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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

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



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INTERVEST BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)



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

One Rockefeller Plaza, Suite 400

New York, New York 10020-2002

(Address of principal executive offices) (Zip
Code)

(212) 218-2800

(Registrants telephone number, including area code)

Not Applicable

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



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

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

Large Accelerated Filer ̈Accelerated Filer  x    Nonaccelerated Filer ̈

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

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



|                                                |  |                                           
|----------------------------------------------- |  | ------------------------------------------
|Title of Each Class:                            |  | Shares Outstanding:                       
|Class A Common Stock, $1.00 par value per share |  | 7,897, 451 outstanding as of July 31, 2007
|Class B Common Stock, $1.00 par value per share |  | 385,000 outstanding as of July 31, 2007   



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##### Table of Contents

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

FORM 10-Q

June 30, 2007

TABLE OF
CONTENTS



|                                                                                                                                 |  |     
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                 |  | Page
|PART I. FINANCIAL INFORMATION                                                                                                    |  |     
|                                                                                                                                 | 
|Item 1. Financial Statements                                                                                                     |  |     
|                                                                                                                                 | 
|Condensed Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006                                      |  | 3   
|                                                                                                                                 | 
|Condensed Consolidated Statements of Earnings (Unaudited) for the Quarters and Six-Months Ended June 30, 2007 and 2006           |  | 4   
|                                                                                                                                 | 
|Condensed Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the Six-Months Ended June 30, 2007 and 2006 |  | 5   
|                                                                                                                                 | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six-Months Ended June 30, 2007 and 2006                      |  | 6   
|                                                                                                                                 | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                 |  | 7   
|                                                                                                                                 | 
|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                                    |  | 19  
|                                                                                                                                 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                               |  | 34  
|                                                                                                                                 | 
|Item 4. Controls and Procedures                                                                                                  |  | 35  
|                                                                                                                                 | 
|PART II. OTHER INFORMATION                                                                                                       |  |     
|                                                                                                                                 | 
|Item 1. Legal Proceedings                                                                                                        |  | 35  
|                                                                                                                                 | 
|Item 1A. Risk Factors                                                                                                            |  | 35  
|                                                                                                                                 | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 35  
|                                                                                                                                 | 
|Item 3. Defaults Upon Senior Securities                                                                                          |  | 35  
|                                                                                                                                 | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                                      |  | 35  
|                                                                                                                                 | 
|Item 5. Other Information                                                                                                        |  | 36  
|                                                                                                                                 | 
|Item 6. Exhibits                                                                                                                 |  | 36  
|                                                                                                                                 | 
|Signatures                                                                                                                       |  | 36  
|                                                                                                                                 | 
|Certifications                                                                                                                   |  |     

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 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.



2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION



|ITEM 1. | Financial Statements
|------- | --------------------

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                                                                                                                            |             |               |           |           |                  |   |          
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------- | --------- | --------- | ---------------- | - | ---------
|($ in thousands, except par value)                                                                                                                          |             | June 30, 2007 |           |           | December 31,2006
|                                                                                                                                                            | (Unaudited) |               |           | (Audited)
|ASSETS                                                                                                                                                      |             |               |           |           |                  |   |          
|Cash and due from banks                                                                                                                                     |             | $             | 8,987     |           |                  | $ | 9,747    
|Federal funds sold                                                                                                                                          |             |               | 5,997     |           |                  |   | 13,662   
|Commercial paper and other short-term investments                                                                                                           |             |               | 24,337    |           |                  |   | 16,786   
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total cash and cash equivalents                                                                                                                             |             |               | 39,321    |           |                  |   | 40,195   
|Securities held to maturity, net (estimated fair value of $358,662 and $402,871, respectively)                                                              |             |               | 359,687   |           |                  |   | 404,015  
|Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                                                                              |             |               | 8,511     |           |                  |   | 6,938    
|Loans receivable (net of allowance for loan losses of $19,402 and $17,833, respectively)                                                                    |             |               | 1,599,089 |           |                  |   | 1,472,820
|Accrued interest receivable                                                                                                                                 |             |               | 12,125    |           |                  |   | 12,769   
|Loan fees receivable                                                                                                                                        |             |               | 9,979     |           |                  |   | 10,443   
|Premises and equipment, net                                                                                                                                 |             |               | 6,126     |           |                  |   | 6,379    
|Deferred income tax asset                                                                                                                                   |             |               | 9,331     |           |                  |   | 8,694    
|Deferred debenture offering costs, net                                                                                                                      |             |               | 4,605     |           |                  |   | 5,158    
|Investments in unconsolidated subsidiaries                                                                                                                  |             |               | 1,702     |           |                  |   | 1,702    
|Other assets                                                                                                                                                |             |               | 2,355     |           |                  |   | 2,640    
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total assets                                                                                                                                                |             | $             | 2,052,831 |           |                  | $ | 1,971,753
|                                                                                                                                                            |             |               |           |           |                  |   |          
|LIABILITIES                                                                                                                                                 |             |               |           |           |                  |   |          
|Deposits:                                                                                                                                                   |             |               |           |           |                  |   |          
|Noninterest-bearing demand deposit accounts                                                                                                                 |             | $             | 4,151     |           |                  | $ | 4,849    
|Interest-bearing deposit accounts:                                                                                                                          |             |               |           |           |                  |   |          
|Checking (NOW) accounts                                                                                                                                     |             |               | 6,021     |           |                  |   | 12,934   
|Savings accounts                                                                                                                                            |             |               | 9,387     |           |                  |   | 10,684   
|Money market accounts                                                                                                                                       |             |               | 232,709   |           |                  |   | 224,673  
|Certificate of deposit accounts                                                                                                                             |             |               | 1,384,019 |           |                  |   | 1,335,394
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total deposit accounts                                                                                                                                      |             |               | 1,636,287 |           |                  |   | 1,588,534
|Borrowed Funds:                                                                                                                                             |             |               |           |           |                  |   |          
|Federal Home Loan Bank advances                                                                                                                             |             |               | 48,000    |           |                  |   | 25,000   
|Subordinated debentures                                                                                                                                     |             |               | 81,750    |           |                  |   | 86,710   
|Subordinated debentures - capital securities                                                                                                                |             |               | 56,702    |           |                  |   | 56,702   
|Accrued interest payable on all borrowed funds                                                                                                              |             |               | 3,347     |           |                  |   | 4,282    
|Mortgage note payable                                                                                                                                       |             |               | 208       |           |                  |   | 215      
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total borrowed funds                                                                                                                                        |             |               | 190,007   |           |                  |   | 172,909  
|Accrued interest payable on deposits                                                                                                                        |             |               | 5,346     |           |                  |   | 4,259    
|Mortgage escrow funds payable                                                                                                                               |             |               | 26,567    |           |                  |   | 19,747   
|Official checks outstanding                                                                                                                                 |             |               | 13,013    |           |                  |   | 13,178   
|Other liabilities                                                                                                                                           |             |               | 3,891     |           |                  |   | 3,080    
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total liabilities                                                                                                                                           |             |               | 1,875,111 |           |                  |   | 1,801,707
|                                                                                                                                                            |             |               |           |           |                  |   |          
|STOCKHOLDERS EQUITY                                                                                                                                        |             |               |           |           |                  |   |          
|Preferred stock (300,000 shares authorized; none issued and outstanding)                                                                                    |             |               |          |           |                  |   |         
|Class A common stock ($1.00 par value; 12,000,000 shares authorized; 8,095,151 shares issued; and 7,979,951 and 7,986,595 shares outstanding, respectively) |             |               | 8,095     |           |                  |   | 7,986    
|Class B common stock ($1.00 par value; 700,000 shares authorized; 385,000 shares issued and outstanding)                                                    |             |               | 385       |           |                  |   | 385      
|Additional paid-in-capital, common                                                                                                                          |             |               | 76,931    |           |                  |   | 75,098   
|Retained earnings                                                                                                                                           |             |               | 95,185    |           |                  |   | 86,577   
|Treasury stock (115,200 shares, at cost)                                                                                                                    |             |               | (2,876    | )         |                  |   |         
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total stockholders equity                                                                                                                                  |             |               | 177,720   |           |                  |   | 170,046  
|                                                                                                                                                            |             |               |           |           |                  |   |          
|Total liabilities and stockholders equity                                                                                                                  |             | $             | 2,052,831 |           |                  | $ | 1,971,753
|                                                                                                                                                            |             |               |           |           |                  |   |          

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)



|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|---------------------------------------------------------------- |  | --------------------- | ------ | ------------------------ | ---- | - | ------ |  | ---- | ------ |  | - | ------
|                                                                 |  | Quarter EndedJune 30, |        | Six-Months EndedJune 30,
|($ in thousands, except per share data)                          |  | 2007                  |        |                          | 2006 |   | 2007   |  | 2006
|INTEREST AND DIVIDEND INCOME                                     |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Loans receivable                                                 |  | $                     | 28,652 |                          |      | $ | 28,203 |  | $    | 56,640 |  | $ | 55,134
|Securities                                                       |  |                       | 5,193  |                          |      |   | 3,222  |  |      | 10,180 |  |   | 5,969 
|Other interest-earning assets                                    |  |                       | 237    |                          |      |   | 312    |  |      | 527    |  |   | 700   
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Total interest and dividend income                               |  |                       | 34,082 |                          |      |   | 31,737 |  |      | 67,347 |  |   | 61,803
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|INTEREST EXPENSE                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Deposits                                                         |  |                       | 19,799 |                          |      |   | 15,516 |  |      | 38,536 |  |   | 30,075
|Subordinated debentures                                          |  |                       | 1,693  |                          |      |   | 1,817  |  |      | 3,464  |  |   | 3,725 
|Subordinated debentures - capital securities                     |  |                       | 886    |                          |      |   | 1,090  |  |      | 1,772  |  |   | 2,180 
|Other borrowed funds                                             |  |                       | 111    |                          |      |   | 224    |  |      | 412    |  |   | 247   
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Total interest expense                                           |  |                       | 22,489 |                          |      |   | 18,647 |  |      | 44,184 |  |   | 36,227
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Net interest and dividend income                                 |  |                       | 11,593 |                          |      |   | 13,090 |  |      | 23,163 |  |   | 25,576
|Provision for loan losses                                        |  |                       | 715    |                          |      |   | 589    |  |      | 1,569  |  |   | 950   
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Net interest and dividend income after provision for loan losses |  |                       | 10,878 |                          |      |   | 12,501 |  |      | 21,594 |  |   | 24,626
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|NONINTEREST INCOME                                               |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Customer service fees                                            |  |                       | 77     |                          |      |   | 100    |  |      | 156    |  |   | 259   
|Income from mortgage lending activities                          |  |                       | 392    |                          |      |   | 540    |  |      | 659    |  |   | 789   
|Income from the early repayment of mortgage loans                |  |                       | 1,380  |                          |      |   | 972    |  |      | 2,626  |  |   | 2,646 
|Gain (loss) from early call of investment securities             |  |                       | (7     | )                        |      |   |       |  |      | 3      |  |   |      
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Total noninterest income                                         |  |                       | 1,842  |                          |      |   | 1,612  |  |      | 3,444  |  |   | 3,694 
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|NONINTEREST EXPENSES                                             |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Salaries and employee benefits                                   |  |                       | 1,291  |                          |      |   | 1,304  |  |      | 2,666  |  |   | 2,763 
|Occupancy and equipment, net                                     |  |                       | 495    |                          |      |   | 425    |  |      | 958    |  |   | 828   
|FDIC and general insurance                                       |  |                       | 438    |                          |      |   | 94     |  |      | 534    |  |   | 182   
|Professional fees and services                                   |  |                       | 245    |                          |      |   | 310    |  |      | 475    |  |   | 535   
|Data processing                                                  |  |                       | 214    |                          |      |   | 180    |  |      | 415    |  |   | 358   
|Director and committee fees                                      |  |                       | 85     |                          |      |   | 100    |  |      | 173    |  |   | 222   
|Stationery, printing and supplies                                |  |                       | 53     |                          |      |   | 60     |  |      | 115    |  |   | 113   
|Advertising and promotion                                        |  |                       | 48     |                          |      |   | 79     |  |      | 109    |  |   | 151   
|Postage and delivery                                             |  |                       | 35     |                          |      |   | 33     |  |      | 70     |  |   | 74    
|Foreclosed real estate                                           |  |                       | 53     |                          |      |   |       |  |      | 53     |  |   |      
|Loss on early extinguishment of debentures                       |  |                       | 6      |                          |      |   |       |  |      | 19     |  |   |      
|All other                                                        |  |                       | 154    |                          |      |   | 147    |  |      | 299    |  |   | 302   
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Total noninterest expenses                                       |  |                       | 3,117  |                          |      |   | 2,732  |  |      | 5,886  |  |   | 5,528 
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Earnings before income taxes                                     |  |                       | 9,603  |                          |      |   | 11,381 |  |      | 19,152 |  |   | 22,792
|Provision for income taxes                                       |  |                       | 4,236  |                          |      |   | 4,973  |  |      | 8,432  |  |   | 9,964 
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Net earnings                                                     |  | $                     | 5,367  |                          |      | $ | 6,408  |  | $    | 10,720 |  | $ | 12,828
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       
|Basic earnings per share                                         |  | $                     | 0.64   |                          |      | $ | 0.82   |  | $    | 1.28   |  | $ | 1.64  
|Diluted earnings per share                                       |  | $                     | 0.63   |                          |      | $ | 0.77   |  | $    | 1.25   |  | $ | 1.54  
|Cash dividends per share                                         |  | $                     | 0.25   |                          |      | $ |       |  | $    | 0.25   |  | $ |      
|                                                                 |  |                       |        |                          |      |   |        |  |      |        |  |   |       

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in
Stockholders Equity

(Unaudited)



|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|---------------------------------------------------- | ------ | ------------------------- | - | ------ | - | ------- | ------ |  | --------- |  | - | -------
|($ thousands)                                        |        | Six-Months Ended June 30,
|                                                     | 2007   |                           |   | 2006  
|                                                     | Shares |                           |   | Amount |   |         | Shares |  | Amount   
|CLASS A COMMON STOCK                                 |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at beginning of period                       |        | 7,986,595                 |   |        | $ | 7,986   |        |  | 7,438,058 |  | $ | 7,438  
|Issuance of shares upon the conversion of debentures |        | 108,556                   |   |        |   | 109     |        |  | 25,847    |  |   | 26     
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at end of period                             |        | 8,095,151                 |   |        |   | 8,095   |        |  | 7,463,905 |  |   | 7,464  
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|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                       |        |                           |   |        |   | 75,098  |        |  |           |  |   | 65,309 
|Issuance of shares upon the conversion of debentures |        |                           |   |        |   | 1,833   |        |  |           |  |   | 381    
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at end of period                             |        |                           |   |        |   | 76,931  |        |  |           |  |   | 65,690 
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|RETAINED EARNINGS                                    |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at beginning of period                       |        |                           |   |        |   | 86,577  |        |  |           |  |   | 63,046 
|Net earnings for the period                          |        |                           |   |        |   | 10,720  |        |  |           |  |   | 12,828 
|Dividends on common stock                            |        |                           |   |        |   | (2,112  | )      |  |           |  |   |        
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at end of period                             |        |                           |   |        |   | 95,185  |        |  |           |  |   | 75,874 
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|TREASURY STOCK                                       |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at beginning of period                       |        |                          |   |        |   |        |        |  |           |  |   |       
|Class A common stock repurchased                     |        | (115,200                  | ) |        |   | (2,876  | )      |  |           |  |   |       
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|Balance at end of period                             |        | (115,200                  | ) |        |   | (2,876  | )      |  |           |  |   |       
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        
|Total stockholders equity at end of period          |        | 8,364,951                 |   |        | $ | 177,720 |        |  | 7,848,905 |  | $ | 149,413
|                                                     |        |                           |   |        |   |         |        |  |           |  |   |        

