##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED September 30, 2009

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For The Transition Period From  to

Commission file number 000-23377





INTERVEST BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 13-3699013                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

One Rockefeller Plaza, Suite 400

New York, New York 10020-2002

(Address of principal executive offices) (Zip Code)

(212) 218-2800

(Registrants telephone number, including area code)

Not Applicable

(Former name, former address and
former fiscal year, if changed since last report)





Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:    YES  x    NO   ̈.

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any`, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).*    YES   ̈    NO   ̈. * The registrant has not yet been phased into the interactive
data requirements.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act). Check one:



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈ |  | Accelerated Filer         |  |  ̈
|                        |  |   | 
|Non-accelerated Filer   |  | x |  | Smaller Reporting Company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act):    YES   ̈    NO  x.

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:



|                                                |  |                                             
|----------------------------------------------- |  | --------------------------------------------
|Title of Each Class:                            |  | Shares Outstanding:                         
|Class A Common Stock, $1.00 par value per share |  | 7,690,812 outstanding as of October 29, 2009
|Class B Common Stock, $1.00 par value per share |  | 580,000 outstanding as of October 29, 2009  









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##### Table of Contents

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

FORM 10-Q

September 30, 2009

TABLE OF CONTENTS



|                                                                                                                                        |  |     
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                        |  | Page
|PART I. FINANCIAL INFORMATION                                                                                                           |  |     
|                                                                                                                                        | 
|Item 1. Financial Statements                                                                                                            |  |     
|                                                                                                                                        | 
|Condensed Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31,
2008                                        |  | 3   
|                                                                                                                                        | 
|Condensed Consolidated Statements of Earnings (Unaudited) for the Quarters and Nine-Months Ended September 30,
 2009 and 2008           |  | 4   
|                                                                                                                                        | 
|Condensed Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the Nine-Months Ended
 September 30, 2009 and 2008 |  | 5   
|                                                                                                                                        | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine-Months Ended September 
30, 2009 and 2008                      |  | 6   
|                                                                                                                                        | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                        |  | 7   
|                                                                                                                                        | 
|Review by Independent Registered Public Accounting Firm                                                                                 |  | 22  
|                                                                                                                                        | 
|Report of Independent Registered Public Accounting Firm                                                                                 |  | 23  
|                                                                                                                                        | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations                                           |  | 24  
|                                                                                                                                        | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                                      |  | 42  
|                                                                                                                                        | 
|Item 4. Controls and Procedures                                                                                                         |  | 43  
|                                                                                                                                        | 
|PART II. OTHER INFORMATION                                                                                                              |  |     
|                                                                                                                                        | 
|Item 1. Legal Proceedings                                                                                                               |  | 43  
|                                                                                                                                        | 
|Item 1A. Risk Factors                                                                                                                   |  | 43  
|                                                                                                                                        | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                     |  | 44  
|                                                                                                                                        | 
|Item 3. Defaults Upon Senior Securities                                                                                                 |  | 44  
|                                                                                                                                        | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                                             |  | 44  
|                                                                                                                                        | 
|Item 5. Other Information                                                                                                               |  | 44  
|                                                                                                                                        | 
|Item 6. Exhibits                                                                                                                        |  | 44  
|                                                                                                                                        | 
|Signatures                                                                                                                              |  | 44  
|                                                                                                                                        | 
|Certifications                                                                                                                          |  |     

Private Securities Litigation Reform Act Safe Harbor Statement

The Company is making this statement in order to satisfy the Safe Harbor provision contained in the Private Securities Litigation Reform Act of
1995. The statements contained in this report on Form 10-Q that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are made based on
managements expectations concerning future events affecting the Company and are subject to uncertainties and factors relating to the Companys operations and the economic environment, all of which are difficult to predict and many of
which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by forward-looking statements. The Companys risk factors are disclosed in the
Risk Factors section of the Companys 2008 annual report on Form 10-K, where such factors are discussed on pages 24 through 29, and updated for any new or material changes in such factors in Item 1A of Part II of this report on
Form 10-Q.



2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION - ITEM 1. Financial Statements

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                                                                                           |  |                      |             |                     |   |          
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ----------- | ------------------- | - | ---------
|($ in thousands, except par value)                                                                                         |  | At September 30,2009 |             | At December 31,2008
|                                                                                                                          
|ASSETS                                                                                                                     |  |                      | (Unaudited) |                     |   | (Audited)
|Cash and due from banks                                                                                                    |  | $                    | 10,546      |                     | $ | 13,170   
|Federal funds sold, commercial paper and other short-term investments                                                      |  |                      | 20,114      |                     |   | 41,733   
|                                                                                                                           |  |                      |            
|Total cash and cash equivalents                                                                                            |  |                      | 30,660      |                     |   | 54,903   
|                                                                                                                           |  |                      |            
|Securities held to maturity, net (estimated fair value of $596,855 and $475,100, respectively)                             |  |                      | 598,313     |                     |   | 475,581  
|Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                                             |  |                      | 9,929       |                     |   | 8,901    
|Loans receivable (net of allowance for loan losses of $31,815 and $28,524, respectively)                                   |  |                      | 1,664,249   |                     |   | 1,677,187
|Accrued interest receivable                                                                                                |  |                      | 10,965      |                     |   | 11,965   
|Loan fees receivable                                                                                                       |  |                      | 7,928       |                     |   | 8,590    
|Premises and equipment, net                                                                                                |  |                      | 5,037       |                     |   | 5,415    
|Foreclosed real estate (net of valuation allowance of $1,206 and $518, respectively)                                       |  |                      | 32,915      |                     |   | 9,081    
|Deferred income tax asset                                                                                                  |  |                      | 16,165      |                     |   | 13,503   
|Deferred debenture offering costs, net                                                                                     |  |                      | 899         |                     |   | 2,750    
|Other assets                                                                                                               |  |                      | 5,110       |                     |   | 3,957    
|                                                                                                                          
|Total assets                                                                                                               |  | $                    | 2,382,170   |                     | $ | 2,271,833
|                                                                                                                          
|LIABILITIES                                                                                                                |  |                      |             |                     |   |          
|Deposits:                                                                                                                  |  |                      |             |                     |   |          
|Noninterest-bearing demand deposit accounts                                                                                |  | $                    | 4,015       |                     | $ | 3,275    
|Interest-bearing deposit accounts:                                                                                         |  |                      |             |                     |   |          
|Checking (NOW) accounts                                                                                                    |  |                      | 7,672       |                     |   | 4,512    
|Savings accounts                                                                                                           |  |                      | 10,863      |                     |   | 8,262    
|Money market accounts                                                                                                      |  |                      | 468,808     |                     |   | 328,660  
|Certificate of deposit accounts                                                                                            |  |                      | 1,521,637   |                     |   | 1,519,426
|                                                                                                                           |  |                      |            
|Total deposit accounts                                                                                                     |  |                      | 2,012,995   |                     |   | 1,864,135
|                                                                                                                           |  |                      |            
|Borrowed Funds:                                                                                                            |  |                      |             |                     |   |          
|Federal Home Loan Bank advances                                                                                            |  |                      | 50,500      |                     |   | 50,500   
|Subordinated debentures                                                                                                    |  |                      | -           |                     |   | 40,000   
|Subordinated debentures - capital securities                                                                               |  |                      | 56,702      |                     |   | 56,702   
|Accrued interest payable on all borrowed funds                                                                             |  |                      | 174         |                     |   | 2,180    
|Mortgage note payable                                                                                                      |  |                      | 171         |                     |   | 184      
|                                                                                                                           |  |                      |            
|Total borrowed funds                                                                                                       |  |                      | 107,547     |                     |   | 149,566  
|                                                                                                                           |  |                      |            
|Accrued interest payable on deposits                                                                                       |  |                      | 4,510       |                     |   | 6,868    
|Mortgage escrow funds payable                                                                                              |  |                      | 34,895      |                     |   | 24,028   
|Other liabilities                                                                                                          |  |                      | 8,604       |                     |   | 15,262   
|                                                                                                                          
|Total liabilities                                                                                                          |  |                      | 2,168,551   |                     |   | 2,059,859
|                                                                                                                          
|STOCKHOLDERS EQUITY                                                                                                       |  |                      |             |                     |   |          
|Preferred stock ($1.00 par value; 300,000 shares authorized; 25,000 issued and outstanding)                                |  |                      | 25          |                     |   | 25       
|Additional paid-in-capital, preferred                                                                                      |  |                      | 24,975      |                     |   | 24,975   
|Preferred stock discount                                                                                                   |  |                      | (1,630)     |                     |   | (1,920)  
|Class A common stock ($1.00 par value; 12,000,000 shares authorized; 8,095,151 shares issued; and 7,690,812 outstanding)   |  |                      | 8,095       |                     |   | 8,095    
|Class B common stock ($1.00 par value; 700,000 shares authorized; and 580,000 shares issued and outstanding,
respectively) |  |                      | 580         |                     |   | 580      
|Additional paid-in-capital, common                                                                                         |  |                      | 81,311      |                     |   | 81,157   
|Retained earnings                                                                                                          |  |                      | 110,263     |                     |   | 109,062  
|Treasury common stock (404,339 shares, at cost)                                                                            |  |                      | (10,000)    |                     |   | (10,000) 
|                                                                                                                          
|Total stockholders equity                                                                                                 |  |                      | 213,619     |                     |   | 211,974  
|                                                                                                                          
|Total liabilities and stockholders equity                                                                                 |  | $                    | 2,382,170   |                     | $ | 2,271,833
|                                                                                                                          

See accompanying notes to condensed consolidated financial statements.



3



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)



|                                                                 |  |                             |        |   |                                 |   |        |      |  |   |        |   |  |   |       
|---------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------
|                                                                 |  | Quarter Ended September 30, |        |   | Nine-Months Ended September 30,
|                                                                 |  |                             |       
|($ in thousands, except per share data)                          |  | 2009                        |        |   | 2008                            |   |        | 2009 |  |   | 2008  
|                                                                
|INTEREST AND DIVIDEND INCOME                                     |  |                             |        |   |                                 |   |        |      |  |   |        |   |  |   |       
|Loans receivable                                                 |  | $                           | 26,581 |   |                                 | $ | 28,840 |      |  | $ | 79,277 |   |  | $ | 82,704
|Securities                                                       |  |                             | 4,356  |   |                                 |   | 4,642  |      |  |   | 13,129 |   |  |   | 13,974
|Other interest-earning assets                                    |  |                             | 2      |   |                                 |   | 26     |      |  |   | 16     |   |  |   | 394   
|                                                                
|Total interest and dividend income                               |  |                             | 30,939 |   |                                 |   | 33,508 |      |  |   | 92,422 |   |  |   | 97,072
|                                                                
|                                                                 |  |                             |        |  
|INTEREST EXPENSE                                                 |  |                             |        |   |                                 |   |        |      |  |   |        |   |  |   |       
|Deposits                                                         |  |                             | 18,711 |   |                                 |   | 19,896 |      |  |   | 57,468 |   |  |   | 60,659
|Subordinated debentures                                          |  |                             | 58     |   |                                 |   | 1,279  |      |  |   | 796    |   |  |   | 4,226 
|Subordinated debentures - capital securities                     |  |                             | 660    |   |                                 |   | 881    |      |  |   | 2,188  |   |  |   | 2,653 
|Other borrowed funds                                             |  |                             | 495    |   |                                 |   | 368    |      |  |   | 1,468  |   |  |   | 531   
|                                                                
|Total interest expense                                           |  |                             | 19,924 |   |                                 |   | 22,424 |      |  |   | 61,920 |   |  |   | 68,069
|                                                                
|Net interest and dividend income                                 |  |                             | 11,015 |   |                                 |   | 11,084 |      |  |   | 30,502 |   |  |   | 29,003
|Provision for loan losses                                        |  |                             | 2,396  |   |                                 |   | 3,446  |      |  |   | 6,939  |   |  |   | 8,462 
|                                                                
|Net interest and dividend income after provision for loan losses |  |                             | 8,619  |   |                                 |   | 7,638  |      |  |   | 23,563 |   |  |   | 20,541
|                                                                
|NONINTEREST INCOME                                               |  |                             |        |   |                                 |   |        |      |  |   |        |   |  |   |       
|Income from the early repayment of mortgage loans                |  |                             | 614    |   |                                 |   | 1,501  |      |  |   | 734    |   |  |   | 2,192 
|Income from mortgage lending activities                          |  |                             | 269    |   |                                 |   | 582    |      |  |   | 828    |   |  |   | 1,316 
|Customer service fees                                            |  |                             | 84     |   |                                 |   | 309    |      |  |   | 304    |   |  |   | 535   
|(Loss) gain from early call of investment securities             |  |                             | (163   | ) |                                 |   | (74    | )    |  |   | (269   | ) |  |   | 357   
|Impairment writedown on investment securities                    |  |                             | (709   | ) |                                 |   | -      |      |  |   | (1,372 | ) |  |   | -     
|                                                                
|Total noninterest income                                         |  |                             | 95     |   |                                 |   | 2,318  |      |  |   | 225    |   |  |   | 4,400 
|                                                                
|NONINTEREST EXPENSES                                             |  |                             |        |   |                                 |   |        |      |  |   |        |   |  |   |       
|Salaries and employee benefits                                   |  |                             | 1,612  |   |                                 |   | 1,455  |      |  |   | 4,717  |   |  |   | 4,331 
|Occupancy and equipment, net                                     |  |                             | 461    |   |                                 |   | 446    |      |  |   | 1,448  |   |  |   | 1,315 
|FDIC and general insurance                                       |  |                             | 1,249  |   |                                 |   | 434    |      |  |   | 4,331  |   |  |   | 1,297 
|Professional fees and services                                   |  |                             | 505    |   |                                 |   | 322    |      |  |   | 1,303  |   |  |   | 1,161 
|Data processing                                                  |  |                             | 279    |   |                                 |   | 257    |      |  |   | 830    |   |  |   | 758   
|Director and committee fees                                      |  |                             | 101    |   |                                 |   | 80     |      |  |   | 294    |   |  |   | 248   
|Stationery, printing and supplies                                |  |                             | 34     |   |                                 |   | 34     |      |  |   | 143    |   |  |   | 139   
|Advertising and promotion                                        |  |                             | 25     |   |                                 |   | 71     |      |  |   | 140    |   |  |   | 185   
|Postage and delivery                                             |  |                             | 28     |   |                                 |   | 24     |      |  |   | 84     |   |  |   | 82    
|Real estate activities expense                                   |  |                             | 2,365  |   |                                 |   | 1,901  |      |  |   | 4,374  |   |  |   | 2,828 
|Loss on the early extinguishment of debentures                   |  |                             | 542    |   |                                 |   | 125    |      |  |   | 1,702  |   |  |   | 243   
|All other                                                        |  |                             | 135    |   |                                 |   | 127    |      |  |   | 463    |   |  |   | 404   
|                                                                
|Total noninterest expenses                                       |  |                             | 7,336  |   |                                 |   | 5,276  |      |  |   | 19,829 |   |  |   | 12,991
|                                                                
|Earnings before income taxes                                     |  |                             | 1,378  |   |                                 |   | 4,680  |      |  |   | 3,959  |   |  |   | 11,950
|Provision for income taxes                                       |  |                             | 627    |   |                                 |   | 2,054  |      |  |   | 1,535  |   |  |   | 5,182 
|                                                                 |  |                             |       
|Net earnings                                                     |  |                             | 751    |   |                                 |   | 2,626  |      |  |   | 2,424  |   |  |   | 6,768 
|Preferred stock dividend requirements and discount amortization  |  |                             | (409   | ) |                                 |   | -      |      |  |   | (1,223 | ) |  |   | -     
|                                                                
|Net earnings available to common stockholders                    |  | $                           | 342    |   |                                 | $ | 2,626  |      |  | $ | 1,201  |   |  | $ | 6,768 
|                                                                
|                                                                 |  |                             |        |  
|Basic earnings per common share                                  |  | $                           | 0.04   |   |                                 | $ | 0.32   |      |  | $ | 0.14   |   |  | $ | 0.82  
|Diluted earnings per common share                                |  | $                           | 0.04   |   |                                 | $ | 0.32   |      |  | $ | 0.14   |   |  | $ | 0.82  
|Cash dividends per common share                                  |  | $                           | -      |   |                                 | $ | -      |      |  | $ | -      |   |  | $ | 0.25  
|                                                                

See accompanying notes to condensed consolidated financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders Equity

(Unaudited)



|                                                                                           |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|------------------------------------------------------------------------------------------ |  | ------------------------------- | - |  | ------ | ------- | - | ------ | --------- | - | ------ | - | ------- | -
|                                                                                           |  | Nine-Months Ended September 30, |  
|                                                                                           |  |                                 |  
|                                                                                           |  | 2009                            |   |  | 2008   |        
|                                                                                           |  |                                 |  
|($ thousands)                                                                              |  | Shares                          |   |  | Amount |         |   | Shares |           |   | Amount |  
|                                                                                           |  |                                 |   | 
|PREFERRED STOCK                                                                            |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning and end of period                                                     |  | 25,000                          |   |  | $      | 25      |   |        | -         |   |        | $ | -       |  
|                                                                                           |  |                                 |   | 
|ADDITIONAL PAID-IN-CAPITAL, PREFERRED                                                      |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning and end of period                                                     |  |                                 |   |  |        | 24,975  |   |        |           |   |        |   | -       |  
|                                                                                           |  |                                 |   | 
|PREFERRED STOCK DISCOUNT                                                                   |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning of period                                                             |  |                                 |   |  |        | (1,920  | ) |        |           |   |        |   | -       |  
|Amortization of preferred stock discount                                                   |  |                                 |   |  |        | 290     |   |        |           |   |        |   | -       |  
|Balance at end of period                                                                   |  |                                 |   |  |        | (1,630  | ) |        |           |   |        |   | -       |  
|                                                                                           |  |                                 |   | 
|CLASS A COMMON STOCK                                                                       |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning and end of period                                                     |  | 8,095,151                       |   |  |        | 8,095   |   |        | 8,095,151 |   |        |   | 8,095   |  
|                                                                                           |  |                                 |   | 
|CLASS B COMMON STOCK                                                                       |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning of period                                                             |  | 580,000                         |   |  |        | 580     |   |        | 385,000   |   |        |   | 385     |  
|Issuance of shares upon the exercise of warrants                                           |  | -                               |   |  |        | -       |   |        | 195,000   |   |        |   | 195     |  
|Balance at end of period                                                                   |  | 580,000                         |   |  |        | 580     |   |        | 580,000   |   |        |   | 580     |  
|                                                                                           |  |                                 |   | 
|ADDITIONAL PAID-IN-CAPITAL, COMMON                                                         |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning of period                                                             |  |                                 |   |  |        | 81,157  |   |        |           |   |        |   | 77,176  |  
|Issuance of shares upon the exercise of Class B warrants, inclusive of income tax benefits |  |                                 |   |  |        | -       |   |        |           |   |        |   | 1,608   |  
|Compensation expense related to common stock options                                       |  |                                 |   |  |        | 154     |   |        |           |   |        |   | 166     |  
|Balance at end of period                                                                   |  |                                 |   |  |        | 81,311  |   |        |           |   |        |   | 78,950  |  
|                                                                                           |  |                                 |   | 
|RETAINED EARNINGS                                                                          |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning of period                                                             |  |                                 |   |  |        | 109,062 |   |        |           |   |        |   | 103,905 |  
|Net earnings                                                                               |  |                                 |   |  |        | 2,424   |   |        |           |   |        |   | 6,768   |  
|Cash dividends on common stock                                                             |  |                                 |   |  |        | -       |   |        |           |   |        |   | (2,068  | )
|Preferred stock dividend requirements and discount amortization                            |  |                                 |   |  |        | (1,223  | ) |        |           |   |        |   | -       |  
|Balance at end of period                                                                   |  |                                 |   |  |        | 110,263 |   |        |           |   |        |   | 108,065 |  
|                                                                                           |  |                                 |   | 
|TREASURY COMMON STOCK                                                                      |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Balance at beginning and end of period                                                     |  | (404,339                        | ) |  |        | (10,000 | ) |        | (404,339  | ) |        |   | (10,000 | )
|                                                                                           |  |                                 |   | 
|                                                                                           |  |                                 |   |  |        |         |   |        |           |   |        |   |         |  
|Total stockholders equity at end of period                                                |  | 8,295,812                       |   |  | $      | 213,619 |   |        | 8,270,812 |   |        | $ | 186,230 |  
|                                                                                           |  |                                 |   | 
|Preferred stockholders equity                                                             |  | 25,000                          |   |  | $      | 23,370  |   |        | -         |   |        | $ | -       |  
|Common stockholders equity                                                                |  | 8,270,812                       |   |  |        | 190,249 |   |        | 8,270,812 |   |        |   | 186,230 |  
|Total stockholders equity at end of period                                                |  | 8,295,812                       |   |  | $      | 213,619 |   |        | 8,270,812 |   |        | $ | 186,230 |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                    |  |                                 |          |   |      |   |          |  
|----------------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                    |  | Nine-Months Ended September 30, |         
|                                                                                    |  |                                 |          |  
|($ in thousands)                                                                    |  | 2009                            |          |   | 2008 |  
|OPERATING ACTIVITIES                                                                |  |                                 |          |   |      |   |          |  
|Net earnings                                                                        |  | $                               | 2,424    |   |      | $ | 6,768    |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                                 |          |   |      |   |          |  
|Depreciation and amortization                                                       |  |                                 | 388      |   |      |   | 418      |  
|Provision for loan losses                                                           |  |                                 | 6,939    |   |      |   | 8,462    |  
|Deferred income tax benefit                                                         |  |                                 | (2,662   | ) |      |   | (1,642   | )
|Amortization of deferred debenture offering costs                                   |  |                                 | 136      |   |      |   | 639      |  
|Compensation expense related to common stock options                                |  |                                 | 154      |   |      |   | 166      |  
|Amortization of premiums (accretion) of discounts and deferred loan fees, net       |  |                                 | (2,407   | ) |      |   | (4,459   | )
|Net gain from sale of foreclosed real estate                                        |  |                                 | (10      | ) |      |   | -        |  
|Impairment writedowns on investment securities                                      |  |                                 | 1,372    |   |      |   | -        |  
|Net loss on early extinguishments of debentures                                     |  |                                 | 1,702    |   |      |   | 243      |  
|Writedowns of foreclosed real estate                                                |  |                                 | 688      |   |      |   | -        |  
|Net decrease in accrued interest payable on debentures                              |  |                                 | (2,000   | ) |      |   | (431     | )
|Net decrease in official checks outstanding                                         |  |                                 | (7,267   | ) |      |   | (5,755   | )
|Net decrease in loan fees receivable                                                |  |                                 | 662      |   |      |   | 909      |  
|Net change in all other assets and liabilities                                      |  |                                 | 234      |   |      |   | 957      |  
|Net cash provided by operating activities                                           |  |                                 | 353      |   |      |   | 6,275    |  
|INVESTING ACTIVITIES                                                                |  |                                 |          |   |      |   |          |  
|Maturities and calls of securities held to maturity                                 |  |                                 | 438,808  |   |      |   | 286,903  |  
|Purchases of securities held to maturity                                            |  |                                 | (563,744 | ) |      |   | (353,255 | )
|Net increase in loans receivable                                                    |  |                                 | (17,578  | ) |      |   | (105,710 | )
|Sales of foreclosed real estate                                                     |  |                                 | 48       |   |      |   | -        |  
|Purchases of Federal Reserve Bank and Federal Home Loan Bank stock, net             |  |                                 | (1,028   | ) |      |   | (4,561   | )
|Purchases of premises and equipment, net                                            |  |                                 | (10      | ) |      |   | (60      | )
|Net cash used by investing activities                                               |  |                                 | (143,504 | ) |      |   | (176,683 | )
|FINANCING ACTIVITIES                                                                |  |                                 |          |   |      |   |          |  
|Net increase in deposits                                                            |  |                                 | 148,860  |   |      |   | 75,646   |  
|Net increase in mortgage escrow funds payable                                       |  |                                 | 10,867   |   |      |   | 9,472    |  
|Net increase in Federal Home Loan Bank advances                                     |  |                                 | -        |   |      |   | 95,200   |  
|Principal repayments of debentures and mortgage note payable                        |  |                                 | (40,013  | ) |      |   | (20,762  | )
|Cash dividends paid to preferred stockholder                                        |  |                                 | (806     | ) |      |   | -        |  
|Cash dividends paid to common stockholders                                          |  |                                 | -        |   |      |   | (2,068   | )
|Cash received from issuance of common stock upon exercise of stock warrants         |  |                                 | -        |   |      |   | 1,467    |  
|Excess tax benefit from exercise of stock warrants recorded to paid in
capital      |  |                                 | -        |   |      |   | 336      |  
|Net cash provided by financing activities                                           |  |                                 | 118,908  |   |      |   | 159,291  |  
|Net decrease in cash and cash equivalents                                           |  |                                 | (24,243  | ) |      |   | (11,117  | )
|Cash and cash equivalents at beginning of period                                    |  |                                 | 54,903   |   |      |   | 33,086   |  
|Cash and cash equivalents at end of period                                          |  | $                               | 30,660   |   |      | $ | 21,969   |  
|                                                                                    |  |                                
|SUPPLEMENTAL DISCLOSURES                                                            |  |                                 |          |   |      |   |          |  
|Cash paid during the period for:                                                    |  |                                 |          |   |      |   |          |  
|Interest                                                                            |  | $                               | 66,148   |   |      | $ | 69,885   |  
|Income taxes                                                                        |  |                                 | 4,763    |   |      |   | 6,827    |  
|Noncash activities:                                                                 |  |                                 |          |   |      |   |          |  
|Loans transferred to foreclosed real estate                                         |  |                                 | 27,210   |   |      |   | 25,099   |  
|Loans to finance sales of foreclosed real estate                                    |  |                                 | 2,650    |   |      |   | -        |  
|Preferred stock dividend requirements and amortization of discount                  |  |                                 | 1,223    |   |      |   | -        |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 1 - Principles of Consolidation, Basis of
Presentation and Use of Estimates

The condensed consolidated financial statements of Intervest Bancshares Corporation and Subsidiaries
(the Company) in this report on Form 10-Q have not been audited except for information derived from the Companys 2008 audited consolidated financial statements and notes thereto and should be read in conjunction with the
Companys 2008 annual report on Form 10-K. Certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles (GAAP) have been condensed or
omitted in this report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry and are
consistent with those described in note 1 to the consolidated financial statements included in the Companys 2008 annual report on Form 10-K, as updated by the information contained in this Form 10-Q. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that affect the reported amounts of assets, 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, the valuation allowance for real estate
losses and the other than temporary impairment of security investments. 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. All significant intercompany balances and transactions have been eliminated in consolidation. 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. Management has evaluated all significant events and transactions that occurred after September 30, 2009 through the date of filing of this Form 10-Q for
potential recognition or disclosure in these condensed consolidated financial statements.

