Intervest Bancshares Corporation (NASDAQ-GS:IBCA), parent company of Intervest National Bank, today reported that its net earnings for the fourth quarter of 2012 increased to $3.1 million, or $0.14 per common share, from $2.7 million, or $0.13 per share, for the fourth quarter of 2011, and net earnings for the full year 2012 increased to $10.4 million, or $0.48 per share, from $9.5 million, or $0.45 per share, for 2011.
Key Points Follow:
- Intervest National Bank's regulatory capital ratios continued to increase through the retention of earnings and a planned gradual reduction in the size of its balance sheet. The Bank's ratios at December 31, 2012 were as follows: Tier One Leverage - 14.44%; Tier One Risk-Based - 19.80%; and Total Risk-Based Capital - 21.06%; well above its minimum requirements of 9%, 10% and 12%, respectively. The Bank's Tier One capital amounted to $244 million and was $92 million in excess of the required minimum for the Tier One Leverage ratio.
- The net interest margin (exclusive of loan prepayment income) increased to 2.47% in Q4-12 and 2.29% for 2012, from 2.22% in Q4-11 and 2.18% for 2011.
- Net interest and dividend income, which was affected by a smaller balance sheet, decreased to $9.7 million in Q4-12 from $10.6 million in Q4-11, and to $39.2 million in 2012 from $42.3 million in 2011.
- New loan originations increased to $242 million in 2012, from $82 million in 2011, while total repayments increased to $291 million in 2012 from $243 million in 2011.
- Nonaccrual loans decreased to $46 million at December 31, 2012, from $57 million at December 31, 2011. Nonaccrual loans include certain restructured loans (TDRs) that are current as to payments and performing in accordance with their renegotiated terms, but are required to be classified nonaccrual based on regulatory guidance. At December 31, 2012, such loans totaled $36 million compared to $46 million at December 31, 2011. These loans were yielding approximately 5% at December 31, 2012.
- Real estate owned through foreclosure (REO) decreased to $15.9 million at December 31, 2012, from $28.3 million at December 31, 2011, reflecting $12.9 million of sales and $4.1 million of writedowns in carrying value, partially offset by $4.6 million of additions.
- Provisions for loan and real estate losses decreased to a total of $1.1 million in Q4-12 from $1.4 million in Q4-11, and to $4.1 million in 2012 from $8.4 million in 2011.
- Operating expenses increased to $4.2 million in Q4-12, from $3.8 million in Q4-11, and to $16.7 million in 2012, from $15.9 million in 2011. Despite the increases, the Company's efficiency ratio (which measures its ability to control expenses as a percentage of revenues) continued to be favorable and was 35% for Q4-12 and 37% for 2012.
- Book value per common share (after subtracting preferred dividends in arrears) increased to $8.44 at December 31, 2012.
Net earnings for Q4-12 increased by $0.4 million from Q4-11 due to the following: a $1.5 million increase in noninterest income (due to a $1.9 million increase in loan prepayment income partially offset by a $0.4 million security impairment charge); a $0.3 million decrease in the provision for loan and real estate losses; and a $0.3 million decrease in real estate expenses associated with REO. The sum of these items was partially offset by a $0.9 million decrease in net interest and dividend income (as detailed below), a $0.4 million increase in operating expenses (primarily due to a $0.3 million aggregate increase in salaries, benefits and stock compensation expense including the impact of several new officer positions filled during 2012) and a $0.3 million increase in income tax expense (due to higher pre-tax income).
Net interest and dividend income for Q4-12 decreased due to a smaller balance sheet. In Q4-12, average interest-earning assets decreased by $339 million from Q4-11, reflecting decreases of $79 million in loans and $260 million in total securities and overnight investments. At the same time, average deposits and borrowed funds decreased by $272 million and $15 million, respectively, while stockholders' equity increased by $13 million. The net interest margin benefited from a 31 basis point improvement in the interest rate spread, partially offset by a $52 million decrease in net average interest-earning assets (due to a higher level of cash on hand). The spread increased due to a steady reduction in rates paid on deposits and run off of higher-cost CDs and borrowings, largely offset by payoffs of higher yielding loans and calls of security investments, coupled with the re-investment of a large portion of these cash inflows into new loans and securities at lower market interest rates. Overall, the average cost of funds decreased by 40 basis points to 2.22% in Q4-12, from 2.62% in Q4-11, while the average yield on earning assets decreased at a slower pace or by 9 basis points to 4.54% in Q4-12, from 4.63% in Q4-11.
