounting Bulletin No. 105, "Application of Accounting Principles to Loan
Commitments", referred to in this prospectus as SAB 105. SAB 105 provides
recognition guidance for entities that issue loan commitments that are required
to be accounted for as derivative instruments. Currently, loan commitments that
we enter into would not be required to be accounted for as derivative
instruments under SAB 105.

IMPAIRMENT. Emerging Issues Task Force Issue No. 3-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments",
referred to in this prospectus as EITF 3-1, was issued and became effective
March 31, 2004. EITF 3-1 provides guidance for determining the meaning of
"other-than-temporarily impaired" and its application to certain debt and equity
securities within the scope of SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities," and investments accounted for under the cost
method. The guidance requires that investments which have declined in value due
to credit concerns or solely

due to changes in interest rates must be recorded as other-than-temporarily
impaired unless we can assert and demonstrate our intention to hold the security
for a period of time sufficient to allow for a recovery of fair value up to or
beyond the cost of the investment which might mean maturity. EITF 3-1 also
requires us to make disclosures assessing our ability and intent to hold
investments in instances in which an investor determines that an investment with
a fair value less than cost is not other-than-temporarily impaired. On September
30, 2004, the Financial Accounting Standards Board, referred to in this
prospectus as FASB, decided to delay the effective date for the measurement and
recognition guidance contained in EITF 3-1. This delay does not suspend the
requirement to recognize other-than-temporary impairments as required by
existing authoritative literature. The disclosure guidance in EITF 3-1 was not
delayed.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES. On January 1 2004, we adopted
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," as
revised in December 2003, referred to in this prospectus as FIN 46-R. FIN 46-R
changes the method of determining whether certain entities should be included in
our financial statements. An entity is subject to FIN 46-R and is called a
variable interest entity, referred to in this prospectus as a VIE, if it has (1)
equity that is insufficient to permit the entity to finance its activities
without additional subordinated financial support from other parties, or (2)
equity investors that cannot make significant decisions about the entity's
operations, or that do not absorb the expected losses or receive the expected
returns of the entity. A VIE is consolidated by its primary beneficiary, which
is the party involved with the VIE that has a majority of the expected losses or
a majority of the expected residual returns or both. FIN 46-R requires bank
holding companies that have used controlled business trusts to raise financing
by issuing trust preferred securities to deconsolidate their investments in
those trusts.

Our adoption of FIN 46-R resulted in the deconsolidation of Intervest
Statutory Trust I and II (both formed prior to FIN 46-R), which increased both
our total assets and our borrowed funds previously reported at December 31, 2003
by $928,000, but had no effect on our net income, stockholders' equity and
regulatory capital.

In response to FIN 46-R, the FRB on March 1, 2005 issued a final rule that
would retain trust preferred securities in the Tier 1 capital of bank holding
companies, referred to in this prospectus as BHCs, but with stricter
quantitative limits and clearer qualitative standards. The new rule provides a
transition period for BHCs to meet the new, stricter limitations within
regulatory capital by allowing the limits on restricted core capital elements to
become fully effective as of March 31, 2009.

Until March 31, 2009, BHCs generally must comply with the current Tier 1
capital limits. That is, BHCs generally should calculate their Tier 1 capital on
a basis that limits the aggregate amount of qualifying cumulative perpetual
preferred stock and qualifying trust preferred securities to 25% of the sum of
qualifying common stockholder's equity, qualifying noncumulative and cumulative
perpetual preferred stock (including related surplus), qualifying minority
interest in the equity accounts of consolidated subsidiaries, and qualifying
trust preferred securities. Amounts of qualifying cumulative perpetual preferred
stock and qualifying trust preferred securities in excess of this limit may be
included in Tier 2 capital.

Beginning March 31, 2009, qualifying cumulative perpetual preferred stock
and trust preferred securities, as well as certain types of minority interest,
are limited to 25% of the sum of core capital elements net of goodwill. The
holding company currently does not have any goodwill.

Beginning March 31, 2009, the excess amounts of restricted core capital
elements in the form of qualifying trust preferred securities included in Tier 2
capital are limited to 50% of Tier 1 capital (net of goodwill). Amounts in
excess of this limit will still be taken into account in the overall assessment
of an organization's funding and financial condition. The final rule also
provides that in the last five years before the underlying subordinated note
matures, the associated trust preferred securities must be treated as
limited-life preferred stock. Thus, in the last five years of the life of the
note, the outstanding amount of trust preferred securities will be excluded from
Tier 1 capital and included in Tier 2 capital, subject, together with
subordinated debt and other limited-life preferred stock, to a limit of 50% of
Tier 1 capital. During this period, the trust preferred securities will be
amortized out of Tier 2 capital by one-fifth of the original amount (less
redemptions) each year and excluded totally from Tier 2 capital during the last
year of life of the underlying note. As of March 31, 2005, assuming we

no longer included our trust preferred securities in Tier 1 Capital, we would
still exceed the well capitalized threshold under the regulatory framework for
prompt corrective action.

SHARE-BASED COMPENSATION. In December 2004, the FASB issued SFAS No. 123
(revised 2004), "Share-Based Payment," referred to in this prospectus as SFAS
No. 123-R. SFAS No. 123-R requires companies to recognize in the income
statement the grant-date fair value of stock options and other equity-based
compensation issued to employees and directors, but expresses no preference for
a type of valuation model. SFAS No. 123-R eliminates the intrinsic value-based
method that we currently use. On April 14, 2005 the SEC announced a deferral of
the effective date of SFAS No. 123-R for calendar year companies until the
beginning of 2006. Our consolidated financial statements will be prepared in
accordance with this new standard if and when we issue any new stock warrants
and/or options to employees or directors in the future. The amount of any impact
of SFAS No. 123-R on our consolidated financial statements cannot be determined
at this juncture.

CERTAIN LOANS AND DEBT SECURITIES ACQUIRED IN A TRANSFER. In December
2003, the American Institute of Certified Public Accountants issued Statement of
Position 03-3, "Accounting for Certain Loans and Debt Securities Acquired in a
Transfer," referred to in this prospectus as SOP 03-3. SOP 03-3 addresses
accounting for differences between contractual cash flows expected to be
collected and an investor's initial investment in loans or debt securities
acquired in a transfer if those differences are attributable, at least in part,
to credit quality. SOP 03-3 also prohibits "carrying over" or creation of
valuation allowances in the initial accounting of all loans acquired in a
transfer that are within the scope of SOP 03-3. The prohibition of the
valuation allowance carryover applies to the purchase of an individual loan, a
pool of loans, a group of loans, and loans acquired in a purchase business
combination. SOP 03-3 is effective for loans acquired in fiscal years beginning
after December 15, 2004. We do not anticipate that the adoption of SOP 03-3
will have a material impact on our financial condition or results of operations.

NONMONETARY ASSETS. In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets - an Amendment to APB opinion No. 29," referred
to in this prospectus as SFAS No. 153. SFAS No. 153 addresses the measurement
of exchanges of nonmonetary assets. SFAS No. 153 is effective for fiscal periods
beginning after June 15, 2005. Our management believes SFAS No. 153 will not
have a material effect on our financial statements.

IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related financial data presented in this
prospectus have been prepared in accordance with accounting principles generally
accepted in the United States of America, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary impact of inflation on our operations is reflected in
increased operating costs. Virtually all of our assets and liabilities are
monetary in nature. As a result, changes in interest rates have a more
significant impact on our performance than do the effects of changes in the
general rate of inflation and in prices. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and
services.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and
interest rates. We have not engaged in and accordingly have no risk related to
trading accounts, commodities, foreign exchange, hedging activities, interest
rate derivatives or interest rate swaps. Our market risk arises primarily from
interest rate risk inherent in our lending and deposit-taking activities, and
the issuance of our debentures. The measurement of market risk associated with
financial instruments is meaningful only when all related and offsetting on-and
off-balance sheet transactions are aggregated, and the resulting net positions
are identified. Disclosures about the fair value of financial instruments as of
December 31, 2004, which reflect changes in market prices and rates, can be
found in note 20 to our consolidated financial statements included elsewhere in
this prospectus. Our management believes that there have been no significant
changes in our market risk exposure since December 31, 2004.

Our management actively monitors and manages our 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 our net interest income and capital. For a further discussion, see the
section of this prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Asset and Liability Management."

BUSINESS

GENERAL

Intervest Bancshares Corporation is a registered financial holding company
incorporated in 1993 under the laws of the State of Delaware and is the parent
company of Intervest National Bank, Intervest Mortgage Corporation, Intervest
Securities Corporation, and Intervest Statutory Trust I, II, III and IV.

Our primary business is the operation of our subsidiaries. Intervest
National Bank, our banking subsidiary, and Intervest Mortgage Corporation, our
mortgage lending subsidiary, emphasize the origination of commercial and
multifamily real estate loans. At March 31, 2005, those loans constituted more
than 99% of our total loan portfolio. We are subject to examination and to
regulation by the FRB.

At March 31, 2005, on a consolidated basis, we had:

- total assets of $1.4 billion;
- cash and security investments of $309.2 million;
- net loans of $1.1 billion;
- deposits of $1.1 billion;
- borrowed funds and related interest payable of $178.0 million; and
- stockholders' equity of $93.4 million.

Intervest National Bank is a nationally chartered bank with headquarters
and a full-service banking office at One Rockefeller Plaza, Suite 400, in New
York City. It also has a total of five full-service banking offices in Pinellas
County, Florida, of which four are located in Clearwater and one is located in
South Pasadena.

At March 31, 2005, the bank had:

- total assets of $1.3 billion;
- cash and security investments of $288.7 million;
- net loans of $992.8 million;
- deposits of $1.1 billion;
- borrowed funds and related interest payable of $15.2 million; and
- stockholder's equity of $113.4 million.

In addition to its lending activities, the bank also provides a variety of
personalized commercial and consumer banking services to small and middle-market
businesses and individuals. The bank attracts deposits from the areas served by
its banking offices. The bank also provides internet banking through its web
site, www.intervestnatbank.com, which attracts deposit customers from within as
well as outside its primary market areas. The deposits, together with funds
derived from other sources, are used to originate loans and to purchase
investment securities. The information on the bank's website should not be
considered part of this prospectus and is not incorporated into this prospectus
by referance.

Intervest Mortgage Corporation is also in the business of originating
mortgage loans on multifamily residential and commercial properties, including
office buildings, restaurants, retail premises, warehouses and vacant land and
provides mortgage loan origination services to the bank. Intervest Mortgage
Corporation has two wholly owned subsidiaries, Intervest Distribution
Corporation, which performs record-keeping functions for Intervest Mortgage
Corporation, and Intervest Realty Servicing Corporation, which is presently
inactive. Intervest Mortgage Corporation issues its subordinated debentures to
the public to raise funds for working capital purposes.

At March 31, 2005, Intervest Mortgage Corporation had:

- total assets of $119.5 million;
- cash and short-term investments of $26.5 million;

- net loans of $88.4 million;
- debentures and related interest payable of $93.0 million; and
- stockholder's equity of $24.2 million.

Intervest Mortgage Corporation's business is significantly influenced by
the movement of interest rates, general economic conditions, particularly those
in the New York City metropolitan area where most of the properties that secure
its mortgage loans are concentrated, and by the volume of loan origination
services it provides to the bank, whose business is also affected by similar
factors. Intervest Mortgage Corporation receives a fee from the bank for its
loan origination services on behalf of the bank, the amount of which is
eliminated in our consolidated financial statements. As the bank's mortgage
loan portfolio has grown, service fee income has comprised an increasing
percentage of our mortgage lending subsidiary's income. See "Certain
Relationships and Related Transactions" for a description of the servicing
agreement between the bank and our mortgage lending subsidiary.

Our third direct, wholly-owned subsidiary, Intervest Securities
Corporation, is a broker/dealer and a member firm of the National Association of
Securities Dealers, referred to in this prospectus as the NASD. The business
activities of Intervest Securities Corporation have not, to date, been
material. Its revenues have been derived from participating as a selected
dealer from time to time in offerings of our debt securities, primarily those of
Intervest Mortgage Corporation.

The holding company also has four wholly-owned, unconsolidated
subsidiaries, Intervest Statutory Trust I, II, III and IV, which issued trust
preferred securities in November 2001, September 2003, March 2004 and September
2004, respectively. Each was formed for the sole purpose of issuing and
administering $15.0 million of trust preferred securities, for a total of $60.0
million. The statutory trusts do not conduct any trade or business. See note 9
to our consolidated financial statements included in this prospectus for more
information about the statutory trusts.

BUSINESS STRATEGY

We are committed to the continued growth of our company through the
continued origination of multifamily residential and commercial real estate
loans. We expect primarily to utilize the relationships we have developed both
with our borrowers and with the brokers with whom we have done business as a
source of new loans. We believe that our ability to rapidly and efficiently
process and close loans gives us a competitive advantage.

While our primary lending activities have been in the commercial and
multifamily real estate areas, we also will explore opportunities to diversify
our revenue. In that regard, we intend to evaluate the possible sale of
participations in our loans, while retaining the servicing. We will also
evaluate the possibility of growth and expansion through acquisitions both
within and outside our primary market areas.

OUR MARKET AREA

Our primary market area for the New York office of our subsidiary bank is
considered to be the New York metropolitan area, consisting of the five boroughs
of New York City and the areas surrounding New York City. The primary market
area of the Florida offices of our subsidiary bank is considered to be Pinellas
County, which is the most populous county in the Tampa Bay area of Florida. The
area has many more seasonal residents. The major cities in the area are Tampa
(Hillsborough County) and St. Petersburg and Clearwater (Pinellas County). The
properties securing our loans may be located in sections of the cities in our
market area that are being revitalized or redeveloped. See "Risk Factors - If
the properties underlying many of our mortgage loans lose value, we may suffer
loan losses."

The bank's primary deposit gathering and lending markets are concentrated
in the communities surrounding its offices. Management believes that all of the
bank's offices are located in areas serving small and mid-sized businesses and
serving middle and upper income communities. The bank's deposit-gathering market

also includes its web site on the internet: www.intervestnatbank.com, which
attracts deposit customers from both within and outside the bank's primary
market areas.

Intervest Mortgage Corporation's lending activities have also been
concentrated in the New York City metropolitan area. Both the bank and Intervest
Mortgage Corporation originate loans on properties in other states, including
Alabama, Connecticut, Florida, Georgia, Indiana, Kentucky, Massachusetts,
Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia and
Washington D.C.

COMPETITION

In one or more aspects of our business, we compete with other commercial
banks, savings and loan associations, credit unions, finance companies, mutual
funds, insurance companies, brokerage and investment banking companies, and
other financial intermediaries. Many of these competitors, some of which are
affiliated with large financial holding companies, have substantially greater
financial and marketing resources and lending limits, and may offer services
that we do not currently provide. In addition, many of our non-bank competitors
are not subject to the same extensive federal regulations that govern financial
holding companies and federally insured banks. Competition among financial
institutions is based upon interest rates offered on deposit accounts, interest
rates charged on loans and other credit and service charges, the quality and
scope of the services rendered, the convenience of banking facilities and, in
the case of loans to commercial borrowers, relative lending limits. An increase
in the general availability of funds may increase competition in the origination
of mortgage loans and may reduce the yields available therefrom.

In making its mortgage investments, Intervest Mortgage Corporation also
experiences significant competition from banks, insurance companies, savings and
loan associations, mortgage bankers, pension funds, real estate investment
trusts, limited partnerships and other lenders and investors. Most of these
competitors also have significantly greater financial and marketing resources.

The employment agreements of our executive officers expressly permit them
to engage in outside activities, including activities competitive with those of
our subsidiaries. See "Risk Factors - Some of our executive officers control
entities that may be considered to be competing with our subsidiaries, which may
have an adverse effect on the business of our subsidiaries."

LENDING ACTIVITIES

General

The volume of our loan originations is dependent on the interest rates we
charge on loans, customer demand for loans, the supply of money available for
lending purposes, the rates offered by our competitors and the terms and credit
risks associated with the loans. Our lending activities emphasize the
origination of first and second mortgage loans on commercial and multifamily
real estate properties. At March 31, 2005, approximately 99% of our loan
portfolio was comprised of loans secured by commercial and multifamily
properties. Our senior management team has substantial experience in commercial
and multifamily real estate lending. To a limited extent, the bank also offers
single-family residential mortgage loans, commercial loans and consumer loans.

The lending activities of the bank are conducted pursuant to written
policies and defined lending limits. In originating loans, the bank places
emphasis on the borrower's ability to generate cash flow to support its debt
obligations and other cash related expenses. Generally, all loans originated by
the bank must be reviewed and approved by the bank's loan committee, which is
comprised of certain members of the board of directors. As part of its written
policies for real estate loans, loan-to-value ratios (the ratio that the
original principal amount of the loan bears to the lower of the purchase price
or appraised value of the property securing the loan at the time of origination)
on new loans originated by the bank typically do not exceed 80%. Debt service
coverage ratios (the ratio of the net operating income generated by the property
securing the loan to the required debt service) on new loans typically are not
less than 1.2 times. As a national bank, the bank may not make a loan or extend
credit to a single or related group of borrowers in excess of 15% of the bank's
unimpaired capital and surplus. Additional

amounts may be loaned, not in excess of 10% of unimpaired capital and surplus,
if such loans or extensions of credit are secured by readily-marketable
collateral.

While the bank and our mortgage lending subsidiary may require guarantees
from the principals of its borrowers, loans are often made on a limited recourse
basis. We also have some non-recourse loans in our portfolio. Under the terms of
non-recourse mortgages, the owner of the property subject to the mortgage has no
personal obligation to pay the mortgage note which the mortgage secures.
Therefore, in the event of a default, our ability to recover our investment is
solely dependent upon the value of the mortgaged property. See "Risk Factors -
If the properties underlying many of our mortgage loans lose value, we may
suffer loan losses."

Intervest Mortgage Corporation, our mortgage lending subsidiary, is not a
bank and is therefore not subject to the same degree of regulation as applies to
the bank. It does not have any formal policies regarding the percentage of its
assets that may be invested in any single or type of mortgage loan, the
geographic location of properties collateralizing those mortgages or limits to
amounts to any one borrower, loan-to-value ratios and debt service coverage
ratios. It also does not have a loan committee or a formal loan approval
process. With respect to loans originated by this subsidiary, all underwriting
and lending decisions are made by the executive officers of the holding company.
Its real estate mortgage loans consist of first mortgage loans and junior
mortgage loans. Junior mortgages normally have greater risks than first
mortgages. Like the bank, Intervest Mortgage Corporation also considers the
borrower's experience in owning or managing similar properties and its lending
experience with the borrower when originating loans. The holding company has
also, from time to time, made mortgage loans. At March 31, 2005, mortgages with
an aggregate principal balance of $14.0 million were held by the holding
company.

The following table sets forth information regarding loans receivable as of the
specified dates:

At March 31, At December 31,
-------------- -----------------------------------------------------------
2005 2004 2003 2002 2001 2000
-------------- ----------- ---------- ---------- ---------- ----------
Carrying Carrying Carrying Carrying Carrying Carrying
($ in thousands) Value Value Value Value Value Value
- --------------------------------------------------------------------------------------------------------------------

Commercial real estate loans $ 641,749 $ 601,512 $ 344,071 $ 275,096 $ 183,167 $ 142,385
Multifamily loans 424,837 403,613 310,650 214,515 182,569 118,368
Land development and other land loans 37,787 19,198 20,526 1,890 2,485 2,531
Residential 1-4 family loans 983 984 1,628 1,953 2,404 3,034
Commercial business loans 1,042 1,215 1,662 1,608 1,363 1,781
Consumer loans 241 221 319 240 286 206
---------------------------------------------------------------------------
Loans receivable 1,106,639 1,026,743 678,856 495,302 372,274 268,305
Deferred loan fees (11,478) (11,347) (7,731) (5,390) (3,748) (1,979)
---------------------------------------------------------------------------
Loans receivable, net of deferred fees 1,095,161 1,015,396 671,125 489,912 368,526 266,326
Allowance for loan losses (12,139) (11,106) (6,580) (4,611) (3,380) (2,768)
- --------------------------------------------------------------------------------------------------------------------
Loans receivable, net $ 1,083,022 $1,004,290 $ 664,545 $ 485,301 $ 365,146 $ 263,558
- --------------------------------------------------------------------------------------------------------------------

The following table sets forth the amounts and categories of our non-performing
assets as of the specified dates:

At March 31, At December 31, (1)
-------------- ------------------------------------------------------
2005 (1) 2004 2003 2002 2001 2000
-------------- --------- --------- ---------- --------- ---------
Carrying Carrying Carrying Carrying Carrying Carrying
($ in thousands) Value Value Value Value Value Value
- ---------------------------------------------------------------------------------------------------------------

Loans that were on a nonaccrual status
at the end of the period(2) $ 4,607 $ 4,607 $ 8,474 $ - $ 1,243 $ -
Accruing loans which are contractually
past due 90 days or more $ - $ - $ - $ - $ - $ -
- ---------------------------------------------------------------------------------------------------------------

(1) During the periods presented, we did not have any "troubled debt
restructurings" as defined in SFAS No. 15, or known information about
possible credit problems of borrowers which would cause management to have
serious doubts as to the ability of such borrowers to comply with the
present loan repayment terms.

(2) Represents multifamily and commercial real estate loans.

The following table sets forth the scheduled contractual principal repayments of
the loan portfolio:

At March 31, 2005
-------------------------------------------------
Within one Over one to Over five
($ in thousands) year five years years Total
- -----------------------------------------------------------------------------------------

Commercial real estate loans $ 115,405 $ 422,735 $ 103,609 $ 641,749
Residential multifamily loans 120,956 260,851 43,030 424,837
Land development and other land loans 6,845 30,942 - 37,787
Residential 1-4 family loans - 900 83 983
Commercial loans 711 331 - 1,042
Consumer loans 31 142 68 241
- -----------------------------------------------------------------------------------------
Total $ 243,948 $ 715,901 $ 146,790 $1,106,639
- -----------------------------------------------------------------------------------------

Real Estate Mortgage Lending

Nearly all of our loan portfolio, or approximately 99% at March 31, 2005,
is comprised of loans that are secured by commercial and multifamily real estate
(including rental and cooperative apartment buildings, office buildings,
mix-used properties, shopping centers, hotels, industrial properties and vacant
land). Our loans had an average principal size of $2.0 million at March 31,
2005. At March 31, 2005, our loan portfolio included loans of $5.0 million or
more aggregating $380.7 million on a total of 47 properties, with the largest
principal balance of any such loan being $16.6 million.

Commercial and multifamily mortgage lending generally involves greater risk
than 1-4 family residential lending. Such lending typically involves larger loan
balances to single borrowers and repayment of loans secured by income producing
properties is typically dependent upon the successful operation of the
underlying real estate. From time to time, we may originate loans on vacant land
which typically do not have income streams. See "Risk Factors - Our loans are
highly concentrated in commercial real estate and multifamily mortgage loans,
increasing the risk associated with our loan portfolio."

The loans in our portfolio have an average life of approximately three
years and many have variable interest rates. The variable interest rate loans
may have an interest rate floor which resets upward along with any increase in
the loan's interest rate. This feature reduces the loan's interest rate exposure
to declining interest rates.

Mortgage loans on commercial and multifamily properties typically provide
for periodic payments of interest and principal during the term of the mortgage,
with the remaining principal balance and any accrued interest due at the
maturity date (i.e, balloon payments). The majority of the mortgage loans that
we originate provide for balloon payments at maturity, which means that a
substantial part or the entire original principal amount is due in one lump sum
payment at maturity. If the net revenue from the property is not sufficient to
make all debt service payments due on the mortgage or, if at maturity or the due
date of any balloon payment, the owner

of the property fails to raise the funds (by refinancing, sale or otherwise) to
make the lump sum payment, we could sustain a loss on our investment in the
mortgage loan. Our mortgage loans sometimes do not include personal obligations
of the borrower or any other party, and are not insured or guaranteed by
governmental agencies. See "Risk Factors - If the properties underlying many of
our mortgage loans lose value, we may suffer loan losses."

Our mortgage lending subsidiary's mortgage portfolio includes junior
mortgages, and our subsidiaries may originate additional junior mortgages in the
future. At March 31, 2005, our mortgage lending subsidiary owned 51 junior
mortgages, which constituted approximately 44% of the aggregate principal amount
of its portfolio. Junior mortgages are subordinate in right of repayment to the
senior mortgage on the property. As a result, in the event of a default on a
senior mortgage secured by the property, the holder of the senior mortgage may
independently commence foreclosure proceedings. In such an event, a junior
mortgage holder must often cure the default in order to prevent foreclosure. If
there is a foreclosure on the senior mortgage, the owner of the junior mortgage
is only entitled to share in liquidation proceeds after all amounts due to
senior lienholders have been fully paid. Actual proceeds available for
distribution upon foreclosure may not be sufficient to pay all sums due on the
senior mortgage, other senior liens and the junior mortgage, and the costs and
fees associated with the foreclosure proceedings. In addition, our mortgage
lending subsidiary makes loans secured by vacant land, which typically does not
have any income stream. See "Risk Factors - Our loans are highly concentrated in
commercial real estate and multifamily mortgage loans, increasing the risk
associated with our loan portfolio."

Commercial Lending

The bank offers commercial loan services including term loans, lines of
credit and equipment financing. Short-to-medium term commercial loans, both
collateralized and uncollateralized, are made available to businesses for
working capital purposes (including those secured by inventory, receivables and
other assets), business expansion (including acquisitions of real estate and
improvements), and the purchase of equipment and machinery. Commercial loans
are typically underwritten on the basis that repayment will come from the cash
flow of the business and are generally collateralized as discussed above. As a
result, the availability of funds for the repayment of commercial loans may be
substantially dependent on the success of the business itself. Further, the
collateral underlying these loans may depreciate over time, cannot be appraised
with as much precision as real estate, and may fluctuate in value based on the
success of the business. Commercial loans have not been emphasized and, at March
31, 2005, our loan portfolio included only approximately $1.0 million of
commercial loans.

Consumer Lending

The bank offers consumer loans including those for: the purchase of
automobiles, recreation vehicles and boats; second mortgages; home improvements;
and home equity lines of credit. These loans are secured by the underlying
vehicle or home, as the case may be. The bank also makes personal loans (both
collateralized and uncollateralized). Consumer loans typically have a shorter
term and carry higher interest rates than other types of loans. In addition,
consumer loans have additional risks of collectability when compared to other
types of loans granted by commercial banks, such as residential mortgage loans.
In many instances, the bank is required to rely on the borrower's ability to
repay the loan from personal income sources, since the collateral may be of
reduced value at the time of collection. Consumer loans have not been emphasized
and, at March 31, 2005, our loan portfolio included only approximately $241,000
of consumer loans.

Loan Solicitation and Processing

Our loan originations for both the bank and our mortgage lending subsidiary
are derived primarily from referrals from mortgage brokers and existing
customers and borrowers and, to a lesser extent, from direct solicitation by our
officers, advertising in newspapers and trade journals, and walk-in customers.

Our written underwriting procedures for the bank and the informal policy
followed by senior management of our mortgage lending subsidiary normally
require the following: physical inspections of the properties being considered
for mortgage loans; mortgage title insurance; hazard insurance; and
environmental surveys. In addition,

the bank generally requires an appraisal of the property securing the loan to
determine the property's adequacy as collateral performed by an independent
appraiser approved by us. There is no such requirement for an independent
appraisal in our mortgage lending subsidiary and generally appraisals are not
obtained. In addition, we analyze relevant real property and financial factors,
which in certain cases may include: the condition and use of the subject
property; the property's income-producing capacity; and the quality, experience
and creditworthiness of the property's owner. For commercial and consumer loans,
upon receipt of a loan application from a prospective borrower, a credit report
and other verifications are obtained to substantiate specific information
relating to the applicant's employment income and credit standing.

The bank has a servicing agreement with Intervest Mortgage Corporation, our
mortgage lending subsidiary, to provide the bank with mortgage loan origination
services. These services include the identification of potential properties and
borrowers; the inspection of properties constituting collateral for such loans;
the negotiation of the terms and conditions of such loans in accordance with the
bank's underwriting standards; and coordinating the preparation of commitment
letters and the loan closing process. The services are performed by Intervest
Mortgage Corporation's personnel and the expenses associated with the services
are borne by Intervest Mortgage Corporation. As a result of this agreement,
origination services for both of our lending subsidiaries are furnished by the
same staff. See "Certain Relationships and Related Transactions" for the amount
of the fees paid by the bank to our mortgage lending subsidiary under the
servicing agreement between them.

Loan Origination, Loan Fees and Prepayment Income from the Early Repayment of
Loans

We charge loan origination fees on nearly all of the mortgage loans we
originate based on a percentage of the principal amount. These fees are normally
comprised of a fee that is received from the borrower at the time the loan is
originated and another similar fee that is contractually due when the loan is
repaid. The total fee, net of related direct loan origination costs, is deferred
and amortized over the contractual life of the loan as an adjustment to the
loan's yield.

Many of our mortgage loans include provisions relating to prepayment and
others prohibit prepayment of indebtedness entirely. When a mortgage loan is
repaid prior to maturity, we may recognize prepayment income, which consists
largely of the recognition of unearned fees associated with such loans at the
time of payoff and the receipt of additional prepayment fees and interest in
certain cases. The amount and timing of, as well as income from loan
prepayments, if any, cannot be predicted and can fluctuate significantly.
Normally, the number of instances of prepayment of mortgage loans tends to
increase during periods of declining interest rates and tends to decrease during
periods of increasing interest rates.

TEMPORARY INVESTMENTS BY AFFILIATES AND LOAN PARTICIPATIONS

From time to time, our mortgage lending subsidiary may originate a real
estate mortgage loan in its own name and temporarily hold such loan in its
portfolio for a short period, subsequently transferring the loan to the bank at
cost. In addition, from time to time, we or our mortgage lending subsidiary may
purchase a participation in a real estate mortgage loan originated by the bank.
All participations are purchased at face value and the interest of the
participant in the collateral securing the loan is pari passu with the bank. The
above transactions are undertaken to provide us additional flexibility in
originating loans.

