================================================================================

                                  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 JUNE 30, 2005
                                                 -------------

                                       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         (I.R.S. Employer Identification No.)
    of incorporation or organization)                or organization)

                        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  XX    NO
     --       --.

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act):
YES         NO  XX
     ---        --.

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

<TABLE>
<CAPTION>
<S>                                                   <C>
     Title of Each Class:                             Shares Outstanding:
     --------------------                             -------------------

     Class A Common Stock, $1.00 par value per share  5,894,501 Outstanding as of July 29, 2005
     -----------------------------------------------  -----------------------------------------

     Class B Common Stock, $1.00 par value per share  385,000 Outstanding as of July 29, 2005
     -----------------------------------------------  -----------------------------------------
</TABLE>

================================================================================


<PAGE>
<TABLE>
<CAPTION>
                             INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

                                                 FORM 10-Q
                                               JUNE 30, 2005
                                             TABLE OF CONTENTS


     PART I. FINANCIAL INFORMATION                                                          Page
                                                                                            ----
       ITEM 1.    FINANCIAL STATEMENTS
<S>                                                                                         <C>
         Condensed Consolidated Balance Sheets
           as of June 30, 2005 (Unaudited) and December 31, 2004 . . . . . . . . . . . . .    2

         Condensed Consolidated Statements of Earnings (Unaudited)
           for the Quarters and Six-Months Ended June 30, 2005 and 2004. . . . . . . . . .    3

         Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
           for the Six-Months Ended June 30, 2005 and 2004 . . . . . . . . . . . . . . . .    4

         Condensed Consolidated Statements of Cash Flows (Unaudited)
           for the Six-Months Ended June 30, 2005 and 2004 . . . . . . . . . . . . . . . .    5

         Notes to Condensed Consolidated Financial Statements (Unaudited). . . . . . . . .    6

         Review by Independent Registered Public Accounting Firm . . . . . . . . . . . . .   17

         Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . .   18

       ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                    RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . .   20

       ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . .   37

       ITEM 4.    CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . .   37

     PART II. OTHER INFORMATION

       ITEM 1.    LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .   37

       ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. . . . . . .   37

       ITEM 3.    DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . . . . . .   37

       ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . .   37

       ITEM 5.    OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .   38

       ITEM 6.    EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   38

       SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   38
</TABLE>

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
Intervest Bancshares Corporation and subsidiaries (the "Company") is making this
statement  in  order  to  satisfy  the  "Safe Harbor" provision contained in the
Private  Securities  Litigation  Reform Act of 1995. The statements contained in
this  report on Form 10-Q that are not statements of historical fact may include
forward-looking  statements  that  involve  a number of risks and uncertainties.
Such  forward-looking statements are made based on management's expectations and
beliefs  concerning  future  events  impacting  the  Company  and are subject to
uncertainties  and  factors  relating  to  the Company's operations and economic
environment,  all of which are difficult to predict and many of which are beyond
the  control  of  the Company, that could cause actual results of the Company to
differ  materially from those matters expressed in or implied by forward-looking
statements. The factors below are among those that could cause actual results to
differ  materially  from  the  forward-looking  statements.

RISK FACTORS
The  Company's  business  is  affected by a number of factors, including but not
limited to the impact of: interest rates; loan demand; loan concentrations; loan
prepayments;  dependence  on  brokers  and other sources for new loan referrals,
ability  to  raise  funds for investment; competition; general or local economic
conditions;  credit  risk  and  the  related  adequacy of the allowance for loan
losses;  terrorist  acts;  natural  disasters;  armed  conflicts;  environmental
liabilities, regulatory supervision and regulation and costs thereof; dependence
on  a  limited  number  of  key  personnel; and voting control held by a limited
number  of  stockholders  who  are  also  management.


                                        2
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                                      INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                                            CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                  JUNE 30,     DECEMBER 31,
($ in thousands, except par value)                                                                  2005           2004
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>           <C>
ASSETS                                                                                           (Unaudited)       (Audited)
Cash and due from banks                                                                         $      7,066  $       12,026
Federal funds sold                                                                                    56,101           9,948
Commercial paper and other short-term investments                                                     12,030           2,625
                                                                                                ----------------------------
  Total cash and cash equivalents                                                                     75,197          24,599
Securities held to maturity, net (estimated fair value of $229,673 and $247,211, respectively)       231,630         248,888
Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                         5,983           5,092
Loans receivable (net of allowance for loan losses of $12,591 and $11,106, respectively)           1,161,516       1,004,290
Accrued interest receivable                                                                            7,234           6,699
Loan fees receivable                                                                                   9,401           8,208
Premises and equipment, net                                                                            6,568           6,636
Deferred income tax asset                                                                              5,800           5,095
Deferred debenture offering costs, net                                                                 5,304           4,929
Other assets                                                                                           2,971           2,315
============================================================================================================================
TOTAL ASSETS                                                                                    $  1,511,604  $    1,316,751
============================================================================================================================
LIABILITIES
Deposits:
  Noninterest-bearing demand deposit accounts                                                   $      5,747  $        6,142
  Interest-bearing deposit accounts:
    Checking (NOW) accounts                                                                            9,167          15,051
    Savings accounts                                                                                  22,214          27,359
    Money market accounts                                                                            195,033         200,549
    Certificate of deposit accounts                                                                  985,345         744,771
                                                                                                ----------------------------
Total deposit accounts                                                                             1,217,506         993,872
Borrowed Funds:
    Federal Home Loan Bank advances                                                                        -          36,000
    Subordinated debentures                                                                           94,010          94,430
    Subordinated debentures - capital securities                                                      61,856          61,856
    Accrued interest payable on all borrowed funds                                                     6,919          10,154
    Mortgage note payable                                                                                236             242
                                                                                                ----------------------------
Total borrowed funds                                                                                 163,021         202,682
Accrued interest payable on deposits                                                                   2,388           1,718
Mortgage escrow funds payable                                                                         17,826          14,533
Official checks outstanding                                                                            9,693          12,061
Other liabilities                                                                                      3,195           1,791
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                                  1,413,629       1,226,657
----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock (300,000 shares authorized, none issued)                                                   -               -
Class A common stock ($1.00 par value, 9,500,000 shares authorized,                                    5,894           5,886
  5,894,501 and 5,886,433 shares issued and outstanding, respectively)
Class B common stock ($1.00 par value, 700,000 shares authorized,                                        385             385
  385,000 shares issued and outstanding)
Additional paid-in-capital, common                                                                    39,063          38,961
Retained earnings                                                                                     52,633          44,862
----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                            97,975          90,094
============================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                      $  1,511,604  $    1,316,751
============================================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                            INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                              CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                               (Unaudited)

                                                                       QUARTER ENDED    SIX-MONTHS ENDED
                                                                         JUNE 30,            JUNE 30,
                                                                  ---------------------------------------
($ in thousands, except per share data)                               2005      2004      2005     2004
---------------------------------------------------------------------------------------------------------
<S>                                                               <C>       <C>       <C>       <C>
INTEREST AND DIVIDEND INCOME
Loans receivable                                                  $ 20,800  $ 14,457  $ 39,611  $ 28,249
Securities                                                           1,723       859     3,286     1,564
Other interest-earning assets                                          173        75       367       171
---------------------------------------------------------------------------------------------------------
TOTAL INTEREST AND DIVIDEND INCOME                                  22,696    15,391    43,264    29,984
---------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
Deposits                                                            10,375     5,906    19,414    11,218
Subordinated debentures                                              2,003     2,098     4,063     4,331
Subordinated debentures - capital securities                         1,089       856     2,179     1,522
Other borrowed funds                                                    33         6       127        10
---------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                              13,500     8,866    25,783    17,081
---------------------------------------------------------------------------------------------------------

NET INTEREST AND DIVIDEND INCOME                                     9,196     6,525    17,481    12,903
Provision for loan losses                                              452     1,284     1,485     2,361
---------------------------------------------------------------------------------------------------------
NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR LOAN LOSSES     8,744     5,241    15,996    10,542
---------------------------------------------------------------------------------------------------------

NONINTEREST INCOME
Customer service fees                                                   79        75       155       134
Income from mortgage lending activities                                301       414       450       604
Income from the early repayment of mortgage loans                    1,568       734     2,222     1,890
Commissions and fees                                                    59         -        59        56
Gain (loss) from early call of investment securities                     2         2         1        (3)
---------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME                                             2,009     1,225     2,887     2,681
---------------------------------------------------------------------------------------------------------

NONINTEREST EXPENSES
Salaries and employee benefits                                       1,382       941     2,667     1,902
Occupancy and equipment, net                                           357       481       714       825
Data processing                                                        146       127       282       256
Professional fees and services                                         267        95       406       198
Stationery, printing and supplies                                       55        46       109        90
Postage and delivery                                                    32        29        65        54
FDIC and general insurance                                              77        63       156       127
Director and committee fees                                            131        84       253       172
Advertising and promotion                                               50        22        97        35
All other                                                              252       157       374       304
---------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSES                                           2,749     2,045     5,123     3,963
---------------------------------------------------------------------------------------------------------
Earnings before income taxes                                         8,004     4,421    13,760     9,260
Provision for income taxes                                           3,481     1,916     5,989     4,020
=========================================================================================================
NET EARNINGS                                                      $  4,523  $  2,505  $  7,771  $  5,240
=========================================================================================================

BASIC EARNINGS PER SHARE                                          $   0.72  $   0.42  $   1.24  $   0.87
DILUTED EARNINGS PER SHARE                                        $   0.67  $   0.37  $   1.15  $   0.78
CASH DIVIDENDS PER SHARE                                          $      -  $      -  $      -  $      -
---------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                 INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                    (Unaudited)

                                                                                     SIX-MONTHS ENDED
                                                                                        JUNE 30,
                                                                   ------------------------------------------------
                                                                              2005                     2004
                                                                   ------------------------------------------------
($ thousands)                                                          SHARES       AMOUNT      SHARES      AMOUNT
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>          <C>         <C>

CLASS A COMMON STOCK
Balance at beginning of period                                      5,886,433  $     5,886   5,603,377  $     5,603
Issuance of shares upon the exercise of warrants                            -            -      42,510           43
Issuance of shares upon the conversion of debentures                    8,068            8      17,188           17
-------------------------------------------------------------------------------------------------------------------
Balance at end of period                                            5,894,501        5,894   5,663,075        5,663
-------------------------------------------------------------------------------------------------------------------

CLASS B COMMON STOCK
-------------------------------------------------------------------------------------------------------------------
Balance at beginning and end of period                                385,000          385     385,000          385
-------------------------------------------------------------------------------------------------------------------

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period                                                      38,961                   35,988
Compensation related to vesting of certain Class B stock warrants                        -                       10
Issuance of shares upon the exercise of warrants                                         -                      383
Issuance of shares upon the conversion of debentures                                   102                      181
-------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            39,063                   36,562
-------------------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of period                                                      44,862                   33,409
Net earnings for the period                                                          7,771                    5,240
-------------------------------------------------------------------------------------------------------------------
Balance at end of period                                                            52,633                   38,649
-------------------------------------------------------------------------------------------------------------------

===================================================================================================================
TOTAL STOCKHOLDERS' EQUITY AT END OF PERIOD                         6,279,501  $    97,975   6,048,075  $    81,259
===================================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                        5
<PAGE>
<TABLE>
<CAPTION>
                          INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Unaudited)


                                                                                  SIX-MONTHS ENDED
                                                                                      JUNE 30,
                                                                               ----------------------
($ in thousands)                                                                   2005       2004
-----------------------------------------------------------------------------------------------------
<S>                                                                            <C>         <C>
OPERATING ACTIVITIES
Net earnings                                                                   $   7,771   $   5,240
Adjustments to reconcile net earnings to net cash provided
  by operating activities:
Depreciation and amortization                                                        257         307
Provision for loan losses                                                          1,485       2,361
Deferred income tax benefit                                                         (705)     (1,123)
Amortization of deferred debenture offering costs                                    586         617
Compensation expense related to common stock warrants                                  -          10
Amortization of premiums (accretion) of discounts and deferred loan fees, net     (3,227)     (1,243)
Net decrease in accrued interest payable on debentures                            (3,172)     (2,382)
Net (decrease) increase in official checks outstanding                            (2,368)      4,104
Net increase in loan fees receivable                                              (1,193)     (1,324)
Net change in all other assets and liabilities                                     5,297       4,353
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                          4,731      10,920
-----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Maturities and calls of securities held to maturity                               42,195      44,665
Purchases of securities held to maturity                                         (25,523)    (89,128)
Net increase in loans receivable                                                (159,333)   (208,814)
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock                  (891)     (1,567)
Purchases of premises and equipment, net                                            (189)     (1,639)
Investment in unconsolidated subsidiaries                                              -        (464)
-----------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                           (143,741)   (256,947)
-----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits                                                         223,634     177,339
Net increase in mortgage escrow funds payable                                      3,293       4,814
Net increase in federal funds purchased                                                -       3,384
Net decrease in FHLB advances                                                    (36,000)          -
Principal repayments of debentures and mortgage note payable                     (14,356)    (11,006)
Gross proceeds from issuance of debentures                                        14,000      25,464
Debenture issuance costs                                                            (963)     (1,178)
Proceeds from issuance of common stock                                                 -       2,961
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                        189,608     201,778
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                              50,598     (44,249)
Cash and cash equivalents at beginning of period                                  24,599      64,128
=====================================================================================================
Cash and cash equivalents at end of period                                     $  75,197   $  19,879
=====================================================================================================

SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
  Interest                                                                     $  27,699   $  18,689
  Income taxes                                                                     6,095       6,227
Noncash activities:
  Conversion of debentures and accrued interest into Class A common stock            110         203
-----------------------------------------------------------------------------------------------------
</TABLE>

    See accompanying notes to condensed consolidated financial statements.


                                        6
<PAGE>
                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  in  this report have not been audited except for
information  derived from the 2004 audited consolidated financial statements and
notes  thereto.  The  condensed consolidated financial statements in this report
should  be  read  in  conjunction  with  the 2004 audited consolidated financial
statements  and  notes  thereto  included in the Company's Annual Report on Form
10-K  for  the  year  ended  December  31,  2004.

The  financial  statements  include  the  accounts  of  Intervest  Bancshares
Corporation  (a  financial holding company referred to by itself as the "Holding
Company")  and  its  three subsidiaries, Intervest National Bank (referred to as
the  "Bank"),  Intervest  Mortgage  Corporation  and  Intervest  Securities
Corporation. All the entities are referred to collectively as the "Company" on a
consolidated  basis. All significant intercompany balances and transactions have
been  eliminated  in  consolidation. Intervest Statutory Trust I, II, III and IV
are  wholly  owned  subsidiaries  of the Holding Company that are unconsolidated
entities  as  required  by  Financial  Accounting  Standards  Board  (FASB)
Interpretation  No.  46-R,  "Consolidation  of  Variable  Interest  Entities."

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

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. In the opinion of
management,  all  material  adjustments  necessary  for  a  fair presentation of
financial  condition and results of operations for the interim periods presented
in  this  report  have  been  made.  These adjustments are of a normal recurring
nature.  The  results  of operations for the interim periods are not necessarily
indicative  of  results  that  may  be expected for the entire year or any other
interim  period.

NOTE  2  -  DESCRIPTION OF BUSINESS

The  offices  of  the Holding Company, Intervest Mortgage Corporation, Intervest
Securities  Corporation  and  the  Bank'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.

The  Holding Company's primary business is the operation of its subsidiaries. It
does  not  engage  in  any  other  substantial  business activities other than a
limited  amount  of real estate mortgage lending. From time to time, the Holding
Company  also  issues  debt  and  equity  securities  to raise funds for working
capital  purposes.  The  Company's  primary business segment is banking and real
estate  lending.