See accompanying notes to condensed consolidated financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                    |  |                          |          |   |      |   |          |  
|----------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                    |  | Six-Months EndedJune 30, |         
|($ in thousands)                                                                    |  | 2007                     |          |   | 2006 |  
|OPERATING ACTIVITIES                                                                |  |                          |          |   |      |   |          |  
|Net earnings                                                                        |  | $                        | 10,720   |   |      | $ | 12,828   |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                          |          |   |      |   |          |  
|Depreciation and amortization                                                       |  |                          | 316      |   |      |   | 275      |  
|Provision for loan losses                                                           |  |                          | 1,569    |   |      |   | 950      |  
|Deferred income tax benefit                                                         |  |                          | (637     | ) |      |   | (331     | )
|Amortization of deferred debenture offering costs                                   |  |                          | 520      |   |      |   | 563      |  
|Loss on the early extinguishment of debentures                                      |  |                          | 19       |   |      |   |         |  
|Amortization of premiums (accretion) of discounts and deferred loan fees, net       |  |                          | (3,956   | ) |      |   | (5,537   | )
|Net decrease in accrued interest payable on debentures                              |  |                          | (133     | ) |      |   | (1,027   | )
|Net decrease in official checks outstanding                                         |  |                          | (165     | ) |      |   | (161     | )
|Net decrease (increase) in loan fees receivable                                     |  |                          | 464      |   |      |   | (654     | )
|Net change in all other assets and liabilities                                      |  |                          | 6,215    |   |      |   | 2,635    |  
|                                                                                    |  |                          |          |   |      |   |          |  
|Net cash provided by operating activities                                           |  |                          | 14,932   |   |      |   | 9,541    |  
|                                                                                    |  |                          |          |   |      |   |          |  
|INVESTING ACTIVITIES                                                                |  |                          |          |   |      |   |          |  
|Maturities and calls of securities held to maturity                                 |  |                          | 91,857   |   |      |   | 61,785   |  
|Purchases of securities held to maturity                                            |  |                          | (47,200  | ) |      |   | (110,859 | )
|Net increase in loans receivable                                                    |  |                          | (127,575 | ) |      |   | (70,886  | )
|Purchases of FRB and FHLB stock, net                                                |  |                          | (1,573   | ) |      |   | (572     | )
|Purchases of premises and equipment, net                                            |  |                          | (63      | ) |      |   | (126     | )
|                                                                                    |  |                          |          |   |      |   |          |  
|Net cash used in investing activities                                               |  |                          | (84,554  | ) |      |   | (120,658 | )
|                                                                                    |  |                          |          |   |      |   |          |  
|FINANCING ACTIVITIES                                                                |  |                          |          |   |      |   |          |  
|Net increase in deposits                                                            |  |                          | 47,753   |   |      |   | 75,625   |  
|Net increase in mortgage escrow funds payable                                       |  |                          | 6,820    |   |      |   | 3,142    |  
|Net increase in short-term FHLB advances                                            |  |                          | 23,000   |   |      |   |         |  
|Principal repayments of debentures and mortgage note payable                        |  |                          | (3,837   | ) |      |   | (4,757   | )
|Debenture issuance costs                                                            |  |                          |         |   |      |   | (69      | )
|Class A common stock repurchased                                                    |  |                          | (2,876   | ) |      |   |         |  
|Cash dividends paid to common stockholders                                          |  |                          | (2,112   | ) |      |   |         |  
|                                                                                    |  |                          |          |   |      |   |          |  
|Net cash provided by financing activities                                           |  |                          | 68,748   |   |      |   | 73,941   |  
|                                                                                    |  |                          |          |   |      |   |          |  
|Net decrease in cash and cash equivalents                                           |  |                          | (874     | ) |      |   | (37,176  | )
|Cash and cash equivalents at beginning of period                                    |  |                          | 40,195   |   |      |   | 56,716   |  
|                                                                                    |  |                          |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                          |  | $                        | 39,321   |   |      | $ | 19,540   |  
|                                                                                    |  |                          |          |   |      |   |          |  
|SUPPLEMENTAL DISCLOSURES                                                            |  |                          |          |   |      |   |          |  
|Cash paid during the period for:                                                    |  |                          |          |   |      |   |          |  
|Interest                                                                            |  | $                        | 42,686   |   |      | $ | 36,277   |  
|Income taxes                                                                        |  |                          | 7,875    |   |      |   | 12,181   |  
|Noncash activities:                                                                 |  |                          |          |   |      |   |          |  
|Loans transferred to foreclosed real estate                                         |  |                          | 975      |   |      |   |         |  
|Conversion of debentures and accrued interest into Class A common stock             |  |                          | 1,942    |   |      |   | 407      |  
|                                                                                    |  |                          |          |   |      |   |          |  

See accompanying notes to condensed consolidated financial statements.



6



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)

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

The condensed consolidated financial statements of Intervest Bancshares Corporation and Subsidiaries in this report have not been audited except for information derived
from the 2006 audited consolidated financial statements and notes thereto. The condensed consolidated financial statements in this report should be read in conjunction with the 2006 audited consolidated financial statements and notes thereto
included in the Companys annual report on Form 10-K for the year ended December 31, 2006.

All significant intercompany balances and
transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to United States generally accepted accounting principles and to general practices within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements, and
revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the estimated
fair values of financial instruments. 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. Certain information and note disclosures
normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

Note 2Description of Business

Intervest Bancshares Corporation
is a registered financial holding company referred to by itself as the Holding Company. At June 30, 2007, its wholly owned consolidated subsidiaries consisted of Intervest National Bank (the Bank) and Intervest Mortgage
Corporation. All the entities are referred to collectively as the Company on a consolidated basis. The Holding Companys primary business is the ownership and operation of its subsidiaries. It does not engage in any other
substantial business activities other than a limited amount of real estate mortgage lending, including the participation in loans originated by the Bank. From time to time, the Holding Company also issues debt and equity securities to raise funds
for working capital purposes. The Holding Company also has four wholly owned subsidiaries, Intervest Statutory Trust II, III, IV and V, that are unconsolidated entities as required by Financial Accounting Standards Board (FASB) Interpretation
No. 46-R, Consolidation of Variable Interest Entities.

In October 2006, the limited operations of Intervest Securities Corporation,
another wholly owned subsidiary of the Holding Company, were discontinued. Intervest Securities Corporation was a broker/dealer whose business activities were not material to the consolidated financial statements. Its only revenues had been derived
from participating as a selected dealer from time to time in offerings of debt securities of primarily those of Intervest Mortgage Corporation.

The
offices of the Holding Company, Intervest Mortgage 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 Companys primary business segment is banking and real estate lending. Its lending activities are comprised
almost entirely of the origination for its loan portfolio mortgage loans secured by commercial and multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping
centers, hotels, restaurants, industrial properties, parking lots/garages and vacant land). Loans in the portfolio had an average life of approximately 3.5 years at June 30, 2007. The Company tends to lend in areas that are in the process of
being revitalized or redeveloped, with a concentration of loans on properties located in New York State and the State of Florida. A large number of the properties in New York are located in Manhattan, Brooklyn, Queens and the Bronx. A large number
of the properties in Florida are located in Clearwater, Tampa, St. Petersburg, Fort Lauderdale, Miami, and Orlando. Many of the multifamily properties located in New York City and surrounding boroughs are also subject to rent control and rent
stabilization laws, which limit the ability of the property owners to increase rents, which may in turn limit the borrowers ability to repay those mortgage loans. At June 30, 2007, the Company also had loans on properties in Alabama,
Connecticut, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Maryland, Michigan, New Jersey, North Carolina, Ohio and Pennsylvania.



7



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 2Description of BusinessContinued



The 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 six full-service banking offices in Pinellas County, Floridafive in Clearwater and one in South Pasadena. The Bank opened its sixth branch office in Florida in December 2006.

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 mainly used to
originate mortgage loans secured by commercial and multifamily real estate properties 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 lending business focuses on the origination of first mortgage and junior mortgage loans secured
by commercial and multifamily real estate properties. It also provides loan origination services to the Bank. Intervest Mortgage Corporation funds its loans through the issuance of subordinated debentures in public offerings.

Intervest Statutory Trust II, III, IV and V are business trusts that were formed for the sole purpose of issuing and administering trust preferred securities and they do
not conduct any trade or business. For a further discussion, see note 9 to the consolidated financials statements included in the Companys 2006 annual report on Form 10-K.

Note 3Securities

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



|                             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|---------------------------- |  | ------------------- |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | -------------------- | ----- | ------------ | - | ------- | -------------------------- | ---- | - |  | ----------
|($ in thousands)             |  | Number ofSecurities |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value |       | Wtd-AvgYield |   |         | Wtd-Avg Remaining Maturity
|At June 30, 2007             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|U.S. government agencies (1) |  | 212                 |  | $              | 352,655 |                        | $ | 132                     |  | $                    | 1,106 |              | $ | 351,681 |                            | 5.12 | % |  | 2.0 Years 
|Corporate                    |  | 7                   |  |                | 7,032   |                        |   | 2                       |  |                      | 53    |              |   | 6,981   |                            | 5.78 | % |  | 26.1 Years
|                             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|                             |  | 219                 |  | $              | 359,687 |                        | $ | 134                     |  | $                    | 1,159 |              | $ | 358,662 |                            | 5.14 | % |  | 2.4 Years 
|                             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|At December 31, 2006         |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|U.S. government agencies (1) |  | 221                 |  | $              | 398,005 |                        | $ | 120                     |  | $                    | 1,218 |              | $ | 396,907 |                            | 4.87 | % |  | 1.9 Years 
|Corporate                    |  | 6                   |  |                | 6,010   |                        |   |                        |  |                      | 46    |              |   | 5,964   |                            | 5.62 | % |  | 26.5 Years
|                             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           
|                             |  | 227                 |  | $              | 404,015 |                        | $ | 120                     |  | $                    | 1,264 |              | $ | 402,871 |                            | 4.88 | % |  | 2.3 Years 
|                             |  |                     |  |                |         |                        |   |                         |  |                      |       |              |   |         |                            |      |   |  |           

---

|(1) | Consist of debt obligations of FHLB, FNMA, FHLMC or FFCB.
|--- | ---------------------------------------------------------

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



|                         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|------------------------ |  | ------------------ |  | ----------------------- | ------- | ----------------------- | - | -------------------- |  | ----------------------- | ------- | -------------------- | - | ----------------------- |  | - | ------- |  | - | -----
|                         |  |                    |  | Less Than Twelve Months |         | Twelve Months or Longer |   | Total               
|($ in thousands)         |  | NumberofSecurities |  | Estimated Fair Value    |         | Gross Unrealized Losses |   | Estimated Fair Value |  | Gross Unrealized Losses |         | Estimated Fair Value |   | Gross Unrealized Losses
|At June 30, 2007         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|U.S. government agencies |  | 176                |  | $                       | 171,174 |                         | $ | 660                  |  | $                       | 130,114 |                      | $ | 446                     |  | $ | 301,288 |  | $ | 1,106
|Corporate                |  | 6                  |  |                         | 6,000   |                         |   | 53                   |  |                         |        |                      |   |                        |  |   | 6,000   |  |   | 53   
|                         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|                         |  | 182                |  | $                       | 177,174 |                         | $ | 713                  |  | $                       | 130,114 |                      | $ | 446                     |  | $ | 307,288 |  | $ | 1,159
|                         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|At December 31, 2006     |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|U.S. government agencies |  | 184                |  | $                       | 227,971 |                         | $ | 597                  |  | $                       | 113,510 |                      | $ | 621                     |  | $ | 341,481 |  | $ | 1,218
|Corporate                |  | 6                  |  |                         | 5,964   |                         |   | 46                   |  |                         |        |                      |   |                        |  |   | 5,964   |  |   | 46   
|                         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      
|                         |  | 190                |  | $                       | 233,935 |                         | $ | 643                  |  | $                       | 113,510 |                      | $ | 621                     |  | $ | 347,445 |  | $ | 1,264
|                         |  |                    |  |                         |         |                         |   |                      |  |                         |         |                      |   |                         |  |   |         |  |   |      

Management believes that the cause of the unrealized losses is directly related to changes in interest rates,
which is consistent with its experience. In general, as interest rates rise, the fair value of fixed rate securities will decrease; as interest rates fall, their fair value will increase. Nearly all of the securities in the portfolio have fixed
rates or have predetermined scheduled rate increases, and many have call features that allow the issuer to call the security at par before its stated maturity without penalty.



8



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3SecuritiesContinued



Management views the unrealized losses 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 Bank, which holds the portfolio, has the ability and intent to hold its investments for a period of time sufficient for the fair value of the securities to recover, which
may be at maturity. Historically, the Bank has always recovered the cost of its investment securities upon maturity. Management evaluates the securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when
economic or market concerns warrant such evaluation. There were no other-than-temporary impairment write-downs recorded, securities classified as available for sale, or sales of securities during the reporting periods.

The amortized cost and estimated fair value of securities held to maturity by remaining term to contractual maturity as of June 30, 2007 is as follows:



|                                       |  |                |         |                      |   |               |  |      |  
|-------------------------------------- |  | -------------- | ------- | -------------------- | - | ------------- |  | ---- | -
|($ in thousands)                       |  | Amortized Cost |         | Estimated Fair Value |   | Average Yield | 
|Due in one year or less                |  | $              | 118,808 |                      | $ | 118,581       |  | 4.82 | %
|Due after one year through five years  |  |                | 222,861 |                      |   | 222,237       |  | 5.27 |  
|Due after five years through ten years |  |                | 10,984  |                      |   | 10,863        |  | 5.45 |  
|Due after ten years                    |  |                | 7,032   |                      |   | 6,981         |  | 5.79 |  
|                                       |  |                |         |                      |   |               |  |      |  
|                                       |  | $              | 359,687 |                      | $ | 358,662       |  | 5.14 | %
|                                       |  |                |         |                      |   |               |  |      |  

Note 4Loans Receivable

Loans receivable are summarized as follows:



|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|-------------------------------------- |  | ---------------- |  | ------ | -------------------- | - | ---------- | --- | ------ | - | --------- | -
|                                       |  | At June 30, 2007 |  |        | At December 31, 2006 |  
|($ in thousands)                       |  | # of Loans       |  | Amount |                      |   | # of Loans |     | Amount |  
|Commercial real estate loans           |  | 297              |  | $      | 880,592              |   |            | 285 |        | $ | 812,063   |  
|Residential multifamily loans          |  | 244              |  |        | 702,781              |   |            | 228 |        |   | 634,753   |  
|Land development and other land loans  |  | 20               |  |        | 44,997               |   |            | 23  |        |   | 54,917    |  
|Residential 1-4 family loans           |  | 1                |  |        | 34                   |   |            | 1   |        |   | 35        |  
|Commercial business loans              |  | 19               |  |        | 717                  |   |            | 21  |        |   | 745       |  
|Consumer loans                         |  | 13               |  |        | 210                  |   |            | 12  |        |   | 218       |  
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|Loans receivable                       |  | 594              |  |        | 1,629,331            |   |            | 570 |        |   | 1,502,731 |  
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|Deferred loan fees                     |  |                  |  |        | (10,840              | ) |            |     |        |   | (12,078   | )
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|Loans receivable, net of deferred fees |  |                  |  |        | 1,618,491            |   |            |     |        |   | 1,490,653 |  
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|Allowance for loan losses              |  |                  |  |        | (19,402              | ) |            |     |        |   | (17,833   | )
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  
|Loans receivable, net                  |  |                  |  | $      | 1,599,089            |   |            |     |        | $ | 1,472,820 |  
|                                       |  |                  |  |        |                      |   |            |     |        |   |           |  

At June 30, 2007 and December 31, 2006, there were $22.1 million and $3.3 million of loans on a
nonaccrual status, respectively. These loans were considered impaired under the criteria of SFAS No.114. but no valuation allowance was maintained at any time since the Company believes that the estimated fair value of the underlying properties
exceeded the Companys recorded investment. At June 30, 2007 and December 31, 2006, there were no other loans classified as impaired. At June 30, 2007, one loan in the amount of $16.3 million was classified as ninety days past
due and still accruing interest since the loan was well secured and in the process of collection.

Interest income that was not recorded on nonaccrual
loans under their contractual terms amounted to $429,000 for the quarter ended June 30, 2007 and $599,000 for the six-months ended June 30, 2007, compared to $66,000 and $117,000, respectively, for the same periods of 2006. The average
principal balance of nonaccrual loans for the quarter and six-months ended June 30, 2007 was $14.5 million and $10.3 million, respectively, and $2.4 million and $2.7 million for the quarter and six-months ended June 30, 2006, respectively.

Note 5Allowance for Loan Losses

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



|                                |  |                       |        |                          |   |        |  |      |        |  |   |       
|------------------------------- |  | --------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                |  | Quarter EndedJune 30, |        | Six-Months EndedJune 30,
|($ in thousands)                |  | 2007                  |        | 2006                     |   | 2007   |  | 2006
|Balance at beginning of period  |  | $                     | 18,687 |                          | $ | 15,542 |  | $    | 17,833 |  | $ | 15,181
|Provision charged to operations |  |                       | 715    |                          |   | 589    |  |      | 1,569  |  |   | 950   
|                                |  |                       |        |                          |   |        |  |      |        |  |   |       
|Balance at end of period        |  | $                     | 19,402 |                          | $ | 16,131 |  | $    | 19,402 |  | $ | 16,131
|                                |  |                       |        |                          |   |        |  |      |        |  |   |       



9



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 6Deposits

Scheduled maturities of certificates of deposit accounts are as follows:



|                         |  |                  |           |                     |                      |   |        |   |                     |  |      |  
|------------------------ |  | ---------------- | --------- | ------------------- | -------------------- | - | ------ | - | ------------------- |  | ---- | -
|                         |  | At June 30, 2007 |           |                     | At December 31, 2006 |  
|($ in thousands)         |  | Amount           |           | Wtd-Avg Stated Rate |                      |   | Amount |   | Wtd-Avg Stated Rate | 
|Within one year          |  | $                | 582,526   |                     | 4.85                 | % |        | $ | 630,454             |  | 4.77 | %
|Over one to two years    |  |                  | 246,391   |                     | 4.62                 |   |        |   | 193,993             |  | 4.49 |  
|Over two to three years  |  |                  | 264,293   |                     | 4.74                 |   |        |   | 204,636             |  | 4.59 |  
|Over three to four years |  |                  | 99,721    |                     | 4.93                 |   |        |   | 178,767             |  | 4.71 |  
|Over four years          |  |                  | 191,088   |                     | 5.27                 |   |        |   | 127,544             |  | 5.36 |  
|                         |  |                  |           |                     |                      |   |        |   |                     |  |      |  
|                         |  | $                | 1,384,019 |                     | 4.85                 | % |        | $ | 1,335,394           |  | 4.75 | %
|                         |  |                  |           |                     |                      |   |        |   |                     |  |      |  

Certificate of deposit accounts of $100,000 or more totaled $539 million and $491 million at June 30, 2007
and December 31, 2006, respectively. At June 30, 2007, certificate of deposit accounts of $100,000 or more by remaining maturity were as follows: $214 million due within one year; $79 million due over one to two years; $105 million due
over two to three years; $42 million due over three to four years; and $99 million due over four years.