Net earnings for 2012 increased by $0.9 million over 2011 due to a $5.0 million decrease in the provision for loan losses (primarily due to fewer loans outstanding and fewer credit rating downgrades) and a $1.8 million increase in noninterest income (primarily due to a $2.6 million increase in loan prepayment income partially offset by a $0.4 million increase in security impairment charges). The sum of these items was partially offset by: a $3.1 million decrease in net interest and dividend income (due to a smaller balance sheet); a $0.7 million increase in the provision for real estate losses (due to lower estimated values on REO); a $0.5 million increase in real estate expenses associated with REO; a $0.8 million increase in operating expenses (primarily due to a $1.4 million aggregate increase in salaries, benefits and stock compensation expense including the impact of increased officers during 2012, partially offset by a $0.7 million decrease in FDIC insurance expense); and a $0.8 million increase in income tax expense (due to higher pre-tax income).
Total assets at December 31, 2012 decreased to $1.67 billion from $1.97 billion at December 31, 2011, primarily reflecting a $257 million decrease in security investments and a $56 million decrease in loans, partially offset by a $31 million increase in cash and short-term investments.
Securities held to maturity decreased to $444 million at December 31, 2012 from $700 million at December 31, 2011, reflecting calls of securities exceeding new purchases. The bulk of the resulting proceeds were used to fund planned deposit outflow and repayments of borrowings and a portion was being held temporarily in cash and short-term investments. At December 31, 2012, the securities portfolio, which represented 27% of total assets and was comprised almost entirely of U.S. government agency debt ($355 million) and residential mortgage-backed pass through securities ($84 million), had a weighted-average expected yield, remaining life and remaining contractual maturity of 1.05%, 2.0 years and 7.1 years, respectively.
Loans totaled $1.11 billion at December 31, 2012, compared to $1.16 billion at December 31, 2011. The decrease reflected $249 million of payoffs, $42 million of amortization, $2.3 million of net chargeoffs and $4.7 million of transfers to REO, mostly offset by $242 million of new loans. Loans paid off had a weighted-average yield of 6.15%. New loans, nearly all with fixed interest rates, had a weighted-average yield, term and loan-to-value ratio of 4.87%, 5.8 years and 56%, respectively.
Nonaccrual loans and REO aggregated to $62 million, or 3.7% of total assets, at December 31, 2012, compared to $86 million, or 4.3%, at December 31, 2011. Nonaccrual loans totaled $46 million at December 31, 2012, down from $57 million at December 31, 2011. Nonaccrual loans included $36 million (10 loans) and $46 million (12 loans) of TDRs that were current at each date, respectively. All the TDRs classified as nonaccrual have performed as agreed under their renegotiated terms and interest income is being recorded on a cash basis. Based on annual updated appraisals received on the underlying collateral properties, a portion of five TDRs (or $2.0 million of aggregate principal) was charged off for financial statement purposes during 2012. The borrowers remain obligated to pay all contractual principal due on the TDRs.
The allowance for loan losses at December 31, 2012 was $28.1 million, representing 2.54% of total net loans, compared to $30.4 million, or 2.61%, at December 31, 2011. The allowance included specific reserves for impaired loans (comprised of all nonaccrual loans as well as accruing TDRs) at each date totaling $6 million and $8 million, respectively.
At December 31, 2012, the Company had a deferred tax asset totaling $29 million, which included remaining unused NOL and AMT credit carryforwards totaling $17 million for Federal tax purposes and $47 million for State and Local tax purposes. These carryforwards are available to reduce taxes payable on the Company's future taxable income.
Deposits at December 31, 2012 decreased to $1.36 billion from $1.66 billion at December 31, 2011, primarily reflecting a $262 million decrease in CD accounts, of which $50 million were brokered. At December 31, 2012, there were $78 million of brokered CDs outstanding with a rate of 4.91%, of which $38 million mature within one year.