The  Bank  is  a nationally chartered, full-service commercial bank that has its
headquarters  and  full-service  banking office in Rockefeller Plaza in New York
City,  and  a  total  of  five  full-service banking offices in Pinellas County,
Florida  -  four  in  Clearwater  and one in South Pasadena. The Bank conducts a
personalized commercial and consumer banking business and attracts deposits from
the areas served by its banking offices. The Bank also provides internet banking
services  through  its  web  site:  www.intervestnatbank.com,  which can attract
deposit  customers from outside its primary market areas. The deposits, together
with funds derived from other sources are used to originate primarily commercial
and  multifamily  real  estate  loans and to purchase investment securities. The
information  on  the aforementioned web site is not and should not be considered
part  of  this  report  and  is  not  incorporated  by  reference.

Intervest  Mortgage  Corporation's  business  focuses  on  the  origination  of
multifamily  and  commercial  real  estate  mortgage  loans, consisting of first
mortgage  and  junior mortgage loans. It also provides loan origination services
to  the  Bank. Intervest Mortgage Corporation funds its lending business through
the  issuance of subordinated debentures in public offerings. Intervest Mortgage
Corporation  has  two  wholly  owned  subsidiaries,  Intervest  Distribution
Corporation,  which  is  currently  inactive,  and  Intervest  Realty  Servicing
Corporation,  which  is  engaged  in  certain  mortgage  servicing  activities.


                                        7
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  2  -  DESCRIPTION OF BUSINESS - CONTINUED

Intervest Securities Corporation is a broker/dealer and a member of the National
Association  of Securities Dealers (NASD) whose business activities to date have
not  been  material. Its only revenues have been derived from participating as a
selected  dealer  from  time  to  time  in  offerings  of debt securities of the
Company,  primarily  those  of  Intervest  Mortgage  Corporation.

Intervest  Statutory  Trust I, II, III and IV issued in December 2001, September
2003,  March  2004  and  September  2004,  respectively,  $15.0 million of trust
preferred securities for a total of $60.0 million. Each trust was formed for the
sole  purpose  of  issuing and administering the trust preferred securities. The
trusts  do not conduct any trade or business. For a further discussion, see note
8.

NOTE  3  -  SECURITIES

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

<TABLE>
<CAPTION>
                                         Gross        Gross   Estimated               Wtd-Avg
                                         -----        -----   ---------               -------
                        Amortized   Unrealized   Unrealized        Fair    Wtd-Avg  Remaining
                        ---------   ----------   ----------        ----    -------  ---------
($ in thousands)             Cost        Gains       Losses       Value      Yield   Maturity
---------------------------------------------------------------------------------------------
<S>                    <C>         <C>          <C>          <C>         <C>       <C>
At June 30, 2005       $  231,630  $        87  $     2,044  $  229,673     2.66%  1.2  Years
At December 31, 2004   $  248,888  $        12  $     1,689  $  247,211     2.33%  1.4  Years
--------------------------------------------------------------------------------------------
</TABLE>

All  the securities at June 30, 2005 and December 31, 2004 were debt obligations
of  U.S.  government corporations or sponsored agencies (FHLB, FNMA, FHLMC, SLMA
or  FFCB).  The securities have fixed rates or have predetermined scheduled rate
increases,  and  some  have  call  features  that  allow  the issuer to call the
security  at  par  before  its  stated  maturity  without  penalty.

At  June 30, 2005, the portfolio consisted of 155 securities of which 152 had an
unrealized  loss.  Substantially  all  of  the  unrealized  losses  were  for  a
continuous  period of more than 12 months. Management believes that the cause of
these unrealized losses is directly related to changes in market interest rates.
In general, as interest rates rise, the fair value of fixed rate securities will
decrease;  as  interest  rates  fall,  their  fair  value  will  increase.

The Company views the unrealized losses noted above to be temporary based on the
impact of interest rates, the very short maturities of the investments and their
high credit quality. In addition, the Company has the ability and intent to hold
its  investments  for  a  period  of  time  sufficient for the fair value of the
securities  to recover. Management evaluates securities for other-than-temporary
impairment  at  least on a quarterly basis, and more frequently when economic or
market  concerns  warrant  such  evaluation.

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

<TABLE>
<CAPTION>
          ($ in thousands)                         Amortized Cost   Estimated Fair Value   Average Yield
          ----------------------------------------------------------------------------------------------
<S>                                               <C>              <C>                    <C>
          At June 30, 2005:
          Due in one year or less                 $       110,793  $             110,060           2.35%
          Due after one year through five years           120,837                119,613           2.94%
          ----------------------------------------------------------------------------------------------
                                                  $       231,630  $             229,673           2.66%
          ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
         ($ in thousands)                          Amortized Cost   Estimated Fair Value   Average Yield
          ----------------------------------------------------------------------------------------------
<S>                                               <C>              <C>                    <C>
          At December 31, 2004:
          Due in one year or less                 $        84,586  $              84,235           1.81%
          Due after one year through five years           164,302                162,976           2.59%
          ----------------------------------------------------------------------------------------------
                                                  $       248,888  $             247,211           2.33%
          ----------------------------------------------------------------------------------------------
</TABLE>

The  Company did not have any securities classified as available for sale or any
sales  of  securities  during  the  reporting  periods.


                                        8
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  4  -  LOANS RECEIVABLE
Loans receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                     At June 30, 2005       At December 31, 2004
                                                  -----------------------  -----------------------
          ($ in thousands)                        # of Loans     Amount    # of Loans    Amount
          ----------------------------------------------------------------------------------------
<S>                                               <C>         <C>          <C>         <C>
          Commercial real estate loans                   257  $  645,134          244  $  601,512
          Residential multifamily loans                  243     450,467          249     403,613
          Land development and other land loans           29      88,051           11      19,198
          Residential 1-4 family loans                     4         980            4         984
          Commercial business loans                       21       1,051           23       1,215
          Consumer loans                                  15         393           12         221
          ----------------------------------------------------------------------------------------
          Loans receivable                               569   1,186,076          543   1,026,743
          ----------------------------------------------------------------------------------------
          Deferred loan fees                                     (11,969)                 (11,347)
          Loans receivable, net of deferred fees               1,174,107                1,015,396
          Allowance for loan losses                              (12,591)                 (11,106)
          ----------------------------------------------------------------------------------------
          Loans receivable, net                               $1,161,516               $1,004,290
          ----------------------------------------------------------------------------------------
</TABLE>

At  June  30, 2005, $0.7 million of loans were on nonaccrual status, compared to
$4.6 million at December 31, 2004. Such loans were considered impaired under the
criteria  of  Statement of Financial Accounting Standards (SFAS) No. 114, but no
valuation  allowance  was maintained at any time since the Company believes that
the  estimated  fair  value  of the underlying properties exceeded the Company's
recorded  investment.  In  April 2005, the property collateralizing a nonaccrual
loan with a principal balance of $3.9 million was sold at foreclosure to a third
party.  The  loan  was  repaid  in  full  and the Bank recovered all amounts due
thereunder. At June 30, 2005 and December 31, 2004, there were no other impaired
loans.  At  June 30, 2005, there were $2.7 million of loans ninety days past due
and  still  accruing  interest  since  they were deemed by management to be well
secured  and  in the process of collection. There were no such loans at December
31,  2004.

Interest  income  that  was  not  recorded  on  nonaccrual  loans  under  their
contractual  terms  amounted  to $36,000 for the six-months ended June 30, 2005,
compared to none for the six-months ended June 30, 2004. There was no unrecorded
interest  for  the  quarterly  periods  in  this  report. The average balance of
nonaccrual loans for the quarter and six-months ended June 30, 2005 and 2004 was
$0.8  million  and  $2.7 million for the 2005 periods, and $0.3 million and $2.8
million  for  the  2004  periods,  respectively.

NOTE  5  -  ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
                                             Quarter Ended June 30,     Six-Months Ended June 30,
                                           --------------------------  --------------------------
          ($ in thousands)                    2005           2004          2005          2004
          ---------------------------------------------------------------------------------------
<S>                                        <C>           <C>           <C>           <C>
          Balance at beginning of period   $     12,139  $      7,657  $     11,106  $      6,580
          Provision charged to operations           452         1,284         1,485         2,361
          ---------------------------------------------------------------------------------------
          Balance at end of period         $     12,591  $      8,941  $     12,591  $      8,941
          ---------------------------------------------------------------------------------------
</TABLE>

NOTE  6  -  DEPOSITS

Scheduled maturities of certificates of deposit accounts are as follows:

<TABLE>
<CAPTION>
                                             At June 30, 2005        At December 31, 2004
                                         ------------------------  ------------------------
                                                        Wtd-Avg                   Wtd-Avg
               ($ in thousands)             Amount    Stated Rate     Amount    Stated Rate
               ----------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>
               Within one year           $   313,025        3.20%  $   269,553        2.84%
               Over one to two years         178,982        4.09       119,780        3.43
               Over two to three years       150,059        4.18       134,409        4.48
               Over three to four years      126,927        4.17        75,317        4.06
               Over four years               216,352        4.64       145,712        4.48
               ----------------------------------------------------------------------------
                                         $   985,345        3.95%  $   744,771        3.68%
               ----------------------------------------------------------------------------
</TABLE>

Certificate  of  deposit accounts of $100,000 or more totaled $312.8 million and
$215.9 million at June 30, 2005 and December 31, 2004, respectively. At June 30,
2005,  certificate of deposit accounts of $100,000 or more by remaining maturity
were  as follows: due within one year $93.7 million; over one to two years $60.8
million;  over  two to three years $45.5 million; over three to four years $37.9
million;  and  over  four  years  $74.9  million.


                                        9
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  7  -  SUBORDINATED DEBENTURES AND MORTGAGE NOTE PAYABLE

Subordinated  debentures  by  series and mortgage note payable are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                   At June 30,   At December 31,
          ($in thousands)                                                             2005            2004
          ------------------------------------------------------------------------------------------------------
<S>                                                                               <C>           <C>
          INTERVEST MORTGAGE CORPORATION:
          Series 05/10/96 - interest at 2% above prime (1) - due April 1, 2005      $        -     $      10,000
          Series 10/15/96 - interest at 2% above prime (1) - due October 1, 2005         5,500             5,500
          Series 04/30/97 - interest at 1% above prime (1) - due October 1, 2005         8,000             8,000
          Series 11/10/98 - interest at 9% fixed           - due January 1, 2005             -             2,600
          Series 06/28/99 - interest at 9% fixed           - due July 1, 2006            2,000             2,000
          Series 09/18/00 - interest at 8 1/2% fixed       - due January 1, 2006         1,250             1,250
          Series 09/18/00 - interest at 9% fixed           - due January 1, 2008         1,250             1,250
          Series 08/01/01 - interest at 7 1/2% fixed       - due April 1, 2005               -             1,750
          Series 08/01/01 - interest at 8% fixed           - due April 1, 2007           2,750             2,750
          Series 08/01/01 - interest at 8 1/2% fixed       - due April 1, 2009           2,750             2,750
          Series 01/17/02 - interest at 7 1/4% fixed       - due October 1, 2005         1,250             1,250
          Series 01/17/02 - interest at 7 1/2% fixed       - due October 1, 2007         2,250             2,250
          Series 01/17/02 - interest at 7 3/4% fixed       - due October 1, 2009         2,250             2,250
          Series 08/05/02 - interest at 7 1/4% fixed       - due January 1, 2006         1,750             1,750
          Series 08/05/02 - interest at 7 1/2% fixed       - due January 1, 2008         3,000             3,000
          Series 08/05/02 - interest at 7 3/4% fixed       - due January 1, 2010         3,000             3,000
          Series 01/21/03 - interest at 6 3/4% fixed       - due July 1, 2006            1,500             1,500
          Series 01/21/03 - interest at 7 % fixed          - due July 1, 2008            3,000             3,000
          Series 01/21/03 - interest at 7 1/4% fixed       - due July 1, 2010            3,000             3,000
          Series 07/25/03 - interest at 6 1/2% fixed       - due October 1, 2006         2,500             2,500
          Series 07/25/03 - interest at 6 3/4% fixed       - due October 1, 2008         3,000             3,000
          Series 07/25/03 - interest at 7 % fixed          - due October 1, 2010         3,000             3,000
          Series 11/28/03 - interest at 6 1/4% fixed       - due April 1, 2007           2,000             2,000
          Series 11/28/03 - interest at 6 1/2% fixed       - due April 1, 2009           3,500             3,500
          Series 11/28/03 - interest at 6 3/4% fixed       - due April 1, 2011           4,500             4,500
          Series 06/07/04 - interest at 6 1/4% fixed       - due January 1, 2008         2,500             2,500
          Series 06/07/04 - interest at 6 1/2% fixed       - due January 1, 2010         4,000             4,000
          Series 06/07/04 - interest at 6 3/4% fixed       - due January 1, 2012         5,000             5,000
          Series 03/21/05 - interest at 6 1/4% fixed       - due April 1, 2009           3,000                 -
          Series 03/21/05 - interest at 6 1/2% fixed       - due April 1, 2011           4,500                 -
          Series 03/21/05 - interest at 7% fixed           - due April 1, 2013           6.500                 -
                                                                                    ----------------------------
                                                                                        88,500            88,850
          INTERVEST BANCSHARES CORPORATION:
          Series 05/14/98 - interest at 8% fixed           - due July 1, 2008            3,010             3,080
          Series 12/15/00 - interest at 8 1/2 % fixed      - due April 1, 2006           1,250             1,250
          Series 12/15/00 - interest at 9% fixed           - due April 1, 2008           1,250             1,250
                                                                                    ----------------------------
                                                                                         5,510             5,580
          INTERVEST NATIONAL BANK:
          Mortgage note payable (2) - interest at 7% fixed - due February 1, 2017          236               242
          ------------------------------------------------------------------------------------------------------
                                                                                    $   94,246     $      94,672
          ------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Prime  represents prime rate of JPMorganChase Bank, which was 6.25% at June
     30,  2005 and 5.25% at December 31, 2004. The floating-rate debentures have
     a  maximum  interest  rate  of  12%.  (2) The note cannot be prepaid except
     during  the  last  year  of  its  term.

On  January 1, 2005, Intervest Mortgage Corporation's Series 11/10/98 debentures
matured  and  were repaid for a total of $4.5 million ($2.6 million of principal
and  $1.9  million  of  accrued  interest). On April 1, 2005, Intervest Mortgage
Corporation's  Series 5/10/96 and 8/01/01 debentures matured and were repaid for
a total of $14.1 million ($11.8 million of principal and $2.3 million of accrued
interest). In April 2005, Intervest Mortgage Corporation issued $14.0 million of
its  Series  3/21/05 debentures for net proceeds, after offering costs, of $13.0
million.  On  August  1,  2005,  Intervest Mortgage Corporation repaid early its
Series  10/15/96 and Series 1/17/02 debentures scheduled to mature on October 1,
2005  for  a  total  of  $6.8  million  in  principal  and  accrued  interest.


                                       10
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  7  -  SUBORDINATED DEBENTURES AND MORTGAGE NOTE PAYABLE, CONTINUED

Interest is paid quarterly on Intervest Mortgage Corporation's debentures except
for  the  following:  all  of Series 6/28/99 and 9/18/00; $0.6 million of Series
8/01/01;  $0.3  million  of Series 1/17/02; $1.5 million of Series 8/05/02; $1.8
million  of  Series 11/28/03; $1.9 million of Series 6/7/04; and $1.9 million of
Series  3/21/05,  all of which accrue and compound interest quarterly, with such
interest  due  and  payable  at  maturity.