Note 7Subordinated Debentures and
Mortgage Note Payable

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



|                                                 |  |                       |  |                     |        |  |   |       
|------------------------------------------------ |  | --------------------- |  | ------------------- | ------ |  | - | ------
|($ in thousands)                                 |  | At June 30,2007       |  | At December 31,2006
|INTERVEST MORTGAGE CORPORATION:                  |  |                       |  |                     |        |  |   |       
|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 1/2% 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 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 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 
|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  |  |   | 3,000 
|Series 03/21/05interest at 6 1/2% fixed         |  | due April 1, 2011    |  |                     | 4,500  |  |   | 4,500 
|Series 03/21/05interest at 7% fixed             |  | due April 1, 2013    |  |                     | 6,500  |  |   | 6,500 
|Series 08/12/05interest at 6 1/4% fixed         |  | due October 1, 2009  |  |                     | 2,000  |  |   | 2,000 
|Series 08/12/05interest at 6 1/2% fixed         |  | due October 1, 2011  |  |                     | 4,000  |  |   | 4,000 
|Series 08/12/05interest at 7% fixed             |  | due October 1, 2013  |  |                     | 6,000  |  |   | 6,000 
|Series 06/12/06interest at 6 1/2% fixed         |  | due July 1, 2010     |  |                     | 2,000  |  |   | 2,000 
|Series 06/12/06interest at 6 3/4% fixed         |  | due July 1, 2012     |  |                     | 4,000  |  |   | 4,000 
|Series 06/12/06interest at 7% fixed             |  | due July 1, 2014     |  |                     | 10,000 |  |   | 10,000
|                                                 |  |                       |  |                     |        |  |   |       
|                                                 |  |                       |  |                     | 81,750 |  |   | 83,750
|INTERVEST BANCSHARES CORPORATION:                |  |                       |  |                     |        |  |   |       
|Series 05/14/98interest at 8% fixed             |  | due July 1, 2008     |  |                     |       |  |   | 1,710 
|Series 12/15/00interest at 9% fixed             |  | due April 1, 2008    |  |                     |       |  |   | 1,250 
|                                                 |  |                       |  |                     |        |  |   |       
|                                                 |  |                       |  |                     |       |  |   | 2,960 
|INTERVEST NATIONAL BANK:                         |  |                       |  |                     |        |  |   |       
|Mortgage note payable (1)  interest at 7% fixed |  | due February 1, 2017 |  |                     | 208    |  |   | 215   
|                                                 |  |                       |  |                     |        |  |   |       
|                                                 |  |                       |  | $                   | 81,958 |  | $ | 86,925
|                                                 |  |                       |  |                     |        |  |   |       

---

|(1) | The note cannot be prepaid except during the last year of its term.
|--- | -------------------------------------------------------------------



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 7Subordinated Debentures and Mortgage Note Payable, Continued



Intervest Bancshares Corporation repaid the following debentures during the six-months ended June 30, 2007:



| |  |  | Series 12/15/00 due 04/01/08 were repaid early on 3/1/07 for $1,250, 000 of principal and $13,000 of accrued interest.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Series 05/14/98 due 07/01/08 were repaid early on 5/1/07 for $580,000 of principal and $469,000 of accrued interest. Prior to the early redemption, a total of
$1,956,000 of debentures ($1,130,000 of principal and $826,000 of accrued interest) were converted (at the option of the debenture holders) into 108,556 shares of the Holding Companys Class A common stock at $18.00 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Intervest Mortgage Corporation repaid the following debentures during the six-months ended June 30, 2007:



| |  |  | Series 11/28/03 due 04/01/07 were repaid early on 2/1/07 for $2,000,000 of principal and $94,000 of accrued interest.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

Scheduled contractual maturities as of June 30, 2007 were as follows:



|                                                      |  |           |        |                  |   |      
|----------------------------------------------------- |  | --------- | ------ | ---------------- | - | -----
|($ in thousands)                                      |  | Principal |        | Accrued Interest
|For the period June 30, 2007 to December 31, 2007 (1) |  | $         | 5,508  |                  | $ | 1,559
|For the year ended December 31, 2008                  |  |           | 6,016  |                  |   |     
|For the year ended December 31, 2009                  |  |           | 10,767 |                  |   | 271  
|For the year ended December 31, 2010                  |  |           | 15,019 |                  |   | 438  
|For the year ended December 31, 2011                  |  |           | 13,020 |                  |   | 399  
|Thereafter                                            |  |           | 31,628 |                  |   | 514  
|                                                      |  |           |        |                  |   |      
|                                                      |  | $         | 81,958 |                  | $ | 3,181
|                                                      |  |           |        |                  |   |      

---

|(1) | Subsequent to June 30, 2007 and prior to the filing date of this report, Intervest Mortgage Corporation on August 1, 2007 repaid early the following debentures due
January 1, 2008: Series 8/5/02 were repaid for $3,000,000 in principal and $263,000 of accrued interest; and Series 6/7/04 were repaid for $2,500,000 of principal and $108,000 of accrued interest.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest is paid quarterly on Intervest Mortgage Corporations debentures except for the following debentures, which accrue and compound interest quarterly, with
such interest due and payable at maturity:



| |  |  | $0.1 million of Series 1/17/02, $0.6 million of Series 8/05/02, $1.3 million of Series 11/28/03, $1.4 million of Series 6/07/04
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | $1.9 million of Series 3/21/05, $1.8 million of Series 8/12/05 and $2.3 million of Series 6/12/06
| | - |  | -------------------------------------------------------------------------------------------------

The holders of Intervest Mortgage Corporations Series 1/17/02 through 8/12/05 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 January 1, 2008 for Series 6/7/04, April 1, 2009 for Series 3/21/05 and October 1, 2009 for Series 8/12/05). 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 may redeem its outstanding debentures at any time, in whole or in part, for face value, except for Series 6/12/06, which would be at a premium of 1% if they were redeemed prior to January 1, 2008. All the
debentures are unsecured and subordinate to all present and future senior indebtedness, as defined in the indenture related to each debenture.

Note
8Short-Term Borrowings and Lines of Credit

At June 30, 2007, the Bank had agreements with correspondent banks whereby it could borrow up to
$28 million on an unsecured basis. In addition, as a member of the Federal Home Loan Bank of New York (FHLB) and the Federal Reserve Bank of New York (FRB), the Bank can also borrow from these institutions on a secured basis. At June 30, 2007,
the Bank had available collateral consisting of investment securities to support additional total borrowings of $294 million from the FHLB and FRB.

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



|                                                   |  |                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------- |  | --------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                   |  | Quarter EndedJune 30, |        |   | Six-Months EndedJune 30, |  
|($ in thousands)                                   |  | 2007                  |        |   | 2006                     |   |        | 2007 |  |   | 2006   |  
|Balance at period end (1)                          |  | $                     | 48,000 |   |                          | $ |       |      |  | $ | 48,000 |   |  | $ |       |  
|Maximum amount outstanding at any month end        |  | $                     | 48,000 |   |                          | $ | 42,000 |      |  | $ | 48,000 |   |  | $ | 42,000 |  
|Average outstanding balance for the period         |  | $                     | 7,838  |   |                          | $ | 17,382 |      |  | $ | 14,844 |   |  | $ | 9,496  |  
|Weighted-average interest rate paid for the period |  |                       | 5.48   | % |                          |   | 5.08   | %    |  |   | 5.49   | % |  |   | 5.08   | %
|Weighted-average interest rate at period end       |  |                       | 5.40   | % |                          |   |       | %    |  |   | 5.40   | % |  |   |       | %
|                                                   |  |                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

---

|(1) | The entire outstanding amount is due at various times during July 2007.
|--- | -----------------------------------------------------------------------



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 9Common Stock Warrants

At June 30, 2007, the Holding Company had common stock warrants outstanding that entitle its current holder, the estate of the former Chairman of the Company, Jerome Dansker, to purchase one share of the Holding
Companys Class B common stock for each outstanding warrant. All warrants are vested and exercisable and they expire on January 31, 2008.

A
summary of the activity in the Holding Companys common stock warrants and related information for the six-months ended June 30, 2007 follows (intrinsic value is presented in thousands):



|                                                   |  |                            |          |        |   |                          |  |   |          |  |   |     
|-------------------------------------------------- |  | -------------------------- | -------- | ------ | - | ------------------------ |  | - | -------- |  | - | ----
|                                                   |  | Exercise Price Per Warrant |          | Totals |   | Wtd.-Avg. Exercise Price
|                                                   |  | $6.67                      |          | $10.00 |   |                         
|Outstanding at December 31, 2006 and June 30, 2007 |  |                            | 145,000  |        |   | 50,000                   |  |   | 195,000  |  | $ | 7.52
|Remaining contractual term at June 30, 2007        |  |                            | 7 Months |        |   | 7 Months                 |  |   | 7 Months |  |   |     
|Intrinsic value (1)                                |  | $                          | 3,116    |        | $ | 908                      |  | $ | 4,024    |  |   |     
|                                                   |  |                            |          |        |   |                          |  |   |          |  |   |     

---

|(1) | Intrinsic value represents the value of the Holding Companys Class A common stock (closing price of $28.16) on June 30, 2007 in excess of the exercise price
multiplied by the number of warrants outstanding. There is no trading market for the Class B common stock. The Class B common stock can be converted into Class A common stock at anytime on a share for share basis.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Holding Company maintains a Long Term Incentive Plan (the Plan) under which stock options and other forms of incentive compensation may be awarded to
officers, employees and directors of the Holding Company and its subsidiaries. The Plan provides for stock-based awards or other awards that offer the Plans participants the possibility of future value, depending on the long-term price
appreciation of the Holding Companys Class A common stock and the award holders continuing service with the Holding Company or any of its subsidiaries. The forms of awards permitted under the Plan include stock options, stock
appreciation rights, restricted stock or cash awards. The maximum number of shares of Class A common stock that may be awarded under the Plan is 750,000. There were no awards or related compensation expense recorded under this plan during the
periods covered in this report.

Note 10Stockholders Equity

The Holding Company is authorized to issue up to 13,000,000 shares of its capital stock, consisting of 12,000,000 shares of Class A common stock, 700,000 shares of Class B common stock and 300,000 shares of
preferred stock. The powers, preferences and rights, and the qualifications, limitations, and restrictions thereof on any series of preferred stock issued are determined by the Holding Companys board of directors. There is no preferred stock
issued and outstanding.

Class A and B common stock have equal voting rights as to all matters, except that, so long as at least 50,000 shares of
Class B common stock remain issued and outstanding, the holders of the outstanding shares of Class B common stock are entitled to vote for the election of two-thirds of the Holding Companys board of directors (rounded up to the nearest whole
number), and the holders of the outstanding shares of Class A common stock are entitled to vote for the remaining directors. The shares of Class B common stock are convertible, on a share-for-share basis, into Class A common stock at any
time.

On April 25, 2007, the Holding Companys board of directors approved the payment of the Holding Companys first annual cash dividend
of $0.25 per share on the Holding Companys outstanding Class A and Class B common stock. A dividend of $2.1 million was paid on June 15, 2007 to shareholders of record on the close of business June 1, 2007.

On April 25, 2007, the Holding Companys board of directors authorized a share repurchase plan. Under the plan, the Holding Company is authorized to purchase
up to $10 million of its outstanding shares of Class A common stock over a six-month period. The repurchases will be made in the open market at prevailing prices or in privately negotiated transactions in accordance with all applicable
securities laws and regulations. The plan does not obligate the Holding Company to acquire any particular amount of the Class A common stock and the plan may be suspended or discontinued at any time. During the second quarter of 2007, a total
of 115,200 shares of Class A common stock was repurchased under this plan at an aggregate cost of $2.9 million.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 11Income Taxes

On January 1, 2007, the Company adopted the FASB Interpretation (FIN) No. 48 Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement 109. FIN 48 establishes a single model to address
accounting for uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The Company applied the
provisions of FIN 48 to all of its tax positions as of January 1, 2007. There was no cumulative effect of applying the provisions of FIN 48 and there was no effect on the Companys provision for income taxes for the reporting periods in
this report.

The Holding Company and its subsidiaries file a consolidated federal income tax return and combined state and city income tax returns in New
York. The Bank files a state income tax return in Florida. All the returns are filed on a calendar year basis. The Company is no longer subject to examinations by taxing authorities as follows: Federal and New York Cityfor years prior to 2003;
and New York State and Floridafor years prior to 2005. The State of Florida commenced an examination of the Banks 2005 income tax return in the first quarter of 2007.

Note 12Earnings Per Share (EPS)

Basic and diluted EPS are calculated in accordance with SFAS No. 128,
Earnings per Share. 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).

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:



|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|--------------------------------------------------------------------- |  | ---------------------- | --------- | ------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                                      |  | Quarter Ended June 30, |           | Six-Months Ended June 30,
|($ in thousands, except share and per share amounts)                  |  | 2007                   |           | 2006                      |   | 2007      |  | 2006
|Basic Earnings Per Share:                                             |  |                        |           |                           |   |           |  |      |           |  |   |          
|Net earnings applicable to common stockholders                        |  | $                      | 5,367     |                           | $ | 6,408     |  | $    | 10,720    |  | $ | 12,828   
|Average number of common shares outstanding                           |  |                        | 8,416,248 |                           |   | 7,842,288 |  |      | 8,394,791 |  |   | 7,834,063
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Basic Earnings Per Share                                              |  | $                      | 0.64      |                           | $ | 0.82      |  | $    | 1.28      |  | $ | 1.64     
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Diluted Earnings Per Share:                                           |  |                        |           |                           |   |           |  |      |           |  |   |          
|Net earnings applicable to common stockholders                        |  | $                      | 5,367     |                           | $ | 6,408     |  | $    | 10,720    |  | $ | 12,828   
|Adjustment to net earnings from assumed conversion of debentures (1)  |  |                        | 11        |                           |   | 37        |  |      | 44        |  |   | 77       
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Adjusted net earnings for diluted earnings per share computation      |  | $                      | 5,378     |                           | $ | 6,445     |  | $    | 10,764    |  | $ | 12,905   
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Average number of common shares outstanding:                          |  |                        |           |                           |   |           |  |      |           |  |   |          
|Common shares outstanding                                             |  |                        | 8,416,248 |                           |   | 7,842,288 |  |      | 8,394,791 |  |   | 7,834,063
|Potential dilutive shares resulting from exercise of warrants (2)     |  |                        | 81,341    |                           |   | 327,963   |  |      | 83,832    |  |   | 319,658  
|Potential dilutive shares resulting from conversion of debentures (3) |  |                        | 80,450    |                           |   | 202,716   |  |      | 108,195   |  |   | 207,696  
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Total average number of common shares outstanding used for dilution   |  |                        | 8,578,039 |                           |   | 8,372,967 |  |      | 8,586,818 |  |   | 8,361,417
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          
|Diluted Earnings Per Share                                            |  | $                      | 0.63      |                           | $ | 0.77      |  | $    | 1.25      |  | $ | 1.54     
|                                                                      |  |                        |           |                           |   |           |  |      |           |  |   |          

---

|(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, 2006 totaled $3.2 million. There were no convertible debentures outstanding at June 30,
2007. The debentures were convertible into common stock at a price of $18.00 per share during 2007 and $16.00 per share during 2006, which result in additional common shares for fully diluted EPS calculations (based on average balances outstanding
during the applicable periods).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 13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 unfunded loan commitments, unused lines of credit and standby letters of credit, and may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated
financial statements. The Companys maximum exposure to credit risk is represented by the contractual amount of those instruments.

Commitments to
extend credit are agreements to lend funds to a customer as long as there is no violation of any condition established in the contract. Such commitments generally have fixed expiration dates or other termination clauses and normally require payment
of fees to the Company. Since some of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness
on a case-by-case basis. Standby letters of credit are conditional commitments issued by the Bank 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 originating loans.

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



|                          |  |                 |         |                     |   |        
|------------------------- |  | --------------- | ------- | ------------------- | - | -------
|($ in thousands)          |  | At June 30,2007 |         | At December 31,2006
|Unfunded loan commitments |  | $               | 163,927 |                     | $ | 107,848
|Unused lines of credit    |  |                 | 924     |                     |   | 939    
|Standby letters of credit |  |                 | 130     |                     |   | 100    
|                          |  |                 |         |                     |   |        
|                          |  | $               | 164,981 |                     | $ | 108,887
|                          |  |                 |         |                     |   |        

Note 14Regulatory Capital

The Company is subject to regulation, examination and supervision by the FRB. The Bank is also subject to regulation, examination and supervision by the Federal Deposit Insurance Corporation (FDIC) and the Office of
the Comptroller of the Currency of the United States of America (OCC).

The Holding Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet them can initiate certain mandatory and discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Companys and the
Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. These capital amounts are also subject to qualitative judgment by the regulators about components, risk weighting and other factors.

Quantitative measures established by the regulations to ensure capital adequacy require the Holding Company, on a consolidated basis, and the Bank to maintain minimum
amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets, as defined by the regulations.