ASSET QUALITY

We consider asset quality to be of primary importance to our business and
have implemented procedures designed to mitigate the risks associated with our
lending activities. In assessing overall asset quality, the bank and our
mortgage lending subsidiary utilize the same criteria.

After a loan is originated, we make periodic reviews of loans in order to
monitor documentation in the loan files and perform periodic reviews of the
property securing the loans to determine the value of the collateral with the
objective of quickly identifying, evaluating and initiating corrective actions
if necessary. We also engage in constant monitoring of the payment status of
outstanding loans and timely follow-up on any delinquencies.

All of our loans are subject to the risk of default, otherwise known as
credit risk, which represents the possibility of our not recovering amounts due
from our borrowers. A borrower's ability to make payments due under a mortgage
loan is considered in our underwriting standards and is, in part, dependent upon
the risks associated with real estate investments in general, including: general
or local economic conditions in the areas the properties are located,
neighborhood values, interest rates, real estate tax rates, operating expenses
of the mortgaged properties, supply of and demand for rental units, supply of
and demand for properties, ability to obtain and maintain adequate occupancy of
the properties, zoning laws, governmental rules, regulations and fiscal
policies. Additionally, terrorist acts, such as those that occurred on September
11, 2001, armed conflicts, such as the war on terrorism, and natural disasters,
such as hurricanes, may have an adverse impact on economic conditions. Economic
conditions affect the market value of the underlying collateral as well as the
levels of occupancy of income-producing properties.

Our mortgage portfolio is comprised predominantly of mortgages on
multifamily residential properties, many of which are subject to applicable rent
control and rent stabilization statutes and regulations. In both cases, any
increases in rent are subject to specific limitations. As such, these
properties, constituting a significant portion of our mortgage portfolio, are
not affected by the general movement of real estate values in the same manner as
other income-producing properties.

Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities. Our loan portfolio has historically been
concentrated in commercial real estate and multifamily mortgage loans (including
land loans), which represented 99.8% of the total loan portfolio at March 31,
2005. The properties underlying our mortgages are also concentrated in New York
State (69%) and the State of Florida (21%).

Loans are placed on nonaccrual status when principal or interest becomes 90
days or more past due unless the loan is well secured and in the process of
collection. At March 31, 2005 and December 31, 2004, $4.6 million of loans were
on a nonaccrual status, compared to $8.5 million at December 31, 2003. These
loans were considered impaired, but no valuation allowance was maintained at any
time since we believe the estimated fair value of the underlying properties
exceeded our recorded investment. At March 31, 2005, December 31, 2004 and 2003,
there were no other loans classified as nonaccrual, impaired or 90 days past due
and still accruing interest. At March 31, 2005, our allowance for loan losses
amounted to $12.1 million, compared to $11.1 million at December 31, 2004 and
$6.6 million at December 31, 2003.

In the last five years, we experienced only one loan chargeoff from our
lending activities, in the amount of $150,000, which loan chargeoff was related
to one commercial real estate property located in the State of Florida that was
acquired by the bank through foreclosure in 2002. There can be no assurance
however, that a downturn in real estate values or local economic conditions, as
well as other factors, would not have an adverse impact on our asset quality and
future level of nonperforming assets, chargeoffs and profitability.

The following table sets forth information regarding the allowance for loan
losses for the period specified:

For the Quarter
Ended For the Year Ended December 31,
March 31, --------------------------------------------------------
($ in thousands) 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------

Allowance at beginning of year (2) $ 11,106 $ 6,580 $ 4,611 $ 3,380 $ 2,768 $ 2,493
Provision charged to operations 1,033 4,526 1,969 1,274 612 275
Chargeoffs (1) - - - (150) - -
Recoveries - - - 107 - -
- ------------------------------------------------------------------------------------------------------------------------
Net chargeoffs - - - (43) - -
- ------------------------------------------------------------------------------------------------------------------------
Allowance at end of year (2) $ 12,139 $ 11,106 $ 6,580 $ 4,611 $ 3,380 $ 2,768
- ------------------------------------------------------------------------------------------------------------------------
Total loans, net of deferred fees $ 1,095,161 $1,015,396 $ 671,125 $489,912 $368,526 $266,326
Average loans outstanding during the year $ 1,071,862 $ 867,724 $ 585,556 $439,241 $315,148 $250,941
Ratio of allowance to net loans receivable 1.11% 1.09% 0.98% 0.94% 0.92% 1.04%
- ------------------------------------------------------------------------------------------------------------------------

(1) Consists entirely of one commercial real estate loan.
(2) Nearly all of the allowance is allocated to commercial and multifamily real
estate loans, including land loans.

REAL ESTATE INVESTING ACTIVITIES

We may also purchase equity interests in real property or we may acquire
such equity interests pursuant to a foreclosure of a mortgage in the normal
course of business, as a result of which we may acquire and retain title to
properties either directly or through a subsidiary. Except for pending
foreclosures, no such transactions are presently pending. We would also
consider the expansion of our business through investments in or acquisitions of
other companies engaged in real estate or mortgage business activities. Although
we have not previously made acquisitions of real property (other than purchases
in connection with the operation of the bank's offices or properties acquired
through foreclosure), our management has had substantial experience in the
acquisition and management of properties. It is not contemplated that any
portion of the proceeds from this offering would be applied to real estate
investing activities.

INVESTMENT ACTIVITIES

Our investment policy is designed to provide and maintain liquidity,
without incurring undue interest and credit risk. We have historically purchased
securities that are issued directly by the U.S. government or one of its
agencies. These securities have a significantly lower credit risk than our loan
portfolio, as well as lower yields. To manage interest rate risk, we normally
purchase securities that have adjustable rates or securities with fixed rates
that have short- to intermediate-maturity terms. From time to time, a securities
available-for-sale portfolio may be maintained to provide additional flexibility
for implementing asset and liability management strategies. We have not had any
securities classified as available for sale since 2002. We also do not engage
in trading activities.

We also invest in various money market instruments (including overnight and
term federal funds, short-term bank commercial paper and certificate of
deposits) to temporarily invest funds resulting from deposit-gathering
activities, normal cash flow from operations and sales of debentures.

The following table sets forth information regarding our securities held to
maturity:

After One Year to After Five Years
-------------------- --------------------
One Year or Less Five Years to Ten Years After Ten Years Total
------------------- -------------------- -------------------- ------------------- -----------------
Carrying Avg. Carrying Avg. Carrying Avg. Carrying Avg. Carrying Avg.
($ in thousands) Value Yield Value Yield Value Yield Value Yield Value Yield
- -------------------------------------------------------------------------------------------------------------------------------

At March 31, 2005:
- ------------------
U.S. gov't agencies(1) $ 99,154 2.14% $ 155,600 2.78% $ - - % $ - - % $ 254,754 2.53%
At December 31, 2004:
- ---------------------
U.S. gov't agencies(1) $ 84,586 1.81% $ 164,302 2.59% $ - - % $ - - % $ 248,888 2.33%
At December 31, 2003:
- ---------------------
U.S. gov't agencies(1) $ 70,026 1.68% $ 82,797 1.81% $ - - % $ - - % $ 152,823 1.75%
At December 31, 2002:
- ---------------------
U.S. gov't agencies(1) $ 75,566 2.52% $ 70,128 2.25% $ - - % $ - - % $ 145,694 2.39%
- -------------------------------------------------------------------------------------------------------------------------------

(1) Does not include investments in FHLB and FRB stock required to be
maintained by the bank in order to be a member of the FHLB and the FRB.

SOURCES OF FUNDS

The bank's primary sources of funds consist of the following: retail
deposits obtained through its branch offices and through the mail; amortization,
satisfactions and repayments of loans; maturities and calls of securities; and
cash generated by operating activities. In addition, the bank has from time to
time borrowed funds on a short-term basis from FHLB and the federal funds market
to manage its liquidity needs. The bank has also received capital contributions
from the holding company.

The bank's deposit accounts are solicited from individuals, small
businesses and professional firms located throughout the bank's primary market
areas through the offering of a variety of deposit services. The bank also uses
its web site on the internet: www.intervestnatbank.com to attract deposit
customers from both within and outside its primary market areas. The bank
believes it does not have a concentration of deposits from any one source and
that a large portion of its depositors are residents in the bank's primary
market areas. The bank has not to date used brokered deposits, but may do so in
the future. At March 31, 2005, consolidated deposit liabilities totaled $1.1
billion, compared to $993.9 million at December 31, 2004 and $675.5 million at
December 31, 2003.

The bank's deposit services include the following: certificates of deposit
(including denominations of $100,000 or more); individual retirement accounts
(IRAs); checking and other demand deposit accounts; negotiable order of
withdrawal (NOW) accounts; savings accounts; and money market accounts. Interest
rates offered by the bank on deposit accounts are normally competitive with
those in the principal market areas of the bank. In addition, the determination
of rates and terms on deposit accounts takes into account the bank's liquidity
requirements, loan demand, growth goals, capital levels and federal regulations.
Maturity terms, service fees and withdrawal penalties on deposit products are
reviewed and established by the bank on a periodic basis.

The following table sets forth the distribution of deposit accounts by type:

At March 31, 2005 At December 31, 2004 At December 31, 2003 At December 31, 2002
--------------------- ------------------------ ------------------------ ------------------------
($ in thousands) % of % of % of % of
Amount Total Amount Total Amount Total Amount Total
- --------------------------------------------------------------------------------------------------------------------------------

Demand deposits $ 7,919 0.7% $ 6,142 0.6% $ 6,210 0.9% $ 5,924 1.2%
Interest checking deposits 10,963 0.9 15,051 1.5 9,146 1.4 10,584 2.1
Savings deposits 23,313 2.1 27,359 2.8 30,784 4.6 30,174 6.0
Money market deposits 193,118 17.2 200,549 20.2 162,214 24.0 134,293 26.5
Certificates of deposit 888,344 79.1 744,771 74.9 467,159 69.1 324,983 64.2
- --------------------------------------------------------------------------------------------------------------------------------
Total deposit accounts (1) $ 1,123,657 100.0% $ 993,872 100.0% $ 675,513 100.0% $ 505,958 100.0%
- --------------------------------------------------------------------------------------------------------------------------------

(1) Includes individual retirement accounts totaling $113,266,000, $74,170,000
and $53,340,000 at December 31, 2004, 2003, and 2002, respectively, nearly
all of which are certificates of deposit.

The following table sets forth certificate of deposits by maturity for the
periods indicated:

At March 31, 2005 At December 31, 2004 At December 31, 2003 At December 31, 2002
--------------------- ------------------------ ------------------------ ------------------------
Wtd-Avg Wtd-Avg Wtd-Avg Wtd-Avg
Stated Stated Stated Stated
($ in thousands) Amount Rate Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------------------------------

Within one year $ 311,192 2.98% $ 269,553 2.84% $ 182,693 2.75% $ 122,890 3.51%
Over one to two years 120,298 3.67 119,780 3.43 90,936 3.64 57,895 4.18
Over two to three years 171,894 4.34 134,409 4.48 30,094 4.43 31,281 5.53
Over three to four years 98,335 4.10 75,317 4.06 89,085 4.83 17,730 5.32
Over four years 186,625 4.54 145,712 4.48 74,351 4.20 95,187 4.92
- ------------------------------------------------------------------------------------------------------------------------------
$ 888,344 3.79% $ 744,771 3.68% $ 467,159 3.66% $ 324,983 4.33%
- ------------------------------------------------------------------------------------------------------------------------------

The following table sets forth the maturities of certificates of deposit in
denominations of $100,000 or more:

At March 31, At December 31,
-------------- ------------------------------
($ in thousands) 2005 2004 2003 2002
- ------------------------------------------------------------------------------------

Due within three months or less $ 25,061 $ 15,761 $ 7,514 $ 7,508
Due over three months to six months 21,263 24,450 7,446 6,122
Due over six months to one year 50,628 40,351 31,459 13.033
Due over one year 170,310 135,314 76,644 46,209
- ------------------------------------------------------------------------------------
Total $ 267,262 $215,876 $123,063 $72,872
- ------------------------------------------------------------------------------------
As a percentage of total deposits 23.8% 21.7% 18.2% 14.4%
- ------------------------------------------------------------------------------------

The following table sets forth net deposit flows:

For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- --------------------------------------
($ in thousands) 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------

Net increase before interest credited $ 121,159 $ 292,667 $ 151,138 $ 126,230
Net interest credited 8,626 25,692 18,417 17,291
- ---------------------------------------------------------------------------------------------------------------
Net deposit increase $ 129,785 $ 318,359 $ 169,555 $ 143,521
- ---------------------------------------------------------------------------------------------------------------

The bank offers internet banking services, ATM services with access to
local, state and national networks, wire transfers, direct deposit of payroll
and social security checks and automated drafts for various accounts. In
addition, the bank offers safe deposit boxes to its customers in Florida. The
bank periodically reviews the scope of the banking products and services it
offers consistent with market opportunities and its available resources.

At March 31, 2005, the bank had agreements with correspondent banks whereby
it may borrow on an overnight, unsecured basis up to $16.0 million. As a member
of the FHLB and the FRB, the bank could borrow from these institutions on a
secured basis up to approximately $230.0 million at March 31, 2005. There were
$15.0 million of FHLB short-term borrowings outstanding at March 31, 2005.

The following is a summary of certain information regarding short-term
borrowings in the aggregate:

For the Quarter Ended March 31, For the Year Ended December 31,
--------------------------------- -----------------------------------------
($ in thousands) 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------

Balance at period end (1) $ 15,000 $ 36,000 $ - $ -
Maximum amount outstanding at any month end $ 17,000 $ 36,000 $ - $ -
Average outstanding balance for the period $ 13,911 $ 1,914 $ - $ 116
Weighted-average interest rate paid for the
period 2.62% 2.08% -% 1.87%
Weighted-average interest rate at period end 2.96% 2.56% -% -%
- ----------------------------------------------------------------------------------------------------------------------------

(1) The balance at March 31, 2005 represented FHLB advances of $15.0 million due
in April 2005. The amounts were repaid. The balance at December 31, 2004
represented FHLB advances of $19.0 million due in January 2005 and $17.0 million
due in February 2005. The amounts were repaid.

Intervest Mortgage Corporation's principal sources of funds for investing
consist of borrowings (through the issuance of its debentures to the public),
mortgage repayments and cash flow generated from operations, including fee
income received from the bank for loan origination services performed for the
bank. From time to time, it has also received capital contributions from the
holding company. At March 31, 2005, Intervest Mortgage Corporation had
debentures outstanding of $86.3 million, compared to $88.9 million at December
31, 2004 and $87.4 million at December 31, 2003. See "Risk Factors - We are a
highly leveraged company and our substantial indebtedness could adversely affect
our financial condition and prevent us from fulfilling our obligations."

Our principal sources of funds consist of dividends from the bank to
service our trust preferred securities, interest income from investments,
management fees from our subsidiaries and principal and interest repayments from
our limited portfolio of mortgage loans. In addition, the bank and our mortgage
lending subsidiary pay us management fees. We have also issued debentures for
working capital purposes. Our debentures outstanding totaled $5.6 million at
March 31, 2005, compared to $5.6 million at December 31, 2004 and $7.3 million
at December 31, 2003. In addition, through our wholly owned subsidiaries
(Intervest Statutory Trust I, II, III and IV), we have issued trust preferred
securities totaling $60.0 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."

EMPLOYEES

At March 31, 2005, we employed 67 full-time equivalent employees. None of
our employees are covered by a collective bargaining agreement. We believe our
employee relations are good.

FEDERAL AND STATE TAXATION

We file a consolidated federal income tax return and combined state and
city income tax returns in New York. We also file a franchise tax return in
Delaware. The bank files a state income tax return in Florida. All the returns
are filed on a calendar year basis.

Consolidated returns have the effect of eliminating intercompany
distributions, including dividends, from the computation of consolidated taxable
income for the taxable year in which the distributions occur. In accordance with
an income tax sharing agreement, income tax charges or credits are, for
financial reporting purposes, allocated among our subsidiaries and us on the
basis of our respective taxable income or taxable loss that is included in the
consolidated income tax return.

Banks and bank holding companies are subject to federal and state income
taxes in the same manner as other corporations. Florida taxes banks under the
same provisions as other corporations, while New York State and New York City
taxable income is calculated under applicable sections of the Internal Revenue
Code of 1986, as amended, referred to as the Code, with some modifications
required by state law.

Although the bank's federal income tax liability is determined under
provisions of the Code, which is applicable to all taxpayers, Sections 581
through 597 of the Code apply specifically to financial institutions. The two
primary areas in which the treatment of financial institutions differs from the
treatment of other corporations under the Code are in the areas of bond gains
and losses and bad debt deductions. Bond gains and losses generated from the
sale or exchange of portfolio instruments are generally treated for financial
institutions as ordinary gains and losses as opposed to capital gains and losses
for other corporations, as the Code considers bond portfolios held by banks to
be inventory in a trade or business rather than capital assets. Banks are
allowed a statutory method for calculating a reserve for bad debt deductions.
Based on its asset size, a bank is permitted to maintain a bad debt reserve
calculated on an experience method, based on chargeoffs and recoveries for the
current and preceding five years, or a "grandfathered" base year reserve, if
larger. Commencing in 2002, due to its asset size, the bank no longer qualified
for this method and began using the direct write-off method in computing its bad
debt deduction for tax purposes.

As a Delaware corporation not earning income in Delaware, we are exempt
from Delaware corporate income tax but are required to file an annual report
with and pay an annual franchise tax to the State of Delaware. The tax is
imposed as a percentage of our capital base and is reported in other expenses on
our consolidated statement of earnings.

INVESTMENT IN SUBSIDIARIES

The following table provides information regarding our subsidiaries:

Subsidiaries earnings (loss)
Quarter Ended for the year ended
At March 31, 2005 March 31, December 31,
---------------------------------
% of Equity in
($ in thousands) Voting Total Underlying
Subsidiary Stock Investment Net Assets 2005 2004 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------

Intervest National Bank 100% $ 113,435 $ 113,435 $ 3,181 $ 2,537 $ 10,865 $ 8,667 $ 6,459
Intervest Mortgage Corporation 100% $ 24,153 $ 24,153 $ 626 $ 513 $ 2,354 $ 1,759 $ 1,566
Intervest Securities Corporation 100% $ 479 $ 479 $ (2) $ 22 $ (6) $ -
Intervest Statutory Trust I to IV 100% $ 1,856 $ 1,856 $ - $ - $ - $ - $ -
- -------------------------------------------------------------------------------------------------------------------------------

PROPERTIES

Our offices, and the offices of our subsidiaries, including the
headquarters of the bank and its full-service banking office, are located in
leased premises (of approximately 21,500 sq. ft.) on the entire fourth floor of
One

Rockefeller Plaza in New York City, New York, 10020. The bank occupies
approximately one-half of this space. The lease expires in March 2014.

The bank's principal office in Florida is located at 625 Court Street,
Clearwater, Florida, 33756. In addition, the bank operates four other branch
offices, three of which are in Clearwater, Florida, at 1875 Belcher Road North,
2175 Nursery Road and 2575 Ulmerton Road, and one is at 6750 Gulfport Boulevard,
South Pasadena, Florida. With the exception of the Belcher Road office, which is
leased through June 2007, the bank owns all its offices in Florida. The Belcher
Road lease contains an operating escalation clause related to taxes and
operating costs based upon various criteria. Both of the aforementioned leases
are accounted for as operating leases.

The bank's office at 625 Court Street consists of a two-story building
containing approximately 22,000 square feet. The bank occupies the ground floor,
consisting of approximately 8,500 square feet, and leases the second floor to a
single commercial tenant. The branch office at 1875 Belcher Road is a two- story
building in which the bank leases approximately 5,100 square feet on the ground
floor. The branch at 2175 Nursery Road is a one-story building containing
approximately 2,700 and it is entirely occupied by the bank. The branch at 2575
Ulmerton Road is a three-story building containing approximately 17,000 square
feet and the bank occupies the ground floor, consisting of approximately 2,500
square feet, and leases the upper floors to commercial tenants. The branch at
6750 Gulfport Boulevard is a one-story building containing approximately 2,800
square feet, which is entirely occupied by the bank. Each of the bank's branch
offices includes drive-through teller facilities. The bank also owns property
located across the street from its Court Street offices, which consists of an
office building that contains approximately 1,400 square feet that is leased to
a single commercial tenant. This property provides additional parking for the
bank's Court Street offices.

LEGAL PROCEEDINGS

We are periodically a party to or otherwise involved in legal proceedings
arising in the normal course of our business, such as foreclosure proceedings.
We do not believe that there is any pending or threatened proceeding against us
which, if determined adversely, would have a material effect on our results of
operations or financial condition.

MANAGEMENT

Our board of directors consists of eleven directors, eight of whom are
elected by the holders of our Class B common stock and three of whom are elected
by the holders of our Class A common stock. On May 26, 2005, our directors were
reelected to serve until the next annual meeting of stockholders and until their
respective successors are elected and qualify. Messrs. Callen, Holly and Swan
were elected by the holders of Class A common stock, and the rest of the
directors were elected by the holders of Class B common stock. Information
concerning each of our directors as of May 26, 2005 is set forth below:

MICHAEL A. CALLEN, age 64, serves as our director and has served in such
capacity since May 1994. Mr. Callen received a Bachelor of Arts degree from the
University of Wisconsin in Economics and Russian. Mr. Callen has been President
of Avalon Argus Associates, a financial consulting firm, since 1996. Mr. Callen
was Senior Advisor, The National Commercial Bank, Jeddah, Kingdom of Saudi
Arabia from April 1993 to April 1996. He was an independent consultant from
January 1992 until June 1993, and an Adjunct Professor at Columbia University
Buiness School during 1992. He was a director of Citicorp and Citibank and a
Sector Executive at Citicorp responsible for corporate banking activities in
North America, Europe and Japan, from 1987 to January 1992. Mr. Callen is also a
director of Intervest National Bank and Intervest Mortgage Corporation, and also
serves as a director of AMBAC, Inc., a leading provider of financial guarantees
to the structured, asset-backed and mortgage-backed securities sectors.

WAYNE F. HOLLY, age 48, serves as our director and has served in such
capacity since June 1999. Mr. Holly received a Bachelor of Arts degree in
Economics from Alfred University. Mr. Holly is Chairman and President of Sage,
Rutty & Co., Inc., a member of the Boston Stock Exchange. Mr. Holly has been an
officer and director of Sage, Rutty & Co., Inc. since 1993. Mr. Holly is also a
director of Intervest National Bank and Intervest Mortgage Corporation.

LAWTON SWAN, III, age 62, serves as our director and has served in such
capacity since February 2000. Mr. Swan received a Bachelor of Science degree
from Florida State University in Business Administration and Insurance. Mr.
Swan is President and Chairman of the Board of Interisk Corporation, a
consulting firm specializing in risk management and employee benefit plans,
which he founded in 1978. Mr. Swan is also a director of Intervest National Bank
and Intervest Mortgage Corporation.

LAWRENCE G. BERGMAN, age 60, serves as our director, Vice President and
Secretary and has served in such capacities since our incorporation in 1993. Mr.
Bergman received a Bachelor of Science degree and a Master of Engineering
(Electrical) degree from Cornell University, and a Master of Science in
Engineering and a Ph.D degree from The Johns Hopkins University. Mr. Bergman is
also a director of Intervest National Bank, and a director, Vice-President and
Secretary of Intervest Mortgage Corporation and Intervest Securities
Corporation. Mr. Bergman also serves as an Administrator of our statutory
trusts.

JEROME DANSKER, age 86, serves as our Chairman of the Board of Directors
and Chief Executive Officer. He has served as Chairman of the Board since 1996
and Chief Executive Officer since 2004, and has been a director since our
incorporation in 1993. Mr. Dansker received a Bachelor of Science degree from
the New York University School of Commerce, Accounts and Finance, and a law
degree from the New York University School of Law, and is admitted to practice
as an attorney in the State of New York. Mr. Dansker is also Chairman of the
Board of Directors of Intervest National Bank and Intervest Securities
Corporation and he is Chairman of the Board of Directors and Executive Vice
President of Intervest Mortgage Corporation. Mr. Dansker also serves as an
Administrator of our statutory trusts.

LOWELL S. DANSKER, age 54, serves as our Vice Chairman of the Board of
Directors, President and Treasurer, and has served in such capacities, except
for Vice Chairman, and has been a director since our incorporation in 1993. He
has served as Vice Chairman since October 2003. Mr. Dansker has also been a
registered representative of Intervest Securities Corporation since 1997. Mr.
Dansker received a Bachelor of Science in Business Administration from Babson
College and a law degree from the University of Akron School of Law, and is
admitted to practice as an attorney in the State of New York, Ohio, Florida and
the District of Columbia. Mr. Dansker also serves as Vice Chairman of the Board
of Directors and Chief Executive Officer of Intervest National Bank; as Vice
Chairman of the Board of Directors, President and Treasurer of Intervest
Mortgage Corporation; and as Vice Chairman of the Board of Directors and Chief
Executive Officer of Intervest Securities Corporation. Mr. Dansker also serves
as an Administrator of our statutory trusts.

PAUL R. DEROSA, age 63, serves as our director and has served in such
capacity since February 2003. Mr. DeRosa received a Bachelor of Arts degree in
Economics from Hobart College and a PhD degree in Economics from Columbia
University. Mr. DeRosa is a principal of Mt. Lucas Management Corp., an asset
management firm where he is responsible for management of fixed income
investments of that firm's Peak Partners Hedge Fund, and has served in that
capacity since 1988. From July 1995 to March 1998, Mr. DeRosa was Chief
Executive Officer of Eastbridge Holdings Inc., a bond and currency trading
company. Mr. DeRosa is also a director of Intervest National Bank and Intervest
Mortgage Corporation.

STEPHEN A. HELMAN, age 65, serves as our director and has served in such
capacity since December 2003. Mr. Helman received a Bachelor of Arts degree from
the University of Rochester and a law degree from Columbia University. Mr.
Helman has been an attorney practicing in New York for more than 25 years and is
presently engaged in private practice. Mr. Helman is also a director of
Intervest National Bank and Intervest Mortgage Corporation.

THOMAS E. WILLETT, age 57, serves as our director and has served in such
capacity since March 1999. Mr. Willett received a Bachelor of Science degree
from the United States Air Force Academy and a law degree from Cornell
University School of Law. Mr. Willett has been a partner of Harris Beach PLLC,
a law firm in Rochester, New York, since 1986 and is also a director of
Intervest National Bank and Intervest Mortgage Corporation.

DAVID J. WILLMOTT, age 66, serves as our director and has served in such
capacity since March 1994. Mr. Willmott is a graduate of Becker Junior College
and attended New York University Extension and Long Island

University Extension of Southampton College. Mr. Willmott is the Editor and
Publisher of Suffolk Life Newspapers, which he founded more than 45 years ago,
and is also a director of Intervest National Bank and Intervest Mortgage
Corporation.

WESLEY T. WOOD, age 62, serves as our director and has served in such
capacity since March 1994. Mr. Wood received a Bachelor of Science degree from
New York University School of Commerce. Mr. Wood is a director and President of
Marketing Capital Corporation, an international marketing consulting and
investment firm which he founded in 1973. Mr. Wood is also a director of
Intervest National Bank and Intervest Mortgage Corporation, an Advisory Board
Member of The Center of Direct Marketing at New York University, a member of the
Advisory Trustees at Fairfield University in Connecticut, and a Trustee of St.
Dominics R.C. Church in Oyster Bay, New York.

Jerome Dansker is the father of Lowell S. Dansker. Lawrence G. Bergman is
the former son-in-law of Jerome Dansker and Helene D. Bergman is the daughter of
Jerome Dansker and the sister of Lowell S. Dansker. Other than as disclosed
above, there are no family relationships between any director, executive officer
or any person nominated or chosen by the board of directors to become a director
or executive officer.

PRINCIPAL OFFICERS

Other than our executive officers who serve as directors and whose
information appears above, our principal officers are:

JOHN J. ARVONIO, age 42, serves as Senior Vice President, Chief Financial
Officer and Secretary of Intervest National Bank and has served in those
capacities since September 2000. Prior to that, he served as Vice President,
Controller and Secretary of Intervest National Bank from April 1999 to August
2000 and as an employee of Intervest Bancshares Corporation from April 1998 to
March 1999. Mr. Arvonio has also been a registered representative of Intervest
Securities Corporation since December 2000. Mr. Arvonio received a Bachelor of
Business Administration degree from Iona College and is a certified public
accountant. Mr. Arvonio has more than 15 years of banking experience. Prior to
joining us, Mr. Arvonio served as Second Vice President Accounting Policy and
Technical Advisor to the Controller of The Greater New York Savings Bank from
1992 to 1997. Prior to that, Mr. Arvonio was a Manager of Financial Reporting
for the Leasing and Investment Banking Divisions of Citibank from 1989 to 1992,
and was a Senior Auditor for Ernst & Young from 1985 to 1989.

JOHN H. HOFFMANN, age 53, serves as Vice President and Controller of
Intervest Mortgage Corporation and has served in such capacities since August
2002 and October 2002, respectively. Mr. Hoffmann received a Bachelor of
Business Administration degree from Susquehanna University and is a certified
public accountant. Mr. Hoffmann has more than 20 years of banking experience.
Prior to joining us, Mr. Hoffmann served as Accounting Manager for Smart World
Technologies, an Internet service provider, from 1998 to 2000 and as Vice
President of Mortgage Accounting for The Greater New York Savings Bank from 1987
to 1997.

KEITH A. OLSEN, age 51, serves as President of the Florida Division and as
a director of Intervest National Bank and has served in such capacities since
July 2001. Prior to that, Mr. Olsen was President of Intervest Bank from 1994
until it merged into Intervest National Bank in July 2001. Mr. Olsen also served
as Senior Vice President of Intervest Bank from 1991 to 2001. Mr. Olsen received
an Associates degree from St. Petersburg Junior College and a Bachelors degree
in Business Administration and Finance from the University of Florida,
Gainesville. He is also a graduate of the Florida School of Banking of the
University of Florida, Gainesville, the National School of Real Estate Finance
of Ohio State University and the Graduate School of Banking of the South of
Louisiana State University. Mr. Olsen has been working in the banking industry
for more than 30 years and has served as a bank officer for more than 20 years.