The  holders  of  Intervest  Mortgage  Corporation's Series 6/28/99, 9/18/00 and
1/17/02  through  3/21/05 debentures can require Intervest Mortgage Corporation,
on  a first come basis during a specified time, to repurchase the debentures for
face  amount plus accrued interest once each year (beginning October 1, 2005 for
Series  1/17/02,  January  1,  2006  for Series 8/05/02, July 1, 2006 for Series
1/21/03,  October  1,  2006  for  Series  7/25/03,  January  1,  2007 for Series
11/28/03,  January  1,  2008  for  Series  6/7/04  and  April 1, 2009 for Series
3/21/05).  However,  in no calendar year can the required purchases be more than
$100,000  in principal amount of each maturity, in each series of debentures, on
a  non-cumulative  basis.

Intervest Mortgage Corporation's debentures may be redeemed at its option at any
time,  in  whole  or  in  part, for face value, except for Series 3/21/05, which
would  be at a premium of 1% if they were redeemed prior to October 1, 2006. All
the  debentures  are  unsecured and subordinate to all present and future senior
indebtedness,  as  defined  in  the  indenture  related  to  each  debenture.

The  Holding  Company's  Series  5/14/98 subordinated debentures are convertible
along  with  accrued  interest at the option of the holders at any time prior to
April  1,  2008  into  shares  of  its  Class  A  common  stock at the following
conversion  prices per share: $14.00 in 2005; $16.00 in 2006; $18.00 in 2007 and
$20.00  from  January 1, 2008 through April 1, 2008. The Holding Company has the
right  to  establish  conversion prices that are less than those set forth above
for  such  periods  as it may determine. For the six-months ended June 30, 2005,
$112,000  of  debentures  ($70,000 of principal and $42,000 of accrued interest)
were  converted  into  shares  of  Class  A  common  stock  at $14.00 per share.

At  June  30, 2005, interest accrued and compounded quarterly on $2.4 million of
the  Holding Company's convertible debentures at the rate of 8% per annum, while
$0.6 million of the convertible debentures pay interest quarterly at the rate of
8%  per  annum.  All  accrued  interest  of  $1.8  million is due and payable at
maturity  whether  by  acceleration,  redemption  or  otherwise. Any convertible
debenture  holder  may,  on  or before July 1 of each year, elect to be paid all
accrued  interest  and  to  thereafter  receive  regular  payments  of  interest
quarterly.  The Holding Company may redeem any of its debentures, in whole or in
part,  at  any  time  for  face  value.

Scheduled contractual maturities as of June 30, 2005 were as follows:

<TABLE>
<CAPTION>
               ($in thousands)                                      Principal   Accrued Interest
               ---------------------------------------------------------------------------------
<S>                                                         <C>                <C>
               For the six-months ended December 31, 2005   $          14,757  $           1,353
               For the year ended December 31, 2006                    10,264              2,073
               For the year ended December 31, 2007                     7,015                159
               For the year ended December 31, 2008                    17,026              2,608
               For the year ended December 31, 2009                    11,517                225
               Thereafter                                              33,667                336
               ---------------------------------------------------------------------------------
                                                            $          94,246  $           6,754
               ---------------------------------------------------------------------------------
</TABLE>

NOTE 8 -  SUBORDINATED DEBENTURES -  CAPITAL SECURITIES

Capital  Securities  (commonly  referred  to  as trust preferred securities) are
summarized  as  follows:

<TABLE>
<CAPTION>
                                                                At June 30, 2005       At December  31, 2004
                                                            ------------------------  ------------------------
                                                                           Accrued                  Accrued
($ in thousands)                                             Principal     Interest    Principal    Interest
--------------------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>          <C>          <C>
Capital Securities   I -  debentures due December 18, 2031  $    15,464  $        59  $    15,464  $        59
Capital Securities  II - debentures due September 17, 2033       15,464           41       15,464           41
Capital Securities III - debentures due March 17, 2034           15,464           36       15,464           36
Capital Securities  IV - debentures due September 20, 2034       15,464           29       15,464           29
--------------------------------------------------------------------------------------------------------------
                                                            $    61,856  $       165  $    61,856  $       165
--------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 8 - SUBORDINATED DEBENTURES - CAPITAL SECURITIES, CONTINUED

The  Capital  Securities  are  obligations of the Holding Company's wholly owned
statutory  business  trusts,  Intervest  Statutory Trust I, II, III and IV. Each
Trust  was  formed  with  a  capital  contribution  of $464,000 from the Holding
Company  and  for  the  sole  purpose  of  issuing and administering the Capital
Securities.  The  proceeds  from the issuance of the Capital Securities together
with  the  capital  contribution for each Trust were used to acquire the Holding
Company's  Junior  Subordinated  Debentures  that  are due concurrently with the
Capital  Securities.  The  Capital  Securities,  net  of  the  Company's capital
contributions  totaling  $1.8  million,  qualify  as  regulatory  capital.

The  sole  assets of the Trusts, the obligors on the Capital Securities, are the
Junior Subordinated Debentures. In addition, for each Trust, the Holding Company
has  guaranteed the payment of distributions on, payments on any redemptions of,
and  any  liquidation  distribution  with  respect  to  the  Capital Securities.
Issuance  costs  of  $0.5  million,  $0.4 million, $0.4 million and $0.2 million
associated  with  Capital  Securities I, II, III and IV, respectively, have been
capitalized  by the Holding Company and are being amortized over the life of the
securities  using  the  straight-line  method.

Interest  payments  on the Junior Subordinated Debentures (and the corresponding
distributions  on  the  Capital  Securities)  are payable in arrears as follows:
Capital  Securities  I  -  semi-annually  at the fixed rate of 9.875% per annum;
Capital  Securities  II  -  quarterly at the fixed rate of 6.75% per annum until
September  17,  2008  and  thereafter  at  the rate of 2.95% over 3 month libor;
Capital  Securities  III  - quarterly at the fixed rate of 5.88% per annum until
March  17,  2009  and  thereafter  at  the rate of 2.79% over 3 month libor; and
Capital  Securities  IV  -  quarterly at the fixed rate of 6.20% per annum until
September  20,  2009  and  thereafter  at  the rate of 2.40% over 3 month libor.

Interest  payments  may be deferred at any time and from time to time during the
term  of  the  Junior  Subordinated  Debentures  at  the election of the Holding
Company  for  up  to  20  consecutive quarterly periods, or 5 years. There is no
limitation  on  the  number  of extension periods the Holding Company may elect;
provided, however, no deferral period may extend beyond the maturity date of the
Junior  Subordinated  Debentures.  During  an interest deferral period, interest
will  continue  to  accrue on the Junior Subordinated Debentures and interest on
such  accrued  interest will accrue at an annual rate equal to the interest rate
in  effect  for  such  deferral  period, compounded quarterly from the date such
interest  would  have  been  payable  were  it  not  deferred. At the end of the
deferral  period, the Holding Company will be obligated to pay all interest then
accrued  and  unpaid.

All  of  the  Capital Securities are subject to mandatory redemption as follows:
(i)  in  whole,  but  not  in  part,  upon  repayment of the Junior Subordinated
Debentures  at stated maturity or earlier, at the option of the Holding Company,
within  90  days following the occurrence and continuation of certain changes in
the  tax or capital treatment of the Capital Securities, or a change in law such
that the Trust would be considered an investment company, contemporaneously with
the redemption by the Holding Company of the Junior Subordinated Debentures; and
(ii)  in  whole or in part at any time on or after December 18, 2006 for Capital
Securities  I,  September 17, 2008 for Capital Securities II, March 17, 2009 for
Capital  Securities  III,  and  September  20,  2009  for  Capital Securities IV
contemporaneously  with  the  optional  redemption by the Holding Company of the
Junior  Subordinated  Debentures  in  whole  or in part. Any redemption would be
subject  to  the  receipt  of  regulatory  approvals.

NOTE  9  -  SHORT-TERM BORROWINGS AND LINES OF CREDIT

From time to time, the Bank may borrow funds on an overnight or short-term basis
to  manage  its liquidity needs. At  June 30, 2005, the Bank had agreements with
correspondent  banks  whereby it could borrow up to $16 million of federal funds
on  an  unsecured  basis.

In  addition,  as  a member of the Federal Home Loan Bank of New York (FHLB) and
the  Federal Reserve Bank of New York (FRB), the Bank can also borrow from these
institutions  on  a  secured  basis.  At  June  30, 2005, the Bank had available
collateral  consisting  of  investment securities to support total borrowings of
$239  million from the FHLB and FRB. At June 30, 2005, there were no outstanding
borrowings  from  any  of  the  aforementioned  sources.


                                       12
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  9  -  SHORT-TERM BORROWINGS AND LINES OF CREDIT, CONTINUED

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

<TABLE>
<CAPTION>
                                                      Quarter Ended June 30,     Six-Months Ended June 30,
                                                    --------------------------  --------------------------
($ in thousands)                                        2005          2004          2005         2004
----------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>           <C>
Balance at period end                               $         -   $     3,384   $         -   $     3,384
Maximum amount outstanding at any month end         $     6,000   $     3,384   $    17,000   $     3,384
Average outstanding balance for the period          $     3,824   $       386   $     8,840   $       193
Weighted-average interest rate paid for the period         3.04%         1.56%         2.71%         1.56%
Weighted-average interest rate at period end                  -%         2.03%            -%         2.03%
----------------------------------------------------------------------------------------------------------
</TABLE>

NOTE  10  -  COMMON STOCK WARRANTS

The  Holding  Company had 696,465 common stock warrants outstanding that entitle
its  holder,  the Chairman of the Board of the Company, to purchase one share of
Class  A  or  Class  B  common  stock  as  the case may be for each warrant. All
warrants  are  currently  exercisable.

Data concerning common stock warrants is as follows:

<TABLE>
<CAPTION>
<S>                                                   <C>                         <C>
                                                      Exercise Price Per Warrant
                                                      --------------------------             Wtd-Avg
Class A Common Stock Warrants:                        $                     6.67      Exercise Price
----------------------------------------------------------------------------------------------------
Outstanding at December 31, 2004 and June 30, 2005                       501,465  $             6.67
Remaining contractual life in years at June 30, 2005                         1.6
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                                         Exercise Price Per Warrant
                                                      -----------------------------     Total          Wtd-Avg
Class B Common Stock Warrants:                        $          6.67  $      10.00  Warrants   Exercise Price
--------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>           <C>       <C>
Outstanding at December 31, 2004 and June 30, 2005            145,000        50,000   195,000  $          7.52
Remaining contractual life in years at June 30, 2005              2.6           2.6       2.6
--------------------------------------------------------------------------------------------------------------
</TABLE>

The  Company elects to use the intrinsic value-based method prescribed under APB
Opinion  No.  25,  "Accounting for Stock Issued to Employees," in accounting for
its  stock  warrants.  Under  this method, compensation expense related to stock
warrants  granted to employees is the excess, if any, of the market price of the
stock  as  of  the  grant  or  modification  date over the exercise price of the
warrant.  Compensation expense recorded in connection with common stock warrants
amounted  to  $3,000  and  $10,000 for the quarter and six-months ended June 30,
2004, respectively. There was no such compensation for the same periods of 2005.

NOTE  11  -  EARNINGS PER SHARE (EPS)

Basic  EPS is calculated by dividing net earnings by the weighted-average number
of  shares  of  common  stock outstanding. Diluted EPS is calculated by dividing
adjusted  net  earnings by the weighted-average number of shares of common stock
and  dilutive  potential  common  stock  shares  that  may be outstanding in the
future.

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


                                       13
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED
--------------------------------------------------------------------------------

NOTE  11  -  EARNINGS PER SHARE (EPS), CONTINUED

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

<TABLE>
<CAPTION>
                                                                              Quarter Ended          Six-Months Ended
                                                                                 June 30,               June 30,
                                                                         ----------------------------------------------
($ in thousands, except share and per share amounts)                        2005        2004         2005       2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>         <C>         <C>         <C>
Basic Earnings Per Share:
  Net earnings applicable to common stockholders                         $    4,523  $    2,505  $    7,771  $    5,240
  Average number of common shares outstanding                             6,275,954   6,048,075   6,274,904   6,045,461
-----------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                                 $     0.72  $     0.42  $     1.24  $     0.87
-----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
  Net earnings applicable to common stockholders                         $    4,523  $    2,505  $    7,771  $    5,240
  Adjustment to net earnings from assumed conversion of debentures (1)           55          82         110         164
                                                                         ----------------------------------------------
  Adjusted net earnings for diluted earnings per share computation       $    4,578  $    2,587  $    7,881  $    5,404
                                                                         ----------------------------------------------
Average number of common shares outstanding:
  Common shares outstanding                                               6,275,954   6,048,075   6,274,904   6,045,461
  Potential dilutive shares resulting from exercise of warrants (2)         249,763     254,567     252,509     253,956
  Potential dilutive shares resulting from conversion of debentures (3)     344,575     609,425     343,390     612,642
                                                                         ----------------------------------------------
Total average number of common shares outstanding used for dilution       6,870,292   6,912,067   6,870,803   6,912,059
-----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share                                               $     0.67  $     0.37  $     1.15  $     0.78
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents  interest  expense  on  dilutive  convertible debentures, net of
     taxes,  that  would  not  occur  if  they  were  assumed  converted.
(2)  All  outstanding  warrants  were  considered  for  the  EPS  computations.
(3)  Convertible debentures (principal and accrued interest) outstanding at June
     30,  2005  and  2004  totaling $4.8 million and $7.6 million, respectively,
     were  convertible  into common stock at a price of $14.00 per share in 2005
     and  $12.00  per  share  in  2004  and resulted in additional common shares
     (based  on  average  balances  outstanding)  .

NOTE  12  -  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. Since some of the commitments are expected
to  expire  without  being  drawn  upon,  the  total  commitment amount does not
necessarily  represent  future  cash  requirements.  The  Company evaluates each
customer's  credit  worthiness on a case-by-case basis. The amount of collateral
obtained  upon extension of credit is based on management's credit evaluation of
the  counterparty.  Standby letters of credit are conditional commitments issued
by  the Company to guarantee the performance of a customer to a third party. The
credit  risk  involved  in  issuing letters of credit is essentially the same as
that  involved  in  extending  loans  to  customers.

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

<TABLE>
<CAPTION>
                                         At June 30,     At December 31,
                                      ----------------  ----------------
          ($ in thousands)                  2005              2004
          --------------------------------------------------------------
<S>                                   <C>               <C>
          Unfunded loan commitments   $        195,688  $        159,697
          Available lines of credit                742               789
          Standby letters of credit                138               750
          --------------------------------------------------------------
                                      $        196,568  $        161,236
          --------------------------------------------------------------
</TABLE>

Management  is  not  aware  of  any  trends,  known  demand,  commitments  or
uncertainties  which  are expected to have a material impact on future operating
results,  liquidity  or  capital  resources.


                                       14
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  13  -  REGULATORY CAPITAL

The  Bank  and  the  Holding Company are required to maintain regulatory defined
minimum  Tier  1  leverage  and  Tier  1  and  total  risk-based capital ratios.
Management believes that the Bank and the Holding Company are in compliance with
their  capital  adequacy requirements. Management is not aware of any conditions
or  events  outstanding  which  would  change  the  Bank's  designation  as  a
well-capitalized  institution.