In 2005,
the Federal Reserve issued a final rule that retains trust preferred securities in the Tier 1 capital of bank holding companies (BHC), but with stricter limitations on the use of such securities. The rule provides a transition period for BHCs to
meet the new, stricter limitations within regulatory capital by allowing the limits on restricted core capital elements to become fully effective as of March 31, 2009. Until March 31, 2009, BHCs generally must comply with the current Tier
1 capital limits. As of June 30, 2007 and December 31, 2006, assuming the Holding Company had excluded all of its eligible trust preferred securities (which totaled $55.0 million) from Tier 1 Capital and included such amount in Tier 2
capital, the Holding Company would still have exceed the well capitalized threshold under the regulatory framework for prompt corrective action.

Management believes that the Holding Company and the Bank met all capital adequacy requirements to which they are subject as of June 30, 2007 and December 31, 2006. As of June 30, 2007, the most recent notification from the
Banks regulators categorized the Bank as a well-capitalized institution under the regulatory framework for prompt corrective action, which requires minimum Tier 1 leverage and Tier 1 and total risk-based capital ratios of 5%, 6% and 10%,
respectively. Management is not aware of any current conditions or events outstanding that would change the designation from well capitalized.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 14Regulatory CapitalContinued



At June 30, 2007, the actual capital of the Bank on a percentage basis was as follows:



|                                                        |  |              |   |  |                    |   |  |                                  |  
|------------------------------------------------------- |  | ------------ | - |  | ------------------ | - |  | -------------------------------- | -
|                                                        |  | ActualRatios |   |  | MinimumRequirement |   |  | To Be ConsideredWell Capitalized |  
|Total capital to risk-weighted assets                   |  | 12.72        | % |  | 8.00               | % |  | 10.00                            | %
|Tier 1 capital to risk-weighted assets                  |  | 11.56        | % |  | 4.00               | % |  | 6.00                             | %
|Tier 1 capital to total average assets  leverage ratio |  | 9.87         | % |  | 4.00               | % |  | 5.00                             | %

At June 30, 2007, the actual capital of the Holding Company (consolidated) on a percentage basis was as
follows:



|                                                        |  |              |   |  |                    |   |  |                                 
|------------------------------------------------------- |  | ------------ | - |  | ------------------ | - |  | --------------------------------
|                                                        |  | ActualRatios |   |  | MinimumRequirement |   |  | To Be ConsideredWell Capitalized
|Total capital to risk-weighted assets                   |  | 14.46        | % |  | 8.00               | % |  | NA                              
|Tier 1 capital to risk-weighted assets                  |  | 13.35        | % |  | 4.00               | % |  | NA                              
|Tier 1 capital to total average assets  leverage ratio |  | 11.39        | % |  | 4.00               | % |  | NA                              

Note 15Contingencies

The Company is periodically a party to or otherwise involved in legal proceedings arising in the normal course of business, such as foreclosure proceedings. Based on review and consultation with legal counsel,
management does not believe that there is any pending or threatened proceeding against the Company, which, if determined adversely, would have a material effect on the business, results of operations, financial position or liquidity of the Company.

Note 16Recent Accounting Pronouncements

SFAS 159Fair Value Accounting. In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities. SFAS 159 allows companies to elect to follow fair value accounting for certain financial assets and liabilities in an effort to mitigate volatility in earnings without having to apply complex hedge accounting provisions. SFAS 159 is
applicable only to certain financial instruments and is effective beginning January 1, 2008. The Company is currently evaluating the provisions of SFAS 159 and its potential effect on its financial statements.

SFAS 158Accounting for Pension Plans. On January 1, 2007, the Company adopted SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans. SFAS 158 requires recognition in the consolidated statement of financial condition of the over or underfunded status of postretirement plans, measured as the difference between the fair value of the plan
assets and the benefit obligation. Currently, the Company does not offer any plans covered under this statement and therefore the adoption of this statement had no effect on the Companys financial statements.

SFAS 157Fair Value Measurements.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157, among other
things, defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an
instrument is carried at fair value. SFAS 157 is effective beginning January 1, 2008. The Company is currently evaluating the provisions of SFAS 157 and its potential effect on its financial statements.

SFAS 156Accounting for Servicing of Financial Assets. On January 1, 2007, the Company adopted SFAS No. 156, Accounting for Servicing
of Financial Assets. SFAS 156 amends SFAS 140 with respect to the accounting for separately recognized servicing assets and liabilities. SFAS 156 requires all separately-recognized servicing assets and liabilities to be initially measured at
fair value, and permits companies to elect, on a class-by-class basis, to account for servicing assets and liabilities on either a lower of cost or market value basis or a fair value basis. The adoption of this statement did not have any effect on
the Companys financial statements.

SFAS 155Accounting for Certain Hybrid Financial Instruments.On January 1, 2007, the
Company adopted SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This statement also resolves issues addressed in SFAS 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 16Recent Accounting PronouncementsContinued



SFAS 155 eliminates the exemption from applying SFAS 133 to interests in securitized financial assets so that similar
instruments are accounted for similarly regardless of the form of the instruments. SFAS 155 also allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a
remeasurement (new basis) event, on an instrument-by-instrument basis, in case in which a derivative would otherwise have to be bifurcated. The Company does not engage in trading or hedging activities, nor does it invest in interest rate derivatives
or enter into interest rate swaps. The adoption of this statement did not affect the Companys financial statements.

FIN 48Accounting for
Uncertainty in Income Taxes.As discussed in note 11, on January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109.

SAB 108Accounting for Misstatements. On January 1, 2007, the Company adopted the SECs Staff Accounting Bulletin
No. 108 (SAB 108), Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, providing guidance on quantifying financial statement misstatement and
implementation (e.g., restatement or cumulative effect to assets, liabilities and retained earnings) when first applying this guidance. The adoption of this statement did not affect the Companys financial statements.



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##### Table of Contents

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, 2007 and for the three and six-month periods ended June 30, 2007 and 2006 presented in this document, in accordance with the standards established by the Public Company Accounting Oversight
Board.

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



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##### Table of Contents

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,
2007 and the related condensed consolidated statements of earnings for the three- and six-month periods ended June 30, 2007 and 2006, and the related condensed consolidated statements of changes in stockholders equity and cash flows for
the six-month periods ended June 30, 2007 and 2006. These interim financial statements are the responsibility of the Companys management.

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

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the Company as of
December 31, 2006, and the related consolidated statements of earnings, changes in stockholders equity and cash flows for the year then ended (not presented herein); and in our report dated February 16, 2007, we, based on our audit
expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2006 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 26, 2007                          



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##### Table of Contents

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

Overview

The following managements discussion of financial condition and results
of operations of Intervest Bancshares Corporation and Subsidiaries should be read in conjunction with the accompanying quarterly condensed consolidated financial statements in this report on Form 10-Q as well as the entire annual report on
Form 10-K for the year ended December 31, 2006.

Intervest Bancshares Corporation is a registered financial holding company referred to by itself
in this report as the Holding Company. At June 30, 2007, its wholly owned consolidated subsidiaries consisted of Intervest National Bank (the Bank) and Intervest Mortgage Corporation. All the entities are referred to
collectively as the Company on a consolidated basis. The Holding Company also had four wholly owned unconsolidated subsidiaries, Intervest Statutory Trust II, III, IV and V, 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 revenues consist of interest, dividends and fees earned on its interest-earning assets, which are comprised of mortgage loans, securities and other short-term investments, and noninterest income. The Companys expenses consist of
interest paid on its interest-bearing liabilities, which are comprised of deposits, debentures and other short-term borrowings, as well as 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 interest expense incurred on its
interest-bearing liabilities. Net interest income is dependent upon the interest-rate spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest-rate spread will generate net interest income. The interest-rate spread is affected by interest rates, deposit flows and loan demand.

The Companys profitability is also affected by the level of its noninterest income and expenses, provision for loan losses and income tax expense. Noninterest
income consists mostly of loan and other banking fees as well as income from loan prepayments. When a mortgage loan is repaid prior to maturity, the Company may recognize prepayment income, which consists of the recognition of unearned fees
associated with such loans at the time of payoff and the receipt of additional prepayment fees and or interest in certain cases, in accordance with the prepayment provisions of the mortgage loan. The Companys income from loan prepayments
fluctuates and cannot be predicted. Normally, loan prepayments tend to increase during periods of declining interest rates and tend to decrease during periods of increasing interest rates. However, given the nature and type of the mortgage loans the
Company originates, including their short average life, the Company may still experience loan prepayments notwithstanding the effects of movements in interest rates. Noninterest expenses consist of the following: salaries and employee benefits,
occupancy and equipment, data processing, advertising and promotion, professional fees and services, FDIC insurance, general insurance and other operating and general expenses. The Companys profitability is also significantly affected by
general and local economic conditions, competition, changes in market interest rates, government policies and actions of regulatory authorities.

The
Companys loan portfolio is concentrated in mortgage loans secured by commercial and multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers,
hotels, restaurants, industrial properties, parking lots/garages and vacant land). Loans in the portfolio had an average life of approximately 3.5 years as of June 30, 2007. The Company does not own or originate sub prime single-family home
loans and construction/development loans.

The Company tends to lend in areas that are in the process of being revitalized or redeveloped, with a
concentration of loans on properties located in New York State and the State of Florida. A large number of the properties in New York are located in Manhattan, Brooklyn, Queens and the Bronx. A large number of the properties in Florida are located
in Clearwater, Tampa, St. Petersburg, Fort Lauderdale, Miami and Orlando. Many of the multifamily properties located in New York City and surrounding boroughs are also subject to rent control and rent stabilization laws, which limit the ability of
the property owners to increase rents, which may in turn limit the borrowers ability to repay those mortgage loans. At June 30, 2007, the Company also had loans on properties in Alabama, Connecticut, Georgia, Illinois, Indiana, Kentucky,
Massachusetts, Maryland, Michigan, New Jersey, North Carolina, Ohio and Pennsylvania.



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##### Table of Contents

Critical Accounting Policies

The Company believes that currently its only accounting policy that is critical to the presentation of its financial statements and requires estimates and judgment on the part of management relates to the
determination of the Companys allowance for loan losses. The allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period requiring management to make assumptions about future
loan chargeoffs. The impact of a sudden large chargeoff could deplete the allowance and potentially require increased provisions to replenish the allowance, which could negatively affect the Companys earnings and financial position. A more
detailed discussion of the factors and estimates used in computing the allowance can be found under the caption Critical Accounting Policies on pages 34 and 35 of the Companys annual report on Form 10-K for the year ended
December 31, 2006.

Comparison of Financial Condition at June 30, 2007 and December 31, 2006

Overview

Selected balance sheet information as of
June 30, 2007 follows:



|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|------------------------------------------- |  | -------------- | ------- | - | ----------------------- | - | --------- | ------------------------ |  | - | -------------------------- | - |  | ------------ | -------- | - |  | - | --------- | -
|($ in thousands)                            |  | HoldingCompany |         |   | Intervest National Bank |   |           | Intervest Mortgage Corp. |  |   | Inter- Company Amounts (1) |   |  | Consolidated |         
|Cash and cash equivalents                   |  | $              | 2,979   |   |                         | $ | 13,641    |                          |  | $ | 31,007                     |   |  | $            | (8,306   | ) |  | $ | 39,321    |  
|Security investments                        |  |                |        |   |                         |   | 368,198   |                          |  |   |                           |   |  |              |         |   |  |   | 368,198   |  
|Loans receivable, net of deferred fees      |  |                | 7,182   |   |                         |   | 1,529,430 |                          |  |   | 81,879                     |   |  |              |         |   |  |   | 1,618,491 |  
|Allowance for loan losses                   |  |                | (85     | ) |                         |   | (19,031   | )                        |  |   | (286                       | ) |  |              |         |   |  |   | (19,402   | )
|Investment in consolidated subsidiaries     |  |                | 220,735 |   |                         |   |          |                          |  |   |                           |   |  |              | (220,735 | ) |  |   |          |  
|All other assets                            |  |                | 3,801   |   |                         |   | 36,896    |                          |  |   | 5,552                      |   |  |              | (26      | ) |  |   | 46,223    |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|Total assets                                |  | $              | 234,612 |   |                         | $ | 1,929,134 |                          |  | $ | 118,152                    |   |  | $            | (229,067 | ) |  | $ | 2,052,831 |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|Deposits                                    |  | $              |        |   |                         | $ | 1,644,601 |                          |  | $ |                           |   |  | $            | (8,314   | ) |  | $ | 1,636,287 |  
|Borrowed funds and related interest payable |  |                | 56,833  |   |                         |   | 48,243    |                          |  |   | 84,931                     |   |  |              |         |   |  |   | 190,007   |  
|All other liabilities                       |  |                | 59      |   |                         |   | 46,597    |                          |  |   | 2,179                      |   |  |              | (18      | ) |  |   | 48,817    |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|Total liabilities                           |  |                | 56,892  |   |                         |   | 1,739,441 |                          |  |   | 87,110                     |   |  |              | (8,332   | ) |  |   | 1,875,111 |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|Stockholders equity                        |  |                | 177,720 |   |                         |   | 189,693   |                          |  |   | 31,042                     |   |  |              | (220,735 | ) |  |   | 177,720   |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|Total liabilities and stockholders equity  |  | $              | 234,612 |   |                         | $ | 1,929,134 |                          |  | $ | 118,152                    |   |  | $            | (229,067 | ) |  | $ | 2,052,831 |  
|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  

---

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

A comparison of selected balance sheet information follows:



|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|-------------------------------------------------------------- |  | ---------------- | --------- | ---------------- | -------------------- | - | ------------- | - | --------------- |  | ----- | -
|                                                               |  | At June 30, 2007 |           |                  | At December 31, 2006 |  
|($ in thousands)                                               |  | CarryingValue    |           | % ofTotal Assets |                      |   | CarryingValue |   | % ofTotalAssets | 
|Cash and cash equivalents                                      |  | $                | 39,321    |                  | 1.9                  | % |               | $ | 40,195          |  | 2.0   | %
|Security investments                                           |  |                  | 368,198   |                  | 17.9                 |   |               |   | 410,953         |  | 20.9  |  
|Loans receivable, net of deferred fees and loan loss allowance |  |                  | 1,599,089 |                  | 77.9                 |   |               |   | 1,472,820       |  | 74.7  |  
|All other assets                                               |  |                  | 46,223    |                  | 2.3                  |   |               |   | 47,785          |  | 2.4   |  
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|Total assets                                                   |  | $                | 2,052,831 |                  | 100.0                | % |               | $ | 1,971,753       |  | 100.0 | %
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|Deposits                                                       |  | $                | 1,636,287 |                  | 79.7                 | % |               | $ | 1,588,534       |  | 80.6  | %
|Borrowed funds and related interest payable                    |  |                  | 190,007   |                  | 9.2                  |   |               |   | 172,909         |  | 8.8   |  
|All other liabilities                                          |  |                  | 48,817    |                  | 2.4                  |   |               |   | 40,264          |  | 2.0   |  
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|Total liabilities                                              |  |                  | 1,875,111 |                  | 91.3                 |   |               |   | 1,801,707       |  | 91.4  |  
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|Stockholders equity                                           |  |                  | 177,720   |                  | 8.7                  |   |               |   | 170,046         |  | 8.6   |  
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  
|Total liabilities and stockholders equity                     |  | $                | 2,052,831 |                  | 100.0                | % |               | $ | 1,971,753       |  | 100.0 | %
|                                                               |  |                  |           |                  |                      |   |               |   |                 |  |       |  

Cash and Cash Equivalents

Cash and cash equivalents amounted to $39 million at June 30, 2007, relatively unchanged from $40 million at December 31, 2006.



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##### Table of Contents

Security Investments

Securities are classified as held to maturity and are carried at amortized cost when management has the intent and ability to hold them to maturity. Such investments, which are held by the Bank, decreased to $360 million at June 30,
2007, from $404 million at December 31, 2006.

The decrease reflected maturities and calls during the period exceeding new purchases. The Bank has
used the proceeds from the security repayments to partially fund new loans. The Bank continues to invest mainly in short-term (up to 5 year maturities) U.S. government agency debt obligations to emphasize safety and liquidity. The Company does not
own or invest in collateralized debt obligations or collateralized mortgage obligations. At June 30, 2007, the held-to-maturity portfolio consisted of debt obligations of the Federal Home Loan Bank, Federal Farm Credit Bank, Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation totaling $353 million and corporate securities (trust preferred notes) of $7 million. At June 30, 2007, the entire portfolio had a weighted-average yield of 5.14% and a
weighted-average remaining maturity of 2.4 years, compared to 4.88% and 2.3 years, respectively, at December 31, 2006. Nearly all of the securities have fixed rates of interest or have predetermined scheduled rate increases, and many have call
features that allow the issuer to call the security before its stated maturity without penalty.

At June 30, 2007 and December 31, 2006, the
held-to-maturity portfolios estimated fair value was $359 million and $403 million, respectively. At June 30, 2007, the held-to-maturity portfolio had net unrealized losses totaling $1.0 million, compared to $1.1 million of net unrealized
losses at December 31, 2006. Management believes that the cause of the 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. Management views the unrealized losses to be temporary based on the impact of changes in interest rates, the very short maturities of the investments and their high credit quality. In addition,
the Bank has the ability and intent to hold its investments for a period of time sufficient for the fair value of the securities to recover, which may be at maturity. Historically, the Bank has always recovered the cost of its investment securities
upon maturity.