RAYMOND C. SULLIVAN, age 58, serves as President and as a director of
Intervest National Bank and has served in such capacities since April 1999.
Prior to that, Mr. Sullivan was an employee of Intervest Bancshares Corporation
from March 1998 to March 1999. Mr. Sullivan received a Bachelor of Arts degree
from St. Francis College, a Master of Business Administration degree from
Fordham University, and a Master of Science degree

from City College of New York. Mr. Sullivan also has a Certificate in Advanced
Graduate Study in Accounting from Pace University and is a graduate of the
National School of Finance and Management. Mr. Sullivan has more than 27 years
of banking experience. Prior to joining us, Mr. Sullivan was the Operations
Manager of the New York Agency Office of Banco Mercantile, C.A. from 1994 to
1997; a Senior Associate at LoBue Associates, Inc. from 1992 to 1993; and
Executive Vice President, Chief Operations Officer and a director of Central
Federal Savings Bank from 1985 to 1992.

DIRECTOR NOMINATIONS PROCESS

We do not have a standing nominating committee, and our board of directors
has determined that its director nomination policy works efficiently without the
need for a separate nominating committee. Candidates for nomination for election
by the holders of our Class A common stock are reviewed by those directors who
qualify as "independent" directors, as such term is defined in the rules of the
NASDAQ Stock Market. The independent directors then recommend a slate of
nominees for election by the holders of our Class A common stock to the full
board of directors for review and approval. Class B stockholders, who are
comprised of Jerome Dansker, Lowell S. Dansker, Lawrence G. Bergman, Helene
Bergman and Jean Dansker, recommend the nominees for Class B directors to the
full board of directors. The full board of directors approves the nominees for
election by the holders of our Class A and Class B common stock. The independent
directors will consider candidates recommended by our management, and will also
consider candidates recommended by any of our stockholders. There are no
differences in the manner in which our independent directors evaluate
stockholder-recommended nominees, as compared with nominees obtained from other
sources.

Any of our stockholders may nominate one or more persons for election by
the holders of our Class A common stock as a director at an annual meeting if
the stockholder complies with the notice, information and consent provisions
contained in our bylaws.

COMMITTEES OF THE BOARD OF DIRECTORS

Currently, our board of directors has the following standing committees:

Executive Committee. Members of the Executive Committee are Jerome Dansker,
Chairman, Lawrence G. Bergman and Lowell S. Dansker. The Executive Committee
exercises all of the powers of the board between meetings of the board.

Audit Committee. Members of the Audit Committee are Michael A.
Callen, Chairman, Paul R. DeRosa, Lawton Swan, III and David J. Willmott. The
members of the Audit Committee are independent directors under the NASDAQ
corporate governance rules.

As set forth in more detail in its charter, the Audit Committee's
primary responsibilities fall into four broad categories: (1) monitoring the
preparation of quarterly and annual financial statements by our management,
including discussions with management and our outside auditors; (2) overseeing
the relationship between us and our outside auditors, including recommending
their appointment or removal; reviewing the scope of their audit services and
related fees, as well as any other services that may be provided to us; and
determining whether the outside auditors are independent; (3) overseeing the
internal audit function; and (4) compliance oversight responsibilities,
including review and approval of all related party transactions.

Compensation Committee. The Compensation Committee was formed in October
2004. Members of the Compensation Committee are Wesley T. Wood, Chairman,
Michael A. Callen and Paul R. DeRosa. All members of the Compensation Committee
are independent directors under the NASDAQ corporate governance rules.

The Compensation Committee is responsible for setting executive officer
compensation, for making recommendations to the full board concerning director
compensation and for general oversight of the compensation and benefit programs
for our other employees.

In addition, the bank's board of directors has the following standing
committee:

Loan Committee. Members of the bank's Loan Committee are Jerome Dansker,
Chairman, Lowell S. Dansker, Lawrence G. Bergman and Wesley T. Wood. The Loan
Committee is responsible for the review and approval of loans made by the bank
consistent with the loan policy approved by the bank's board of directors. See
"Business - Lending Activities."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee had any relationship with us
requiring disclosure under applicable SEC rules regarding Compensation Committee
interlocks and insider participation in compensation decisions. None of our
executive officers served on any board of directors or compensation committee of
any other company (except for our wholly-owned subsidiaries) for which any of
our directors served as an executive officer.

COMPENSATION OF DIRECTORS

All of our directors receive fees for attendance at meetings of the board
of directors and at meetings of the committees of the board. The amount of these
fees are evaluated and adjusted periodically by the board of directors based on
the recommendation of the Compensation Committee. Director fees were increased
on October 21, 2004. The fees paid before and after that increase are noted in
the table that follows:

Amount Per Meeting
Attended
----------------------
Upon Prior to
Increase Increase
---------- ----------

Chairman and Vice Chairman of our board of directors (1) $ 4,000 $ 3,500
Other members of our board of directors (1) $ 1,250 $ 750
Chairman of each committee of our board of directors and our subsidiaries' boards of $ 1,000 $ 750
directors(2)
Other members of each committee of our board of directors and our subsidiaries' $ 750 $ 500
boards of directors(2)

(1) The same fee is also paid for each board meeting of the bank and our
mortgage lending subsidiary attended by directors, except for Messrs.
Raymond Sullivan and Keith Olsen who are directors of Intervest National
Bank and do not receive any compensation for attending meetings.

(2) Effective as of June 23, 2005, the fees paid to the Chairman of the Audit
Committee and the other members of the Audit Committee were increased to
$3,500 and $1,500 for each meeting attended, respectively.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning all compensation
awarded to, earned by or paid to our Chief Executive Officer and the four other
most highly compensated executive officers, collectively referred to as "named
executive officers" in this prospectus, for all services rendered in all
capacities to us and all of our subsidiaries during each of the past three
fiscal years. Messrs. Olsen and Sullivan serve as executive officers of
Intervest National Bank but do not serve as executive officers of the holding
company.

Annual Compensation
-------------------
Name and
Principal Position Year Salary(1)(2) Bonuses All Other Compensation(3)
- ------------------------------ ---- ------------- -------- -------------------------

Jerome Dansker, 2004 $ 496,202 $300,000 $ ----
Chairman, 2003 $ 380,914 $ 10,000 $ ----
Chief Executive Officer 2002 $ 307,524 $150,000 $ ----

Lowell S. Dansker, 2004 $ 288,700 $ 25,000 $ 4,800
Vice Chairman, 2003 $ 174,500 $ 15,000 $ 3,222
President 2002 $ 91,250 $ ---- $ 2,325

Keith A. Olsen, 2004 $ 171,558 $ 10,000 $ 5,447
President - Florida Division 2003 $ 161,000 $ 10,000 $ 5,430
Intervest National Bank 2002 $ 128,750 $ 20,000 $ 4,663

Lawrence G. Bergman, 2004 $ 171,750 $ 25,000 $ ----
Vice President, 2003 $ 116,500 $ 7,500 $ ----
Secretary 2002 $ 91,400 $ ---- $ ----

Raymond C. Sullivan, 2004 $ 149,769 $ 10,000 $ 4,493
President 2003 $ 140,000 $ 7,500 $ 4,425
Intervest National Bank 2002 $ 123,750 $ 7,500 $ 3,938

(1) Includes director and committee fees, commissions from sales of debentures,
expense allowance, unused vacation pay and unreimbursed medical expenses
paid by the holding company and its subsidiaries.
(2) In December 2004, our board of directors approved incentive compensation in
the amount of $250,000, $200,000, and $150,000 for Messrs. Jerome Dansker,
Lowell Dansker and Lawrence Bergman, respectively, effective for 2005.
These amounts will be paid during 2005. In June 2005, our board of
directors approved the payment of cash incentive awards in the amount of
$80,000, $40,000 and $20,000 to Messrs. Jerome Dansker, Lowell Dansker and
Lawrence Bergman, respectively. These amounts will be paid to such
individuals during 2005 by Intervest Mortgage Corporation.
(3) Represents matching contributions under the 401(k) plan.

AGGREGATED WARRANT GRANTS, EXERCISES AND FISCAL YEAR-END WARRANT VALUES

No warrants or options were granted to or exercised by any of our named
executive officers during our last completed fiscal year.

The following table contains information regarding the number of warrants
that are exercisable for shares of Class A and Class B common stock held by
Jerome Dansker, our Chairman and Chief Executive Officer. All of the warrants
are currently exercisable. No other officer named in the summary compensation
table above held warrants as of December 31, 2004.

Number of Securities
Underlying Unexercised
Warrants at Fiscal Year End Value of
- ----------------------------- Unexercised In-the
Class A Class B Money Warrants
Shares Shares at Fiscal Year End
- -------------- ------------- -------------------

501,465 195,000 $ 8,936,298

The aggregate value of unexercised in-the-money warrants at year end was
calculated by subtracting the exercise price from the fair market value of the
underlying shares. For purposes of this table, fair market value was deemed to
be $19.74 per share, the average of the high and low prices reported by the
NASDAQ Stock Market for transactions in our Class A common stock on December 31,
2004. There is no established trading market for our Class B common stock. For
purposes of this table, the fair market value of the Class B common stock was
also deemed to be $19.74 per share. The Class B common stock is convertible into
Class A common stock on a share for share basis.

EMPLOYMENT AGREEMENTS

On July 1, 2004, we entered into an employment and supplemental benefits
agreement with Mr. Jerome Dansker, our Chief Executive Officer. Mr. Jerome
Dansker's starting annual salary was $200,000, subject to annual increases
pursuant to a formula described in the agreement. In addition to the salary
described above, Mr. Jerome Dansker is entitled to receive such bonuses or
incentive compensation as may, from time to time, be approved by the board of
directors as well as an expense account, starting from $500.00 per month, which
increases annually in the same proportion as the increase in Mr. Jerome
Dansker's salary for such year. Mr. Jerome Dansker is also entitled to obtain
the reimbursement of all travel expenses incurred by him in the performance of
his duties and to participate in our employee benefit plans or programs, to the
extent that his position and other qualifications make him eligible to
participate. The agreement does not limit our power to award to Mr. Jerome
Dansker, whether or not pursuant to the agreement, any bonus, stock options,
warrants or any other form of benefit or compensation.

The terms of the agreement provide that Mr. Jerome Dansker may devote as
much of his time to our affairs as in his judgment the conduct of his duties
will require. The agreement further provides that Mr. Jerome Dansker may engage
in the following: (i) any other business; (ii) financing, acquiring, operating,
selling or otherwise disposing of real property for his own account or for the
account of any such other business; or (iii) performing services on behalf of
any other business entity. Under the agreement, Mr. Jerome Dansker may engage
in the same or similar businesses as we, and we will not have any right to
participate in any such other businesses or investments.

In the event of Mr. Jerome Dansker's disability, as defined in the
agreement, or death, we will pay to Mr. Jerome Dansker, his wife or his estate,
as applicable, the distribution amount for the greater of (i) three years, and
(ii) the number of months remaining in the stated term of the agreement. The
distribution amount is equal to a percentage, 50% in the case of disability and
25% in the case of death, of Mr. Jerome Dansker's monthly salary had the
agreement continued in force and effect. The distribution amount (or the
balance of any remaining distribution amount if monthly payments have previously
commenced due to disability) will, in the case of death, be paid to Mr. Jerome
Dansker's estate in a lump sum and will, for these purposes, be calculated on
the basis of annual salary increases at the rate of six percent. The obligation
to pay the distribution amount survives the expiration of the term of the
agreement.

Subject to certain exceptions, we agreed to indemnify Mr. Jerome Dansker to
the fullest extent permitted by law, against all losses, claims, damages or
liabilities, including legal fees, disbursements, and any other expenses
incurred in investigating or defending against any such loss, claim, damage or
liability.

In the event of any sale of our assets or stock, merger, reorganization or
other transaction, our successor will, as a condition to the consummation of
such transaction, expressly assume and perform the agreement. The agreement
expires on June 30, 2014, unless terminated earlier by Mr. Jerome Dansker upon
thirty days' prior notice.

Mr. Jerome Dansker is also a party to the employment agreement with our
mortgage lending subsidiary, Intervest Mortgage Corporation, dated July 1, 1995,
as amended. Pursuant to the employment agreement, Mr. Dansker serves as the
Executive Vice President of the mortgage lending subsidiary. The employment
agreement

is similar to the employment and supplemental benefits agreement described above
and provides for, among other items (i) the starting annual salary of $125,000,
subject to annual increases, pursuant to a formula described in the employment
agreement and additional salary of $1,000 per month for each $10.0 million or
part thereof of gross assets of the subsidiary in excess of $110.0 million,
which level of gross assets is determined at the end of each month; (ii) an
expense account starting at $750.00 per month, subject to increases pursuant to
a formula set forth in the agreement; (iii) coverage of all medical and
hospitalization expenses of Mr. Dansker and his wife; (iv) distribution amount
equal to 50% of Mr. Dansker's monthly salary in case of Mr. Dansker's death or
disability; (v) unlimited use of a car and driver during the term of the
employment agreement and the balance of his lifetime, or Mrs. Dansker's
lifetime, if she survives Mr. Dansker); and (vi) an office at the offices of the
mortgage lending subsidiary, which Mr. Dansker can use in connection with his
duties for the subsidiary and for any other purposes as Mr. Dansker may
determine, during the balance of Mr. Dansker's lifetime and after the expiration
of the term of the employment agreement. If the subsidiary ceases to maintain
offices in Midtown Manhattan, City of New York, then the subsidiary will pay Mr.
Dansker an amount, as reasonably determined by Mr. Dansker, reflecting the cost
of an office and secretarial services in the City of New York.

On July 1, 2004, Messrs. Lowell Dansker and Lawrence Bergman also entered
into employment and supplemental benefits agreements with us. Pursuant to the
agreements, Mr. Lowell Dansker serves as our President and Treasurer, and Mr.
Bergman serves as our Vice President and Secretary. Mr. Lowell Dansker's and Mr.
Bergman's starting annual salaries were $185,000 and $165,000, respectively,
subject to annual increases pursuant to a formula described in the agreements.
In addition to the salary described above, Mr. Lowell Dansker and Mr. Bergman
are entitled to receive such bonuses or incentive compensation as may, from time
to time, be approved by the board of directors as well as to obtain the
reimbursement of all travel expenses incurred by each of them in the performance
of their duties and to participate in our employee benefit plans or programs, to
the extent that their positions and other qualifications make them eligible to
participate. The agreements do not limit our power to award to each of Messrs.
Lowell Dansker and Lawrence Bergman, whether or not pursuant to the agreements,
any bonus, stock options, warrants or any other form of benefit or compensation.

Under their respective agreements, we provide each of Messrs. Lowell
Dansker and Bergman with an office, which they can use in connection with their
duties as our executive officers and for any other purposes as each of them may
determine. Upon the expiration of the term of the agreements, we will continue
to provide each of Messrs. Lowell Dansker and Bergman with an office for a
period of two years. If we cease to maintain our office in Midtown Manhattan,
City of New York, then we will pay each of Messrs. Lowell Dansker and Bergman an
amount, as reasonably determined by them, reflecting the cost of an office and
secretarial services in New York City.

Messrs. Lowell Dansker's and Bergman's respective agreements expire on June
30, 2014, unless terminated earlier, upon thirty days' prior notice, by Mr.
Lowell Dansker or Mr. Bergman, as applicable, and permit each of them to devote
as much of their time to our affairs as in their judgment the conduct of their
duties will require. The agreements further provide that Messrs. Lowell Dansker
and Bergman may engage in the following: (i) any other business; (ii)
financing, acquiring, operating, selling or otherwise disposing of real property
for their own account or for the account of any such other business; or (iii)
performing services on behalf of any other business entity. Under the
agreements, Messrs. Lowell Dansker and Bergman may engage in the same or similar
businesses as we, and we will not have any right to participate in any such
other businesses or investments.

Messrs. Lowell Dansker's and Bergman's respective agreements also contain
certain other provisions, including disability and death benefits and
indemnification, which are similar to those described in connection with Mr.
Jerome Dansker's agreement above.

In addition, Mr. Lowell Dansker is entitled to an expense account, starting
from $500.00 per month, which increases annually in the same proportion as the
increase in Mr. Lowell Dansker's salary for such year and to an unlimited use of
a car. Following the expiration of the agreement, we will provide Mr. Lowell
Dansker with an unlimited use of a car for a period of two years.

Intervest National Bank has employment agreements with Keith A. Olsen and
Raymond C. Sullivan that expire on December 31, 2005. The agreements are
renewable under the same terms and conditions from year to year with the written
consent of both the executive and Intervest National Bank. Messrs. Olsen and
Sullivan have base salaries in the present amounts of $200,000 and $165,000,
respectively, and their employment agreements also provide for expense
reimbursements, medical and life insurance benefits, bonuses and other benefits
as may be provided by the board of directors of the bank. The agreements provide
for the payment of base salary through December 31, 2005 and an additional
payment equal to six months base salary in the event of a termination without
cause within the first six months of the term of employment, or an additional
payment equal to three months base salary in the event of a termination without
cause after the first six months of the term. The Agreements give the employee
the right, during the one year period following any change in control of the
employer, to terminate his employment, in which case he is entitled to receive
compensation through December 31, 2005, together with an additional payment
equal to either six months base salary (for a change in control during the first
six months of the term) or three months base salary (for a change in control
after the first six months of the term).

Intervest National Bank also has an employment agreement with its Senior
Vice President and Chief Financial Officer, John J. Arvonio, and Intervest
Mortgage Corporation also has an employment agreement with its Vice President
and Controller, John H. Hoffmann. The agreements include the same terms and
conditions as the agreements between the bank and Messrs Mr. Olsen and Mr.
Sullivan, described above, except for the annual base salaries. Messrs. Arvonio
and Hoffman have annual base salaries in the present amounts of $162,500 and
$102,500, respectively.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Intervest National Bank may, from time to time, enter into various loan and
other banking transactions in the ordinary course of business with our directors
and executive officers (or associates of such persons). All such transactions:
(i) will be made in the ordinary course of business, (ii) will be made on
substantially the same terms, including interest rates and collateral on loans,
as those generally prevailing at the time for comparable transactions with
unrelated persons, and (iii) will not involve more than the normal risk of
collectability or present other unfavorable features. There were no loans
outstanding or made to any directors or executive officers during the quarter
ended March 31, 2005 or the fiscal years ended December 31, 2004, 2003 or 2002.

Intervest National Bank has deposit accounts from affiliated companies,
directors, executive officers and members of their immediate families and
related business interests, all of which are on terms comparable to those made
available to non-affiliates. These accounts had aggregate balances of
approximately $30.0 million at March 31, 2005, $32.0 million at December 31,
2004, $35.0 million at December 31, 2003 and $19.0 million at December 31, 2002.

The holding company, its directors and entities affiliated with certain of
our directors, have in the past and may in the future participate in mortgage
loans originated by our subsidiaries. Such participations are on substantially
the same terms as would apply for comparable transactions with other persons and
the interest of the participants in the collateral securing those loans is pari
passu with such subsidiaries. At March 31, 2005, there were no such transactions
outstanding.

Wayne F. Holly, one of our directors, is the Chairman and President of
Sage, Rutty & Co., Inc., which firm has acted as underwriter or placement agent
from time to time in connection with our securities offerings and with the
securities offerings of Intervest Mortgage Corporation, our wholly owned
subsidiary. Intervest National Bank, another wholly owned subsidiary, also uses
that firm to purchase investment securities. Intervest Mortgage Corporation did
not pay any commissions or fees to Sage, Rutty & Co., Inc., in the quarter
ended March 31, 2005 and paid approximately $0.7 million, $0.5 million and $0.5
million in 2004, 2003 and 2002, respectively, in connection with the placement
of debentures. Intervest National Bank paid commissions to Sage, Rutty & Co.,
Inc., of approximately $4,750 in the quarter ended March 31, 2005 and
approximately $69,000 in 2004 in connection with the purchase of securities.
Commissions in the aggregate amount of $0.5 million were also paid to Sage Rutty
& Co., Inc. in April 2005 in connection with the issuance of debentures by our
mortgage lending

subsidiary. Our management believes that the commissions paid to Sage, Rutty &
Co., Inc. are comparable to those that would be paid to non-affiliates for
similar services.

Lowell S. Dansker, our President, also serves as a registered
representative of Intervest Securities Corporation and, in that capacity,
receives compensation directly from Intervest Securities Corporation in
connection with sales of securities by that entity. Mr. Dansker received no such
compensation during the quarter ended March 31, 2005, and received compensation
of $54,000, $28,000 and $0 for such sales in 2004, 2003 and 2002, respectively.
All such compensation for 2004, 2003 and 2002 is included in the salary column
of the Summary Compensation Table included at page 69.

In June of 2003, we acquired all of the outstanding shares of capital stock
of Intervest Securities Corporation in exchange for 30,000 shares of our Class B
common stock. Intervest Securities Corporation's total assets at the time of our
acquisition consisted of approximately $218,000 of cash. Prior to our
acquisition, Intervest Securities Corporation was an affiliated entity, in that
it was wholly owned by the spouse of our Chairman. The acquisition was accounted
for at historical cost and, accordingly, the recorded assets, liabilities and
shareholders' equity of both companies were combined and recorded at their
historical cost amounts.

Thomas E. Willett, another of our directors, is a member of Harris Beach
PLLC, a law firm that provides legal services to the holding company and its
subsidiaries. The total fees paid by us to Harris Beach PLLC in 2004 were less
than 5% of that firm's gross revenues for that firm's last full fiscal year.

The bank has entered into a service agreement with our mortgage lending
subsidiary to provide the bank with mortgage loan origination services. These
services include the identification of potential properties and borrowers; the
inspection of properties constituting collateral for such loans; the
negotiation of the terms and conditions of such loans in accordance with the
bank's underwriting standards; and coordinating the preparation of commitment
letters and the loan closing process. Intervest Mortgage Corporation also acts
as a mortgage servicing agent for the bank. The services are performed by
Intervest Mortgage Corporation's personnel and the expenses associated with the
services are borne by Intervest Mortgage Corporation. The amounts paid for those
services were approximately $1.3 million in the quarter ended March 31, 2005 and
$4.3 million, $2.3 million and $1.6 million in 2004, 2003 and 2002,
respectively. In addition, pursuant to an informal arrangement, our subsidiaries
occupy office space at our headquarters, consisting of the entire fourth floor
of One Rockefeller Plaza in New York City, and reimburse us for their pro rata
share of our rent. All of these intercompany payments are eliminated in our
consolidated financial statements.

From time to time, certain relatives of our executive officers and
directors may perform clerical or similar services for the holding company or
its subsidiaries on a part-time basis, for which such individuals receive de
minimis compensation.

Except for the transactions described above and outside of normal customer
relationships, none of our directors, officers or principal stockholders and no
companies or firms with which such persons or entities are associated, currently
maintains or proposes to maintain, has maintained since the beginning of the
last fiscal year, or maintained in fiscal 2002 or 2003, any significant business
or personal relationship with us or with our subsidiaries other than such as
arises by virtue of such position or ownership interest in our shares.

SUPERVISION AND REGULATION

The supervision and regulation of bank or financial holding companies and
their subsidiaries is intended primarily for the protection of depositors, the
deposit insurance funds of the FDIC, and the banking system as a whole, and not
for the protection of the bank or financial holding company stockholders or
creditors. The banking agencies have broad enforcement power over banks and
financial holding companies, including the power to impose substantial fines and
other penalties for violations of laws and regulations.

The following description summarizes some of the laws to which we and
Intervest National Bank are subject. References in the following description to
applicable statutes and regulations are brief summaries of

these statutes and regulations, do not purport to be complete, and are qualified
in their entirety by reference to such statutes and regulations.

INTERVEST BANCSHARES CORPORATION

We are a bank holding company that has elected to be treated as a financial
holding company under the Gramm-Leach Bliley Financial Services Modernization
Act of 1999, referred to as the Modernization Act. We are subject to
supervision, regulation and examination by the Board of Governors of the Federal
Reserve System, referred to as the FRB. The Modernization Act, the Bank Holding
Company Act of 1956, as amended, referred to as the BHCA, and other federal laws
subject financial and bank holding companies to particular restrictions on the
types of activities in which they may engage, and to a broad range of
supervisory requirements and activities, including regulatory enforcement
actions for violations of laws and regulations.

Scope of Permissible Activities. Under the BHCA, a bank holding company
generally may not, subject to certain exceptions, engage in, or acquire or
control, directly or indirectly, voting securities or assets of any company that
is engaged in activities other than those of banking, managing or controlling
banks or certain activities that the FRB determines to be closely related to
banking, managing and controlling banks as to the proper incident thereto. In
approving acquisitions or the addition of activities, the FRB considers whether
the acquisition or the additional activities can reasonably be expected to
produce benefits to the public, such as greater convenience, increased
competition and gains in efficiency, that outweigh such possible adverse effects
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices.

However, the Modernization Act permits bank holding companies to become
financial holding companies and thereby engage in, or acquire shares of any
company engaged in, activities that are financial in nature or incidental to
financial activities. "Financial in nature" activities include, among other
matters, securities underwriting, dealings in or making a market in securities
and insurance underwriting and agency activities.

A bank holding company may become a financial holding company under the
Modernization Act if each of the depository institutions controlled by it is
"well-capitalized," is and remains well managed and has at least a satisfactory
rating under the Community Reinvestment Act. In addition, a bank holding
company must have an effective election filed with the FRB to become a financial
holding company. A bank holding company that falls out of compliance with some
of these requirements may be required to cease engaging in some of its
activities.

The FRB serves as the "umbrella" regulator for financial holding companies
and has the power to examine new activities, regulate and supervise activities
which are financial in nature or determined to be incidental to such financial
activities. Accordingly, activities of subsidiaries of a financial holding
company are regulated by the agency or authorities with the most experience
regulating that activity as it is conducted in a financial holding company.

Source of Strength for Subsidiaries. Under the Regulation Y, a bank
holding company must serve as a source of financial and managerial strength for
its subsidiary banks and must not conduct its operations in an unsafe or unsound
manner. If the FRB believes that an activity of a bank holding company or
control of a non-bank subsidiary constitutes a serious risk to the financial
safety, soundness or stability of a subsidiary bank or the bank holding company
and is inconsistent with sound banking practices, the FRB may require that the
bank holding company terminate the activity or terminate its control of the
subsidiary engaging in that activity.

Mergers and Acquisitions by Bank Holding Companies. Subject to certain
exceptions, the BHCA requires every bank holding company to obtain the prior
approval of the FRB before the bank holding company may merge or consolidate
with another bank holding company, acquire all or substantially all of the
assets of any bank, or, direct or indirect, ownership or control of any voting
securities of any bank or bank holding company, if after such acquisition the
bank holding company would control, directly or indirectly, more than 5% of the
voting securities of such bank or bank holding company. In approving bank
acquisitions by bank holding companies, the FRB is required to consider the
financial and managerial resources and future prospects of the bank holding

company and the banks concerned, the convenience and needs of the communities to
be served, and various competitive factors.

Anti-Tying Restrictions. Subject to certain exceptions, a bank holding
company and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.

Capital Adequacy. The FRB has promulgated capital adequacy guidelines for
all bank holding companies with consolidated assets in excess of $150.0 million.
The FRB's capital adequacy guidelines are based upon a risk-based capital
determination, whereby a bank holding company's capital adequacy is determined
by assigning different categories of assets and off-balance sheet items to broad
risk categories.

The guidelines divide the qualifying total capital of a bank holding
company into Tier I capital elements (core capital elements) and Tier 2 capital
elements (supplementary capital elements). Tier I capital consists primarily
of, subject to certain limitations, common stock, non-cumulative perpetual
preferred stock, minority interests in consolidated subsidiaries and qualifying
trust preferred securities; goodwill and certain other intangibles are excluded
from Tier I capital. Tier 2 capital may consist of, subject to certain
limitations, an amount equal to the allowance for loan and lease losses, limited
other types of preferred stock not included in Tier I capital, hybrid capital
instruments and term subordinated debt. The Tier I capital must comprise at
least 50% of the qualifying total capital categories.

Every bank holding company has to achieve and maintain a minimum Tier I
capital ratio of at least 4% and a minimum total capital ratio of at least 8% of
weighted-risk assets. In addition, bank holding companies are required to
maintain a minimum ratio of Tier 1 capital to average total consolidated assets
(leverage capital ratio) of at least 3% for strong banks and bank holding
companies and a minimum leverage ratio of at least 4% for all other bank holding
companies. As of March 31, 2005, our Tier I capital ratio and total capital
were 8.67% and 13.51%, respectively, and our leverage capital ratio was 10.05%.

Dividends. As a holding company that does not, as an entity, currently
engage in separate business activities of a material nature, our ability to pay
cash dividends depends upon the cash dividends received from our subsidiary bank
and management fees paid by the bank. We must pay our operating expenses from
funds we receive from the bank. Therefore, stockholders may receive cash
dividends from us only to the extent that funds are available after payment of
operating expenses. In addition, the FRB generally prohibits a bank holding
company from paying cash dividends except out of its net income, provided that
the prospective rate of earnings retention appears consistent with the bank
holding company's capital needs, asset quality and overall financial condition.
See "Description of Our Securities" for a description of the restrictions on the
payment of dividends under Delaware General Corporation Law.

Control Acquisitions. The Bank Control Act prohibits a person or group of
persons from acquiring "control" of a bank holding company unless the FRB has
been notified and has not objected to the transaction. Under a rebuttable
presumption established by the FRB, the acquisition of 10% or more of a class of
voting securities of a bank holding company with a class of securities
registered under Section 12 of the Exchange Act, such as us, would, under the
circumstances set forth in the presumption, constitute acquisition of control of
such company.

In addition, any entity is required to obtain the approval of the FRB
before acquiring 25% (5% in the case of an acquirer that is a bank holding
company) or more of our outstanding voting securities.