At  June  30,  2005, the actual capital of the Bank on a percentage basis was as
follows:

<TABLE>
<CAPTION>
                                                              Actual     Minimum     To Be Considered
                                                              Ratios   Requirement   Well Capitalized
                                                              -------  ------------  -----------------
<S>                                                           <C>      <C>           <C>
     Total capital to risk-weighted assets                     11.19%     8.00%             10.00%
     Tier 1 capital to risk-weighted assets                    10.13%     4.00%              6.00%
     Tier 1 capital to total average assets - leverage ratio    8.86%     4.00%              5.00%
</TABLE>

At  June  30,  2005,  the  actual  capital  of  the  Company (consolidated) on a
percentage  basis  was  as  follows:

<TABLE>
<CAPTION>
                                                              Actual     Minimum     To Be Considered
                                                              Ratios   Requirement   Well Capitalized
                                                              -------  ------------  ----------------
<S>                                                           <C>      <C>           <C>
     Total capital to risk-weighted assets                     13.03%      8.00%            NA
     Tier 1 capital to risk-weighted assets                     9.87%      4.00%            NA
     Tier 1 capital to total average assets - leverage ratio    8.71%      4.00%            NA
</TABLE>

The  Federal  Reserve  on  March  1,  2005 issued a final rule that allows trust
preferred  securities  to  continue to be included in the Tier 1 capital of bank
holding companies, but with stricter quantitative limits and clearer qualitative
standards.  The new rule provides a transition period for bank holding companies
to  meet the new, stricter limitations within regulatory capital by allowing the
limits on restricted core capital elements to become fully effective as of March
31,  2009.  For  a  further discussion of these regulatory implications, see the
section  entitled  "Recent  Accounting and Regulatory Developments" in note 1 to
consolidated  financial  statements  included  in the Company's Annual Report on
Form  10-K  for  the  year  ended  December  31,  2004.

Intervest  Securities  Corporation  is  subject to the SEC's Uniform Net Capital
Rule  [15c3-1  (a)  (2)  (vi)],  which  requires  the maintenance of minimum net
capital  of  $5,000.  At  June  30, 2005, Intervest Securities Corporation's net
capital  was  $492,000.

NOTE  14  -  RECENT ACCOUNTING PRONOUNCEMENTS

In  December  2004,  the  FASB  issued SFAS No. 123 (revised 2004), "Share-Based
Payment,"  SFAS No. 123-R. SFAS No. 123-R requires companies to recognize in the
income  statement  the  grant-date  fair  value  of  stock  options  and  other
equity-based  compensation  issued  to employees and directors, but expresses no
preference  for  a  type  of  valuation  model.  SFAS  No.  123-R eliminates the
intrinsic  value-based  method  that  the  Company  currently  uses.

In  March  2005,  the  Securities  and  Exchange  Commission  staff issued Staff
Accounting  Bulletin No. 107 (SAB No.107) to provide guidance on SFAS No. 123-R.
SAB  No.  107  provides  the staff's view regarding the valuation of share-based
payment  arrangements  for  public  companies.  In particular, this SAB provides
guidance  related  to  share-based  payment transactions with non-employees, the
transition from non public to public entity status, valuation methods (including
assumptions  such  as expected volatility and expected term), the accounting for
certain  redeemable  financial  instruments  issued  under  share-based  payment
arrangements,  the  classification  of  compensation expense, non-GAAP financial
measures,  first  time  adoption of SFAS No. 123 R, the modification of employee
share  options  prior  to  the  adoption  of  SFAS  No.  123 R and disclosure in
Management's  Discussion  and Analysis subsequent to adoption of SFAS No. 123 R.
SAB  No.  107  is  effective  March  29,  2005.

In  April  2005 the U.S. Securities and Exchange Commission announced a deferral
of  the  effective  date of SFAS No. 123-R for calendar year companies until the
beginning  of  2006.  The  Company's  financial  statements  will be prepared in
accordance  with  this new standard if and when the Company issues any new stock
warrants  and/or  options to employees or directors in the future. The amount of
any  impact  cannot  be  determined  at  this  juncture.


                                       15
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  14  -  RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED

On  May  30,  2005,  the  FASB issued SFAS No. 154 "Accounting Changes and Error
Corrections." This statement requires entities that voluntarily make a change in
accounting  principle  to  apply  that  change retrospectively to prior periods'
financial  statements,  unless  this  would  be  impracticable.  SFAS  No.  154
supersedes  APB  Opinion  No.  20, Accounting Changes, which previously required
that  most  voluntary changes in accounting principle be recognized by including
in  the current period's net income the cumulative effect of changing to the new
accounting  principle.  SFAS  No.  154  also  makes  a  distinction  between
"retrospective  application" of an accounting principle and the "restatement" of
financial  statements to reflect the correction of an error. Another significant
change  in  practice  under  SFAS  No. 154 will be that if an entity changes its
method of depreciation, amortization, or depletion for long-lived, non-financial
assets,  the  change  must  be accounted for as a change in accounting estimate.
Under  APB Opinion No. 20, such a change would have been reported as a change in
accounting  principle.

SFAS  No.  154 applies to accounting changes and error corrections that are made
in  fiscal  years  beginning  after  December  15,  2005. Earlier application is
permitted  for  accounting  changes  and corrections of errors made occurring in
fiscal  years  beginning  after  June 1, 2005. The Statement does not change the
transition provisions of any existing accounting pronouncements, including those
that  are  in  a  transition  phase  as of the effective date of this Statement.


                                       16
<PAGE>
                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 financial data as of
June  30,  2005 and for the three- and six-month periods ended June 30, 2005 and
2004 presented in this document, in accordance with the standards established by
the  Public  Company  Accounting  Oversight  Board. As part of Hacker, Johnson &
Smith, P.A., P.C.'s review, Eisner, LLP was relied upon for their limited review
of  Intervest  Mortgage  Corporation,  a wholly owned subsidiary of the Company.

     The  reports  of  Hacker,  Johnson  &  Smith,  P.A.,  P.C.  and Eisner, LLP
furnished  pursuant  to  Article  10  of  Regulation  S-X  are  included herein.


                                       17
<PAGE>
             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 June 30,
2005  and  the  related  condensed  consolidated  statements of earnings for the
three-  and  six-month  periods  ended  June  30, 2005 and 2004, and the related
condensed  consolidated  statements  of changes in stockholders' equity and cash
flows  for  the  six-month  periods  ended June 30, 2005 and 2004. These interim
financial  statements  are  the  responsibility  of  the  Company's  management.

We  were  furnished  the  reports  of  the  other  independent registered public
accounting  firm  on  their  reviews  of  the  interim  financial information of
Intervest  Mortgage  Corporation,  whose  total  assets  as  of  June  30,  2005
constituted  7.5%  of  the  related  consolidated  total, and whose net interest
income, noninterest income and net earnings for the three- and six-month periods
then  ended,  constituted  7.1%,  12.2%,  and  15.8%; and 6.6%, 12.3% and 17.2%,
respectively, and whose net interest income, noninterest income and net earnings
for  the  three-  and  six-month  periods ended June 30, 2004, constituted 7.2%,
11.8%,  and  20.0%;  and  6.1%,  16.5%  and  19.4%, respectively, of the related
consolidated  totals.

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 and the reports of the other  independent registered public
accounting  firm,  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,  2004, and the related consolidated statements of
earnings,  comprehensive  income, changes in stockholders' equity and cash flows
for  the  year  then ended (not presented herein); and in our report dated March
11,  2005,  we,  based  on  our  audit  and  the report of the other independent
registered  public  accounting  firm,  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, 2004 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
July 25, 2005


                                       18
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholder
Intervest Mortgage Corporation
New York, New York:

We  have reviewed the condensed consolidated balance sheet of Intervest Mortgage
Corporation and Subsidiaries (the "Company") as of June 30, 2005 and the related
condensed  consolidated statements of operations for each of the three-month and
six-month  periods  ended  June  30,  2005  and  2004, and the related condensed
consolidated  statements  of  changes in stockholders' equity and cash flows for
the  six-months  ended  June  30,  2005 and 2004 (all of which are not presented
separately herein). These interim financial statements are the responsibility of
the  Company's  management.

We  conducted  our  reviews  in  accordance with 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  previously  audited,  in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United States), the consolidated balance sheet of
the  Company  as of December 31, 2004 and the related consolidated statements of
operations,  changes  in  stockholder's  equity and cash flows for the year then
ended  (not  presented  herein),  and  in our report dated February 10, 2005, we
expressed  an unqualified opinion on those consolidated financial statements. In
our  opinion,  the  information  set forth in the condensed consolidated balance
sheet as of December 31, 2004 (not presented separately herein) is fairly stated
in  all  material  respects  in  relation to the consolidated balance sheet from
which  it  has  been  derived.


/s/ Eisner, LLP
---------------
EISNER,LLP
New York, New York
July 22, 2005


                                       19
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

                                    OVERVIEW
                                    --------

Intervest  Bancshares  Corporation  has  three  wholly  owned  consolidated
subsidiaries  -  Intervest  National  Bank,  Intervest  Mortgage Corporation and
Intervest  Securities  Corporation  (hereafter  referred  to collectively as the
"Company"  on  a  consolidated  basis).  Intervest  Bancshares  Corporation  and
Intervest National Bank may be referred to individually as the "Holding Company"
and  the  "Bank,"  respectively.  Intervest Bancshares Corporation also has four
wholly  owned  unconsolidated subsidiaries, Intervest Statutory Trust I, II, III
and  IV,  which  were  formed in connection with the issuance of trust preferred
securities.  For  a  discussion  of  the  Company's  business, see note 2 to the
condensed  consolidated  financial  statements  in  this  report.

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

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  the  interest expense incurred on its interest-bearing liabilities.
Net  interest  income  is  dependent upon the interest-rate spread, which is the
difference  between  the average yield earned on interest-earning assets and the
average  rate paid on interest-bearing liabilities. When interest-earning assets
approximate  or  exceed interest-bearing liabilities, any positive interest rate
spread  will  generate net interest income. The interest rate spread is impacted
by  interest  rates,  deposit  flows  and  loan  demand.

The  Company's  profitability  is  also affected by the level of its noninterest
income  and  expenses,  provision  for  loan  losses  and  income  tax  expense.
Noninterest  income  consists  mostly  of loan and other banking fees as well as
income  from loan prepayments. When a mortgage loan is repaid prior to maturity,
the  Company  may  recognize  prepayment  income,  which consists largely of the
recognition  of  unearned  fees associated with such loans at the time of payoff
and the receipt of additional prepayment fees and interest in certain cases. The
amount of income from loan prepayments can fluctuate significantly and cannot be
predicted.  Normally,  the  number  of instances of prepayment of mortgage loans
tends  to  increase  during  periods  of  declining  interest rates and tends to
decrease  during  periods  of  increasing  interest rates. Many of the Company's
mortgage  loans  include  provisions  relating to prepayment and others prohibit
prepayment  of  indebtedness  entirely.  Noninterest  expense  consists  of
compensation  and  benefits  expense,  occupancy  and  equipment  expenses, data
processing  expenses,  advertising expense, professional fees, insurance expense
and  other operating expenses. The Company's profitability is also significantly
affected  by  general  economic  and  competitive  conditions, changes in market
interest  rates,  government  policies  and  actions  of regulatory authorities.

The  Company's  loan  portfolio  has  historically  been  and  continues  to  be
concentrated in mortgage loans secured by commercial and multifamily real estate
properties,  which  represented  nearly all of the Company's loan portfolio. The
properties  underlying the Company's mortgage loans are also concentrated in New
York  State  (70%)  and the State of Florida (19%). A significant portion of the
New York properties are located in New York City and are subject to rent control
and  rent  stabilization laws, which limit the ability of the property owners to
increase  rents.

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


                                       20
<PAGE>
                          CRITICAL ACCOUNTING POLICIES
                          ----------------------------

The  preparation  of  the  Company's  consolidated  financial statements and the
information  included in Management's Discussion and Analysis herein is governed
by  policies  that  are based on accounting principles generally accepted in the
United  States  (GAAP)  and  general  practices within the banking industry. The
financial  information  contained in the Company's financial statements is, to a
significant  extent,  based on measures of the financial effects of transactions
and  events  that  have  already occurred. A variety of factors could affect the
ultimate  value  that  is  obtained  either  when earning income, recognizing an
expense, recovering an asset or relieving a liability.  In addition, GAAP itself
may  change  from  one previously acceptable method to another method.  Although
the  economics  of  the  Company's transactions would be the same, the timing of
events  that  would  impact  its  transactions  could  change.  Among  the  more
significant  policies  of the Company are those that govern accounting for loans
and  the  allowance  for  loan  losses.  For  a  summary of all of the Company's
significant  accounting  policies,  see  note  1  to  the consolidated financial
statements  in  the  Company's  Annual  Report  on  Form 10-K for the year ended
December  31,  2004.

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

The  Company  believes  that  currently its only significant critical accounting
policy  relates  to  the  determination  of  the  allowance for loan losses. The
allowance  for  loan  losses  reflects management's judgment as to the estimated
losses  that  may  result from defaults in the loan portfolio. The allowance for
loan  losses is established through a provision charged to operations. Loans are
charged  against  the allowance when management believes that the collectability
of  the principal is unlikely. Subsequent recoveries are added to the allowance.

The  adequacy  of  the  allowance  for  loan losses is evaluated monthly or more
frequently when necessary with consideration given to the following factors: (i)
the  nature and size of the Company's loan portfolio which has experienced rapid
growth  and  an  increase in individual loan balances; (ii) the concentration of
the  Company's  loans  on  commercial  and  multifamily  real estate properties,
including  loans  on  vacant land, all of which are generally considered to have
more  credit  risk  because  these loans tend to involve larger loan balances to
single  borrowers, the repayment of loans secured by income-producing properties
is  typically  dependent  upon  the  successful operation of the underlying real
estate  and  loans  on  vacant  land  typically  do  not have income streams for
repayment; (iii) specific problem loans, such as loans on nonaccrual status, and
loan  commitments and estimates of fair value of the underlying properties; (iv)
historical  chargeoffs  and  recoveries; (v) adverse situations which may affect
the borrowers' ability to repay; (vi) and management's perception of the current
and  anticipated  economic  conditions in the Company's lending areas, which are
concentrated  in  New York and Florida. Although management believes it uses the
best  information available to make determinations with respect to the allowance
for  loan losses, future adjustments may be necessary if economic conditions, or
other  factors, differ from those previously assumed in the determination of the
level  of  the  allowance.

For  calculation  purposes,  the  allowance  for  loan losses is comprised of an
unallocated  portion  (which  is derived from an estimated loss factor currently
ranging  from  0.30%  to 1.35% multiplied by the principal amount of loans rated
acceptable, and higher percentages for loans that are assigned a credit grade of
special  mention  or  lower)  and, from time to time, an allocated (or specific)
portion  on  certain  loans, particularly for loans that have been identified as
being  impaired.

Statement  of Financial Accounting Standards (SFAS) No. 114 specifies the manner
in  which the portion of the allowance for loan losses related to impaired loans
is  computed.  A  loan  is  normally  deemed  impaired  when, based upon current
information  and  events,  it is probable that we will be unable to collect both
full  principal  and interest due according to the contractual terms of the loan
agreement.  Impairment  for  larger balance loans such as commercial real estate
and  multifamily  loans  are  measured  based  on: the present value of expected
future  cash  flows,  discounted  at  the loan's effective interest rate; or the
observable  market  price of the loan; or the estimated fair value of the loan's
collateral,  if  payment  of  the  principal  and interest is dependent upon the
collateral.


                                       21
<PAGE>
When  the fair value of the property is less than the recorded investment in the
loan,  this deficiency is recognized as a valuation allowance within the overall
allowance  for  loan  losses and a charge through the provision for loan losses.
The  Company's policy is to charge off any portion of the recorded investment in
the  loan that exceeds the fair value of the collateral. The Company considers a
variety  of factors in determining whether a loan is impaired, including (i) any
notice from the borrower that the borrower will be unable to repay all principal
and  interest  amounts  contractually  due  under  the  loan agreement, (ii) any
delinquency  in the principal and/or interest payments other than minimum delays
or  shortfalls in payments, and (iii) other information known by management that
would  indicate the full repayment of principal and interest is not probable. In
evaluating loans for impairment, management generally considers delinquencies of
60  days  or  less  to be minimum delays, and accordingly does not consider such
delinquent  loans  to  be impaired in the absence of other indications. Impaired
loans  normally  consist of loans on nonaccrual status. Generally, all loans are
evaluated for impairment on a loan-by-loan basis.