Borrowed funds and related interest payable at December 31, 2012 decreased to $62.9 million, from $78.6 million at December 31, 2011, due to the repayment of $17.5 million of FHLB borrowings, partially offset by a $1.9 million increase in accrued interest payable on trust preferred securities (TRUPs). Stockholders' equity increased to $211 million at December 31, 2012 from $198 million at December 31, 2011, primarily due to $12.2 million of net earnings before preferred dividend requirements.
Since February 2010, as required by its regulator and as permitted by the underlying documents, the Company has suspended the payment of interest on $55 million of its debt in the form of TRUPs and the declaration and payment of dividends on $25 million of its preferred stock held by the U.S. Treasury (TARP). Late last year, the Treasury announced that it will continue to conduct periodic, individual auctions of TARP securities, including those of 53 named institutions, one of which was the Company. Although the precise timing of any auction is not known, the Company and its subsidiary bank have applied for the necessary approvals from their respective regulators to permit the Company to bid for the preferred stock in any such auction. There is no assurance that such approvals will be granted.
Intervest Bancshares Corporation (IBC) is a bank holding company. Its operating subsidiary is Intervest National Bank (INB), a nationally chartered commercial bank that has its headquarters and full-service banking office at One Rockefeller Plaza, in New York City, and a total of six full-service banking offices in Clearwater and Gulfport, Florida. IBC's Common Stock is listed on the NASDAQ Global Select Market: Trading Symbol IBCA. This release may contain forward-looking information. Words such as "may," "will," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," "project," "assume," "indicate," "continue," "target," "goal," and similar words or expressions of the future are intended to identify forward-looking statements. Except for historical information, the matters discussed herein are subject to certain risks and uncertainties that may adversely affect our business, financial condition and results of operations. The following factors, among others, could cause actual results to differ materially from those set forth in forward looking statements: the regulatory agreements to which IBC and INB are currently subject to and any operating restrictions arising therefrom including availability of regulatory approvals or waivers; changes in economic conditions and real estate values both nationally and in our market areas; changes in our borrowing facilities, volume of loan originations and deposit flows; changes in the levels of our non-interest income and provisions for loan and real estate losses; changes in the composition and credit quality of our loan portfolio; legislative or regulatory changes, including increased expenses arising therefrom; changes in interest rates which may reduce our net interest margin and net interest income; increases in competition; technological changes which we may not be able to implement; changes in accounting or regulatory principles, policies or guidelines; changes in tax laws and our ability to utilize our deferred tax asset, including NOL and AMT carryforwards; and our ability to attract and retain key members of management. Reference is made to IBC's filings with the SEC for further discussion of risks and uncertainties regarding our business. We assume no obligation to update any forward looking statements. Historical results are not necessarily indicative of our future prospects.
Selected Consolidated Financial Information Follows.
INTERVEST BANCSHARES CORPORATION
|Selected Consolidated Financial Information|
|(Dollars in thousands, except per share amounts)||Quarter Ended||Year Ended|
|December 31,||December 31,|
|Selected Operating Data:||2012||2011||2012||2011|
|Interest and dividend income||$17,798||$22,166||$77,284||$92,837|
|Net interest and dividend income||9,695||10,642||39,217||42,297|
|Provision for loan losses||-||40||-||5,018|
|Provision for real estate losses||1,135||1,370||4,068||3,349|