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, which amounted to $3.6 million and $4.9 million, respectively, at June 30, 2007. The FRB stock has historically paid a dividend of 6%, while the FHLB stock dividend fluctuates quarterly and most
recently was 7.5%. The total investment, which amounted to $8.5 million at June 30, 2007, compared to $6.9 million at December 31, 2006, fluctuates based on the Banks capital level for the FRB stock and the Banks loans and
borrowings for the FHLB stock.

Loans Receivable, Net of Deferred Fees

Loans receivable, net of deferred fees, increased to $1.62 billion at June 30, 2007, from $1.49 billion at December 31, 2006. The growth reflected new mortgage loan originations secured by commercial and
multifamily real estate exceeding principal repayments. Originations totaled $310 million in the first half of 2007, compared to $290 million in the first half of 2006, of which the Banks originations were $285 million in the 2007 period
compared to $240 million in the 2006 period, and Intervest Mortgage Corporations originations were $25 million in the 2007 period, compared to $50 million in the 2006 period. Principal repayments aggregated to $183 million in the first half of
2007, compared to $219 million in the first half of 2006.

Nearly all (99.9%) of the Companys loan portfolio is concentrated in mortgage loans
secured by commercial and multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial properties, parking
lots/garages and vacant land). At June 30, 2007, such loans consisted of 561 loans with an aggregate principal balance of $1.63 billion and an average principal size of $2.9 million. Loans with principal balances of more than $10 million
aggregated to 24 loans or $350 million, with the largest loan amounting to $21 million. Loans with principal balances of $5 million to $10 million aggregated to 70 loans or $474 million.

Nonaccrual loans increased to $22.1 million at June 30, 2007, from $3.3 million at December 31, 2006, due to the addition of five loans totaling $19.8 million, less one loan for $1.0 million that was
transferred to foreclosed real estate upon the acquisition, by the Bank, of the property securing the loan. Four loans totaling $8.5 million were added in March and are collateralized by commercial real estate located in New Jersey. Each loan
is guaranteed by a principal for whom a Bankruptcy Trustee has been appointed to administer his assets. The other loan of $11.3 million was added in June for nonpayment and is secured by a multifamily property located in Long Island, New York.
Foreclosure proceedings are pending for all nonaccrual loans, although the proceedings concerning the New Jersey properties are temporarily stayed by reason of the bankruptcy filing. The Company believes each of the nonaccrual loans is well
collateralized.



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##### Table of Contents

At June 30, 2007, a total of six loans were on nonaccrual status and each was 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 each of the underlying properties exceeded the Companys recorded investment in each loan. At June 30, 2007
and December 31, 2006, there were no other loans classified as impaired.

Loans past due ninety days and still accruing interest at June 30, 2007
amounted to $16.3 million and represented one loan that matured on April 1, 2007. The borrower has since ceased making payments of principal and interest. The loan is well secured by a waterfront hotel, restaurant and marina resort in St.
Augustine, Florida, as well as a $1.3 million cash deposit with the Bank constituting additional collateral security. As of June 30, 2007, discussions regarding the resolution of this loan were in progress which were expected to result in
either a full satisfaction of the loan, including the receipt of all past due interest of approximately $0.5 million, or in the loan being brought current with an extension of the maturity date. However, as of July 31, 2007, the Bank has not
succeeded in collecting the amounts due. As a result, on July 31, 2007 the Bank transferred this loan to a nonaccrual status after applying $1.2 million of the cash collateral as a reduction of principal and $0.1 million as reduction of accrued
interest. The remaining accrued and unpaid interest was reversed from income in accordance with the Banks accounting policy. The Bank is continuing its foreclosure proceedings on this loan and a trial date has been scheduled for
November 5, 2007. At December 31, 2006, there were no loans past due ninety days and still accruing interest.

The Company is also closely
monitoring six accruing real estate loans totaling $22.3 million to one borrower as of June 30, 2007, each of which loans is collateralized by multifamily properties located in New York City. Five of such loans totaling $18.4 million are held
by Intervest Mortgage Corporation and one for $3.9 million is held by the Bank. The principals of the borrowers are experiencing legal difficulties in connection with activities alleged by independent third parties to be fraudulent with respect to
the placing of unauthorized and unrecorded mortgages on these and other properties. As of July 1, 2007, the loan held by the Bank and two loans held by Intervest Mortgage Corporation were current as to principal and interest payments. The
remaining three loans held by Intervest Mortgage Corporation were not current as to the payments due July 1, but were partially paid. One loan in the amount of $4.3 million matured on June 1, 2007. On July 30, 2007, the independent
third parties filed for an involuntary bankruptcy against the borrowers. On August 2, 2007, all these loans were placed on nonaccrual status due to the uncertainty of the timing of future payments that has resulted from the involuntary
bankruptcy filing. Accrued and unpaid interest was reversed from income accordingly.

Although the Company presently believes that the estimated fair value
of each of the underlying properties exceeded the Companys recorded investment in each of the aforementioned nonaccrual loans, there can be no assurance that the Company will not incur loan chargeoffs or significant expenses with respect to
the ultimate collection of these loans.

Allowance For Loan Losses

At June 30, 2007, the allowance for loan losses amounted to $19.4 million, compared to $17.8 million at December 31, 2006, and represented 1.2% of total loans (net of deferred fees) outstanding on both of
those dates. The increase in the allowance was due to provisions totaling $1.6 million resulting primarily from net loan growth of $127 million during the period. There were no charge offs during the period.

All Other Assets

All other assets decreased to $46.2 million
at June 30, 2007, from $47.8 million at December 31, 2006. The decrease was primarily due to the following: a $1.2 million decrease in prepaid income taxes; a $0.6 million decrease in accrued interest receivable; and a $0.5 million
decrease in loan fees receivable; partially offset by a $1.0 million increase in foreclosed real estate.

Prepaid income taxes decreased due to the
application of a 2006 overpayment of estimated income taxes against 2007 income taxes payable. Accrued interest receivable fluctuates based on the level of interest-earning assets outstanding and the timing of interest payments. Loan fees receivable
decreased due to cash payments exceeding new fees charged on new originations. Foreclosed real estate represented the carrying value of a nonaccrual loan that was transferred to foreclosed real estate. The property is a multifamily property located
in Jersey City, New Jersey, that was acquired in April by the Bank. The property is being actively marketed for sale. The Bank believes as of June 30, 2007, that the estimated fair value of the property exceeded its carrying value.



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##### Table of Contents

Deposits

Deposits increased to $1.64 billion at June 30, 2007, from $1.59 billion at December 31, 2006, reflecting an increase in certificate of deposit accounts of $48.6 million, partially offset by a net decrease in checking, savings and
money market accounts totaling $0.9 million.

At June 30, 2007, certificate of deposit accounts totaled $1.38 billion, and checking, savings and money
market accounts aggregated $252 million. The same categories of deposit accounts totaled $1.34 billion and $253 million, respectively, at December 31, 2006. Certificate of deposit accounts represented 85% of total consolidated deposits at
June 30, 2007, compared to 84% at December 31, 2006. At June 30, 2007 and December 31, 2006, certificate of deposit accounts included $99 million and $56 million, respectively, of brokered deposits.

Borrowed Funds and Related Interest Payable

Borrowed funds
and related interest payable increased to $190 million at June 30, 2007, from $173 million at December 31, 2006. The increase was due to a higher level of short-term FHLBNY advances of $23 million, partially offset by the early repayment
and conversion of certain debentures along with accrued interest payable as more fully described in note 7 to the condensed consolidated financial statements included in this report.

All Other Liabilities

All other liabilities increased to $48.8 million at June 30, 2007, from $40.3
million at December 31, 2006, largely due to increases of $6.8 million in mortgage escrow funds payable and $1.1 million in accrued interest payable on deposits. Mortgage escrow funds payable represent advance payments made to the Company by
borrowers for property taxes and insurance that are remitted by the Company to third parties. The increase reflected growth in the loan portfolio as well as the timing of tax remittances by the Company. Accrued interest payable on deposits
fluctuates based on total deposits and the timing of interest payments. The increase reflected the growth in deposits.

Stockholders Equity

Stockholders equity increased to $177.7 million at June 30, 2007, from $170.0 million at December 31, 2006 as follows:



|                                          |  |        |         |   |               |           |   |                |         |              |           |   |                  |   |      
|----------------------------------------- |  | ------ | ------- | - | ------------- | --------- | - | -------------- | ------- | ------------ | --------- | - | ---------------- | - | -----
|($ in thousands)                          |  | Amount |         |   | Class AShares |           |   | Class B Shares |         | Total Shares |           |   | Amount Per Share
|Stockholders equity at December 31, 2006 |  | $      | 170,046 |   |               | 7,986,595 |   |                | 385,000 |              | 8,371,595 |   |                  | $ | 20.31
|Net earnings for the period               |  |        | 10,720  |   |               |          |   |                |        |              |          |   |                  |   |     
|Convertible debentures converted (1)      |  |        | 1,942   |   |               | 108,556   |   |                |        |              | 108,556   |   |                  |   | 17.89
|Repurchase of Class A common stock (2)    |  |        | (2,876  | ) |               | (115,200  | ) |                |        |              | (115,200  | ) |                  |   | 24.97
|Cash common stock dividend paid (3)       |  |        | (2,112  | ) |               |          |   |                |        |              |          |   |                  |   |     
|                                          |  |        |         |   |               |           |   |                |         |              |           |   |                  |   |      
|Stockholders equity at June 30, 2007     |  | $      | 177,720 |   |               | 7,979,951 |   |                | 385,000 |              | 8,364,951 |   |                  | $ | 21.25
|                                          |  |        |         |   |               |           |   |                |         |              |           |   |                  |   |      

---

|(1) | A total of $1.9 million ($1.1 million of principal and $0.8 million of accrued interest payable) of the Holding Companys Series 5/14/98 debentures were converted at the option
of the debenture holders into Class A common stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On April 25, 2007, the Holding Companys board of directors authorized a share repurchase plan. Under the plan, the Holding Company is authorized to purchase up to $10
million of its outstanding shares of Class A common stock over a six-month period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On April 25, 2007, the Holding Companys board of directors approved the payment of the Holding Companys first annual cash dividend of $0.25 per share on the Holding
Companys outstanding Class A and Class B common stock. A total dividend of $2.1 million was paid on June 15, 2007 to shareholders of record on the close of business June 1, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Comparison of Results of Operations for the Quarters Ended June 30, 2007 and 2006

Overview

Consolidated net earnings for
the second quarter of 2007 (Q2-07) decreased by $1.0 million, or 16%, to $5.4 million, or $0.63 per diluted share, from $6.4 million, or $0.77 per diluted share, for the second quarter of 2006 (Q2-06). Average diluted shares
outstanding amounted to 8.6 million for Q2-07, compared to 8.4 million for Q2-06. The decrease in net earnings was due to a $1.5 million decrease in net interest and dividend income and a $0.4 million increase in noninterest expenses,
partially offset by a $0.7 million decrease in the provision for income taxes and a $0.2 million increase in noninterest income.

The Companys
efficiency ratio, which is a measure of its ability to control expenses as a percentage of its revenues, continued to be favorable and was 23% for Q2-07, compared to 19% for Q2-06. The ratio for Q2-07 was adversely affected by an increase in FDIC
insurance premium rates. The Companys return on average assets and equity decreased to 1.05% and 12.09%, respectively, in Q2-07, from 1.42% and 17.66%, respectively, in Q2-06.

Selected information regarding results of operations for Q2-07 follows:



|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|--------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------ | - | ------------------------------ |  | - | --------------- | - |  | -------------------------- | ---- | - | ------------ | - | ------ | - |  | - | ------
|($ in thousands)                                                      |  | IntervestNational Bank |        |   | Intervest Mortgage Corp. |   | Intervest Securities Corp.
(2) |  |   | Holding Company |   |  | Inter- Company Amounts (3) |      |   | Consolidated
|Interest and dividend income                                          |  | $                      | 31,734 |   |                          | $ | 2,290                          |  | $ |                |   |  | $                          | 167  |   |              | $ | (109   | ) |  | $ | 34,082
|Interest expense                                                      |  |                        | 20,019 |   |                          |   | 1,673                          |  |   |                |   |  |                            | 906  |   |              |   | (109   | ) |  |   | 22,489
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Net interest and dividend income                                      |  |                        | 11,715 |   |                          |   | 617                            |  |   |                |   |  |                            | (739 | ) |              |   |       |   |  |   | 11,593
|Provision for loan losses                                             |  |                        | 684    |   |                          |   | 31                             |  |   |                |   |  |                            |     |   |              |   |       |   |  |   | 715   
|Noninterest income                                                    |  |                        | 1,402  |   |                          |   | 1,410                          |  |   |                |   |  |                            | 130  |   |              |   | (1,100 | ) |  |   | 1,842 
|Noninterest expenses                                                  |  |                        | 3,315  |   |                          |   | 738                            |  |   |                |   |  |                            | 164  |   |              |   | (1,100 | ) |  |   | 3,117 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Earnings before taxes                                                 |  |                        | 9,118  |   |                          |   | 1,258                          |  |   |                |   |  |                            | (773 | ) |              |   |       |   |  |   | 9,603 
|Provision for income taxes                                            |  |                        | 4,013  |   |                          |   | 576                            |  |   |                |   |  |                            | (353 | ) |              |   |       |   |  |   | 4,236 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Net earnings                                                          |  | $                      | 5,105  |   |                          | $ | 682                            |  | $ |                |   |  | $                          | (420 | ) |              | $ |       |   |  | $ | 5,367 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Intercompany dividends (1)                                            |  |                        | (885   | ) |                          |   |                               |  |   |                |   |  |                            | 885  |   |              |   |       |   |  |   |      
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Net earnings after intercompany dividends                             |  | $                      | 4,220  |   |                          | $ | 682                            |  | $ |                |   |  | $                          | 465  |   |              | $ |       |   |  | $ | 5,367 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       
|Net earnings after intercompany dividends for the same period of 2006 |  | $                      | 4,776  |   |                          | $ | 1,124                          |  | $ | (1              | ) |  | $                          | 509  |   |              | $ |       |   |  | $ | 6,408 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |      |   |              |   |        |   |  |   |       

---

|(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) | The limited operations of Intervest Securities Corporation were discontinued in the fourth quarter of 2006 as discussed in note 1 to the condensed consolidated financial statements
in this report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | All significant intercompany balances and transactions are eliminated in consolidation. Such amounts arise from intercompany deposit accounts and management and service agreements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest and Dividend Income

Net interest and dividend income 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 income and dividend income is the difference between interest income earned on interest-earning assets, such as loans and securities, and interest expense paid on
interest-bearing liabilities, such as deposits and borrowings.

Net interest and dividend income decreased to $11.6 million in Q2-07, from $13.1 million in
Q2-06. The decrease was due to a lower net interest margin during a period in which the treasury yield curve continued to be flat-to-inverted, which more than offset growth in interest-earning assets. The net interest margin (excluding prepayment
income) decreased to 2.29% in Q2-07, from 2.94% in Q2-06, due to a higher cost of deposits, repayments of higher yielding loans coupled with lower competitive pricing for new loans, and an increase in nonaccrual loans.

Total average interest-earning assets increased $243 million in Q2-07 from Q2-06 due to growth in loans of $165 million and a $78 million net increase in security and
short-term investments. The growth in average earning assets was funded by increases of $224 million in interest-bearing deposits, $32 million in stockholders equity (largely due to retained earnings and the exercise of common stock warrants
and conversion of debentures into common stock) and a $6 million increase in noninterest-bearing liabilities, partially offset by an $18 million decrease in borrowed funds.



24



---

##### Table of Contents

The yield on interest-earning assets decreased 39 basis points to 6.75% in Q2-07 due to repayments of higher yielding
loans being replaced with new loan originations with lower competitive pricing and an increase in nonaccrual loans, partially offset by higher yields earned on security and other short-term investments. The cost of funds increased by 32 basis points
to 4.97% in Q2-07 due to higher rates paid on deposit accounts, partially offset by a decrease in the cost of borrowed funds resulting from the early repayment of certain debentures with higher rates of interest.