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

    COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2005 AND DECEMBER 31, 2004
    ------------------------------------------------------------------------

OVERVIEW
--------
Total  assets  at  June  30, 2005 increased to $1.5 billion, from $1.3 billon at
December 31, 2004. Total liabilities at June 30, 2005 increased to $1.4 billion,
from  $1.2  billion  at December 31, 2004, and stockholders' equity increased to
$98.0  million  at  June 30, 2005, from $90.1 million at December 31, 2004. Book
value  per  common  share  increased  to $15.60 per share at June 30, 2005, from
$14.37  at  December  31,  2004.

Selected balance sheet information as of June 30, 2005 follows:

<TABLE>
<CAPTION>
                                                          Intervest    Intervest    Intervest      Inter-
                                               Holding    National     Mortgage    Securities     Company
($in thousands)                                Company      Bank         Corp.        Corp.     Amounts (1)    Consolidated
----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>          <C>          <C>          <C>           <C>
Cash and cash equivalents                     $  1,775   $   61,583   $   19,792   $       503  $    (8,456)  $      75,197
Security investments                                 -      237,613            -             -            -         237,613
Loans receivable, net of deferred fees          13,870    1,065,293       94,944             -            -       1,174,107
Allowance for loan losses                          (85)     (12,219)        (287)            -            -         (12,591)
Investment in consolidated subsidiaries        146,609            -            -             -     (146,609)              -
All other assets                                 5,277       26,581        5,636             6         (222)         37,278
----------------------------------------------------------------------------------------------------------------------------
Total assets                                  $167,446   $1,378,851   $  120,085   $       509  $  (155,287)  $   1,511,604
----------------------------------------------------------------------------------------------------------------------------
Deposits                                      $      -   $1,226,045   $        -   $         -  $    (8,539)  $   1,217,506
Borrowed funds and related interest payable     69,402          236       93,383             -            -         163,021
All other liabilities                               69       31,319        1,836            17         (139)         33,102
----------------------------------------------------------------------------------------------------------------------------
Total liabilities                               69,471    1,257,600       95,219            17       (8,678)      1,413,629
----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                            97,975      121,251       24,866           492     (146,609)         97,975
----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity    $167,446   $1,378,851   $  120,085   $       509  $  (155,287)  $   1,511,604
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

A  comparison  of  selected  balance  sheet  information as of June 30, 2005 and
December  31,  2004  follows:

<TABLE>
<CAPTION>
                                                                      At June 30, 2005            At December 31, 2004
                                                                 ----------------------------  ----------------------------
                                                                   Carrying         % of         Carrying         % of
($in thousands)                                                      Value      Total Assets       Value      Total Assets
---------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>            <C>
Cash and cash equivalents                                        $      75,197           5.0%  $      24,599           1.9%
Security investments                                                   237,613          15.7         253,980          19.3
Loans receivable, net of deferred fees and loan loss allowance       1,161,516          76.8       1,004,290          76.3
All other assets                                                        37,278           2.5          33,882           2.5
---------------------------------------------------------------------------------------------------------------------------
Total assets                                                     $   1,511,604         100.0%  $   1,316,751         100.0%
---------------------------------------------------------------------------------------------------------------------------
Deposits                                                         $   1,217,506          80.5%  $     993,872          75.5%
Borrowed funds and related interest payable                            163,021          10.8         202,682          15.4
All other liabilities                                                   33,102           2.2          30,103           2.2
---------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                    1,413,629          93.5       1,226,657          93.1
---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                                                    97,975           6.5          90,094           6.9
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                       $   1,511,604         100.0%  $   1,316,751         100.0%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       22
<PAGE>
CASH AND CASH EQUIVALENTS
-------------------------
Cash  and  cash  equivalents  increased  to $75.2 million at June 30, 2005, from
$24.6  million  at  December  31,  2004.  The level of cash and cash equivalents
fluctuates  based  on  various  factors, including liquidity needs, loan demand,
deposit flows, calls of securities, repayments of borrowed funds and alternative
investment  opportunities.  The increase reflected the temporary investment into
overnight federal funds of deposit inflows during June. A portion of these funds
is  expected  to  fund  new  loans.

SECURITY INVESTMENTS
--------------------
Securities  for which the Company has the intent and ability to hold to maturity
are  classified  as  held  to  maturity  and  carried  at  amortized  cost. Such
securities  decreased to $231.6 million at June 30, 2005, from $248.9 million at
December  31,  2004.  The  decrease reflected maturities exceeding new purchases
during  the  period. The Company continues to invest in short-term (up to 5 year
maturities)  U.S.  government agency debt obligations to emphasize liquidity and
to  currently  target  Intervest  National  Bank's  loan-to-deposit  ratio  at
approximately  85%.  The  investment  portfolio  at  June  30,  2005  had  a
weighted-average  remaining maturity of 1.2 years and a yield of 2.66%, compared
to  1.4  years  and a yield of 2.33% at December 31, 2004.  At June 30, 2005 and
December  31  2004,  the portfolio's estimated fair value was $229.7 million and
$247.2  million  respectively.

In  order  for the Bank to be a member of the Federal Reserve Bank (FRB) and the
Federal  Home  Loan Bank of New York (FHLB), the Bank maintains an investment in
their  capital  stock.  The  Bank's  total  investment in the FRB and FHLB stock
increased  to $6.0 million at June 30, 2005, from 5.1 million December 31, 2004.
The  total  investment  fluctuates based on the Bank's capital level for the FRB
stock  and  the Bank's loans and outstanding FHLB borrowings for the FHLB stock.

LOANS RECEIVABLE, NET OF DEFERRED FEES AND ALLOWANCE FOR LOAN LOSSES
--------------------------------------------------------------------
Loans  receivable,  net  of  deferred  fees  and  the allowance for loan losses,
increased  to  $1.2  billion  at June 30, 2005 from $1.0 billion at December 31,
2004.  The growth reflected new mortgage loan originations secured by commercial
and  multifamily  real  estate  exceeding  principal  repayments.  New  loan
originations totaled $173.1 million and $324.6 million in the second quarter and
first  half of 2005, respectively, compared to $175.9 million and $338.6 million
in  the  second  quarter  and  first  half  of  2004,  respectively.

Nearly  all (99.8%) of the Company's loan portfolio is secured by commercial and
multifamily  real  estate, including rental and cooperative apartment buildings,
office  buildings,  mix-used properties, shopping centers, industrial properties
and  vacant  land.  At  June  30,  2005, such loans consist of 529 loans with an
aggregate  principal  balance  of  $1.2 billion and an average principal size of
$2.2  million.  Loans with principal balances of $5.0 million or more aggregated
to 53 loans or $437.9 million, with the largest loan amounting to $16.5 million.

At  June  30, 2005, $0.7 million of loans were on nonaccrual status, compared to
$4.6 million at December 31, 2004. In April 2005, the property collateralizing a
nonaccrual loan with a principal balance of $3.9 million was sold at foreclosure
to  a  third party. The loan was paid in full and the Bank recovered all amounts
due  thereunder.  Nonaccrual loans are considered impaired under the criteria of
SFAS  No.  114,  but no valuation allowance was maintained at any time since the
Company  believes  that  the  estimated  fair value of the underlying properties
exceeded  its recorded investment. At June 30, 2005 and December 31, 2004, there
were  no  other  impaired  loans.

At  June  30,  2005,  there  were $2.7 million of loans ninety days past due and
still  accruing  interest  because  they  were  deemed  by management to be well
secured  and  in  the process of collection. Such amount represented three loans
that  are  past  their maturity date, but in each case the borrower continues to
make  monthly  payments  of  interest and principal. Based upon discussions with
these  borrowers,  it  is  anticipated  that  these loans will repaid in full or
refinanced  in the near term. There were no loans ninety days past due and still
accruing  interest  at  December  31,  2004.

At  June  30,  2005,  the  allowance  for loan losses amounted to $12.6 million,
compared  to $11.1 million at December 31, 2004. The allowance represented 1.07%
of  total loans (net of deferred fees) outstanding at June 30, 2005 and 1.09% at
December  31,  2004.  The  increase  in  the  allowance  was  due  to provisions
aggregating  $1.5  million  during the period resulting largely from loan growth
(which  amounted  to $159.3 million from December 31, 2004), partially offset by
the  favorable  impact from the satisfaction of the $3.9 million nonaccrual loan
noted  above.


                                       23
<PAGE>
For  a  further  discussion  of  the  criteria the Company uses to determine the
adequacy  of  the  allowance,  see  the  section  "Critical Accounting Policies"
included in this report.

ALL OTHER ASSETS
----------------
The following table sets forth the composition of the caption "All other assets"
as  follows:

<TABLE>
<CAPTION>
                                                               At June 30,    At December 31,
                                                           ----------------  ----------------
               ($in thousands)                                    2005            2004
               ------------------------------------------------------------------------------
<S>                                                        <C>               <C>
               Accrued interest receivable                 $          7,234  $          6,699
               Loan fees receivable                                   9,401             8,208
               Premises and equipment, net                            6,568             6,636
               Deferred income tax asset                              5,800             5,095
               Deferred debenture offering costs, net                 5,304             4,929
               Investment in unconsolidated subsidiaries              1,856             1,856
               All other                                              1,115               459
               ------------------------------------------------------------------------------
                                                           $         37,278  $         33,882
               ------------------------------------------------------------------------------
</TABLE>

Accrued interest receivable fluctuates based on the amount of loans, investments
and  other  interest-earning  assets  outstanding  and  the  timing  of interest
payments  received.  The increase of $0.5 million from December 31, 2004 was due
to  the  growth  in  all  of  these  assets.

Loan fees receivable are fees due to the Company in accordance with the terms of
mortgage  loans.  Such  amounts are generally due upon the full repayment of the
loan.  This  fee is recorded as deferred income at the time a loan is originated
and  is  then  amortized to interest income over the life of the loan as a yield
adjustment.  The  increase  of  $1.2  million from December 31, 2004 was due the
increase  in  the  loan  portfolio.

Premises  and  equipment remained relatively unchanged from December 31, 2004 as
net  purchases  of  $0.2  million  during  the  period  were  offset  by  normal
depreciation  and  amortization.

The deferred income tax asset relates primarily to the unrealized tax benefit on
the  Company's  allowance  for  loan losses. The allowance has been expensed for
financial  statement  purposes but it is currently not deductible for income tax
purposes until actual loan chargeoffs are incurred. The increase in the deferred
tax  asset  of $0.7 million from December 31, 2004 is a function of the increase
in  the  allowance  for  loan  losses  during  the  period.

Deferred debenture offering costs consist primarily of underwriters' commissions
and  are  amortized  over  the terms of the debentures. The net increase of $0.4
million  from  December  31,  2004  was  due to $1.0 million of additional costs
incurred  in connection with the issuance of new debentures, partially offset by
normal  amortization  during  the  period.

The  investment in unconsolidated subsidiaries consists of the Holding Company's
total  common  stock  investment in Intervest Statutory Trust I, II, III and IV.

All  other assets increased by $0.6 million from December 31, 2004 primarily due
to  $0.4  million  of  miscellaneous  receivables  at  June 30, 2005, which were
collected  in  full  in  July  2005.

DEPOSITS
--------
Deposits  increased  to  $1.2  billion  at June 30, 2005, from $993.9 million at
December  31, 2004. The increase reflected an increase in certificate of deposit
accounts  of $240.6 million, partially offset by a decrease in checking, savings
and  money  market  accounts  aggregating  $16.9  million.

At  June  30,  2005, certificate of deposit accounts totaled $985.3 million, and
checking,  savings and money market accounts aggregated $232.2 million. The same
categories  of  deposit  accounts  totaled  $744.8  million  and $249.1 million,
respectively,  at December 31, 2004. Certificate of deposit accounts represented
81%  of  total  deposits  at June 30, 2005 and 75% at December 31, 2004. In June
2005,  the  Bank  began  accepting brokered deposits as another source of funds.
Such  accounts  totaled  $22.3  million  at  June  30,  2005.


                                       24
<PAGE>
BORROWED FUNDS AND RELATED INTEREST PAYABLE
-------------------------------------------
At  June  30,  2005,  borrowed  funds  and related interest payable decreased to
$163.0  million,  from  $202.7  million  at  December 31, 2004. The decrease was
largely  due  to  the  repayment by the Bank of $36.0 million of short-term FHLB
advances.

ALL OTHER LIABILITIES
---------------------
The  table  below  sets  forth  the  composition  of  the  caption  "All  other
liabilities"  as  follows:

<TABLE>
<CAPTION>
                                                         At June 30,     At December 31,
                                                      ----------------  ----------------
               ($in thousands)                              2005              2004
               -------------------------------------------------------------------------
<S>                                                   <C>               <C>
               Mortgage escrow funds payable          $         17,826  $         14,533
               Official checks outstanding                       9,693            12,061
               Accrued interest payable on deposits              2,388             1,718
               All other                                         3,195             1,791
               -------------------------------------------------------------------------
                                                      $         33,102  $         30,103
               -------------------------------------------------------------------------
</TABLE>

Mortgage  escrow  funds payable represent advance payments made by borrowers for
taxes  and  insurance  that  are remitted to third parties. The increase of $3.3
million  from  December  31,  2004  reflected  the growth in the loan portfolio.

Official  checks  outstanding  vary  and  fluctuate  based  on banking activity.
Accrued  interest  payable  on  deposits  fluctuates based on total deposits and
timing of interest payments. The increase of $0.7 million from December 31, 2004
reflected  the  growth  in  deposits.

All  other  liabilities  is  comprised  mainly of accrued expenses, income taxes
payable  (which  fluctuates  based on the Company's earnings, effective tax rate
and  timing of tax payments) and fees received on loan commitments that have not
yet been funded. The increase of $1.4 million from December 31, 2004 reflected a
higher  level of income taxes payable and fees received on loan commitments that
have  not  yet  been  funded.

STOCKHOLDERS' EQUITY
--------------------
Stockholders'  equity  increased  to  $98.0 million at June 30, 2005, from $90.1
million  at  December  31,  2004  as  follows:

<TABLE>
<CAPTION>
          ($in thousands)                                                     Amount    Shares
          --------------------------------------------------------------------------------------
<S>                                                                           <C>      <C>
          Stockholders' equity at December 31, 2004                           $90,094  6,271,433
          Net earnings for the period                                           7,771          -
          Convertible debentures converted at election of debenture holders       110      8,068
          --------------------------------------------------------------------------------------
          Stockholders' equity at June 30, 2005                               $97,975  6,279,501
          --------------------------------------------------------------------------------------
</TABLE>


                                       25
<PAGE>
   COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 2005 AND
   ----------------------------------------------------------------------------
                                      2004
                                      ----
OVERVIEW
--------
Consolidated  net  earnings  for  the second quarter of 2005 increased by 81% to
$4.5  million or $0.67 per diluted share, from $2.5 million or $0.37 per diluted
share  reported in the second quarter of 2004. The increase was due to continued
growth in the Company's lending activities and nonrecurring income from the full
repayment  of  a  $3.9  million  nonaccrual  loan  during  the  quarter.

The  $2.0  million  increase  in  consolidated earnings reflected a $2.7 million
increase  in  net  interest  and  dividend  income,  a  $0.8 million increase in
noninterest income and a $0.8 million decrease in the provision for loan losses,
partially  offset  by  a  $1.6 million increase in income tax expense and a $0.7
million  increase  in  noninterest  expenses.

The Company's return on average assets and equity increased to 1.26% and 19.01%,
respectively,  in  the  2005  quarter,  compared to 0.95% and 12.58% in the 2004
quarter.  The  Company's  efficiency ratio, which is a measure of its ability to
control  expenses  as a percentage of its revenues, continues to be favorable at
25%  for  the  second  quarter  of  2005.