Enforcement Authority. The FRB may impose civil or criminal penalties or
may institute a cease-and-desist proceeding, in accordance with the Financial
Institutions Supervisory Act of 1966, as amended, for the violation of
applicable laws and regulations.

INTERVEST NATIONAL BANK

Intervest National Bank is a nationally chartered banking association, the
deposits of which are insured up to applicable limits by the Bank Insurance Fund
of the FDIC. The bank is subject to the examination by the OCC, as the bank's
primary regulator, and, by virtue of the insurance of the bank's deposits, it is
also subject to the supervision and regulation of the FDIC. Because the bank is
a member of the Federal Reserve System, it is subject to regulation pursuant to
the Federal Reserve Act. In addition, because the FRB regulates the holding
company, as described above, the FRB also has supervisory authority, which
directly affects the bank.

Transactions with Affiliates. Under Section 23A of the Federal Reserve
Act, subject to certain exemptions, the bank may engage in a transaction with an
affiliate, including, but not limited to, a loan or extension of credit to the
affiliate, a purchase of or an investment in securities issued by the affiliate,
a purchase of assets from the affiliate or the issuance of a guarantee or letter
of credit on behalf of an affiliate, only if the aggregate amount of the
transactions with one affiliate or with all affiliates does not exceed 10% or
20%, respectively, of the capital stock and surplus of the bank. The bank is
also generally prohibited from purchasing a low-quality asset from an affiliate.
Any transaction between the bank and an affiliate must be on terms and
conditions that are consistent with safe and sound banking practices. Each loan
or extension of credit to, or guarantee, acceptance, or letter of credit issued
on behalf of, an affiliate by the bank must be secured at the time of the
transaction by certain collateral, as specified in Section 23A of the Federal
Reserve Act.

Under Section 23B of the Federal Reserve Act, the bank can engage in
transactions with affiliates only on terms and under circumstances, including
credit standards, that are substantially the same, or at least as favorable to
the bank, as those prevailing at the time for comparable transactions with
nonaffiliated companies, or, in the absence of comparable transactions, on terms
and under circumstances, including credit standards, that in good faith would be
offered to nonaffiliated companies. The term "affiliate" with respect to the
bank includes any company that controls the bank and any other company that is
controlled by the company that controls the bank (i.e., the term affiliate
includes the holding company and its subsidiaries).

Loans to Insiders. Under Regulation O, the bank is prohibited from
extending credit to its executive officers, directors, principal shareholders
and their related interests, collectively referred to as "insiders," unless the
extension of credit is made on substantially the same terms and in accordance
with the underwriting procedures that are not less stringent than those
prevailing at the time for comparable transactions with unrelated persons.
Regulation O also sets limits on the amount of the loan extended to insiders and
stipulates what types of loans should be reported to and/or approved by the
bank's board of directors.

Reserve Requirements. Pursuant to Regulation D, the bank must hold a
percentage of certain types of deposits as reserves in the form of vault cash,
as a deposit in a Federal Reserve Bank or as a deposit in a pass-through account
at a correspondent institution. For net transaction accounts in 2005, the first
$7.0 million will be exempt from reserve requirements. A 3% reserve ratio will
be assessed on net transaction accounts over $7.0 million up to and including
$47.6 million, and a 10% reserve ratio plus $1.2 million will be assessed on net
transaction accounts in excess of $47.6 million.

Dividends. All dividends paid by the bank are paid to us as the sole
shareholder of the bank. The general dividend policy of the bank is to pay
dividends at levels consistent with maintaining liquidity and preserving
applicable capital ratios and debt servicing obligations. Under the National
Bank Act and the OCC regulations, the bank's board of directors may declare
dividends to be paid out of the bank's undivided profits. However, until the
capital surplus equals or exceeds the capital stock of the bank, no dividends
can be declared unless, in the case of a quarterly or semiannual dividend, the
bank transfers 10% of its net income for the preceding two quarters to capital
surplus, and in the case of an annual dividend, the bank transfers 10% of its
net income for the preceding four quarters to capital surplus. In addition, no
dividends may be paid without the OCC's approval if the total amount of all
dividends, including the proposed dividend, declared by the bank in any calendar
year exceeds the total of the bank's retained net income of that year to date,
combined with its retained net income of the preceding two years. Also, the
bank may not declare or pay any dividends if, after making the dividend, the
bank will be

"undercapitalized" and no cash dividend may be paid by the bank if it is in
default of any deposit insurance assessment due to the FDIC.

Capital Adequacy. In general, the capital adequacy regulations which apply
to national banks, such as the bank, are similar to the FRB guidelines, which
are discussed above, promulgated with respect to bank holding companies. Under
the OCC regulations and guidelines, all banks must maintain a minimum ratio of
total capital (after deductions) to risk-weighted assets of 8%, total assets
leverage ratio (i.e., Tier 1 capital in an amount equal to at least 3% of
adjusted total assets) and Tier 1 leverage ratio. For all but the most highly
rated banks, the minimum Tier 1 leverage ratio is 4%. The bank's Tier 1 capital
ratio at March 31, 2005 was 8.66%.

Prompt Corrective Action. Banks are subject to restrictions on their
activities depending on their level of capital. The OCC "prompt corrective
action" regulations divide banks into five different categories, depending on
their level of capital: (i) a well-capitalized bank; (ii) an adequately
capitalized bank; (iii) an undercapitalized bank; (iv) a significantly
undercapitalized bank; and (v) a critically undercapitalized bank.

Under these regulations, a bank is deemed to be "well-capitalized" if it
has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based capital
ratio of 6% or more and a leverage ratio of 5% or more, and if the bank is not
subject to an order or capital directive to meet and maintain a specific capital
level. A bank is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4%
or more and a leverage ratio of 4% or more (unless the bank is rated 1 in its
most recent examination, in which instance it must maintain a leverage ratio of
3% or more) and does not meet the definition of a well-capitalized bank. A bank
is deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier 1 risk-based capital ratio of less than 4%, or a leverage
ratio of less than 4% or 3% or less than 3%, as applicable. A bank is deemed to
be "significantly undercapitalized" if it has a total risk-based capital ratio
of less than 6%, a Tier 1 risk-based capital ratio of less than 3% or a leverage
ratio of less than 3%. A bank is deemed to be "critically undercapitalized" if
it has a ratio of tangible equity to total assets that is equal to or less than
2%. In addition, the OCC may reclassify a well-capitalized bank as adequately
capitalized and may require an adequately capitalized or an undercapitalized
bank to comply with certain supervisory actions, except that the OCC may not
reclassify a significantly undercapitalized bank as a critically
undercapitalized bank, if the OCC has determined that the bank is in unsafe or
unsound condition or that the bank has not corrected a less-than-satisfactory
rating for any of the categories of asset quality, management, earnings or
liquidity.

If a bank is classified as undercapitalized, significantly undercapitalized
or critically undercapitalized, it is required to submit a capital restoration
plan to the OCC and becomes subject to certain requirements restricting the
bank's payment of capital distributions, management fees and compensation of
senior executive officers of the bank, requiring that the OCC monitor the
condition of the bank, restricting the growth of the bank's assets, requiring
prior approval of certain expansion proposals and restricting the activities of
the bank.

Deposit Insurance Assessments. The bank's deposits are insured up to
applicable limits through the Bank Insurance Fund of the FDIC. The bank, along
with other depository institutions, must pay a semiannual assessment, determined
in accordance with the FDIC regulations, to maintain the reserve ratio of the
deposit insurance fund at the designated reserve ratio. The FDIC established a
risk-based assessment system to calculate the depository institution's
assessment. The FDIC determines the assessment rate on the basis of the bank's
assessment risk classification composed of capital factors and supervisory risk
factors. Depository institutions are assigned to one of the following three
capital groups in connection with their capital factors: group 1 -
well-capitalized, group 2 - adequately capitalized and group 3 -
undercapitalized. Depository institutions are also divided into three
supervisory subgroups: (i) subgroup A, which consists of financially sound
institutions with only a few minor weaknesses, (ii) subgroup B, which consists
of institutions that demonstrate weaknesses which, if not corrected, could
result in significant deterioration of the institution and increased risk of
loss to the insurance fund, and (iii) subgroup C, which consists of institutions
that pose a substantial probability of loss to the insurance fund unless
effective corrective action is taken.

Community Reinvestment. Under the Community Reinvestment Act of 1977,
referred to as the CRA, and regulations promulgated under the CRA, the bank
should have a record of helping to meet the credit needs of its

local communities, including low- and moderate-income neighborhoods, consistent
with the safe and sound operations of the bank, and the FDIC will take such
record into account in considering certain bank's applications. The FDIC
applies the lending, investment and service tests to assess the bank's CRA
performance and assigns to a bank a rating of "outstanding," "satisfactory,"
"needs to improve," or "substantial noncompliance" on the basis of the bank's
performance under these tests. All banks are required to publicly disclose
their CRA performance ratings. The bank received an "outstanding" rating in its
most recent CRA Performance Evaluation.

Enforcement Authority. The FDIC and other federal banking agencies have
broad enforcement powers, including, but not limited to, the power to terminate
deposit insurance, impose substantial fines and other civil and criminal
penalties.

Regulation of Lending Activity. In addition to the laws and regulations
discussed above, the bank is also subject to certain consumer laws and
regulations, including, but not limited to, the Truth in Lending Act, the Real
Estate Settlement Procedures Act, the Equal Credit Opportunity Act of 1974, and
their associated Regulations Z, X and B, respectively.

INTERVEST MORTGAGE CORPORATION

Investment in mortgages on real properties presently may be impacted by
government regulation in several ways. Residential properties may be subject to
rent control and rent stabilization laws. As a consequence, the owner of the
property may be restricted in its ability to raise the rents on apartments. If
real estate taxes, fuel costs and maintenance of and repairs to the property
were to increase substantially, and such increases are not offset by increases
in rental income, the ability of the owner of the property to make the payments
due on the mortgage as and when they are due might be adversely affected.

Laws and regulations relating to asbestos have been adopted in many
jurisdictions, including New York City, which require that whenever any work is
undertaken in a property in an area in which asbestos is present, the asbestos
must be removed or encapsulated in accordance with such applicable local and
federal laws and regulations. The cost of asbestos removal or encapsulation may
be substantial, and if there were not sufficient cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property fails to fund such work from other sources, the value of the property
could be adversely affected, with consequent impairment of the security for the
mortgage.

Laws regulating the storage, disposal and clean up of hazardous or toxic
substances at real property have been adopted at the federal, state and local
levels. Such laws may impose a lien on the real property superior to any
mortgages on the property. In the event such a lien were imposed on any
property which serves as security for a mortgage owned by our mortgage lending
subsidiary, the security for such mortgage could be impaired.

The lending business of our mortgage lending subsidiary is regulated by
federal, state and, in certain cases, local laws, including, but not limited to,
the Equal Credit Opportunity Act of 1974 and Regulation B. The Equal Credit
Opportunity Act and Regulation B prohibit creditors from discriminating against
applicants on the basis of race, color, religion, national origin, sex, age or
marital status. Regulation B also restricts creditors from obtaining certain
types of information from loan applicants. Among other things, it also requires
lenders to advise applicants of the reasons for any credit denial. Equal Credit
Opportunity Act violations can also result in fines, penalties and other
remedies.

Our mortgage lending subsidiary is subject to various other federal, state
and local laws, rules and regulations governing, among other things, the
licensing of mortgage lenders and servicers. Our mortgage lending subsidiary
must comply with procedures mandated for mortgage lenders and servicers, and
must provide disclosures to certain borrowers. Failure to comply with these
laws, as well as with the laws described above, may result in civil and criminal
liability, termination or suspension of licenses, rights of rescission for
mortgage loans, lawsuits and/or administrative enforcement actions.

NON-BANK SUBSIDIARIES

All of our subsidiaries, as subsidiaries of a financial holding company,
are subject to regulation by the FRB. In addition, Intervest Securities
Corporation, as a registered broker-dealer and member firm of the NASD is
subject to regulation by both the SEC and the NASD. It is also subject, in
connection with its activities in various states, to the supervision and
regulation by various state securities regulators.

LEGISLATION

Sarbanes-Oxley Act. On July 30, 2002, the Sarbanes-Oxley Act, or SOX, was
enacted. SOX is not a banking law, but applies to all public companies,
including us. The stated goals of SOX are to increase corporate responsibility,
to provide for enhanced penalties for accounting and auditing improprieties at
publicly traded companies, and to protect investors by improving the accuracy
and reliability of corporate disclosures pursuant to the securities laws.

SOX includes additional disclosure requirements and new corporate
governance rules for public companies, requires the SEC to adopt extensive
additional disclosure, corporate governance and other related rules for public
companies, increases criminal penalties for violations of the securities laws,
and mandates further studies of specified issues by the SEC and other federal
government agencies. SOX also provides for the federal regulation of accounting
firms that provide services to public companies and mandates additional listing
standards for the securities exchanges.

PATRIOT Act. The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
referred to as the PATRIOT Act, was enacted in October 2001 to, among other
purposes, deter and punish terrorist acts in the United States and around the
world and to enhance law enforcement investigatory tools. The PATRIOT Act
includes numerous provisions for fighting international money laundering and
blocking terrorist access to the U.S. financial system. The PATRIOT Act is
far-reaching in scope and covers a broad range of financial activities and
institutions. The provisions affecting banking organizations were generally set
forth as amendments to the Bank Secrecy Act and relate principally to U.S.
banking organizations' relationships with foreign banks and persons who reside
outside the United States, including, but not limited to: (1) due diligence
requirements for financial institutions that administer, maintain, or manage
private banking accounts or correspondent accounts in the United States for
these non-U.S. persons; (2) standards for verifying customer identification upon
account opening; and (3) provisions to promote cooperation among financial
institutions, regulators and law enforcement authorities in identifying parties
that may be involved in terrorism or money laundering. The bank does not have
significant foreign business and does not believe that its operations have been
materially affected by the PATRIOT Act.

Our management cannot predict what other legislation might be enacted or
what other regulations might be adopted by our regulatory authorities or the
effects thereof.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our Class A and Class B common stock as of June 30, 2005 by (i)
each person who is known by us to be the beneficial owner of more than 5% of our
outstanding Class A or Class B common stock, (ii) each of our directors, (iii)
each of our named executive officers and (iv) all of our current directors and
executive officers as a group.

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------- ------------- -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES % CLASS(1) SHARES % CLASS(1)
- --------------------------------------- ---------------- ------------- ------------- ----------

HELENE D. BERGMAN 422,000 (2)(3) 7.16% 75,000 19.48%

DIRECTORS AND EXECUTIVE OFFICERS

LAWRENCE G. BERGMAN 400,800 (2) 6.80% 75,000 19.48%
Director, Vice President and Secretary

MICHAEL A. CALLEN 25,000 0.42% - -
Director

LOWELL S. DANSKER 928,500 (2)(4) 15.75% 150,000 38.96%
Vice Chairman and President

JEROME DANSKER 1,005,965 (2)(5) 15.73% 280,000(5) 48.28%
Chairman and Chief Executive Officer

PAUL R. DEROSA 5,000 0.08% - -
Director

STEPHEN A. HELMAN 37,600 0.64% - -
Director

WAYNE F. HOLLY 18,700(6) 0.32% - -
Director

LAWTON SWAN, III 500 0.01% - -
Director

THOMAS E. WILLETT 6,000 0.10% - -
Director

DAVID J. WILLMOTT 99,047 1.68% - -
Director

WESLEY T. WOOD 92,500 1.57% - -
Director

KEITH A. OLSEN 2,250 0.04% - -
President, Florida Division
Intervest National Bank

RAYMOND C. SULLIVAN, 500 0.01% - -
President, Intervest National Bank

ALL DIRECTORS AND EXECUTIVE OFFICERS 2,622,362 41.00% 505,000 87.07%
AS A GROUP (13 PERSONS)
- ---------------------------------------------------------------------------------------------------

(1) Percentages have been computed based upon 5,894,501 shares of Class A
common stock and 385,000 shares of Class B common stock outstanding as of
June 30, 2005, plus, for each person and the group, shares that person or
the group has the right to acquire pursuant to warrants or convertible
debentures, if any, within 60 days of such date. The address of all persons
listed is: Care of Intervest Bancshares Corporation, One Rockefeller Plaza
(Suite 400) New York, New York 10020.

(2) Does not include shares of Class A common stock issuable upon conversion of
the shares of Class B common stock beneficially owned by such person. The
Class B common stock is immediately convertible into Class A common stock
at the option of the holder.

(3) Includes 128,571 shares held by a family limited liability company and
10,350 shares held by adult children.

(4) Includes 207,336 shares held by a family limited liability company, 10,500
shares held by children and 200 shares held by his spouse.

(5) Includes 501,465 shares of Class A common stock issuable upon the exercise
of warrants and 36,000 shares of Class A common stock held by his spouse.
The shares of Class B common stock include 195,000 shares issuable upon the
exercise of warrants and 30,000 shares held by his spouse.

(6) Includes 2,500 shares held by minor children. Does not include 26,000
shares of Class A common stock held by Sage, Rutty & Co., Inc. over which
Mr. Holly does not exercise voting or investment power. Mr. Holly disclaims
beneficial ownership of such shares.

DESCRIPTION OF OUR SECURITIES

The following descriptions do not purport to be complete and are subject
to, and qualified in their entirety by reference to, the more complete
descriptions thereof set forth in our Restated Certificate of Incorporation and
our Bylaws, as amended to date.

AUTHORIZATION

Our authorized capital stock consists of 10,500,000 shares of capital
stock. We are authorized to issue two classes of common stock, consisting of
9,500,000 shares of Class A common stock, par value $1.00 per share, and 700,000
shares of Class B common stock, par value $1.00 per share. We are also
authorized to issue 300,000 shares of preferred stock, par value $1.00 per
share.

As of June 30, 2005, there were 5,894,501 shares of Class A common stock
and 385,000 shares of Class B common stock issued and outstanding, and no shares
of preferred stock were issued and outstanding.

COMMON STOCK

Dividend Rights. Subject to preferences that might be applicable to any
shares of our preferred stock that may hereafter be issued, the holders of Class
A and Class B common stock are entitled to share ratably in such dividends as
may be declared by the board of directors out of funds legally available
therefor.

As a Delaware corporation, we may not declare and pay dividends on our
capital stock if the amount paid exceeds an amount equal to the surplus which
represents the excess of our net assets over paid-in-capital or, if there is no
surplus, our net earnings for the current and/or immediately preceding fiscal
year. Dividends cannot be paid from our net profits unless the paid-in- capital
represented by the issued and outstanding stock having a preference upon the
distribution of our assets at the market value is intact. Under applicable
Delaware case law, dividends may not be paid on our capital stock if we become
insolvent or the payment of the dividend will render us insolvent. To the
extent we pay dividends and we are deemed to be insolvent or inadequately
capitalized, a bankruptcy court could direct the return of any dividends.

In addition, our ability to pay cash dividends is further impacted by the
funding requirements of the trust preferred securities issued by our statutory
trusts, all of the common stock of which is owned by us. We are required to make
quarterly payments of interest on the principal of the trust preferred
securities, which are required to be made before we can consider the payment of
cash dividends on our Class A and Class B common

stock. Our ability to pay cash dividends to our stockholders is also primarily
dependent upon the cash dividends received from our subsidiary bank and our
other subsidiaries. See "Dividend Policy."

Voting Rights. Each share of our Class A and Class B common stock entitles
its holder to one vote in the election of directors as well as all other matters
to be voted on by stockholders. Both classes of common stock have equal voting
rights as to all matters, except that, so long as at least 50,000 shares of
Class B common stock are issued and outstanding, the holders of the Class B
common stock are entitled to vote for the election of two-thirds (rounded up to
the nearest whole number) of the directors, and the holders of Class A common
stock are entitled to elect the remaining directors. Holders of our Class A or
Class B common stock are not entitled to cumulate their votes in the election of
directors. Under Delaware law, the holders of each class of our common stock
would be entitled to vote as a separate class on certain matters that would
adversely affect or subordinate the rights of that class.

Conversion Rights. The shares of Class B common stock are convertible, at
any time, on a share for share basis, into shares of Class A common stock at the
option of the holder.

No Preemptive Rights. Holders of our Class A and Class B common stock do
not have any preemptive rights to subscribe for additional shares on a pro rata
basis or otherwise when additional shares are offered for sale by us.

Assessment and Redemption. Our common stock is not subject to redemption or
any sinking fund provisions, and all outstanding shares are fully paid and
non-assessable.

Liquidation Rights. Subject to preferences that might be applicable to any
shares of our preferred stock that may hereafter be issued, in the event of our
liquidation, dissolution or winding up, the holders of our Class A and Class B
common stock are entitled to receive, pro rata, after payment of all of our
debts and liabilities, all of our remaining assets available for distribution in
cash or in kind. In the event of any liquidation, dissolution or winding up of
any subsidiary, the holding company, as the sole shareholder of the subsidiary's
common stock, would be entitled to receive all remaining assets of that
subsidiary available for distribution in cash or in kind after payment of all
debts and liabilities of the subsidiary (including, in the case of the bank, all
deposits and accrued interest thereon).

PREFERRED STOCK

The authorized preferred stock is available for issuance from time to time
at the discretion of our board of directors without stockholder approval. The
board of directors has the authority to prescribe for each series of preferred
stock it establishes the number of shares in that series, the number of votes
(if any) to which the shares in that series are entitled, the consideration for
the shares in that series, and the designations, powers, preferences and other
rights, qualifications, limitations or restrictions of the shares in that
series. Depending upon the rights prescribed for a series of preferred stock,
the issuance of preferred stock could have an adverse effect on the voting power
of the holders of common stock and could adversely affect holders of common
stock by delaying or preventing a change in control, making removal of our
present management more difficult or imposing restrictions upon the payment of
dividends and other distributions to the holders of common stock.

WARRANTS

As of June 30, 2005, there were outstanding warrants to purchase up to
501,465 shares of our Class A common stock, all of which are held by Jerome
Dansker, our chairman and chief executive officer. These warrants, which were
issued in 1994 and expire on January 31, 2007, entitle Mr. Dansker to purchase
the shares at an exercise price of $6.67 per share. The warrants may be
exercised at any time, in whole or in part, prior to the expiration date,
provided that the warrants may not be exercised for fewer than 100 shares unless
exercised as to all remaining shares. The exercise price and the number of
shares covered by the warrants are subject to adjustment upon occurrence of
certain events, including stock dividends, stock splits and similar
recapitalizations affecting our Class A common stock, or sales by us of shares
of our Class A common stock at prices less than the exercise price of the
warrants.

Also as of June 30, 2005, there were outstanding warrants to purchase up to
195,000 shares of our Class B common stock, all of which are held by Jerome
Dansker, our chairman and chief executive officer, including a

warrant to purchase 145,000 shares of our Class B common stock at any time prior
to January 31, 2008 (provided that we may, at our election, establish an earlier
expiration date to occur after February 1, 2007 and prior to January 31, 2008 by
giving not less than 30 nor more than 90 days notice) at an exercise price of
$6.67 per share. The remaining warrant allows the purchase of up to 50,000
shares of Class B common stock at an exercise price of $10.00 per share and
expires on January 31, 2008. The warrants to purchase shares of our Class B
common stock contain terms and conditions substantially in conformity with those
applicable to warrants to purchase shares of our Class A common stock, including
provisions regarding adjustments to the exercise price and the number of shares
issuable upon exercise of the warrant.

CERTAIN PROVISIONS HAVING POTENTIAL ANTI-TAKEOVER EFFECTS

General. The following is a summary of the material provisions of Delaware
General Corporation Law and our Certificate of Incorporation and Bylaws that
address matters of corporate governance and the rights of stockholders. Certain
of these provisions may delay or prevent takeover attempts not first approved by
our board of directors (including takeovers which certain stockholders may deem
to be in their best interests). These provisions also could delay or frustrate
the removal of incumbent directors or the assumption of control by stockholders.
The primary purpose of these provisions is to encourage negotiations with our
management by persons interested in acquiring control of Intervest Bancshares
Corporation. All references to the Certificate of Incorporation and Bylaws are
to our Certificate of Incorporation and Bylaws in effect on the date of this
prospectus.

Filling Vacancies. Vacancies occurring in our board of directors may be
filled by the stockholders or a majority of the remaining directors, even though
less than a quorum. Vacancies filled by the stockholders will be filled in
accordance with the relative voting rights of the holders of our Class A and
Class B common stock in connection with an election of directors, as described
above.

Amendment of Bylaws. Subject to certain restrictions described below,
either a majority of our board of directors or our stockholders may amend or
repeal the Bylaws. Generally, the stockholders may adopt, amend, or repeal the
Bylaws in accordance with the Delaware General Corporation Law.

Special Meetings of Stockholders. Our Bylaws provide that special meetings
of stockholders may be called only by our Chairman, our President, our board of
directors or by a committee of the board of directors whose authority includes
the power to call such meetings.

Authorized But Unissued Shares. Delaware law does not require stockholder
approval for any issuance of authorized shares. Authorized but unissued shares
may be used for a variety of corporate purposes, including future public or
private offerings to raise additional capital or to facilitate corporate
acquisitions. One of the effects of the existence of authorized but unissued
shares may be to enable the board of directors to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of us by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of our
management and possibly deprive the stockholders of opportunities to sell their
shares of common stock at prices higher than prevailing market prices.

Preferred Stock. Under the terms of our Certificate of Incorporation, our
board of directors is authorized to issue shares of preferred stock in one or
more series without stockholder approval. Our board of directors has the
discretion to determine the rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, of each series of preferred stock. The
purpose of authorizing our board of directors to issue preferred stock and
determine its rights and preferences is to provide flexibility and eliminate
delays associated with a stockholder vote on specific issues. However, the
ability of our board of directors to issue preferred stock and determine its
rights and preferences may have the effect of delaying or preventing a change in
control, as described above under "Description of Our Securities - Preferred
Stock."

Statutory and other Restrictions on Acquisition of our Capital Stock.
Provisions of our Certificate of Incorporation and Bylaws may have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us. These provisions could
limit the price that certain investors might be willing to pay in the future for
shares of our common stock. These provisions:

- give the holders of Class B common stock the right to elect
two-thirds (rounded up to the nearest whole number) of our board
of directors; and

- allow us to issue preferred stock without any vote or further
action of the stockholders.

We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with an interested stockholder, unless:

- prior to the time of the proposed action, the board of directors of
the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder;

- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned (i) by persons who
are directors and also officers and (ii) by employee stock plans in
which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or

- at or subsequent to the time of the proposed action, the business
combination is approved by the board of directors and authorized at an
annual or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least two-thirds of the outstanding
voting stock that is not owned by the interested stockholder.

These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board and in policies formulated by the
board and to discourage certain types of transactions that may involve an actual
or threatened change of control of our company. These provisions are designed
to reduce our vulnerability to an unsolicited proposal for a takeover that does
not contemplate the acquisition of all of our outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of our
company.

LIMITATIONS ON DIRECTOR LIABILITY

Our Certificate of Incorporation provides that our directors shall
generally not be liable to us or any of our stockholders for monetary damages
for breach of duty as a director to the fullest extent permitted by the Delaware
General Corporation Law. This provision will eliminate such liability except for
(i) any breach of the director's duty of loyalty to us or to our stockholders,
(ii) acts and omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) liability for unlawful payment
of dividends or unlawful stock purchases or redemptions in violation of the
Delaware General Corporation Law, and (iv) any transaction from which the
director derived an improper personal benefit.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") empowers a Delaware corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was a director, officer, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
other enterprise. A corporation may indemnify such person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. A corporation may,
in advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such

action, provided that the officer or director undertakes to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation.

A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys' fees) which he or she actually
and reasonably incurred in connection therewith. The indemnification provided
by the DGCL is not deemed to be exclusive of any other rights to which those
seeking indemnification may be entitled under any corporation's bylaws,
agreement, vote or otherwise.

Our bylaws provide that we will indemnify any person made or threatened to
be made a party to any action or proceeding by reason of the fact that he, his
testator or intestate, is or was a director or officer, and any director or
officer who served any other company in any capacity at our request, in the
manner and to the maximum extent permitted by the DGCL, as the same now exists
or may hereafter be amended in a manner more favorable to persons entitled to
indemnification; and we may, in the discretion of our board of directors,
indemnify all other corporate personnel to the extent permitted by law. The
right to indemnification contained in our bylaws includes the right to be paid
by us the expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition.

The employment agreements between us and each of Messrs. Jerome Dansker,
Lowell Dansker and Lawrence Bergman contain indemnification provisions, in
addition to those contained in our bylaws, which provide that we will indemnify
and hold each of the foregoing persons harmless against all losses, claims,
damages or liabilities (including legal fees, disbursements, and any other
expenses incurred in investigating or defending against any such loss, claim,
damage or liability) arising (i) by reason of any acts or omissions or any
alleged acts or omissions arising out of the person's activities in connection
with the conduct of our business (or any of our subsidiaries or affiliated
entities), (ii) by reason of the performance by such person of the services to
be performed pursuant to the terms of the employment agreement, (iii) by reason
of any claim or allegation of failure to perform such services in accordance
with the terms of the employment agreement, or (iv) by reason of the performance
of services alleged to be beyond the scope of the authority conferred upon such
person pursuant to the terms of the employment agreement; provided that, no
indemnity will be provided for losses, claims, damages or liabilities described
above to the extent that such losses, claims, damages or liabilities result from
the gross negligence or willful misconduct of such person. The indemnification
provided in the employment agreements survives the expiration or earlier
termination of such employment agreements and is in addition to any common law
or contractual rights of indemnification available at law or in equity, and
includes all costs and expenses of enforcing the right to indemnification.
Under the employment agreements, each of Messrs. Jerome Dansker, Lowell Dansker
and Lawrence Bergman are also entitled, upon request, to the payment by us of
all costs and expenses paid or incurred by such person in investigating,
defending or settling any claim, loss, damage or liability that may be subject
to a right of indemnification.

The employment agreement between Mr. Jerome Dansker and Interest Mortgage
Corporation contains indemnification provisions similar to the provisions
described above.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
under the provisions discussed above or otherwise, we have been advised that, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for our Class A and Class B common stock
is The Bank of New York.