The following table provides information on: average assets, liabilities and stockholders equity; yields earned on interest-earning assets; and rates paid on
interest-bearing liabilities for the periods indicated. The yields and rates shown are based on a computation of income/expense (including any related fee income or expense) for each period divided by average interest-earning assets/interest-bearing
liabilities during each period. Average balances are derived from daily balances. Net interest margin is computed by dividing net interest and dividend income by the average of total interest-earning assets during each period. The interest rate
spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin is greater than the interest rate spread due to the additional income earned on
those assets funded by non-interest-bearing liabilities, primarily demand deposits and stockholders equity.



|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|---------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | -------------- |  | ---- | -------------- |  | - | ----------------- | - | -------------- | - | ------ |  | ---- | -
|                                                                             |  | Quarter Ended  |          
|                                                                             |  | June 30, 2007  |           |   | June 30, 2006     |  
|($ in thousands)                                                             |  | AverageBalance |           |   | InterestInc./Exp. |   | Yield/Rate (2) |  |      | AverageBalance |  |   | InterestInc./Exp. |   | Yield/Rate (2) |  
|Assets                                                                       |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest-earning assets:                                                     |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Loans (1)                                                                    |  | $              | 1,600,360 |   |                   | $ | 28,652         |  | 7.18 | %              |  | $ | 1,435,306         |   |                | $ | 28,203 |  | 7.88 | %
|Securities                                                                   |  |                | 407,788   |   |                   |   | 5,193          |  | 5.11 |                |  |   | 322,628           |   |                |   | 3,222  |  | 4.01 |  
|Other interest-earning assets                                                |  |                | 18,235    |   |                   |   | 237            |  | 5.21 |                |  |   | 25,882            |   |                |   | 312    |  | 4.84 |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total interest-earning assets                                                |  |                | 2,026,383 |   |                   | $ | 34,082         |  | 6.75 | %              |  |   | 1,783,816         |   |                | $ | 31,737 |  | 7.14 | %
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-earning assets                                                   |  |                | 17,700    |   |                   |   |                |  |      |                |  |   | 15,865            |   |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total assets                                                                 |  | $              | 2,044,083 |   |                   |   |                |  |      |                |  | $ | 1,799,681         |   |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Liabilities and Stockholders Equity                                         |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest-bearing liabilities:                                                |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest checking deposits                                                   |  | $              | 6,304     |   |                   | $ | 28             |  | 1.78 | %              |  | $ | 9,071             |   |                | $ | 43     |  | 1.90 | %
|Savings deposits                                                             |  |                | 9,483     |   |                   |   | 70             |  | 2.96 |                |  |   | 14,600            |   |                |   | 107    |  | 2.94 |  
|Money market deposits                                                        |  |                | 230,197   |   |                   |   | 2,496          |  | 4.35 |                |  |   | 243,698           |   |                |   | 2,484  |  | 4.09 |  
|Certificates of deposit                                                      |  |                | 1,417,773 |   |                   |   | 17,205         |  | 4.87 |                |  |   | 1,172,287         |   |                |   | 12,882 |  | 4.41 |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total deposit accounts                                                       |  |                | 1,663,757 |   |                   |   | 19,799         |  | 4.77 |                |  |   | 1,439,656         |   |                |   | 15,516 |  | 4.32 |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|FHLB advances and Fed funds purchased                                        |  |                | 7,838     |   |                   |   | 107            |  | 5.48 |                |  |   | 17,382            |   |                |   | 220    |  | 5.08 |  
|Debentures and related interest payable                                      |  |                | 84,925    |   |                   |   | 1,693          |  | 8.00 |                |  |   | 88,095            |   |                |   | 1,817  |  | 8.27 |  
|Debenturescapital securities                                                |  |                | 56,702    |   |                   |   | 886            |  | 6.27 |                |  |   | 61,856            |   |                |   | 1,090  |  | 7.07 |  
|Mortgage note payable                                                        |  |                | 210       |   |                   |   | 4              |  | 7.64 |                |  |   | 225               |   |                |   | 4      |  | 7.13 |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total borrowed funds                                                         |  |                | 149,675   |   |                   |   | 2,690          |  | 7.21 |                |  |   | 167,558           |   |                |   | 3,131  |  | 7.49 |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total interest-bearing liabilities                                           |  |                | 1,813,432 |   |                   | $ | 22,489         |  | 4.97 | %              |  |   | 1,607,214         |   |                | $ | 18,647 |  | 4.65 | %
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-bearing deposits                                                 |  |                | 4,180     |   |                   |   |                |  |      |                |  |   | 5,722             |   |                |   |        |  |      |  
|Noninterest-bearing liabilities                                              |  |                | 48,902    |   |                   |   |                |  |      |                |  |   | 41,614            |   |                |   |        |  |      |  
|Stockholders equity                                                         |  |                | 177,569   |   |                   |   |                |  |      |                |  |   | 145,131           |   |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total liabilities and stockholders equity                                   |  | $              | 2,044,083 |   |                   |   |                |  |      |                |  | $ | 1,799,681         |   |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Net interest and dividend income/spread                                      |  |                |           |   |                   | $ | 11,593         |  | 1.78 | %              |  |   |                   |   |                | $ | 13,090 |  | 2.49 | %
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Net interest-earning assets/margin (3)                                       |  | $              | 212,951   |   |                   |   |                |  | 2.29 | %              |  | $ | 176,602           |   |                |   |        |  | 2.94 | %
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Ratio of total interest-earning assets to total interest-bearing liabilities |  |                | 1.12      |   |                   |   |                |  |      |                |  |   | 1.11              |   |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Other Ratios:                                                                |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Return on average assets (2)                                                 |  |                | 1.05      | % |                   |   |                |  |      |                |  |   | 1.42              | % |                |   |        |  |      |  
|Return on average equity (2)                                                 |  |                | 12.09     | % |                   |   |                |  |      |                |  |   | 17.66             | % |                |   |        |  |      |  
|Noninterest expense to average assets (2)                                    |  |                | 0.61      | % |                   |   |                |  |      |                |  |   | 0.61              | % |                |   |        |  |      |  
|Efficiency ratio (4)                                                         |  |                | 23        | % |                   |   |                |  |      |                |  |   | 19                | % |                |   |        |  |      |  
|Average stockholders equity to average assets                               |  |                | 8.69      | % |                   |   |                |  |      |                |  |   | 8.06              | % |                |   |        |  |      |  
|                                                                             |  |                |           |   |                   |   |                |  |      |                |  |   |                   |   |                |   |        |  |      |  

---

|(1) | Includes average nonaccrual loans of $14.5 million in the 2007 period and $2.4 million in the 2006 period. Interest not accrued on such loans totaled $0.4 million in the 2007 period
and $0.1 million in the 2006 period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



25



---

##### Table of Contents

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan prepayments, the
margin would compute to 2.57% and 3.16% for the 2007 period and 2006 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|------------------------------------------ |  | -------------------------------------------------------------------------------- | ------ | - | ------ | - | ----- | ----------- |  | - | ----- | - |  | - | ------ | -
|                                           |  | For the Quarter Ended June 30, 2007 vs 2006Increase (Decrease) Due To Change In: |       
|($ in thousands)                           |  | Rate                                                                             |        |   | Volume |   |       | Rate/Volume |  |   | Total |  
|Interest-earning assets:                   |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Loans                                      |  | $                                                                                | (2,512 | ) |        | $ | 3,252 |             |  | $ | (291  | ) |  | $ | 449    |  
|Securities                                 |  |                                                                                  | 887    |   |        |   | 854   |             |  |   | 230   |   |  |   | 1,971  |  
|Other interest-earning assets              |  |                                                                                  | 24     |   |        |   | (93   | )           |  |   | (6    | ) |  |   | (75    | )
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total interest-earning assets              |  |                                                                                  | (1,601 | ) |        |   | 4,013 |             |  |   | (67   | ) |  |   | 2,345  |  
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Interest-bearing liabilities:              |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Interest checking deposits                 |  |                                                                                  | (3     | ) |        |   | (13   | )           |  |   | 1     |   |  |   | (15    | )
|Savings deposits                           |  |                                                                                  | 1      |   |        |   | (38   | )           |  |   |      |   |  |   | (37    | )
|Money market deposits                      |  |                                                                                  | 158    |   |        |   | (138  | )           |  |   | (8    | ) |  |   | 12     |  
|Certificates of deposit                    |  |                                                                                  | 1,348  |   |        |   | 2,706 |             |  |   | 269   |   |  |   | 4,323  |  
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total deposit accounts                     |  |                                                                                  | 1,504  |   |        |   | 2,517 |             |  |   | 262   |   |  |   | 4,283  |  
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|FHLB advances and Fed funds purchased      |  |                                                                                  | 17     |   |        |   | (121  | )           |  |   | (9    | ) |  |   | (113   | )
|Debentures and accrued interest payable    |  |                                                                                  | (59    | ) |        |   | (66   | )           |  |   | 1     |   |  |   | (124   | )
|Debenturescapital securities              |  |                                                                                  | (124   | ) |        |   | (91   | )           |  |   | 11    |   |  |   | (204   | )
|Mortgage note payable                      |  |                                                                                  |       |   |        |   |      |             |  |   |      |   |  |   |       |  
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total borrowed funds                       |  |                                                                                  | (166   | ) |        |   | (278  | )           |  |   | 3     |   |  |   | (441   | )
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total interest-bearing liabilities         |  |                                                                                  | 1,338  |   |        |   | 2,239 |             |  |   | 265   |   |  |   | 3,842  |  
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Net change in interest and dividend income |  | $                                                                                | (2,939 | ) |        | $ | 1,774 |             |  | $ | (332  | ) |  | $ | (1,497 | )
|                                           |  |                                                                                  |        |   |        |   |       |             |  |   |       |   |  |   |        |  

Provision for Loan Losses

The provision for loan losses increased by $0.1 million to $0.7 million in Q2-07, from $0.6 million in Q2-06, primarily due to an increase in the rate of net loan growth over the prior year period, largely offset by
the effect of changes in internal credit ratings on several loans. Total loans outstanding grew by $67.6 million in Q2-07, compared to $37.7 million in Q2-06. The provision for Q2-07 was reduced by $0.2 million primarily due to the satisfaction of
loan with a lower credit grade, whereas the Q2-06 provision included an additional $0.1 million resulting from various credit downgrades of existing loans.

Noninterest Income

Noninterest income increased by $0.2 million to $1.8 million in Q2-07, from $1.6 million in Q2-06. The increase
was due to a higher level of income ($0.4 million) from loan prepayments, partially offset by a decrease in fees ($0.2 million) earned from expired loan commitments.

Noninterest Expenses

Noninterest expenses increased by $0.4 million to $3.1 million in Q2-07, from $2.7
million in Q2-06, due to a $0.3 million increase in FDIC deposit insurance premiums resulting from a higher rate structure imposed by the FDIC on all insured financial institutions beginning in 2007. The new rates for nearly all institutions vary
between five and seven cents for every $100 of domestic deposits.

Increases in occupancy and equipment expenses of $70,000 (largely associated with the
opening of a new branch in Florida), foreclosed real estate expenses of $53,000 and data processing expenses of $34,000 (associated with the growth in the Banks total assets), were nearly offset by decreases of $65,000 in professional fees and
$31,000 in advertising and promotion expenses. The Company had 72 employees at June 30, 2007, compared to 76 at June 30, 2006.



26



---

##### Table of Contents

Provision for Income Taxes

The provision for income taxes decreased by $0.7 million to $4.2 million in Q2-07, from $4.9 million in Q2-06 due to a decrease in pre-tax income. The Companys effective tax rate (inclusive of state and local
taxes) amounted to 44.1% in Q2-07 and 43.7% in Q2-06.

Comparison of Results of Operations for the Six-Months Ended June 30, 2007
and 2006

Overview

Consolidated net
earnings for the six-months ended June 30, 2007 (6mths-07) decreased by $2.1 million, or 16%, to $10.7 million, or $1.25 per diluted share, from $12.8 million, or $1.54 per diluted share, for the six-months ended June 30, 2006
(6mths-06). Average diluted shares outstanding amounted to 8.6 million for the 2007 period, compared to 8.4 million for the 2006 period. The decrease in net earnings was due to a $2.4 million decrease in net interest and
dividend income, a $0.6 million increase in the provision for loan losses, a $0.4 million increase in noninterest expenses and $0.2 million decrease in noninterest income, partially offset by a $1.5 million decrease in the provision for income
taxes. The Companys efficiency ratio was 22% for the 2007 period, compared to 19% for the 2006 period. The ratio for the 2007 period was adversely affected by an increase in FDIC insurance premium rates. The Companys return on average
assets and equity decreased to 1.06% and 12.27%, respectively, for the 2007 period, from 1.45% and 18.09%, respectively, for the 2006 period.

Selected
information regarding results of operations for the six-months ended June 30, 2007 follows:



|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|--------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------------------ | - | ------------------------------ |  | - | --------------- | - |  | -------------------------- | ------ | - | ------------ | - | ------ | - |  | - | ------
|($ in thousands)                                                      |  | IntervestNational Bank |        |   | Intervest Mortgage Corp. |   | Intervest Securities Corp.
(2) |  |   | Holding Company |   |  | Inter- Company Amounts (3) |        |   | Consolidated
|Interest and dividend income                                          |  | $                      | 62,738 |   |                          | $ | 4,630                          |  | $ |                |   |  | $                          | 356    |   |              | $ | (377   | ) |  | $ | 67,347
|Interest expense                                                      |  |                        | 39,325 |   |                          |   | 3,361                          |  |   |                |   |  |                            | 1,875  |   |              |   | (377   | ) |  |   | 44,184
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Net interest and dividend income                                      |  |                        | 23,413 |   |                          |   | 1,269                          |  |   |                |   |  |                            | (1,519 | ) |              |   |       |   |  |   | 23,163
|Provision for loan losses                                             |  |                        | 1,545  |   |                          |   | 24                             |  |   |                |   |  |                            |       |   |              |   |       |   |  |   | 1,569 
|Noninterest income                                                    |  |                        | 2,850  |   |                          |   | 2,651                          |  |   |                |   |  |                            | 243    |   |              |   | (2,300 | ) |  |   | 3,444 
|Noninterest expenses                                                  |  |                        | 6,370  |   |                          |   | 1,489                          |  |   |                |   |  |                            | 327    |   |              |   | (2,300 | ) |  |   | 5,886 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Earnings before taxes                                                 |  |                        | 18,348 |   |                          |   | 2,407                          |  |   |                |   |  |                            | (1,603 | ) |              |   |       |   |  |   | 19,152
|Provision for income taxes                                            |  |                        | 8,061  |   |                          |   | 1,107                          |  |   |                |   |  |                            | (736   | ) |              |   |       |   |  |   | 8,432 
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Net earnings                                                          |  | $                      | 10,287 |   |                          | $ | 1,300                          |  | $ |                |   |  | $                          | (867   | ) |              | $ |       |   |  | $ | 10,720
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Intercompany dividends (1)                                            |  |                        | (1,770 | ) |                          |   |                               |  |   |                |   |  |                            | 1,770  |   |              |   |       |   |  |   |      
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Net earnings after intercompany dividends                             |  | $                      | 8,517  |   |                          | $ | 1,300                          |  | $ |                |   |  | $                          | 903    |   |              | $ |       |   |  | $ | 10,720
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       
|Net earnings after intercompany dividends for the same period of 2006 |  | $                      | 9,843  |   |                          | $ | 1,953                          |  | $ | (1              | ) |  | $                          | 1,033  |   |              | $ |       |   |  | $ | 12,828
|                                                                      |  |                        |        |   |                          |   |                                |  |   |                 |   |  |                            |        |   |              |   |        |   |  |   |       

---

|(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) | The limited operations of Intervest Securities Corporation were discontinued in the fourth quarter of 2006 as discussed in note 1 to the condensed consolidated financial statements
in this report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | All significant intercompany balances and transactions are eliminated in consolidation. Such amounts arise from intercompany deposit accounts and management and service agreements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest and Dividend Income

Net interest and dividend income decreased to $23.2 million in the 6mths-07 period, from $25.6 million in the 6mths-06 period. The decrease was due to a lower net interest margin during a period in which the treasury yield curve continued
to be flat-to-inverted, which more than offset growth in interest-earning assets. The net interest margin (excluding prepayment income) decreased to 2.34% in the 6mths-07 period, from 2.93% in the 6mths-06 period, due to a higher cost of deposits,
repayments of higher yielding loans coupled with lower competitive pricing for new loans, and an increase in nonaccrual loans.

Total average
interest-earning assets increased $240 million in the 6mths-07 period from the 6mths-06 period due to growth in loans of $156 million and an $84 million net increase in security and short-term investments. The growth in average earning assets was
funded by increases of $211 million in interest-bearing deposits and $33 million in stockholders equity (largely due to retained earnings and the exercise of common stock warrants and conversion of debentures into common stock), partially
offset by a $3 million decrease in borrowed funds.

The yield on interest-earning assets decreased 29 basis points to 6.80% in the 6mths07 period, due to
repayments of higher yielding loans being replaced with new loan originations with lower competitive pricing and an increase in nonaccrual loans, partially offset by higher yields earned on security and other short-term investments. The cost



27



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##### Table of Contents

of funds increased by 37 basis points to 4.97% in the 6mths-07 period due to higher rates paid on deposit accounts, partially offset by a decrease in the
cost of borrowed funds resulting from the early repayment of certain debentures with higher rates of interest.