Note 2 - Description of Business

Intervest Bancshares Corporation is a holding company under the Bank Holding Company Act and was incorporated in 1993 under the laws of the State of
Delaware and is referred to by itself in this report as IBC. IBCs wholly owned consolidated subsidiaries are Intervest National Bank (referred to as INB) and Intervest Mortgage Corporation (referred to as
IMC). All three entities are referred to collectively in this report as the Company on a consolidated basis. The Companys business is banking and real estate lending. IBCs Class A common stock is listed on
the NASDAQ Global Select Market under the Trading Symbol IBCA. There is no public trading market for IBCs Class B common stock. The offices of IBC, IMC and INBs headquarters and full-service banking office are located on the
entire fourth floor of One Rockefeller Plaza in New York City, New York, 10020-2002 and the main telephone number is 212-218-2800.

IBCs
principal business is the ownership and operation of its subsidiaries. From time to time, it also engages in a limited amount of real estate mortgage lending, including participation in loans originated by INB. IBC also issues debt and equity
securities to raise funds for working capital purposes as needed. IBC also has four other wholly owned subsidiaries, Intervest Statutory Trust II, III, IV and V that are unconsolidated entities as required by GAAP. These entities are statutory
business trusts formed for the sole purpose of issuing and administering trust preferred securities and lending the proceeds to IBC. They do not conduct any trade or business. As discussed in note 10 to the consolidated financial statements in the
Companys 2008 annual report on Form 10-K, pursuant to the U.S. Treasurys Capital Purchase Program, in December 2008 IBC sold to the U.S. Treasury 25,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock along with a ten year
warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for $5.42 per share, for a total cash investment of $25 million from the Treasury. The preferred stock carries a 5% annual cumulative preferred dividend
rate, payable quarterly, which increases to 9% after five years. Both IBC and INB maintained capital ratios in excess of well-capitalized levels prior to and after this investment.

INB is a nationally chartered commercial bank that has its headquarters and full-service banking office at One Rockefeller Plaza, Suite 400, in New York City, and a total of six full-service banking
offices in Pinellas County, Florida - four in Clearwater, one in Clearwater Beach and one in South Pasadena. INB conducts a personalized commercial and consumer banking business that attracts deposits from the general public in the areas served by
its banking offices.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 2 - Description of Business - Continued



INB also provides internet banking services through its web site: www.intervestnatbank.com, which also
attracts deposit customers from outside its primary market areas. Information on this web site is not and should not be considered part of this report and is not incorporated herein by reference. The deposits, together with funds generated from
operations, principal repayments on loans and securities and other sources, are mainly used to originate mortgage loans secured by commercial and multifamily real estate and to purchase investment securities. INB maintains capital ratios in excess
of applicable regulatory requirements to be designated as a well-capitalized institution. On April 7, 2009, INB entered into a Memorandum of Understanding (MOU) with the Comptroller of the Currency (OCC), it primary
regulator, and also agreed with the OCC to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations. See note 12 and 16 for a further discussion of INBs regulatory capital requirements.

IMCs business focused on the origination of first and junior mortgage loans secured by commercial and multifamily real estate, and it
also provided loan origination services to INB, its affiliate, through an intercompany service agreement. IMC funded its loan originations through the issuance of subordinated debentures in public offerings. Since early 2007, competitive market
conditions and lower pricing for new loans have decreased IMCs loan originations significantly from its historical levels, and only one loan has been originated since December 31, 2007. As a result, IMC has been applying the proceeds from
loan repayments to redeem its outstanding debentures, in many cases prior to contractual maturity. As of September 30, 2009, IMC has repaid all of its outstanding debentures. At September 30, 2009, IMC had total assets of $22 million,
consisting primarily of $18 million in loans, and stockholders equity of $21 million. In light of the significant reduction in IMCs business activities, effective January 1, 2009, the employees of IMC became employees of INB and
they continue to perform loan origination services for INB consistent with past practice. Certain personnel of INB administer the remaining net assets of IMC and IMC reimburses INB monthly for the cost of such services. Intercompany fee income and
expenses are eliminated in the consolidated financial statements. Management intends for INB to eventually acquire all of the remaining net assets of IMC and IMC would be subsequently dissolved. In the first nine months of 2009, INB has acquired
$30.8 million of performing loans from IMC at cost. Any future transactions continue to be subject to regulatory approval and no assurance can be given that such approval will be received. Since IMC no longer has outstanding debentures as noted
above, it no longer files its own separate reports on Forms 10-K, 10-Q and 8-K with the Securities and Exchange Commission. In September 2009, IMC paid a cash dividend to IBC in the amount of $9.3 million which was used by IBC to make an additional
capital investment in INB for the same amount.

The Companys lending activities are comprised almost entirely of the origination for its
loan portfolio of mortgage loans secured by commercial and multifamily real estate (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial/warehouse
properties, parking lots/garages, mobile home parks, self-storage facilities and vacant land). Loans in the portfolio had an average life of approximately 4 years at September 30, 2009. The Company does not own or originate
construction/development loans or condominium conversion loans.

The Company tends to lend in areas that are in the process of being
revitalized or redeveloped, with a concentration of loans on properties located in New York State and the State of Florida. A large number of the properties in New York are located in Manhattan, Brooklyn, Queens, Long Island, Staten Island and the
Bronx. A large number of the properties in Florida are located in Clearwater, Tampa, St. Petersburg, Orlando, Fort Lauderdale, Hollywood and Miami. Many of the multifamily properties located in New York City and surrounding boroughs are also subject
to rent control and rent stabilization laws, which limit the ability of the property owners to increase rents, which may in turn limit the borrowers ability to repay those mortgage loans. At September 30, 2009, the Company also had loans
on properties in Alabama, Connecticut, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Maryland, North Carolina, New Jersey, Ohio, Pennsylvania, South Carolina and Virginia.

The Companys revenues consist of interest, dividends and fees earned on its interest-earning assets, which are comprised of mortgage loans, securities and other short-term investments, and
noninterest income. The Companys expenses consist of interest paid on its interest-bearing liabilities, which are comprised of deposits, debentures and other borrowings, as well as its operating and general expenses.



8



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 2 - Description of Business - Continued



The Companys profitability depends primarily on its net interest income, which is the difference
between interest income generated from its interest-earning assets and interest expense incurred on its interest-bearing liabilities. Net interest income is dependent upon the interest-rate spread, which is the difference between the average yield
earned on interest-earning assets and the average rate paid on interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest-rate spread will generate net interest income. The
interest-rate spread is affected by interest rates, deposit flows and loan demand. The Companys profitability is also affected by the level of its noninterest income and expenses, provision for loan losses and income tax expense.

The Companys noninterest income consists mostly of loan and other banking fees as well as income from loan prepayments. When a mortgage loan is
repaid prior to maturity, the Company may recognize prepayment income, which consists of the recognition of unearned fees associated with such loans at the time of payoff and the receipt of additional prepayment fees and/or interest in certain
cases, in accordance with the prepayment provisions of the mortgage loan. The Companys income from loan prepayments fluctuates and cannot be predicted. Normally, loan prepayments tend to increase during periods of declining interest rates and
tend to decrease during periods of increasing interest rates. However, given the nature and type of mortgage loans the Company originates, including their short average life, the Company may still experience loan prepayments notwithstanding the
effects of movements in interest rates.

The Companys noninterest expenses consist of the following: salaries and employee benefits;
occupancy and equipment; data processing; advertising and promotion; professional fees and services; FDIC insurance; general insurance; real estate activities; and other operating and general expenses. The Companys profitability is also
significantly affected by general and local economic conditions, competition, changes in market interest rates, changes in real estate values, government policies and actions of regulatory authorities.

The Company continues to be negatively impacted by the weak economy, increased vacancy rates and lower real estate values, all of which have resulted in a
higher level of nonperforming assets. As described in more detail elsewhere in this report, nonperforming assets at September 30, 2009 amounted to $164.6 million, or 6.91% of total assets, compared to $117.7 million, or 5.18%, at
December 31, 2008. At September 30, 2009, nonperforming assets were comprised of $131.7 million of nonaccrual loans, or 38 loans, and $32.9 million (net of a $1.2 million valuation allowance) of real estate acquired through foreclosure, or
9 properties. At September 30, 2009, the Company also had $71.2 million of accruing restructured loans on which the Company has granted certain concessions to provide payment relief generally consisting of the deferral of principal payments
and/or a partial reduction in interest payments for a period of time. At September 30, 2009 and December 31, 2008, a specific valuation allowance (included as part of the overall allowance for loan losses) in the aggregate amount of $13.5
million and $8.2 million, respectively, was maintained on nonaccrual and restructured loans, all of which are considered impaired loans.

The
Company is taking various steps to resolve its nonaccrual loans, including proceeding with foreclosures on many of the collateral properties, working with certain borrowers to provide payment relief and, in limited cases, accepting partial payment
as full satisfaction of a nonaccrual loan. In the third quarter of 2009, nonperforming assets with an original carrying value of $23.3 million were repaid or sold for total proceeds of $22.8 million. The Company believes that concentrating its
effort towards the individual collection of nonaccrual loans either through the restructure of certain loans or through the acquisition and eventual sale of the collateral properties will in most cases maximize the recovery of its investment. The
ability to complete foreclosure or other proceedings to acquire and sell certain collateral properties however continues to be delayed by various factors including bankruptcy proceedings and an overloaded court system. As a result of these delays,
the timing and amount of the resolution/disposition of nonaccrual loans as well as foreclosed real estate cannot be predicted with certainty. In addition, if the current downturn in commercial real estate values and local economic conditions in both
New York and Florida as well as other factors noted above continue for an additional extended period, it could have an adverse impact on the Companys future asset quality and level of nonperforming assets, charge offs and profitability. There
can be no assurance that the Company will not have significant additional loan loss provisions or expenses in connection with the ultimate collection of nonaccrual loans or in carrying and disposing of foreclosed real estate.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities

The carrying value (amortized cost) and estimated fair value of securities held to maturity are as follows:



|                             |  |                      |  |                |         |                        |   |                         |  |                      |       |               |   |         |                            |      |   |  |           
|---------------------------- |  | -------------------- |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | -------------------- | ----- | ------------- | - | ------- | -------------------------- | ---- | - |  | ----------
|($ in thousands)             |  | Number of Securities |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value |       | Wtd-Avg Yield |   |         | Wtd-Avg Remaining Maturity
|At September 30, 2009        |  |                      |  |                |         |                        |   |                         |  |                      |       |               |   |         |                            |      |   |  |           
|U.S. government agencies (1) |  | 361                  |  | $              | 591,653 |                        | $ | 3,237                   |  | $                    | 1,087 |               | $ | 593,803 |                            | 2.87 | % |  | 4.4 Years 
|Corporate (2)                |  | 8                    |  |                | 6,660   |                        |   | -                       |  |                      | 3,608 |               |   | 3,052   |                            | 2.64 | % |  | 23.9 Years
|                             |  | 369                  |  | $              | 598,313 |                        | $ | 3,237                   |  | $                    | 4,695 |               | $ | 596,855 |                            | 2.86 | % |  | 4.6 Years 
|At December 31, 2008         |  |                      |  |                |         |                        |   |                         |  |                      |       |               |   |         |                            |      |   |  |           
|U.S. government agencies (1) |  | 305                  |  | $              | 467,550 |                        | $ | 3,288                   |  | $                    | 365   |               | $ | 470,473 |                            | 3.77 | % |  | 3.9 Years 
|Corporate (2)                |  | 8                    |  |                | 8,031   |                        |   | -                       |  |                      | 3,404 |               |   | 4,627   |                            | 5.32 | % |  | 24.6 Years
|                             |  | 313                  |  | $              | 475,581 |                        | $ | 3,288                   |  | $                    | 3,769 |               | $ | 475,100 |                            | 3.80 | % |  | 4.2 Years 

|(1) | Consist of debt obligations of U.S. government sponsored agencies - FHLB, FNMA, FHLMC or FFCB.
|--- | ----------------------------------------------------------------------------------------------

|(2) | Consist of variable-rate pooled trust preferred securities backed by obligations of companies in the banking industry. The amortized cost reported as of
September 30, 2009 is net of $1.4 million of impairment charges, of which $0.3 million, $0.4 million and $0.7 million was recorded in the first, second and third quarter of 2009, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The estimated fair values of securities with gross unrealized losses segregated between securities that have been in a continuous unrealized loss position
for less than twelve months at the respective dates and those that have been in a continuous unrealized loss position for twelve months or longer are summarized as follows:



|                         |  |                      |  |                         |         |                         |   |                         |  |                      |       |                         |   |       |  |   |         |  |   |      
|------------------------ |  | -------------------- |  | ----------------------- | ------- | ----------------------- | - | ----------------------- |  | -------------------- | ----- | ----------------------- | - | ----- |  | - | ------- |  | - | -----
|($ in thousands)         |  | Number of Securities |  | Less Than Twelve Months |         | Twelve Months or Longer |   | Total                  
|                         |  | Estimated Fair Value |  | Gross Unrealized Losses |         | Estimated Fair Value    |   | Gross Unrealized Losses |  | Estimated Fair Value |       | Gross Unrealized Losses
|At September 30, 2009    |  |                      |  |                         |         |                         |   |                         |  |                      |       |                         |   |       |  |   |         |  |   |      
|U.S. government agencies |  | 98                   |  | $                       | 148,886 |                         | $ | 1,063                   |  | $                    | 3,981 |                         | $ | 24    |  | $ | 152,867 |  | $ | 1,087
|Corporate                |  | 8                    |  |                         | -       |                         |   | -                       |  |                      | 3,052 |                         |   | 3,608 |  |   | 3,052   |  |   | 3,608
|                         |  | 106                  |  | $                       | 148,886 |                         | $ | 1,063                   |  | $                    | 7,033 |                         | $ | 3,632 |  | $ | 155,919 |  | $ | 4,695
|At December 31, 2008     |  |                      |  |                         |         |                         |   |                         |  |                      |       |                         |   |       |  |   |         |  |   |      
|U.S. government agencies |  | 33                   |  | $                       | 49,116  |                         | $ | 354                     |  | $                    | 4,033 |                         | $ | 11    |  | $ | 53,149  |  | $ | 365  
|Corporate                |  | 8                    |  |                         | -       |                         |   | -                       |  |                      | 4,627 |                         |   | 3,404 |  |   | 4,627   |  |   | 3,404
|                         |  | 41                   |  | $                       | 49,116  |                         | $ | 354                     |  | $                    | 8,660 |                         | $ | 3,415 |  | $ | 57,776  |  | $ | 3,769

Management believes that the cause of unrealized gains and losses on the agency securities portfolio
is directly related to changes in market interest rates, which has been consistent with its experience. In general, as interest rates rise, the estimated fair value of fixed-rate securities will decrease; as interest rates fall, their value will
increase. Nearly all of the securities in the agency portfolio have fixed interest rates or have predetermined scheduled rate increases and have call features that allow the issuer to call the security at par before its stated maturity without
penalty. INB, which holds the portfolio, also has the ability and intent to hold all of the investments for a period of time sufficient for the estimated fair value of the securities to recover, which may be at time of maturity. Historically, INB
has always recovered the cost of its investments in U.S. government agency securities upon maturity. Management views all the gross unrealized losses related to the agency portfolio to be temporary for the reasons noted above. The estimated fair
values disclosed in the table above on U.S government agency securities are obtained from third-party brokers who provide quoted prices derived from active markets for identical or similar securities.

INB also owns corporate securities (as described in footnote 2 under the first table above) that are also classified as held to maturity. In addition to the
impact of changing interest rates, the estimated fair value of these securities have been and continue to be very depressed due to the unusual credit conditions that the financial industry has faced since the middle of 2008 and a weak economy, all
of which has severely reduced the demand for these securities and rendered their trading market inactive. In the first nine months of 2009, other than temporary impairment (OTTI) charges of $1.4 million were recorded on these securities
which are detailed in the table that follows. Management concluded that an adverse change in the estimated future cash flows for six trust preferred securities had occurred to such a level that these securities have been other than temporarily
impaired. The OTTI conclusion was based on an increase in the aggregate amount of deferred and defaulted interest payments on the underlying collateral by the issuing banks such that it is no longer probable that INB will recover its full investment
in the applicable security over time as indicated by an expected cash flow analysis prepared by a third party broker utilizing GAAP guidance.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities, Continued



The aggregate of defaults and deferrals on each of the two remaining trust preferred securities was not
at a level to reach the same conclusion. There can be no assurance that there will not be further write downs in the future on trust preferred securities INB owns as conditions change. There were no securities classified as available for sale or
sales of securities during the reporting periods in this report.

The following table provides various information regarding trust preferred
securities as of September 30, 2009.



|                 |  |              |  |               |       |                 |   |        |                       |  |                             |       |                 |   |       |                                 |   |        |                                |  |       |                       |  |         |   |                |    |  |     |  |      |  
|---------------- |  | ------------ |  | ------------- | ----- | --------------- | - | ------ | --------------------- |  | --------------------------- | ----- | --------------- | - | ----- | ------------------------------- | - | ------ | ------------------------------ |  | ----- | --------------------- |  | ------- | - | -------------- | -- |  | --- |  | ---- | -
|($ in thousands) | 
|Cusip # (4)      |  | CreditRating |  | Cost    Basis |       | Write Downs (1) |   |        | Adj.    Cost    Basis |  | Estimated    Fair Value (2) |       | Unrealized Loss |   |       | % of    Collateral    Defaulted |   |        | % of    Collateral    Deferred |  |       | # of Banks    in Pool |  | OTTI(3) |   | DiscountMargin |   
|74041PAEO        |  | CC           |  | $             | 1,000 |                 | $ | (582   | )                     |  | $                           | 418   |                 | $ | 126   |                                 | $ | (292   | )                              |  | 13.60 | %                     |  | 29.20   | % |                | 39 |  | Yes |  | 1.90 | %
|74040XAD6        |  | CC           |  |               | 1,017 |                 |   | (150   | )                     |  |                             | 867   |                 |   | 434   |                                 |   | (433   | )                              |  | 7.20  | %                     |  | 19.10   | % |                | 54 |  | Yes |  | 1.80 | %
|74040XAE4        |  | CC           |  |               | 994   |                 |   | (127   | )                     |  |                             | 867   |                 |   | 433   |                                 |   | (434   | )                              |  | 7.20  | %                     |  | 19.10   | % |                | 54 |  | Yes |  | 1.80 | %
|74040XAE4        |  | CC           |  |               | 995   |                 |   | (128   | )                     |  |                             | 867   |                 |   | 434   |                                 |   | (433   | )                              |  | 7.20  | %                     |  | 19.10   | % |                | 54 |  | Yes |  | 1.80 | %
|74040YAF9        |  | CC           |  |               | 981   |                 |   | (183   | )                     |  |                             | 798   |                 |   | 296   |                                 |   | (502   | )                              |  | 8.30  | %                     |  | 20.30   | % |                | 58 |  | Yes |  | 1.70 | %
|74040YAE2        |  | CC           |  |               | 1,000 |                 |   | (202   | )                     |  |                             | 798   |                 |   | 296   |                                 |   | (502   | )                              |  | 8.30  | %                     |  | 20.30   | % |                | 58 |  | Yes |  | 1.70 | %
|74041UAE9        |  | CC           |  |               | 1,022 |                 |   | -      |                       |  |                             | 1,022 |                 |   | 516   |                                 |   | (506   | )                              |  | 1.60  | %                     |  | 13.50   | % |                | 64 |  | No  |  | 1.57 | %
|74041UAE9        |  | CC           |  |               | 1,023 |                 |   | -      |                       |  |                             | 1,023 |                 |   | 517   |                                 |   | (506   | )                              |  | 1.60  | %                     |  | 13.50   | % |                | 64 |  | No  |  | 1.57 | %
|                 |  |              |  | $             | 8,032 |                 | $ | (1,372 | )                     |  | $                           | 6,660 |                 | $ | 3,052 |                                 | $ | (3,608 | )                              |  |       |                       |  |         |   |                |    |  |     |  |      |  

(1) Writedowns are derived from the difference between the book value of the security and the
projected present value of the securitys cash flows as indicated per an analysis performed under GAAP guidance.