|Real estate expenses||324||619||2,146||1,619|
|Earnings before income taxes||6,517||5,813||22,529||20,758|
|Provision for income taxes||2,987||2,679||10,307||9,512|
|Net earnings before preferred dividend requirements||3,530||3,134||12,222||11,246|
|Preferred dividend requirements (1)||456||440||1,801||1,730|
|Net earnings available to common stockholders||$ 3,074||$ 2,694||$ 10,421||$ 9,516|
|Basic and diluted earnings per common share||$0.14||$0.13||$0.48||$0.45|
|Average shares used for basic earnings per share||21,589,589||21,125,289||21,566,009||21,126,187|
|Average shares used for diluted earnings per share (2)||21,594,468||21,125,289||21,568,196||21,126,187|
|Common shares outstanding at end of period||21,589,589||21,125,289||21,589,589||21,125,289|
|Common stock options/warrants outstanding at end of period (2)||1,078,122||1,085,622||1,078,122||1,085,622|
|Yield on interest-earning assets||4.54%||4.63%||4.51%||4.80%|
|Cost of funds||2.22%||2.62%||2.40%||2.83%|
|Net interest margin (3)||2.47%||2.22%||2.29%||2.18%|
|Return on average assets (annualized)||0.82%||0.63%||0.66%||0.56%|
|Return on average common equity (annualized)||7.67%||7.31%||6.82%||6.74%|
|Effective income tax rate||46%||46%||46%||46%|
|Efficiency ratio (4)||35%||32%||37%||34%|
|Average loans outstanding||$1,112,357||$1,191,177||$1,149,689||$1,258,454|
|Average securities outstanding||437,604||700,221||555,777||665,608|
|Average short-term investments outstanding||10,350||7,658||8,273||11,806|
|Average assets outstanding||1,712,892||1,984,615||1,839,727||2,023,957|
|Average interest-bearing deposits outstanding||$1,395,622||$1,668,111||$1,522,625||$1,707,150|
|Average borrowings outstanding||59,452||74,202||65,789||78,298|
|Average stockholders' equity||208,691||195,576||203,647||190,954|
At Dec 31,
At Sep 30,
At Jun 30,
At Mar 31,
At Dec 31,
|Selected Financial Condition Information:||2012||2012||2012||2012||2011|
|Cash and short-term investments||60,395||94,268||122,378||89,839||29,863|
|Securities held to maturity||443,777||440,002||535,056||590,959||700,444|
|Loans, net of unearned fees||1,107,466||1,155,171||1,137,780||1,155,437||1,163,790|
|Allowance for loan losses||28,103||28,382||28,844||29,169||30,415|
|Allowance for loan losses/net loans||2.54%||2.46%||2.54%||2.52%||2.61%|
|Borrowed funds and accrued interest payable||62,930||69,487||72,528||72,064||78,606|
|Preferred stockholder's equity||24,624||24,528||24,431||24,335||24,238|
|Common stockholders' equity||186,323||182,580||179,690||176,716||173,293|
|Common book value per share (5)||8.44||8.28||8.16||8.04||8.07|
|Loan chargeoffs for the quarter||$ 676||$ 548||$498||$1,430||$2,044|
|Loan recoveries for the quarter||397||86||173||184||54|
|Real estate chargeoffs for the quarter||1,124||3,642||-||-||-|
|Security impairment writedowns for the quarter||425||-||-||157||-|
|Nonaccrual loans (6)||$45,898||$47,957||$50,643||$53,208||$57,240|
|Real estate owned, net of valuation allowance||15,923||21,858||26,370||27,767||28,278|
|Investment securities on a cash basis||3,721||4,221||4,221||4,221||4,378|
|Accruing troubled debt restructured (TDR) loans (7).||20,076||14,167||14,596||8,980||9,030|
|Loans 90 days past due and still accruing||4,391||6,503||5,290||2,798||1,925|
|Loans 60-89 days past due and still accruing||-||15,477||1,902||6,303||3,894|
|Loans 31-59 days past due and still accruing||15,497||50||-||11,840||24,876|
|(1)||Represents dividend requirements on cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount.|
|(2)||Outstanding options/warrants to purchase 997,622 shares and 1,085,622 shares were not dilutive for the 2012 and 2011 periods, respectively.|
|(3)||Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of such income, the margin would compute to 3.08%, 2.33%, 2.59% and 2.31%, respectively.|
|(4)||Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.|
|(5)||Represents common stockholders' equity less preferred dividends in arrears of $4.2 million, $3.8 million, $3.5 million, $3.1 million and $2.8 million, respectively, divided by common shares outstanding.|
|(6)||Include performing TDRs maintained on nonaccrual status of $36 million, $39 million, $39 million, $44 million and $46 million, respectively.|