OUR SECURITIES ARE NOT INSURED BY THE FDIC

An investment in any of our securities, including our Class A common stock,
will not be a deposit or a savings account and will not be insured or guaranteed
by the FDIC or any other governmental agency and is subject to investment risk,
including the possible loss of your entire investment.

UNDERWRITING

We and Ryan Beck & Co., Inc., as co-manager and representative of the
underwriters named below, have entered into an underwriting agreement with
respect to the shares of Class A common stock being offered. Subject to the
terms and conditions contained in the underwriting agreement, each underwriter
has agreed to purchase from us the respective number of shares of common stock
set forth opposite its name below. The underwriters' obligations are several,
which means that each underwriter is required to purchase a specific number of
shares, but it is not responsible for the commitment of any other underwriter to
purchase shares. Ryan Beck & Co., Inc. is acting as the representative of the
underwriters.

Number of Shares
Name of Class A Common Stock
- ------------------------------- -----------------------

Ryan Beck & Co., Inc . . . . .
Sandler O'Neill & Partners, L.P
Total. . . . . . . . . . .

Under the terms and conditions of the underwriting agreement, and subject
to certain exceptions, the underwriters are obligated to accept and pay for all
of the shares of Class A common stock, if any are taken. The underwriting
agreement provides that the obligations of the underwriters are subject to
approval of certain legal matters by their counsel, including the authorization
and the validity of the Class A common stock, and to other conditions contained
in the underwriting agreement, such as effectiveness with the SEC of the
registration statement that includes this prospectus and the receipt by the
underwriters of certificates from our officers, legal opinions from our
attorneys and a letter from our independent accountants regarding our financial
statements and the statistical data contained in this prospectus and in our
filings under the Securities Exchange Act of 1934.

We have been advised that the underwriters propose to offer the shares of
Class A common stock to the public at the public offering price set forth on the
cover of this prospectus and to certain selected dealers at this price, less a
concession not in excess of $___ per share. The underwriters may allow, and any
selected dealers may reallow, a concession not to exceed $___ per share to
certain brokers and dealers. After the shares of Class A common stock are
released for sale to the public, the offering price and other selling terms may
from time to time be changed by the underwriters.

In addition, we have granted the underwriters an option to purchase
additional shares of our Class A common stock, not to exceed 165,000 shares, at
the public offering price, less underwriting discounts and commissions. The
underwriters may exercise this option at any time during a period of 30 days
following the offering. In the event the underwriters exercise this option in
full, the total offering price, aggregate discounts and commissions and net
proceeds before expenses of the offering will each increase by 15%. The
underwriters may exercise the option to purchase additional shares of our Class
A common stock solely for the purpose of covering over-allotments, if any, made
in connection with the distribution.

The following table shows the per share and total underwriting discount we
will pay to the underwriters in connection with this offering and the proceeds
we will receive before expenses. These amounts are shown assuming both no
exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares of Class A common stock.

Total Without Total With
Per Share Over-Allotment Over-Allotment
--------- --------------- ---------------

Price to public. . . . . . . . $ $
Underwriting discounts . . . .
Proceeds to us, before expenses

The underwriters have informed us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.

All of our executive officers and directors have agreed that, prior to
_________, 2005, they will not, without the underwriters' prior written consent,
and subject to limited exceptions, directly or indirectly, offer for sale, sell,
contract to sell, or grant any option to sell (including, without limitation,
any short sale), pledge, transfer, assign or otherwise dispose of any shares of
our common stock or securities exchangeable for or convertible into shares of
our common stock.

We will reimburse the underwriters for their reasonable out-of-pocket
expenses in an amount not to exceed $60,000 in the aggregate, including fees of
counsel for the underwriters.

We have agreed to indemnify the underwriters and the persons who control
them against certain liabilities, including liabilities under the Securities Act
of 1933 and the Securities Exchange Act of 1934 and liabilities arising from
breaches of the representations, warranties and covenants contained in the
underwriting agreement, and, under certain conditions, to contribute to any
payment that the underwriters may be required to make for those liabilities.

During and after this offering, the underwriters may purchase and sell our
Class A common stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of our Class A common stock. The
underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers in respect of our Class A common
stock sold in the offering for their account may be reclaimed by the syndicate
if such securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of our Class A common stock, which may be higher than the price
that might otherwise prevail in the open market, and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the NASDAQ National Market, in the over-the-counter market or otherwise.

LEGAL MATTERS

Harris Beach PLLC, Rochester, New York, will pass upon the legality of the
securities offered by this prospectus for us. Thomas E. Willett, a member of
Harris Beach PLLC, serves as one of our directors. Certain legal matters will be
passed upon for the underwriters by Blank Rome LLP, Philadelphia, Pennsylvania.

EXPERTS

The consolidated audited financial statements of Intervest Bancshares
Corporation as of December 31, 2004 and 2003, and for each of the years in the
three-year period ended December 31, 2004, have been included herein in reliance
upon the report of Hacker, Johnson & Smith, P.A., P.C., independent registered
public accounting firm, as set forth in their report appearing elsewhere herein,
which is based in part on the report of Eisner LLP, New York, New York,
independent registered public accounting firm for Intervest Mortgage Corporation
(whose financial statements are not presented separately in this prospectus),
appearing elsewhere herein. The consolidated audited financial statements of
Intervest Bancshares Corporation and subsidiaries are included in reliance upon
such reports, given on the authority of those firms as experts in accounting and
auditing.

WHERE YOU CAN OBTAIN MORE INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, and we file reports on Forms 10-K, 10-Q and 8-K, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our filings with the SEC are also available to the public from
the SEC's website at http://www.sec.gov.

Our subsidiary, Intervest National Bank, has a website at
www.intervestnatbank.com. The information on this web site is not and should
not be considered part of this prospectus and is not incorporated into this
prospectus by reference. This web site is, and is only intended to be, inactive
textual references.

We have filed with the SEC a registration statement on Form S-1 of which
this prospectus is a part, under the Securities Act of 1933, as amended, for the
Class A common stock to be sold in this offering. This prospectus does not
contain all of the information set forth in the registration statement. For
further information about us or our Class A or Class B common stock, please
review the registration statement, which may be inspected for free at the
principal office of the SEC in Washington, D.C., and copies of all or part of
which maybe obtained from the SEC by paying the prescribed fees.

INTERVEST BANCSHARES CORPORATION & SUBSIDIARIES

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Page No.

Reports of Independent Registered Public Accounting Firms F-1
Consolidated Balance Sheets as of March 31, 2005 (unaudited), F-3
December 31, 2004 and 2003
Consolidated Statements of Earnings for the quarters ended F-4
March 31, 2005 and 2004 (unaudited) and for the years ended
December 31, 2004, 2003 and 2002
Consolidated Statements of Comprehensive Income for the quarters F-5
ended March 31, 2005 and 2004 (unaudited) and for the
years ended December 31, 2004, 2003 and 2002
Consolidated Statements of Changes in Stockholders' Equity F-6
for the quarters ended March 31, 2005 and 2004 (unaudited)
and for the years ended December 31, 2004, 2003 and 2002
Consolidated Statements of Cash Flows for the quarters ended F-7
March 31, 2005 and 2004 (unaudited) and for the years ended
December 31, 2004, 2003 and 2002
Notes to Consolidated Financial Statements for the quarters ended
March 31, 2005 and 2004 (unaudited) and the years ended F-8
December 31, 2004, 2003 and 2002

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Intervest Bancshares Corporation
New York, New York:

We have audited the accompanying consolidated balance sheets of Intervest
Bancshares Corporation and Subsidiaries (the "Company") as of December 31,
2004 and 2003 and the related consolidated statements of earnings,
comprehensive income, changes in stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 2004. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We were furnished the reports of the other auditor on their audits of the
consolidated financial statements of Intervest Mortgage Corporation, whose
total assets as of December 31, 2004 and 2003, constituted 8.6% and 11.1%
of the related consolidated totals, respectively, and whose net interest
income, noninterest income and net earnings, constituted 7.0%, 14.3% and
20.6%, respectively in 2004, 9.7%, 14.8% and 19.3%, respectively in 2003
and 12.4%, 21.9% and 22.7%, respectively in 2002, of the related
consolidated totals. Our opinion, insofar as it relates to the amounts
included in the consolidated totals, are based solely on the reports of the
other auditors.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, based on our audits and the report of another independent
registered public accounting firm, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of the Company at December 31, 2004 and 2003, and the results of
its operations and its cash flows for each of the years in the three-year
period ended December 31, 2004 in conformity with U.S. generally accepted
accounting principles.

As discussed in Note 1 to the accompanying consolidated financial
statements, in 2004, the Company adopted Financial Accounting Standards
Board Interpretation No. 46 "Consolidation of Variable Interest Entities"
as revised in December 2003. In accordance with this Interpretation,
Intervest Statutory Trusts I, II, III and IV are not consolidated in the
financial statements of the Company. The Company has also elected to adopt
this Interpretation on a retroactive basis.

/s/ Hacker, Johnson & Smith, P.A., P.C.
---------------------------------------------
Hacker, Johnson & Smith, P.A., P.C.
Tampa, Florida
March 11, 2005

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholder
Intervest Mortgage Corporation:

We have audited the consolidated balance sheets of Intervest Mortgage
Corporation and subsidiaries (the "Company"), a wholly owned subsidiary of
Intervest Bancshares Corporation, as of December 31, 2004 and 2003 and the
related consolidated statements of operations, changes in stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 2004 (all of which are not presented separately herein). These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

In our opinion, the financial statements referred to above fairly present,
in all material respects, the consolidated financial position of Intervest
Mortgage Corporation and subsidiaries as of December 31, 2004 and 2003, and
the consolidated results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 2004 in conformity
with U.S. generally accepted accounting principles.

/s/ Eisner LLP
----------------
Eisner LLP
New York, New York
February 10, 2005

F-2

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

AT MARCH 31, AT DECEMBER 31,
----------------------------------
($in thousands, except par value) 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited)

ASSETS
Cash and due from banks $ 21,874 $ 12,026 $ 8,833
Federal funds sold 22,372 9,948 36,816
Commercial paper and other short-term investments 5,101 2,625 18,479
----------------------------------
Total cash and cash equivalents 49,347 24,599 64,128
Securities held to maturity, net 254,754 248,888 152,823
Federal Reserve Bank and Federal Home Loan Bank stock, at cost 5,092 5,092 3,075
Loans receivable, net (net of allowance for loan losses of
$12,139, $11,106 and $6,580, respectively) 1,083,022 1,004,290 664,545
Accrued interest receivable 7,098 6,699 4,995
Loan fees receivable 8,732 8,208 5,622
Premises and equipment, net 6,610 6,636 5,752
Deferred income tax asset 5,547 5,095 2,960
Deferred debenture offering costs, net 4,664 4,929 4,023
Other assets 2,573 2,315 3,600
=======================================================================================================================
TOTAL ASSETS $ 1,427,439 $1,316,751 $911,523
=======================================================================================================================
LIABILITIES
Deposits:
Noninterest-bearing demand deposit accounts $ 7,919 $ 6,142 $ 6,210
Interest-bearing deposit accounts:
Checking (NOW) accounts 10,963 15,051 9,146
Savings accounts 23,313 27,359 30,784
Money market accounts 193,118 200,549 162,214
Certificate of deposit accounts 888,344 744,771 467,159
----------------------------------
Total deposit accounts 1,123,657 993,872 675,513
Borrowed Funds:
Federal Home Loan Bank advances 15,000 36,000 -
Subordinated debentures 91,810 94,430 94,690
Subordinated debentures - capital securities 61,856 61,856 30,928
Accrued interest payable on all borrowed funds 9,090 10,154 14,510
Mortgage note payable 239 242 255
----------------------------------
Total borrowed funds 177,995 202,682 140,383
Accrued interest payable on deposits 2,131 1,718 1,080
Mortgage escrow funds payable 19,914 14,533 10,540
Official checks outstanding 6,578 12,061 6,122
Other liabilities 3,788 1,791 2,500
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,334,063 1,226,657 836,138
- -----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 5, 9, 17 and 19)

STOCKHOLDERS' EQUITY
Preferred stock (300,000 shares authorized, none issued) - - -
Class A common stock ($1.00 par value, 9,500,000 shares authorized,
5,888,843, 5,886,433 and 5,603,377 shares issued and outstanding, respectively) 5,889 5,886 5,603
Class B common stock ($1.00 par value, 700,000 shares authorized,
and 385,000 shares issued and outstanding) 385 385 385
Additional paid-in-capital, common 38,992 38,961 35,988
Retained earnings 48,110 44,862 33,409
- -----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 93,376 90,094 75,385
=======================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,427,439 $1,316,751 $911,523
=======================================================================================================================

F-3

See accompanying notes to consolidated financial statements.

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------------------------
($in thousands, except per share data) 2005 2004 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------
(Unaudited)

INTEREST AND DIVIDEND INCOME
Loans receivable $18,811 $13,792 $61,928 $47,223 $39,273
Securities 1,563 705 4,259 2,965 3,964
Other interest-earning assets 194 96 362 276 242
- -----------------------------------------------------------------------------------------------------------------
TOTAL INTEREST AND DIVIDEND INCOME 20,568 14,593 66,549 50,464 43,479
- -----------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 9,039 5,312 26,330 18,437 17,369
Subordinated debentures 2,060 2,233 8,801 8,316 7,440
Subordinated debentures - capital securities 1,090 666 3,495 1,793 1,497
Other borrowed funds 94 4 57 18 19
- -----------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 12,283 8,215 38,683 28,564 26,325
- -----------------------------------------------------------------------------------------------------------------
Net interest and dividend income 8,285 6,378 27,866 21,900 17,154
Provision for loan losses 1,033 1,077 4,526 1,969 1,274
- -----------------------------------------------------------------------------------------------------------------
Net interest and dividend income after provision for loan losses 7,252 5,301 23,340 19,931 15,880
- -----------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Customer service fees 76 59 252 187 171
Income from mortgage lending activities 149 190 1,221 824 485
Income from the early repayment of mortgage loans 654 1,156 3,546 2,317 1,435
Commissions and fees - 56 119 38 -
Gain from the sales of securities available for sale - - - - 120
(Loss) gain from early call of investment securities (1) (5) 2 (51) 7
All other - - - 6 -
- -----------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 878 1,456 5,140 3,321 2,218
- -----------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and employee benefits 1,285 961 4,046 3,655 3,016
Occupancy and equipment, net 357 344 1,659 1,270 1,318
Data processing 136 129 428 533 564
Professional fees and services 139 103 411 364 350
Stationery, printing and supplies 54 44 180 152 141
Postage and delivery 33 25 111 101 93
FDIC and general insurance 79 64 264 225 179
Director and committee fees 122 88 397 229 95
Advertising and promotion 47 13 110 35 69
All other 122 147 645 695 654
- -----------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSES 2,374 1,918 8,251 7,259 6,479
- -----------------------------------------------------------------------------------------------------------------
Earnings before income taxes 5,756 4,839 20,229 15,993 11,619
Provision for income taxes 2,508 2,104 8,776 6,873 4,713
=================================================================================================================
NET EARNINGS $ 3,248 $ 2,735 $11,453 $ 9,120 $ 6,906
=================================================================================================================
BASIC EARNINGS PER SHARE $ 0.52 $ 0.45 $ 1.89 $ 1.85 $ 1.71
DILUTED EARNINGS PER SHARE $ 0.48 $ 0.41 $ 1.71 $ 1.53 $ 1.37
DIVIDENDS PER SHARE $ - $ - $ - $ - $ -
- -----------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-4

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-----------------------------------------
($in thousands) 2005 2004 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
(Unaudited)

- ------------------------------------------------------------------------------------------------------------
NET EARNINGS $3,248 $ 2,735 $11,453 $9,120 $6,906
- ------------------------------------------------------------------------------------------------------------
Net unrealized holding losses on available-for-sale securities - - - - (72)
Reclassification adjustment for gains realized in earnings - - - - (120)
-----------------------------------------
Net unrealized losses on available-for-sale securities - - - - (192)
Credit for income taxes related to unrealized losses
on available-for-sale securities - - - - 81
- ------------------------------------------------------------------------------------------------------------
Other comprehensive loss, net of tax - - - - (111)
============================================================================================================
TOTAL COMPREHENSIVE INCOME, NET OF TAX $3,248 $ 2,735 $11,453 $9,120 $6,795
============================================================================================================
See accompanying notes to consolidated financial statements.

F-5

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($in thousands) 2005 2004 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
(Unaudited)

CLASS A COMMON STOCK
Balance at beginning of period $ 5,886 $ 5,603 $ 5,603 $ 4,348 $ 3,545
Issuance of 42,510, 42,510, 945,717 and 803,458 shares,
respectively, upon the exercise of warrants - 43 43 946 803
Issuance of 2,410, 17,188, 240,546 and 309,573 shares,
respectively, upon the conversion of debentures 3 17 240 309 -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period 5,889 5,663 5,886 5,603 4,348
- --------------------------------------------------------------------------------------------------------------------------------

CLASS B COMMON STOCK
Balance at beginning of period 385 385 385 355 355
Issuance of 30,000 shares to acquire
Intervest Securities Corporation - - - 30 -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period 385 385 385 385 355
- --------------------------------------------------------------------------------------------------------------------------------

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period 38,961 35,988 35,988 24,134 19,001
Compensation related to vesting of certain Class B stock warrants - 7 9 26 26
Compensation related to the modification of
certain Class A stock warrants - - - 418 109
Issuance of 30,000 shares of Class B stock to acquire
Intervest Securities Corporation - - - 185 -
Issuance of shares of Class A stock upon the exercise of Class A
stock warrants, inclusive of tax benefits - 383 383 8,520 4,998
Issuance of shares upon the conversion of debentures 31 181 2,581 2,705 -
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period 38,992 36,559 38,961 35,988 24,134
- --------------------------------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of period 44,862 33,409 33,409 24,289 17,383
Net earnings for the period 3,248 2,735 11,453 9,120 6,906
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period 48,110 36,144 44,862 33,409 24,289
- --------------------------------------------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period - - - - 111
Net change in accumulated other comprehensive income, net - - - - (111)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of period - - - - -
- --------------------------------------------------------------------------------------------------------------------------------

================================================================================================================================
TOTAL STOCKHOLDERS' EQUITY AT END OF PERIOD $ 93,376 $ 78,751 $ 90,094 $ 75,385 $ 53,126
================================================================================================================================

RECONCILIATION OF SHARES OUTSTANDING
Class A and Class B shares outstanding at beginning of period 6,271,433 5,988,377 5,988,377 4,703,087 3,899,629
Issuance of shares upon the exercise of warrants - 42,510 42,510 945,717 803,458
Issuance of shares upon the conversion of debentures 2,410 17,188 240,546 309,573 -
Issuance of shares to acquire Intervest Securities Corporation - - - 30,000 -
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A AND CLASS B SHARES OUTSTANDING AT END OF PERIOD 6,273,843 6,048,075 6,271,433 5,988,377 4,703,087
- --------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-6

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------------
($in thousands) 2005 2004 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES (Unaudited)
Net earnings $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization 129 176 593 568 606
Provision for loan losses 1,033 1,077 4,526 1,969 1,274
Deferred income tax benefit (452) (487) (2,135) (963) (681)
Amortization of deferred debenture offering costs 296 315 1,249 1,084 919
Compensation expense related to common stock warrants - 7 9 444 135
Amortization of premiums (accretion) of discounts
and deferred loan fees, net (1,499) (575) (3,539) (1,610) (588)
Gain from sales of securities available for sale - - - - (120)
Net loss from sale of foreclosed real estate - - - 51 -
Net (decrease) increase in accrued interest payable on debentures (1,032) (1,607) (3,254) 1,648 2,392
Net(decrease) increase in official checks outstanding (5,483) (4,222) 5,939 1,749 1,154
Net increase in loan fees receivable (524) (428) (2,586) (1,916) (1,027)
Net change in all other assets and liabilities 3,718 3,673 7,223 6,783 3,829
- --------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (566) 664 19,478 18,927 14,799
- --------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net decrease (increase) in interest-earning time deposits with banks - - - 2,000 (1,750)
Maturities and calls of securities available for sale - - - - 2,500
Sales of securities available for sale - - - - 3,620
Maturities and calls of securities held to maturity 19,305 24,315 88,880 117,755 104,785
Purchases of securities held to maturity (25,523) (14,220) (187,089) (127,221) (153,335)
Net increase in loans receivable (79,896) (92,889) (347,887) (182,674) (124,271)
Sale of foreclosed real estate - - - 150 -
Cash acquired through acquisition of Intervest Securities Corporation - - - 218 -
Purchases of FRB and FHLB stock - (180) (2,017) (1,967) (454)
Purchases of premises and equipment, net (103) (89) (1,477) (222) (387)
Investment in unconsolidated subsidiaries - (464) (928) (464) -
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (86,217) (83,527) (450,518) (192,425) (169,292)
- --------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 129,785 61,637 318,359 169,555 143,521
Net increase in mortgage escrow funds payable 5,381 4,157 3,993 4,646 1,641
Net (decrease) increase in FHLB advances (21,000) - 36,000 - -
Principal repayments of debentures and mortgage note payable (2,603) (9,003) (20,013) (3,661) (2,509)
Gross proceeds from issuance of debentures - 25,464 52,428 31,000 13,500
Debentures issuance costs (32) (1,105) (2,217) (1,694) (1,021)
Proceeds from issuance of common stock - 2,961 2,961 6,931 5,801
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 111,531 84,111 391,511 206,777 160,933
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 24,748 1,248 (39,529) 33,279 6,440
Cash and cash equivalents at beginning of period 24,599 64,128 64,128 30,849 24,409
================================================================================================================================
Cash and cash equivalents at end of period $ 49,347 $ 65,376 $ 24,599 $ 64,128 $ 30,849
================================================================================================================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest $ 12,606 $ 9,434 $ 40,050 $ 25,647 $ 22,936
Cash paid during the period for income taxes 871 1,508 11,637 7,557 5,301
Transfer of loan to foreclosed real estate, net of chargeoff - - - - 1,081
Loan to finance sale of foreclosed real estate - - - 880 -
Purchase of premises with mortgage note payable - - 275
Conversion of debentures and accrued interest payable
into Class A common stock 34 203 2,821 3,015 -
Issue Class B common stock to purchase
Intervest Securities Corporation - - - 215 -
Accumulated other comprehensive income - change in unrealized
loss on securities available for sale, net of tax - - - - (111)

See accompanying notes to consolidated financial statements.

F-7

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO THE THREE-MONTH PERIODS ENDED
MARCH 31, 2005 AND 2004)
- --------------------------------------------------------------------------------

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Intervest Bancshares Corporation is a registered financial holding company
referred to by itself as the "Holding Company." Its subsidiaries are:
Intervest National Bank (the "Bank"); Intervest Mortgage Corporation; and
Intervest Securities Corporation. All the entities listed above are
referred to collectively as the "Company" on a consolidated basis. 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 also issues debt securities to raise funds for working
capital purposes. The Company's primary business segment is banking and
real estate lending.

Intervest Statutory Trust I, II, III and IV are wholly owned subsidiaries
of the Holding Company that are unconsolidated entities as required by the
Financial Accounting Standards Board (FASB) Interpretation No. 46,
"Consolidation of Variable Interest Entities," as revised in December 2003.
FIN 46-R requires bank holding companies that have used controlled business
trusts to raise financing by issuing trust preferred securities to
deconsolidate their investments in those trusts. On January 1, 2004, the
Company adopted FIN 46-R and deconsolidated Intervest Statutory Trust I and
II, which were formed prior to FIN 46-R. The deconsolidation increased both
the Company's total assets and borrowed funds previously reported at
December 31, 2003 by $928,000, but had no effect on net income,
stockholders' equity and regulatory capital.

The Bank is a nationally chartered, full-service commercial bank that has
its headquarters and full-service banking office in Rockefeller Plaza in
New York City, and a total of five full-service banking offices in Pinellas
County, Florida - four in Clearwater and one in South Pasadena. The Bank
conducts a personalized commercial and consumer banking business and
attracts deposits from the areas served by its banking offices. It also
provides internet banking services through its web site:
www.intervestnatbank.com, which can attract deposit customers from outside
its primary market areas. The deposits, together with funds derived from
other sources, are used to originate real estate, commercial and consumer
loans and to purchase investment securities. The Bank emphasizes
multifamily and commercial real estate lending.

Intervest Mortgage Corporation is a mortgage investment company engaged in
the real estate business, including the origination and purchase of real
estate mortgage loans, consisting of first mortgage and junior mortgage
loans. Intervest Mortgage Corporation also provides loan origination
services to the Bank. Intervest Mortgage Corporation has two wholly owned
subsidiaries, Intervest Distribution Corporation and Intervest Realty
Servicing Corporation that provide administrative services to Intervest
Mortgage Corporation. Intervest Mortgage Corporation issues debentures to
provide funding for its lending business. Intervest Mortgage Corporation's
mortgage loans are comprised of multifamily and commercial real estate
loans.

Intervest Securities Corporation is a broker/dealer and a National
Association of Securities Dealers (NASD) and a Securities Investor
Protection Corporation (SIPC) member firm whose business activities to date
have been insignificant and its only revenues have been derived from
participating as a selected dealer from time to time in offerings of debt
securities of the Company, primarily those of Intervest Mortgage
Corporation. Intervest Securities Corporation was acquired by the Holding
Company in June 2003 as discussed in note 22 herein. Intervest Statutory
Trust I, II, III and IV were formed in December 2001, September 2003, March
2004 and September 2004, respectively. Each was formed for the sole purpose
of issuing and administering capital securities as discussed in note 9
herein. The Trusts do not conduct any trade or business.

F-8

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

PRINCIPLES OF CONSOLIDATION, BASIS OF PRESENTATION AND USE OF ESTIMATES

The consolidated financial statements include the accounts of the Holding
Company and its subsidiaries- Intervest National Bank, Intervest Mortgage
Corporation and Intervest Securities Corporation. All significant
intercompany balances and transactions have been eliminated in
consolidation.

Certain reclassifications have been made to prior period amounts to conform
to the current period's presentation. The accounting and reporting policies
of the Company conform to United States generally accepted accounting
principles and to general practices within the banking industry.

In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent liabilities, as of the
date of the consolidated financial statements, and revenues and expenses
during the reporting periods. Actual results could differ from those
estimates. Estimates that are particularly susceptible to significant
change relate to the determination of the allowance for loan losses and the
need for a valuation allowance for deferred tax assets.

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.

CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, cash equivalents
include federal funds sold (generally sold for one-day periods) and
commercial paper and other short-term investments that have maturities of
three months or less from the time of purchase.

SECURITIES

Securities for which the Company has the ability and intent to hold until
maturity are classified as securities held to maturity and are carried at
cost, adjusted for accretion of discounts and amortization of premiums,
which are recognized into interest income using the interest method over
the period to maturity. 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 fair value. Unrealized gains and losses on securities available
for sale, net of related income taxes, are reported as a separate component
of comprehensive income. Realized gains and losses from sales of securities
are determined using the specific identification method. The Company does
not acquire securities for the purpose of engaging in trading activities.

LOANS RECEIVABLE

Loans that the Company has the intent and ability to hold for the
foreseeable future or until maturity or satisfaction are carried at their
outstanding principal net of chargeoffs, the allowance for loan losses,
unamortized discounts and deferred loan fees or costs. Loan origination and
commitment fees, net of certain costs, are deferred and amortized to
interest income as an adjustment to the yield of the related loans over the
contractual life of the loans using the interest method. When a loan is
paid off or sold, or if a commitment expires unexercised, any unamortized
net deferred amount is credited or charged to earnings accordingly.

Loans are placed on nonaccrual status when principal or interest becomes 90
days or more past due unless the loan is well secured and in the process of
collection. Accrued interest receivable previously recognized is reversed
when a loan is placed on nonaccrual status. Amortization of net deferred
fee income is discontinued for loans placed on nonaccrual status. Interest
payments received on loans in nonaccrual status are recognized as income on
a cash basis unless future collections of principal are doubtful, in which
case the payments received are applied as a reduction of principal. Loans
remain on nonaccrual status until principal and interest payments are
current.

F-9

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is netted against loans receivable and is
increased by provisions charged to operations and decreased by chargeoffs
(net of recoveries). The adequacy of the allowance is evaluated monthly
with consideration given to: the nature and volume of the loan portfolio;
overall portfolio quality; loan concentrations; specific problem loans and
commitments and estimates of fair value thereof; historical chargeoffs and
recoveries; adverse situations which may affect the borrowers' ability to
repay; and management's perception of the current and anticipated economic
conditions in the Company's lending areas. In addition, Statement of
Financial Accounting Standards (SFAS) No. 114 specifies the manner in which
the portion of the allowance for loan losses is computed related to certain
loans that are impaired. A loan is normally deemed impaired when, based
upon current information and events, it is probable the Company will be
unable to collect both principal and interest due according to the
contractual terms of the loan agreement. Impaired loans normally consist of
loans on nonaccrual status. Interest income on impaired loans is recognized
on a cash basis. Impairment for commercial real estate and multifamily
loans is measured based on: the present value of expected future cash
flows, discounted at the loan's effective interest rate; or the observable
market price of the loan; or the estimated fair value of the loan's
collateral, if payment of the principal and interest is dependent upon the
collateral. When the fair value of the property is less than the recorded
investment in the loan, this deficiency is recognized as a valuation
allowance within the overall allowance for loan losses and a charge through
the provision for loan losses. The Company charges off any portion of the
recorded investment in the loan that exceeds the fair value of the
collateral. The net carrying amount of an impaired loan does not at any
time exceed the recorded investment in the loan.

Lastly, the Company's regulators, as an integral part of their examination
process, periodically review the allowance for loan losses. Accordingly,
the Company may be required to take certain chargeoffs and/or recognize
additions to the allowance based on the regulators' judgment concerning
information available to them during their examination.

PREMISES AND EQUIPMENT

Land is carried at cost. Buildings, leasehold improvements and furniture,
fixtures and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method
over the estimated useful life of the asset. Leasehold improvements are
amortized using the straight-line method over the terms of the related
leases, or the useful life of the asset, whichever is shorter. Maintenance,
repairs and minor improvements are expensed as incurred, while major
improvements are capitalized.