(2) Obtained from
Moodys pricing service, which uses a complex valuation model that factors in numerous assumptions and data, including anticipated discounts related to illiquid trading markets, credit and interest rate risk, which under GAAP would be
considered Level 3 inputs. INB believes that the actual values that would be realized in an orderly market under normal credit conditions between a willing buyer and seller would very likely be higher than those disclosed in the table above and,
therefore, these estimated fair values are used for disclosure purposes only and are not used for recording impairment. INB also has the intent and the ability to retain these trust preferred securities until maturity and currently has no intention
of selling them.

(3) In determining whether there is OTTI, INB relies on a cash flow analysis as prescribed under GAAP and prepared by a third
party broker to determine whether conditions are such that the projected cash flows are insufficient to recover INBs principal investment. The basic methodology under GAAP is to compare the present value of the cash flows that are derived from
assumptions made with respect to deferrals, defaults and prepayments from quarter to quarter. A decline in the present value versus that for the previous quarter is considered to be an adverse change. The discount margin in the table
above represents the incremental credit spread used to derive the discount rate for present value computations. Other assumptions utilized: prepayments of 1% annually and 100% at maturity and annual defaults of 75 bps with a 15% recovery after a 2
year lag.

(4) In July 2009, cusip 74041PAE0 was placed on cash basis accounting because 100% of the contractual interest payments on this
security have been deferred. In October 2009, Cusip 74040YAF9 and 74040YAE2 were also placed on cash basis accounting for the same reason. The cash flows for the interest payments on these three securities are being redirected to a more senior class
of bonds to pay down the principal balance on the more senior class faster. This occurs when deferral and default activity reduces the securitys underlying performing collateral to a level where a predetermined coverage test fails and requires
cash flows from interest payments to be redirected to the senior class. If no additional deferrals or defaults occur, such test will eventually be met again through the redirection of the cash flow and cash interest payments would resume on
INBs bonds, although no such assurance can be given as to the amount and timing of the resumption.

INB evaluates all of its security
investments for OTTI at least quarterly or more frequently when conditions warrant such evaluation. Impairment is assessed at the individual security level. INB considers an investment security to be impaired if, after a review of available
evidence, the full collection of contractual principal and interest over the life of the security is no longer probable. The assessment for and the amount of impairment requires considerable judgment by INB and is entirely an estimate and not a
precise determination. INBs impairment evaluation process considers all available evidence, including factors such as the expected cash flows of the security, severity, length of time and anticipated recovery period of the cash shortfalls,
recent events specific to the issuer, including investment downgrades by rating agencies and current and anticipated economic and regulatory conditions of its industry, and the issuers financial condition, capital strength and near-term
prospects. INB also considers its intent and ability to retain the security for a period of time sufficient to allow for a recovery in fair value, or until maturity. Among the factors that are considered in determining INBs intent and ability
to retain the security is a review of its capital adequacy, interest rate risk position and liquidity. If it is deemed that OTTI has occurred, the security is written down to a new cost basis and the resulting loss is charged to earnings as a
component of non-interest income.



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Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities, Continued



The amortized cost and estimated fair value of securities held to maturity by remaining term to
contractual maturity as of September 30, 2009 is as follows:



|                                       |  |                |         |                      |   |               |  |      |  
|-------------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | ---- | -
|($ in thousands)                       |  | Amortized Cost |         | Estimated Fair Value |   | Average Yield | 
|Due in one year or less                |  | $              | 18,275  |                      | $ | 18,554        |  | 2.74 | %
|Due after one year through five years  |  |                | 411,366 |                      |   | 413,671       |  | 2.46 |  
|Due after five years through ten years |  |                | 144,663 |                      |   | 144,367       |  | 3.81 |  
|Due after ten years                    |  |                | 24,009  |                      |   | 20,263        |  | 4.13 |  
|                                       |  | $              | 598,313 |                      | $ | 596,855       |  | 2.86 | %

Note 4 - Loans Receivable

Major classifications of loans receivable are summarized as follows:



|                                       |  |                       |  |        |                      |   |            |     |        |   |           |  
|-------------------------------------- |  | --------------------- |  | ------ | -------------------- | - | ---------- | --- | ------ | - | --------- | -
|                                       |  | At September 30, 2009 |  |        | At December 31, 2008 |  
|($ in thousands)                       |  | # of Loans            |  | Amount |                      |   | # of Loans |     | Amount |  
|Commercial real estate loans           |  | 398                   |  | $      | 1,121,702            |   |            | 383 |        | $ | 1,081,865 |  
|Residential multifamily loans          |  | 237                   |  |        | 542,453              |   |            | 231 |        |   | 599,721   |  
|Land development and other land loans  |  | 17                    |  |        | 38,004               |   |            | 15  |        |   | 31,430    |  
|Residential 1-4 family loans           |  | 2                     |  |        | 447                  |   |            | 2   |        |   | 464       |  
|Commercial business loans              |  | 18                    |  |        | 666                  |   |            | 18  |        |   | 684       |  
|Consumer loans                         |  | 24                    |  |        | 635                  |   |            | 21  |        |   | 373       |  
|                                       |  |                       | 
|Loans receivable                       |  | 696                   |  |        | 1,703,907            |   |            | 670 |        |   | 1,714,537 |  
|Deferred loan fees                     |  |                       |  |        | (7,843               | ) |            |     |        |   | (8,826    | )
|                                       |  |                       |  |        |                      |   |            |     |        |   |           |  
|Loans receivable, net of deferred fees |  |                       |  |        | 1,696,064            |   |            |     |        |   | 1,705,711 |  
|Allowance for loan losses              |  |                       |  |        | (31,815              | ) |            |     |        |   | (28,524   | )
|Loans receivable, net                  |  |                       |  | $      | 1,664,249            |   |            |     |        | $ | 1,677,187 |  

At September 30, 2009 and December 31, 2008, there were $131.7 million and $108.6 million
of loans on a nonaccrual status, respectively, and considered impaired. At September 30, 2009 and December 31, 2008, a specific valuation allowance (included as part of the overall allowance for loan losses) in the amount of $11.7 million
and $8.2 million, respectively, was maintained on nonaccrual loans.

At September 30, 2009, there were also $71.2 million of accruing
loans on which INB has granted certain concessions to provide payment relief generally consisting of the deferral of principal payments and/or a partial reduction in interest payments for a period of time. These loans are considered troubled debt
restructurings (TDRs) and also impaired. An additional valuation allowance of $1.8 million was maintained on TDRs at September 30, 2009. At September 30, 2009 and December 31, 2008, one loan for $1.9 million was classified as ninety
days past due and still accruing interest. This loan is past its maturity date but the borrower continues to make monthly loan payments.

Selected information related to impaired loans is summarized as follows:



|                                                                                  |  |                            |         |                                |   |         |  |      |         |  |   |        
|--------------------------------------------------------------------------------- |  | -------------------------- | ------- | ------------------------------ | - | ------- |  | ---- | ------- |  | - | -------
|                                                                                  |  | Quarter EndedSeptember 30, |         | Nine-Months EndedSeptember 30,
|($ in thousands)                                                                  |  | 2009                       |         | 2008                           |   | 2009    |  | 2008
|Interest income that was not recorded on nonaccrual loans under contractual terms |  | $                          | 2,408   |                                | $ | 1,104   |  | $    | 7,257   |  | $ | 5,923  
|Average principal balance of nonaccrual loans                                     |  |                            | 135,401 |                                |   | 105,887 |  |      | 124,581 |  |   | 108,270
|Average principal balance of restructured loans                                   |  |                            | 71,727  |                                |   | -       |  |      | 53,215  |  |   | -      

Note 5 - Allowance for Loan Losses and Valuation Allowance for Real Estate Losses

Activity in the allowance for loan losses is summarized as follows:



|                                             |  |                            |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------- |  | -------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                             |  | Quarter EndedSeptember 30, |        |   | Nine-Months EndedSeptember 30, |  
|($ in thousands)                             |  | 2009                       |        |   | 2008                           |   |        | 2009 |  |   | 2008   |  
|Balance at beginning of period               |  | $                          | 32,054 |   |                                | $ | 26,609 |      |  | $ | 28,524 |   |  | $ | 21,593 |  
|Provision for loan losses charged to expense |  |                            | 2,396  |   |                                |   | 3,446  |      |  |   | 6,939  |   |  |   | 8,462  |  
|Loan recoveries                              |  |                            | -      |   |                                |   | -      |      |  |   | 1,329  |   |  |   | -      |  
|Loan chargeoffs                              |  |                            | (2,635 | ) |                                |   | (4,227 | )    |  |   | (4,977 | ) |  |   | (4,227 | )
|Balance at end of period                     |  | $                          | 31,815 |   |                                | $ | 25,828 |      |  | $ | 31,815 |   |  | $ | 25,828 |  



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Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 5 - Allowance for Loan Losses and Valuation Allowance for Real Estate Losses, Continued



Activity in the valuation allowance for real estate losses is summarized as follows:



|                                                                        |  |                             |       |                                 |   |      |  |      |       |  |   |  
|----------------------------------------------------------------------- |  | --------------------------- | ----- | ------------------------------- | - | ---- |  | ---- | ----- |  | - | -
|                                                                        |  | Quarter Ended September 30, |       | Nine-Months Ended September 30,
|                                                                        |  |                             |       |                                 |   |     
|($ in thousands)                                                        |  | 2009                        |       | 2008                            |   | 2009 |  | 2008
|Balance at beginning of period                                          |  | $                           | 806   |                                 | $ | -    |  | $    | 518   |  | $ | -
|Write downs of carrying value charged to real estate activities expense |  |                             | 400   |                                 |   | -    |  |      | 688   |  |   | -
|Balance at end of period                                                |  | $                           | 1,206 |                                 | $ | -    |  | $    | 1,206 |  | $ | -

Note 6 - Deposits

Scheduled maturities of certificates of deposit accounts are as follows:



|                         |  |                       |           |                     |                      |   |        |   |                     |  |      |  
|------------------------ |  | --------------------- | --------- | ------------------- | -------------------- | - | ------ | - | ------------------- |  | ---- | -
|                         |  | At September 30, 2009 |           |                     | At December 31, 2008 |  
|($ in thousands)         |  | Amount                |           | Wtd-Avg Stated Rate |                      |   | Amount |   | Wtd-Avg Stated Rate | 
|Within one year          |  | $                     | 584,051   |                     | 3.71                 | % |        | $ | 571,085             |  | 4.27 | %
|Over one to two years    |  |                       | 274,285   |                     | 4.31                 |   |        |   | 333,041             |  | 4.62 |  
|Over two to three years  |  |                       | 223,635   |                     | 4.50                 |   |        |   | 171,647             |  | 5.08 |  
|Over three to four years |  |                       | 160,368   |                     | 4.37                 |   |        |   | 168,814             |  | 5.09 |  
|Over four years          |  |                       | 279,298   |                     | 4.69                 |   |        |   | 274,839             |  | 5.05 |  
|                         |  | $                     | 1,521,637 |                     | 4.18                 | % |        | $ | 1,519,426           |  | 4.67 | %

Certificate of deposit accounts (CDs) of $100,000 or more totaled $689 million and $663 million at
September 30, 2009 and December 31, 2008, respectively, and included brokered CDs of $170 million and $173 million at each date, respectively. At September 30, 2009, CDs of $100,000 or more by remaining maturity were as follows: $207
million due within one year; $117 million due over one to two years; $115 million due over two to three years; $90 million due over three to four years; and $160 million due over four years.

Note 7 - Subordinated Debentures and Mortgage Note Payable

IMCs subordinated debentures by series and INBs mortgage note payable are summarized as follows:



|                                                                          |  |                       |     |                     |   |       
|------------------------------------------------------------------------- |  | --------------------- | --- | ------------------- | - | ------
|($ in thousands)                                                          |  | At September 30, 2009 |     | At December 31,2008
|Series 03/21/05 - interest at 6.50% fixed - due April 1, 2011     (1)     |  | $                     | -   |                     | $ | 4,500 
|Series 08/12/05 - interest at 6.50% fixed - due October 1, 2011 (1)       |  |                       | -   |                     |   | 4,000 
|Series 06/07/04 - interest at 6.75% fixed - due January 1, 2012 (1)       |  |                       | -   |                     |   | 5,000 
|Series 06/12/06 - interest at 6.75% fixed - due July 1, 2012      (1)     |  |                       | -   |                     |   | 4,000 
|Series 03/21/05 - interest at 7.00% fixed - due April 1, 2013     (1)     |  |                       | -   |                     |   | 6,500 
|Series 08/12/05 - interest at 7.00% fixed - due October 1, 2013 (1)       |  |                       | -   |                     |   | 6,000 
|Series 06/12/06 - interest at 7.00% fixed - due July 1,
2014        (1)   |  |                       | -   |                     |   | 10,000
|                                                                          |  |                       |    
|                                                                          |  |                       | -   |                     |   | 40,000
|Mortgage note payable- interest at 7% fixed - due February 1,
2017    (2) |  |                       | 171 |                     |   | 184   
|                                                                          |  | $                     | 171 |                     | $ | 40,184

(1) These debentures were repaid at various times during the nine-months ended September 30, 2009
with cash on hand prior to their stated maturity for an aggregate of $40 million of principal and $1.3 million of related accrued interest payable. A loss aggregating $1.7 million from the early extinguishment of debentures was recorded in the first
nine months of 2009, which represents the expensing of remaining related unamortized issuance costs associated with each debenture.

(2) The
note cannot be prepaid except during the last year of its term.



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Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 8 - FHLB Advances and Lines of Credit

At September 30, 2009, INB had agreements with correspondent banks whereby it could borrow up to $28 million 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), INB can also borrow from these institutions on a secured basis. At September 30, 2009, INB had available collateral consisting of investment
securities to support additional total borrowings of approximately $519 million from the FHLB and FRB if needed.

The following is a summary
of certain information regarding FHLB advances in the aggregate:



|                                                   |  |                                           |        |   |                                               |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------- |  | ----------------------------------------- | ------ | - | --------------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                   |  | At or for the Quarter Ended September 30, |        |   | At or for the Nine-Months Ended September 30, |  
|($ in thousands)                                   |  | 2009                                      |        |   | 2008                                          |   |        | 2009 |  |   | 2008   |  
|Balance at period end                              |  | $                                         | 50,500 |   |                                               | $ | 95,200 |      |  | $ | 50,500 |   |  | $ | 95,200 |  
|Maximum amount outstanding at any month end        |  | $                                         | 53,500 |   |                                               | $ | 95,200 |      |  | $ | 59,500 |   |  | $ | 95,200 |  
|Average outstanding balance for the period         |  | $                                         | 51,466 |   |                                               | $ | 55,182 |      |  | $ | 50,991 |   |  | $ | 26,196 |  
|Weighted-average interest rate paid for the period |  |                                           | 3.80   | % |                                               |   | 2.63   | %    |  |   | 3.83   | % |  |   | 2.66   | %
|Weighted-average interest rate at period end       |  |                                           | 3.81   | % |                                               |   | 3.20   | %    |  |   | 3.81   | % |  |   | 3.20   | %

Scheduled contractual maturities of FHLB advances as of September 30, 2009 were as follows:



|                                                           |  |        |        |                |      |  
|---------------------------------------------------------- |  | ------ | ------ | -------------- | ---- | -
|($ in thousands)                                           |  | Amount |        | Wtd. Avg. Rate |     
|Maturing in the period October 1 through December 31, 2009 |  | $      | -      |                | -    | %
|Maturing in 2010                                           |  |        | 25,000 |                | 3.59 | %
|Maturing in 2011                                           |  |        | 8,000  |                | 3.83 | %
|Maturing in 2012                                           |  |        | 10,500 |                | 4.02 | %
|Maturing in 2013                                           |  |        | 7,000  |                | 4.22 | %
|                                                           |  | $      | 50,500 |                | 3.81 | %

Note 9 - Common Stock Options and Warrant

IBC has a shareholder-approved Long Term Incentive Plan (the Plan) under which stock options and other forms of incentive compensation may be
awarded from time to time to officers, employees and directors of IBC and its subsidiaries. The maximum number of shares of Class A common stock that may be awarded under the Plan is 750,000. As of September 30, 2009, 489,870 shares of
Class A common stock remain available for awards under this plan. There were no grants of options or warrants during the reporting periods in this report.

Activity in IBCs outstanding Class A common stock options and warrant and related information for the first nine-months of 2009 is summarized as follows:



|                                              |  |                                   |  |         |       |  |         |                          |  |         |   |  |   |      
|--------------------------------------------- |  | --------------------------------- |  | ------- | ----- |  | ------- | ------------------------ |  | ------- | - |  | - | -----
|                                              |  | Exercise Price Per Warrant/Option |  |         | Total |  |         | Wtd.-Avg. Exercise Price
|                                              |  | $5.42                             |  | $7.50   |       |  | $17.10  |                          |  |        
|Outstanding at December 31, 2008              |  | 691,882                           |  | 135,590 |       |  | 132,040 |                          |  | 959,512 |   |  | $ | 7.32 
|Forfeited                                     |  | -                                 |  | -       |       |  | (3,600  | )                        |  | (3,600  | ) |  |   | 17.10
|Expired (1)                                   |  | -                                 |  | (1,500  | )     |  | (2,400  | )                        |  | (3,900  | ) |  |   | 13.41
|Outstanding at September 30, 2009 (2)         |  | 691,882                           |  | 134,090 |       |  | 126,040 |                          |  | 952,012 |   |  |   | 7.26 
|Wtd-avg contractual remaining term (in years) |  | 9.2                               |  | 9.2     |       |  | 8.2     |                          |  | 9.1     |   |  |   |      
|Intrinsic value at September 30, 2009 (3)     |  | -                                 |  | -       |       |  | -       |                          |  | -       |   |  |   |      

(1) Represent vested options issued to former employees that expired unexercised under the terms of
the option agreements.

(2) The $5.42 warrant, held by the U.S. Treasury, expires on December 23, 2018 and is 100% exercisable. The $7.50
options held by officers, employees and directors expire on December 11, 2018 and are 100% vested and exercisable. The $17.10 options held by officers, employees and directors expire on December 13, 2017 and 88,560 of those options are
vested and exercisable; and the remaining 37,480 options vest and become exercisable on December 13, 2009.

(3) Intrinsic value is zero
since the closing market price of the Class A common stock on September 30, 2009 of $3.53 was below the exercise price of all the options and warrant.

Compensation expense recorded in connection with stock options outstanding with a corresponding increase to paid in capital is as follows: For the quarter ended September 30, 2009 and 2008, $43,000
and $56,000, respectively, and for the nine-months ended September 30, 2009 and 2008, $154,000 and $166,000, respectively. At September 30, 2009, there was $43,000 of unrecognized compensation expense related to the $17.10 outstanding
stock options granted in 2007 that is expected to be recognized in the fourth quarter of 2009.



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Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 10 - Earnings Per Common Share

Net earnings applicable to common stockholders and the weighted-average number of shares used for basic and diluted earnings per common share computations are summarized in the table that follows:



|                                                                           |  |                             |           |                                |   |           |  |      |           |  |   |          
|-------------------------------------------------------------------------- |  | --------------------------- | --------- | ------------------------------ | - | --------- |  | ---- | --------- |  | - | ---------
|                                                                           |  | Quarter Ended September 30, |           | Nine-Months EndedSeptember 30,
|                                                                           |  |                             |          
|($ in thousands, except share and per share amounts)                       |  | 2009                        |           | 2008                           |   | 2009      |  | 2008
|Basic Earnings Per Common Share:                                           |  |                             |           |                                |   |           |  |      |           |  |   |          
|Net earnings applicable to common stockholders                             |  | $                           | 342       |                                | $ | 2,626     |  | $    | 1,201     |  | $ | 6,768    
|Weighted-Average number of common shares outstanding                       |  |                             | 8,270,812 |                                |   | 8,270,812 |  |      | 8,270,812 |  |   | 8,255,155
|Basic Earnings Per Common Share                                            |  | $                           | 0.04      |                                | $ | 0.32      |  | $    | 0.14      |  | $ | 0.82     
|Diluted Earnings Per Common Share:                                         |  |                             |           |                                |   |           |  |      |           |  |   |          
|Net earnings applicable to common stockholders                             |  | $                           | 342       |                                | $ | 2,626     |  | $    | 1,201     |  | $ | 6,768    
|Weighted-Average number of common shares outstanding:                      |  |                             |           |                                |   |           |  |      |           |  |   |          
|Common shares outstanding                                                  |  |                             | 8,270,812 |                                |   | 8,270,812 |  |      | 8,270,812 |  |   | 8,255,155
|Potential dilutive shares resulting from exercise of warrants /options (1) |  |                             | -         |                                |   | -         |  |      | -         |  |   | 2,049    
|                                                                           |  |                             |          
|Total average number of common shares outstanding used for dilution        |  |                             | 8,270,812 |                                |   | 8,270,812 |  |      | 8,270,812 |  |   | 8,257,204
|Diluted Earnings Per Common Share                                          |  | $                           | 0.04      |                                | $ | 0.32      |  | $    | 0.14      |  | $ | 0.82     

(1) All outstanding options/warrants for the 2009 periods and for the 2008 quarterly period were not
dilutive because their exercise prices were above the average market price of the Class A common stock during such period. For the 2008 nine-month period, 132,140 options were not dilutive.

Note 11 - 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.

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 to the Company. 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 creditworthiness on a case-by-case basis. Standby letters of credit are
conditional commitments issued by INB to guarantee the performance of a customer to a third party. The credit risk involved in the underwriting of letters of credit is essentially the same as that involved in originating loans.

The contractual amounts of off-balance sheet financial instruments is summarized as follows:



|                          |  |                      |        |                     |   |       
|------------------------- |  | -------------------- | ------ | ------------------- | - | ------
|($ in thousands)          |  | At September 30,2009 |        | At December 31,2008
|Unfunded loan commitments |  | $                    | 39,448 |                     | $ | 38,637
|Available lines of credit |  |                      | 887    |                     |   | 915   
|                          |  | $                    | 40,335 |                     | $ | 39,552

Note 12 - Regulatory Capital

The Company is subject to regulation, examination and supervision by the FRB. INB 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).

The Company (on a consolidated basis) and INB are subject to
various regulatory capital requirements administered by the federal banking agencies. Failure to meet them can initiate certain mandatory and possible discretionary actions by the regulators that, if undertaken, could have a direct material effect
on the Companys and INBs financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company
and INB 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 judgment by the regulators about components, risk weighting and other factors. Quantitative measures established by the regulations to ensure capital adequacy require the Company, on a consolidated basis, and INB on a stand alone basis,
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.

The Federal Reserve allows trust preferred securities to be included in the Tier 1 capital of bank holding companies but with stricter limitations on the use of such securities that are scheduled to
become effective on March 31, 2011. Until then, bank holding companies may continue to include cumulative perpetual preferred stock and trust preferred securities in Tier 1 capital up to 25 percent of total core capital elements (excluding
senior preferred stock issued to the U.S. Treasury, all of which qualifies as Tier 1 capital without restriction).

INB maintains its
regulatory capital at levels to be classified 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. In April 2009, INB agreed with the OCC, its primary regulator, to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets
(leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%.

At September 30,
2009, the Company and INB met all capital adequacy requirements to which they are subject. As of the date of filing of this report on Form 10-Q, management is not aware of any conditions or events that would have changed the Companys or
INBs compliance with each of its regulatory capital requirements.