Selected  information  regarding results of operations for the second quarter of
2005  follows:

<TABLE>
<CAPTION>
                                             Intervest    Intervest    Intervest                  Inter-
                                             National     Mortgage     Securities    Holding     Company
($ in thousands)                               Bank         Corp.        Corp.       Company   Amounts (2)   Consolidated
--------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>           <C>        <C>           <C>
Interest and dividend income                $   20,023   $    2,496   $         3   $    266   $       (92)  $      22,696
Interest expense                                10,500        1,839             -      1,253           (92)         13,500
                                            ------------------------------------------------------------------------------
Net interest and dividend income                 9,523          657             3       (987)            -           9,196
Provision for loan losses                          497          (45)            -          -             -             452
Noninterest income                               1,704        1,463            59        112        (1,329)          2,009
Noninterest expenses                             2,946          837            38        257        (1,329)          2,749
                                            ------------------------------------------------------------------------------
Earnings before taxes                            7,784        1,328            24     (1,132)            -           8,004
Provision for income taxes                       3,379          614            11       (523)            -           3,481
--------------------------------------------------------------------------------------------------------------------------
Net earnings                                $    4,405   $      714   $        13   $   (609)  $         -   $       4,523
--------------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (1,089)           -             -      1,089             -               -
--------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    3,316   $      714   $        13   $    480   $         -   $       4,523
--------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
    for the same period of 2004             $    1,589   $      502   $        (2)  $    416   $         -   $       2,505
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Dividends  to  the Holding Company from the Bank provide funds for the debt
     service  on  the  subordinated  debentures-capital  securities,  which  is
     included  in  the  Holding  Company's  interest  expense.

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


NET INTEREST AND DIVIDEND INCOME
--------------------------------
Net interest and dividend income is the Company's primary source of earnings and
is  influenced  primarily  by  the  amount,  distribution  and  repricing
characteristics  of its interest-earning assets and interest-bearing liabilities
as  well  as  by  the  relative  levels  and  movements  of  interest  rates.

Net interest and dividend income increased to $9.2 million in the second quarter
of  2005,  from  $6.5  in  the  second  quarter  of  2004.  The  improvement was
attributable  to  a  $385.9  million increase in average interest-earning assets
resulting from continued growth in loans of $315.8 million and a higher level of
security  and  short-term  investments  aggregating $70.1 million. The growth in
average  assets  was  funded  by  $352.9  million of additional interest-bearing
deposits, $9.4 million of additional borrowed funds and a $15.5 million increase
in  stockholders'  equity.

The  Company's  net  interest margin increased to 2.59% in the second quarter of
2005, from 2.53% in the second quarter of 2004. The higher margin was due to the
Company's  yield on interest-earning assets increasing at a faster pace than its
cost  of  funds.

The  yield  on interest-earning assets increased 43 basis points to 6.39% in the
2005  quarter  due to higher rates on new mortgage loans originated, the receipt
of  $0.3  million  of  nonaccrual  interest  income  during  the  quarter  and


                                       26
<PAGE>
higher  yields  earned on security and other short-term investments. The cost of
funds  increased  by  36 basis points to 4.15% in the 2005 quarter due to higher
rates  paid  on  deposit  accounts.

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.

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------
                                                                                 Quarter Ended
                                                   --------------------------------------------------------------------
                                                              June 30, 2005                      June 30, 2004
                                                   ---------------------------------  ---------------------------------
                                                     Average     Interest    Yield/     Average     Interest    Yield/
($ in thousands)                                     Balance    Inc./Exp.   Rate (2)    Balance    Inc./Exp.   Rate (2)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>       <C>          <C>         <C>
ASSETS
Interest-earning assets:
    Loans (1)                                      $1,140,156   $   20,800     7.32%  $  824,379   $   14,457     7.05%
    Securities                                        260,383        1,723     2.65      181,091          859     1.91
    Other interest-earning assets                      23,799          173     2.92       32,997           75     0.91
-----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,424,338   $   22,696     6.39%   1,038,467   $   15,391     5.96%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             14,900                             15,453
-----------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,439,238                         $1,053,920
-----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest checking deposits                     $   10,968   $       42     1.54%  $   10,022   $       38     1.52%
    Savings deposits                                   21,794          139     2.56       31,834          141     1.78
    Money market deposits                             191,078        1,308     2.75      189,053          837     1.78
    Certificates of deposit                           917,943        8,886     3.88      557,952        4,890     3.52
-----------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,141,783       10,375     3.64      788,861        5,906     3.01
-----------------------------------------------------------------------------------------------------------------------
    Fed funds purchased and FHLB Advances               3,824           29     3.04          386            1     1.56
    Debentures and related interest payable            95,784        2,003     8.39      105,264        2,098     8.02
    Debentures - capital securities                    61,856        1,089     7.06       46,392          856     7.42
    Mortgage note payable                                 238            4     7.00          251            5     7.00
-----------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  161,702        3,125     7.75      152,293        2,960     7.82
-----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,303,485   $   13,500     4.15%     941,154   $    8,866     3.79%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            5,734                              6,838
Noninterest-bearing liabilities                        34,865                             26,302
Stockholders' equity                                   95,154                             79,626
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,439,238                         $1,053,920
-----------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $    9,196     2.24%               $    6,525     2.17%
-----------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  120,853                  2.59%  $   97,313                  2.53%
-----------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
    to total interest-bearing liabilities                1.09                               1.10
-----------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.26%                              0.95%
  Return on average equity  (2)                         19.01%                             12.58%
  Noninterest expense to average assets (2)              0.76%                              0.78%
  Efficiency ratio (3)                                     25%                                26%
  Average stockholders' equity to average assets         6.61%                              7.56%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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


                                       27
<PAGE>
<TABLE>
<CAPTION>
                                                         For the Quarter Ended June 30, 2005 vs 2004
                                                    ----------------------------------------------------
                                                             Increase (Decrease) Due To Change In:
                                                    ----------------------------------------------------
     ($ in thousands)                                    Rate          Volume      Rate/Volume     Total
     ---------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>
     Interest-earning assets:
         Loans                                      $        556   $      5,566   $        221   $6,343
         Securities                                          335            379            150      864
         Other interest-earning assets                       166            (21)           (47)      98
     ---------------------------------------------------------------------------------------------------
     Total interest-earning assets                         1,057          5,924            324    7,305
     ---------------------------------------------------------------------------------------------------
     Interest-bearing liabilities:
         Interest checking deposits                            1              4             (1)       4
         Savings deposits                                     62            (45)           (19)      (2)
         Money market deposits                               458              9              4      471
     Certificates of deposit                                 502          3,168            326    3,996
     ---------------------------------------------------------------------------------------------------
     Total deposit accounts                                1,023          3,136            310    4,469
     ---------------------------------------------------------------------------------------------------
         Federal funds purchased and FHLB advances             1             13             14       28
         Debentures and accrued interest payable              97           (190)            (2)     (95)
         Debentures - capital securities                     (42)           287            (12)     233
         Mortgage note payable                                 -              -             (1)      (1)
     ---------------------------------------------------------------------------------------------------
     Total borrowed funds                                     56            110             (1)     165
     ---------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities                    1,079          3,246            309    4,634
     ---------------------------------------------------------------------------------------------------
     Net change in interest and dividend income     $        (22)  $      2,678   $         15   $2,671
     ---------------------------------------------------------------------------------------------------
</TABLE>

PROVISION FOR LOAN LOSSES
-------------------------
The  provision  for loan losses decreased by $0.8 million to $0.5 million in the
second  quarter  of  2005,  from $1.3 million in the second quarter of 2004. The
lower  provision was a function of the favorable impact from the satisfaction of
a $3.9 million nonaccrual loan in April 2005 as well as a decrease in the amount
of  loan  growth. Total loans grew by $79.4 million in the 2005 period, compared
to  $115.9  million  in  the  2004  period.

NONINTEREST INCOME
------------------
Noninterest  income  increased  by  $0.8  million  to $2.0 million in the second
quarter  of  2005,  from  $1.2 million in the second quarter of 2004. The higher
income  was  due  to  a  $0.8  million increase in income from the prepayment of
mortgage  loans,  of which $0.6 million was the result of the early satisfaction
of the nonaccrual loan noted above. Income from the prepayment of mortgage loans
consists  largely of the recognition of unearned fees associated with such loans
at  the  time  of payoff and the receipt of prepayment penalties and interest in
certain  cases. The Company's income from loan prepayments, which fluctuates and
cannot  be  predicted,  tends  to  increase during periods of declining interest
rates  and  tends  to  decrease  during  periods  of  increasing interest rates.

NONINTEREST EXPENSES
--------------------
Noninterest  expenses  increased  by  $0.7 million to $2.7 million in the second
quarter  of  2005, from $2.0 million in the second quarter of 2004. The increase
was  primarily  due to increases in salary and employee benefits expense of $0.4
million,  professional  fees  expense  of $0.2 million and all other expenses of
$0.1  million,  partially  offset  by  a  $0.1 million decrease in occupancy and
equipment  expense.

Salaries  and  employee  benefits  expense  increased due to salary increases, a
higher  cost of employee benefits and additional staff aggregating $0.2 million,
and  a  $0.2  million  increase  in  bonus payments to certain executives of the
Company.  The Company had 68 fulltime employees at June 30, 2005, compared to 62
at  June  30,  2004.

Occupancy  and  equipment  expense  decreased  primarily due to a lower level of
depreciation  expense  as  well as a decrease in rent expense resulting from the
termination  in  September 2004 of Intervest Mortgage Corporation's lease on its
former  space  at  10  Rockefeller  Plaza.

Professional fees expense increased due to the growth in the Company's assets as
well  as  additional  accruals of $0.1 million for consulting expense associated
with  the  ongoing  compliance with the Sarbanes Oxley requirements for internal
controls.

All  other  expense increased due to a $0.1 million Nasdaq National Market entry
fee.  The  Company's  Class  A common stock began trading on the Nasdaq National
Market on June 27, 2005. Previously, the stock had traded on the Nasdaq SmallCap
Market.


                                       28
<PAGE>
PROVISION FOR INCOME TAXES
--------------------------
The  provision for income taxes increased by $1.6 million to $3.5 million in the
second  quarter of 2005, from $1.9 million in the second quarter of 2004, due to
an  increase  in pre-tax income.  The Company's effective tax rate (inclusive of
state  and  local taxes) amounted to 43.5% in the 2005 period, compared to 43.3%
in  the  2004  period.

  COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX-MONTHS ENDED JUNE 30, 2005 AND
  ------------------------------------------------------------------------------
                                      2004
                                      ----

OVERVIEW
--------
Consolidated  net  earnings  for the first half of 2005 increased by 48% to $7.8
million or $1.15 per diluted share, from $5.2 million or $0.78 per diluted share
reported in the first half of 2004. The increase reflected a 35% or $4.6 million
increase  in  net  interest  and  dividend  income,  a  $0.2 million increase in
noninterest income and a $0.9 million decrease in the provision for loan losses.
These  improvements  were  partially offset by a $2.0 million increase in income
tax expense and a $1.1 million increase in noninterest expenses. The increase in
net earnings was due to continued growth in the Company's lending activities and
nonrecurring  income  from  the full repayment of a $3.9 million nonaccrual loan
during  the  first  half  of  2005.

The  Company's  return  on  average  assets  and  equity  was  1.10% and 16.68%,
respectively,  in  the  first  half of 2005, compared to 1.05% and 13.43% in the
first  half  of  2004. The Company's efficiency ratio, which is a measure of its
ability  to  control  expenses  as a percentage of its revenues, continues to be
favorable  at  25%  for  the  first  half  of  2005.

Selected  information regarding results of operations for the first half of 2005
follows:

<TABLE>
<CAPTION>
                                             Intervest    Intervest    Intervest                 Inter-
                                             National     Mortgage    Securities    Holding     Company
($ in thousands)                               Bank         Corp.        Corp.      Company   Amounts (2)   Consolidated
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>        <C>           <C>
Interest and dividend income                $   38,071   $    4,888   $         6  $    494   $      (195)  $      43,264
Interest expense                                19,736        3,736             -     2,506          (195)         25,783
                                            -----------------------------------------------------------------------------
Net interest and dividend income                18,335        1,152             6    (2,012)            -          17,481
Provision for loan losses                        1,530          (45)            -         -             -           1,485
Noninterest income                               2,473        2,865            59       225        (2,735)          2,887
Noninterest expenses                             5,866        1,570            44       378        (2,735)          5,123
                                            -----------------------------------------------------------------------------
Earnings before taxes                           13,412        2,492            21    (2,165)            -          13,760
Provision for income taxes                       5,826        1,153            10    (1,000)            -           5,989
-------------------------------------------------------------------------------------------------------------------------
Net earnings                                $    7,586   $    1,339   $        11  $ (1,165)  $         -   $       7,771
-------------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (2,178)           -             -     2,178             -               -
-------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    5,408   $    1,339   $        11  $  1,013   $         -   $       7,771
-------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
    for the same period of 2004             $    3,496   $    1,015   $         8  $    721   $         -   $       5,240
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Dividends  to  the Holding Company from the Bank provide funds for the debt
     service  on  the  subordinated  debentures-capital  securities,  which  is
     included  in  the  Holding  Company's  interest  expense.

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

NET INTEREST AND DIVIDEND INCOME
--------------------------------
Net interest and dividend income is the Company's primary source of earnings and
is  influenced  primarily  by  the  amount,  distribution  and  repricing
characteristics  of its interest-earning assets and interest-bearing liabilities
as  well  as  by  the  relative  levels  and  movements  of  interest  rates.

Net interest and dividend income increased to $17.5 million in the first half of
2005,  from  $12.9  million  in  the  first  half  of  2004. The improvement was
attributable  to  a  $408.4  million increase in average interest-earning assets
resulting from continued growth in loans of $331.1 million and a higher level of
security  and  short-term  investments  aggregating $77.3 million. The growth in
average  assets  was  funded  by  $366.2  million of additional interest-bearing
deposits,  $18.8  million  of  additional borrowed funds and a $15.1 increase in
stockholders'  equity.

The  Company's net interest margin decreased to 2.53% in the first half of 2005,
from  2.63% in the first half of 2004. The lower margin was due to the Company's
cost  of  funds  increasing  at a faster pace than its yield on interest-earning
assets.


                                       29
<PAGE>
The  yield  on interest-earning assets increased 14 basis points to 6.26% in the
2005  first  half  due  to higher yields earned on security and other short-term
investments,  partially  offset  by  a slight decline in the yield earned on the
loan  portfolio.  The cost of funds increased by 22 basis points to 4.07% in the
2005  first  half due to higher rates paid on deposit accounts, partially offset
by  a  decrease  in  the  cost  of  borrowed  funds resulting primarily from the
addition  of  debentures  with  lower  rates  than  existing  ones.

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.