The following table provides information
for the periods indicated, the contents of which are described above a similar table in the section entitled Comparison of Results of Operations for the Quarters Ended June 30, 2007 and 2006 under the caption Net Interest
Income.



|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|---------------------------------------------------------------------------- |  | ---------------- | --------- | - | ----------------- | - | --------------- |  | ---- | -------------- |  | - | ----------------- | - | -------------- | - | ------ |  | ---- | -
|                                                                             |  | Six-Months Ended |          
|                                                                             |  | June 30, 2007    |           |   | June 30, 2006     |  
|($ in thousands)                                                             |  | AverageBalance   |           |   | InterestInc./Exp. |   | Yield/ Rate (2) |  |      | AverageBalance |  |   | InterestInc./Exp. |   | Yield/Rate (2) |  
|Assets                                                                       |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest-earning assets:                                                     |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Loans (1)                                                                    |  | $                | 1,570,330 |   |                   | $ | 56,640          |  | 7.27 | %              |  | $ | 1,414,189         |   |                | $ | 55,134 |  | 7.86 | %
|Securities                                                                   |  |                  | 407,775   |   |                   |   | 10,180          |  | 5.03 |                |  |   | 313,396           |   |                |   | 5,969  |  | 3.84 |  
|Other interest-earning assets                                                |  |                  | 20,442    |   |                   |   | 527             |  | 5.20 |                |  |   | 31,000            |   |                |   | 700    |  | 4.55 |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total interest-earning assets                                                |  |                  | 1,998,547 |   |                   | $ | 67,347          |  | 6.80 | %              |  |   | 1,758,585         |   |                | $ | 61,803 |  | 7.09 | %
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-earning assets                                                   |  |                  | 19,044    |   |                   |   |                 |  |      |                |  |   | 15,761            |   |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total assets                                                                 |  | $                | 2,017,591 |   |                   |   |                 |  |      |                |  | $ | 1,774,346         |   |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Liabilities and Stockholders Equity                                         |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest-bearing liabilities:                                                |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Interest checking deposits                                                   |  | $                | 9,027     |   |                   | $ | 86              |  | 1.92 | %              |  | $ | 8,803             |   |                | $ | 82     |  | 1.88 | %
|Savings deposits                                                             |  |                  | 9,849     |   |                   |   | 144             |  | 2.95 |                |  |   | 15,590            |   |                |   | 228    |  | 2.95 |  
|Money market deposits                                                        |  |                  | 225,977   |   |                   |   | 4,873           |  | 4.35 |                |  |   | 240,553           |   |                |   | 4,777  |  | 4.00 |  
|Certificates of deposit                                                      |  |                  | 1,391,205 |   |                   |   | 33,433          |  | 4.85 |                |  |   | 1,160,143         |   |                |   | 24,988 |  | 4.34 |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total deposit accounts                                                       |  |                  | 1,636,058 |   |                   |   | 38,536          |  | 4.75 |                |  |   | 1,425,089         |   |                |   | 30,075 |  | 4.26 |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|FHLB advances and Fed funds purchased                                        |  |                  | 14,844    |   |                   |   | 404             |  | 5.49 |                |  |   | 9,496             |   |                |   | 239    |  | 5.08 |  
|Debentures and related interest payable                                      |  |                  | 86,583    |   |                   |   | 3,464           |  | 8.07 |                |  |   | 90,179            |   |                |   | 3,725  |  | 8.33 |  
|Debenturescapital securities                                                |  |                  | 56,702    |   |                   |   | 1,772           |  | 6.30 |                |  |   | 61,856            |   |                |   | 2,180  |  | 7.11 |  
|Mortgage note payable                                                        |  |                  | 212       |   |                   |   | 8               |  | 7.61 |                |  |   | 226               |   |                |   | 8      |  | 7.14 |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total borrowed funds                                                         |  |                  | 158,341   |   |                   |   | 5,648           |  | 7.19 |                |  |   | 161,757           |   |                |   | 6,152  |  | 7.67 |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total interest-bearing liabilities                                           |  |                  | 1,794,399 |   |                   | $ | 44,184          |  | 4.97 | %              |  |   | 1,586,846         |   |                | $ | 36,227 |  | 4.60 | %
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Noninterest-bearing deposits                                                 |  |                  | 4,268     |   |                   |   |                 |  |      |                |  |   | 6,111             |   |                |   |        |  |      |  
|Noninterest-bearing liabilities                                              |  |                  | 44,148    |   |                   |   |                 |  |      |                |  |   | 39,590            |   |                |   |        |  |      |  
|Stockholders equity                                                         |  |                  | 174,776   |   |                   |   |                 |  |      |                |  |   | 141,799           |   |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Total liabilities and stockholders equity                                   |  | $                | 2,017,591 |   |                   |   |                 |  |      |                |  | $ | 1,774,346         |   |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Net interest and dividend income/spread                                      |  |                  |           |   |                   | $ | 23,163          |  | 1.83 | %              |  |   |                   |   |                | $ | 25,576 |  | 2.49 | %
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Net interest-earning assets/margin (3)                                       |  | $                | 204,148   |   |                   |   |                 |  | 2.34 | %              |  | $ | 171,739           |   |                |   |        |  | 2.93 | %
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Ratio of total interest-earning assets to total interest-bearing liabilities |  |                  | 1.11      |   |                   |   |                 |  |      |                |  |   | 1.11              |   |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Other Ratios:                                                                |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  
|Return on average assets (2)                                                 |  |                  | 1.06      | % |                   |   |                 |  |      |                |  |   | 1.45              | % |                |   |        |  |      |  
|Return on average equity (2)                                                 |  |                  | 12.27     | % |                   |   |                 |  |      |                |  |   | 18.09             | % |                |   |        |  |      |  
|Noninterest expense to average assets (2)                                    |  |                  | 0.58      | % |                   |   |                 |  |      |                |  |   | 0.62              | % |                |   |        |  |      |  
|Efficiency ratio (4)                                                         |  |                  | 22        | % |                   |   |                 |  |      |                |  |   | 19                | % |                |   |        |  |      |  
|Average stockholders equity to average assets                               |  |                  | 8.66      | % |                   |   |                 |  |      |                |  |   | 7.99              | % |                |   |        |  |      |  
|                                                                             |  |                  |           |   |                   |   |                 |  |      |                |  |   |                   |   |                |   |        |  |      |  

---

|(1) | Includes average nonaccrual loans of $10.3 million in the 2007 period and $2.7 million in the 2006 period. Interest not recorded on such loans totaled $0.6 million in the 2007
period and $0.1 million in the 2006 period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan prepayments, the
margin would compute to 2.60% and 3.24% for the 2007 period and 2006 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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##### Table of Contents

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



|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|------------------------------------------ |  | ---------------------------------------------- | ------ | - | ------ | - | ----- | ----------- |  | - | ----- | - |  | - | ------ | -
|                                           |  | For the Six-Months Ended June 30, 2007 vs 2006 |       
|                                           |  | Increase (Decrease) Due To Change In:          |       
|($ in thousands)                           |  | Rate                                           |        |   | Volume |   |       | Rate/Volume |  |   | Total |  
|Interest-earning assets:                   |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Loans                                      |  | $                                              | (4,172 | ) |        | $ | 6,136 |             |  | $ | (458  | ) |  | $ | 1,506  |  
|Securities                                 |  |                                                | 1,865  |   |        |   | 1,812 |             |  |   | 534   |   |  |   | 4,211  |  
|Other interest-earning assets              |  |                                                | 101    |   |        |   | (240  | )           |  |   | (34   | ) |  |   | (173   | )
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total interest-earning assets              |  |                                                | (2,206 | ) |        |   | 7,708 |             |  |   | 42    |   |  |   | 5,544  |  
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Interest-bearing liabilities:              |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Interest checking deposits                 |  |                                                | 2      |   |        |   | 2     |             |  |   |      |   |  |   | 4      |  
|Savings deposits                           |  |                                                |       |   |        |   | (85   | )           |  |   | 1     |   |  |   | (84    | )
|Money market deposits                      |  |                                                | 421    |   |        |   | (292  | )           |  |   | (33   | ) |  |   | 96     |  
|Certificates of deposit                    |  |                                                | 2,958  |   |        |   | 5,014 |             |  |   | 473   |   |  |   | 8,445  |  
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total deposit accounts                     |  |                                                | 3,381  |   |        |   | 4,639 |             |  |   | 441   |   |  |   | 8,461  |  
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|FHLB advances and Fed funds purchased      |  |                                                | 19     |   |        |   | 136   |             |  |   | 10    |   |  |   | 165    |  
|Debentures and accrued interest payable    |  |                                                | (117   | ) |        |   | (150  | )           |  |   | 6     |   |  |   | (261   | )
|Debenturescapital securities              |  |                                                | (251   | ) |        |   | (183  | )           |  |   | 26    |   |  |   | (408   | )
|Mortgage note payable                      |  |                                                | 1      |   |        |   |      |             |  |   | (1    | ) |  |   |       |  
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total borrowed funds                       |  |                                                | (348   | ) |        |   | (197  | )           |  |   | 41    |   |  |   | (504   | )
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Total interest-bearing liabilities         |  |                                                | 3,033  |   |        |   | 4,442 |             |  |   | 482   |   |  |   | 7,957  |  
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  
|Net change in interest and dividend income |  | $                                              | (5,239 | ) |        | $ | 3,266 |             |  | $ | (440  | ) |  | $ | (2,413 | )
|                                           |  |                                                |        |   |        |   |       |             |  |   |       |   |  |   |        |  

Provision for Loan Losses

The provision for loan losses increased by $0.6 million to $1.6 million in the 6mths-07 period, from $1.0 million in the 6mths-06 period, due to an increase in the rate of net loan growth. Total loans outstanding grew
by $126.6 million in the 2007 period, compared to $70.9 million in the 2006 period.

Noninterest Income

Noninterest income decreased by $0.2 million to $3.5 million in the 6mths-07 period, from $3.7 million in the 6mths-06 period, due to fewer fees earned from expired loan
commitments.

Noninterest Expenses

Noninterest
expenses increased by $0.4 million to $5.9 million in the 6mths-07 period, from $5.5 million in the 6mths-06 period, due to a $0.3 million increase in FDIC deposit insurance premiums resulting from a higher rate structure imposed by the FDIC on all
insured financial institutions beginning in 2007. The new rates for nearly all institutions vary between five and seven cents for every $100 of domestic deposits.

Increases in occupancy and equipment expenses of $130,000 (largely associated with the opening of a new branch in Florida), foreclosed real estate expenses of $53,000 and data processing expenses of $57,000 (associated with the growth in
the Banks total assets), were nearly offset by decreases of $97,000 in salary and employee benefits expense (due to a decrease in executive bonuses), $60,000 in professional fees and $42,000 in advertising and promotion expenses. The Company
had 72 employees at June 30, 2007, compared to 76 at June 30, 2006.

Provision for Income Taxes

The provision for income taxes decreased by $1.5 million to $8.4 million in the 6mths-07 period, from $9.9 million in the 6mths-06 period, due to a decrease in pre-tax
income. The Companys effective tax rate (inclusive of state and local taxes) amounted to 44.0% in the 2007 period and 43.7% in the 2006 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 13 to the condensed consolidated financial statements included in this report.



29



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##### Table of Contents

Liquidity and Capital Resources

General. The Company manages its liquidity position on a daily basis to assure that funds are available to meet its operating requirements, loan and
investment commitments, deposit withdrawals and debt service obligations. Primary sources of funds consist of the following: retail deposits obtained through the Banks branch offices and through the mail; principal repayments of loans;
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.

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

The Bank continues to rely heavily on certificates of deposit (time deposits) as its main source of funds. Total consolidated deposits
amounted to $1.64 billion at June 30, 2007 and time deposits represented 85%, or $1.38 billion, of those deposits, up from 84% at December 31, 2006. Additionally, time deposits of $100,000 or more at June 30, 2007 totaled $539 million
and included $99 million of brokered deposits, up from $491 million and $56 million for the same categories, respectively, at December 31, 2006. The Banks brokered deposits are sold by investment firms, which are paid a fee by the Bank
for placing the deposit. The Bank must maintain its status as a well-capitalized insured depository institution in order to solicit and accept, renew or roll over any brokered deposit without restriction. 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. At June 30,
2007, the Bank had $583 million of time deposits maturing by June 30, 2008. The Bank expects that a substantial portion of these deposits will be renewed and stay with the Bank.

The Banks loan-to-deposit ratio was 90% at June 30, 2007. During the second quarter of 2007, the Bank utilized a higher level of FHLB advances to partially fund the growth in its loan portfolio, which has
caused this ratio to increase from 84% at December 31, 2006. The Banks goal is to target its loan-to-deposit ratio at approximately 85%.

The
Bank borrows funds on an overnight or short-term basis to manage its liquidity needs. At June 30, 2007, the Bank had agreements with correspondent banks whereby it could borrow up to $28 million on an unsecured basis. As a member of the FHLB of
New York and FRB of New York, the Bank can also borrow from these institutions on a secured basis. During the first half of 2007, the Bank utilized a total of $246 million of short-term borrowings. At June 30, 2007, there were $48 million of
such borrowings outstanding, compared to $25 million at December 31, 2006. At June 30, 2007, the Bank had available collateral consisting of investment securities to support additional total borrowings of $294 million from the FHLB and
FRB.

The Bank continues to invest mainly in short-term (up to 5 year maturities) U.S. government agency debt obligations to emphasize safety and
liquidity. All of the Banks security investments are classified as held to maturity, and nearly all of the securities have fixed rates of interest or have predetermined scheduled rate increases, and many have call features that allow the
issuer to call the security before its stated maturity without penalty. At June 30, 2007, the entire portfolio had a weighted-average remaining maturity of 2.4 years, and a total of $119 million of the securities were maturing by June 30,
2008. The Bank expects to reinvest the proceeds from these maturities into new securities in order achieve its targeted loan-to-deposit ratio.

The Bank
had cash and short-term investments of $39 million at June 30, 2007. In addition, as of June 30, 2007, the Bank had a total of $305 million of its loan portfolio maturing by June 30, 2008. The Bank expects to extend or refinance a
portion of these maturing loans. At June 30, 2007, the Bank had new commitments to lend of $162 million, most of which are anticipated to be funded over the next 12 months from the sources of funds described above. The Bank continues to
experience increased competitive market conditions and lower pricing, which encompass both interest rates and fees charged, for its new loans.



30



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##### Table of Contents

The Bank has in the past and may continue in the future to rely on capital contributions from the Holding Company to
increase its capital to support its asset growth. No cash contributions have been made to the Bank since 2005. At June 30, 2007, the Bank had excess capital to support an additional $446 million of asset growth and still maintain a
well-capitalized designation.

Intervest Mortgage Corporation. Intervest Mortgage Corporations lending business is dependent on its
ability to sell its subordinated debentures with interest rates that result in a positive interest rate spread, which is the difference between yields earned on its loans and the rates paid on its debentures.

Intervest Mortgage Corporation relies on the issuance of its subordinated debentures in registered, best efforts offerings to the public as its primary 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 a large percentage of Intervest Mortgage
Corporations earnings and cash inflows. The Bank has a servicing agreement with Intervest Mortgage Corporation that is described in the Companys annual report of Form 10-K for the year ended December 31, 2006 in Item. 1
Business, under the caption Loan Solicitation and Processing. The Bank paid $2.1 million in the first half of 2007 to Intervest Mortgage Corporation in connection with this agreement. From time to time, Intervest Mortgage
Corporation has also received cash capital contributions from the Holding Company. No contributions have been made since 2002.

Intervest Mortgage
Corporation, as of June 30, 2007, had $82 million of debentures outstanding with fixed interest rates that range from 6.25% to 7.75% and maturities that range from January 1, 2008 to July 1, 2014. In the first half of 2007, Intervest
Mortgage Corporation repaid from cash on hand $2 million of its debentures prior to their stated maturity, including $0.1 million of related accrued interest payable, and did not issue any new debentures. At June 30, 2007, Intervest Mortgage
Corporation had $5.5 million of debentures and $1.6 million of accrued interest payable maturing by June 30, 2008. Subsequent to June 30, 2007 and prior to the filing date of this report, on August 1, 2007, Intervest Mortgage
Corporation repaid early those maturing debentures from cash on hand.

Intervest Mortgage Corporation, as of June 30, 2007, had $31 million in cash
and short-term investments, compared to $2.7 million of commitments to lend. In addition, $42 million of its mortgage loans are scheduled to mature by June 30, 2008, although some portion is expected to be extended or refinanced. As a result,
both cash and short-term investments as well as the proceeds from the repayment of maturing mortgages, less $7.1 million used to repay debentures outstanding, will be available for investment in new mortgage loans. The current level of cash and
short-term investments continues to be higher than has been customary for Intervest Mortgage Corporation and the level of its outstanding commitments continues to be at historically low levels. The increase in cash and short-term investments is
primarily attributable to a significant decline in originations of new mortgage loans since June 30, 2006 that is attributable to increased competitive market conditions and lower pricing, which have made it more difficult for Intervest
Mortgage Corporation to identify suitable mortgage investment opportunities. The level of outstanding loan commitments has always fluctuated with market conditions and is unpredictable.

Holding Company. The Holding Companys sources of funds and capital have been derived from the following: interest income from a limited portfolio of mortgage loans (including purchased
participations in loans originated by the Bank) 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 common stock warrants and conversion of debentures; the issuance of trust preferred securities through its
wholly owned business trusts; and the direct issuance of other subordinated debentures to the public.

In the first half of 2007, the Holding Company
repaid early $2.3 million (principal and accrued interest) of debentures from cash on hand. In addition, a total of $2.0 million (principal and accrued interest) of debentures were converted (at the option of the debenture holders) into 108,556
shares of the Holding Companys Class A common stock at $18 per share. At June 30, 2007, the Holding Company had no debentures outstanding and $3 million in cash and short-term investments.

The Holding Company, through its wholly owned business trusts, has issued at various times since 2001 approximately $72 million of trust preferred securities, of which
$56.7 million were outstanding as of June 30, 2007. The outstanding securities have fixed rates of interest for a five-year period and thereafter variable rates and contractually mature at various time through 2036. The resulting proceeds have
been invested in the Bank at various times through capital contributions. The Holding Company is required to make interest payments that currently total



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$3.5 million annually on the outstanding trust preferred securities. The Bank provides the funds in the form of dividends to the Holding Company for this
debt service. At June 30, 2007, $55 million of the trust preferred securities (representing outstanding debentures net of the Holding Companys common stock investments in the trusts) qualified as regulatory Tier 1 capital.

On April 25, 2007, the Holding Companys board of directors approved the payment of the Holding Companys first annual cash dividend of $0.25 per share on
the Holding Companys outstanding Class A and Class B common stock. A total dividend of $2.1 million was paid from cash on hand on June 15, 2007 to shareholders of record on the close of business June 1, 2007.