The actual capital of the Company (consolidated) and INB on a
percentage basis are as follows:



|                                                        |  |              |   |  |                                                                          |   |  |                                                     |   |  |                                           |  
|------------------------------------------------------- |  | ------------ | - |  | ------------------------------------------------------------------------ | - |  | --------------------------------------------------- | - |  | ----------------------------------------- | -
|                                                        |  | ActualRatios |   |  | Minimum RequirementUnder RegulatoryFramework for PromptCorrective Action |   |  | MinimumRequirement tobe Considered Well Capitalized |   |  | MinimumRequirementUnder Agreementwith OCC |  
|Consolidated at September 30, 2009 (1)                  |  |              |   |  |                                                                          |   |  |                                                     |   |  |                                           |  
|Total capital to risk-weighted assets                   |  | 15.34        | % |  | 8.00                                                                     | % |  | NA                                                  |   |  | NA                                        |  
|Tier 1 capital to risk-weighted assets                  |  | 14.09        | % |  | 4.00                                                                     | % |  | NA                                                  |   |  | NA                                        |  
|Tier 1 capital to total average assets  leverage ratio |  | 11.29        | % |  | 4.00                                                                     | % |  | NA                                                  |   |  | NA                                        |  
|                                                        |  |              |   | 
|Intervest National Bank at September 30, 2009           |  |              |   |  |                                                                          |   |  |                                                     |   |  |                                           |  
|Total capital to risk-weighted assets                   |  | 13.96        | % |  | 8.00                                                                     | % |  | 10.00                                               | % |  | 12.00                                     | %
|Tier 1 capital to risk-weighted assets                  |  | 12.71        | % |  | 4.00                                                                     | % |  | 6.00                                                | % |  | 10.00                                     | %
|Tier 1 capital to total average assets  leverage ratio |  | 10.22        | % |  | 4.00                                                                     | % |  | 5.00                                                | % |  | 9.00                                      | %

(1) At September 30, 2009, assuming IBC had excluded all of its eligible outstanding trust
preferred capital securities (which totaled $55 million) from its Tier 1 capital and included the entire amount in its Tier 2 capital, consolidated proforma capital ratios would have been 15.34%, 11.20% and 8.98%, respectively.

Note 13 - 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. Based on review and consultation with legal counsel, 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.

Note 14 - Fair Value Measurements

The
Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Currently, the Company has no assets or liabilities that are recorded at fair value on a recurring
basis, such as securities available for sale.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 14 - Fair Value Measurements, Continued



From time to time, the Company may be required to record at fair value other assets or liabilities on a
non-recurring basis, such as impaired loans, impaired investment securities and foreclosed real estate. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets. In
accordance GAAP, the Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value, as follows:

Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets;

Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that are not active and model-based valuation techniques for which all significant assumptions are observable in the market; and

Level 3 -
Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These assumptions reflect the Companys estimates of assumptions that market participants would use in pricing the asset or
liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the
asset or liability.

The Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. GAAP requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In instances where the
determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or
liability.

The following describes valuation methodologies used for assets measured at fair value on a non-recurring basis.

Impaired Loans.The Companys real estate loans are evaluated individually for impairment. A loan is considered impaired when, based upon
current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Companys impaired loans are normally collateral
dependent and, as such, are carried at the lower of the Companys net recorded investment in the loan or the estimated fair value of the collateral less estimated selling costs. Adjustments to recorded investment are made through specific
valuation allowances that are recorded as part of the overall allowance for loan losses. Estimates of fair value are determined based on a review of a variety of information, including formal appraisals, when available, and values derived from
broker opinions, as well as the knowledge and experience of the Companys two senior lending officers with respect to values of properties in the Companys lending markets. Consideration is given to the type, location and occupancy of the
collateral property as well as current economic conditions in the area in which the property is located in assessing and determining fair value. Accordingly, fair value estimates for impaired loans are classified as Level 3.

Other Than Temporary Impaired Investment Securities.See note 3 for a detailed discussion.

Foreclosed Real Estate.Foreclosed real estate represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is
carried, net of a valuation allowance for real estate losses, at the lower of cost or estimated fair value less estimated selling costs. Fair value is estimated in the same manner as impaired loans and, as such, is also classified as Level 3. As
these properties are actively marketed, estimated fair value may be periodically adjusted though the valuation allowance for losses to reflect changes in values resulting from changing market conditions.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 14 - Fair Value Measurements, Continued



The following table provides the level of valuation assumptions used to determine the carrying value of
assets measured at fair value on a nonrecurring basis at September 30, 2009.



|                        |  |                                         |         |                                                 |   |         |  |         |   |      |   |         |  |   |       |  |   |      
|----------------------- |  | --------------------------------------- | ------- | ----------------------------------------------- | - | ------- |  | ------- | - | ---- | - | ------- |  | - | ----- |  | - | -----
|                        |  | At September 30,2009 Net carrying value |         | Total Losses (3)Nine Months Ended September 30,
|($ in thousands)        |  | Total                                   |         | Level 1                                         |   | Level 2 |  | Level 3 |   | 2009 |   | 2008   
|Impaired loans (1)      |  | $                                       | 202,898 |                                                 | $ | -       |  | $       | - |      | $ | 202,898 |  | $ | 8,928 |  | $ | 9,584
|Impaired securities (2) |  |                                         | 4,615   |                                                 |   | -       |  |         | - |      |   | 4,615   |  |   | 1,372 |  |   | -    
|Foreclosed real estate  |  |                                         | 32,915  |                                                 |   | -       |  |         | - |      |   | 32,915  |  |   | 678   |  |   | -    

(1) Comprised of nonaccrual loans and troubled debt restructurings.

(2) Comprised of certain trust preferred securities considered other than temporarily impaired.

(3) The loss for impaired loans represents the change (before net chargeoffs) during the period in the corresponding specific valuation allowance. The loss for foreclosed real estate represents writedowns
in carrying values subsequent to foreclosure, adjusted for any gains or losses from the sale of the properties, during the period that are charged to real estate activities expense. The loss on investment securities represents OTTI charges recorded
as a component of noninterest income.

The following table presents information regarding the change is assets measured at fair value on a
nonrecurring basis for the nine-months ended September 30, 2009.



|                                                       |  |                    |        |   |               |   |         |                       |  |   |        |  
|------------------------------------------------------ |  | ------------------ | ------ | - | ------------- | - | ------- | --------------------- |  | - | ------ | -
|($ in thousands)                                       |  | ImpairedSecurities |        |   | ImpairedLoans |   |         | ForeclosedReal Estate | 
|Balance at December 31, 2008                           |  | $                  | -      |   |               | $ | 108,610 |                       |  | $ | 9,081  |  
|Net new impaired securities and loans                  |  |                    | 5,987  |   |               |   | 146,441 |                       |  |   | -      |  
|Other than temporary impairment writedowns             |  |                    | (1,372 | ) |               |   | -       |                       |  |   | -      |  
|Principal repayments/sales                             |  |                    | -      |   |               |   | (19,966 | )                     |  |   | (2,698 | )
|Loan chargeoffs                                        |  |                    | -      |   |               |   | (4,977  | )                     |  |   | -      |  
|Loans transferred to foreclosed real estate            |  |                    | -      |   |               |   | (27,210 | )                     |  |   | 27,210 |  
|Writedowns of carrying value subsequent to foreclosure |  |                    | -      |   |               |   | -       |                       |  |   | (688   | )
|Gain on sales                                          |  |                    | -      |   |               |   | -       |                       |  |   | 10     |  
|Balance at September 30, 2009                          |  | $                  | 4,615  |   |               | $ | 202,898 |                       |  | $ | 32,915 |  

The carrying and estimated fair values of the Companys financial instruments are as follows:



|                                                   |  |                       |           |                      |   |                |  |            |           |  |   |          
|-------------------------------------------------- |  | --------------------- | --------- | -------------------- | - | -------------- |  | ---------- | --------- |  | - | ---------
|                                                   |  | At September 30, 2009 |           | At December 31, 2008
|($ in thousands)                                   |  | Carrying Value        |           | Fair Value           |   | Carrying Value |  | Fair Value
|Financial Assets:                                  |  |                       |           |                      |   |                |  |            |           |  |   |          
|Cash and cash equivalents                          |  | $                     | 30,660    |                      | $ | 30,660         |  | $          | 54,903    |  | $ | 54,903   
|Securities held to maturity, net                   |  |                       | 598,313   |                      |   | 596,855        |  |            | 475,581   |  |   | 475,100  
|FRB and FHLB stock                                 |  |                       | 9,929     |                      |   | 9,929          |  |            | 8,901     |  |   | 8,901    
|Loans receivable, net of allowance for loan losses |  |                       | 1,664,249 |                      |   | 1,699,287      |  |            | 1,677,187 |  |   | 1,710,506
|Loan fees receivable                               |  |                       | 7,928     |                      |   | 6,246          |  |            | 8,590     |  |   | 6,768    
|Accrued interest receivable                        |  |                       | 10,965    |                      |   | 10,965         |  |            | 11,965    |  |   | 11,965   
|Financial Liabilities:                             |  |                       |           |                      |   |                |  |            |           |  |   |          
|Deposits                                           |  |                       | 2,012,995 |                      |   | 2,064,403      |  |            | 1,864,135 |  |   | 1,900,143
|Borrowed funds plus accrued interest payable       |  |                       | 107,547   |                      |   | 109,141        |  |            | 149,566   |  |   | 152,684  
|Accrued interest payable on deposits               |  |                       | 4,510     |                      |   | 4,510          |  |            | 6,868     |  |   | 6,868    
|Off-Balance Sheet Instruments:                     |  |                       |           |                      |   |                |  |            |           |  |   |          
|Commitments to lend                                |  |                       | 255       |                      |   | 255            |  |            | 416       |  |   | 416      

Discussion regarding the assumptions used to compute the fair values of financial instruments in the
table above can be found in note 21 to the consolidated financial statements included in the Companys 2008 annual report on Form 10-K.

Note 15 - Recent Accounting Standards Update

Business Combinations. On January 1, 2009, the Company adopted
a new standard which requires, among other things, the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the
measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business
combination. The adoption of this standard had no effect on the Companys financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 15Recent Accounting Standards Update, Continued



Noncontrolling Interest in Consolidated Financial Statements.On January 1, 2009, the
Company adopted a new standard whose objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and
reporting standards for the noncontrolling interest in a subsidiary and for deconsolidation of a subsidiary. The adoption of this standard had no effect on the Companys financial statements.

Disclosures about Derivative Instruments and Hedging Activities.On January 1, 2009, the Company adopted a new standard which, among
other things, provides for enhanced disclosures about how and why an entity uses derivatives and how and where those derivatives and related hedged items are reported in the entitys financial statements. The Company currently does not engage
in trading or hedging activities, nor does it invest in interest rate derivatives or enter into interest rate swaps. The adoption of this standard had no effect on the Companys financial statements.

Subsequent Events.On January 1, 2009, the Company adopted a new standard which establishes accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or available to be issued. The standard defines (i) the period after the balance sheet date during which a reporting entitys management should evaluate events
or transactions that may occur for potential recognition or disclosure in the financial statements (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial
statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The adoption of this standard had no effect on the Companys financial statements.

Accounting for Transfers of Financial Assets.This new standard enhances reporting about transfers of financial assets, including
securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a qualifying special-purpose entity and changes the requirements for derecognizing financial
assets. It also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The standard will be effective
January 1, 2010 and is not expected to have an impact on the Companys financial statements.

Consolidation of Variable
Interest Entities.This new standard changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is
required to consolidate an entity is based on, among other things, an entitys purpose and design and a companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. The
standard requires additional disclosures about the reporting entitys involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entitys financial
statements. The standard will be effective January 1, 2010 and is not expected to have a significant impact on the Companys financial statements.

Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.On September 30, 2009, the Company adopted a new standard that makes the Financial
Accounting Standards Boards Accounting Standards Codification (the Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial
statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative guidance for SEC registrants. All guidance contained in
the Codification carries an equal level of authority. All non-grandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed non-authoritative. The Codification does not change or alter existing GAAP and,
therefore, the adoption of this standard had no effect on the Companys financial statements, other than to eliminate previous references to accounting pronouncements that are no longer applicable as a result of this new codification scheme.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 15Recent Accounting Standards Update, Continued



Impairment.On January 1, 2009, the Company adopted a new standard whose objective is to
achieve more consistent determinations of whether OTTI has occurred. The adoption of this standard had no effect on the Companys financial statements.

Fair Value Measurements and Impairments of Securities. On June 30, 2009, the Company adopted new accounting standards that provide additional application guidance and enhance disclosures
regarding fair value measurements and impairments of securities, as well as clarity and consistency in accounting for and presenting impairment losses on securities. The standards give guidance to determining fair values when there is no active
market or where the price inputs being used represent distressed sales. It reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The
standards also relate to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Previously, fair values for these assets and liabilities were only disclosed once a year,
These disclosures are now required on a quarterly basis to provide qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. Guidance on OTTI is intended
to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in
comprehensive income remains fair value. The standard also requires increased and timelier disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The adoption of this standard
had no impact on the Companys financial statements.

Note 16Recent Regulatory Developments

Memorandum of Understanding and Level of Regulatory Capital.On April 7, 2009, Intervest National Bank (INB) entered into a Memorandum of
Understanding (MOU) with the Comptroller of the Currency (OCC), which requires INB to (1) appoint a Compliance Committee to monitor and coordinate INBs adherence to the MOU and to submit progress reports to the
OCC; (2) develop and implement a Strategic Plan in accordance with guidelines set forth in the MOU; (3) review and revise INBs Contingency Funding Plan to address matters outlined in the MOU; (4) develop and implement a written
program to improve credit risk management processes that are consistent across INBs two primary markets; (5) develop and implement a three-year capital program in accordance with guidelines set out in the MOU; and (6) review and
revise INBs interest rate risk policy and procedures to address matters set forth in the MOU. As of September 30, 2009, management believes that it has satisfied a number of the conditions of the MOU and has commenced the steps necessary
to resolve any and all remaining issues presented therein.

INB has also agreed with the OCC to maintain minimum capital ratios at specified
levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio)9%; Tier 1 capital to risk-weighted assets10%; and total capital to risk-weighted assets12%.
At September 30, 2009, INBs capital ratios were in excess of these levels and were 10.22%, 12.71% and 13.96%, respectively.

Regulatory Core Capital.In March 2009, the Federal Reserve Board announced the adoption of a final rule that delays until March 31, 2011, the effective date of new limits on the inclusion of trust preferred securities
and other restricted core capital elements in Tier 1 capital of all bank holding companies (BHCs). This action was taken in light of continued stress in financial markets and the efforts of BHCs to increase their overall capital levels. These new
limits were scheduled to take effect on March 31, 2009, pursuant to a final rule adopted by the Board on March 10, 2005. Until the new effective date in 2011, BHCs may continue to include cumulative perpetual preferred stock and trust
preferred securities in Tier 1 capital up to 25 percent of total core capital elements (excluding senior preferred stock issued to the U.S. Treasury, all of which qualifies as Tier 1 capital without restriction).



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 16Recent Regulatory Developments, Continued



FDIC Insurance Premiums.In February 2009, the FDIC adopted a final rule that
(1) modified the risk-based assessment system and sets initial base assessment rates beginning April 1, 2009, at 12 to 45 basis points; (2) extended the period of the Restoration Plan for the Deposit Insurance Fund to seven years; and
(3) adopted an interim rule to impose an emergency special insurance assessment on June 30, 2009 to be collected on September 30, 2009, and (4) allows the FDIC to impose possible additional special assessments thereafter to
maintain public confidence in the Deposit Insurance Fund (DIF).

Risk-Based Assessments for Risk Category I: The final rule:
(1) introduces a new financial ratio into the financial ratios method applicable to most Risk Category I institutions that includes certain brokered deposits above a threshold that are used to fund rapid asset growth; (2) revises a large
bank method for a large Risk Category I institution with long-term debt issuer ratings; and (3) broadens the spread between minimum and maximum initial base assessment rates for Risk Category I institutions.

Adjustments to Assessment Rates: The final rule provides for the following adjustments to an institutions assessment rate: (1) a decrease
for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for non-Risk Category I
institutions, an increase for brokered deposits above a threshold amount.

Amended Restoration Plan: Due to extraordinary
circumstances, the FDIC extended the time within which the reserve ratio must be restored to 1.15 from five to seven years.

Emergency
Special Assessment: In May 2009, the FDIC levied a special assessment applicable to all insured depository institutions totaling 5 basis points of each institutions total assets less Tier 1 capital as of June 30, 2009, not to exceed
10 basis points of domestic deposits. The special assessment is part of the FDICs efforts to rebuild the DIF and was collected on September 30, 2009. The FDIC also has the ability to impose additional special assessments of 5 basis points
for the fourth quarters of 2009, if the FDIC estimates that the DIF reserve ratio will fall to a level that would adversely affect public confidence in federal deposit insurance or to a level that would be close to or below zero. Any additional
special assessment would also be capped at 10 basis points of domestic deposits. INB cannot provide any assurance as to the ultimate amount or timing of any such special assessments, should such special assessments occur, as such special assessments
depend upon a variety of factors which are beyond INBs control. The changes to deposit insurance premiums discussed above have significantly increased FDIC insurance expense for all insured depository institutions. INBs FDIC insurance
expense for the first nine months of 2009, including the additional special assessment, amounted to $4.0 million, compared to $1.1 million for same period of 2008, a 264% increase.

Prepaid Assessments: In September 2009, the FDIC proposed that insured institutions prepay their estimated quarterly insurance assessments for the fourth quarter of 2009 and for all of 2010, 2011
and 2012. The FDIC also proposed a three-basis point increase in assessment rates effective on January 1, 2011, and an extension to the restoration period from seven to eight years. The FDIC believes that this arrangement is much less likely to
impair bank lending than additional one-time special assessments.



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Intervest Bancshares Corporation and Subsidiaries

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith, P.A., P.C., the Companys independent registered public accounting firm, has made a limited review of
the Companys financial data as of September 30, 2009 and for the three- and nine-month periods ended September 30, 2009 and 2008 presented in this document, in accordance with the standards established by the Public Company
Accounting Oversight Board.

The report of Hacker, Johnson & Smith, P.A., P.C. furnished pursuant to Article 10 of
Regulation S-X is included on the following page herein.



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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Intervest Bancshares Corporation

New York, New York:

We have reviewed the accompanying condensed consolidated balance sheet of Intervest Bancshares Corporation and Subsidiaries (the Company) as of September 30, 2009 and the related
condensed consolidated statements of earnings for the three- and nine-month periods ended September 30, 2009 and 2008, and the related condensed consolidated statements of changes in stockholders equity and cash flows for the nine-month
periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the Companys management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is
the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on
our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the Company
as of December 31, 2008, and the related consolidated statements of earnings, changes in stockholders equity and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2009, we, based on our
audit expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been derived.



|                                       
|---------------------------------------
|/s/ Hacker, Johnson & Smith, P.A., P.C.
|HACKER, JOHNSON & SMITH, P.A., P.C.    
|Tampa, Florida                         
|October 29, 2009                       



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|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Overview

Managements
discussion of financial condition and results of operations of Intervest Bancshares Corporation and Subsidiaries that follows should be read in conjunction with the accompanying quarterly condensed consolidated financial statements in this report on
Form 10-Q as well as the Companys entire 2008 annual report on Form 10-K.

Intervest Bancshares Corporation has two wholly owned
consolidated subsidiaries, Intervest National Bank and Intervest Mortgage Corporation (Intervest Bancshares Corporation and its subsidiaries are referred to collectively as the Company on a consolidated basis in this report). Intervest
Bancshares Corporation, Intervest National Bank and Intervest Mortgage Corporation may be referred to individually as IBC, INB and IMC, respectively, in this report. IBC also has four other wholly owned
unconsolidated subsidiaries, Intervest Statutory Trust II, III, IV and V, all of which were formed at various times in connection with the issuance of trust preferred securities. For a more detailed discussion of the Companys business, see
note 2 to the condensed consolidated financial statements included in this report.

Critical Accounting Policies

The Company currently considers its critical accounting policies to be those that relate to the determination of: the allowance for loan losses; the
valuation allowance for real estate losses; and the other than temporary impairment charge of its security investments. These three items are considered critical accounting estimates because each is highly susceptible to change from period to period
and require management to make numerous assumptions about a variety of information that directly affect the calculation of the amounts reported in the consolidated financial statements. For example, the impact of a large unexpected chargeoff could
deplete the allowance for loan losses and potentially require increased provisions to replenish the allowance, which could negatively affect the Companys earnings and financial condition.

A more detailed discussion of the factors and estimates used in computing the above items can be found as follows: for the allowance for loan losses - under
the caption Critical Accounting Policies on pages 36 to 39 of the Companys 2008 annual report on Form 10-K; for the valuation allowance for real estate losses  note 14 to the condensed consolidated financial statements in
this report; and for the other than temporary impairment charge on security investments  note 3 to the condensed consolidated financial statements in this report.