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------
                                                                              Six-Months Ended
                                                   --------------------------------------------------------------------
                                                              June 30, 2005                      June 30, 2004
                                                   ---------------------------------  ---------------------------------
                                                     Average     Interest    Yield/     Average     Interest    Yield/
($in thousands)                                      Balance    Inc./Exp.   Rate (2)    Balance    Inc./Exp.   Rate (2)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>       <C>          <C>         <C>
ASSETS
Interest-earning assets:
    Loans (1)                                      $1,106,197   $   39,611     7.22%  $  775,082   $   28,249     7.33%
    Securities                                        259,217        3,286     2.56      173,283        1,564     1.82
    Other interest-earning assets                      28,092          367     2.63       36,776          171     0.94
-----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,393,506   $   43,264     6.26%     985,141   $   29,984     6.12%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             15,026                             15,945
-----------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,408,532                         $1,001,086
-----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest checking deposits                     $   12,198   $       94     1.55%  $   10,194   $       78     1.54%
    Savings deposits                                   23,521          252     2.16       31,414          279     1.79
    Money market deposits                             192,718        2,367     2.48      178,409        1,579     1.78
    Certificates of deposit                           881,191       16,701     3.82      523,382        9,282     3.57
-----------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,109,628       19,414     3.53      743,399       11,218     3.03
-----------------------------------------------------------------------------------------------------------------------
    Fed funds purchased and FHLB Advances               8,840          119     2.71          193            1     1.56
    Debentures and related interest payable            97,481        4,063     8.41      109,212        4,331     7.97
    Debentures - capital securities                    61,856        2,179     7.10       39,935        1,522     7.66
    Mortgage note payable                                 239            8     6.98          252            9     6.98
-----------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  168,416        6,369     7.63      149,592        5,863     7.88
-----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,278,044   $   25,783     4.07%     892,991   $   17,081     3.85%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            5,959                              6,509
Noninterest-bearing liabilities                        31,362                             23,562
Stockholders' equity                                   93,167                             78,024
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,408,532                         $1,001,086
-----------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   17,481     2.19%               $   12,903     2.27%
-----------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  115,462                  2.53%  $   92,150                  2.63%
-----------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
    to total interest-bearing liabilities                1.09                               1.10
-----------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.10%                              1.05%
  Return on average equity  (2)                         16.68%                             13.43%
  Noninterest expense to average assets (2)              0.73%                              0.79%
  Efficiency ratio (3)                                     25%                                25%
  Average stockholders' equity to average assets         6.61%                              7.79%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       30
<PAGE>
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).

<TABLE>
<CAPTION>
                                                               For the Six-Months Ended June 30, 2005 vs 2004
                                                         ----------------------------------------------------------
                                                                    Increase (Decrease) Due To Change In:
                                                         ----------------------------------------------------------
          ($ in thousands)                                     Rate          Volume       Rate/Volume      Total
          ---------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>            <C>
          Interest-earning assets:
              Loans                                      $       (426)  $     12,135   $       (347)  $     11,362
              Securities                                          641            782            299          1,722
              Other interest-earning assets                       311            (41)           (74)           196
          ---------------------------------------------------------------------------------------------------------
          Total interest-earning assets                           526         12,876           (122)        13,280
          ---------------------------------------------------------------------------------------------------------
          Interest-bearing liabilities:
              Interest checking deposits                            1             15              -             16
              Savings deposits                                     58            (71)           (14)           (27)
              Money market deposits                               624            127             37            788
              Certificates of deposit                             654          6,387            378          7,419
          ---------------------------------------------------------------------------------------------------------
          Total deposit accounts                                1,337          6,458            401          8,196
          ---------------------------------------------------------------------------------------------------------
              Federal funds purchased and FHLB advances             1             67             50            118
              Debentures and accrued interest payable             240           (467)           (41)          (268)
              Debentures - capital securities                    (112)           827            (58)           657
              Mortgage note payable                                 -              -             (1)            (1)
          ---------------------------------------------------------------------------------------------------------
          Total borrowed funds                                    129            427            (50)           506
          ---------------------------------------------------------------------------------------------------------
          Total interest-bearing liabilities                    1,466          6,885            351          8,702
          ---------------------------------------------------------------------------------------------------------
          Net change in interest and dividend income     $       (940)  $      5,991   $       (473)  $      4,578
          ---------------------------------------------------------------------------------------------------------
</TABLE>

PROVISION FOR LOAN LOSSES
-------------------------
The  provision  for loan losses decreased by $0.9 million to $1.5 million in the
first  half  of  2005,  from  $2.4  million in the first half of 2004. The lower
provision was a function of the favorable impact from the satisfaction of a $3.9
million  nonaccrual  loan  as  well  as a decrease in the amount of loan growth.
Total  loans  grew  by  $159.3  million  in  the 2005 period, compared to $208.8
million  in  the  2004  period.

NOINTEREST INCOME
-------------------
Noninterest  income  increased by $0.2 million to $2.9 million in the first half
of  2005, from $2.7 million in the first half of 2004. The higher income was due
to  a $0.3 million increase in income from the prepayment of mortgage loans. The
income  for the 2005 period included $0.6 million from the early satisfaction of
the  nonaccrual  loan  noted  above.  See  the section "Comparison of Results of
Operations  for  the  Quarters Ended June 30, 2005 and 2004" for a discussion of
the  effects  of  rising and falling interest rates on the Company's income from
the  prepayment  of  mortgage  loans.

NONINTEREST EXPENSES
--------------------
Noninterest expenses increased by $1.1 million to $5.1 million in the first half
of 2005, from $4.0 million in the first half of 2004. The increase was primarily
due  to increases in the following: salary and employee benefits expense of $0.8
million;  professional fees expense of $0.2 million; director and committee fees
expense  of  $0.1  million,  advertising  expense  of $0.1 million and all other
expenses of $0.1 million. These increase were partially offset by a $0.1 million
decrease  in  occupancy  and  equipment  expense.

Salaries  and  employee  benefits  expense  increased  primarily  due  to salary
increases,  a  higher cost of employee benefits and additional staff aggregating
$0.4  million,  and  a  $0.3  million  increase  in  bonus  payments  to certain
executives  of  the  Company.  The Company had 68 fulltime employees at June 30,
2005,  compared  to  62  at  June  30,  2004.

Director  and  committee  fees  expense  increased  due  to  higher fees paid to
directors for each board and committee meeting attended. The fees were increased
for  board and committee meetings in October 2004 and an additional increase was
made  in  June  2005 for audit committee meetings. Advertising expense increased
due  to  additional  advertising  to  support  loan  and  deposit  growth.


                                       31
<PAGE>
The  reasons for the changes in professional fees expense, all other expense and
occupancy  and  equipment  expense  are  the  same  as  those  discussed  in the
Comparison  of  Results  of  Operations for the Quarters Ended June 30, 2005 and
2004.

PROVISION FOR INCOME TAXES
--------------------------
The  provision for income taxes increased by $2.0 million to $6.0 million in the
first  half  of  2005,  from  $4.0  million in the first half of 2004, due to an
increase  in  pre-tax  income.  The  Company's  effective tax rate (inclusive of
state  and  local taxes) amounted to 43.5% in the 2005 period, compared to 43.4%
in  the  2004  period.


               OFF-BALANCE SHEET AND OTHER FINANCING ARRANGEMENTS
               --------------------------------------------------

The Company is 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 12 to the condensed
consolidated  financial  statements  in  this  report.

                         LIQUIDITY AND CAPITAL RESOURCES
                         -------------------------------

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

The  Bank has and expects to continue to rely heavily on certificates of deposit
(time deposits) as a source of funds. Total deposits amounted to $1.2 billion at
June  30,  2005  and  time deposits represented 81%, or $985.3 million, of those
deposits.  Additionally,  time  deposits  of  $100,000  or more at June 30, 2005
totaled $312.8 million and included $22.3 million of brokered deposits. The Bank
began  accepting  brokered deposits as another source of funds beginning in June
2005.  Time deposits are the only deposit accounts offered by the Bank 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.  The  Bank  needs  to  pay
competitive  interest rates to attract and retain time deposits to fund its loan
originations.  In  addition,  the  Bank  has  and expects to continue to rely on
capital  contributions  from  the  Holding  Company  to  increase its capital to
support its rapid asset growth. At June 30, 2005, the Bank had $377.7 million of
time deposits maturing by December 31, 2006. The Bank expects that a substantial
portion  of  these  deposits  will  be  renewed  and  stay  with  the  Bank.

From time to time, the Bank may borrow funds on an overnight or short-term basis
to  manage  its  liquidity needs. At June 30, 2005, the Bank had agreements with
correspondent  banks  whereby it could borrow up to $16 million of federal funds
on  an  unsecured  basis. In addition, as a member of the FHLB and FRB, the Bank
can  also  borrow  from these institutions on a secured basis. At June 30, 2005,
the Bank had available collateral consisting of investment securities to support
total borrowings of $239 million from the FHLB and FRB. During the first half of
2005,  the  Bank  repaid  $36.0  million  of  short-term FHLB advances that were
outstanding  at  December  31, 2004. At June 30, 2005, there were no outstanding
borrowings  from  any  of  the  aforementioned  sources.

Intervest  Mortgage  Corporation  has  and  expects  to  continue to rely on the
issuance of its subordinated debentures in registered, best efforts offerings to
the  public  as a source of funds to support its loan originations. In addition,
as  the Bank's mortgage loan portfolio has grown, service fee income received by
Intervest  Mortgage  Corporation  from  the  Bank  has  comprised  an increasing
percentage  of  Intervest  Mortgage  Corporation's  cash  flow.  The  Bank has a
servicing  agreement  with  Intervest  Mortgage  Corporation  whereby  Intervest
Mortgage  Corporation  provides the Bank with mortgage loan origination services
in  exchange  for  a  monthly fee that is based on loan origination volumes. The
services  include  the identification of potential properties and borrowers; the
inspection of properties constituting collateral for such loans; the negotiation
of  the  terms  and  conditions  of  such  loans  in  accordance with the Bank's
underwriting  standards;  and coordinating the preparation of commitment letters
and  the  loan closing process. The services are performed by Intervest Mortgage
Corporation's  personnel  and  the  related  expenses  are  borne  by  Intervest


                                       32
<PAGE>
Mortgage  Corporation.  In  addition,  From  time  to  time,  Intervest Mortgage
Corporation  has  also  received capital contributions from the Holding Company.

The  future  growth  of  Intervest  Mortgage  Corporation's  lending business is
dependent  on  its continuing ability to sell its debentures with interest rates
that  would  result  in a positive interest rate spread, which is the difference
between  yields  earned  on  its loans and the rates paid on its debentures. The
outstanding  debentures  of  Intervest  Mortgage  Corporation have predominately
fixed  rates  of  interest  and  mature within three to eight years. At June 30,
2005,  $88.5  million  in  aggregate  principal  amount  of  Intervest  Mortgage
Corporation's  subordinated debentures were outstanding with interest rates that
range  from  6.25%  to  9.00%  per annum. On January 1, 2005, Intervest Mortgage
Corporation's  Series 11/10/98 debentures matured and were repaid for a total of
$4.5  million  ($2.6 million of principal and $1.9 million of accrued interest).
On  April  1,  2005, Intervest Mortgage Corporation's Series 5/10/96 and 8/01/01
debentures  matured  and were repaid for a total of $14.1 million ($11.8 million
of principal and $2.3 million of accrued interest). These repayments were offset
by  the  issuance  in  April  2005  of  $14.0  million  of  Intervest  Mortgage
Corporation's  Series  3/21/05  debentures. At June 30, 2005, Intervest Mortgage
Corporation had $27.1 million of debentures and related accrued interest payable
maturing  by  December  31, 2006, which are expected to be repaid from cash flow
generated  from  maturities  of  existing mortgage loans, ongoing operations and
cash  on  hand.

In  June  2005, Intervest Mortgage Corporation filed a Registration Statement on
Form S-11 with the Securities and Exchange Commission with respect to a proposed
offering  of  up  to  $12.0  million  in additional subordinated debentures. The
expected  terms  of the debentures are as follows: $2.0 million maturing October
1,  2009 with an annual interest rate of 6.25%; $4.0 million maturing October 1,
2011 with an annual interest rate of 6.50%; and $6.0 million maturing October 1,
2013  with  an  annual  interest  rate  of  7.00%.  On August 1, 2005, Intervest
Mortgage  Corporation  repaid  early  its  Series  10/15/96  and  Series 1/17/02
debentures  that were scheduled to mature on October 1, 2005 for a total of $6.8
million  in  principal  and  accrued  interest.

The  Holding  Company's  working  capital  to  date  has  been  derived from the
following:  interest  income  from  a  limited  portfolio  of mortgage loans and
short-term  investments;  monthly  dividends  from  the Bank to service interest
expense  on  trust  preferred securities; monthly management fees from Intervest
Mortgage  Corporation and the Bank for providing these subsidiaries with certain
administrative  services;  the  issuance  of  its  common  stock  through public
offerings,  exercise  of  outstanding  common  stock  warrants and conversion of
outstanding  convertible  debentures; the issuance of trust preferred securities
through  its  wholly  owned  business  trusts;  and the direct issuance of other
subordinated  debentures  to  the public. These sources of funds are expected to
continue  to  be available to the Holding Company. At June 30, 2005, the Holding
Company  had  $1.3  million  of  debentures and related accrued interest payable
maturing  by  December  31,  2006,  which are expected to be repaid from cash on
hand.  On  July  8,  2005, the Holding Company filed a registration statement on
Form  S-1 with the Securities and Exchange Commission with respect to a proposed
offering of an additional 1,250,000 shares of its Class A Common Stock, which is
expected  to  have  estimated  net  proceeds  of  $22.9  million.

The  Holding  Company,  through  its  wholly  owned  business  trusts  Intervest
Statutory  Trust  I,  II, III and IV, has issued a total of $60 million of trust
preferred securities at both fixed and variable rates of interest that mature in
2031  or  later.  The total proceeds from these securities have been invested in
the  Bank at various times through capital contributions. The Holding Company is
required  to  make interest payments on the principal of those securities, which
currently  amount  to  $4.4 million annually. The Bank provides funds to Holding
Company  in  the  form  of  dividends  for  this  purpose.  At  June  30,  2005,
approximately  $32.7  million  of  the  trust  preferred securities qualified as
regulatory  Tier  1 capital and the remainder qualified as Tier 2 capital in the
Holding  Company's  computation  of  regulatory  capital.

Additional  information  concerning  outstanding  time  deposits, debentures and
trust  preferred  securities, including interest rates and maturity dates can be
found  in  notes 6, 7 and 8 of the notes to the condensed consolidated financial
statements  included  in  this  report.

At  June  30,  2005,  total  commitments  to  lend aggregated to $196.6 million.
Although  there  is  no  certainty, management anticipates the majority of these
loan  commitments  will  fund  over the next 12 months. If all these commitments
were to close, they would be funded by the sources of funds described above. The
Company  considers  its  current  liquidity  and  sources of funds sufficient to
satisfy  its  outstanding  lending  commitments  and  its  maturing liabilities.
Management  is  not  aware  of  any  trends,  known  demand,  commitments  or
uncertainties  which  are expected to have a material impact on future operating
results,  liquidity  or  capital  resources.


                                       33
<PAGE>
REGULATORY CAPITAL

The  Bank  is  subject  to  various regulatory capital requirements. 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 initiate certain mandatory and possibly
additional  discretionary  actions  by the regulators that, if undertaken, could
have  a  direct  material  effect  on  the  Company's  consolidated  financial
statements.

The  Bank is required to maintain regulatory defined minimum Tier 1 leverage and
Tier  1and  total  risk-based  capital  ratio  levels of at least 4%, 4% and 8%,
respectively.  At  June 30, 2005 and December 31, 2004, management believes  the
Bank met its capital adequacy requirements and is a well-capitalized institution
as  defined in the regulations, which require minimum Tier 1 leverage and Tier 1
and  total  risk-based ratios of 5%, 6% and 10%, respectively. Management is not
aware  of any conditions or events that would change the Bank's designation as a
well-capitalized  institution.

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

<TABLE>
<CAPTION>
                                                                                At June 30,    At December 31,
                                                                                -----------    ---------------
          ($in thousands)                                                          2005             2004
          -----------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
          Tier 1 Capital:   Stockholder's equity                            $       121,251   $        111,343
                            Disallowed portion of deferred tax asset                 (5,382)            (4,619)
                                                                            -----------------------------------
                                                                                    115,869            106,724
          Tier 2 Capital:   Allowable portion of allowance for loan losses           12,219             10,689
          -----------------------------------------------------------------------------------------------------
          Total risk-based capital                                          $       128,088   $        117,413
          -----------------------------------------------------------------------------------------------------
          Net risk-weighted assets                                          $     1,144,214   $        971,823
          Average assets for regulatory purposes                            $     1,307,663   $      1,140,624
          -----------------------------------------------------------------------------------------------------
          Tier 1 capital to average assets                                             8.86%              9.36%
          Tier 1 capital to risk-weighted assets                                      10.13%             10.98%
          Total capital to risk-weighted assets                                       11.19%             12.08%
          -----------------------------------------------------------------------------------------------------
</TABLE>

The  Holding  Company  on  a consolidated basis is subject to minimum regulatory
capital  requirements  administered by the FRB. These guidelines require a ratio
of  Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted
assets of at least 4% and a ratio of total capital to risk-weighted assets of at
least  8%.  The  guidelines  also  require a ratio of Tier 1 capital to adjusted
total  average  assets  of  not  less than 3%. At June 30, 2005 and December 31,
2004,  management  believes  that  the  Holding Company met its capital adequacy
requirements.