DEFERRED DEBENTURE OFFERING COSTS

Costs relating to offerings of debentures are amortized over the terms of
the debentures. The costs consist primarily of underwriters' commissions.
Accumulated amortization amounted to $4,499,000 at March 31, 2005,
$4,360,000 at December 31, 2004 and $4,794,000 at December 31, 2003.

FORECLOSED REAL ESTATE

Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold. Upon foreclosure of the property, the related loan is
transferred from the loan portfolio to foreclosed real estate at the lower
of the loan's carrying value at the date of transfer, or estimated fair
value of the property less estimated selling costs. Such amount becomes the
new cost basis of the property. Adjustments made to the carrying value at
the time of transfer are charged to the allowance for loan losses. After
foreclosure, management periodically performs market valuations and the
real estate is carried at the lower of cost or estimated fair value less
estimated selling costs. Revenue and expenses from operations and changes
in the valuation allowance of the property are included in the consolidated
statements of earnings.

F-10

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

STOCK-BASED COMPENSATION

The Company follows Accounting Principles Board (APB) No.25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting
for compensation related to its stock warrants. Under APB No. 25, if the
exercise price of the Company's stock warrants issued to employees or
directors equals the market price of the underlying stock on the date of
the grant or modification, no compensation expense is recognized. SFAS
No.123, "Accounting for Stock-Based Compensation," as amended by SFAS
No.148 "Accounting for Stock-Based Compensation Transition and Disclosure,"
collectively "SFAS No.123," requires pro forma disclosures of net earnings
and earnings per share determined as if the Company accounted for its stock
warrants under the fair value method. Had compensation expense been
determined based on estimated fair value, the Company's net earnings and
earnings per share would have not have been materially different than those
reported.

ADVERTISING COSTS

Advertising costs are expensed as incurred.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
year in which those temporary differences are expected to be recovered or
settled. A valuation allowance is recorded if it is more likely than not
that some portion or all of the deferred tax assets will not be realized
based on a review of available evidence.

EARNINGS PER SHARE (EPS)

Basic EPS is calculated by dividing net earnings 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 and dilutive potential common stock shares that may be
outstanding in the future.

Potential common stock shares consist of shares that may arise from
outstanding dilutive common stock warrants (the number of which is computed
using the "treasury stock method") and from outstanding convertible
debentures (the number of which is computed using the "if converted
method"). Diluted EPS considers the potential dilution that could occur if
the Company's outstanding common stock warrants and convertible debentures
were converted into common stock that then shared in the Company's earnings
(as adjusted for interest expense, net of taxes, that would no longer occur
if the debentures were converted).

COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net earnings. However, certain changes in
assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the
stockholders' equity section of the consolidated balance sheet, such items
along with net earnings, are components of comprehensive income.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

In the ordinary course of business, the Company enters into off-balance
sheet financial instruments consisting of commitments to extend credit,
unused lines of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they are funded
or related fees are incurred or received.

F-11

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

RECENT ACCOUNTING AND REGULATORY DEVELOPMENTS

ACCOUNTING FOR LOAN COMMITMENTS. In March 2004, the SEC issued Staff
Accounting Bulletin No. 105, "Application of Accounting Principles to Loan
Commitments" (SAB 105). SAB 105 provides recognition guidance for entities
that issue loan commitments that are required to be accounted for as
derivative instruments. Currently, loan commitments that the Company enters
into would not be required to be accounted for as derivative instruments
under SAB 105.

IMPAIRMENT. Emerging Issues Task Force Issue No. 3-1 "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
("EITF 3-1") was issued and became effective March 31, 2004. This EITF
provides guidance for determining the meaning of "other-than-temporarily
impaired" and its application to certain debt and equity securities within
the scope of SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities," and investments accounted for under the cost method.
The guidance requires that investments which have declined in value due to
credit concerns or solely due to changes in interest rates must be recorded
as other-than-temporarily impaired unless the Company can assert and
demonstrate its intention to hold the security for a period of time
sufficient to allow for a recovery of fair value up to or beyond the cost
of the investment which might mean maturity. This issue also requires
disclosures assessing the ability and intent to hold investments in
instances in which an investor determines that an investment with a fair
value less than cost is not other-than-temporarily impaired. On September
30, 2004, the Financial Accounting Standards Board decided to delay the
effective date for the measurement and recognition guidance contained in
Issue 03-1. This delay does not suspend the requirement to recognize
other-than-temporary impairments as required by existing authoritative
literature. The disclosure guidance in Issue 3-1 was not delayed.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES. On January 1 2004, the Company
adopted FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities," as revised in December 2003 ("FIN 46-R"). FIN 46-R changes the
method of determining whether certain entities should be included in the
Company's financial statements. An entity is subject to FIN 46-R and is
called a variable interest entity ("VIE") if it has (1) equity that is
insufficient to permit the entity to finance its activities without
additional subordinated financial support from other parties, or (2) equity
investors that cannot make significant decisions about the entity's
operations, or that do not absorb the expected losses or receive the
expected returns of the entity. A VIE is consolidated by its primary
beneficiary, which is the party involved with the VIE that has a majority
of the expected losses or a majority of the expected residual returns or
both. FIN 46-R requires bank holding companies that have used controlled
business trusts to raise financing by issuing trust preferred securities to
deconsolidate their investments in those trusts.

The adoption of FIN 46-R resulted in the deconsolidation of Intervest
Statutory Trust I and II (both formed prior to FIN 46-R), which increased
both the Company's total assets and borrowed funds previously reported at
December 31, 2003 by $928,000, but had no effect on its net income,
stockholders' equity and regulatory capital.

In response to FIN 46-R, the Federal Reserve on March 1, 2005 issued a
final rule that would retain trust preferred securities in the Tier 1
capital of bank holding companies (BHC), but with stricter quantitative
limits and clearer qualitative standards. The new rule provides a
transition period for BHCs to meet the new, stricter limitations within
regulatory capital by allowing the limits on restricted core capital
elements to become fully effective as of March 31, 2009.

F-12

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

RECENT ACCOUNTING AND REGULATORY DEVELOPMENTS, CONTINUED

Until March 31, 2009, BHCs generally must comply with the current Tier 1
capital limits. That is, BHCs generally should calculate their Tier 1
capital on a basis that limits the aggregate amount of qualifying
cumulative perpetual preferred stock and qualifying trust preferred
securities to 25 percent of the sum of qualifying common stockholder's
equity, qualifying noncumulative and cumulative perpetual preferred stock
(including related surplus), qualifying minority interest in the equity
accounts of consolidated subsidiaries, and qualifying trust preferred
securities. Amounts of qualifying cumulative perpetual preferred stock and
qualifying trust preferred securities in excess of this limit may be
included in Tier 2 capital.

Beginning March 31, 2009, qualifying cumulative perpetual preferred stock
and trust preferred securities, as well as certain types of minority
interest, are limited to 25 percent of the sum of core capital elements net
of goodwill. The Holding Company currently does not have any goodwill.

Beginning March 31, 2009, the excess amounts of restricted core capital
elements in the form of qualifying trust preferred securities included in
Tier 2 capital are limited to 50 percent of Tier 1 capital (net of
goodwill). Amounts in excess of this limit will still be taken into account
in the overall assessment of an organization's funding and financial
condition. The final rule also provides that in the last five years before
the underlying subordinated note matures, the associated trust preferred
securities must be treated as limited-life preferred stock. Thus, in the
last five years of the life of the note, the outstanding amount of trust
preferred securities will be excluded from Tier 1 capital and included in
Tier 2 capital, subject, together with subordinated debt and other
limited-life preferred stock, to a limit of 50 percent of Tier 1 capital.
During this period, the trust preferred securities will be amortized out of
Tier 2 capital by one-fifth of the original amount (less redemptions) each
year and excluded totally from Tier 2 capital during the last year of life
of the underlying note. As of March 31, 2005, assuming the Company no
longer included its trust preferred securities in Tier 1 Capital, the
Company would still exceed the well capitalized threshold under the
regulatory framework for prompt corrective action.

SHARE-BASED COMPENSATION. In December 2004, the FASB issued SFAS No. 123
(revised 2004), "Share-Based Payment," SFAS No. 123-R). SFAS No. 123-R
requires companies to recognize in the income statement the grant-date fair
value of stock options and other equity-based compensation issued to
employees and directors, but expresses no preference for a type of
valuation model. SFAS No. 123-R eliminates the intrinsic value-based method
that the Company currently uses. On April 14, 2005 the U.S. Securities and
Exchange Commission announced a deferral of the effective date of SFAS No.
123-R for calendar year companies until the beginning of 2006. The
Company's consolidated financial statements will be prepared in accordance
with this new standard if and when the Company issues any new stock
warrants and/or options to employees or directors in the future. The amount
of any impact on the Company's consolidated financial statements cannot be
determined at this juncture.

CERTAIN LOANS AND DEBT SECURITIES ACQUIRED IN A TRANSFER. In December 2003,
the American Institute of Certified Public Accountants issued Statement of
Position 03-3, "Accounting for Certain Loans and Debt Securities Acquired
in a Transfer" (SOP 03-3). SOP 03-3 addresses accounting for differences
between contractual cash flows expected to be collected and an investor's
initial investment in loans or debt securities acquired in a transfer if
those differences are attributable, at least in part, to credit quality.
SOP 03-3 also prohibits "carrying over" or creation of valuation allowances
in the initial accounting of all loans acquired in a transfer that are
within the scope of SOP 03-3. The prohibition of the valuation allowance
carryover applies to the purchase of an individual loan, a pool of loans, a
group of loans, and loans acquired in a purchase business combination. SOP
03-3 is effective for loans acquired in fiscal years beginning after
December 15, 2004. The Company does not anticipate that the adoption of SOP
03-3 will have a material impact on its financial condition or result of
operations.

F-13

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED

RECENT ACCOUNTING AND REGULATORY DEVELOPMENTS, CONTINUED

NONMONETARY ASSETS. In December 2004, the FASB issued SFAS No. 153,
"Exchanges of Nonmonetary Assets-an Amendment to APB opinion No. 29." This
Statement addresses the measurement of exchanges of nonmonetary assets. The
statement is effective for fiscal periods beginning after June 15, 2005.
Management believes this Statement will not have a material effect on the
Company's financial statements.

2. SECURITIES

The carrying value (amortized cost) and estimated fair value of securities
held to maturity are as follows:

Gross Gross Estimated Wtd-Avg
Amortized Unrealized Unrealized Fair Wtd-Avg Remaining
($in thousands) Cost Gains Losses Value Yield Maturity
--------------------------------------------------------------------------------------------------

At March 31, 2005 $ 254,754 - $ 2,977 $ 251,777 2.53% 1.3 Years
At December 31, 2004 $ 248,888 $ 12 $ 1,689 $ 247,211 2.33% 1.4 Years
At December 31, 2003 $ 152,823 $ 278 $ 106 $ 152,995 1.75% 1.1 Years

All the securities at March 31, 2005, December 31, 2004 and 2003 were debt
obligations of U.S. government corporations or sponsored agencies (FHLB,
FNMA, FHLMC, SLMA or FFCB). The securities have fixed rates or have
predetermined scheduled rate increases, and some have call features that
allow the issuer to call the security before its stated maturity without
penalty.

At March 31, 2005, the portfolio consisted of 173 securities, all of which
had an unrealized loss. Substantially all of the unrealized losses were for
a continuous period of more than 12 months. Management believes that the
cause of the unrealized losses is directly related to changes in interest
rates. In general, as interest rates rise, the fair value of fixed rate
securities will decrease; as interest rates fall, their fair value will
increase.

The Company views the unrealized losses noted above to be temporary based
on the impact of interest rates, the very short life of the investments and
their high credit quality. In addition, the Company has the ability and
intent to hold its investments for a period of time sufficient for the fair
value of the securities to recover. Management evaluates securities for
other-than-temporary impairment at least on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation.

The amortized cost and estimated fair value of securities held to maturity
by remaining term to contractual maturity is as follows:

($in thousands) Amortized Cost Estimated Fair Value Average Yield
----------------------------------------------------------------------------------------------

At March 31, 2005:
Due in one year or less $ 99,154 $ 98,503 2.14%
Due after one year through five years 155,600 153,274 2.78%
----------------------------------------------------------------------------------------------
$ 254,754 $ 251,777 2.53%
----------------------------------------------------------------------------------------------

($in thousands) Amortized Cost Estimated Fair Value Average Yield
----------------------------------------------------------------------------------------------
At December 31, 2004:
Due in one year or less $ 84,586 $ 84,235 1.81%
Due after one year through five years 164,302 162,976 2.59%
----------------------------------------------------------------------------------------------
$ 248,888 $ 247,211 2.33%
----------------------------------------------------------------------------------------------

The Company did not have any securities classified as available for sale
during the first quarter of 2005 or for the full year of 2004 and 2003. In
2002, there were sales of $3,500,000 of securities available for sale and
gross realized gains amounted to $120,000. There were no other sales of
securities during the reporting periods.

F-14

3. LOANS RECEIVABLE

Loans receivable are as follows:

At March 31, 2005 At December 31, 2004 At December 31, 2003
----------------- -------------------- ---------------------
($in thousands) # of Loans Amount # of Loans Amount # of Loans Amount
----------------------------------------------------------------------------------------------------------------

Commercial real estate loans 258 $ 641,749 244 $ 601,512 184 $344,071
Residential multifamily loans 248 424,837 249 403,613 210 310,650
Land development and other land loans 17 37,787 11 19,198 6 20,526
Residential 1-4 family loans 4 983 4 984 26 1,628
Commercial business loans 22 1,042 23 1,215 28 1,662
Consumer loans 12 241 12 221 16 319
----------------------------------------------------------------------------------------------------------------
Loans receivable 561 1,106,639 543 1,026,743 470 678,856
----------------------------------------------------------------------------------------------------------------
Deferred loan fees (11,478) (11,347) (7,731)
----------------------------------------------------------------------------------------------------------------
Loans receivable, net of deferred fees 1,095,161 1,015,396 671,125
----------------------------------------------------------------------------------------------------------------
Allowance for loan losses (12,139) (11,106) (6,580)
----------------------------------------------------------------------------------------------------------------
Loans receivable, net $1,083,022 $1,004,290 $664,545
----------------------------------------------------------------------------------------------------------------

At March 31, 2005, December 31, 2004, and December 31, 2003, there were
$4,607,000, $,4,607,000 and $8,474,000 of loans on nonaccrual status,
respectively. These loans were considered impaired under the criteria of
SFAS No.114, but no valuation allowance was maintained at any time since
the Company believes that the estimated fair value of the underlying
properties exceeded the Company's recorded investment. There were no other
loans classified as nonaccrual, impaired or ninety days past due and still
accruing interest at March 31, 2005, December 31, 2004 and 2003. In April
2005, the property collateralizing a nonaccrual loan with a principal
balance of $3,857,000 was sold at foreclosure to a third party. The loan
was paid in full and the Bank recovered all amounts due thereunder.

Interest income that was not recorded on nonaccrual loans under their
contractual terms amounted to $104,000 and $28,000 in the quarter ended
March 31, 2005 and 2004, respectively, and $236,000 in 2004, $339,000 in
2003 and $29,000 in 2002. The average balance of nonaccrual loans for the
quarter ended March 31, 2005 and 2004 was $4,607,000 and $5,290,000,
respectively, and $3,162,000 in 2004, $4,568,000 in 2003 and $310,000. in
2002.

Credit risk represents the possibility of the Company not recovering
amounts due from its borrowers and is significantly related to local
economic conditions in the areas the properties are located. Economic
conditions affect the market value of the underlying collateral as well as
the levels of occupancy of income-producing properties (such as office
buildings, shopping centers and rental and cooperative apartment
buildings).

The geographic distribution of the loan portfolio is as follows:

At March 31, 2005 At December 31, 2004 At December 31, 2003
----------------- -------------------- --------------------
($in thousands) Amount % of Total Amount % of Total Amount % of Total
----------------------------------------------------------------------------------------------------

New York $ 768,086 69.4% $ 729,301 71.0% $435,790 64.2%
Florida 227,652 20.6 198,823 19.4 189,802 28.0
Connecticut and New Jersey 52,353 4.7 51,186 5.0 39,681 5.8
All other states 58,548 5.3 47,433 4.6 13,583 2.0
----------------------------------------------------------------------------------------------------
$1,106,639 100.0% $1,026,743 100.0% $678,856 100.0%
----------------------------------------------------------------------------------------------------

4. ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses is as follows:

For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
($in thousands) 2005 2004 2004 2003 2002
-----------------------------------------------------------------------------------------------------------

Allowance at beginning of period $ 11,106 $ 6,580 $ 6,580 $ 4,611 $ 3,380
Provision charged to operations 1,033 1,077 4,526 1,969 1,274
Chargeoffs (1) - - - - (150)
Recoveries (2) - - - - 107
-----------------------------------------------------------------------------------------------------------
Allowance at end of period $ 12,139 $ 7,657 $ 11,106 $ 6,580 $ 4,611
-----------------------------------------------------------------------------------------------------------

(1) Represents a chargeoff taken in connection with the transfer of a
nonperforming loan to foreclosed real estate.
(2) Represents proceeds received from the sale of collateral from a loan
that was charged off prior to 1997.

F-15

5. PREMISES AND EQUIPMENT, LEASE COMMITMENTS AND RENTAL EXPENSE

Premises and equipment is as follows:

At March 31, At December 31,
------------ ---------------
($in thousands) 2005 2004 2003
----------------------------------------------------------------------------------

Land $ 1,516 $ 1,516 $ 1,516
Buildings 4,979 4,979 4,913
Leasehold improvements 1,356 1,355 346
Furniture, fixtures and equipment 2,377 2,276 2,137
----------------------------------------------------------------------------------
Total cost 10,228 10,126 8,912
----------------------------------------------------------------------------------
Less accumulated deprecation and amortization (3,618) (3,490) (3,160)
----------------------------------------------------------------------------------
Net book value $ 6,610 $ 6,636 $ 5,752
----------------------------------------------------------------------------------

The offices of the Holding Company, Intervest Mortgage Corporation,
Intervest Securities Corporation and the Bank's headquarters and
full-service banking office are located in leased premises on the entire
fourth floor of One Rockefeller Plaza in New York City. In addition, the
Bank leases its Belcher Road office in Clearwater, Florida. The leases
expire in March 2014 and June 2007, respectively. The Bank owns all of its
remaining offices in Florida. Both leases contain operating escalation
clauses related to taxes and operating costs based upon various criteria
and are accounted for as operating leases. Total future minimum annual
lease payments due under these non-cancelable leases as of March 31, 2005
are as follows: $680,000 in the period April 1, 2005 to December 31, 2005;
$911,000 in 2006; $852,000 in 2007; $856,000 in 2008; $878,000 in 2009; and
$3,839,000 thereafter for an aggregate amount of $8,016,000. Rent expense
aggregated $226,000 and $148,000 in the quarter ended March 31, 2005 and
2004, respectively, and $986,000 in 2004, $654,000 in 2003 and $618,000 in
2002. The Bank leases a portion of the space in its office buildings in
Florida that is not used for banking operations to other companies under
leases that expire at various times through October 2009. Future lease
rental income due under these non-cancelable subleases as of March 31, 2005
are as follows: $359,000 in the period April 1, 2005 to December 31, 2005;
$380,000 in 2006; $213,000 in 2007; $45,000 in 2008; and $24,000 in 2009
for an aggregate amount of $1,021,000. Lease rental income aggregated
$130,000 and $122,000 in the quarter ended March 31, 2005 and 2004,
respectively, and $498,000 in 2004, $462,000 in 2003 and $421,000 in 2002.

6. DEPOSITS

Scheduled maturities of certificates of deposit accounts are as follows:

At March 31, 2005 At December 31, 2004 At December 31, 2003
----------------- -------------------- --------------------
Wtd-Avg Wtd-Avg Wtd-Avg
($in thousands) Amount Stated Rate Amount Stated Rate Amount Stated Rate
-------------------------------------------------------------------------------------------------

Within one year $311,192 2.98% $269,553 2.84% $182,693 2.75%
Over one to two years 120,298 3.67 119,780 3.43 90,936 3.64
Over two to three years 171,894 4.34 134,409 4.48 30,094 4.43
Over three to four years 98,335 4.10 75,317 4.06 89,085 4.83
Over four years 186,625 4.54 145,712 4.48 74,351 4.20
-------------------------------------------------------------------------------------------------
$888,344 3.79% $744,771 3.68% $467,159 3.66%
-------------------------------------------------------------------------------------------------

Certificates of deposit accounts (CDs) of $100,000 or more totaled
$267,262,000 at March 31, 2005 with a remaining maturity as follows: due
within one year $96,951,000; over one to two years $27,070,000; over two to
three years $51,584,000; over three to four years $27,941,000; and over
four years $63,716,000. CDs of $100,000 or more totaled $215,876,000 and
$123,063,000 at December 31, 2004 and 2003, respectively.

Interest expense on deposits is as follows:

For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
($in thousands) 2005 2004 2004 2003 2002
- -------------------------------------------------------------------------------------------------------

Interest checking accounts $ 52 $ 40 $ 187 $ 182 $ 221
Savings accounts 113 137 550 601 762
Money market accounts 1,059 742 3,583 2,763 3,082
Certificates of deposit accounts 7,815 4,393 22,010 14,891 13,304
- -------------------------------------------------------------------------------------------------------
$ 9,039 $ 5,312 $ 26,330 $ 18,437 $ 17,369
- -------------------------------------------------------------------------------------------------------

F-16

7. SUBORDINATED DEBENTURES AND MORTGAGE NOTE PAYABLE

Subordinated debentures and mortgage note payable are summarized as
follows:

At March 31, At December 31,
------------ ---------------
($in thousands) 2005 2004 2003
----------------------------------------------------------------------------------------------------------

INTERVEST MORTGAGE CORPORATION (1) :
Series 05/12/95 - interest at 2% above prime - due April 1, 2004 $ - $ - $ 9,000
Series 10/19/95 - interest at 2% above prime - due October 1, 2004 - - 9,000
Series 05/10/96 - interest at 2% above prime - due April 1, 2005 10,000 10,000 10,000
Series 10/15/96 - interest at 2% above prime - due October 1, 2005 5,500 5,500 5,500
Series 04/30/97 - interest at 1% above prime - due October 1, 2005 8,000 8,000 8,000
Series 11/10/98 - interest at 9% fixed - due January 1, 2005 - 2,600 2,600
Series 06/28/99 - interest at 8 1/2% fixed - due July 1, 2004 - - 2,000
Series 06/28/99 - interest at 9% fixed - due July 1, 2006 2,000 2,000 2,000
Series 09/18/00 - interest at 8 1/2% fixed - due January 1, 2006 1,250 1,250 1,250
Series 09/18/00 - interest at 9% fixed - due January 1, 2008 1,250 1,250 1,250
Series 08/01/01 - interest at 7 1/2% fixed - due April 1, 2005 1,750 1,750 1,750
Series 08/01/01 - interest at 8% fixed - due April 1, 2007 2,750 2,750 2,750
Series 08/01/01 - interest at 8 1/2% fixed - due April 1, 2009 2,750 2,750 2,750
Series 01/17/02 - interest at 7 1/4% fixed - due October 1, 2005 1,250 1,250 1,250
Series 01/17/02 - interest at 7 1/2% fixed - due October 1, 2007 2,250 2,250 2,250
Series 01/17/02 - interest at 7 3/4% fixed - due October 1, 2009 2,250 2,250 2,250
Series 08/05/02 - interest at 7 1/4% fixed - due January 1, 2006 1,750 1,750 1,750
Series 08/05/02 - interest at 7 1/2% fixed - due January 1, 2008 3,000 3,000 3,000
Series 08/05/02 - interest at 7 3/4% fixed - due January 1, 2010 3,000 3,000 3,000
Series 01/21/03 - interest at 6 3/4% fixed - due July 1, 2006 1,500 1,500 1,500
Series 01/21/03 - interest at 7 % fixed - due July 1, 2008 3,000 3,000 3,000
Series 01/21/03 - interest at 7 1/4% fixed - due July 1, 2010 3,000 3,000 3,000
Series 07/25/03 - interest at 6 1/2% fixed - due October 1, 2006 2,500 2,500 2,500
Series 07/25/03 - interest at 6 3/4% fixed - due October 1, 2008 3,000 3,000 3,000
Series 07/25/03 - interest at 7 % fixed - due October 1, 2010 3,000 3,000 3,000
Series 11/28/03 - interest at 6 1/4% fixed - due April 1, 2007 2,000 2,000 -
Series 11/28/03 - interest at 6 1/2% fixed - due April 1, 2009 3,500 3,500 -
Series 11/28/03 - interest at 6 3/4% fixed - due April 1, 2011 4,500 4,500 -
Series 06/07/04 - interest at 6 1/4% fixed - due January 1, 2008 2,500 2,500 -
Series 06/07/04 - interest at 6 1/2% fixed - due January 1, 2010 4,000 4,000 -
Series 06/07/04 - interest at 6 3/4% fixed - due January 1, 2012 5,000 5,000 -
-------------------------------
86,250 88,850 87,350
INTERVEST BANCSHARES CORPORATION:
Series 05/14/98 - interest at 8% fixed - due July 1, 2008 3,060 3,080 4,840
Series 12/15/00 - interest at 8 1/2% fixed - due April 1, 2006 1,250 1,250 1,250
Series 12/15/00 - interest at 9% fixed - due April 1, 2008 1,250 1,250 1,250
-------------------------------
5,560 5,580 7,340
INTERVEST NATIONAL BANK:
Mortgage note payable (2) - interest at 7% fixed - due February 1, 2017 239 242 255
----------------------------------------------------------------------------------------------------------
$ 92,049 $94,672 $94,945
----------------------------------------------------------------------------------------------------------

(1) Prime represents the prime rate of JPMorganChase Bank, which was 5.75%
at March 31, 2005, 5.25% at December 31, 2004 and 4.00% at December 31,
2003. The floating-rate debentures have a maximum interest rate of 12%. (2)
The note cannot be prepaid except during the last year of its term.

Intervest Mortgage Corporation's following debentures matured and were
repaid in 2004: Series 5/12/95 due April 1, 2004 for $9,000,000 of
principal and $2,749,000 of accrued interest; Series 6/28/99 due July 1,
2004 for $2,000,000 of principal and $980,000 of accrued interest; and
Series 10/19/95 due October 1, 2004 for $9,000,000 of principal and
$2,244,000 of accrued interest. On January 1, 2005, Intervest Mortgage
Corporation's Series 11/10/98 debentures matured and were repaid for
$2,600,000 of principal and $1,859,000 of accrued interest. On April 1,
2005, Intervest Mortgage Corporation's Series 5/10/96 and 8/01/01
debentures matured and were repaid for $11,750,000 of principal and
$2,302,000 of accrued interest.

F-17

7. SUBORDINATED DEBENTURES AND MORTGAGE NOTE PAYABLE, CONTINUED

In April 2005, Intervest Mortgage Corporation issued $14,000,000 of its
Series 3/21/05 debentures for net proceeds, after offering costs, of
approximately $12,975,000, with terms as follows: $3,000,000 maturing April
1, 2009 with an annual interest rate of 6.25%; $4,500,000 maturing April 1,
2011 with an annual interest rate of 6.50%; and $6,500,000 maturing April
1, 2013 with an annual interest rate of 7.00%

Interest is paid quarterly on Intervest Mortgage Corporation's debentures
except for: $1,980,000 of Series 5/10/96; all of Series 6/28/99, 9/18/00;
$770,000 of Series 8/01/01; $270,000 of Series 1/17/02; $1,520,000 of
Series 8/05/02; $1,750,000 of Series 11/28/03; $1,910,000 of Series 6/7/04;
and $1,920,000 of Series 3/21/05, all of which accrue and compound interest
quarterly, with such interest due and payable at maturity.

The holders of Intervest Mortgage Corporation's Series 6/28/99, 9/18/00 and
Series 1/17/02 through 3/21/05 debentures, on first-come, first-serve
basis, can require Intervest Mortgage Corporation to repurchase the
debentures for face amount plus accrued interest each year (beginning
October 1, 2005 for Series 1/17/02, January 1, 2006 for Series 8/05/02,
July 1, 2006 for Series 1/21/03, October 1, 2006 for Series 7/25/03,
January 1, 2007 for Series 11/28/03, January 1, 2008 for Series 6/7/04 and
April 1, 2009 for Series 3/21/05). However, in no calendar year can the
required purchases be more than $100,000 in principal amount of each
maturity, in each series of debentures, on a non-cumulative basis.

Intervest Mortgage Corporation's debentures may be redeemed at its option
at any time, in whole or in part, for face value, except for Series 6/7/04
and 3/21/05, which would be at a premium of 1% if they were redeemed prior
to July 1, 2005 for Series 6/7/04 and prior to October 1, 2006 for Series
3/21/05. All the debentures are unsecured and subordinate to all present
and future senior indebtedness, as defined in the indenture related to each
debenture.

The Holding Company's Series 5/14/98 subordinated debentures are
convertible along with accrued interest at the option of the holders at any
time prior to April 1, 2008 into shares of its Class A common stock at the
following conversion prices per share: $14.00 in 2005; $16.00 in 2006;
$18.00 in 2007 and $20.00 from January 1, 2008 through April 1, 2008. The
Holding Company has the right to establish conversion prices that are less
than those set forth above for such periods as it may determine. In the
first quarter of 2005, $34,000 of debentures ($20,000 of principal and
$14,000 of accrued interest) were converted into shares of Class A common
stock at $14.00 per share. In 2004, $2,883,000 of debentures ($1,760,000 of
principal and $1,123,000 of accrued interest) were converted into shares of
Class A common stock at $12.00 per share. In 2003, $3,100,000 of debentures
($2,090,000 of principal and $1,010,000 of accrued interest) were converted
into shares of Class A common stock at $10.01 per share.