Comparison of Financial Condition at September 30, 2009 and December 31, 2008

Selected balance sheet information by entity as of September 30, 2009 follows:



|                                            |  |     |         |     |   |           |     |  |   |                  |   |  |              |          |   |  |   |           |  
|------------------------------------------- |  | --- | ------- | --- | - | --------- | --- |  | - | ---------------- | - |  | ------------ | -------- | - |  | - | --------- | -
|($ in thousands)                            |  | IBC |         | INB |   |           | IMC |  |   | Eliminations (1) |   |  | Consolidated |         
|Cash and cash equivalents                   |  | $   | 6,670   |     | $ | 29,492    |     |  | $ | 1,697            |   |  | $            | (7,199   | ) |  | $ | 30,660    |  
|Security investments                        |  |     | -       |     |   | 608,242   |     |  |   | -                |   |  |              | -        |   |  |   | 608,242   |  
|Loans receivable, net of deferred fees      |  |     | -       |     |   | 1,677,901 |     |  |   | 18,163           |   |  |              | -        |   |  |   | 1,696,064 |  
|Allowance for loan losses                   |  |     | -       |     |   | (31,225   | )   |  |   | (590             | ) |  |              | -        |   |  |   | (31,815   | )
|Foreclosed real estate                      |  |     | -       |     |   | 30,588    |     |  |   | 2,327            |   |  |              | -        |   |  |   | 32,915    |  
|Investments in consolidated subsidiaries    |  |     | 260,832 |     |   | -         |     |  |   | -                |   |  |              | (260,832 | ) |  |   | -         |  
|All other assets                            |  |     | 3,187   |     |   | 42,083    |     |  |   | 911              |   |  |              | (77      | ) |  |   | 46,104    |  
|Total assets                                |  | $   | 270,689 |     | $ | 2,357,081 |     |  | $ | 22,508           |   |  | $            | (268,108 | ) |  | $ | 2,382,170 |  
|Deposits                                    |  | $   | -       |     | $ | 2,020,197 |     |  | $ | -                |   |  | $            | (7,202   | ) |  | $ | 2,012,995 |  
|Borrowed funds and related interest payable |  |     | 56,784  |     |   | 50,763    |     |  |   | -                |   |  |              | -        |   |  |   | 107,547   |  
|All other liabilities                       |  |     | 286     |     |   | 46,733    |     |  |   | 1,064            |   |  |              | (74      | ) |  |   | 48,009    |  
|Total liabilities                           |  |     | 57,070  |     |   | 2,117,693 |     |  |   | 1,064            |   |  |              | (7,276   | ) |  |   | 2,168,551 |  
|Stockholders equity                        |  |     | 213,619 |     |   | 239,388   |     |  |   | 21,444           |   |  |              | (260,832 | ) |  |   | 213,619   |  
|Total liabilities and stockholders equity  |  | $   | 270,689 |     | $ | 2,357,081 |     |  | $ | 22,508           |   |  | $            | (268,108 | ) |  | $ | 2,382,170 |  

|(1) | All significant intercompany balances and transactions are eliminated in consolidation. Nearly all the amounts arise from intercompany deposit accounts and investments
in consolidated subsidiaries.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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A comparison of selected consolidated balance sheet information follows:



|                                                               |  |                       |           |                  |       |   |                      |  |               |   |                  |  |       |  
|-------------------------------------------------------------- |  | --------------------- | --------- | ---------------- | ----- | - | -------------------- |  | ------------- | - | ---------------- |  | ----- | -
|                                                               |  | At September 30, 2009 |           |                  |       |   | At December 31, 2008 | 
|($ in thousands)                                               |  | CarryingValue         |           | % ofTotal Assets |       |   |                      |  | CarryingValue |   | % ofTotal Assets | 
|Cash and cash equivalents                                      |  | $                     | 30,660    |                  | 1.3   | % |                      |  |               | $ | 54,903           |  | 2.4   | %
|Security investments                                           |  |                       | 608,242   |                  | 25.5  |   |                      |  |               |   | 484,482          |  | 21.4  |  
|Loans receivable, net of deferred fees and loan loss allowance |  |                       | 1,664,249 |                  | 69.9  |   |                      |  |               |   | 1,677,187        |  | 73.8  |  
|Foreclosed real estate                                         |  |                       | 32,915    |                  | 1.4   |   |                      |  |               |   | 9,081            |  | 0.4   |  
|All other assets                                               |  |                       | 46,104    |                  | 1.9   |   |                      |  |               |   | 46,180           |  | 2.0   |  
|Total assets                                                   |  | $                     | 2,382,170 |                  | 100.0 | % |                      |  |               | $ | 2,271,833        |  | 100.0 | %
|Deposits                                                       |  | $                     | 2,012,995 |                  | 84.5  | % |                      |  |               | $ | 1,864,135        |  | 82.1  | %
|Borrowed funds and related interest payable                    |  |                       | 107,547   |                  | 4.5   |   |                      |  |               |   | 149,566          |  | 6.6   |  
|All other liabilities                                          |  |                       | 48,009    |                  | 2.0   |   |                      |  |               |   | 46,158           |  | 2.0   |  
|Total liabilities                                              |  |                       | 2,168,551 |                  | 91.0  |   |                      |  |               |   | 2,059,859        |  | 90.7  |  
|Stockholders equity                                           |  |                       | 213,619   |                  | 9.0   |   |                      |  |               |   | 211,974          |  | 9.3   |  
|Total liabilities and stockholders equity                     |  | $                     | 2,382,170 |                  | 100.0 | % |                      |  |               | $ | 2,271,833        |  | 100.0 | %

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing and noninterest-bearing cash balances with banks, and other short-term investments that have original maturities of three months or less. Cash and cash
equivalents decreased to $31 million at September 30, 2009 from $55 million at December 31, 2008. 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

Security investments consist of securities held to maturity and Federal Reserve Bank (FRB) and Federal Home Loan Bank of New York (FHLB) stock. Securities
are classified as held to maturity and are carried at amortized cost when management has the intent and ability to hold them to maturity. Such investments, all of which are held by INB, increased to $598 million at September 30, 2009, from $476
million at December 31, 2008. The increase reflected $564 million of new purchases exceeding a total of $439 million of calls and maturities of securities during the period. INB invests in U.S. government agency debt obligations to emphasize
safety and liquidity. The Company does not own or invest in any collateralized debt obligations, collateralized mortgage obligations, or any preferred or common stock of the Federal National Mortgage Association or Federal Home Loan Mortgage
Corporation.

At September 30, 2009, securities held to maturity consisted of investment grade rated debt obligations of the Federal Home
Loan Bank, Federal Farm Credit Bank, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation totaling $591.7 million and noninvestment grade rated corporate securities (consisting of variable-rate pooled trust preferred
securities backed by obligations of companies in the banking industry) totaling $6.7 million. As discussed in more detail in note 3 to the condensed consolidated financial statements in this report, in the first nine months of 2009, INB recorded
impairment charges of $1.4 million on six trust preferred securities.

At September 30, 2009, the entire securities held to maturity
portfolio had a weighted-average yield of 2.86% and a weighted-average remaining maturity of 4.6 years, compared to 3.80% and 4.2 years, respectively, at December 31, 2008. Nearly all of the securities in the portfolio have fixed interest rates
or have predetermined rate increases, and have call features that allow the issuer to call the security before its stated maturity without penalty. In the first nine months of 2009, $428 million of agency securities with a weighted average yield of
approximately 3.62% were called by the issuers and the resulting proceeds were invested into new securities yielding 91 basis points less. Largely as a result of these calls, the overall average yield on the portfolio decreased from
December 31, 2008. At September 30, 2009 and December 31, 2008, the held-to-maturity portfolios estimated fair value was $597 million and $475 million, respectively. At September 30, 2009, the portfolio had a net unrealized
loss of $1.5 million, compared to a net unrealized loss of $0.5 million at December 31, 2008. See note 3 to the condensed consolidated financial statements in this report for a discussion regarding unrealized losses. In order for INB to be a
member of the FRB and FHLB, INB maintains an investment in the capital stock of each entity, which amounted to $4.4 million and $5.5 million, respectively, at September 30, 2009.



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##### Table of Contents

Loans Receivable, Net of Deferred Fees

Loans receivable, net of deferred fees, amounted to $1.70 billion at September 30, 2009, a $10 million decrease from $1.71 billion at December 31,
2008. The decrease was due to the aggregate of $143 million of principal repayments, $27.2 million of transfers to foreclosed real estate and $4.9 million of loan chargeoffs exceeding $165 million of new loan originations that were primarily secured
by commercial real estate. The new originations are nearly all fixed-rate loans with a weighted-average yield and term of 6.71% and 5.1 years, respectively. The terms of the loans have largely been a function of the demand by borrowers for
longer-term, fixed-rate product that has been driven by the historically low interest rate environment. The Company expects this demand for longer-term, fixed-rate product to continue and expects that most of its new loan originations for the
foreseeable future will have similar terms. Fixed-rate loans constituted approximately 75% of the consolidated loan portfolio at September 30, 2009, up from 72% at December 31, 2008. New loan originations for the first nine-months of 2008
amounted to $327 million. The lower level of originations as compared to the same period of 2009 primarily reflects a decrease in suitable lending opportunities for the Company.

The consolidated loan portfolio is concentrated in mortgage loans secured by commercial and multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office
buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial/warehouse properties, parking lots/garages, mobile home parks, self storage facilities and vacant land). At September 30, 2009, such loans consisted of 652 loans
with an aggregate principal balance of $1.70 billion and an average loan size of $2.6 million. Loans with principal balances of more than $10 million consisted of 18 loans or $247 million, with the largest loan being $20.4 million. Loans with
principal balances of $5 million to $10 million consisted of 54 loans and aggregated to $393 million. The Company does not own or originate construction/development loans or condominium conversion loans.

Nonaccrual and Restructured (Impaired) Loans

Nonaccrual loans increased to $131.7 million (38 loans) at September 30, 2009, from $108.6 million (26 loans) at December 31, 2008. At September 30, 2009 and December 31, 2008, there was one loan for $1.9 million
classified as ninety days past due and still accruing interest. This loan is past its maturity date but the borrower continues to make monthly loan payments. At September 30, 2009, there also were $71.2 million of accruing loans on which INB
has granted certain concessions to provide payment relief to the borrower generally consisting of the deferral of principal and/or a partial reduction in interest payments for a period of time. These loans are considered troubled debt restructurings
(TDRs). Nonaccrual loans and TDRs are considered impaired under GAAP. At September 30, 2009 and December 31, 2008, nonaccrual loans had a specific valuation allowance (included as part of the overall allowance for loan losses) in the
aggregate amount of $11.7 million and $8.2 million, respectively. Estimated loan-to-value ratios, net of specific valuation allowances, on nonaccrual loans ranged from 50% to 99% at September 30, 2009. At September 30, 2009, there was an
additional specific valuation allowance of $1.8 million maintained for TDRs. At September 30, 2009 there were also $12.0 million of loans for which there were concerns regarding the ability of the borrowers to meet existing repayment terms.
Such potential problem loans are normally classified as substandard for regulatory purposes and reflect the distinct possibility, but not the probability, that the Company will not be able to collect all amounts due according to the contractual
terms of the loan. Such loans may never become delinquent, nonaccrual or impaired. Potential problem loans are considered in the determination of the overall adequacy of the allowance for loan losses.

The Company is taking various steps to resolve its nonaccrual loans, including proceeding with foreclosures on many of the collateral properties, working
with certain borrowers to provide payment relief and in limited cases, accepting partial payment as full satisfaction of a nonaccrual loan. In the third quarter of 2009, nonperforming assets with an original carrying value of $23.3 million were
repaid or sold for total proceeds of $22.8 million. The Company believes that concentrating its effort towards the individual collection of nonaccrual loans either through the restructure of certain loans or through the acquisition and eventual sale
of the collateral properties in most cases will maximize the recovery of its investment. The ability to complete foreclosure or other proceedings to acquire and sell certain collateral properties however continues to be delayed by various factors
including bankruptcy proceedings and an overloaded court system. As a result of these delays, the timing and amount of the resolution/disposition of nonaccrual loans as well as foreclosed real estate cannot be predicted with certainty. In addition,
if the current downturn in commercial real estate values and local economic conditions in both New York and Florida as well as other factors noted above continue for an additional extended period, it could have an adverse impact on the
Companys future asset



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##### Table of Contents

quality and level of nonperforming assets, chargeoffs and profitability. There can be no assurance that the Company will not have significant additional loan loss provisions or expenses in
connection with the ultimate collection of nonaccrual loans or in carrying and disposing of foreclosed real estate.

Nonaccrual loans are
detailed in the table that follows:



|                                                                          |  |                  |        |              |  |        |  |                          |  |              |         |              |   |         |  |    |  
|------------------------------------------------------------------------- |  | ---------------- | ------ | ------------ |  | ------ |  | ------------------------ |  | ------------ | ------- | ------------ | - | ------- |  | -- | -
|($ in thousands)                                                          |  |                  |        |              |  |        |  | Principal Balance as of: |  |              |        
|Property Type                                                             |  | City             |        | State        |  | Lender |  | Month Nonaccrual         |  | Sep 30, 2009 |         | Dec 31, 2008 |   | Notes   | 
|Retail                                                                    |  | Flushing         |        | New York     |  | INB    |  | Aug 2008                 |  | $            | 13,060  |              | $ | 13,060  |  |    |  
|Hotel                                                                     |  | St. Augustine    |        | Florida      |  | INB    |  | Jun 2007                 |  |              | 13,000  |              |   | 15,087  |  | (1 | )
|Multifamily                                                               |  | Long Island      |        | New York     |  | INB    |  | Jun 2007                 |  |              | -       |              |   | 11,316  |  | (2 | )
|Undeveloped Land                                                          |  | Long Island City |        | New York     |  | INB    |  | Mar 2008                 |  |              | 11,001  |              |   | 11,001  |  |    |  
|Multifamily                                                               |  | Philadelphia     |        | Pennsylvania |  | INB    |  | Sep 2009                 |  |              | 9,512   |              |   | -       |  |    |  
|Mixed Use                                                                 |  | New York         |        | New York     |  | INB    |  | Nov 2008                 |  |              | 8,104   |              |   | 8,104   |  |    |  
|Multifamily                                                               |  | Tampa            |        | Florida      |  | INB    |  | Oct 2008                 |  |              | 7,475   |              |   | 7,475   |  |    |  
|Hotel                                                                     |  | Clearwater       |        | Florida      |  | INB    |  | Nov 2008                 |  |              | 6,954   |              |   | 6,954   |  | (3 | )
|Hotel                                                                     |  | Orlando          |        | Florida      |  | INB    |  | Aug 2008                 |  |              | -       |              |   | 5,939   |  | (4 | )
|Multifamily                                                               |  | Brooklyn         |        | New York     |  | INB    |  | Sep 2009                 |  |              | 6,470   |              |   | -       |  |    |  
|Office Building                                                           |  | Staten Island    |        | New York     |  | INB    |  | May 2008                 |  |              | 6,150   |              |   | 6,150   |  | (5 | )
|Multifamily                                                               |  | Jacksonville     |        | Florida      |  | INB    |  | Sep 2009                 |  |              | 4,644   |              |   | -       |  |    |  
|Warehouse                                                                 |  | New York         |        | New York     |  | INB    |  | Feb 2009                 |  |              | 4,456   |              |   | -       |  |    |  
|Office Building                                                           |  | Wappinger Falls  |        | New York     |  | INB    |  | Sep 2009                 |  |              | 4,156   |              |   | -       |  |    |  
|Undeveloped Land                                                          |  | Perryville       |        | Maryland     |  | INB    |  | May 2008                 |  |              | 4,024   |              |   | 4,024   |  |    |  
|Retail                                                                    |  | Avenel           |        | New Jersey   |  | INB    |  | Mar 2007                 |  |              | -       |              |   | 3,064   |  | (6 | )
|Hotel                                                                     |  | Clearwater       |        | Florida      |  | INB    |  | Nov 2008                 |  |              | -       |              |   | 2,977   |  | (4 | )
|Multifamily                                                               |  | Cleveland        |        | Ohio         |  | INB    |  | Sep 2009                 |  |              | 3,529   |              |   | -       |  |    |  
|Office Building                                                           |  | East Orange      |        | New Jersey   |  | INB    |  | Mar 2009                 |  |              | 2,869   |              |   | -       |  |    |  
|Mobile Home                                                               |  | Venice           |        | Florida      |  | INB    |  | Aug 2009                 |  |              | 2,603   |              |   | -       |  | (7 | )
|Hotel                                                                     |  | Far Rockaway     |        | New York     |  | INB    |  | Aug 2009                 |  |              | 2,274   |              |   | -       |  |    |  
|Office Building                                                           |  | Yonkers          |        | New York     |  | INB    |  | Nov 2008                 |  |              | -       |              |   | 2,644   |  | (4 | )
|Various nonaccrual loans with individual balances of less than $2 million |  |                  | 21,461 |              |  | 10,815 |  |                          | 
|                                                                          |  |                  |        |              |  |        |  |                          |  | $            | 131,742 |              | $ | 108,610 |  |    |  



|(1) | Loan was originated by INB and IMC owns a 40% participation. The loan is secured by a waterfront hotel, restaurant and marina resort. In April 2009, INB and the debtor
reached a multi-faceted settlement agreement whereby the loans principal balance was reduced (charged off by $2.0 million) to a principal amount of $13 million and the debtor agreed to and paid a portion of outstanding real estate taxes. This
agreement was further modified in October 2009 and now calls for the borrower to begin making new loan payments as per the modified agreement beginning on March 1, 2010. The borrower is also required to make escrow payments for real estate
taxes, with any previous shortfall to be paid in a lump sum by February 1, 2010. This loan will remain on nonaccrual status until a satisfactory payment history has been achieved under the restructured terms. The modified agreement is subject
to the approval of the bankruptcy court.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Loan paid off in full in September 2009.
|--- | ----------------------------------------

|(3) | The loan is secured by a hotel that has 148 suites and is operational but revenues are currently insufficient to service the loan. INB agreed to allow an existing
borrower of INB, experienced in hotel management, to assume the loan under modified terms. This loan will be maintained on nonaccrual status and be accounted for on a cash basis until such time the normal payments resume and a satisfactory payment
history has been achieved.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Title to collateral property was acquired and the loan was transferred to foreclosed real estate at the lower of its carrying value or estimated fair value less
estimated selling costs.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | INB agreed to the deferral of contractual loan payments through June 2010 to give the borrower time to lease vacant space at the property. The borrower will continue to
make monthly escrow payments as required under INBs $5.8 million first mortgage loan. IMC holds a second mortgage of $0.4 million on this property. This loan will remain on nonaccrual status until such time normal payments resume and a
satisfactory payment history has been achieved.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Loan paid off in full in August 2009, including receipt of all nonaccrual interest.
|--- | -----------------------------------------------------------------------------------

|(7) | Restructured terms are being negotiated which will include deferral of principal and/or interest for a short period of time.
|--- | ----------------------------------------------------------------------------------------------------------------------------

The table that follows summarizes nonaccrual loans at September 30, 2009 by collateral type and location.



|                 |  |    |        |    |   |        |  |    |        |    |   |       |  |    |       |        |   |       |  |   |       |  |   |        
|---------------- |  | -- | ------ | -- | - | ------ |  | -- | ------ | -- | - | ----- |  | -- | ----- | ------ | - | ----- |  | - | ----- |  | - | -------
|($ in thousands)
|Property Type    |  | NY |        | FL |   | NJ     |  | MA |        | PA |   | MD    |  | OH |       | Totals
|Retail           |  | $  | 16,775 |    | $ | -      |  | $  | 2,590  |    | $ | -     |  | $  | -     |        | $ | -     |  | $ | -     |  | $ | 19,365 
|Hotel            |  |    | 2,274  |    |   | 19,953 |  |    | 3,049  |    |   | -     |  |    | -     |        |   | -     |  |   | -     |  |   | 25,276 
|Office Building  |  |    | 10,306 |    |   | -      |  |    | 4,470  |    |   | -     |  |    |       |        |   | -     |  |   |       |  |   | 14,776 
|Warehouse        |  |    | 6,349  |    |   | -      |  |    | -      |    |   | -     |  |    | -     |        |   | -     |  |   | -     |  |   | 6,349  
|Mixed Use        |  |    | 11,569 |    |   | -      |  |    | -      |    |   | -     |  |    | -     |        |   | -     |  |   | -     |  |   | 11,569 
|Mulitifamily     |  |    | 7,361  |    |   | 12,129 |  |    | 710    |    |   | 1,272 |  |    | 9,512 |        |   | -     |  |   | 3,529 |  |   | 34,513 
|Mobile home      |  |    | -      |    |   | 2,604  |  |    | -      |    |   | -     |  |    | -     |        |   | -     |  |   | -     |  |   | 2,604  
|Undeveloped Land |  |    | 11,697 |    |   | 1,569  |  |    | -      |    |   | -     |  |    | -     |        |   | 4,024 |  |   | -     |  |   | 17,290 
|                 |  | $  | 66,331 |    | $ | 36,255 |  | $  | 10,819 |    | $ | 1,272 |  | $  | 9,512 |        | $ | 4,024 |  | $ | 3,529 |  | $ | 131,742



27



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##### Table of Contents

The table that follows summarizes the change in nonaccrual loans for the nine-months ended
September 30, 2009.



|                                            |  |        |         |  
|------------------------------------------- |  | ------ | ------- | -
|($ in thousands)                            |  | Amount |        
|Balance at December 31, 2008                |  | $      | 108,610 |  
|New nonaccrual loans                        |  |        | 75,285  |  
|Principal repayments                        |  |        | (19,966 | )
|Loan chargeoffs                             |  |        | (4,977  | )
|Loans transferred to foreclosed real estate |  |        | (27,210 | )
|Balance at September 30, 2009               |  | $      | 131,742 |  

Allowance For Loan Losses

The allowance for loan losses increased to $31.8 million at September 30, 2009, from $28.5 million at December 31, 2008. The allowance represented 1.88% of total loans (net of deferred fees)
outstanding at September 30, 2009 compared to 1.67% at December 31, 2008. The increase in the allowance was due to $6.9 million of loan loss provisions and a $1.3 million partial recovery of a previous chargeoff, partially offset by $4.9
million of new chargeoffs. The loan loss provision of $6.9 million was attributable to downgrades of internal risk ratings on nonaccrual loans as well as lower estimates of real estate values on certain collateral properties. At September 30,
2009 and December 31, 2008, the allowance for loan losses included a specific valuation allowance in the aggregate amount of $13.5 million and $8.2 million, respectively, for nonaccrual and restructured loans, all of which are considered
impaired loans.

The following table summarizes the activity in the allowance for loan losses by entity:



|                                                      |  |     |        |   |     |   |        |     |  |   |              |   |  |   |        |  
|----------------------------------------------------- |  | --- | ------ | - | --- | - | ------ | --- |  | - | ------------ | - |  | - | ------ | -
|($ in thousands)                                      |  | INB |        |   | IMC |   |        | IBC |  |   | Consolidated |  
|Balance at December 31, 2008                          |  | $   | 27,506 |   |     | $ | 988    |     |  | $ | 30           |   |  | $ | 28,524 |  
|Recoveries                                            |  |     | 1,329  |   |     |   | -      |     |  |   | -            |   |  |   | 1,329  |  
|Chargeoffs                                            |  |     | (3,932 | ) |     |   | (1,045 | )   |  |   | -            |   |  |   | (4,977 | )
|Provision (credit) for loan losses charged to expense |  |     | 6,322  |   |     |   | 647    |     |  |   | (30          | ) |  |   | 6,939  |  
|Balance at September 30, 2009                         |  | $   | 31,225 |   |     | $ | 590    |     |  | $ | -            |   |  | $ | 31,815 |  

The following table sets forth information concerning nonperforming assets by entity at
September 30, 2009:



|                                              |  |     |         |   |     |   |       |     |  |              |  |   |         |  
|--------------------------------------------- |  | --- | ------- | - | --- | - | ----- | --- |  | ------------ |  | - | ------- | -
|($ in thousands)                              |  | INB |         |   | IMC |   |       | IBC |  | Consolidated | 
|Nonaccrual loans                              |  | $   | 124,495 |   |     | $ | 7,247 |     |  | -            |  | $ | 131,742 |  
|Real estate acquired through foreclosure      |  |     | 30,588  |   |     |   | 2,327 |     |  | -            |  |   | 32,915  |  
|Total nonperforming assets                    |  | $   | 155,083 |   |     | $ | 9,574 |     |  | -            |  | $ | 164,657 |  
|Nonperforming assets to total assets          |  |     | 6.58    | % |     |   | 42.53 | %   |  | -            |  |   | 6.91    | %
|Nonaccrual loans to total gross loans         |  |     | 7.39    | % |     |   | 39.79 | %   |  | -            |  |   | 7.73    | %
|Allowance for loan losses to total net loans  |  |     | 1.86    | % |     |   | 3.25  | %   |  | -            |  |   | 1.88    | %
|Allowance for loan losses to nonaccrual loans |  |     | 25.08   | % |     |   | 8.14  | %   |  | -            |  |   | 24.15   | %

There can be no assurance that the Company will not have additional significant loan loss provisions,
loan chargeoffs or expenses in connection with the ultimate collection of its nonaccrual loans. The Company may also incur significant expenses in carrying and disposing of properties acquired through foreclosure. For the nine-months ended
September 30, 2009, full year 2008 and full year 2007, the Company has incurred a total of $4.8 million, $5.4 million and $0.7 million, respectively, in various expenses and costs associated with nonaccrual loans/foreclosed real estate. These
amounts do not include interest income that has not been recorded or loan chargeoffs.

Real Estate Acquired Through Foreclosure

Real estate properties that are acquired through, or in lieu of, loan foreclosure are held for sale. 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 the 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 property continues to be
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 caption Real Estate Activities Expenses in
the consolidated statements of earnings.