On April 25, 2007, the Holding Companys board of directors authorized a share repurchase plan. Under the plan, the Holding Company is authorized to purchase
up to $10 million of its outstanding shares of Class A common stock over a six-month period. The repurchases will be made in the open market at prevailing prices or in privately negotiated transactions in accordance with all applicable
securities laws and regulations. The plan does not obligate the Holding Company to acquire any particular amount of the Class A common stock and the plan may be suspended or discontinued at any time. During the second quarter of 2007, a total
of 115,200 shares of Class A common stock was repurchased under this plan using cash on hand at an aggregate cost of $2.9 million. As of June 30, 2007, the Holding Company expects to fund additional stock repurchases through cash on hand
as well as from the proceeds resulting from the anticipated repurchase by the Bank of the Holding Companys loan participations.

Other.
Additional information concerning securities held to maturity, short-term borrowings, outstanding time deposits and debentures, including interest rates and maturity dates, can be found in notes 3, 6, 7 and 8 of the notes to the condensed
consolidated financial statements included in this report. Additional information regarding trust preferred securities can be found in note 9 to the consolidated financial statements included in the Companys annual report of Form 10-K for the
year ended December 31, 2006.

The Holding Company, the Bank and Intervest Mortgage Corporation consider their current liquidity and sources of funds
sufficient to satisfy their outstanding lending commitments and maturing liabilities. Management is not aware of any trends, known demand, commitments or uncertainties that are expected to have a material impact on future operating results,
liquidity or capital resources of each entity.

Regulatory Capital

The Bank is subject to various regulatory capital requirements. As disclosed on pages 18 and 19 of the Companys annual report of Form 10-K for the year ended
December 31, 2006, the Federal Deposit Insurance Corporation (FDIC) and other bank regulatory agencies use five capital categories ranging from well capitalized to critically undercapitalized to determine various matters, including prompt
corrective action and each institutions FDIC deposit insurance premiums. These categories involve quantitative measures of a banks assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting
practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can result in certain mandatory and
discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Banks and the Companys financial statements.

The Bank is required to maintain regulatory defined minimum Tier 1 leverage and Tier land total risk-based capital ratio levels of at least 4%, 4% and 8%, respectively. At June 30, 2007 and December 31, 2006, 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:



|                                       |  |                 |           |   |                     |   |           |  
|-------------------------------------- |  | --------------- | --------- | - | ------------------- | - | --------- | -
|($ in thousands)                       |  | At June 30,2007 |           |   | At December 31,2006 |  
|Tier 1 Capital                         |  | $               | 189,693   |   |                     | $ | 181,176   |  
|Tier 2 Capital                         |  |                 | 19,031    |   |                     |   | 17,486    |  
|                                       |  |                 |           |   |                     |   |           |  
|Total risk-based capital               |  | $               | 208,724   |   |                     | $ | 198,662   |  
|                                       |  |                 |           |   |                     |   |           |  
|Net risk-weighted assets               |  | $               | 1,641,188 |   |                     | $ | 1,526,791 |  
|Average assets for regulatory purposes |  | $               | 1,921,652 |   |                     | $ | 1,841,231 |  
|                                       |  |                 |           |   |                     |   |           |  
|Tier 1 capital to average assets       |  |                 | 9.87      | % |                     |   | 9.84      | %
|Tier 1 capital to risk-weighted assets |  |                 | 11.56     | % |                     |   | 11.87     | %
|Total capital to risk-weighted assets  |  |                 | 12.72     | % |                     |   | 13.01     | %
|                                       |  |                 |           |   |                     |   |           |  



32



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##### Table of Contents

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, 2007 and December 31, 2006, management believes that the Holding Company met its capital adequacy requirements.

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



|                                       |  |                 |           |   |                     |   |           |  
|-------------------------------------- |  | --------------- | --------- | - | ------------------- | - | --------- | -
|($ in thousands)                       |  | At June 30,2007 |           |   | At December 31,2006 |  
|Tier 1 Capital (1)                     |  | $               | 232,720   |   |                     | $ | 225,046   |  
|Tier 2 Capital (1)                     |  |                 | 19,402    |   |                     |   | 17,833    |  
|                                       |  |                 |           |   |                     |   |           |  
|Total risk-based capital               |  | $               | 252,122   |   |                     | $ | 242,879   |  
|                                       |  |                 |           |   |                     |   |           |  
|Net risk-weighted assets               |  | $               | 1,742,984 |   |                     | $ | 1,624,713 |  
|Average assets for regulatory purposes |  | $               | 2,044,083 |   |                     | $ | 1,969,533 |  
|                                       |  |                 |           |   |                     |   |           |  
|Tier 1 capital to average assets       |  |                 | 11.39     | % |                     |   | 11.43     | %
|Tier 1 capital to risk-weighted assets |  |                 | 13.35     | % |                     |   | 13.85     | %
|Total capital to risk-weighted assets  |  |                 | 14.46     | % |                     |   | 14.95     | %
|                                       |  |                 |           |   |                     |   |           |  

---

|(1) | At June 30, 2007 and December 31, 2006, there were $55 million of qualifying capital securities outstanding, representing the total outstanding debentures issued to
Statutory Trust II, III, IV and V by the Holding Company, net of the Holding Companys investments in those trusts. At June 30, 2007 and December 31, 2006, the entire $55 million was included in Tier I capital. The inclusion of these
capital securities in Tier 1 capital is limited to 25% of core capital elements, as defined in the FDIC regulations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Federal Reserve on
March 1, 2005 issued a final rule that retains trust preferred securities in the Tier 1 capital of bank holding companies but with stricter limitations on the use of such securities. The new rule provides a transition period for bank holding
companies to meet the new, stricter limitations within regulatory capital by allowing the stricter limits on restricted core capital elements to become fully effective as of March 31, 2009. For a further discussion of these changes, see page 52
of the Companys annual report on Form 10-K for the year ended December 31, 2006. As of June 30, 2007 and December 31, 2006, assuming the Holding Company had excluded all of its eligible trust preferred securities from Tier 1
Capital and included such amount in Tier 2 capital, the Holding Company would still have exceed the well capitalized threshold under the regulatory framework for prompt corrective action.

Asset and Liability Management

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

The Company uses gap analysis, which measures the difference between interest-earning assets and interest-bearing liabilities that mature or reprice within a given time period, to monitor its interest rate
sensitivity. For a further discussion of gap analysis, including the factors that affect its computation and results, see pages 52 to 54 of the Companys annual report on Form 10-K for the year ended December 31, 2006.

The Companys one-year positive interest rate sensitivity gap amounted to $19 million, or 0.9% of total assets, at June 30, 2007, compared to $109 million, or
5.5% of total assets at December 31, 2006. The decrease in the positive gap primarily reflects the runoff of loans with a repricing or remaining maturity of less than one year being replaced with new fixed rate loans with maturities of greater
than one year, coupled with a higher level of short-term borrowings. Consistent with the competitive lending environment, a greater percentage of loans were originated on a fixed rate basis.

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. Depositors may not necessarily immediately withdraw 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 10% at June 30, 2007, compared to a positive 15% at December 31, 2006.



33



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##### Table of Contents

The table that follows summarizes interest-earning assets and interest-bearing liabilities as of June 30, 2007, that
are scheduled to mature or reprice within the periods shown.



|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|------------------------------------------ |  | ---------- | ------- | - | ----------- | - | ------- | -------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | --------- | -
|($ in thousands)                           |  | 0-3 Months |         |   | 4-12 Months |   |         | Over 1-4 Years |  |   | Over 4 Years |   |  | Total |        
|Loans (1)                                  |  | $          | 473,277 |   |             | $ | 231,965 |                |  | $ | 565,464      |   |  | $     | 336,549 |   |  | $ | 1,607,255 |  
|Securities held to maturity (2)            |  |            | 47,495  |   |             |   | 117,236 |                |  |   | 154,297      |   |  |       | 40,659  |   |  |   | 359,687   |  
|Short-term investments                     |  |            | 30,334  |   |             |   |        |                |  |   |             |   |  |       |        |   |  |   | 30,334    |  
|FRB and FHLB stock                         |  |            | 4,885   |   |             |   |        |                |  |   |             |   |  |       | 3,626   |   |  |   | 8,511     |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Total rate-sensitive assets                |  | $          | 555,991 |   |             | $ | 349,201 |                |  | $ | 719,761      |   |  | $     | 380,834 |   |  | $ | 2,005,787 |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Deposit accounts (3):                      |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Interest checking deposits                 |  | $          | 6,021   |   |             | $ |        |                |  | $ |             |   |  | $     |        |   |  | $ | 6,021     |  
|Savings deposits                           |  |            | 9,387   |   |             |   |        |                |  |   |             |   |  |       |        |   |  |   | 9,387     |  
|Money market deposits                      |  |            | 232,709 |   |             |   |        |                |  |   |             |   |  |       |        |   |  |   | 232,709   |  
|Certificates of deposit                    |  |            | 212,946 |   |             |   | 369,580 |                |  |   | 610,405      |   |  |       | 191,088 |   |  |   | 1,384,019 |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Total deposits                             |  |            | 461,063 |   |             |   | 369,580 |                |  |   | 610,405      |   |  |       | 191,088 |   |  |   | 1,632,136 |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|FHLB advances                              |  |            | 48,000  |   |             |   |        |                |  |   |             |   |  |       |        |   |  |   | 48,000    |  
|Debentures and mortgage note payable (1)   |  |            | 5,500   |   |             |   |        |                |  |   | 87,142       |   |  |       | 46,018  |   |  |   | 138,660   |  
|Accrued interest on all borrowed funds (1) |  |            | 1,725   |   |             |   |        |                |  |   | 1,021        |   |  |       | 601     |   |  |   | 3,347     |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Total borrowed funds                       |  |            | 55,225  |   |             |   |        |                |  |   | 88,163       |   |  |       | 46,619  |   |  |   | 190,007   |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Total rate-sensitive liabilities           |  | $          | 516,288 |   |             | $ | 369,580 |                |  | $ | 698,568      |   |  | $     | 237,707 |   |  | $ | 1,822,143 |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|GAP (repricing differences)                |  | $          | 39,703  |   |             | $ | (20,379 | )              |  | $ | 21,193       |   |  | $     | 143,127 |   |  | $ | 183,644   |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Cumulative GAP                             |  | $          | 39,703  |   |             | $ | 19,324  |                |  | $ | 40,517       |   |  | $     | 183,644 |   |  | $ | 183,644   |  
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Cumulative GAP to total assets             |  |            | 1.9     | % |             |   | 0.9     | %              |  |   | 2.0          | % |  |       | 8.9     | % |  |   | 8.9       | %
|                                           |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  

Significant assumptions used in preparing the gap table above 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, nonaccrual loans and the effect of possible loan prepayments are excluded from the 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 according to their
contractual maturity dates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Accounting Pronouncements

See note 16 to the condensed consolidated financial statements included in this report for a discussion of this topic.



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

Market
risk is the risk of loss from adverse changes in market prices and interest rates. The Companys market risk arises primarily from interest rate risk inherent in its lending and deposit-taking activities, and the issuance of its debentures. The
Company has not engaged in and accordingly has no risk related to trading accounts, commodities, interest rate hedges or foreign exchange.

The measurement
of market risk associated with financial instruments is meaningful only when all related and offsetting on-and off-balance sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of
financial instruments as of December 31, 2006, which reflect changes in market prices and rates, can be found in note 21 to the consolidated financial statements included in the Companys annual report of Form 10-K for the year ended
December 31, 2006. Management believes that there have been no significant changes in the Companys market risk exposure since December 31, 2006.

Management actively monitors and manages the Companys interest rate risk exposure. The primary objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on the
Companys net interest income and capital. In this regard, the Bank does internal analyses by preparing interest rate shock scenarios (representing the effects of specific assumed interest rate changes on net interest income) to its basic
one-year gap model as a quantitative tool to measure the amount of interest rate risk associated with changing



34



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##### Table of Contents

market interest rates. The Bank also engages an outside consultant to prepare quarterly reports using an earnings simulation model to quantify the effects of
various interest rate scenarios on projected net interest income and net income over projected periods. These computations rely on various assumptions regarding balance sheet growth and composition, and the pricing and repricing and maturity
characteristics of the balance sheet. For a further discussion of GAP analysis, see the section entitled Asset and Liability Management of this report.



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

The Companys management evaluated,
with the participation of its Principal Executive and Financial Officers, the effectiveness of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end
of the period covered by this report. Based on such evaluation, the Principal Executive and Financial Officers have concluded that the Companys disclosure controls and procedures are designed to ensure that information required to be disclosed
in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and regulations, and are operating in an effective
manner.

There has been no change in the Companys internal control over financial reporting that occurred during the Companys most recent
fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II. OTHER INFORMATION



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

Not Applicable



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

This Item 1A requires disclosure of any material
changes from risk factors previously disclosed in the Companys most recent annual report on Form 10-K. There have been no material changes to the Companys risk factors disclosed in the Risk Factors section of the
Companys annual report on Form 10-K for the year ended December 31, 2006, where such factors are discussed on pages 22 through 27.



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

The
following table provides information relating to the Companys repurchase of Class A common stock during the second quarter of 2007.



|                               |  |                               |  |                            |       |                                                                     |         |                                                                            |   |          
|------------------------------ |  | ----------------------------- |  | -------------------------- | ----- | ------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------- | - | ---------
|Period                         |  | TotalNumber ofSharesPurchased |  | AveragePrice Paidper Share |       | Total Number of SharesPurchased as Part of aPublicly Announced Plan |         | Remaining Dollar Value ofShares that May Be PurchasedUnder the Program (1)
|April 1, 2007  April 30, 2007 |  |                              |  |                            |      |                                                                     |        |                                                                            |   |         
|May 1, 2007  May 31, 2007     |  | 28,000                        |  | $                          | 24.84 |                                                                     | 28,000  |                                                                            | $ | 9,304,422
|June 1, 2007  June 30, 2007   |  | 87,200                        |  | $                          | 25.00 |                                                                     | 87,200  |                                                                            | $ | 7,124,255
|                               |  |                               |  |                            |       |                                                                     |         |                                                                            |   |          
|Total                          |  | 115,200                       |  | $                          | 24.96 |                                                                     | 115,200 |                                                                            |   |          
|                               |  |                               |  |                            |       |                                                                     |         |                                                                            |   |          

---

|(1) | On April 30, 2007, the Company announced that its board of directors had authorized a share repurchase plan effective April 25, 2007 providing for the purchase of up to
$10,000,000 of its outstanding shares of Class A common stock over a six-month period. The plan expires on October 25, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Not Applicable



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



|(a) | An Annual Meeting of Stockholders was held on May 24, 2007.
|--- | -----------------------------------------------------------



|(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. Each of the persons named in the Proxy Statement dated April 10, 2007 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). Additionally, the Companys stockholders ratified the appointment of Hacker, Johnson & Smith, P.A., P.C., as the Companys independent registered public
accounting firm for 2007 (see Item 4-c).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(c) | The table that follows summarizes voting results on the matters submitted to the Companys common stockholders:
|--- | ---------------------------------------------------------------------------------------------------------------



|                                                                                                                                          |  |           |  |                   |  |          
|----------------------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | ----------------- |  | ---------
|                                                                                                                                          |  | For       |  | WithheldAuthority |  |          
|Election of DirectorsClass A                                                                                                             |  |           |  |                   | 
|Michael A. Callen                                                                                                                         |  | 7,551,181 |  | 173,470           | 
|Wayne F. Holly                                                                                                                            |  | 6,227,582 |  | 1,497,069         | 
|Lawton Swan, III                                                                                                                          |  | 7,606,543 |  | 118,108           | 
|Election of DirectorsClass B                                                                                                             |  |           |  |                   | 
|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   |  |                  | 
|                                                                                                                                          |  |           |  |                   | 
|                                                                                                                                          |  |           | 
|                                                                                                                                          |  | For       |  | Against           |  | Abstained
|To ratify the appointment of Hacker, Johnson & Smith, P.A., P.C., as the Companys independent registered public
accounting firm for 2007 |  |           |  |                   |  |          
|Class A shareholders                                                                                                                      |  | 7,642,752 |  | 71,723            |  | 10,176   
|Class B shareholders                                                                                                                      |  | 385,000   |  |                  |  |         
|                                                                                                                                          |  |           |  |                   |  |          



|(d) | Not Applicable
|--- | --------------



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

Not Applicable



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

The following exhibits are filed as part of this report.



|10.1 | Amendment to Employment Agreement between Intervest Bancshares Corporation and Lowell S. Dansker dated June 21, 2007, incorporated by reference to Form 8-K filed on
June 25, 2007.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

SIGNATURES

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



|                     |  |                                  |  |                                                         
|-------------------- |  | -------------------------------- |  | --------------------------------------------------------
|                     |  | INTERVEST BANCSHARES CORPORATION
|                     |  | (Registrant)                    
|                     |  |                                 
|Date: August 2, 2007 |  | By:                              |  | /s/ Lowell S. Dansker                                   
|                     |  |                                  |  | Lowell S. Dansker, Chairman and Executive Vice President
|                     |  |                                  |  | (Principal Executive Officer)                           
|                     |  |                                 
|Date: August 2, 2007 |  | By:                              |  | /s/ John J. Arvonio                                     
|                     |  |                                  |  | John J. Arvonio, Chief Financial and Accounting Officer 
|                     |  |                                  |  | (Principal Financial Officer)                           



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