At March 31, 2005, interest accrued and compounded quarterly on $2,460,000
of the Holding Company's convertible debentures at the rate of 8% per
annum, while $600,000 of the convertible debentures paid interest quarterly
at the rate of 8% per annum. All accrued interest of $1,762,000 is due and
payable at maturity whether by acceleration, redemption or otherwise. Any
convertible debenture holder may, on or before July 1 of each year, elect
to be paid all accrued interest and to thereafter receive regular payments
of interest quarterly. The Holding Company may redeem any of its
debentures, in whole or in part, at any time for face value.

Scheduled contractual maturities as of March 31, 2005 are as follows:

($in thousands) Principal Accrued Interest
---------------------------------------------------------------------------------

For the period April 1, 2005 to December 31, 2005 $ 26,510 $ 3,492
For the year ended December 31, 2006 10,264 1,952
For the year ended December 31, 2007 7,015 143
For the year ended December 31, 2008 17,076 2,492
For the year ended December 31, 2009 8,517 198
Thereafter 22,667 264
---------------------------------------------------------------------------------
$ 92,049 $ 8,541
---------------------------------------------------------------------------------

F-18

8. FEDERAL FUNDS PURCHASED, FEDERAL HOME LOAN BANK ADVANCES AND LINES OF
CREDIT

From time to time, the Bank may borrow funds on an overnight or short-term
basis to manage its liquidity needs. At March 31, 2005, the Bank had
agreements with correspondent banks whereby it could borrow up to
$16,000,000 of federal funds on an unsecured basis. In addition, as a
member of the Federal Home Loan Bank of New York (FHLB) and the Federal
Reserve Bank of New York (FRB), at March 31, 2005, the Bank could also
borrow from these institutions on a secured basis that aggregated
approximately $230,000,000 based on available collateral (which is
comprised of investment securities that were pledged or were available to
be pledged).

The following is a summary of certain information regarding short-term
borrowings in the aggregate:

Balance at period end (1) $ 15,000 $ - $ 36,000 $ - $ -
Maximum amount outstanding at any month end $ 17,000 $ - $ 36,000 $ - $ -
Average outstanding balance for the period $ 13,911 $ - $ 1,914 $ - $ 116
Weighted-average interest rate paid for the period 2.62% -% 2.08% -% 1.87%
Weighted-average interest rate at period end 2.96% -% 2.56% -% -%
----------------------------------------------------------------------------------------------------------------------------

(1) The balance at March 31, 2005 represented FHLB advances of $15,000,000
due in April 2005. The amounts were repaid. The balance at December 31,
2004 represented FHLB advances of $19,000,000 due in January 2005 and
$17,000,000 due in February 2005. The amounts were repaid.

9. SUBORDINATED DEBENTURES - CAPITAL SECURITIES

Capital Securities (commonly referred to as Trust Preferred Securities) are
summarized as follows:

At March 31, 2005 At December 31, 2004 At December 31, 2003
----------------- --------------------- --------------------
($in thousands) Accrued Accrued Accrued
Principal Interest Principal Interest Principal Interest
-----------------------------------------------------------------------------------------------------------------------

Capital Securities I - debentures due 12/18/2031 $ 15,464 $ 441 $ 15,464 $ 59 $ 15,464 $ 58
Capital Securities II - debentures due 9/17/2033 15,464 41 15,464 41 15,464 39
Capital Securities III - debentures due 3/17/2034 15,464 35 15,464 36 - -
Capital Securities IV - debentures due 9/20/2034 15,464 29 15,464 29 - -
-----------------------------------------------------------------------------------------------------------------------
$ 61,856 $ 546 $ 61,856 $ 165 $ 30,928 $ 97
-----------------------------------------------------------------------------------------------------------------------

The Capital Securities are obligations of the Holding Company's wholly
owned statutory business trusts, Intervest Statutory Trust I, II, III and
IV. Each Trust was formed with a capital contribution of $464,000 from the
Holding Company and for the sole purpose of issuing and administering the
Capital Securities. The proceeds from the issuance of the Capital
Securities together with the capital contribution for each Trust were used
to acquire the Holding Company's Junior Subordinated Debentures that are
due concurrently with the Capital Securities. The Capital Securities
qualify as regulatory capital (see note 1 herein).

The sole assets of the Trusts, the obligors on the Capital Securities, are
the Junior Subordinated Debentures. In addition, for each Trust, the
Holding Company has guaranteed the payment of distributions on, payments on
any redemptions of, and any liquidation distribution with respect to the
Capital Securities. Issuance costs of $469,000, $444,000, $444,000 and
$220,000 associated with Capital Securities I, II, III and IV,
respectively, have been capitalized by the Holding Company and are being
amortized over the life of the securities using the straight-line method.

Interest payments on the Junior Subordinated Debentures (and the
corresponding distributions on the Capital Securities) are payable in
arrears as follows: Capital Securities I - semi-annually at the fixed rate
of 9.875% per annum; Capital Securities II - quarterly at the fixed rate of
6.75% per annum until September 17, 2008 and thereafter at the rate of
2.95% over 3 month libor; Capital Securities III - quarterly at the fixed
rate of 5.88% per annum until March 17, 2009 and thereafter at the rate of
2.79% over 3 month libor; and Capital Securities IV - quarterly at the
fixed rate of 6.20% per annum until September 20, 2009 and thereafter at
the rate of 2.40% over 3 month libor.

F-19

9. SUBORDINATED DEBENTURES - CAPITAL SECURITIES, CONTINUED

Interest payments may be deferred at any time and from time to time during
the term of the Junior Subordinated Debentures at the election of the
Company for up to 20 consecutive quarterly periods (5 years). There is no
limitation on the number of extension periods the Company may elect;
provided, however, no deferral period may extend beyond the maturity date
of the Junior Subordinated Debentures. During an interest deferral period,
interest will continue to accrue on the Junior Subordinated Debentures and
interest on such accrued interest will accrue at an annual rate equal to
the interest rate in effect for such deferral period, compounded quarterly
from the date such interest would have been payable were it not deferred.
At the end of the deferral period, the Company will be obligated to pay all
interest then accrued and unpaid.

All of the Capital Securities are subject to mandatory redemption as
follows: (i) in whole, but not in part, upon repayment of the Junior
Subordinated Debentures at stated maturity or earlier, at the option of the
Holding Company, within 90 days following the occurrence and continuation
of certain changes in the tax or capital treatment of the Capital
Securities, or a change in law such that the Trust would be considered an
investment company, contemporaneously with the redemption by the Holding
Company of the Junior Subordinated Debentures; and (ii) in whole or in part
at any time on or after December 18, 2006 for Capital Securities I,
September 17, 2008 for Capital Securities II, March 17, 2009 for Capital
Securities III, and September 20, 2009 for Capital Securities IV
contemporaneously with the optional redemption by the Holding Company of
the Junior Subordinated Debentures in whole or in part. Any redemption
would be subject to the receipt of regulatory approvals.

10. STOCKHOLDERS' EQUITY

The Holding Company's Board of Directors is authorized to issue up to
300,000 shares of preferred stock of the Holding Company without
stockholder approval. The powers, preferences and rights, and the
qualifications, limitations, and restrictions thereof on any series of
preferred stock issued is determined by the Board of Directors. There is no
preferred stock issued and outstanding. Class A and B common stock have
equal voting rights as to all matters, except that, so long as at least
50,000 shares of Class B common stock remain issued and outstanding, the
holders of the outstanding shares of Class B common stock are entitled to
vote for the election of two-thirds of the Board of Directors (rounded up
to the nearest whole number), and the holders of the outstanding shares of
Class A common stock are entitled to vote for the remaining Directors of
the Holding Company. The shares of Class B common stock are convertible, on
a share-for-share basis, into Class A common stock at any time.

11. ASSET AND DIVIDEND RESTRICTIONS

The Bank is required under FRB regulations to maintain reserves (generally
consisting of cash or noninterest-earning accounts) against its transaction
accounts. At March 31, 2005, December 31, 2004 and 2003, balances
maintained as reserves were $956,000, $1,190,000 and $691,000,
respectively. At March 31, 2005, $14,052,000 was reserved for the payment
of principal and interest due on debentures.

As a member of the Federal Reserve Banking and Federal Home Loan Banking
systems, the Bank must maintain an investment in the capital stock of the
FRB and FHLB. At March 31, 2005, December 31, 2004 and 2003, the total
investment, which earns a dividend, aggregated $5,092,000, $5,092,000 and
$3,075,000, respectively. At March 31, 2005, December 31, 2004 and 2003,
U.S. government agency securities with a carrying value of $81,067,000,
$82,218,000 and $5,835,000, respectively, were pledged against various
lines of credit. The payment of dividends by the Holding Company to its
shareholders and the payment of dividends by the Holding Company's
subsidiaries to the Holding Company itself are subject to various
regulatory restrictions, as well as restrictions that may arise from
outstanding indentures. These restrictions take into consideration various
factors such as whether there are sufficient net earnings, as defined,
liquidity, asset quality, capital adequacy and economic conditions. The
holders of Class A common stock and Class B common stock share ratably in
any dividend. The Holding Company has not paid any dividends on its capital
stock and currently is not contemplating the payment of a dividend.

F-20

12. PROFIT SHARING PLANS

The Company sponsors tax-qualified, profit sharing plans in accordance with
the provisions of Section 401(k) of the Internal Revenue Code, whereby
eligible employees meeting certain length-of-service requirements may make
tax-deferred contributions up to certain limits. The Company makes
discretionary matching contributions up to 3% of employee compensation,
which vest to the employees over a period of time. Total cash contributions
to the plans included in the consolidated statements of earnings aggregated
$19,000 and $15,000 for the quarter ended March 31, 2005 and 2004,
respectively, and $68,000, $55,000 and $47,000 in 2004, 2003 and 2002,
respectively.

13. RELATED PARTY TRANSACTIONS

The Bank has deposit accounts from affiliated companies, directors,
executive officers and members of their immediate families and related
business interests of approximately $30,000,000 at March 31, 2005,
$32,000,000 at December 31, 2004 and $35,000,000 at December 31, 2003.
There are no loans to any directors or executive officers of the Holding
Company or its subsidiaries.

The Company paid fees of approximately $19,000 in each of the quarters
ended March 31, 2005 and 2004, and $177,000 in 2004, $262,000 in 2003 and
$157,000 in 2002 for legal services rendered by a law firm, a principal of
which is a director of the Company. The Company paid commissions and fees
in connection with the placement of debentures and for the purchase of
investment securities of approximately $5,000 and $329,000 in the quarter
ended March 31, 2005 and 2004, respectively, and $680,000 in 2004, $531,000
in 2003 and $515,000 in 2002 to a broker/dealer, a principal of which is a
director of the Company.

14. COMMON STOCK WARRANTS

At March 31, 2005, the Holding Company had 696,465 common stock warrants
outstanding that entitle its holder, the Chairman of the Holding Company,
to purchase one share of Class A or Class B common stock, as the case may
be, for each warrant. All warrants are currently exercisable.

Data concerning common stock warrants is as follows:

Exercise Price Per Warrant
-------------------------- Total Wtd-Avg
CLASS A COMMON STOCK WARRANTS: $6.67 $10.01 Warrants Exercise Price
-------------------------------------------------------------------------------------------------------------

Outstanding at December 31, 2001 1,370,815 1,084,403 2,455,218 $ 9.42
Exercised in 2002 (772,600) (30,858) (803,458) $ 9.88
Expired in 2002 (96,750) - (96,750) $ 6.67
--------------------------------------------------------------------------------------------
Outstanding at December 31, 2002 501,465 1,053,545 1,555,010 $ 8.93
--------------------------------------------------------------------------------------------
Exercised in 2003 - (945,717) (945,717) $ 10.01
Expired in 2003 - (65,318) (65,318) $ 10.01
--------------------------------------------------------------------------------------------
Outstanding at December 31, 2003 (1) 501,465 42,510 543,975 $ 6.93
--------------------------------------------------------------------------------------------
Exercised in 2004 - (42,510) (42,510) $ 10.01
--------------------------------------------------------------------------------------------
Outstanding at December 31, 2004 and March 31, 2005 501,465 - 501,465 $ 6.67
--------------------------------------------------------------------------------------------
Remaining contractual life in years at March 31, 2005 1.8 - 1.8
-------------------------------------------------------------------------------------------------------------

(1) The holders of the 42,510 warrants outstanding at December 31, 2003
presented these warrants to the Company for exercise prior to the
expiration date of December 31, 2003. The resulting shares were issued in
January 2004.

Exercise Price Per Warrant
-------------------------- Total Wtd-Avg
CLASS B COMMON STOCK WARRANTS: $6.67 $10.00 Warrants Exercise Price
------------------------------------------------------------------------------------------------------------------

Outstanding at December 31, 2002 through March 31, 2005 145,000 50,000 195,000 $ 7.52
-------------------------------------------------------------------------------------------------
Remaining contractual life in years at March 31, 2005 2.8 2.8 2.8
------------------------------------------------------------------------------------------------------------------

The Company elects to use the intrinsic value-based method prescribed under
APB Opinion No. 25, "Accounting for Stock Issued to Employees," in
accounting for its stock warrants. Under this method, compensation expense
related to stock warrants granted to employees is the excess, if any, of
the market price of the stock as of the grant or modification date over the
exercise price of the warrant.

F-21

14. COMMON STOCK WARRANTS, CONTINUED

For warrants granted to employees whose exercise price was reduced to
$10.01 effective January 1, 2002 and whose expiration date was extended in
2002, compensation expense was recorded under variable rate accounting as
prescribed by APB 25 and related interpretations. For these warrants, which
originally totaled 138,500, compensation expense was recorded in salaries
and employee benefits expense with a corresponding credit to paid in
capital in the consolidated financial statements.

Compensation expense recorded in connection with common stock warrants is
summarized as follows:

For the Quarter Ended For the Year Ended
March 31, December 31,
----------------------------------------------
($in thousands) 2005 2004 2004 2003 2002
--------------------------------------------------------------------------------------------------------------------

Compensation expense recorded in connection with vesting of Class B
common stock warrants during the period $ - $ 7 $ 9 $ 26 $ 26
Compensation expense recorded in connection with Class A common
stock warrants whose terms were modified - - - 418 109
---------------------------------------------------------------------------------------------------------------------
$ - $ 7 $ 9 $ 444 $ 135
---------------------------------------------------------------------------------------------------------------------

15. INCOME TAXES

The Holding Company and its subsidiaries file a consolidated federal income
tax return and combined state and city income tax returns in New York. The
Holding Company also files a franchise tax return in Delaware. The Bank
files a state income tax return in Florida. All returns are filed on a
calendar year basis.

At March 31, 2005, December 31, 2004 and 2003, the Company had a net
deferred tax asset amounted to $5,547,000, $5,095,000, $2,960,000,
respectively. The asset relates to the unrealized benefit for net temporary
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases that will result in
future tax deductions. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized based on
available evidence. 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 was not maintained at any time.

Allocation of federal, state and local income taxes between current and
deferred portions is as follows:

($in thousands) Current Deferred Total
------------------------------------------------------------

Quarter Ended March 31, 2005:
-----------------------------
Federal $ 2,074 $ (368) $1,706
State and Local 886 (84) 802
------------------------------------------------------------
$ 2,960 $ (452) $2,508
------------------------------------------------------------
Quarter Ended March 31, 2004:
-----------------------------
Federal $ 1,823 $ (397) $1,426
State and Local 767 (89) 678
------------------------------------------------------------
$ 2,590 $ (486) $2,104
------------------------------------------------------------
Year Ended December 31, 2004:
-----------------------------
Federal $ 7,707 $ (1,742) $5,965
State and Local 3,204 (393) 2,811
------------------------------------------------------------
$ 10,911 $ (2,135) $8,776
------------------------------------------------------------
Year Ended December 31, 2003:
-----------------------------
Federal $ 5,576 $ (782) $4,794
State and Local 2,260 (181) 2,079
------------------------------------------------------------
$ 7,836 $ (963) $6,873
------------------------------------------------------------
Year Ended December 31, 2002:
-----------------------------
Federal $ 4,004 $ (547) $3,457
State and Local 1,390 (134) 1,256
------------------------------------------------------------
$ 5,394 $ (681) $4,713
------------------------------------------------------------

F-22

15. INCOME TAXES, CONTINUED

The components of the deferred tax benefit are as follows:

For The Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
($in thousands) 2005 2004 2004 2003 2002
------------------------------------------------------------------------------------------------------

Allowance for loan losses $ (490) $ (495) $ (2,073) $ (896) $ (623)
Organization and startup costs - 7 11 29 28
Stock-based compensation - (3) (4) 45 (62)
Depreciation (7) (4) (88) (65) (41)
Deferred income 45 9 19 (75) 13
All other - - - (1) 4
------------------------------------------------------------------------------------------------------
$ (452) $ (486) $ (2,135) $ (963) $ (681)
------------------------------------------------------------------------------------------------------

The tax effects of the temporary differences that give rise to the deferred
tax asset are as follows:

At March 31, At December 31,
------------- ---------------
($in thousands) 2005 2004 2003
-------------------------------------------------------------------

Allowance for loan losses $ 5,031 $ 4,541 $2,468
Organization and startup costs - - 11
Stock-based compensation 77 77 73
Depreciation 274 267 179
Deferred income 155 200 219
All other 10 10 10
-------------------------------------------------------------------
Total deferred tax asset $ 5,547 $ 5,095 $2,960
-------------------------------------------------------------------

The reconciliation between the statutory federal income tax rate and the
Company's effective tax rate (including state and local taxes) is as
follows:

For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
2005 2004 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------

Tax provision at statutory rate 35.0% 35.0% 35.0% 35.0% 34.0%
Increase in taxes resulting from:
State and local income taxes, net of federal benefit 8.6 8.5 8.4 8.2 6.6
Other - - - (0.2) -
----------------------------------------------------------------------------------------------------------------------
43.6% 43.5% 43.4% 43.0% 40.6%
----------------------------------------------------------------------------------------------------------------------

16. EARNINGS PER SHARE

Net earnings applicable to common stock and the weighted-average number of
shares used for basic and diluted earnings per share computations are as
follows:

For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
($in thousands, except share and per share amounts) 2005 2004 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------

Basic earnings per share:
Net earnings applicable to common stockholders $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906
Average number of common shares outstanding 6,273,843 6,042,087 6,068,755 4,938,995 4,043,619
---------------------------------------------------------------------------------------------------------------------------
Basic net earnings per share amount $ 0.52 $ 0.45 $ 1.89 $ 1.85 $ 1.71
---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
Net earnings applicable to common stockholders $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906
Adjustment to net earnings from assumed
conversion of debentures 55 82 254 452 436
----------------------------------------------------------------------
Adjusted net earnings for diluted earnings
per share computation $ 3,303 $ 2,817 $ 11,707 $ 9,572 $ 7,342
----------------------------------------------------------------------
Average number of common shares outstanding:
Common shares outstanding 6,273,843 6,042,847 6,068,755 4,938,995 4,043,619
Potential dilutive shares resulting from
exercise of warrants (1) 255,207 253,362 255,171 356,339 313,519
Potential dilutive shares resulting from
conversion of debentures (1) 342,719 592,279 504,250 962,386 990,983
----------------------------------------------------------------------
Total average number of common shares outstanding
used for dilution 6,871,769 6,888,488 6,828,176 6,257,720 5,348,121
---------------------------------------------------------------------------------------------------------------------------
Diluted net earnings per share amount $ 0.48 $ 0.41 $ 1.71 $ 1.53 $ 1.37
---------------------------------------------------------------------------------------------------------------------------

(1) All warrants and convertible debentures outstanding were considered in
the computation of diluted EPS because they were dilutive.

F-23

17. CONTINGENCIES

The Company is periodically a party to or otherwise involved in legal
proceedings arising in the normal course of business, such as foreclosure
proceedings. Management does not believe that there is any pending or
threatened proceeding against the Company, which, if determined adversely,
would have a material effect on the business, results of operations,
financial position or liquidity of the Company.

18. REGULATORY CAPITAL

The Holding Company is subject to regulation, examination and supervision
by the FRB. The Bank is also subject to regulation, examination and
supervision by the Federal Deposit Insurance Corporation (FDIC) and the
Office of the Comptroller of the Currency of the United States of America
(OCC). Intervest Securities Corporation is subject to regulation,
examination and supervision by the U.S. Securities and Exchange Commission
(SEC) and the NASD.

The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking
agencies. Failure to meet them can initiate certain mandatory and possibly
discretionary actions by the regulators that, if undertaken, could have a
direct material effect on the Company's and the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. These capital amounts are also subject to
qualitative judgement by the regulators about components, risk weighting
and other factors.

Prompt corrective action provisions are not applicable to bank holding
companies. Quantitative measures established by the regulations to ensure
capital adequacy require the Company and the Bank to maintain minimum
amounts and ratios of total and Tier 1 capital to risk-weighted assets and
of Tier 1 capital to average assets, as defined by the regulations.

Management believes, as of March 31, 2005, December 31, 2004 and 2003, that
the Company and the Bank met all capital adequacy requirements to which
they are subject. As of March 31, 2005, the most recent notification from
the Bank's regulators categorized the Bank as a well-capitalized
institution under the regulatory framework for prompt corrective action,
which requires minimum Tier 1 leverage and Tier 1 and total risk-based
capital ratios of 5%, 6% and 10%, respectively. Management is not aware of
any current conditions or events outstanding that would change the
designation from well capitalized.

Intervest Securities Corporation is subject to the SEC's Uniform Net
Capital Rule [15c3-1 (a) (2) (vi)], which requires the maintenance of
minimum net capital of $5,000. At March 31, 2005, December 31, 2004 and
2003, Intervest Securities Corporation's net capital was $479,000, $481,000
and $459,000, respectively.

On January 1 2004, the Company adopted FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46-R"), as revised in
December 2003. FIN 46-R changes the method of determining whether certain
entities should be included in the Company's financial statements. It
requires bank holding companies that have used controlled business trusts
to raise financing by issuing trust preferred securities to deconsolidate
their investments in those trusts. For a further discussion of FIN 46-R and
its regulatory implications, see the section entitled "Recent Accounting
and Regulatory Developments" in note 1 herein.

F-24

18. REGULATORY CAPITAL, CONTINUED

The table that follows presents information regarding the Company's and the
Bank's capital adequacy.

Minimum to Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirements Action Provisions
---------------- ------------------ -----------------------
($in thousands) Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------------------------------------------

Consolidated as of March 31, 2005:
----------------------------------
Total capital to risk-weighted assets $159,968 13.51% $ 94,692 8.00% NA NA
Tier 1 capital to risk-weighted assets $118,954 10.05% $ 47,346 4.00% NA NA
Tier 1 capital to average assets $118,954 8.67% $ 54,878 4.00% NA NA
Consolidated as of December 31, 2004:
-------------------------------------
Total capital to risk-weighted assets $156,105 14.23% $ 87,737 8.00% NA NA
Tier 1 capital to risk-weighted assets $115,031 10.49% $ 43,868 4.00% NA NA
Tier 1 capital to average assets $115,031 9.03% $ 50,951 4.00% NA NA
Consolidated as of December 31, 2003:
-------------------------------------
Total capital to risk-weighted assets $109,029 14.84% $ 58,787 8.00% NA NA
Tier 1 capital to risk-weighted assets $ 97,571 13.28% $ 29,394 4.00% NA NA
Tier 1 capital to average assets $ 97,571 11.31% $ 34,515 4.00% NA NA
-------------------------------------------------------------------------------------------------------------
Intervest National Bank at March 31, 2005:
------------------------------------------
Total capital to risk-weighted assets $120,041 11.23% $ 85,543 8.00% $ 106,929 10.00%
Tier 1 capital to risk-weighted assets $108,319 10.13% $ 42,771 4.00% $ 64,157 6.00%
Tier 1 capital to average assets $108,319 8.66% $ 50,011 4.00% $ 62,514 5.00%
Intervest National Bank at December 31, 2004:
---------------------------------------------
Total capital to risk-weighted assets $117,413 12.08% $ 77,746 8.00% $ 97,182 10.00%
Tier 1 capital to risk-weighted assets $106,724 10.98% $ 38,873 4.00% $ 58,309 6.00%
Tier 1 capital to average assets $106,724 9.36% $ 45,625 4.00% $ 57,031 5.00%
Intervest National Bank at December 31, 2003:
---------------------------------------------
Total capital to risk-weighted assets $ 77,709 12.53% $ 49,612 8.00% $ 62,016 10.00%
Tier 1 capital to risk-weighted assets $ 71,399 11.51% $ 24,806 4.00% $ 37,209 6.00%
Tier 1 capital to average assets $ 71,399 9.66% $ 29,569 4.00% $ 36,962 5.00%
-------------------------------------------------------------------------------------------------------------

19. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These instruments are in the form of commitments to extend
credit, unused lines of credit and standby letters of credit, and may
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the consolidated financial statements.
The Company's maximum exposure to credit risk is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend funds to a customer as
long as there is no violation of any condition established in the contract.
Such commitments generally have fixed expiration dates or other termination
clauses and normally require payment of fees. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amount does not necessarily represent future cash requirements. The Company
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary upon extension of
credit, is based on management's credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loans to customers. Management is not aware of any
trends, known demand, commitments or uncertainties which are expected to
have a material impact on future operating results, liquidity or capital
resources.

F-25

19. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS, CONTINUED

The contractual amounts of the Company's off-balance sheet financial
instruments are as follows:

At March 31, At December 31,
------------ ---------------
($in thousands) 2005 2004 2003
-----------------------------------------------------------------------

Unfunded loan commitments $ 136,956 $ 159,697 $ 123,791
Available lines of credit 937 789 825
Standby letters of credit 750 750 100
-----------------------------------------------------------------------
$ 138,643 $ 161,236 $ 124,716
-----------------------------------------------------------------------

20. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying and estimated fair values of the Company's financial
instruments are as follows:

At March 31, 2005 At December 31, 2004 At December 31, 2003
----------------- -------------------- --------------------
($in thousands) Carrying Fair Carrying Fair Carrying Fair
Value Value Value Value Value Value
---------------------------------------------------------------------------------------------------------------------

Financial Assets:
Cash and cash equivalents $ 49,347 $ 49,347 $ 24,599 $ 24,599 $ 64,128 $ 64,128
Securities held to maturity, net 254,754 251,777 248,888 247,211 152,823 152,995
FRB and FHLB stock 5,092 5,092 5,092 5,092 3,075 3,075
Loans receivable, net 1,083,022 1,103,472 1,004,290 1,011,559 664,545 700,855
Accrued interest receivable 7,098 7,098 6,699 6,699 4,995 4,995
Financial Liabilities:
Deposit liabilities 1,123,657 1,126,178 993,872 997,939 675,513 687,135
Borrowed funds plus accrued interest payable 177,995 178,517 202,682 204,578 139,455 143,939
Accrued interest payable on deposits 2,131 2,131 1,718 1,718 1,080 1,080
Off-Balance Sheet Financial Instruments:
Commitments to lend 799 799 920 920 868 868
---------------------------------------------------------------------------------------------------------------------

Fair value estimates are made at a specific point in time based on
available information. Where available, quoted market prices are used.
However, a significant portion of the Company's financial instruments, such
as mortgage loans, do not have an active marketplace in which they can be
readily sold or purchased to determine fair value. Consequently, fair value
estimates for such instruments are based on assumptions made by management
that include the instrument's credit risk characteristics and future
estimated cash flows and prevailing interest rates. As a result, these fair
value estimates are subjective in nature, involve uncertainties and matters
of significant judgment and therefore, cannot be determined with precision.
Accordingly, changes in any of management's assumptions could cause the
fair value estimates to deviate substantially. The fair value estimates
also do not reflect any additional premium or discount that could result
from offering for sale, at one time, the Company's entire holdings of a
particular financial instrument, nor estimated transaction costs. Further,
the tax ramifications related to the realization of unrealized gains and
losses can have a significant effect on and have not been considered in the
fair value estimates. Finally, fair value estimates do not attempt to
estimate the value of anticipated future business, the Company's customer
relationships, branch network, and the value of assets and liabilities that
are not considered financial instruments, such as core deposit intangibles
and premises and equipment.

The following methods and assumptions were used to estimate the fair value
of financial instruments:

SECURITIES. The estimated fair value of securities held to maturity is
based on quoted market prices. The estimated fair value of the FRB and FHLB
stock approximates carrying value since the securities do not present
credit concerns and are redeemable at cost.

LOANS RECEIVABLE. The estimated fair value of loans is based on a
discounted cash flow analysis, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
Management can make no assurance that its perception and quantification of
credit risk would be viewed in the same manner as that of a potential
investor. Therefore, changes in any of management's assumptions could cause
the fair value estimates of loans to deviate substantially.

F-26

20. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED

DEPOSITS. The estimated fair value of deposits with no stated maturity,
such as savings, money market, checking and noninterest-bearing demand
deposit accounts approximates carrying value. The estimated fair value of
certificates of deposit are based on the discounted value of their
contractual cash flows. The discount rate used in the present value
computation was estimated by comparison to current interest rates offered
by the Bank for certificates of deposit with similar remaining maturities.

BORROWED FUNDS AND ACCRUED INTEREST PAYABLE. The estimated fair value of
borrowed funds and related accrued interest payable is based on a
discounted cash flow analysis. The discount rate used in the present value
computation was estimated by comparison to what management believes to be
the Company's incremental borrowing rate for similar arrangements.

ALL OTHER FINANCIAL ASSETS AND LIABILITIES. The estimated fair value of
cash and cash equivalents, accrued interest receivable and accrued interest
payable on deposits approximates their carrying values since these
instruments are payable on demand or have short-term maturities.

OFF-BALANCE SHEET INSTRUMENTS. The carrying amounts of commitments to lend
approximated estimated fair value. The fair value of commitments to lend is
based on fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the counter party's
credit standing.

21. BUSINESS SEGMENT INFORMATION

The Company follows the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." An operating segment is
defined as a component of an enterprise that engages in business activities
from which it may earn revenues and incur expenses whose separate financial
information is available and is evaluated regularly by the Company's chief
operating decision makers to perform resource allocations and performance
assessments.