All of the properties owned by the Company, which are detailed in the following table, are available
for sale. A number of these properties are being actively marketed with local brokers and through the internet, which has prompted significant investor interest in several properties. Contracts of sale on several properties are being negotiated but
no assurance can be given as to the timing of any sale. In September, one property (a hotel in Clearwater, Florida) with a carrying value of $2.7 million was sold. INB provided financing of $2.6 million in connection with this sale.



28



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##### Table of Contents

Real estate acquired through foreclosure is detailed as follows:



|                 |  |                        |  |             |  |          |  |          |        |      |       |       |   |      
|---------------- |  | ---------------------- |  | ----------- |  | -------- |  | -------- | ------ | ---- | ----- | ----- | - | -----
|                 |  | Net carrying value (1)
|($ in thousands) |  | At Sep. 30,            |  | At Dec. 31,
|Property Type    |  | City                   |  | State       |  | Owned By |  | Acquired |        | 2009 |       | 2008 
|Undeveloped land |  | North Fort Myers       |  | Florida     |  | INB      |  | May 2008 |        | $    | 2,545 |       | $ | 2,933
|Undeveloped land |  | Hollywood              |  | Florida     |  | INB      |  | Feb 2008 |        |      | 3,821 |       |   | 3,821
|Office building  |  | Brooklyn               |  | New York    |  | IMC      |  | Sep 2008 |        |      | 2,327 |       |   | 2,327
|Undeveloped land |  | Hollywood              |  | Florida     |  | INB      |  | Jan 2009 |        |      | 709   |       |   | -    
|Hotel            |  | Orlando                |  | Florida     |  | INB      |  | Apr 2009 |        |      | 5,924 |       |   | -    
|Office Building  |  | Yonkers                |  | New York    |  | INB      |  | Aug 2009 |        |      | 2,158 |       |   | -    
|Multifamily      |  | Austell                |  | Georgia     |  | INB      |  | Sep 2009 |        |      | 4,757 |       |   | -    
|Multifamily      |  | Melbourne              |  | Florida     |  | INB      |  | Sep 2009 |        |      | 9,478 |       |   | -    
|Office Building  |  | Oakland Park           |  | Florida     |  | INB      |  | Sep 2009 |        |      | 1,196 |       |   | -    
|                 |  |                        |  |             |  |          |  | $        | 32,915 |      | $     | 9,081

(1) Net carrying value is reported net of any valuation allowance that has been recorded due to
decreases in the estimated fair value of the property subsequent to the date of foreclosure. The total valuation allowance amounted to $1.2 million and $0.5 million at September 30, 2009 and December 31, 2008, respectively.

The following table summarizes the change in foreclosed real estate for the nine-months ended September 30, 2009:



|                                                        |  |        |        |   |                      |    |  
|------------------------------------------------------- |  | ------ | ------ | - | -------------------- | -- | -
|($ in thousands)                                        |  | Amount |        |   | Number of Properties |   
|Balance at December 31, 2008                            |  | $      | 9,081  |   |                      | 3  |  
|Transfers from loan portfolio (1)                       |  |        | 27,210 |   |                      | 7  |  
|Writedowns to carrying values subsequent to foreclosure |  |        | (688   | ) |                      | -  |  
|Sales                                                   |  |        | (2,698 | ) |                      | (1 | )
|Gain on sale                                            |  |        | 10     |   |                      | -  |  
|Balance at September 30, 2009                           |  | $      | 32,915 |   |                      | 9  |  

(1) At the time of transfer, loan chargeoffs of $2.2 million were taken and charged to
the allowance for loan losses.

All Other Assets

All other assets at September 30, 2009 as denoted in the table on page 25 amounted to $46 million and remained unchanged from December 31, 2008.

Deposits

Deposits increased to
$2.01 billion at September 30, 2009, from $1.86 billion at December 31, 2008, primarily reflecting an increase of $140 million in money market accounts. At September 30, 2009, certificate of deposit accounts totaled $1.52 billion, and
checking, savings and money market accounts aggregated to $491 million. The same categories of deposit accounts totaled $1.52 billion and $345 million, respectively, at December 31, 2008. Certificate of deposit accounts represented 76% of total
consolidated deposits at September 30, 2009, compared to 82% at December 31, 2008. At September 30, 2009 and December 31, 2008, certificate of deposit accounts included $170 million and $173 million of brokered deposits,
respectively.

Borrowed Funds and Related Interest Payable

Borrowed funds and related interest payable decreased to $107 million at September 30, 2009, from $149 million at December 31, 2008, due to the early repayment of $40 million of higher cost,
fixed-rate debentures by IMC. The repayments are detailed in note 7 to the condensed consolidated financial statements in this report.

All Other Liabilities

All other liabilities at September 30, 2009 as denoted in the table on page 25 remained
relatively unchanged at $48 million, compared to $46 million at December 31, 2008.



29



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##### Table of Contents

Stockholders Equity

The following table sets forth the change in stockholders equity:



|                                                        |  |        |         |                |           |                |         |              |           |                  |   |      
|------------------------------------------------------- |  | ------ | ------- | -------------- | --------- | -------------- | ------- | ------------ | --------- | ---------------- | - | -----
|                                                        |  |        |         | Outstanding    |           |               
|($ in thousands, except per share amounts)              |  | Amount |         | Class A Shares |           | Class B Shares |         | Total Shares |           | Amount Per Share
|Common stockholders equity at December 31, 2008        |  | $      | 188,894 |                | 7,690,812 |                | 580,000 |              | 8,270,812 |                  | $ | 22.84
|Net earnings available to common stockholders           |  |        | 1,201   |                | -         |                | -       |              | -         |                  |   | 0.14 
|Compensation from stock options                         |  |        | 154     |                | -         |                | -       |              | -         |                  |   | 0.02 
|Common stockholders equity at September 30, 2009       |  | $      | 190,249 |                | 7,690,812 |                | 580,000 |              | 8,270,812 |                  | $ | 23.00
|Preferred stockholders equity at December 31, 2008 (1) |  | $      | 23,080  |                |           |                |         |              |           |                  |   |      
|Amortization of preferred stock discount                |  |        | 290     |                |           |                |         |              |           |                  |   |      
|Preferred stockholders equity at September 30, 2009    |  | $      | 23,370  |                |           |                |         |              |           |                  |   |      
|Total stockholders equity at September 30, 2009        |  | $      | 213,619 |                |           |                |         |              |           |                  |   |      



|(1) | On December 23, 2008, IBC sold to the United States Department of the Treasury 25,000 shares of IBCs Fixed Rate Cumulative Perpetual Preferred Stock, Series
A, with a liquidation preference of $1,000 per share, along with a ten year warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for $5.42 per share, for a total cash investment of $25 million from the
Treasury. The total investment was allocated between preferred and common equity as described in more detail in note 10 to the consolidated financial statements in the Companys 2008 annual report on Form 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30



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##### Table of Contents

Comparison of Results of Operations for the Quarters Ended September 30, 2009 and
2008

Overview

Consolidated net earnings for the third quarter of 2009 (Q3-09) decreased by $2.3 million, or 88%, to $0.3 million, or $0.04 per diluted share, from $2.6 million, or $0.32 per diluted share, in the third quarter of 2008
(Q3-08). The decrease in net earnings was due a $2.1 million increase in noninterest expenses, a $2.2 million decrease in noninterest income and $0.4 million of dividend requirements related to outstanding preferred stock held by the
U.S. Treasury under the TARP program. The aggregate of these items was partially offset by a $1.4 million decrease in the provision for income tax expense and a $1.0 million decrease in the provision for loan losses.

Selected information regarding results of operations by entity follows:



|                                                           |  |     |        |   |     |   |      |     |  |   |          |   |  |              |      |   |         |   |        |   |  |   |       
|---------------------------------------------------------- |  | --- | ------ | - | --- | - | ---- | --- |  | - | -------- | - |  | ------------ | ---- | - | ------- | - | ------ | - |  | - | ------
|                                                           |  |     |        |   |     |   |      |     |  |   |          |   |  | Consolidated
|($ in thousands)                                           |  | INB |        |   | IMC |   |      | IBC |  |   | Elim (1) |   |  | Q3-2009      |      |   | Q3-2008
|Interest and dividend income                               |  | $   | 30,470 |   |     | $ | 478  |     |  | $ | 20       |   |  | $            | (29  | ) |         | $ | 30,939 |   |  | $ | 33,508
|Interest expense                                           |  |     | 19,235 |   |     |   | 58   |     |  |   | 660      |   |  |              | (29  | ) |         |   | 19,924 |   |  |   | 22,424
|Net interest and dividend income (expense)                 |  |     | 11,235 |   |     |   | 420  |     |  |   | (640     | ) |  |              | -    |   |         |   | 11,015 |   |  |   | 11,084
|Provision (credit) for loan losses                         |  |     | 2,246  |   |     |   | 150  |     |  |   | -        |   |  |              | -    |   |         |   | 2,396  |   |  |   | 3,446 
|Noninterest income                                         |  |     | 101    |   |     |   | (6   | )   |  |   | 113      |   |  |              | (113 | ) |         |   | 95     |   |  |   | 2,318 
|Noninterest expenses                                       |  |     | 6,577  |   |     |   | 703  |     |  |   | 169      |   |  |              | (113 | ) |         |   | 7,336  |   |  |   | 5,276 
|Earnings (loss) before taxes                               |  |     | 2,513  |   |     |   | (439 | )   |  |   | (696     | ) |  |              | -    |   |         |   | 1,378  |   |  |   | 4,680 
|Provision (credit) for income taxes                        |  |     | 1,147  |   |     |   | (201 | )   |  |   | (319     | ) |  |              | -    |   |         |   | 627    |   |  |   | 2,054 
|Net earnings (loss) before preferred dividend requirements |  |     | 1,366  |   |     |   | (238 | )   |  |   | (377     | ) |  |              | -    |   |         |   | 751    |   |  | $ | 2,626 
|Preferred dividend requirements (2)                        |  |     | -      |   |     |   | -    |     |  |   | (409     | ) |  |              | -    |   |         |   | (409   | ) |  |   | -     
|Net earnings (loss) available to common stockholders       |  |     | 1,366  |   |     |   | (238 | )   |  |   | (786     | ) |  |              | -    |   |         |   | 342    |   |  |   | 2,626 
|Intercompany dividends (3)                                 |  |     | (984   | ) |     |   | -    |     |  |   | 984      |   |  |              | -    |   |         |   | -      |   |  |   | -     
|Net earnings (loss) after intercompany dividends           |  | $   | 382    |   |     | $ | (238 | )   |  | $ | 198      |   |  | $            | -    |   |         | $ | 342    |   |  | $ | 2,626 
|Net earnings (loss) after intercompany dividends for Q3-08 |  | $   | 1,224  |   |     | $ | 972  |     |  | $ | 430      |   |  | $            | -    |   |         | $ | 2,626  |   |  |   |       

|(1) | All significant intercompany balances and transactions are eliminated in consolidation. Such amounts arise from intercompany deposit accounts and management agreements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the total of accrued dividends (5%) on $25 million of cumulative Series A preferred stock held by U.S. Treasury and amortization of related preferred
stock discount.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Dividends paid to IBC from INB provided funds for the debt service on IBCs outstanding subordinated debentures-capital securities, which is included in IBCs
interest expense, and for the cash dividend requirements on the Series A preferred stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest and Dividend
Income

Net interest and dividend income is the Companys primary source of earnings and is influenced by the amount, distribution
and repricing characteristics of its interest-earning assets and interest-bearing liabilities, as well as by the relative levels and movements of interest rates. Net interest and dividend income is the difference between interest income earned on
interest-earning assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowings.

As detailed in the table that follows, net interest and dividend income decreased by $0.1 million to $11.0 million in Q3-09, from $11.1 million in Q3-08. A $23 million increase in net interest earning assets from the investment of TARP
proceeds was more than offset by a lower net interest margin (1.86% in Q3-09 compared to 2.04% in Q3-08).

Total average interest-earning
assets increased by $180 million in Q3-09 from Q3-08, due to growth of $14 million in loans and $166 million in total security and other short-term investments. Asset growth was funded by a $222 million increase in interest-bearing deposits and a
$29 million increase in stockholders equity (largely due to the participation in TARP as described in note 2 to the condensed consolidated financial statements included in this report), partially offset by a $66 million decrease in borrowed
funds.

The net interest margin decreased primarily due to the impact of calls of $428 million of higher yielding U.S. government agency
security investments (coupled with the reinvestment of the proceeds into similar securities at lower market rates of 91 basis points) and a higher level ($1.3 million) of interest income not recorded on nonaccrual loans. The historically low
interest rate environment resulted in the call of a large number of investment securities that were purchased in 2007 and 2008. These factors were partially offset by lower rates paid for deposits and adjustable-rate borrowings as well as the early
retirement of IMCs higher-cost, fixed rate debentures. The yield on interest-earning assets decreased by 92 basis points to 5.24% in Q3-09, while the cost of funds decreased by 82 basis points to 3.75% in Q3-09.



31



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##### Table of Contents

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. The interest rate spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin is greater than the
interest rate spread due to the additional income earned on those assets funded by non-interest-bearing liabilities, primarily demand deposits and stockholders equity.



|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|---------------------------------------------------------------------------- |  | --------------------- | --------- | - | ----------------- | - | ------------------ |  | ---- | - |  | -------------- |  | - | ----------------- | - | -------------- | - | ------ |  | ---- | -
|                                                                             |  | For the Quarter Ended |          
|                                                                             |  | September 30, 2009    |           |   |                   |   | September 30, 2008 | 
|($ in thousands)                                                             |  | AverageBalance        |           |   | InterestInc./Exp. |   | Yield/Rate (2)     |  |      |   |  | AverageBalance |  |   | InterestInc./Exp. |   | Yield/Rate (2) |  
|Interest-earning assets:                                                     |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Loans (1)                                                                    |  | $                     | 1,734,983 |   |                   | $ | 26,581             |  | 6.08 | % |  |                |  | $ | 1,720,596         |   |                | $ | 28,840 |  | 6.67 | %
|Securities                                                                   |  |                       | 601,338   |   |                   |   | 4,356              |  | 2.87 |   |  |                |  |   | 437,463           |   |                |   | 4,642  |  | 4.22 |  
|Other interest-earning assets                                                |  |                       | 7,071     |   |                   |   | 2                  |  | 0.11 |   |  |                |  |   | 5,642             |   |                |   | 26     |  | 1.83 |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total interest-earning assets                                                |  |                       | 2,343,392 |   |                   | $ | 30,939             |  | 5.24 | % |  |                |  |   | 2,163,701         |   |                | $ | 33,508 |  | 6.16 | %
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-earning assets                                                   |  |                       | 34,980    |   |                   |   |                    |  |      |   |  |                |  |   | 24,893            |   |                |   |        |  |      |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Total assets                                                                 |  | $                     | 2,378,372 |   |                   |   |                    |  |      |   |  |                |  | $ | 2,188,594         |   |                |   |        |  |      |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Interest-bearing liabilities:                                                |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Interest checking deposits                                                   |  | $                     | 7,443     |   |                   | $ | 30                 |  | 1.60 | % |  |                |  | $ | 5,695             |   |                | $ | 26     |  | 1.82 | %
|Savings deposits                                                             |  |                       | 10,125    |   |                   |   | 43                 |  | 1.68 |   |  |                |  |   | 8,716             |   |                |   | 64     |  | 2.92 |  
|Money market deposits                                                        |  |                       | 443,317   |   |                   |   | 1,955              |  | 1.75 |   |  |                |  |   | 326,202           |   |                |   | 2,738  |  | 3.34 |  
|Certificates of deposit                                                      |  |                       | 1,536,805 |   |                   |   | 16,683             |  | 4.31 |   |  |                |  |   | 1,434,694         |   |                |   | 17,068 |  | 4.73 |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total deposit accounts                                                       |  |                       | 1,997,690 |   |                   |   | 18,711             |  | 3.72 |   |  |                |  |   | 1,775,307         |   |                |   | 19,896 |  | 4.46 |  
|FHLB advances                                                                |  |                       | 51,466    |   |                   |   | 492                |  | 3.79 |   |  |                |  |   | 55,182            |   |                |   | 365    |  | 2.63 |  
|Debentures and related interest payable                                      |  |                       | 2,905     |   |                   |   | 58                 |  | 7.92 |   |  |                |  |   | 65,195            |   |                |   | 1,279  |  | 7.80 |  
|Debentures - capital securities                                              |  |                       | 56,702    |   |                   |   | 660                |  | 4.62 |   |  |                |  |   | 56,702            |   |                |   | 881    |  | 6.18 |  
|Mortgage note payable                                                        |  |                       | 174       |   |                   |   | 3                  |  | 6.84 |   |  |                |  |   | 191               |   |                |   | 3      |  | 6.25 |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total borrowed funds                                                         |  |                       | 111,247   |   |                   |   | 1,213              |  | 4.33 |   |  |                |  |   | 177,270           |   |                |   | 2,528  |  | 5.67 |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total interest-bearing liabilities                                           |  |                       | 2,108,937 |   |                   | $ | 19,924             |  | 3.75 | % |  |                |  |   | 1,952,577         |   |                | $ | 22,424 |  | 4.57 | %
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Noninterest-bearing deposits                                                 |  |                       | 3,269     |   |                   |   |                    |  |      |   |  |                |  |   | 3,496             |   |                |   |        |  |      |  
|Noninterest-bearing liabilities                                              |  |                       | 53,163    |   |                   |   |                    |  |      |   |  |                |  |   | 48,025            |   |                |   |        |  |      |  
|Preferred stockholders equity                                               |  |                       | 23,337    |   |                   |   |                    |  |      |   |  |                |  |   | -                 |   |                |   |        |  |      |  
|Common stockholders equity                                                  |  |                       | 189,666   |   |                   |   |                    |  |      |   |  |                |  |   | 184,496           |   |                |   |        |  |      |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Total liabilities and stockholders equity                                   |  | $                     | 2,378,372 |   |                   |   |                    |  |      |   |  |                |  | $ | 2,188,594         |   |                |   |        |  |      |  
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Net interest and dividend income/spread                                      |  |                       |           |   |                   | $ | 11,015             |  | 1.49 | % |  |                |  |   |                   |   |                | $ | 11,084 |  | 1.59 | %
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |  
|Net interest-earning assets/margin (3)                                       |  | $                     | 234,455   |   |                   |   |                    |  | 1.86 | % |  |                |  | $ | 211,124           |   |                |   |        |  | 2.04 | %
|                                                                             |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Ratio of total interest-earning assets to total interest-bearing
liabilities |  |                       | 1.11      |   |                   |   |                    |  |      |   |  |                |  |   | 1.11              |   |                |   |        |  |      |  
|Other Ratios:                                                                |  |                       |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Return on average assets (2)                                                 |  |                       | 0.13      | % |                   |   |                    |  |      |   |  |                |  |   | 0.48              | % |                |   |        |  |      |  
|Return on average common equity (2)                                          |  |                       | 1.58      | % |                   |   |                    |  |      |   |  |                |  |   | 5.69              | % |                |   |        |  |      |  
|Noninterest expense to average assets (2)                                    |  |                       | 1.23      | % |                   |   |                    |  |      |   |  |                |  |   | 0.96              | % |                |   |        |  |      |  
|Efficiency ratio (4)                                                         |  |                       | 45        | % |                   |   |                    |  |      |   |  |                |  |   | 25                | % |                |   |        |  |      |  
|Average stockholders equity to average assets                               |  |                       | 8.96      | % |                   |   |                    |  |      |   |  |                |  |   | 8.43              | % |                |   |        |  |      |  

|(1) | Includes average nonaccrual loans of $135.4 million in the 2009 period and $105.9 million in the 2008 period. Interest not accrued on such loans and excluded from the
table totaled $2.4 million in the 2009 period and $1.1 million in the 2008 period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Annualized.
|--- | -----------

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan
prepayments, the margin would compute to 1.97% and 2.31% for the 2009 and 2008 period, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Defined as noninterest expenses (excluding the provision for loan losses and real estate expenses) as a percentage of net interest and dividend income plus noninterest
income.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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##### Table of Contents

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 September 30, 2009 vs. 2008 |       
|                                           |  | Increase (Decrease) Due To Change In:             |       
|($ in thousands)                           |  | Rate                                              |        |   | Volume |   |        | Rate/Volume |  |   | Total |  
|Interest-earning assets:                   |  |                                                   |        |   |        |   |        |             |  |   |       |   |  |   |        |  
|Loans                                      |  | $                                                 | (2,538 | ) |        | $ | 240    |             |  | $ | 39    |   |  | $ | (2,259 | )
|Securities                                 |  |                                                   | (1,476 | ) |        |   | 1,729  |             |  |   | (539  | ) |  |   | (286   | )
|Other interest-earning assets              |  |                                                   | (24    | ) |        |   | 7      |             |  |   | (7    | ) |  |   | (24    | )
|Total interest-earning assets              |  |                                                   | (4,038 | ) |        |   | 1,976  |             |  |   | (507  | ) |  |   | (2,569 | )
|Interest-bearing liabilities:              |  |                                                   |        |   |        |   |        |             |  |   |       |   |  |   |        |  
|Interest checking deposits                 |  |                                                   | (3     | ) |        |   | 8      |             |  |   | (1    | ) |  |   | 4      |  
|Savings deposits                           |  |                                                   | (27    | ) |        |   | 10     |             |  |   | (4    | ) |  |   | (21    | )
|Money market deposits                      |  |                                                   | (1,297 | ) |        |   | 978    |             |  |   | (464  | ) |  |   | (783   | )
|Certificates of deposit                    |  |                                                   | (1,506 | ) |        |   | 1,207  |             |  |   | (86   | ) |  |   | (385   | )
|Total deposit accounts                     |  |                                                   | (2,833 | ) |        |   | 2,203  |             |  |   | (555  | ) |  |   | (1,185 | )
|FHLB advances                              |  |                                                   | 160    |   |        |   | (24    | )           |  |   | (9    | ) |  |   | 127    |  
|Debentures and accrued interest payable    |  |                                                   | 20     |   |        |   | (1,215 | )           |  |   | (26   | ) |  |   | (1,221 | )
|Debentures - capital securities            |  |                                                   | (221   | ) |        |   | -      |             |  |   | -     |   |  |   | (221   | )
|Mortgage note payable                      |  |                                                   | -      |   |        |   | -      |             |  |   | -     |   |  |   | -      |  
|Total borrowed funds                       |  |                                                   | (41    | ) |        |   | (1,239 | )           |  |   | (35   | ) |  |   | (1,315 | )
|Total interest-bearing liabilities         |  |                                                   | (2,874 | ) |        |   | 964    |             |  |   | (590  | ) |  |   | (2,500 | )
|Net change in interest and dividend income |  | $                                                 | (1,164 | ) |        | $ | 1,012  |             |  | $ | (83   | ) |  | $ | (69    | )

Provision for Loan Losses

The provision for loan losses decreased to $2.4 million in Q3-09 from $3.4 million in Q3-08. The decrease was due to $0.3 million attributable to a larger decrease in net loans as compared to the prior
year period (loans outstanding decreased by $51.1 million in Q3-09, compared to a $32.1 million decrease in Q3-08) and a $1.7 million specific valuation allowance associated with an $11.3 million impaired loan that was no longer required because the
loan was repaid in full, which amounts were partially offset by $1.0 million of provisions associated with new credit downgrades and lower estimated real estate values on certain properties collateralizing nonaccrual loans.

The Company continues to be negatively impacted by the weak economy, increased vacancy rates and lower real estate values, all of which have resulted in an
increase in nonaccrual loans and a high level of loan loss provisions.