Information  regarding  the  Holding  Company's  regulatory  capital and related
ratios  is  summarized  below:

<TABLE>
<CAPTION>
                                                                                      At June 30,      At December 31,
                                                                                   -----------------  -----------------
          ($ in thousands)                                                                2005               2004
          -------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>
          Tier 1 Capital:   Stockholder's equity                                   $         97,975   $         90,094
                            Capital Securities limited to 25% of core capital (1)            32,659             30,032
                                                                                   ------------------------------------
          Total core capital elements                                                       130,634            120,126
                            Disallowed portion of deferred tax asset                         (5,800)            (5,095)
          -------------------------------------------------------------------------------------------------------------
          Total Tier 1 Capital                                                              124,834            115,031
          -------------------------------------------------------------------------------------------------------------
          Tier 2 Capital :  Excess Capital Securities (1)                                    27,341             29,968
                            Allowable portion of allowance for loan losses                   12,591             11,106
          -------------------------------------------------------------------------------------------------------------
          Total Tier 2 Capital                                                               39,932             41,074
          -------------------------------------------------------------------------------------------------------------
          Total risk-based capital                                                 $        164,766   $        156,105
          -------------------------------------------------------------------------------------------------------------
          Net risk-weighted assets                                                 $      1,264,309   $      1,096,711
          Average assets for regulatory purposes                                   $      1,433,438   $      1,273,770
          -------------------------------------------------------------------------------------------------------------
          Tier 1 capital to average assets                                                     8.71%              9.03%
          Tier 1 capital to risk-weighted assets                                               9.87%             10.49%
          Total capital to risk-weighted assets                                               13.03%             14.23%
          -------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  At  June  30,  2005,  the  Company  has $60.0 million of qualifying capital
securities  outstanding  (total  debentures of $61.9 million issued to Statutory
Trust  I,  II,  III  and  IV  by  the Holding Company less the Holding Company's
investments  in  the  trusts  aggregating  $1.9  million).


                                       34
<PAGE>
Intervest  Securities  Corporation  is  subject to the SEC's Uniform Net Capital
Rule  [15c3-1  (a)  (2)  (vi)],  which  requires  the maintenance of minimum net
capital  of $5,000. At June 30, 2005 and December 31, 2004, Intervest Securities
Corporation's  net  capital  was  $0.5  million.

The  Federal Reserve Bank on March 1, 2005 issued a final rule that allows trust
preferred  securities  to  continue to be included in the Tier 1 capital of bank
holding  companies  (BHC),  but  with  stricter  quantitative limits and clearer
qualitative  standards.  The  new  rule provides a transition period for BHCs to
meet  the  new,  stricter  limitations within regulatory capital by allowing the
limits on restricted core capital elements to become fully effective as of March
31,  2009.  For  a  further discussion of these regulatory implications, see the
section  entitled  "Recent  Accounting and Regulatory Developments" in note 1 to
consolidated  financial  statements  included  in the Company's Annual Report on
Form  10-K  for  the  year  ended  December  31,  2004.

                         ASSET AND LIABILITY MANAGEMENT
                         ------------------------------

Interest  rate  risk  arises  from  differences  in  the repricing of assets and
liabilities  within a given time period. The Company does note engage in trading
or  hedging activities, nor does it invest in interest rate derivatives or enter
into  interest  rate  swaps.  The  primary  objective  of  the  Company's
asset/liability  management strategy is to limit, within established guidelines,
the  adverse  impact of changes in interest rates on its net interest income and
capital.

The  Company  uses  "gap  analysis,"  which  measures  the  difference  between
interest-earning  assets and interest-bearing liabilities that mature or reprice
within  a  given time period, to monitor its interest rate sensitivity. An asset
or  liability  is  normally  considered to be interest-rate sensitive if it will
reprice  or mature within one year or less. The interest-rate sensitivity gap is
the  difference between interest-earning assets and interest-bearing liabilities
scheduled  to  mature  or  reprice within one-year. A gap is considered positive
when the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive  liabilities.  Conversely,  a gap is considered negative when the
opposite  is  true.

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

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

The  Company's  one-year  positive  interest  rate  sensitivity gap increased to
$404.3  million , or 26.7% of total assets, at June 30, 2005, compared to $114.0
million,  or  8.7%  at  December  31,  2004.  The  increase  in the positive gap
primarily  reflects  an increase in loans that reprice or mature within one year
funded  by  time  deposits  with  terms  of  more  than  1 year. For purposes of
computing the gap, all deposits with no stated maturities are treated as readily
accessible  accounts.  However,  if  such deposits were treated differently, the
one-year  gap  would  then  change.  The  behavior  of  core  depositors may not
necessarily  result  in  the  immediate withdrawal of funds in the event deposit
rates  offered by the Bank did not change as quickly and uniformly as changes in
general  market  rates.  For  example,  if  only  25% of deposits with no stated
maturity were assumed to be readily accessible, the one-year gap would have been
a positive 38.0% at June 30, 2005, compared to a positive 22.5 % at December 31,
2004.


                                       35
<PAGE>
Many  of the Company's floating-rate loans have a "floor," or minimum rate, that
is determined in relation to prevailing market rates on the date of origination.
This floor only adjusts upwards in the event of increases in the loan's interest
rate.  This  feature  reduces  the  effect  on interest income of a falling rate
environment  because  the  interest  rates  on such loans do not reset downward.
However,  the Company may nonetheless experience loan prepayments, the amount of
which  cannot  be predicted, and reinvestment risk associated with the resulting
proceeds.

Notwithstanding  all  of the above, there can be no assurances that a sudden and
substantial  increase  in  interest rates may not adversely impact the Company's
earnings,  to the extent that the interest rates borne by assets and liabilities
do  not  change  at  the  same  speed, to the same extent, or on the same basis.

The  table  that follows summarizes interest-earning assets and interest-bearing
liabilities  as of June 30, 2005, that are scheduled to mature or reprice within
the  periods  shown.

<TABLE>
<CAPTION>
                                                      0-3       4-12    Over 1-4     Over 4
                                                      ---       ----    --------     -------
     ($in thousands)                               Months     Months       Years       Years        Total
     -----------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>        <C>         <C>         <C>
     Loans (1)                                   $419,457   $335,438   $ 320,717   $ 110,464   $1,186,076
     Securities held to maturity (2)               35,801    102,618      92,106       1,105      231,630
     Short-term investments                        68,131          -           -           -       68,131
     FRB and FHLB stock                             3,519          -           -       2,464        5,983
     -----------------------------------------------------------------------------------------------------
     Total rate-sensitive assets                 $526,908   $438,056   $ 412,823   $ 114,033   $1,491,820
     -----------------------------------------------------------------------------------------------------
     Deposit accounts (3):
       Interest checking deposits                $  9,167   $      -   $       -   $       -   $    9,167
       Savings deposits                            22,214          -           -           -       22,214
       Money market deposits                      195,033          -           -           -      195,033
       Certificates of deposit                     73,839    239,186     455,968     216,352      985,345
     -----------------------------------------------------------------------------------------------------
       Total deposits                             300,253    239,186     455,968     216,352    1,211,759
     -----------------------------------------------------------------------------------------------------
     Debentures and mortgage note payable (1)      13,500      5,500      70,188      66,914      156,102
     Accrued interest on all borrowed funds (1)     1,450        757       4,353         359        6,919
     -----------------------------------------------------------------------------------------------------
     Total borrowed funds                          14,950      6,257      74,541      67,273      163,021
     -----------------------------------------------------------------------------------------------------
     Total rate-sensitive liabilities            $315,203   $245,443   $ 530,509   $ 283,625   $1,374,780
     -----------------------------------------------------------------------------------------------------
     GAP (repricing differences)                 $211,705   $192,613   $(117,686)  $(169,592)  $  117,040
     -----------------------------------------------------------------------------------------------------
     Cumulative GAP                              $211,705   $404,318   $ 286,632   $ 117,040   $  117,040
     -----------------------------------------------------------------------------------------------------
     Cumulative GAP to total assets                  14.0%      26.7%       19.0%        7.7%         7.7%
     -----------------------------------------------------------------------------------------------------
</TABLE>
     Significant assumptions used in preparing the preceding gap table follow:

     (1)  Floating-rate  loans and debentures payable are included in the period
     in  which  their interest rates are next scheduled to adjust rather than in
     the  period  in  which they mature. Fixed-rate loans and debentures payable
     are  scheduled,  including  repayments,  according  to  their  contractual
     maturities.  Deferred  loan  fees  are  excluded  from  this  analysis; (2)
     securities  are  scheduled  according  to  the earlier of their contractual
     maturity  or  the date in which the interest rate is scheduled to increase.
     The effects of possible prepayments that may result from the issuer's right
     to call a security before its contractual maturity date are not considered;
     (3)  interest  checking,  savings and money market deposits are regarded as
     readily  accessible  withdrawable accounts; and certificates of deposit are
     scheduled  through  their  maturity  dates.

                           SARBANES OXLEY ACT OF 2002
                           --------------------------

The  requirements  of  Section  404 of the Sarbanes Oxley Act and Securities and
Exchange Commission rules and regulations require an annual management report on
the Company's internal controls over financial reporting, including, among other
matters,  management's assessment of the effectiveness of the Company's internal
control  over  financial  reporting,  and an attestation report by the Company's
independent  registered  public  accounting  firm  addressing these assessments.

Beginning  with  the  Company's  annual  report for the year ending December 31,
2006,  the  Company will have to include in its annual report on Form 10-K filed
with the Securities and Exchange Commission a report of management regarding the
Company's  internal  controls  over  financial  reporting in accordance with the
above  requirements.

In  this  regard,  the  Company  has  recently  begun  a process to document and
evaluate its internal control over financial reporting in order to satisfy these
requirements.  The  process  includes  dedicating  internal resources toward the
adoption  of  a  detailed  work  plan,  which will also involve the retention of
outside  consultants.


                                       36
<PAGE>

This  process  is  designed  to (i) assess and document the adequacy of internal
control  over financial reporting, (ii) take steps to improve control processes,
where  appropriate,  and  (iii)  verify  through  testing  that  controls  are
functioning  as  documented.  To  date,  the  Company  has  identified  certain
deficiencies  in  the design and operating effectiveness of its internal control
over  financial  reporting, and it believes that they have been corrected or are
in  the  process  of  being  corrected.  Although  this  process has just begun,
management  is  not  aware  of  any  "significant  deficiencies"  or  "material
weaknesses"  in  the  Company's  internals  control over financial reporting, as
defined in applicable Securities and Exchange Commission rules and regulations.

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  has  not  engaged in and accordingly has no risk
related  to trading accounts, commodities, foreign exchange, hedging activities,
interest  rate  derivatives  or  interest  rate swaps. The Company's market risk
arises  primarily  from  interest  rate  risk  inherent  in  its  lending  and
deposit-taking  activities,  and the issuance of its debentures. The measurement
of market risk associated with financial instruments is meaningful only when all
related and offsetting on-and off-balance sheet transactions are aggregated, and
the  resulting net positions are identified. Disclosures about the fair value of
financial  instruments  as of December 31, 2004, which reflect changes in market
prices  and  rates,  can  be  found  in  note  20  to the consolidated financial
statements  included  in  the  Company's Annual Report on Form 10-K for the year
ended December 31, 2004. Management believes that there have been no significant
changes  in  the  Company's  market  risk  exposure  since  December  31,  2004.

Management  actively  monitors  and  manages  the  Company's  interest rate risk
exposure.  The  primary  objective  in  managing interest rate risk is to limit,
within  its  established  guidelines,  the adverse impact of changes in interest
rates  on  the  Company's  net  interest  income  and  capital.  For  a  further
discussion,  see  the  section  "Asset and Liability Management" under Item 2 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.
The  Company made no significant changes in its internal controls over financial
reporting  or  in  other  factors that could significantly affect these controls
subsequent  to  June  30,  2005.

PART II. OTHER INFORMATION

ITEM  1.  LEGAL PROCEEDINGS
      Not  Applicable
ITEM  2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)   Not Applicable
(b)   Not Applicable
(c)   Not Applicable
ITEM  3.  DEFAULTS UPON SENIOR SECURITIES
(a)   Not Applicable
(b)   Not Applicable
ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a)   An  Annual  Meeting  of  Stockholders  was  held  on  May  26, 2005.
(b)   Pursuant  to  the Company's charter and bylaws, one-third of the directors
      are  elected  by  the  holders  of Class A common stock and two-thirds are
      elected  by holders of Class B common stock. On all other matters, Class A
      and  Class  B common stockholders vote together as a single class.


                                       37
<PAGE>
      Each  of the  persons  named  in  the Proxy Statement dated April 21, 2005
      as  a nominee for Director was elected for a one-year term expiring on the
      date of the next annual meeting (see Item 4-c).

(c)   The table that follows summarizes voting results on the matter submitted
      to the Company's common stockholders:

<TABLE>
<CAPTION>
                                               FOR     AGAINST OR WITHHELD  ABSTAINED
          ---------------------------------------------------------------------------
<S>                                         <C>        <C>                  <C>
          ELECTION OF DIRECTORS - CLASS A
          -------------------------------
          Michael A. Callen                 5,483,641               35,597          -
          Wayne F. Holly                    5,138,401              380,837          -
          Lawton Swan, III                  5,480,761               38,477          -
          ELECTION OF DIRECTORS - CLASS B
          -------------------------------
          Lawrence G. Bergman                 385,000                    -          -
          Jerome Dansker                      385,000                    -          -
          Lowell S. Dansker                   385,000                    -          -
          Paul DeRosa                         385,000                    -          -
          Stephen A. Helman                   385,000                    -          -
          Thomas E. Willett                   385,000                    -          -
          David J. Willmott                   385,000                    -          -
          Wesley T. Wood                      385,000                    -          -
          ---------------------------------------------------------------------------
</TABLE>

(d)  Not Applicable
ITEM  5.  OTHER INFORMATION
(a)  Not Applicable
(b)  Not Applicable
ITEM  6.  EXHIBITS
     The following exhibits are filed as part of this report.

 3.0 Bylaws  of  the  Company  as  amended,  incorporated  by  reference  to the
     Company's  report on Form 8-K dated June 23, 2005, wherein such document is
     identified  as  Exhibit  3.1.

 4.0 Form  of  Indenture  between  the  Company's subsidiary, Intervest Mortgage
     Corporation,  and  The  Bank  of  New  York  incorporated  by  reference to
     Intervest  Mortgage Corporation's Registration Statement on Form S-11 dated
     June  14,  2005,  wherein  such  document  is  identified  as  Exhibit 4.1.

10.0 Underwriting  Agreement  between  the  Company  and  Ryan  Beck & Co., Inc.
     and  Sandler  O'Neill  &  Partners,  L.P. dated as of August 10, 2005 filed
     herewith.

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

Date: August 10, 2005               By:  /s/ Jerome Dansker
                                    -----------------------
                                    Jerome Dansker, Chairman and Executive
                                    Vice President (Principal Executive Officer)




Date: August 10, 2005               By:  /s/ Lowell S. Dansker
                                    --------------------------
                                    Lowell S. Dansker, Vice Chairman, President
                                    and Treasurer (Principal Financial Officer)


                                       38