The Company's primary business is banking and real estate lending as more
fully described in note 1 herein. The Company's day-to-day operating
decisions are normally made by the members of its Executive Committee of
the Board of Directors, which is comprised of the Chairman, Vice Chairman
and Vice President of the Company. The Executive Committee generally uses
revenue and earnings performance of each segment to determine operating,
strategic and resource allocation decisions.

The following table presents certain information regarding the Company's
operations by business segment:

Revenues, Net of Interest
Expense for the Net Earnings (Loss) for the Total Assets
----------------- ------------------------------- -------------
Quarter Ended March 31, Quarter Ended March 31, at Mar 31,
----------------------------------------------------------------------------------------------------------------------------

($in thousands) 2005 2004 2005 2004 2005 2004
----------------------------------------------------------------------------------------------------------------------------
Banking (1) $ 8,492 $ 7,117 $ 2,092 $ 1,907 $ 1,294,903 $ 871,814
Non-Bank Mortgage
Investments 1,897 1,456 625 513 119,455 120,660
Broker/dealer 2 57 (2) 10 482 475
Holding Company (1) 178 121 533 305 163,215 135,366
Intersegment (2) (1,406) (917) - - (150,616) (135,305)
----------------------------------------------------------------------------------------------------------------------------
Consolidated $ 9,163 $ 7,834 $ 3,248 $ 2,735 $ 1,427,439 $ 993,010
----------------------------------------------------------------------------------------------------------------------------

Revenues, Net of Interest
Expense for the Year Net Earnings (Loss) for the Year Total Assets at Year End
-------------------- -------------------------------- ------------------------
($in thousands) 2004 2003 2002 2004 2003 2002 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------

Banking (1) $ 30,016 $ 22,604 $ 16,906 $ 7,436 $ 6,972 $ 4,959 $ 1,183,509 $ 789,567
Non-Bank Mortgage
Investments 6,866 4,928 4,189 2,354 1,759 1,567 122,451 119,578
Broker/dealer 125 41 - 22 (6) - 484 455
Holding Company (1) 554 142 (2) 1,641 395 380 159,522 116,184
Intersegment (2) (4,555) (2,494) (1,721) - - - (149,215) (114,261)
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated $ 33,006 $ 25,221 $ 19,372 $ 11,453 $ 9,120 $ 6,906 $ 1,316,751 $ 911,523
- -------------------------------------------------------------------------------------------------------------------------------

(1) For purposes of this table, revenues, net of interest expense and net
earnings (loss) amounts are shown after intercompany dividends of
$1,089,000 and $630,000 for the quarter ended March 31, 2005 and 2004,
respectively, and $3,429,000 in 2004, $1,695,000 in 2003 and
$1,500,000 in 2002 that were paid by the Bank to the Holding Company
for debt service on trust preferred securities, the proceeds of which
are invested in the capital of the Bank.

(2) Intersegment revenues, net of interest expense, arise from
intercompany management and loan origination service agreements. All
significant intercompany balances and transactions are eliminated in
consolidation.

F-27

22. ACQUISITION OF INTERVEST SECURITIES CORPORATION

In June 2003, the Holding Company acquired all of the outstanding capital
stock of Intervest Securities Corporation (ISC) in exchange for 30,000
shares of its Class B common stock that was newly issued for this
transaction. ISC's total assets consisted of approximately $218,000 of cash
at the time of acquisition. Prior to the acquisition, ISC was an affiliated
entity in that it was wholly owned by the spouse of the Chairman of the
Holding Company. The acquisition was accounted for at historical cost and
accordingly, the recorded assets, liabilities and shareholders' equity of
both companies were combined and recorded at their historical cost amounts.
The Company did not restate its consolidated financial statements in this
report for the periods prior to the acquisition because the financial
results of ISC were diminimus.

23. HOLDING COMPANY FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS At March 31, At December 31,
------------ ---------------
($in thousands) 2005 2004 2003
------------------------------------------------------------------------------------------------------

ASSETS
Cash and due from banks $ 72 $ 74 $ 286
Short-term investments 5,585 4,788 2,682
-------------------------------------------
Total cash and cash equivalents 5,657 4,862 2,968
Loans receivable, net (net of allowance for loan losses
of $85, $85 and $78, respectively ) 13,890 13,993 15,514
Investment in consolidated subsidiaries 138,067 135,351 92,539
Investment in unconsolidated subsidiaries -
Intervest Statutory Trusts I, II, III and IV 1,856 1,856 928
Deferred debenture offering costs, net of amortization 1,630 1,658 1,172
Stock proceeds receivable from warrant conversions - - 2,535
Premises and equipment, net 1,102 1,132 12
All other assets 1,013 670 516
------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 163,215 $ 159,522 $ 116,184
------------------------------------------------------------------------------------------------------
LIABILITIES
Debentures payable $ 5,560 $ 5,580 $ 7,340
Debentures payable - capital securities 61,856 61,856 30,928
Accrued interest payable on all debentures 2,363 1,914 2,461
All other liabilities 60 78 70
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 69,839 69,428 40,799
------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common equity 93,376 90,094 75,385
------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 93,376 90,094 75,385
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 163,215 $ 159,522 $ 116,184
------------------------------------------------------------------------------------------------------

CONDENSED STATEMENTS OF EARNINGS For the Quarter Ended March 31, For the Year Ended December 31,
------------------------------- -------------------------------
($in thousands) 2005 2004 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------

Interest income $ 229 $ 295 $ 1,087 $ 1,125 $ 988
Dividend income from subsidiary (1) 1,089 630 3,429 1,695 1,500
Interest expense 1,253 879 4,351 3,024 2,695
---------------------------------------------------------------------------
Net interest and dividend income
(expense) 65 46 165 (204) (207)
Provision (credit) for loan losses - 7 7 32 (2)
Noninterest income 113 75 389 346 205
Noninterest expenses 122 88 440 748 544
---------------------------------------------------------------------------
Income (loss) before income taxes 56 26 107 (638) (544)
Credit for income taxes (2) (477) (279) (1,534) (1,033) (924)
---------------------------------------------------------------------------
Net earnings before earnings of
subsidiaries 533 305 1,641 395 380
Equity in undistributed earnings
of Intervest National Bank 2,092 1,907 7,436 6,972 4,959
Equity in undistributed earnings
of Intervest Mortgage Corporation 625 513 2,354 1,759 1,567
Equity in undistributed (loss) earnings
of Intervest Securities Corporation (2) 10 22 (6) -
---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED NET EARNINGS $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906
---------------------------------------------------------------------------------------------------------------------

(1) Represent dividends to the Holding Company from the Bank to provide
funds for the debt service on the debentures payable - capital
securities. This debt service is included in the Holding Company's
interest expense. The proceeds from the capital securities are
invested in the capital of the Bank.

(2) Dividends from subsidiaries are eliminated in consolidation and are
therefore not included in the Holding Company's pre-tax income for
purposes of computing income taxes.

F-28

23. HOLDING COMPANY FINANCIAL INFORMATION, CONTINUED

CONDENSED STATEMENTS OF CASH FLOWS For the Quarter End March 31, For the Year Ended December 31,
----------------------------- -------------------------------
($in thousands) 2005 2004 2004 2003 2002
----------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
Net earnings $ 3,248 $ 2,735 $ 11,453 $ 9,120 $ 6,906
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Equity in earnings of subsidiaries (3,804) (3,060) (13,241) (10,420) (8,026)
Cash dividends received from subsidiary 1,089 630 3,429 1,695 1,500
Provision (credit) for loan losses - 7 7 32 (2)
Depreciation and amortization 30 - 86 1 1
Amortization of deferred debenture costs 27 26 115 131 114
Amortization of deferred loan fees, net (4) (13) (35) (50) (69)
Deferred income tax (benefit) expense - (6) (3) 38 (55)
Compensation expense from awards/modifications
of stock warrants - 7 9 444 135
Increase in accrued interest
payable on debentures 463 543 576 347 756
Change in all other assets and liabilities, net (360) 12 (97) 93 (411)
----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 689 881 2,299 1,431 849
----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Investment in subsidiaries, net - (16,464) (33,928) (20,715) (338)
Cash acquired through acquisition of
Intervest Securities Corporation - - - 218 -
Purchase of equipment and leasehold improvements - (79) (1,206) (11) (2)
Loan principal repayments and (originations), net 106 (342) 1,519 (6,316) 389
----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 106 (16,885) (33,615) (26,824) 49
----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in mortgage escrow
funds payable - 12 (16) (75) (64)
Gross proceeds from issuance of debentures - 15,464 30,928 15,464 -
Debenture offering costs - (440) (663) (446) (9)
Principal repayments of debentures - - - (1,000) -
Proceeds from issuance of common stock upon the
exercise of common stock warrants - 2,961 2,961 6,931 5,801
----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 17,997 33,210 20,874 5,728
----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 795 1,993 1,894 (4,519) 6,626
Cash and cash equivalents at beginning of period 4,862 2,968 2,968 7,487 861
----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,657 $ 4,961 $ 4,862 $ 2,968 $ 7,487
----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest $ 763 $ 310 $ 3,658 $ 2,545 $ 1,825
Income taxes (154) (314) (1,621) (1,136) (617)
Noncash transactions:
Conversion of debentures into Class A common stock:
Principal converted 20 130 1,760 2,090 -
Accrued interest converted 14 73 1,123 1,009 -
Unamortized debenture offering costs converted - (5) (62) (84) -
Class B stock issued to acquire Intervest
Securities Corporation - - - 215 -
Accumulated other comprehensive income, change in
subsidiary's unnrealized loss on securities
available for sale, net of tax - - - - (111)
----------------------------------------------------------------------------------------------------------------------

F-29

24. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following information is as of or for the period ended:

2004 2005
---- ----
First Second Third Fourth First
($in thousands, except per share amounts) Quarter Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------------------------------------------------

Interest and dividend income $ 14,593 $ 15,391 $ 17,655 $ 18,910 $ 20,568
Interest expense 8,215 8,866 10,348 11,254 12,283
-------------------------------------------------------------
Net interest and dividend income 6,378 6,525 7,307 7,656 8,285
Provision for loan losses 1,077 1,284 1,067 1,098 1,033
-------------------------------------------------------------
Net interest and dividend income
after provision for loan losses 5,301 5,241 6,240 6,558 7,252
Noninterest income 1,456 1,225 1,477 982 878
Noninterest expenses 1,918 2,045 2,141 2,147 2,374
-------------------------------------------------------------
Earnings before income taxes 4,839 4,421 5,576 5,393 5,756
Provision for income taxes 2,104 1,916 2,424 2,332 2,508
-----------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 2,735 $ 2,505 $ 3,152 $ 3,061 $ 3,248
-----------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE: $ .45 $ .42 $ .52 $ .50 $ .52
DILUTED EARNINGS PER SHARE: $ .41 $ .37 $ .47 $ .46 $ .48
-----------------------------------------------------------------------------------------------------------------

Return on average assets 1.15% 0.95% 1.05% 0.96% 0.94%
Return on average equity 14.32% 12.58% 15.32% 14.30% 14.25%
Total assets $993,010 $1,119,266 $1,269,256 $1,316,751 $1,427,439
Total cash and investment securities $210,747 $ 220,653 $ 307,120 $ 278,579 $ 309,193
Total loans, net of unearned fees $763,108 $ 877,296 $ 939,001 $1,015,396 $1,095,161
Total deposits $737,150 $ 852,852 $ 976,392 $ 993,872 $1,123,657
Total borrowed funds and related interest payable $155,034 $ 155,640 $ 180,368 $ 202,682 $ 177,995
Total stockholders' equity $ 78,751 $ 81,259 $ 84,410 $ 90,094 $ 93,376
-----------------------------------------------------------------------------------------------------------------

2003
----
First Second Third Fourth
($in thousands, except per share amounts) Quarter Quarter Quarter Quarter
----------------------------------------------------------------------------------------------

Interest and dividend income $ 11,625 $ 12,470 $ 12,845 $ 13,524
Interest expense 6,788 6,964 7,079 7,733
------------------------------------------
Net interest and dividend income 4,837 5,506 5,766 5,791
Provision for loan losses 344 430 602 593
------------------------------------------
Net interest and dividend income
after provision for loan losses 4,493 5,076 5,164 5,198
Noninterest income 329 1,176 1,038 778
Noninterest expenses 1,784 1,879 1,812 1,784
------------------------------------------
Earnings before income taxes 3,038 4,373 4,390 4,192
Provision for income taxes 1,237 1,807 1,859 1,970
----------------------------------------------------------------------------------------------
NET EARNINGS $ 1,801 $ 2,566 $ 2,531 $ 2,222
----------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE: $ .38 $ .55 $ .52 $ .41
DILUTED EARNINGS PER SHARE: $ .32 $ .45 $ .42 $ .35
----------------------------------------------------------------------------------------------

Return on average assets 1.03% 1.40% 1.32% 1.03%
Return on average equity 13.40% 18.33% 16.76% 13.17%
Total assets $728,409 $750,241 $823,828 $911,523
Total cash and investment securities $178,087 $158,043 $174,664 $220,026
Total loans, net of unearned fees $532,592 $575,975 $631,361 $671,125
Total deposits $538,098 $553,388 $594,832 $675,513
Total borrowed funds and related interest payable $120,602 $120,988 $145,291 $140,383
Total stockholders' equity $ 55,000 $ 58,009 $ 63,745 $ 75,385
----------------------------------------------------------------------------------------------

F-30

================================================================================
NO PERSON HAS BEEN AUTHORIZED BY INTERVEST BANCSHARES CORPORATION OR BY RYAN
BECK & CO., INC. AND SANDLER, O'NEILL & PARTNERS, L.P., THE UNDERWRITERS, TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING OF THE SECURITIES MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
CLASS A COMMON STOCK, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SHARES OF CLASS A COMMON STOCK IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.

TABLE OF CONTENTS
PAGE
- ----

Prospectus Summary. . . . . . . . . . . . . 2
Risk Factors. . . . . . . . . . . . . . . . 8
Forward-Looking Statements. . . . . . . . . 14
Use of Proceeds . . . . . . . . . . . . . . 14
Market for Class A Common Stock and Related
Stockholder Matters . . . . . . . . . . 14
Dividend Policy . . . . . . . . . . . . . . 15
Capitalization. . . . . . . . . . . . . . . 16
Selected Consolidated Financial Information
and Other Financial Data. . . . . . . . 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . 19
Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . 51
Business. . . . . . . . . . . . . . . . . . 52
Management. . . . . . . . . . . . . . . . . 64
Executive Compensation. . . . . . . . . . . 69
Supervision and Regulation. . . . . . . . . 73
Principal Stockholders. . . . . . . . . . . 80
Description of our Securities . . . . . . . 81
Underwriting. . . . . . . . . . . . . . . . 86
Legal Matters . . . . . . . . . . . . . . . 87
Experts . . . . . . . . . . . . . . . . . . 87
Where you Can Obtain More Information . . . 87
Index to Financial Statements . . . . . . . 89

___________________________

UNTIL ____________________ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

================================================================================

INTERVEST BANCSHARES CORPORATION

1,100,000 SHARES

CLASS A COMMON STOCK

--------------

PROSPECTUS

--------------

RYAN BECK & CO.

Sandler O'Neill & Partners, L.P.

THE DATE OF THIS PROSPECTUS IS __________, 2005.

================================================================================

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.
- ------- -------------------------------------------

The following statement sets forth the amounts of expenses in connection
with the offering of the securities of Intervest Bancshares Corporation pursuant
to this registration statement, all of which shall be borne by the registrant.

Amount*
-------

Securities and Exchange Commission
Registration Fee. . . . . . . . $ 2,709
NASD Filing Fee. . . . . . . . . . 2,802
Printing and Engraving Expenses. . 40,000
Accounting Fees and Expenses . . . 50,000
Legal Fees and Expenses. . . . . . 100,000
Miscellaneous. . . . . . . . . . . 50,000
--------

Total. . . . . . . . . . . . . 245,511

*Estimated amounts of expenses.

Item 14. Indemnification of Directors and Officers.
- ------- -----------------------------------------

The registrant's bylaws provide that the registrant will indemnify any
person made or threatened to be made a party to any action or proceeding by
reason of the fact that he, his testator or intestate, is or was a director or
officer, and any director or officer who served any other company in any
capacity at the registrant's request, in the manner and to the maximum extent
permitted by the DGCL, as the same now exists or may hereafter be amended in a
manner more favorable to persons entitled to indemnification; and the registrant
may, in the discretion of its board of directors, indemnify all other corporate
personnel to the extent permitted by law. The right to indemnification
contained in the registrant's bylaws includes the right to be paid by the
registrant the expenses (including attorneys' fees) incurred in defending any
such proceeding in advance of its final disposition.

II - 1

The employment agreements between the registrant and each of Messrs. Jerome
Dansker, Lowell Dansker and Lawrence Bergman contain indemnification provisions,
in addition to those contained in the registrant's bylaws, which provide that
the registrant will indemnify and hold each of the foregoing persons harmless
against all losses, claims, damages or liabilities (including legal fees,
disbursements, and any other expenses incurred in investigating or defending
against any such loss, claim, damage or liability) arising (i) by reason of any
acts or omissions or any alleged acts or omissions arising out of the person's
activities in connection with the conduct of the registrant's business (or any
of the registrant's subsidiaries or affiliated entities), (ii) by reason of the
performance by such person of the services to be performed pursuant to the terms
of the employment agreement, (iii) by reason of any claim or allegation of
failure to perform such services in accordance with the terms of the employment
agreement, or (iv) by reason of the performance of services alleged to be beyond
the scope of the authority conferred upon such person pursuant to the terms of
the employment agreement; provided that, no indemnity will be provided for
losses, claims, damages or liabilities described above to the extent that such
losses, claims, damages or liabilities result from the gross negligence or
willful misconduct of such person. The indemnification provided in the
employment agreements survives the expiration or earlier termination of such
employment agreements and is in addition to any common law or contractual rights
of indemnification available at law or in equity, and includes all costs and
expenses of enforcing the right to indemnification. Under the employment
agreements, each of Messrs. Jerome Dansker, Lowell Dansker and Lawrence Bergman
are also entitled, upon request, to the payment by the registrant of all costs
and expenses paid or incurred by such person in investigating, defending or
settling any claim, loss, damage or liability that may be subject to a right of
indemnification.

The employment agreement between Mr. Jerome Dansker and Interest Mortgage
Corporation contains indemnification provisions similar to the provisions
described above. We also have purchased a policy of directors' and officers'
liability insurance.

The form of Underwriting Agreement included as an exhibit to this
Registration Statement provides for indemnification of the registrant and its
officers and directors against certain liabilities.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the registrant's directors, officers and controlling
persons under the provisions discussed above or otherwise, the registrant has
been advised that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

Item 15. Recent Sales of Unregistered Securities.
- ------- ---------------------------------------

On June 2, 2003, the registrant issued 30,000 shares of its Class B
Common Stock in consideration for its acquisition of all of the shares of
capital stock of Intervest Securities Corporation. These shares were not
registered under the Securities Act, but were issued to a single person in
reliance upon Section 4(2) of the Securities Act.

Item 16. Exhibits and Financial Statement Schedules.
- ------- ------------------------------------------

(a) The following exhibits are filed as part of this Registration Statement:

Exhibit No.
- -----------

1.1 Form of Underwriting Agreement between Intervest Bancshares Corporation (the
"Company") and Ryan Beck & Co., Inc.*

2.1 Agreement and Plan of Merger dated as of November 1, 1999 by and among the Company, ICNY
Acquisition Corporation and Intervest Corporation of New York, incorporated by reference to the
Company's definitive proxy statement for the special meeting of shareholders to be held March 10,
2000, wherein such document is identified as "Annex A."

2.2 Stock Purchase Agreement dated as of December 18, 2002, by and between Intervest Bancshares
Corporation and Jean Dansker regarding the purchase and sale of the issued and outstanding shares
of Intervest Securities Corporation.**

3.1 Restated Certificate of Incorporation of the Company.**

II - 2

3.2 By-laws of the Company, incorporated by reference to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission (the "SEC") on June 29, 2005, wherein such
document is identified as Exhibit 3.2.

4.1 Form of Certificate for Shares of Class A Common Stock, incorporated by reference to the
Company's Pre-Effective Amendment No.1 to the Registration Statement on Form SB-2, File No.
33-82246, filed with the SEC on September 15, 1994, wherein such document is identified as
Exhibit No. 4.1.

4.2 Form of Certificate for Shares of Class B Common Stock, incorporated by reference to the
Company's Pre-Effective Amendment No.1 to the Registration Statement on Form SB-2, File No.
33-82246, filed with the SEC on September 15, 1994, wherein such document is identified as
Exhibit No. 4.2.

4.3 Form of Warrant for Class B Common Stock issued to Mr. Jerome Dansker, incorporated by
reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
wherein such document is identified as Exhibit 4.2.

4.4 Form of Warrant for Class A Common Stock, incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form SB-2, File No. 333-33419, filed with the SEC on
September 22, 1997, wherein such document is identified as Exhibit 4.3.

4.5 Form of Warrant Agreement between the Company and the Bank of New York, incorporated by
reference to the Company's Registration Statement on Form SB-2, File No. 333-33419, filed with
the SEC on August 12, 1997, wherein such document is identified as Exhibit 4.4.

4.6 Form of Indenture between the Company and the Bank of New York, as Trustee, incorporated by
reference to the Company's Registration Statement on Form SB-2, File No. 333-50113, filed with
the SEC on April 15, 1998, wherein such document is identified as Exhibit 4.1.

4.7 Form of Indenture between the Company and the Bank of New York, as Trustee, dated January 1,
2001, incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, wherein such document is identified as Exhibit 4.7.

Form of Indenture between the Company, as Issuer, and State Street Bank and Trust Company, as
4.8 Trustee, dated as of December 18, 2001, incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 2001, wherein such document is identified as
Exhibit 4.8.

4.9 Form of Indenture between the Company, as Issuer, and U.S. Bank National Association, as
Trustee, dated as of September 17, 2003, incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 2003, wherein such document is identified as
Exhibit 4.9.

4.10 Form of Indenture between the Company, as Issuer, and U.S. Bank National Association, as
Trustee, dated as of March 17, 2004, incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified as
Exhibit 4.10.

4.11 Form of Indenture between the Company, as Issuer, and Wilmington Trust Company, as Trustee,
dated as of September 20, 2004, incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified as
Exhibit 4.11.

4.12 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of November 1, 1996, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-11413, filed with the SEC on
September 5, 1996, wherein such document is identified as Exhibit 4.1.

II - 3

4.13 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of May 1, 1997, incorporated by reference to Intervest Mortgage Corporation's
Registration Statement on Form S-11, File No. 333-23093, filed with the SEC on March 11, 1997,
wherein such document is identified as Exhibit 4.1.

4.14 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of December 1, 1998, incorporated by reference to Intervest Mortgage
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998, wherein such
document is identified as Exhibit 4.1.

4.15 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of July 1, 1999 incorporated by reference to Intervest Mortgage Corporation's
Registration Statement on Form S-11, File No. 333-78135, filed with the SEC on May 10, 1999,
wherein such document is identified as Exhibit 4.1.

4.16 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of September 15, 2000, incorporated by reference to Intervest Mortgage
Corporation's Annual Report on Form 10-K for the year ended December 31, 2000, wherein such
document is identified as Exhibit 4.16.

4.17 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of August 1, 2001, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-57324, filed with the SEC on
March 20, 2001, wherein such document is identified as Exhibit 4.1.

4.18 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of February 1, 2002, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-73580, filed with the SEC on
November 16, 2001, wherein such document is identified as Exhibit 4.1.

4.19 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of August 1, 2002, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-90346, filed with the SEC on June
12, 2002, wherein such document is identified as Exhibit 4.1.

4.20 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of January 1, 2003, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-101722, filed with the SEC on
December 9, 2002, wherein such document is identified as Exhibit 4.1.

4.21 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of August 1, 2003, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-105199, filed with the SEC on
May 13, 2003, wherein such document is identified as Exhibit 4.1.

4.22 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of December 1, 2003, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-109128, filed with the SEC on
September 25, 2003, wherein such document is identified as Exhibit 4.1.

4.23 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of June 1, 2004, incorporated by reference to Intervest Mortgage Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, wherein such document
is identified as Exhibit 4.23.

II - 4

4.24 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York,
as Trustee, dated as of April 1, 2005, incorporated by reference to Intervest Mortgage Corporation's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, wherein such document is
identified as Exhibit 4.0.

4.25 Form of Indenture between Intervest Mortgage Corporation, as Issuer, and Sage, Rutty & Co., Inc.
as Trustee, dated as of ______________, 2005, incorporated by reference to Intervest Mortgage
Corporation's Registration Statement on Form S-11, File No. 333-125793, filed with the SEC on
June 14, 2005, wherein such document is identified as Exhibit 4.1.

5.1 Opinion of Harris Beach PLLC.*

10.1+ Employment and Supplemental Benefits Agreement between the Company and Jerome Dansker,
dated as of July 1, 2004, incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.0.

10.2+ Employment and Supplemental Benefits Agreement between the Company and Lowell S. Dansker,
dated as of July 1, 2004, incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2004, wherein such document is identified as Exhibit
10.1.

10.3+ Employment and Supplemental Benefits Agreement between the Company and Lawrence G.
Bergman, dated as of July 1, 2004, incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified as
Exhibit 10.2.

10.4+ Employment Agreement between Intervest National Bank and Keith A. Olsen, dated as of
November 9, 2004, incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.3.

10.5+ Employment Agreement between Intervest National Bank and Raymond C. Sullivan, dated as of
November 10, 2004, incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.4.

10.6+ Employment Agreement between Intervest National Bank and John J. Arvonio, dated as of
November 10, 2004, incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.5.

10.7 Mortgage Servicing Agreement dated as of April 1, 2002, as supplemented on October 21, 2004,
between Intervest Mortgage Corporation and Intervest National Bank, incorporated by reference to
Intervest Mortgage Corporation's Quarterly Report on Form 10-Q for the quarter ended September
30, 2004, wherein such document is identified as Exhibit 10.1.

10.8+ Employment Agreement between Intervest Mortgage Corporation and John H. Hoffmann, dated as
of November 10, 2004, incorporated by reference to Intervest Mortgage Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004, wherein such document is
identified as Exhibit 10.2.

10.9+ Employment Agreement between Intervest Mortgage Corporation and Jerome Dansker, dated as of
July 1, 1995, incorporated by reference to Intervest Mortgage Corporation's Registration Statement
on Form S-11, File No. 33-96662, filed with the SEC on September 7, 1995, wherein such document
is identified as Exhibit __.

10.10+ Amendment to Employment Agreement between Intervest Mortgage Corporation and Jerome
Dansker, dated August 3, 1998, incorporated by reference to Intervest Mortgage Corporation's
Annual Report on Form 10-K for the year ended December 31, 1998, wherein such document is
identified as Exhibit 10.1.

II - 5

10.11+ Amendment to Employment Agreement between Intervest Mortgage Corporation and Jerome
Dansker, dated as of July 1, 2004, incorporated by reference to Intervest Mortgage Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, wherein such document
is identified as Exhibit 10.0.

21.1 List of Subsidiaries, incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, wherein such document is identified as Exhibit 21.0.

23.1 Consent of Harris Beach PLLC is included in the opinion of Harris Beach PLLC, filed as Exhibit
5.1.

23.2 Consent of Hacker, Johnson & Smith, P.A., P.C.**

23.3 Consent of Eisner LLP.**

__________________________________________________

* To be filed by amendment.

** Filed herewith.

+ Denotes management contract or compensatory plan or arrangement.

II - 6

Item 17. Undertakings.
- ------- ------------

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each such
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II - 7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 8, 2005.

INTERVEST BANCSHARES CORPORATION
By: /s/ Lowell S. Dansker
----------------------------------------
Name: Lowell S. Dansker
Title: Vice Chairman, President, Treasurer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Lowell S.
Dansker and Lawrence G. Bergman, and each of them, as his attorney-in-fact, with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this Registration Statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to this Registration Statement.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of July 8, 2005.

Signature Capacity
- --------- --------

/s/ Lowell S. Dansker Vice Chairman, President and Treasurer (Principal
- --------------------------- Financial Officer and Principal Accounting Officer)
(Lowell S. Dansker) and Director

/s/ Lawrence G. Bergman Vice President, Secretary and Director
- ---------------------------
(Lawrence G. Bergman)

/s/ Jerome Dansker Chairman, Chief Executive Officer and Director
- --------------------------- (Principal Executive Officer)
(Jerome Dansker)

/s/ Michael A. Callen Director
- ---------------------------
(Michael A. Callen)

Director
- ---------------------------
(Paul R. DeRosa)

/s/ Stephen A. Helman Director
- ---------------------------
(Stephen A. Helman)

/s/ Wayne F. Holly Director
- ---------------------------
(Wayne F. Holly)

/s/ Lawton Swan Director
- ---------------------------
(Lawton Swan, III)

/s/ Thomas E. Willett Director
- ---------------------------
(Thomas E. Willett)

/s/ David J. Willmott Director
- ---------------------------
(David J. Willmott)

/s/ Wesley T. Wood Director
- ---------------------------
(Wesley T. Wood)

II - 8

EXHIBITS

TO REGISTRATION STATEMENT

FORM S-1

INTERVEST BANCSHARES CORPORATION

II - 9

EXHIBIT INDEX

1.1 Form of Underwriting Agreement between Intervest Bancshares Corporation (the
"Company") and Ryan Beck & Co., Inc.*

3.1 Restated Certificate of Incorporation of the Company.**

II - 10

II - 11

5.1 Opinion of Harris Beach PLLC.*

II - 12

21.1 List of Subsidiaries, incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, wherein such document is identified as Exhibit 21.0.

23.1 Consent of Harris Beach PLLC is included in the opinion of Harris Beach PLLC, filed as Exhibit
5.1.

23.2 Consent of Hacker, Johnson & Smith, P.A., P.C.**

23.3 Consent of Eisner LLP.**

__________________________________________________

* To be filed by amendment.

** Filed herewith.

+ Denotes management contract or compensatory plan or arrangement.

II - 13