Noninterest Income

Noninterest income decreased by $2.2 million to $0.1 million in Q3-09, from $2.3 million in Q3-08. The decrease was primarily due to a $0.9 million decrease
in income from early repayment of loans, a $0.5 million decrease in deposit and loan service charge income and a $0.7 million impairment charge on trust preferred security investments (which is discussed in more detail in note 3 to the condensed
consolidated financial statements in this report).

The Company attributes the decrease in its volume of loan prepayments and prepayment
income derived therefrom primarily due to the effects of the crisis in the credit markets (which has reduced funding sources available for both new real estate lending and refinancing of existing loans) as well as lower real estate values.

Noninterest Expenses

Noninterest expenses increased by $2.1 million to $7.4 million in Q3-09, from $5.3 million in Q3-08. The increase was primarily due to the following: a $0.8 million increase in FDIC insurance premiums due to higher rates imposed on all FDIC
insured depository institutions (as discussed in note 16 to the condensed consolidated financial statements in this report); a $0.6 million increase in expenses associated with nonperforming assets (which included $0.9 million related to one
property that is not expected to recur); a $0.4 million increase in expense from the early retirement of $40 million of IMCs higher-cost, fixed-rate debentures; and a $0.2 million increase in compensation and benefits expense (primarily due to
additional employees, salary increases and higher medical insurance costs). IMC has repaid all of its outstanding debentures as September 30, 2009. The Company had 72 employees at September 30, 2009, compared to 70 at September 30,
2008.



33



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##### Table of Contents

Expenses associated with nonperforming assets are comprised of real estate taxes, insurance, utilities and
other charges required to protect the Companys interest in real estate acquired through foreclosure and/or various properties collateralizing the Companys nonaccrual loans (all of which are categorized as real estate activities
expense in the condensed consolidated statements of earnings), as well as certain legal costs incurred in the Companys collection efforts with such assets (which are included as part of the line item professional fees and services
expense).

Expenses associated with the retirement of debentures represent unamortized issuance costs that were expensed in connection
with the repayment of debentures prior to their stated maturity as detailed in note 7 to the condensed consolidated financial statements in this report.

Primarily as a result of the negative effects of nonperforming assets on operating results, the Companys efficiency ratio, which is a measure of its ability to control expenses as a percentage of
its revenues, increased to 45% in Q3-09 from 25% in Q3-08.

Provision for Income Taxes

The provision for income taxes decreased by $1.4 million to $0.6 million in Q3-09, from $2.0 million in Q3-08 due to a decrease in pre-tax income. The
Companys effective income tax rate (inclusive of state and local taxes) was 45.5% in Q3-09, compared 43.9% in Q3-08. The higher rate is primarily a function of certain restrictions on compensation deductions due to the Companys
participation in the TARP program.



34



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##### Table of Contents

Comparison of Results of Operations for the Nine-Months Ended September 30, 2009
and 2008

Overview

Consolidated net earnings for the nine-months ended September 30, 2009 (9mths-09) decreased by $5.6 million, or 82%, to $1.2 million, or $0.14 per diluted share, from $6.8 million, or $0.82 per diluted share, in the first
nine-months of 2008 (9mths-08). The decrease in consolidated net earnings was due to a $6.8 million increase in noninterest expenses, a $4.2 million decrease in noninterest income and $1.2 million of dividend requirements related to
outstanding preferred stock held by the U.S. Treasury under the TARP program. The aggregate of these items was partially offset by a $3.6 million decrease in the provision for income taxes, a $1.5 million increase in net interest and dividend income
and a $1.5 million decrease in the provision for loan losses.

Selected information regarding results of operations by entity follows:



|                                                           |  |     |        |   |     |   |        |     |  |   |          |   |  |              |      |   |          |   |        |   |  |   |       
|---------------------------------------------------------- |  | --- | ------ | - | --- | - | ------ | --- |  | - | -------- | - |  | ------------ | ---- | - | -------- | - | ------ | - |  | - | ------
|                                                           |  |     |        |   |     |   |        |     |  |   |          |   |  | Consolidated
|($ in thousands)                                           |  | INB |        |   | IMC |   |        | IBC |  |   | Elim (1) |   |  | 9mths-09     |      |   | 9mths-08
|Interest and dividend income                               |  | $   | 90,551 |   |     | $ | 1,851  |     |  | $ | 125      |   |  | $            | (105 | ) |          | $ | 92,422 |   |  | $ | 97,072
|Interest expense                                           |  |     | 59,041 |   |     |   | 796    |     |  |   | 2,188    |   |  |              | (105 | ) |          |   | 61,920 |   |  |   | 68,069
|Net interest and dividend income (expense)                 |  |     | 31,510 |   |     |   | 1,055  |     |  |   | (2,063   | ) |  |              | -    |   |          |   | 30,502 |   |  |   | 29,003
|Provision (credit) for loan losses                         |  |     | 6,322  |   |     |   | 647    |     |  |   | (30      | ) |  |              | -    |   |          |   | 6,939  |   |  |   | 8,462 
|Noninterest income                                         |  |     | 222    |   |     |   | (18    | )   |  |   | 359      |   |  |              | (338 | ) |          |   | 225    |   |  |   | 4,400 
|Noninterest expenses                                       |  |     | 17,400 |   |     |   | 2,263  |     |  |   | 504      |   |  |              | (338 | ) |          |   | 19,829 |   |  |   | 12,991
|Earnings (loss) before taxes                               |  |     | 8,010  |   |     |   | (1,873 | )   |  |   | (2,178   | ) |  |              | -    |   |          |   | 3,959  |   |  |   | 11,950
|Provision (credit) for income taxes                        |  |     | 3,395  |   |     |   | (860   | )   |  |   | (1,000   | ) |  |              | -    |   |          |   | 1,535  |   |  |   | 5,182 
|Net earnings (loss) before preferred dividend requirements |  |     | 4,615  |   |     |   | (1,013 | )   |  |   | (1,178   | ) |  |              | -    |   |          |   | 2,424  |   |  |   | 6,768 
|Preferred dividend requirements (2)                        |  |     | -      |   |     |   | -      |     |  |   | (1,223   | ) |  |              | -    |   |          |   | (1,223 | ) |  |   | -     
|Net earnings (loss) available to common stockholders       |  |     | 4,615  |   |     |   | (1,013 | )   |  |   | (2,401   | ) |  |              | -    |   |          |   | 1,201  |   |  |   | 6,768 
|Intercompany dividends (3)                                 |  |     | (3,102 | ) |     |   | -      |     |  |   | 3,102    |   |  |              | -    |   |          |   | -      |   |  |   | -     
|Net earnings (loss) after intercompany dividends           |  | $   | 1,513  |   |     | $ | (1,013 | )   |  | $ | 701      |   |  | $            | -    |   |          | $ | 1,201  |   |  | $ | 6,768 
|Net earnings (loss) after intercompany dividends- 9mths-08 |  | $   | 4,553  |   |     | $ | 941    |     |  | $ | 1,274    |   |  | $            | -    |   |          | $ | 6,768  |   |  |   |       

|(1) | All significant intercompany balances and transactions are eliminated in consolidation. Such amounts arise from intercompany deposit accounts and management agreements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the total of accrued dividends (5%) on $25 million of cumulative Series A preferred stock held by U.S. Treasury and amortization of related preferred
stock discount.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Dividends paid to IBC from INB provided funds for the debt service on IBCs outstanding subordinated debentures-capital securities, which is included in IBCs
interest expense, and for the cash dividend requirements on the Series A preferred stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest and Dividend
Income

Net interest and dividend income is the Companys primary source of earnings and is influenced by the amount, distribution
and repricing characteristics of its interest-earning assets and interest-bearing liabilities, as well as by the relative levels and movements of interest rates. Net interest and dividend income is the difference between interest income earned on
interest-earning assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowings.

As detailed in the table that follows, net interest and dividend income increased by $1.5 million to $30.5 million in 9mths-09 from $29.0 million in 9mths-08. The increase was primarily due to a $25 million increase in the Companys
net interest earning assets resulting from the investment of TARP proceeds. Total average interest-earning assets increased by $178 million in 9mths-09 from 9mths-08, due to growth of $40 million in loans and $138 million in total security and other
short-term investments. Asset growth was funded by a $186 million increase in interest-bearing deposits and a $29 million increase in stockholders equity, partially offset by a $33 million decrease in borrowed funds.

The Companys net interest margin decreased to 1.76% in 9mths-09 from 1.82% in 9mths-08. This decrease was nearly all due to the impact of calls of
$428 million of higher yielding U.S. government agency security investments (coupled with the reinvestment of the proceeds into similar securities at market rates that were 91 basis points lower) and a higher level ($1.3 million) of interest income
not recorded on nonaccrual loans. The historically low interest rate environment has resulted in the call of a large number of investment securities that were purchased in 2007 and 2008. These factors were largely offset by lower rates paid on
deposits and adjustable-rate borrowings as well as the early retirement of IMCs higher-cost, fixed-rate debentures. The Companys yield on interest-earning assets decreased to 5.35% in 9mths-09 from 6.08% in 9mths-08, while the
Companys cost of funds decreased to 3.99% in 9mths-09 from 4.73% in 9mths-08.



35



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##### Table of Contents

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. The interest rate spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin is greater than the
interest rate spread due to the additional income earned on those assets funded by non-interest-bearing liabilities, primarily demand deposits and stockholders equity.



|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|---------------------------------------------------------------------------- |  | ------------------------- | --------- | - | ----------------- | - | ------------------ |  | ---- | - |  | -------------- |  | - | ----------------- | - | -------------- | - | ------ |  | ---- | -
|                                                                             |  | For the Nine-Months Ended |          
|                                                                             |  | September 30, 2009        |           |   |                   |   | September 30, 2008 | 
|($ in thousands)                                                             |  | AverageBalance            |           |   | InterestInc./Exp. |   | Yield/Rate (2)     |  |      |   |  | AverageBalance |  |   | InterestInc./Exp. |   | Yield/Rate (2) |  
|Interest-earning assets:                                                     |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Loans (1)                                                                    |  | $                         | 1,729,587 |   |                   | $ | 79,277             |  | 6.13 | % |  |                |  | $ | 1,689,846         |   |                | $ | 82,704 |  | 6.54 | %
|Securities                                                                   |  |                           | 567,717   |   |                   |   | 13,129             |  | 3.09 |   |  |                |  |   | 422,457           |   |                |   | 13,974 |  | 4.42 |  
|Other interest-earning assets                                                |  |                           | 13,498    |   |                   |   | 16                 |  | 0.16 |   |  |                |  |   | 20,961            |   |                |   | 394    |  | 2.51 |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total interest-earning assets                                                |  |                           | 2,310,802 |   |                   | $ | 92,422             |  | 5.35 | % |  |                |  |   | 2,133,264         |   |                | $ | 97,072 |  | 6.08 | %
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-earning assets                                                   |  |                           | 29,395    |   |                   |   |                    |  |      |   |  |                |  |   | 21,386            |   |                |   |        |  |      |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Total assets                                                                 |  | $                         | 2,340,197 |   |                   |   |                    |  |      |   |  |                |  | $ | 2,154,650         |   |                |   |        |  |      |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Interest-bearing liabilities:                                                |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Interest checking deposits                                                   |  | $                         | 5,973     |   |                   | $ | 74                 |  | 1.66 | % |  |                |  | $ | 5,743             |   |                | $ | 77     |  | 1.79 | %
|Savings deposits                                                             |  |                           | 9,299     |   |                   |   | 141                |  | 2.03 |   |  |                |  |   | 8,432             |   |                |   | 186    |  | 2.95 |  
|Money market deposits                                                        |  |                           | 416,844   |   |                   |   | 6,567              |  | 2.11 |   |  |                |  |   | 297,119           |   |                |   | 7,928  |  | 3.56 |  
|Certificates of deposit                                                      |  |                           | 1,521,186 |   |                   |   | 50,686             |  | 4.45 |   |  |                |  |   | 1,455,535         |   |                |   | 52,468 |  | 4.82 |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total deposit accounts                                                       |  |                           | 1,953,302 |   |                   |   | 57,468             |  | 3.93 |   |  |                |  |   | 1,766,829         |   |                |   | 60,659 |  | 4.59 |  
|FHLB advances                                                                |  |                           | 50,991    |   |                   |   | 1,459              |  | 3.83 |   |  |                |  |   | 26,196            |   |                |   | 521    |  | 2.66 |  
|Debentures and related interest payable                                      |  |                           | 13,285    |   |                   |   | 796                |  | 8.01 |   |  |                |  |   | 71,363            |   |                |   | 4,226  |  | 7.91 |  
|Debentures - capital securities                                              |  |                           | 56,702    |   |                   |   | 2,188              |  | 5.16 |   |  |                |  |   | 56,702            |   |                |   | 2,653  |  | 6.25 |  
|Mortgage note payable                                                        |  |                           | 178       |   |                   |   | 9                  |  | 6.76 |   |  |                |  |   | 195               |   |                |   | 10     |  | 6.85 |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total borrowed funds                                                         |  |                           | 121,156   |   |                   |   | 4,452              |  | 4.91 |   |  |                |  |   | 154,456           |   |                |   | 7,410  |  | 6.41 |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Total interest-bearing liabilities                                           |  |                           | 2,074,458 |   |                   | $ | 61,920             |  | 3.99 | % |  |                |  |   | 1,921,285         |   |                | $ | 68,069 |  | 4.73 | %
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Noninterest-bearing deposits                                                 |  |                           | 3,142     |   |                   |   |                    |  |      |   |  |                |  |   | 3,991             |   |                |   |        |  |      |  
|Noninterest-bearing liabilities                                              |  |                           | 49,962    |   |                   |   |                    |  |      |   |  |                |  |   | 45,813            |   |                |   |        |  |      |  
|Preferred stockholders equity                                               |  |                           | 23,241    |   |                   |   |                    |  |      |   |  |                |  |   | -                 |   |                |   |        |  |      |  
|Common stockholders equity                                                  |  |                           | 189,394   |   |                   |   |                    |  |      |   |  |                |  |   | 183,561           |   |                |   |        |  |      |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Total liabilities and stockholders equity                                   |  | $                         | 2,340,197 |   |                   |   |                    |  |      |   |  |                |  | $ | 2,154,650         |   |                |   |        |  |      |  
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Net interest and dividend income/spread                                      |  |                           |           |   |                   | $ | 30,502             |  | 1.36 | % |  |                |  |   |                   |   |                | $ | 29,003 |  | 1.35 | %
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |  
|Net interest-earning assets/margin (3)                                       |  | $                         | 236,344   |   |                   |   |                    |  | 1.76 | % |  |                |  | $ | 211,979           |   |                |   |        |  | 1.82 | %
|                                                                             |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Ratio of total interest-earning assets to total interest-bearing
liabilities |  |                           | 1.11      |   |                   |   |                    |  |      |   |  |                |  |   | 1.11              |   |                |   |        |  |      |  
|Other Ratios:                                                                |  |                           |           |   |                   |   |                    |  |      |   |  |                |  |   |                   |   |                |   |        |  |      |  
|Return on average assets (2)                                                 |  |                           | 0.14      | % |                   |   |                    |  |      |   |  |                |  |   | 0.42              | % |                |   |        |  |      |  
|Return on average common equity (2)                                          |  |                           | 1.71      | % |                   |   |                    |  |      |   |  |                |  |   | 4.92              | % |                |   |        |  |      |  
|Noninterest expense to average assets (2)                                    |  |                           | 1.13      | % |                   |   |                    |  |      |   |  |                |  |   | 0.80              | % |                |   |        |  |      |  
|Efficiency ratio (4)                                                         |  |                           | 50        | % |                   |   |                    |  |      |   |  |                |  |   | 30                | % |                |   |        |  |      |  
|Average stockholders equity to average assets                               |  |                           | 9.09      | % |                   |   |                    |  |      |   |  |                |  |   | 8.52              | % |                |   |        |  |      |  

|(1) | Includes average nonaccrual loans of $124.6 million in the 2009 period and $108.3 million in the 2008 period. Interest not accrued on such loans and excluded from the
table totaled $7.3 million in the 2009 period and $5.9 million in the 2008 period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Annualized.
|--- | -----------

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan
prepayments, the margin would compute to 1.81% and 1.95% for the 2009 period and 2008 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Defined as noninterest expenses (excluding the provision for loan losses and real estate expenses) as a percentage of net interest and dividend income plus noninterest
income.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36



---

##### Table of Contents

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 Nine-Months Ended September 30, 2009 vs. 2008 Increase
(Decrease) Due To Change In: |       
|($ in thousands)                           |  | Rate                                                                                        |        |   | Volume |   |        | Rate/Volume |  |   | Total  |  
|Interest-earning assets:                   |  |                                                                                             |        |   |        |   |        |             |  |   |        |   |  |   |        |  
|Loans                                      |  | $                                                                                           | (5,196 | ) |        | $ | 1,949  |             |  | $ | (180   | ) |  | $ | (3,427 | )
|Securities                                 |  |                                                                                             | (4,214 | ) |        |   | 4,815  |             |  |   | (1,446 | ) |  |   | (845   | )
|Other interest-earning assets              |  |                                                                                             | (369   | ) |        |   | (140   | )           |  |   | 131    |   |  |   | (378   | )
|Total interest-earning assets              |  |                                                                                             | (9,779 | ) |        |   | 6,624  |             |  |   | (1,495 | ) |  |   | (4,650 | )
|Interest-bearing liabilities:              |  |                                                                                             |        |   |        |   |        |             |  |   |        |   |  |   |        |  
|Interest checking deposits                 |  |                                                                                             | (6     | ) |        |   | 3      |             |  |   | -      |   |  |   | (3     | )
|Savings deposits                           |  |                                                                                             | (58    | ) |        |   | 19     |             |  |   | (6     | ) |  |   | (45    | )
|Money market deposits                      |  |                                                                                             | (3,231 | ) |        |   | 3,197  |             |  |   | (1,327 | ) |  |   | (1,361 | )
|Certificates of deposit                    |  |                                                                                             | (4,039 | ) |        |   | 2,373  |             |  |   | (116   | ) |  |   | (1,782 | )
|Total deposit accounts                     |  |                                                                                             | (7,334 | ) |        |   | 5,592  |             |  |   | (1,449 | ) |  |   | (3,191 | )
|FHLB advances                              |  |                                                                                             | 230    |   |        |   | 495    |             |  |   | 213    |   |  |   | 938    |  
|Debentures and accrued interest payable    |  |                                                                                             | 54     |   |        |   | (3,445 | )           |  |   | (39    | ) |  |   | (3,430 | )
|Debentures - capital securities            |  |                                                                                             | (464   | ) |        |   | -      |             |  |   | (1     | ) |  |   | (465   | )
|Mortgage note payable                      |  |                                                                                             | -      |   |        |   | (1     | )           |  |   | -      |   |  |   | (1     | )
|Total borrowed funds                       |  |                                                                                             | (180   | ) |        |   | (2,951 | )           |  |   | 173    |   |  |   | (2,958 | )
|Total interest-bearing liabilities         |  |                                                                                             | (7,514 | ) |        |   | 2,641  |             |  |   | (1,276 | ) |  |   | (6,149 | )
|Net change in interest and dividend income |  | $                                                                                           | (2,265 | ) |        | $ | 3,983  |             |  | $ | (219   | ) |  | $ | 1,499  |  

Provision for Loan Losses

The provision for loan losses decreased by $1.5 million to $6.9 million in 9mths-09, from $8.4 million in 9mths-08. The decrease was due to $1.0 million attributable to a decrease in net loan growth from
the prior year period ($76 million of loan growth in the 2008 period, compared to an $11 million decrease in the 2009 period) and a $1.7 million specific valuation allowance associated with an $11.3 million impaired loan that was no longer required
because the loan was repaid in full, which items were partially offset by $1.2 million of provisions associated with new credit downgrades and lower estimated real estate values on certain properties collateralizing nonaccrual loans.

Noninterest Income

Noninterest
income decreased by $4.2 million to $0.2 million in 9mths-09, from $4.4 million in 9mths-08. The decrease was due to a $1.5 million decrease in income from early repayment of loans, a $0.7 million decrease in deposit and loan service charge income,
$1.4 million of impairment charges on trust preferred security investments (as discussed in note 3 to the condensed consolidated financial statements in this report) and a $0.6 million decrease in income from calls of investment securities (such
income consists of the immediate recognition of any remaining unamortized premium or discount at time the security is called).

Noninterest Expenses

Noninterest expenses increased by $6.8 million to $19.8 million in 9mths-09, from $13.0 million in
9mths-08. The increase was primarily due to the following: a $2.9 million increase in FDIC insurance premiums; a $1.6 million increase in expenses associated with nonperforming assets (which included $0.9 million related to one property that is not
expected to recur); a $1.5 million increase in expense from the early retirement of debentures; and a $0.4 million increase in compensation and benefits expense. The reasons for the increases in FDIC insurance premiums, expenses associated with
nonperforming assets and compensation and benefits expenses are the same as those described in the section Comparison of Results of Operations for the Quarters September 30, 2009 and 2008.

Provision for Income Taxes

The
provision for income taxes decreased by $3.6 million to $1.5 million in 9mths-09, from $5.2 million in 9mths-08. The decrease was due to less pre-tax income as well as a $0.2 million refund of prior year income taxes paid resulting from the
completion of an audit of 2005 Florida income tax return. The Companys effective income tax rate (inclusive of state and local taxes) was 38.8% in the 2009 period, compared 43.4% in the 2008 period. The lower effective rate was due to the tax
refund noted above.



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Off-Balance Sheet and Other Financing Arrangements

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.
For a further discussion of these financial instruments, see note 11 to the condensed consolidated financial statements included in this report.

Liquidity and Capital Resources

General.The Company manages its
liquidity position on a daily basis to assure that funds are available to meet its operating requirements, loan and investment commitments, deposit withdrawals and debt service obligations. Primary sources of funds currently consist of the
following: retail deposits obtained through INBs branch offices and the mail; principal repayments of loans; maturities and calls of securities; borrowings from the federal funds market and through FHLB advances; and cash flow provided by
operating activities. For additional detail concerning the Companys actual cash flows, see the condensed consolidated statements of cash flows included in this report.

Intervest National Bank.INBs lending business is dependent on its ability to generate a positive interest rate spread between the yields earned on its loans and the rates offered on
its deposits. INB needs to pay competitive interest rates to attract and retain deposits to fund its loan originations.

INB relies heavily on
certificates of deposit (time deposits) as its main source of funds. Consolidated deposits amounted to $2.01 billion at September 30, 2009 and time deposits represented 76% or $1.52 billion of those deposits, down from 82% at December 31,
2008, which is the result of a 43% increase in money market deposit accounts to $468 million at September 30, 2009. Time deposits of $100,000 or more at September 30, 2009 totaled $689 million, compared to $663 million at December 31,
2008, and included $170 million and $173 million of brokered deposits at each date, respectively. Brokered deposits had a weighted average remaining term and stated interest rate of 3.5 years and 4.96%, respectively, at September 30, 2009 and
$10.9 million of those deposits mature by September 30, 2010. INBs brokered deposits are sold by investment firms, which are paid a fee by INB for placing the deposit. INB must maintain its status as a well-capitalized insured depository
institution in order to solicit and accept, renew or roll over any brokered deposit without restriction. Additionally, INB has agreed with the OCC not to have its total brokered deposits exceed 10% of INBs total deposits without obtaining
prior approval of the OCC. Time deposits are the only deposit accounts offered by INB that have stated maturity dates. These deposits are generally considered to be rate sensitive and have a higher cost than deposits with no stated maturities, such
as checking, savings and money market accounts. At September 30, 2009, $584 million, or 38%, of INBs total time deposits mature by September 30, 2010. INB expects to retain or replace a significant portion of such deposits based on
its competitive pricing and historical experience.