|(7)||Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments, or extension of maturity date. All loans were performing and current as of December 31, 2012 and were yielding approximately 5%.|
INTERVEST BANCSHARES CORPORATION
Consolidated Financial Highlights
|At or For The Period Ended|
($ in thousands, except per share amounts)
|Dec 31,||Dec 31,||Dec 31,||Dec 31,||Dec 31,|
|Balance Sheet Highlights:|
|Cash and short-term investments||60,395||29,863||23,911||7,977||54,903|
|Securities held to maturity||443,777||700,444||614,335||634,856||475,581|
|Loans, net of unearned fees||1,107,466||1,163,790||1,337,326||1,686,164||1,705,711|
|Allowance for loan losses||28,103||30,415||34,840||32,640||28,524|
|Allowance for loan losses/net loans||2.54%||2.61%||2.61%||1.94%||1.67%|
|Borrowed funds and accrued interest payable||62,930||78,606||84,676||118,552||149,566|
|Preferred stockholder's equity||24,624||24,238||23,852||23,466||23,080|
|Common stockholders' equity||186,323||173,293||162,108||190,588||188,894|
|Common book value per share (1)||8.44||8.07||7.61||23.04||22.84|
|Market price per common share||3.89||2.65||2.93||3.28||3.99|
|Asset Quality Highlights|
|Real estate owned, net of valuation allowance||15,923||28,278||27,064||31,866||9,081|
|Investment securities on a cash basis||3,721||4,378||2,318||1,385||-|
|Accruing troubled debt restructured loans (2)||20,076||9,030||3,632||97,311||-|
|Loans past due 90 days and still accruing||4,391||1,925||7,481||6,800||1,964|
|Loans past due 31-89 days and still accruing||15,497||28,770||11,364||5,925||18,943|
|Real estate chargeoffs||4,766||-||15,614||-||-|
|Impairment writedowns on security investments||582||201||1,192||2,258||-|
|Statement of Operations Highlights:|
|Interest and dividend income||$77,284||$92,837||$107,072||$123,598||$128,497|
|Net interest and dividend income||39,217||42,297||44,380||42,598||38,162|
|Provision for loan losses||-||5,018||101,463||10,865||11,158|
|Provision for real estate losses||4,068||3,349||15,509||2,275||518|
|Real estate expenses||2,146||1,619||4,105||4,945||4,281|
|Earnings (loss) before income taxes||22,529||20,758||(93,656)||4,946||13,157|
|Provision (benefit) for income taxes||10,307||9,512||(40,348)||1,816||5,891|
|Net earnings (loss) before preferred dividend requirements||12,222||11,246||(53,308)||3,130||7,266|
|Preferred dividend requirements (3)||1,801||1,730||1,667||1,632||41|
|Net earnings (loss) available to common stockholders||$10,421||$ 9,516||$(54,975)||$ 1,498||$ 7,225|
|Basic earnings (loss) per common share||$0.48||$0.45||$(4.95)||$0.18||$0.87|
|Diluted earnings (loss) per common share||$0.48||$0.45||$(4.95)||$0.18||$0.87|
|Average common shares used to calculate:|
|Basic earnings (loss) per common share||21,566,009||21,126,187||11,101,196||8,270,812||8,259,091|
|Diluted earnings (loss) per common share||21,568,196||21,126,187||11,101,196||8,270,812||8,267,781|
|Common shares outstanding||21,589,589||21,125,289||21,126,489||8,270,812||8,270,812|
|Net interest margin (4)||2.29%||2.18%||2.11%||1.83%||1.79%|
|Return on average assets||0.66%||0.56%||-2.42%||0.13%||0.34%|
|Return on average common equity||6.82%||6.74%||-32.20%||1.65%||3.94%|
|Effective income tax rate||46%||46%||43%||37%||45%|
|Efficiency ratio (5)||37%||34%||41%||46%||33%|
|(1)||Represents common stockholders' equity less preferred dividends in arrears ($4.2 million at December 31, 2012, $2.8 million at December 31, 2011 and $1.4 million at December 31, 2010) divided by common shares outstanding.|
|(2)||Represent loans whose terms have been modified mostly through the deferral of principal and/or a partial reduction in interest payments.|
|(3)||Represents dividend requirements on cumulative preferred stock held by the U.S. Treasury and amortization of related preferred stock discount.|
|(4)||Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of such income, the margin would compute to 2.59%, 2.31%, 2.17%, 1.89% and 1.90%, respectively.|
|(5)||Represents operating expenses as a percentage of net interest and dividend income plus noninterest income.|
Lowell S. Dansker, Chairman
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