INB also borrows funds on an overnight or short-term basis to manage its liquidity needs.
At September 30, 2009, INB had agreements with correspondent banks whereby it could borrow up to $28 million on an unsecured basis. As a member of the FHLB of New York and FRB of New York, INB can also borrow from these institutions on a
secured basis. At September 30, 2009, INB had $51 million of FHLB advances outstanding, which mature at various times beginning in March 2010 through September 2013, of which $20 million will mature by September 30, 2010. At
September 30, 2009, INB had available collateral consisting of investment securities to support additional total secured borrowings of $519 million if needed. INB expects to have the flexibility to either repay or rollover its outstanding
borrowings as they mature. The disruption in the credit markets that began in 2008 has not affected INBs access to ordinary course borrowings.

INB invests in U.S. government agency debt obligations to emphasize safety and liquidity. All of INBs security investments are classified as held to maturity, and nearly all of the securities have fixed rates of interest or have
predetermined scheduled rate increases, and many have call features that allow the issuer to call the security at par before its stated maturity without penalty. At September 30, 2009, the securities held to maturity portfolio had a
weighted-average remaining stated maturity of 4.6 years, and $18 million, or 3%, of the portfolio matures by September 30, 2010. INB expects to reinvest the proceeds from these maturities as well as any calls into new securities. INBs
loan-to-deposit ratio was 80% at September 30, 2009 compared to 85% at December 31, 2008. INBs goal is to target its loan-to-deposit ratio at approximately 85%. A decrease in suitable lending opportunities for the Company in 2009 has
negatively impacted this ratio.



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INB had cash and short-term investments of $29 million at September 30, 2009 and $237 million of its
loan portfolio (excluding nonaccrual loans) matures by September 30, 2010. INB expects to extend or refinance a portion of these maturing loans. At September 30, 2009, INB had commitments to lend of $40 million, most of which are
anticipated to be funded over the next 12 months from the sources of funds described above.

In April 2009, INB agreed with the OCC, its
primary regulator, to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets
- 10%; and total capital to risk-weighted assets - 12%. At September 30, 2009, INBs actual capital ratios exceeded these specified percentages and it had excess regulatory capital to support an additional $308 million of asset growth and
still be in compliance with this new threshold. See the section entitled Regulatory Capital and notes 12 and 16 to the condensed consolidated financial statements in this report for a further discussion. In September 2009, IBC invested
$9.3 million as a capital contribution into INB.

Intervest Mortgage Corporation.As more fully described in note 2 to the
consolidated financial statements in this report, IMC has been applying cash inflows from its maturing loans to the early repayment of its outstanding debentures (which have a higher cost than INBs sources of funds). In the first nine months
of 2009, IMC also sold $30.8 million of its performing loans to INB at cost to provide additional funds for debenture repayments. In the first nine months of 2009, IMC repaid all ($40 million) of its outstanding debentures. In September 2009, IMC
paid a cash dividend to IBC in the amount of $9.3 million which was used by IBC to make an additional capital investment in INB for the same amount. At September 30, 2009, IMC had cash and short-term investments of $1.7 million.

Intervest Bancshares Corporation. IBCs current sources of funds are derived from the following: interest income from short-term
investments; monthly dividends from INB; and monthly management fees from IMC and INB for providing these subsidiaries with certain administrative services. IBCs historical sources of capital have been derived from the issuance of its common
stock through public offerings, exercise of common stock warrants and conversion of debentures; the issuance of trust preferred securities through its wholly owned business trusts; and the direct issuance of other subordinated debentures to the
public.

As more fully described in note 10 to the consolidated financial statements in the Companys 2008 annual report on Form 10-K, in
December 2008, IBC sold to the U.S. Treasury 25,000 shares of its 5% Fixed Rate Cumulative Perpetual Preferred Stock, Series A, along with a ten year warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for
$5.42 per share, for a total cash investment of $25 million from the Treasury. The $25 million of proceeds was invested by IBC into INB as a capital contribution.

IBC, through its wholly owned business trusts, also has $56.7 million of trust preferred securities outstanding and $55.0 million (representing outstanding debentures net of IBCs common stock
investments in the trusts) qualified for and are included in regulatory Tier 1 capital. The proceeds from these securities have also been invested in INB at various times through capital contributions. The securities have fixed rates of interest for
the initial five-year period and thereafter variable rates and contractually mature at various times through 2036.

INB provides funds to IBC
for the cash dividend requirements on the preferred stock and for the debt service on trust preferred securities in the form of cash dividends paid to IBC, which totaled $3.9 million annually as of September 30, 2009. If INB is unable to pay
cash dividends to IBC, IBC may not be able to service its debt, pay its other obligations, or pay cash dividends on its outstanding common or preferred stock. At September 30, 2009, IBC had $6.7 million in cash and short-term investments.

Other.Additional information regarding security investments, time deposits and borrowings, including interest rates and
maturity dates, can be found in notes 3, 6, 7 and 8 of the notes to the condensed consolidated financial statements included in this report. Information regarding trust preferred securities can be found in note 9 to the consolidated financial
statements included in the Companys 2008 annual report on Form 10-K.

IBC, INB and IMC each consider their current liquidity and sources
of funds sufficient to satisfy their outstanding lending commitments, if any, and maturing liabilities. Management is not aware of any trends, known demand, commitments or uncertainties other than those discussed above or elsewhere in this report
that are expected to have a material impact on future operating results, liquidity or capital resources of each entity. However, there can be no assurances that adverse conditions may not arise in credit markets that would adversely impact the
Companys liquidity and ability to raise funds (either through attracting deposits, from borrowings or sales of assets) to meet its operations and satisfy its outstanding lending commitments and maturing liabilities.



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Regulatory Capital

INB is subject to various regulatory capital requirements. As discussed on page 20 of the Companys 2008 annual report on Form 10-K, the Federal
Deposit Insurance Corporation (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 discretionary actions by the
regulators that, if undertaken, could have a direct material effect on INBs and the Companys financial statements.

Regulations
require banks 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 September 30, 2009, INB maintained its capital at levels to be classified 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. In April 2009, INB agreed with the OCC,
its primary regulator, to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted
assets - 10%; and total capital to risk-weighted assets - 12%. INB met its capital adequacy requirements as of September 30, 2009 and December 31, 2008. As of the date of filing of this report on Form 10-Q, management is not aware of any
conditions or events that would have changed INBs or IBCs compliance with each of its regulatory capital requirements.

Information regarding INBs regulatory capital and related ratios is summarized as follows:



|                                       |  |                  |           |   |                 |   |           |  
|-------------------------------------- |  | ---------------- | --------- | - | --------------- | - | --------- | -
|                                       |  | At September 30, |           |   | At December 31, |  
|($ in thousands)                       |  | 2009             |           |   | 2008            |  
|Tier 1 Capital                         |  | $                | 239,388   |   |                 | $ | 228,435   |  
|Tier 2 Capital                         |  |                  | 23,647    |   |                 |   | 22,674    |  
|Total risk-based capital               |  | $                | 263,035   |   |                 | $ | 251,109   |  
|Net risk-weighted assets               |  | $                | 1,884,163 |   |                 | $ | 1,809,079 |  
|Average assets for regulatory purposes |  | $                | 2,343,165 |   |                 | $ | 2,116,762 |  
|Tier 1 capital to average assets       |  |                  | 10.22     | % |                 |   | 10.79     | %
|Tier 1 capital to risk-weighted assets |  |                  | 12.71     | % |                 |   | 12.63     | %
|Total capital to risk-weighted assets  |  |                  | 13.96     | % |                 |   | 13.88     | %

IBC 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 September 30, 2009 and December 31, 2008, IBC met its capital adequacy requirements.

Information regarding consolidated regulatory capital and related ratios is summarized below:



|                                       |  |                  |           |   |                 |   |           |  
|-------------------------------------- |  | ---------------- | --------- | - | --------------- | - | --------- | -
|                                       |  | At September 30, |           |   | At December 31, |  
|($ in thousands)                       |  | 2009             |           |   | 2008            |  
|Tier 1 Capital (1)                     |  | $                | 268,619   |   |                 | $ | 266,974   |  
|Tier 2 Capital                         |  |                  | 23,935    |   |                 |   | 23,455    |  
|Total risk-based capital               |  | $                | 292,554   |   |                 | $ | 290,429   |  
|Net risk-weighted assets               |  | $                | 1,906,901 |   |                 | $ | 1,871,343 |  
|Average assets for regulatory purposes |  | $                | 2,378,372 |   |                 | $ | 2,186,753 |  
|Tier 1 capital to average assets       |  |                  | 11.29     | % |                 |   | 12.21     | %
|Tier 1 capital to risk-weighted assets |  |                  | 14.09     | % |                 |   | 14.27     | %
|Total capital to risk-weighted assets  |  |                  | 15.34     | % |                 |   | 15.52     | %

(1) Tier 1 capital includes $55 million of qualifying trust preferred securities, which represent
outstanding debentures issued to Intervest Statutory Trust II, III, IV and V by IBC, net of the IBCs investments in those trusts. The inclusion of these securities in Tier 1 capital is currently limited to 25% of core capital elements, as
defined in the FDIC regulations. Tier 1 capital also includes $25 million of cumulative perpetual preferred stock sold to the U.S. Treasury for which there is no limit.

In March 2009, the Federal Reserve Board announced the adoption of a final rule that delays until March 31, 2011, the effective date of new limits on the inclusion of trust preferred securities and
other restricted core capital elements in Tier 1 capital of all bank holding companies (BHCs). This action was taken in light of continued stress in financial markets and the efforts of BHCs to increase their overall capital levels.



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These new limits were scheduled to take effect on March 31, 2009, pursuant to a final rule adopted by
the Board on March 10, 2005. This delay will further the Boards efforts, as well as the efforts of the other Federal banking agencies and the U.S. Department of the Treasury, to respond to the recent crisis in the financial markets. Until
the new effective date in 2011, all BHCs may include cumulative perpetual preferred stock and trust preferred securities in Tier 1 capital up to 25 percent of total core capital elements (excluding senior preferred stock issued to the U.S. Treasury,
all of which qualifies as Tier 1 capital without restriction). See page 54 of the Companys 2008 annual report on Form 10-K for a more detailed discussion of the new requirements.

Asset and Liability Management

The Companys interest
rate risk arises from differences in the repricing of its assets and its liabilities within a given time period. The primary objective of the Companys asset/liability management strategy is to limit, within established guidelines, the adverse
effect of changes in interest rates on its net interest income and capital. The Company has never engaged in trading or hedging activities, nor invested in interest rate derivatives or entered into interest rate swaps. The Company uses gap
analysis, which measures the difference between interest-earning assets and interest-bearing liabilities that mature or reprice within a given time period, to monitor its interest rate sensitivity. For a discussion of gap analysis, including
the factors that affect its computation and results, see pages 55 to 57 of the Companys 2008 annual report on Form 10-K.

At
September 30, 2009, the Companys interest-bearing liabilities that are scheduled to mature or reprice within one-year exceeded its interest-earning assets that are scheduled to mature or reprice within one-year. This one-year interest
rate sensitivity gap amounted to a negative $631 million, or (26.5)% of total assets, at September 30, 2009, compared to a negative gap of $425 million, or (18.7)% of total assets at December 31, 2008. As a result of the negative one-year
gap, the Company continues to be liability-sensitive, indicating that its interest-bearing liabilities would generally reprice with changes in interest rates more rapidly than its interest-earning assets.

The change in the one-year gap from December 31, 2008 was primarily due to the following: the continued runoff of accruing loans with a repricing or
remaining maturity of less than one year being replaced with new fixed rate loans with maturities averaging 5.1 years; an increase in nonaccrual loans; and purchases of security investments with maturities averaging 4.8 years. The new loans and
securities have been funded largely through an increase in money market accounts. INBs deposit flows and deposit rates offered are monitored daily and adjusted as needed. Beginning in the fourth quarter of 2008, INB has emphasized the
attraction of longer-term deposits by offering competitive rates on these products and being less competitive on the rates offered for shorter-term deposits. Notwithstanding this strategy, INB has still experienced a significant inflow of money
market deposit accounts. There can be no assurance that the behavior of depositors will match the expectations of management. INBs objective is to maintain its deposit rates at levels that will promote a stable deposit base and at the same
time adjust to its cash flow needs.

INB, whose assets represent 99% of consolidated assets, performs internal analyses by preparing interest
rate shock scenarios (representing the effects of specific interest rate changes on its net interest income and capital) to its basic one-year gap model as a quantitative tool to measure the amount of INBs interest rate risk associated with
changing market interest rates. Based on the September 30, 2009 negative one-year static gap adjusted for various assumptions, if market rates were assumed to immediately increase by either 100, 200 or 300 basis points, INBs annualized
net interest income would be reduced in each scenario from current levels by an estimated 12%, 25% and 38%, respectively. It should be noted that for purposes of computing the one-year interest rate sensitivity gap, all of INBs deposits with
no stated maturities are treated as readily accessible accounts (as noted in footnote 3 to the GAP table follows), which contributes significantly to the liability sensitive position reported per the one-year gap. However, if such deposits were
treated differently, the one-year gap would then change. Depositors may not necessarily immediately withdraw funds in the event deposit rates offered by INB 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 interest rate sensitivity gap would have been a negative 11% at September 30, 2009, compared to a negative 7% at December 31, 2008, which
would have resulted in a significantly lower level of perceived interest rate sensitivity when using gap analysis for such measure.



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The table that follows summarizes interest-earning assets and interest-bearing liabilities as of
September 30, 2009, that are scheduled to mature or reprice within the periods shown.



|                                         |  |            |          |    |             |   |          |                |  |   |              |    |  |       |         |   |  |   |           |  
|---------------------------------------- |  | ---------- | -------- | -- | ----------- | - | -------- | -------------- |  | - | ------------ | -- |  | ----- | ------- | - |  | - | --------- | -
|($ in thousands)                         |  | 0-3 Months |          |    | 4-12 Months |   |          | Over 1-4 Years |  |   | Over 4 Years |    |  | Total |        
|Loans (1)                                |  | $          | 137,340  |    |             | $ | 241,865  |                |  | $ | 892,486      |    |  | $     | 300,474 |   |  | $ | 1,572,165 |  
|Securities held to maturity (2)          |  |            | 15,345   |    |             |   | 86,918   |                |  |   | 283,174      |    |  |       | 212,458 |   |  |   | 597,895   |  
|Short-term investments                   |  |            | 20,114   |    |             |   | -        |                |  |   | -            |    |  |       | -       |   |  |   | 20,114    |  
|FRB and FHLB stock                       |  |            | 5,531    |    |             |   | -        |                |  |   | -            |    |  |       | 4,398   |   |  |   | 9,929     |  
|Total rate-sensitive assets              |  | $          | 178,330  |    |             | $ | 328,783  |                |  | $ | 1,175,660    |    |  | $     | 517,330 |   |  | $ | 2,200,103 |  
|Deposit accounts (3) :                   |  |            |          |    |             |   |          |                |  |   |              |    |  |       |         |   |  |   |           |  
|Interest checking deposits               |  | $          | 7,672    |    |             | $ | -        |                |  | $ | -            |    |  | $     | -       |   |  | $ | 7,672     |  
|Savings deposits                         |  |            | 10,863   |    |             |   | -        |                |  |   | -            |    |  |       | -       |   |  |   | 10,863    |  
|Money market deposits                    |  |            | 468,808  |    |             |   | -        |                |  |   | -            |    |  |       | -       |   |  |   | 468,808   |  
|Certificates of deposit                  |  |            | 93,336   |    |             |   | 490,715  |                |  |   | 658,288      |    |  |       | 279,298 |   |  |   | 1,521,637 |  
|Total deposits                           |  |            | 580,679  |    |             |   | 490,715  |                |  |   | 658,288      |    |  |       | 279,298 |   |  |   | 2,008,980 |  
|FHLB advances                            |  |            | -        |    |             |   | 20,000   |                |  |   | 30,500       |    |  |       | -       |   |  |   | 50,500    |  
|Debentures and mortgage note payable (1) |  |            | 46,392   |    |             |   | -        |                |  |   | 10,310       |    |  |       | 171     |   |  |   | 56,873    |  
|Accrued interest on all borrowed funds   |  |            | 174      |    |             |   | -        |                |  |   | -            |    |  |       | -       |   |  |   | 174       |  
|Total borrowed funds                     |  |            | 46,566   |    |             |   | 20,000   |                |  |   | 40,810       |    |  |       | 171     |   |  |   | 107,547   |  
|Total rate-sensitive liabilities         |  | $          | 627,245  |    |             | $ | 510,715  |                |  | $ | 699,098      |    |  | $     | 279,469 |   |  | $ | 2,116,527 |  
|GAP (repricing differences)              |  | $          | (448,915 | )  |             | $ | (181,932 | )              |  | $ | 476,562      |    |  | $     | 237,861 |   |  | $ | 83,576    |  
|Cumulative GAP                           |  | $          | (448,915 | )  |             | $ | (630,847 | )              |  | $ | (154,285     | )  |  | $     | 83,576  |   |  | $ | 83,576    |  
|Cumulative GAP to total assets           |  |            | (18.8    | )% |             |   | (26.5    | )%             |  |   | (6.5         | )% |  |       | 3.5     | % |  |   | 3.5       | %

Significant assumptions used in preparing the gap table above follow:



| | (1) | Adjustable-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, debentures payable and FHLB advances are scheduled, including repayments, according to their contractual maturities. Certain debentures that have been identified to be repaid prior to their contractual maturity are
scheduled according to the repayment date. Deferred loan fees and the effect of possible loan prepayments are excluded from the analysis. Nonaccrual loans of $131.7 million and foreclosed real estate of $32.9 million are also excluded from the table
although some portion is expected to return to an interest-earning status in the near term.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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 in the analysis. The net carrying value ($0.4 million) of corporate securities that are on a cash basis of accounting
are excluded from the table.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Interest checking, savings and money market deposits are regarded as readily accessible withdrawable accounts and certificates of deposit are scheduled according to
their contractual maturity dates.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Regulatory Developments

As discussed in more detail in note 16 to the condensed consolidated financial statements in this report, INB and its primary regulator, the OCC, have
entered into a Memorandum of Understanding. INB has also agreed to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations. Changes have also been made by the FDIC to insurance premium rates
that have and will continue to negatively affect the Banks FDIC insurance expense and that of the banking industry as a whole.

Recent Accounting Standards

See note 14 to the condensed consolidated financial statements included in this report for a
discussion of this topic.



|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Market risk is the risk of loss from adverse changes in market prices and interest rates. The Companys market risk arises primarily from interest rate risk inherent in its lending, deposit-taking
and borrowing activities. The Company has not engaged in and accordingly has no present risk related to trading accounts, commodities, interest rate hedges or foreign exchange. 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 September 30, 2009 and
December 31, 2008, which reflect changes in market prices and rates, can be found in note 14 to the condensed consolidated financial statements included in this report.



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Management actively monitors and manages the Companys interest rate risk exposure. The primary
objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on the Companys net interest income and capital. To this regard, INB, whose assets represent 99% of total
consolidated assets, performs internal analyses by preparing interest rate shock scenarios (representing the effects of specific interest rate changes on its net interest income and capital) to its basic one-year gap model as a quantitative tool to
measure the amount of interest rate risk associated with changing market interest rates. INB also engages an outside consultant to prepare quarterly reports using an earnings simulation model to quantify the effects of various interest rate
scenarios on its projected net interest income and net income over projected periods. These computations rely on various assumptions regarding balance sheet growth and composition, and the pricing and repricing and maturity characteristics of the
balance sheet. For a further discussion of GAP analysis, see the section entitled Asset and Liability Management of this report.



|ITEM 4. | Controls and Procedures
|------- | -----------------------

The
Companys management evaluated, with the participation of its Principal Executive and Financial Officers, the effectiveness of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, the Principal Executive and Financial Officers have concluded that the Companys disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and regulations,
and are operating in an effective manner. There has been no change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Companys internal control over financial reporting.

PART II. OTHER INFORMATION



|ITEM 1. | Legal Proceedings
|------- | -----------------

Not Applicable



|ITEM 1A. | Risk Factors
|-------- | ------------

References in this section
to we, us, and our refer to IBC and its consolidated subsidiaries, unless otherwise specified. References to INB refer to our subsidiary, Intervest National Bank. This item requires disclosure of any
new or material changes to our risk factors disclosed in our 2008 annual report on Form 10-K, where such factors are discussed on pages 24 through 29. The following also needs to be considered.

Our operations and activities are now subject to heightened regulatory oversight which will increase our operating expenses and may negatively
impact our ability to grow our business.

On April 7, 2009, Intervest National Bank (INB) entered into a Memorandum of
Understanding (MOU) with the Comptroller of the Currency (OCC), which requires INB to (1) appoint a Compliance Committee to monitor and coordinate INBs adherence to the MOU and to submit progress reports to the
OCC; (2) develop and implement a Strategic Plan in accordance with guidelines set forth in the MOU; (3) review and revise INBs Contingency Funding Plan to address matters outlined in the MOU; (4) develop and implement a written
program to improve credit risk management processes that are consistent across INBs two primary markets; (5) develop and implement a three-year capital program in accordance with guidelines set out in the MOU; and (6) review and
revise INBs interest rate risk policy and procedures to address matters set forth in the MOU. As of September 30, 2009, management believes that it has satisfied a number of the conditions of the MOU and has commenced the steps necessary
to resolve any and all remaining issues presented therein. INB has also agreed with the OCC to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total
average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%. At September 30, 2009, INBs actual capital ratios were in excess of these levels at 10.22%, 12.71% and
13.96%, respectively. Based on this new threshold established by the OCC, INBs available asset growth as of September 30, 2009 is $308 million. As a result of the above, our operations, lending activities and capital levels are now
subject to heightened regulatory oversight, over and above the extensive regulation which normally applies to us under existing regulations, which will increase our expenses and may negatively impact our ability to grow our business. In addition,
failure by INB to comply with these heightened requirements could lead to additional regulatory actions, more expenses and other restrictions.



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|ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Not Applicable



|ITEM 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not Applicable



|ITEM 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Not Applicable



|ITEM 5. | Other Information
|------- | -----------------

Not
Applicable



|ITEM 6. | Exhibits
|------- | --------

The following exhibits are
filed as part of this report.



|31.0 | Certification of the principal executive officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
|---- | -----------------------------------------------------------------------------------------------------------



|31.1 | Certification of the principal financial officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
|---- | -----------------------------------------------------------------------------------------------------------



|32.0 | Certification of the principal executive and financial officers pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
|---- | --------------------------------------------------------------------------------------------------------------------------

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                                                          |  |                         
|---------------------- |  | -------------------------------------------------------- |  | ------------------------
|                       |  | INTERVEST BANCSHARES CORPORATION                        
|                       |  | (Registrant)                                            
|                       |  |                                                         
|Date: October 29, 2009 |  | By:                                                      |  | /S/    LOWELL S.
DANSKER
|                       |  | Lowell S. Dansker, Chairman and Executive Vice President
|                       |  | (Principal Executive Officer)                           
|                       |  |                                                         
|Date: October 29, 2009 |  | By:                                                      |  | /S/    JOHN J.
ARVONIO  
|                       |  | John J. Arvonio, Chief Financial and Accounting Officer 
|                       |  | (Principal Financial Officer)                           



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